Ocorian Trustee (UK) Limited & Anor v Babu Haridas Chandarana & Ors

For an interim proprietary injunction, the claimant must show a serious issue to be tried, inadequacy of damages and a balance of convenience favouring relief. No risk of dissipation is required. At the interim stage the court should not resolve difficult factual or legal questions that depend on the trial. Where trust money is paid to a person who lacked notice of the trust, the material question is whether that person became a purchaser for value before notice. A payment made before a contractual repayment date may nevertheless be accepted as accord and satisfaction. Acceptance may be express or inferred from retaining the full payment without protest, particularly where nothing remains to sue upon. A claimant need not elect between alternative tracing methods before trial. The court may continue relief against a recipient where notice remains a triable issue, while dismissing claims against recipients who establish that no serious issue is shown.

The claimants sought to continue interim proprietary injunctions over payments made by Market Financial Solutions Ltd to fifteen individuals and companies. The payments were said to represent traceable proceeds of money held on Quistclose trust for Cronus Finance Limited and misapplied by a solicitor to MFS.

At earlier hearings, injunctions, undertakings and directions were made in relation to different defendants. The present applications concerned seven defendants. Most argued that the payments were repayments of loans received in good faith, without notice of the trust, and that they were bona fide purchasers for value without notice. The third defendant also challenged the claimants’ tracing methodology and relied on hardship. The central issues were whether there was a serious issue to be tried on the proprietary claims and whether the injunctions should continue pending trial.

1. Interim injunction principles. CPR 25.1(1)(c) and CPR 25.1(2) permit preservation of relevant property. The American Cyanamid requirements applied: a serious issue to be tried, damages not being an adequate remedy, and the balance of convenience being in favour of relief. Under section 37(1) of the Senior Courts Act 1981, relief must also be just and convenient. No risk of dissipation was required, applying Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm).
2. The serious-issue threshold was equivalent to the real-prospect-of-success test on summary judgment. The court should not determine critical disputed facts or difficult legal questions dependent on fine factual issues at the interim stage, following Sukhoruchkin v Van Bekestein [2014] EWCA Civ 399.
3. The payments were objectively characterised as repayments of loans. Where repayment was contractually due, or early repayment was contractually permitted, a recipient without notice might take free of the trust as a bona fide purchaser for value without notice. Where no repayment obligation had accrued and no right to repay early existed, the recipient initially received as a volunteer and the trust continued.
4. The critical time for notice was when the recipient obtained notice of the trust. If value was given before notice, there was no principled basis for fixing the recipient’s position at the earlier date of receipt. The court rejected the claimants’ contrary contention. Gray v Smith [2013] EWHC 4136 (Comm) and Cloutte v Storey [1911] 1 Ch 18 were consistent with that approach.
5. A non-contractual repayment could be accepted expressly or by conduct. Acceptance gave up the creditor’s right to sue for the debt and was valuable consideration. In Ms Yadav’s case, her January email was express acceptance. In the other relevant cases, retaining substantially the full principal and interest for three and a half months without protest amounted to accord and satisfaction, applying the reasoning in Taylor v Blakelock (1886) 32 ChD 560 and the factual approach in Stour Valley Builders v Stuart.
6. Accordingly, the claimants showed no serious issue to be tried against D1, D2, D9, D10, D13 and D15, and those claims were dismissed. The injunctions were not continued against them. The claim against D3 was different: his relationship with Mr Raja raised a triable issue as to notice, and the court could not determine that issue summarily.
7. The claimants had an election between alternative tracing methods, but the election was for trial. They were not required to adopt one method at the interim stage, and the total secured by injunctions against multiple defendants was not limited to the total claim. The injunction against D3 was continued until trial or further order. Consequential matters, including costs, form of order and permission to appeal, were adjourned for determination on paper.