England and Wales Land Registry Adjudicator

 

REF/2005/0886

 

 

The Adjudicator to Her majesty’s Land Registry

LAND Registration act 2002

 

IN the matter of a reference from hm land registry

 

 

BETWEEN

 

Abu Taher Giasuddin Ahmed and Iffet Ara Ahmed

 

APPLICANTS

 

and

 

Paul Davis and Tim Dolder

 

RESPONDENTS

 

 

Property Address: 23 Dongola Road, London N17 6EB

Title Number: MX213756

 

 

Before: Mr Rhys sitting as Deputy Adjudicator to HM Land Registry

 

 

Sitting at: The Adjudicator to HM Land Registry

On: Tuesday 29 May 2007

 

Applicant Representation: Mr S Merali Solicitor Advocate

Respondent Representation: Mr A Underwood QC instructed by Messrs Edwin Coe Solicitors

 

D E C I S I O N

 

 

 

 

1.                  The Applicants are Mr Abu Taher Giasuddin Ahmed and his wife Mrs Iffet Ara Ahmed. They are the registered proprietors of the property known as 23 Dongola Road, London N17 6EB, which is registered at the Land Registry under Title Number MX213756 (“the Dongola Road Property”). The Respondents are Mr Paul Davis and Mr Tim Dolder, who are both partners in the firm of insolvency practitioners known as Begbies Traynor. They are the joint liquidators of a company known as Millennium Advanced Technology Training Limited (“MATT”). Mr Ahmed was, at all material times, a director of MATT. In October 2003 the London Borough of Tower Hamlets (“Tower Hamlets”) applied to the Court for the winding-up of MATT, on the just and equitable ground under section 122(1)(g) of the Insolvency Act 1986. Broadly speaking, the allegation made by Tower Hamlets was that MATT had been paid in excess of £700,000 in regeneration grant monies, both from its own funds and from other grant funds for which it is the accountable body. It was alleged that MATT had been misusing grant monies for the purpose of enriching individuals associated with the company. The petition was opposed by MATT, and on that occasion Mr Ahmed appeared for the company in person. The matter was heard by Mr Michael Briggs QC (as he then was) sitting as a Deputy Judge of the Chancery Division, and he made the winding-up order in relation to MATT on 2^nd April 2004. In the course of his decision, the learned Judge considered some of the allegations made by Tower Hamlets against MATT, particularly with regard to false accounting. The Judge was satisfied on the balance of probabilities that the specific, sample, allegations of false accounting on the part of MATT were made out, and this was sufficient to result in the winding-up order. The exercise conducted before Mr Briggs QC was not, and did not purport to be, a full review of the activities of MATT and its directors.

 

2.                  As I have said, the Respondents were appointed joint liquidators of MATT, on 15^th April 2004. On 11^th August 2004, the Respondents registered a Restriction against title number MX213576 (the Dongola Road Property) and the grounds stated in support of the application were as follows:-

 

“Mr P M Davis and Mr T E Dolder were appointed Joint Liquidators of Millennium Advanced Technology Training Limited (“the Company”) on 15^th April 2004. The Winding-Up Order was granted on the petition of the London Borough of Tower Hamlets who were concerned at the misuse of public funds, specifically grant monies made available to the Company to provide training to disadvantaged members of the community. By a Judgment of Judge Briggs QC certain findings of fact of forgery and creation of false documents were made against the Company.

 

The Joint Liquidators are currently investigating causes of action against the officers of the Company and will shortly be issuing proceedings against Mr Ahmed, the Managing Director of the Company who is a registered proprietor of a property.

 

The Proceedings will include a claim of misfeasance for misuse of company funds, specifically that Mr Ahmed used company funds to pay for work to the property, giving rise to a tracing claim into Mr Ahmed’s interest in the Property. The Joint Liquidators therefore ask for a restriction on the property pending the outcome of such proceedings.

 

The Joint Liquidators assert that by virtue of the tracing claim they are persons having a sufficient interest to apply for a restriction pursuant to r93(b) of the Land Registration Rules 2003.

 

In support of this assertion we refer to the witness statement of Mr Steve Carver of Carver’s Builders dated 7 March 2002. This statement has been obtained from the Metropolitan Police Fraud Squad pursuant to various Production Orders.

 

At page 2, paragraph 1 Mr Carver refers to work he was instructed to carry out by Mr Ahmed for his personal benefit to the property and states “I have received several cheques for this work and I think that they are all company cheques believed to be MATT”.”

 

3.                  For some reason Mr or Mrs Ahmed, the joint owners of the Dongola Road Property, did not become aware of the Restriction at the time. At all events, on 23^rd December 2004 solicitors instructed by the Applicants wrote to the Respondents’ solicitors inviting them to withdraw the restriction by Friday 7^th January 2005. In that letter, the Applicants denied that either of them had ever used any monies belonging to MATT to carry out improvements to their personal properties. They also stated the following:-

 

“Our clients have evidence to show that a total sum of £28,950 was paid to Mr Carver between 10/10/02 and 21/3/03, of which £24,000 and £4,950 came from the personal accounts of Mr Ahmed and Mrs Ahmed respectively. These sums were paid to Mr Carver for works carried out to the said properties before he ran away leaving the works unfinished.”

 

4.                  The Respondents’ solicitors responded on 5^th January 2005 with a letter which included the following paragraph:-

 

“Regarding Dongola Road, we would ask you please to provide us with copies of all documents in your client’s possession evidencing that the works carried out to this property were funded by Mr and Mrs Ahmed personally. Upon receipt of this we will take the Joint Liquidators’ immediate instructions upon your request to remove their restriction.”

 

5.                  There then ensued a further exchange of correspondence between the parties. The Applicants’ solicitors provided a certain amount of documentation, but this did not satisfy the Respondents. Eventually on 21^st April 2005, the Applicants supplied the Respondents with a written authority, addressed to Barclays Bank plc, at the Strand branch, permitting the Respondents to inspect 6 specific original cheques, which were alleged to have been payments made to Mr Carver. In the event, the Respondents decided that it was not for them to inspect the originals but for the Applicants to demonstrate conclusively that there had been no misuse of funds belonging to MATT, and this the Applicants (in their view) had failed to achieve. Accordingly, the Applicants proceeded with their application to cancel the Restriction, originally lodged on 22^nd February 2005, and the dispute was referred to the Adjudicator by the Chief Land Registrar on 8^th June 2005.

 

6.                  Statements of Case were exchanged by August 2005, and in October 2005 the Adjudicator issued standard directions for hearing, including disclosure and the service of evidence. Subsequently, on 22^nd November 2005, the Respondents sought a stay of these proceedings, pending the outcome of criminal proceedings which, by this stage, had been brought against the Applicants. In their letter of 22^nd November 2005, the Respondents’ solicitors made the following statements:-

 

“To assist we enclose a summary of the criminal charges brought against Mr and Mrs Ahmed. Given the serious nature of the allegations we trust the Adjudicator will appreciate that any criminal conviction is highly relevant to our client’s contention that there is an issue of veracity and credibility regarding the version of events put forward by Mr and Mrs Ahmed in support of their application.

 

Furthermore, it is our understanding that charge number: 9 partly relies upon the evidence of Mr Carver that he was paid by monies from the companies to carry out repairs to Mr and Mrs Ahmed’s personal property. This allegation is crucial to our client’s position.”

 

7.                  The Respondents’ application for a stay of proceedings was refused by the Adjudicator in April 2006. Subsequently, the Respondents made further submissions on the issue, and applied for permission to appeal the decision of 25^th April 2006. In a reasoned decision, Deputy Adjudicator Hewitt dismissed the application for permission to appeal, in August 2006, and gave directions for a hearing. When he made that direction, he was aware – because the Respondents had informed him – that the criminal proceedings were likely to be heard in January 2007. As a result of the directions given by Deputy Adjudicator Hewitt, this matter was listed for hearing in May 2007.

 

8.                  Shortly before the hearing was due to come on, the Respondents’ solicitors applied to the Adjudicator for an adjournment of the proceedings, pending the outcome of the Prosecution’s application for a Confiscation Order in the criminal proceedings. By the date of this letter, Mr Ahmed had been found guilty on various counts of theft, furnishing false information and conspiracy to steal. He was sentenced to an 18-month custodial sentence. Mrs Ahmed was also found guilty on a charge of conspiracy to steal. It was pointed out that the proposed application for a Confiscation Order might render the intended tracing proceedings otiose, and for all these reasons an adjournment was requested. That application was denied, and eventually the matter came on for hearing before me on 29^th May 2007.

 

9.                  At the hearing, the Applicants’ case was put in the following way. First, it was alleged that the Applicants had paid Mr Carver from their own monies, and the documentary evidence supplied by them rebut the contents of Mr Carver’s statement to the police upon which the Restriction was based. I was asked to note that the prosecution did not call Mr Carver to give evidence in the criminal trial, nor were any of the allegations relating to Mr Carver’s work on the Dongola Road Property the subject of criminal charges. Furthermore, Mr Carver did not make a witness statement in the instant proceedings and is not being called by the Respondents to give evidence. Accordingly, it was submitted by the Applicants, the Respondents’ alleged tracing claim is unsustainable and should fail. In the circumstances the Restriction should be vacated. The Applicants also asked me to take into account other considerations. In particular, the Respondents’ refusal to vacate the Restriction voluntarily is oppressive, because since at least January 2005 the Applicants have furnished sufficient evidence to the Respondents to show the legitimate provenance of the monies paid to Mr Carver.

 

10.              The Respondents’ submissions were as follows. First, it was asserted that the Applicants had been unable to rebut the statement of Mr Carver, used as the basis for the Restriction. Although some documentation has been produced, it is said, this documentation is incomplete, and reveals certain discrepancies. Both the Applicants have been convicted of offences of dishonesty and their evidence cannot be relied upon in any event. Secondly, it is impossible to say that any tracing claim by the Respondents is bound to fail. On the contrary such a claim would have a good deal in common with the specimen charges on which the first Applicant was convicted and the conspiracy on which both Applicants were convicted. Although no proceedings have yet been commenced, the monies stolen from MATT belonged to the public purse. Any tracing claim would be for the benefit of the public purse. The CPS is bringing confiscation proceedings which would render a tracing claim academic if successful. The Respondents’ primary submission, therefore, is that a Restriction is justified in principle. If that is accepted, the question is whether the delay in commencing proceedings should lead to cancellation, alternatively whether the Respondents should be ordered to commence proceedings. It is submitted for the Respondents that no order should be made until the confiscation proceedings are disposed of. If no confiscation order is made then a tracing claim can be required as a condition of the Restriction continuing. If an order is made then the Respondents can lead evidence to show whether a tracing claim has any prospect of leading to a viable recovery. The basis for that submission is that it would be a waste of public funds for the Respondents to be required to commence proceedings unnecessarily, and it would be unjust to cancel the Restriction if, in the event, no confiscation order is made.

 

11.              Before considering the specific facts of this case, and the parties’ submissions, it would be helpful to set out the relevant provisions of the Land Registration Act 2002 and the 2003 Rules. Restrictions are dealt with by section 40 to 47 inclusive of the 2002 Act. It is provided by section 40 as follows:-

 

“(1) A restriction is an entry in the register regulating the circumstances in which a disposition of a registered estate or charge may be the subject of an entry in the register.

 

(2) A restriction may, in particular -

(a)     prohibit the making of an entry in respect of any disposition, or a disposition of a kind specified in the restriction;

(b)     prohibit the making of an entry -

(i)                    indefinitely,

(ii)                   for a period specified in the restriction, or

(iii)                 until the occurrence of an event so specified.

 

(3) Without prejudice to the generality of subsection 2(b)(iii), the events which may be specified include -

(a) the giving of notice,

(b) the obtaining of consent, and

(c) the making of an order by the court or registrar.”

 

12.              The effect of a Restriction is spelled out in section 41 of the 2002 Act, which, in subsection (1), provides as follows:-

 

“Where a restriction is entered in the register, no entry in respect of a disposition to which the restriction applies may be made in the register otherwise than in accordance with the terms of the restriction, subject to any order under subsection (2).”

 

13.              Section 42 of the 2002 Act identifies the circumstances in which a Restriction may be entered. The section provides as follows:

 

“(1) The registrar may enter a restriction in the register if it appears to him that it is necessary or desirable to do so for the purpose of –

(a) preventing invalidity of unlawfulness in relation to dispositions of a registered estate or charge,

(b) securing that interests which are capable of being overreached on a disposition of a registered estate or charge are overreached, or

(c)     protecting a right or claim in relation to a registered estate or charge.

 

(2) No restriction may be entered under subsection (1)(c) for the purpose of protecting the priority of an interest which is, or could be, the subject of a notice.”

 

14.              The 2003 Rules contain additional provisions relating to restrictions. These are set out at Rules 91 to 100 inclusive. In particular Rule 93 contains a list of persons who are regarded as “included in section 43(1)(c) of the 2002 Act” – namely, persons regarded as having a sufficient interest to apply for a restriction. This includes (under sub-rule (h)) “any person with the benefit of a freezing order or an undertaking given in place of a freezing order” and under sub-rule (i) “any person who has applied for a freezing order….”.

 

15.              Mr Ashley Underwood QC, who appeared on behalf of the Respondents, supplemented his skeleton argument at the commencement of the hearing. He submitted that the purpose of a Restriction, in these circumstances, was to “hold the ring” whilst the Respondents considered how best to progress their claim, or potential claim, against the Applicants. He drew my attention to section 46 or the 2002 Act, which gives the power to the court to direct the registrar to enter a restriction “if it is necessary or desirable to do so for the purpose of protecting a right or claim…”. He said that it was only necessary for a party to establish a prima facie or arguable case that there was a tracing claim against a particular property, to permit the registration of a Restriction. Alternatively, if I was against him on that point, he further submitted that there was sufficient evidence in this case to establish, as a point of fact, that the Applicants had misapplied monies belonging to MATT, in relation to the building works on the Dongola Road Property, and therefore that there was a right to trace into that property.

 

16.              Before I consider the evidence adduced by the parties, and my conclusions and findings in relation to that evidence, I should set out my understanding of the legal framework.

 

(1)               A Restriction may be entered for the purposes of “protecting a right or claim in relation to a registered estate…”. On the face of it, this is a wide formulation, which might be apt to include a potential tracing claim against a registered title.

 

(2)               However, once proceedings are commenced which seek the tracing remedy, the appropriate way of protecting the claim is by virtue of a notice – see Ruoff & Roper “The Law and Practice of Registered Conveyancing” at paragraph 42.022.

 

(3)               It is expressly provided by section 42(2) that a Restriction is not to be entered, where the interest is, or could be, the subject of a notice. This would seem to prevent the entry of a restriction to protect a pending land action. This is the conclusion to be drawn from the inter-relation between section 34(1) of the 2002 Act (relating to notices) and section 87(1)(a).

 

(4)               Notwithstanding this, Rule 93(h) and (i) specifically permit parties with the benefit of a freezing order, or who have applied for a freezing order, to enter a restriction against the property in form CC or DD. I think the explanation for this express reference to a freezing order is as follows. A freezing order, or an application relating to a freezing order, does not generally fall within the definition of a pending land action, as defined in the Land Charges Act. This is because the claim does not assert any particular right or interest in relation to the property: the order simply restrains the estate owner from disposing of the property until a specified event. It would not, I think, therefore be possible to protect a freezing order by the entry of a notice, hence the necessity to protect it by some other means, namely a restriction.

 

(5)               By virtue of section 46 of the 2002 Act, the Court may, of its own motion, direct the entry of a restriction in order to protect “a right or claim in relation to a registered estate or charge”.

 

17.              In the present case, the Respondents have entered the Restriction in order to protect a potential claim to trace MATT monies into the Dongola Road property. The Respondents included the following statement in their application: “the Joint Liquidators are currently investigating causes of action against the officers of the Company and will shortly be issuing proceedings against Mr Ahmed, the managing director of the Company, who is a registered proprietor of the property. The Proceedings will include a claim of misfeasance for misuse of company funds, specifically that Mr Ahmed used company funds to pay for work to the property, giving rise to a tracing claim into Mr Ahmed’s interest in the property. The Joint Liquidators therefore asked for a restriction on the property pending the outcome of such proceedings. The Joint Liquidators assert that by virtue of the tracing claim they are persons having a sufficient interest to apply for a restriction pursuant to Rule 93(b) of the Land Registration Rules 2003.”.

 

18.              Rule 93(b) is in the following terms:-

 

“Any person who has a sufficient interest in preventing a contravention of section 6(6) or section 6(8) of the Trusts of Land and Appointment of Trustees Act 1996 and who is applying for a restriction in order to prevent such a contravention.”

 

19.              Section 6 of the Trusts of Land and Appointment of Trustees Act 1996 is headed “General Powers of Trustees”. Section 6(1) states that “for the purpose of exercising their functions as trustees, the trustees of land have in relation to the land subject to the trust all the powers of an absolute owner.” Sections 6(6) and 6(8) of the Act are in the following terms:-

 

“(6) The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of any other enactment or any rule of law or equity.

 

(8) Where any enactment other than this section confers on trustees authority to act subject to any restriction, limitation or condition, trustees of land may not exercise the powers conferred by this section to do any act which they are prevented from doing under the other enactment by reason of the restriction, limitation or condition.”

 

20.              A number of points can be made with regard to the basis of the Respondents’ application. First, it was expressly stated (a) that the Joint Liquidators were currently investigating causes of action and (b) that they would shortly be issuing proceedings against Mr Ahmed. Those proceedings, it was asserted, would include a tracing claim in respect of the Dongola Road Property. At the time when the Restriction was applied for, the Respondents were simply asserting a right to trace. The right to trace into property is an equitable remedy, which can only be established and enforced by means of court proceedings. Until such time as an order is made, declaring that the target property is subject to the tracing remedy, all that the claimant has is the right to assert the claim. It does have any immediate right or interest in the property. The Respondents seemed tacitly to accept this, since the basis of the Restriction was to “hold the ring” while further investigations were carried out, leading to the issue of proceedings. I am not at all clear that sections 6(6) and 6(8) of the Trusts of Land and Appointment of Trustees Act 1996 covers such a situation. It is difficult to see how section 6(8) applies at all – this prohibits the exercise of trustees’ powers in contravention of an enactment. It is also difficult to see how section 6(6) is said to be applicable. This prevents trustees from exercising their powers “in contravention of… any other enactment or any rule of law or equity.” Presumably it is suggested that a disposal by Mr and Mrs Ahmed would be in contravention of the Respondents’ equity to trace into the property: however, I do not think that the words of the sub-section are apt to cover this eventuality.

 

21.              This explains the basis on which the Restriction was originally applied for and entered. Subsequently, the Applicants applied for the register to be altered so as to remove the Restriction. I am not entirely sure that the method adopted by the Applicants was correct. The correct process would seem to be an application made under Form RX3 pursuant to Rule 97 of the 2003 Rules. Be that as it may, it is quite apparent from the Land Registry’s response to the application that they were treating it as an application to cancel a restriction, as if made under Rule 97. Certainly, the Respondents have never taken the point that the application was in the incorrect form. Rule 97 states that “if the registrar is satisfied that the restriction is no longer required, he must cancel the restriction.”

 

22.              It seems to me that I should consider the situation as it presents itself to me, at the date of the hearing. In other words, if indeed the Restriction is no longer required, then it should be cancelled. My conclusions on this aspect of the case are as follows. Where a person claims an equitable remedy in relation to registered property, which falls short of a subsisting interest in that property, the normal method of enforcing that claim is by the issue of proceedings. Once proceedings are issued, it is quite clear that the proper method of protecting the claim is by the entering of a notice in the register. There may be cases where the claim is not to an interest in the property as such, but a right to restrain the proprietor from disposing of the property, as would be the case with a freezing order. In such circumstances, it is expressly provided that the freezing order, or application for the freezing order, may be protected by a restriction. There may be other cases where no application for an injunction is made but a party has a strong prima facie case that it is entitled to an equitable remedy in relation to property, but for some reason it has not been possible to issue proceedings. In such circumstances, it may in some cases be permissible for a restriction to be entered. That appears to have been the very basis on which the Land Registry entered the Restriction in the present case.

 

23.              However, I must consider the situation that presents itself to me in May 2007, almost three years after the Restriction was entered. It does not seem to me appropriate that the Restriction should remain on the register, when it was entered in order to hold the ring pending investigations leading to proceedings which were going to be “shortly” issued. A party in the position of the Respondents has ample remedy, if it chooses to exercise it. It could issue proceedings, as originally envisaged, and register a unilateral notice to protect the pending land action. The proceedings would doubtless seek to establish a breach of fiduciary duty (misfeasance) and a right to trace into the Dongola Road Property. Alternatively, it could apply for a freezing order, which under the Rules could be protected by means of a restriction. In the latter event, of course, cross-undertakings in damages would have to be given. It could issue the appropriate proceedings and ask the Court to enter a restriction under Section 46 of the 2002 Act. However, I do not consider that the restriction process should be used in the way that the Respondents wish to use it, namely to protect a potential tracing claim, without actually testing the claim by issuing proceedings at court. Manifestly, the tracing claim ought to be progressed, if at all, by issuing proceedings in the Companies Court and/or Chancery Division. Unless and until such a claim is issued, the claim is merely inchoate, and gives no present interest to the Respondents in the Dongola Road Property. If such proceedings were issued, it would be open to the court, under section 46 of the 2002 Act, to enter a restriction. I do not think that it is sufficient for the Respondents simply to assert that they have an equity to trace into the property, without actually pursuing that remedy. Nor is it enough to assert merely an “arguable” claim: for the reasons which I have given, a party in the position of the Respondents ought to issue proceedings, or apply for a freezing order, but cannot simply rely on a restriction to support an as yet inchoate equitable claim.

 

24.              On this basis, therefore, I do not see any grounds upon which the Restriction should remain in force. Indeed, as appears from the arguments deployed by the Respondents initially in support of the application to adjourn (which was rejected) and in support of the Restriction itself, the restriction mechanism is in effect being used in lieu of injunctive relief. It is not in my view a proper use of the procedure or one that can be justified by reference to the applicable provisions of the 2002 Act and the Rules.

 

25.              As I have said, the Respondents argue, in the alternative, that they have made out, on the evidence, a right to trace into the Dongola Road property. I have already held that it is not enough for the Respondents merely to show an “arguable” case. However, it is possible that the maintenance of the Restriction might be justified, if the Respondents were able to demonstrate to me, on the appropriate standard of proof, that they are currently entitled to trace into the Dongola Road property. In other words, this would require them to go beyond demonstrating an arguable case, and would require them to prove their case at this stage. I discussed this issue with Mr Underwood when he opened his case, and indicated to him that he may need to prove his case in this way, and he accepted that burden.

 

26.              I must now therefore consider the evidence which I heard on both sides in relation to these issues. The evidence adduced by the parties was as follows. Both Applicants had verified with a statement of truth the material contained in their Statement of Case. Both of them gave oral evidence before me, and were cross-examined (at some length in the case of Mr Ahmed) by Mr Underwood on behalf of the Respondents. No “live” evidence was called by the Respondents. However, they relied upon their Statement of Case, verified by a statement of truth by Mr Davis, and by two witness statements. The first statement was made by a Ms Jo Rolls, a qualified Insolvency Practitioner and Accountant working for the firm of Begbies Traynor, under the supervision of the Joint Liquidators. The other statement was made by a Detective Sergeant Keith Bright, of the Metropolitan Police Fraud Squad, who had led the Fraud Squad’s investigation into the affairs of MATT, culminating in the partially successful criminal prosecution to which I have already referred. These statements were introduced at a very late stage, approximately one week before the hearing was due to commence. Although the Applicants objected to the admission of this evidence, I gave permission to the Respondents to rely upon it, notwithstanding the late service. However, neither witness was available to be cross-examined.

 

27.              It will be recalled that the alleged tracing claim referred to in the Form RX1 is based upon the statement made by the Applicants’ former builder – Mr Steve Carver – in the course of a police interview relating to the Applicants’ alleged fraud in connection with MATT and associated companies. The interview with the police occurred in March 2003 and the witness statement has been signed by Mr Carver and was produced in evidence by the Respondents. The relevant part of Mr Carver’s statement reads as follows:-

 

“Since being introduced to Abu he has asked me to do other work for him, at a house in Dongola Road, number 23. He told me that he owned the house and had a number of business premises in the East End.

 

I am still working on the house on Dongola Road, I have already put on a new roof on the extension, replaced the guttering to the rear of the house and I’ve partially tiled the bathroom, replaced internal doors. When I quoted for the work he told me that he already had some of the materials and that I would only need to provide the guttering, roofing materials and tiles. However, when the work began, some of his materials were of poor quality and as such I needed to give a second quote. I priced the roof separately for £1,360 which I identify the quote dated 13^th January 03 as my exhibit SKPC/2, the original quote dated 18^th December 2002 as exhibit SKPC/3. I have received several cheques for this work and I think that they are all company cheques believed to be MATT (Millennium Advanced Technology Training).(my emphasis).

 

Some of this money was a deposit for the double-glazing, which I think, was a cheque for £3,000. Altogether I received cheques for £5,000 for it. The windows are ordered and can be fitted when the final payment has been received.”

 

28.              The Applicants’ evidence is to this effect. As set out at paragraph 17 of their Statement of Case, they say that they made total payments of £8,000 to Mr Carver, of which all but £500 related to works carried out on the Dongola Road property. The payments were made on four separate occasions as follows:-

 

Date	Amount	Bank	Account No.	Account Name
23/10/02	£2,000	Barclays	70412872	A T G Ahmed
21/01/03	£2,000	HSBC	31323083	Women into ICT and Creative Entrepreneurship Limited (Mrs Ahmed’s employer paying against her salary)
25/02/03	£2,000	Barclays	70412872	A T G Ahmed
08/05/03	£2,000	HSBC	01321943	Mrs Iffet Ahmed (of which £1,500 went towards works carried out on Dongola Road)

 

29.              In support of this evidence, the Applicants provided a certain amount of documentation. These consisted of photocopies of the paid cheques, bearing certain endorsements made by the bank. The original cheques themselves were not produced, and according to the Applicants the banks would not release them. However, written authority was given to inspect the original cheques relating to Mr Ahmed’s account at Barclays Bank. However, as previously explained, the Respondents did not take up the opportunity of inspecting the originals. In view of the ambiguity of certain endorsements on the photocopied cheques, I gave the Applicants the opportunity of adducing further evidence, after the end of the hearing, in order to establish that the sums referred to in the cheques were in fact debited from the relevant accounts. No objection to course of action was made by either party at this stage. In the event, the Applicants submitted extracts from the witness statement of a Mr Robert Nelson, a banking expert who had given evidence for the prosecution in the criminal proceedings. Included in this extract was a spreadsheet, purporting to itemise payments out of the Applicants’ personal bank accounts. However, after receipt of this evidence, the Respondents have adopted the position that this evidence should not be admitted, at least not unless substantial further disclosure is made by the Applicants. They complain that this evidence had not previously been made available by the Applicants notwithstanding requests from them, and notwithstanding the Applicants’ continuing duty of disclosure. In the light of these objections, some of which are well-founded, I have not taken this new evidence into account in reaching my decision.

 

30.              In summary, therefore, the Applicants gave evidence which contradicted the statement of Mr Carver to the extent that he suggested that the payments made for the Dongola Road work were made on MATT cheques. As it happens, of course, Mr Carver’s statement did not unequivocally assert that the cheques were paid out of the MATT account – he said that he thought they had been.

 

31.              Mr Ahmed was subjected to a very thorough cross-examination by Mr Underwood QC. This cross-examination was largely based on material exhibited to the witness statements of Detective Sergeant Bright and Ms Jo Rolls. Essentially, the cross-examination consisted of putting to Mr Ahmed various discrepancies that existed between those documents, and his own evidence. I shall give two examples of this. First, it was pointed out that on an earlier occasion he had prepared a schedule of payments to Mr Carver. This schedule did not match in every respect the schedule of payments which he was relying on in these proceedings. Mr Ahmed’s answer was that he did not have all the documentation at his disposal when he gave instructions for the original schedule, and the original schedule therefore contained a mistake. Secondly, a receipt from Mr Carver – dated 22^nd October 2002 – was put to Mr Ahmed. This receipt purports to show a payment of £2,000 as advanced payment “with respect to building work being carried out at the property situated at 34 Sheringham Avenue, London N14 4CG”. It was pointed out by Mr Underwood that this receipt must have related to the first cheque written by Mr Ahmed to Mr Carver. In other words, the cheque paid in October 2002 did not relate to the Dongola Road Property at all. Mr Ahmed denied that he had ever received the receipt from Mr Carver, and insisted that Mr Carver did no work on the Sheringham Avenue property as early as October 2002. He referred to the payment schedule dated 24^th February 2003 which suggested that the work only was due to commence in February 2003. I also note that the date of the first cheque is 23^rd October 2002: which raises the question as to how that cheque could be said to relate to a receipt dated 22^nd October 2002.

 

32.              A full list of the alleged discrepancies in the documentation, and the various doubts raised by the Respondents with regard to the source of the Carver payments, can be found in the evidence of Ms Rolls and DS Bright, and in the Statement of Case itself. Each of these points were put to Mr Ahmed, and it was suggested to him in robust terms that he was lying, and that, as Mr Carver had suggested in his police statement, the payments for the Dongola Road Property were made not by the Applicants but by cheques drawn on MATT’s bank account. Mr Ahmed rejected this allegation.

 

33.              The Respondents also relied heavily on a document dated 13^th May 2004, being MATT’s detailed supplier activity log in relation to Carver’s Builders. This document was analysed by Ms Rolls in her witness statement, the document itself having been obtained by the Joint Liquidators from the company records. It was pointed out that there appeared to be a number of items on this log, for which no actual invoice could be found. It was therefore suggested by Ms Rolls that some of these payments might have related to the Dongola Road Property.

 

34.              The question I have to ask myself is this: have the Respondents shown, on the balance of probabilities, that the Applicants did use MATT cheques to pay for the work on the Dongola Road Property? Although of course that would not necessarily get the Respondents home, in terms of asserting a right to trace, it is an essential first step in that process. Before reviewing the evidence, I should make the following points. First, the Joint Liquidators were appointed as long ago as April 2004. In their application for the Restriction, in August 2004, they stated that they were investigating MATT’s affairs, with a view to issuing proceedings “shortly” against the Applicants in respect of the Dongola Road Property. The specific allegation upon which the Restriction was based was that made by Mr Carver in his police statement, namely that “I have received several cheques for this work and I think that they are all company cheques believed to be MATT”. No further evidence has been produced by the Respondents to support this claim. Mr Carver himself has not made a witness statement for the purposes of these proceedings, and did not give evidence. Furthermore, no explanation has been given for his absence or the absence of any further evidence from him. The Joint Liquidators have been in possession of all MATT’s financial and other records since April 2004, yet even now the Respondents’ case has to be made by means of inference and innuendo rather than by hard facts. I cannot understand why, if indeed MATT cheques were used to pay Mr Carver, direct evidence of this was not available to the Respondents some three years into the liquidation.

 

35.              Mr Underwood QC, on behalf of the Respondents, relies heavily on the fact of the criminal conviction of Mr and Mrs Ahmed. He relies on the statement in DS Keith Bright’s witness statement, that he has “no reason to doubt the veracity of the statement” made by Mr Carver. Furthermore, DS Bright says that “I can confirm that Mr Carver’s evidence fits within the pattern of behaviour which led to the Applicants’ criminal convictions set out above”. It was submitted to me that the fact of the convictions suggests that the jury at the criminal trial must have rejected much of the Applicants’ evidence. It was also pointed out that the criminal convictions related to (among other things) furnishing false information contrary to section 17(1)(b) of the Theft Act 1968. I was taken to passages in the judgment of Mr Briggs QC (as he then was) on the winding-up petition of MATT, in which he found that Mr Ahmed had been responsible for creating false invoices. Taking all this material together, Mr Underwood submitted to me that I should not rely on any evidence given by the Applicants, and specifically I should reject their rebuttal of Mr Carver’s police statement. In short, the Applicants were dishonest people who had a tendency to use MATT money for their own purposes and to cover their tracks.

 

36.              I am unable to accept the Respondents’ submissions in this regard. In view of the criminal convictions, I do of course treat the Applicants’ evidence with a degree of scepticism. Mr Ahmed in particular seemed reluctant to accept that he had done anything wrong or that he had been properly convicted. However, despite my scepticism, I am satisfied by his explanations as to the various discrepancies in the paperwork that were identified by the Respondents. Furthermore, the Respondents have been unable to produce any direct evidence – beyond the slightly vague statement by Mr Carver – which can support their case. No criminal charges relating to the Dongola Road Property have been brought. It may be that at some future date they will be in a stronger position with regard to the evidence. I do not know. However, as far as the proceedings before me are concerned, I am unable to find, on the balance of probabilities, that Mr Carver was paid for the work to the Dongola Road Property by cheques drawn on MATT’s bank account: the specific allegation supporting the Restriction. There is simply insufficient material for me to reach that conclusion. Indeed, sometimes the Respondents’ case was presented in a way which appeared to confuse the burden of proof, as if they regarded the burden of disproving their allegations as resting with the Applicants, rather than accepting that the burden rested on them to prove their case. Furthermore, such a finding in regard to the Applicants would be tantamount to a finding of fraud against them – in other words, that they have used monies belonging to MATT for their own purposes. At the very least, this would be a serious breach of a fiduciary duty by Mr Ahmed as director. I am conscious that serious allegations of this nature ought to be proved with cogent evidence, albeit to be assessed on the balance of probabilities. In short, I do not regard the evidence provided by the Respondents as sufficient to establish the facts on which they rely. In all the circumstances, therefore, I do not consider that there is any justification for the Restriction remaining on the register in regard to the Applicants’ title, and I shall direct the Chief Land Registrar to cancel it. Accordingly, the Applicants’ application to cancel the Restriction succeeds.

 

37.              I have heard no arguments regarding costs. I direct each party to make written submissions on costs to be served on the other party and filed with this Office within 14 days of the date of this Decision. Each party may then respond in writing within 7 days of receiving the other’s submission. Any party claiming costs should provide a detailed breakdown of those costs with the initial submission.

 

 

 

 

 

Dated this 2^nd July 2007

 

 

 

By Order of The Adjudicator to HM Land Registry