High Court Upholds Order for Sale to Enforce Charging Order in Case of Disputed Trust Deed

Citation: [2023] EWHC 3183 (Ch)
Judgment on

Introduction

The High Court case of HRH Princess Deema Bint Sultan Bin Abdulaziz Al Saud v Ronald William Gibbs & Ors [2023] EWHC 3183 (Ch) provides a detailed examination of the law relating to orders for sale over property subject to a charging order, the authenticity of trust deeds, and the enforcement of equitable charges. The judgment by Deputy Master Linwood delves into the issue of whether a property, entangled in long-standing litigation and represented as beneficially and legally owned by the debtor, should be sold to satisfy outstanding debts.

Key Facts

The case revolves around a property at 36 Kings Road, Richmond, Surrey (“the Property”), owned by Ronald William Gibbs, against whom HRH Princess Deema Bint Sultan Bin Abdulaziz Al Saud sought an order for sale due to an outstanding debt of approximately £582,000 plus US$2,076,000. Gibbs had previously agreed to repay Princess Deema by selling assets, which he claimed he held on her behalf, but failed to do so. Gibbs was also subject to a worldwide freezing order and had been disbarred from defending the underlying proceedings related to the repayment of US$25 million he allegedly invested on the claimant’s behalf.

The property, which Gibbs claimed to own solely both legally and beneficially, was the subject of a Declaration of Trust (the “Deed”) which purportedly granted 50% beneficial interest to Sandra Dawn Gibbs (Mr. Gibbs’ estranged wife) and 25% to their three children. The authenticity of the Deed became central to the dispute.

Authenticity of Trust Deeds

The court first had to ascertain if the Deed was authentic. Deputy Master Linwood scrutinized numerous factors, including representations made by Mr. Gibbs regarding his sole ownership of the Property, the absence of contemporaneous evidence supporting the creation of the Deed, and contradictions in the testimonies of Mr. and Mrs. Gibbs.

Sham Trusts

The court explored the concept of ‘sham’ trusts. It referenced the criteria for a deed to be a sham, such as having no intention to create legal rights and obligations. The scrutiny of Mr. Gibbs’ past conduct and representations was pivotal, revealing a pattern of deception and inconsistency with the existence of the Deed.

Orders for Sale and Equitable Charges

The analysis following the finding that Mr. Gibbs was the sole beneficial owner involved consideration under CPR 73.10C, concerning orders for sale to enforce a charging order. Factors included the size of the debt relative to the value of the property, the debtor’s conduct, the presence of alternative repayment methods, the impact on third parties, and consideration under TLATA (Trusts of Land and Appointment of Trustees Act 1996).

Discretion of the Court

The court exercised its discretion regarding the order for sale, weighing factors such as the breach of various court orders by Mr. Gibbs, the unfeasibility of realizing alternative assets to satisfy the debt, the commercial nature of the creditor’s interest, and the proportionality of enforcing the order for sale against the debtor’s Article 8 ECHR rights.

Constructive Trusts

The judgment discussed the creation of constructive trusts and whether Mrs. Gibbs’ contributions to the maintenance and management of the Property might result in a beneficial interest. The court looked at common intention and detriment reliance—key components in asserting a constructive trust.

Outcomes

Deputy Master Linwood concluded that the Deed was not authentic, thus upholding that Mr. Gibbs was the sole legal and beneficial owner of the Property. The court rejected the establishment of a constructive trust in favor of Mrs. Gibbs and, given the significant debt and lack of available alternative assets for repayment, exercised its discretion to grant the Order for Sale. The judgment relates that the charging order over the Property be enforced through the sale, ensuring the claimant’s ability to recover the outstanding debt.

Conclusion

The case signifies the court’s commitment to upholding legal integrity and debt enforcement mechanisms. Deputy Master Linwood provided a detailed unpacking of Mr. Gibbs’ ostensible ownership claims, highlighting the importance of honest and consistent evidence. Furthermore, it demonstrates the court’s intricate balancing of factors when considering orders for sale under charging orders, addressing the interests of commercial creditors alongside the rights of alleged beneficiaries under suspect trust arrangements. This judgment reinforces that orders for sale can be a drastic but necessary legal remedy for creditors, particularly where debtors have consistently failed to satisfy outstanding debts and have engaged in misleading conduct.