Deluxe Property Holdings Ltd v SCL Construction Ltd & Anor (Interim Relief)

For a proprietary interim claim, the court applies the familiar requirements of a serious issue to be tried, the balance of convenience, and whether it is just and convenient to grant relief. A proprietary claim may justify interim protection more readily than a claim for damages. It is unnecessary to establish a risk of dissipation for a proprietary injunction. Where a claimant has a good arguable case that money or a chose in action is held on a constructive or Quistclose trust, interim payment, preservation and disclosure orders may be appropriate. The court must still consider the adequacy of damages for each party and the practical terms of the proposed order.

The claimant, a property developer, contracted with the first defendant for construction works. VAT was charged and paid at 20 per cent, but the parties later considered that most of the works were zero-rated. The contractor submitted a repayment claim to HMRC under section 80 of the VAT Act 1994, accompanied by an undertaking to repay any credited amount to the relevant consumer.

After the contracts were terminated, the claimant alleged that the repayment claim and any proceeds were held for it on constructive or Quistclose trust principles. It sought interim orders requiring payment into a solicitors’ account or court, disclosure of the claim’s status and proceeds, and restrictions on further steps. The central issue was whether the claimant had established a sufficient proprietary case and whether interim relief should be granted.

1. Interim relief granted. The court granted interim orders against SCL requiring any money received from HMRC in respect of the section 80 claim to be paid to the claimant’s solicitors, subject to retention in a separate account pending further order or agreement. SCL was also required to provide information and an affidavit. The injunction was continued to the return date of 21 October 2020 or further order. Costs were reserved.
2. Applying the approach identified in Madoff Securities v Raven [2011] EWHC 3102 (Comm), the claimant had to show a serious issue to be tried, that the balance of convenience favoured relief, and that relief was just and convenient. The court accepted that there was a good arguable case that the section 80 claim, and any money or credit obtained under it, was subject to a constructive or Quistclose trust. The undertaking provided that sums credited by HMRC would be paid without deduction to the relevant consumer, identified here as Deluxe.
3. Damages might not adequately protect Deluxe because SCL appeared to be in financial difficulty. Conversely, Deluxe had given an undertaking in damages and had sufficient assets to meet an adverse order if its claim failed. Those considerations supported interim relief.
4. The proprietary nature of the claim meant that interim remedies could be granted more readily than where only a money judgment was sought. It was unnecessary to establish a risk of dissipation. The relief also reflected the parties’ prior agreement that SCL would make the claim in its own name and pay any recovery to Deluxe.
5. Although the application was made urgently and without notice, SCL had received advance warning of possible proceedings and an opportunity to attend and respond. Its correspondence did not address the substance of the claimant’s entitlement or explain whether any payment or credit had been obtained. In light of the undertaking, SCL had no right of set-off against the trust fund.