Sheriff allows proof in action to determine entitlement to funds raised by selling property of convicted fraudster

About this case:

• Citation:
  [2022] SC HAM 30
• Judgment:
  External link
• Court:
  Sheriff Court
• Judge:
  Sheriff J Speir

The action was originally raised by Bank of Scotland plc against the Crown Office and Procurator Fiscal Service and M, the original owner of the property, after it could not determine who was entitled to the fund in medio. Bill Cleghorn, the enforcement administrator under the POCA order, appeared as a party minuter and lodged a note of argument in advance of the proof arguing that he was entitled to take possession of the whole of the fund prior to distribution.

The case was heard by Sheriff John Speir. No appearance was made by the pursuer at this stage, with the first defender represented by Duffy, solicitor, the second defender appearing as a party litigant, and Forrester, solicitor, appearing for the minuter.

Entitled to possession

The sale of the property, which the pursuer had taken possession of under the terms of a standard security granted by the second defender, generated net proceeds of £86,523.24. The second defender had a claim on the fund in medio under section 27 of the Conveyancing and Feudal Reform (Scotland) Act 1970. However, a competing claim was made by the first defender following their registration of an order under the Proceeds of Crime Act 2002 against the second defender, who had been convicted of fraud.

The confiscation order against the second defender was made in October 2011 in Glasgow Sheriff Court in the sum of £13,003.25. Following a first hearing of the case in 2008, an order was made for the consignation of the fund. Thereafter, nothing of substance happened procedurally until June 2021, when an interlocutor was pronounced stating that, as it appeared that no payments had been made by the second defender in respect of the 2002 Act order the total amount due was now £22,753.22 including interest.

It was argued by the minuter that as a result of the 2011 order he was entitled to take possession of the whole of the fund and any distribution due to the second defender would be determined by Glasgow Sheriff Court after the satisfaction of the sums to which he was entitled in order to meet her liabilities. As the second defender had not advanced any relevant defence to this proposition, he invited the court to grant decree for payment of the entire fund.

The second defender’s position was that she did not accept that the minuter had properly vouched his title and interest in the terms required by the 2002 Act. She accepted that she had been convicted of fraud but disputed that a valid confiscation order or the order appointing the party minuter had been made in terms of POCA despite the terms of the certified extract interlocutors produced.

No discrete submissions were made by the solicitor for the Crown at this stage of proceedings.

Realisable property

In his decision, Sheriff Speir observed: “Ultimately, the objective of the court in which the action of a multiplepoinding has been brought is to pronounce a decree of ranking and preference. Where there is a competition between claimants it is for the sheriff to determine further procedure. An interlocutor ranking and preferring the successful claimants in terms of their claims may include, or be followed by, an order for payment or transfer of the fund in medio to the claimants preferred. In my view this is a function and requirement of this court which has been seized with action of multiplepoinding rather than Glasgow Sheriff Court in terms of section 130 of POCA.”

Addressing the minuter’s substantial arguments, he said: “I am not satisfied that the party minuter has established a basis in law (or fact) for his primary propositions, particularly [that] the fund in medio comprises realisable property, of which the party minuter has been appointed to take possession in terms of Section 128 of the Act. ‘Realisable property’ is defined in section 149 of POCA as ‘(a) any free property held by the accused; (b) any free property held by the recipient of a tainted gift.’ Unfortunately, I was not addressed on the terms of this provision or any judicial consideration of it.”

He explained further: “In my view the proper approach is for the party minuter to fully specify the legal basis for his claim and thereafter to properly vouch it. Only then, in my view can this court proceed to issue a decree of ranking and preference. I consider that further procedure by way of a proof before answer will be required in that respect. That will also allow the party minuter to consider whether he wishes to insist on his primary legal proposition and if so to address the issue more fully by reference to any relevant authority.”

The sheriff concluded: “What remains of the second defender’s case on record still contain certain averments which are of doubtful relevancy. In particular, the second defender’s challenge to the interlocutors from Glasgow Sheriff Court dated 6 October 2011 and 22 July 2016 of which certified extracts have been lodged. It is difficult, however, to disentangle these averments from what I understand her primary arguments to be in relation to her claim on the fund and what may be relevant challenges to the claim of the party minuter, in particular the proposition that he is entitled to payment of the whole fund in medio. Accordingly, I consider it appropriate and pragmatic that any further consideration of these matters be determined at proof before answer.”