Skatteforvaltningen v Solo Capital Partners LLP (in administration)

In the absence of a statutory insolvency procedure, charging orders generally operate on a first-past-the-post basis. The existence of other creditors does not, by itself, justify refusing a charging order. The debtor or other creditors must show that making the order would be likely to cause undue prejudice. The judgment creditor must act fairly, and sharp conduct may displace or qualify the usual rule. A judgment creditor may pursue charging orders alongside other available enforcement methods. Personal hardship, financial difficulty, disproportion to the creditor’s resources, or the effect on other secured creditors will not ordinarily suffice without compelling evidence or truly unusual circumstances. Technical defects in service may be cured where the intended recipients received notice and had a fair opportunity to participate.

Skatteforvaltningen sought to make interim charging orders final against property connected with Mr Jain, in enforcement of a costs order made in its favour by the Court of Appeal. Mr Jain and other creditors opposed the applications. Their objections included the effect on other secured creditors, the existence of competing creditors, an alternative proposed charge, the origin and fairness of the costs order, financial hardship, medical circumstances and a request for a stay.

The court also considered whether notification of co-owners of one property, effected by email after correspondence sent to the property had been returned, amounted to good service. The central issues were whether the statutory test concerning likely undue prejudice to other creditors was satisfied and whether the procedural and personal circumstances justified refusing or delaying final charging orders.

1. Service. Although the co-owners had not been served strictly in accordance with the rules, the emails had notified them of the proceedings and enabled them to participate. The notification was therefore declared to constitute good service.
2. Enforcement entitlement. A judgment creditor is prima facie entitled to enforce against all available property and may pursue more than one enforcement method at the same time, including charging orders and third-party debt orders. The proposed charge over one property did not establish that the creditor should be deprived of that general entitlement.
3. Other creditors. The existence of competing creditors was not itself a reason to refuse a charging order. Under section 1(5)(b) of the Charging Orders Act, the relevant question was whether another creditor was likely to be unduly prejudiced. The approach in British Arab Commercial Bank plc & Ors v Algosaibi and Brothers Co & Ors [2011] EWHC 2444 (Comm) was applied: absent a statutory insolvency procedure, the ordinary position is first past the post, subject to the judgment creditor’s duty to act fairly and to qualification where there is sharp conduct.
4. No sharp conduct or undue prejudice was established. The creditor had acted openly and had not pursued the application with undue haste. The possibility that another secured creditor might call in its loans was unsupported, and any forced sale would require separate proceedings and an order for sale.
5. The reversal on appeal of an earlier costs order, the debtor’s financial difficulties, medical condition, the alleged disproportionality of the security and the effect on his finances did not justify refusal. The Court of Appeal’s costs order had not been stayed or successfully appealed.
6. The interim charging orders were made final. A 14-day stay was refused because enforcement would in any event require separate Part 8 proceedings and an order for sale.

The judgment was a first-instance decision on applications to make interim charging orders final. It records that the underlying costs order had been made by the Court of Appeal and had not been stayed, but does not provide its citation.