High Court Case Examines Interim Third Party Debt Orders and Family Dynamics

Citation: [2024] EWHC 101 (Ch)
Judgment on

Introduction

This article examines the High Court case of Chedington Events Ltd v Nihal Mohamed Brake & Anor [2024] EWHC 101 (Ch), which involved the further consideration of an interim third party debt order (TPDO). The case provides a comprehensive view of TPDOs, the intention to create legal relations within family dynamics, and the use of judicial discretion. Legal professionals can gain insights from the case regarding property transfers to avoid creditor enforcement, the evidentiary requirements in proving the legitimacy of financial transactions, and the precedence of a creditor’s right to execute a judgment.

Key Facts

Chedington Events Ltd claimed possession of West Axnoller Farm from the defendants, leading to a costs order favoring the claimant at £700,000. The interim TPDO was predicated on the defendants allegedly owing a debt to a third party, Diana Rebecca Cawley, who had received £25,000 from the defendants. The claimant sought to satisfy part of the judgment debt through this alleged debt the defendants owed to the third party. Facts revealed that the funds transferred purportedly for “rent” in advance for a property, were not used as claimed. Instead, the third party made payments at the direction of the first defendant from the transferred funds.

Several legal principles are pivotal to this case, including:

A key legal issue was whether there was an intention to create legal relations when the funds were transferred to Mrs. Cawley, particularly since the parties were close family members. Drawing from Balfour v Balfour [1919] 2 KB 571 and Pearce v Merriman [1904] 1 KB 80, the court emphasized that an intention to create legal relations can exist amongst family members when significant sums are involved, and the purpose behind the transfer necessitates such a legal relationship.

Third Party Debt Orders

The legal framework for TPDOs is established in CPR rule 72.2(1), which requires that the debt sought to be attached be owed solely to the judgment debtor. Taurus Petroleum Ltd v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2018] AC 690 was referred to in understanding that TPDOs are directed at “a debt owed solely to the judgment debtor”.

Exercise of Judicial Discretion

The court possesses the discretion to make a TPDO final, demonstrated in Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192. The principle upheld in this case was that unless there exists a mandatory insolvency regime, the creditor who acts first, as per the “first past the post rule”, can seek to secure the assets of the debtor.

Evidentiary Requirements and Inferences

The court deliberated on the sufficiency of evidence regarding debts owed. In a situation lacking full disclosure, such as the absence of Tom D’Arcy’s witness statement, the court relied on inferences drawn from the available facts, consistent with Royal Mail Group Ltd v Efobi [2021] 1 WLR 3893.

Outcomes

A final TPDO was pronounced for the amount of £7,755.04 due from the third party to the first defendant. Payments attributed to the original sum were deducted, leaving the residue as the amount legally enforceable. A key consideration was that, absent full enforcement of the entire costs order, any recovery that reduces the judgment debt was deemed better than none (“drop in the ocean” principle was not seen as adverse to making a TPDO).

Conclusion

The case of Chedington Events Ltd v Nihal Mohamed Brake & Anor acts as a substantive reference point on the utilisation of TPDOs, the intention to create legal relations between family members for transactional purposes, and the court’s discretion in execution of judgment debts. The principles discussed here are critical points of reference for legal professionals in pursuing or defending claims involving judgments, familial financial arrangements, and third party debts.