Chedington Events Ltd v Nihal Mohamed Brake & Anor

A final third party debt order may be made where money is held by a third party to the order of a judgment debtor. Funds held in that way constitute a debt payable on demand. The court must determine the beneficial entitlement to the funds on the evidence, including properly drawn inferences from non-disclosure. The rule in Browne v Dunn is a rule of fairness, not an inflexible requirement that every challenge be put in cross-examination. Earlier notice of the challenge may suffice, and the court may still find evidence mistaken where appropriate. Family arrangements are not presumed incapable of creating legal relations. The court retains a discretion whether to make an interim order final, but the existence of an enforceable debt which improves the judgment creditor’s position is ordinarily a good reason to do so.

The claimant obtained judgment for possession of West Axnoller Farm and a costs order against the defendants, later varied to £700,000. It obtained an interim third party debt order against Diana Rebecca Cawley in respect of £25,000 transferred to her by the first defendant and Tom D’Arcy, the first defendant’s son.

The defendants argued that the debt was jointly owed to them and Tom and therefore fell outside the jurisdiction under CPR rule 72.2(1). The central issues were whether Tom acted as the first defendant’s nominee, whether any part of the £25,000 remained repayable, whether the evidence was affected by the rule in Browne v Dunn, and whether the interim order should be made final.

1. Jurisdiction. The court found that the £20,000 paid by the first defendant and the £5,000 paid by Tom were separate payments. Tom was acting as the first defendant’s nominee and at her direction. The total sum was therefore paid by or on behalf of the first defendant. Any repayable balance was a debt due, at least beneficially, to her and fell within the third party debt order jurisdiction under CPR Part 72.
2. Repayable balance. The money was held by the third party to the defendants’ order. That was a paradigm debt payable on demand. Payments totalling £17,244.96, made at the first defendant’s direction, were treated as payments out of the £25,000. The balance was therefore £7,755.04.
3. Evidence and challenge. The court rejected the submission that evidence not challenged in cross-examination automatically stood. The rule in Browne v Dunn prevents rejection of evidence for dishonesty or another substantial reason where the witness had no fair notice of the challenge. The challenge may be made before cross-examination. Even without challenge, evidence may in an appropriate case be found mistaken. Here the connection between the invoices and the alleged use of the £25,000 had been challenged in advance and during the hearing.
4. Intention to create legal relations. A family relationship does not establish, as a matter of law, that no legal relations were intended. The question is factual. The size and purpose of the payment, and the parties’ conduct, demonstrated an intention that ordinary legal consequences should attach to the arrangement.
5. Discretion. The court had a discretion under CPR rule 72.8(6)(a). No insolvency regime applied. The proportion of the judgment debt recovered was less significant than in an application for a mandatory injunction. The existence of a debt which would improve the judgment creditor’s position was prima facie a good reason for making the order final.
6. The interim third party debt order was made final in the sum of £7,755.04.

First-instance decision. The judgment refers to the earlier liability decision, [2022] EWHC 365 (Ch), and states that permission to appeal was refused by the Court of Appeal on 7 April 2022.