The National Crime Agency v Dong & Anor

This judgement arises from the trial of an issue between the National Crime Agency (“the NCA”) (as successor to the Serious and Organised Crime Agency) and the first defendant (“Mr Dong”) and an interested party (“Mr Feng”).

The NCA assumed the general revenue functions of HMRC pursuant to s.317 of the Proceeds of Crime Act 2002 and raised discovery assessments in respect of unpaid taxes for the years 2004/5 to 2008/09 against Mr Dong pursuant to s.29 of the Taxes Management Act 1970. A freezing order was obtained on 21 May 2012 that related, in part, to 32 Grove Wood Hill Coulsdon CR5 2EL title number SGL93187 (“the Property”). At the time the order was made, the Property was registered in the name of Mr Feng but it had previously been registered in the name of Mr Dong. Under the freezing order, Mr Feng was required not to dispose of his interest in the Property. These proceedings were issued on the same day as the freezing order was granted and the freezing order was later continued. Mr Feng gave notice of his intention to set aside the freezing order, as it affected him, and served a detailed witness statement dated 1 November 2012. However, he then did not pursue the application to set aside the order.

The NCA’s claim for unpaid tax due from Mr Dong was eventually pursued in these proceedings after Mr Dong’s challenge to the assessments was dismissed in the First Tier Tribunal on 11 November 2016. He later applied out of time for permission to appeal and that application is outstanding. However, the NCA obtained summary judgement on 27 January 2016 against Mr Dong in the amount of £681,890.28 plus interest. An application for permission to appeal against that judgement was dismissed on 30 March 2017.

On 6 February 2017, the NCA obtained an interim charging order against Mr Dong’s interest in the Property, such as it may be. The NCA asserts that Mr Dong retained beneficial ownership of the Property despite the transfer to Mr Feng in 2011. Mr Dong has applied to set aside the interim charging order and Mr Feng has applied, as an interested party, for an order dismissing the interim charging order.

The remaining background matter of importance is that on 25 May 2017 Mr Dong was convicted at Blackfriars Crown Court of two offences; under count 1, converting criminal property (money laundering) and under count 2, possession of a prohibited weapon (a stun gun). He was later sentenced to a term of imprisonment of 11 years on count 1 with a concurrent sentence on count 2. There is little direct evidence before this court about Mr Dong’s activities. There are, however, two sources of hearsay evidence. First, the decision of the FTT and secondly, the sentencing remarks of the judge in the Crown Court. The court is entitled to have regard to both sources, placing such weight on them as it considers just (see Rogers v Hoyle [2013] EWHC 1409 (QB) per Leggatt J at [100] to [102]).

The decision of the FTT records that Mr Dong established a company named Credit Lucky Limited in August 2004. The company offered money exchange facilities and remittance of funds to China and operated under a money laundering regulation licence from premises in London and five other United Kingdom cities. The company has since been wound up. Between 2005 and 2009 Mr Dong held 17 personal accounts with five different banks and over that period about £74 million was deposited in these accounts. Most of the funds were transferred to Credit Lucky Limited. The tax assessments relate to the balance of the funds that were not so remitted.

The decision of the FTT records conclusions of fact that are directly relevant to the issues to be determined by this court. Although this court is entitled to have regard to those conclusions as hearsay evidence, their weight in the evidential scales will be variable depending upon the relationship between the factual enquiry in the tribunal and that to be decided by this court. Where the court is trying the same, or a very similar issue, in some cases the findings of the tribunal will barely register on the scales. On the other hand, where the tribunal has been able, for whatever reason, to conduct a more detailed factual enquiry than the court, the findings of fact may carry much greater weight. Here, Mr Dong has not provided the court with a witness statement and the NCA lacks the ability to put forward evidence about Mr Dong’s activities other than from hearsay sources. It follows that it is right, in my judgment, to have regard to the findings of the FTT and to accord them full weight, save to the extent they conflict with the evidence provided directly at the trial.

The key findings in the FTT that are material are contained in the following passage in the decision:

“17.

The sums not transferred to Credit Lucky were used by Mr Dong and Ms Fang [his wife] for their personal and private expenditure. This included … the purchase of a property in Couldsdon (sic) …on 10 September 2008 by Mr Dong for £512,500 with the apparent assistance of a mortgage of £299,001, obtained from the Bank of Ireland, which was redeemed in full on 8 December 2008. A payment of £234,999 from Mr Dong’s personal account on 29 August 2008 appears to relate to the Property as a payment of £315,737.45 used to redeem the mortgage.

18.

Following the purchase, the original Property was demolished and completely rebuilt and extravagantly fitted out at a cost of several hundred thousand pounds. The re-built Property, which was valued at up to £750,000 in November 2012, has marble floors and walls throughout the first floor and a purpose-built entertainment room complete with a home cinema in the basement. It is the residence of Mr Dong and Ms Fang and their children.

19.

Funds for the purchase of the Property were received into Mr Dong’s bank account from Chinese sources. Mr Dong says these were “investors” who transferred funds into Cohl Limited, a company of which he is the sole shareholder and director, that was involved in the demolition and reconstruction of the Property. Mr Dong explained that these investors intend to make a profit on the sale of the Property to which he would be entitled to a 10% commission. However, he kept no record of the costs of its demolition and re-construction.

20.

In 2011 the Property was transferred by Mr Dong to a Mr Feng Xing.

…

His [Mr Dong’s] solicitor’s telephone attendance note, dated 13 May 2011, records:

“ (Footnote: ¹ ) TELEPHONE ATTENDANCE NOTE

MATTER transfer of equity – 32 Grove Road

CLIENT Dong

2.00pm

Attending Mr Dong personally. He wants me to act for him to change the name of the title deed to his brother in China. He provided evidence from his brother in respect of ID and proof of address and the English translation of the certificate.

He said that the brother is in fact holding the property on trust for him and I advised him to do a Trust Deed registered at the Land Registry to ensure that his brother does not sell the property without his knowledge. He said it is alright and does not wish me to do this Trust Deed.

He also does not wish for a restriction to be put on the title, as he does not wish any reference of his name on the title document.

He said he will be looking to have the property transferred to his children when they reach 18 years old but I did point out to him that he has no means of compelling his brother to change the property back to his children in about 8 years time, unless he gets his brother to sign the Trust Deed. He says he is aware of my concern but that he does not wish to do so.

I indicated my fee of £250 plus VAT and land registration fee of £130 for the preparation and registering of the transfer. He confirmed that the property is probably worth £600,000 now.

Mr Gui Hui Dong

23 Westley Close

London SE17 3AU

Longfeng30@yahoo.cn

Mobile: 07984977308

His brother is Feng Xing, Feng being the surname.

Prepared and he signed the TR1. I said that I will have to wait for the cheque of £430 to clear before I can formally complete the TR1. I will also check to ensure that no SDLT is required. If one is required [sic], I will notify him and send the form for signature by his brother. He said okay.

(40)

mins JL ”.

21.

Notwithstanding its transfer, Mr Dong, Mrs Fang and their children continued to live at the Property on what Mr Dong described as a “rent free” basis. …”.

The court is also entitled to have regard to the sentencing remarks of the sentencing judge given after Mr Dong’s trial. The judge considered Mr Dong’s conduct was within category 1 of the sentencing guidelines for money laundering offences. Credit Lucky operated a ‘no questions asked’ service which accepted ‘dirty money’ and used sophisticated methods to disguise its origins. Sums in the tens of thousands of pounds were broken down into amounts of £3,000 or less, £3,000 being the maximum amount permitted before checks are required. The value of the sums converted in the period of the indictment ran into tens of millions of pounds.

Mr Feng says he is the beneficial owner of the Property. The NCA’s case is that the beneficial ownership of Property has at all material times remained with Mr Dong and it is entitled to ask that the interim charging order to be made final to charge his interest in the Property with the judgment sum. The court was satisfied at the initial stage that it was appropriate to make the interim charging order, despite the legal title being vested in Mr Feng, because the NCA was able to make out an inferential case about beneficial ownership based upon three pieces of evidence. First, Mr Dong became the registered proprietor of the Property in about September 2005 and, in the absence of evidence to the contrary, was presumed to have become the beneficial owner. Secondly, form TR1 transferring title between Mr Dong and Mr Feng dated 23 May 2011, showed the transaction as having taken place for nil consideration. Thirdly, the attendance note made by Mr Dong’s solicitor recorded that Mr Dong was to remain the beneficial owner of the Property after the transfer to Mr Feng.

It is not the NCA’s case that Mr Feng had any involvement with the criminal activity for which Mr Dong was convicted. There is, however, an issue about the extent of business dealings, if any, between Mr Feng and Mr Dong and whether they were friends.

There are two issues for the court; first, whether Mr Dong has a beneficial interest in the Property and, secondly, whether the interim charging order should be made final. It is only necessary to deal with the second issue if the NCA successful on the first issue. It is common ground that the onus is on the NCA to establish that Mr Dong has a beneficial interest in the Property. As to the second issue, there is strictly no onus on either side. It is a matter for the court in the exercise of its discretion whether to make the interim charging order final.

On 5 April 2017 Deputy Master Lloyd directed that a hearing should be fixed to determine whether the interim charging order should continue and gave directions to ensure that the proceedings came to the attention of Mr Feng who is resident in China. He was exercising powers under CPR 73.10A(3) to direct a trial. On 31 May 2017, at the hearing directed by the Deputy Master, neither Mr Dong nor Mr Feng attended. By then Mr Dong was in prison awaiting sentence and the court was told Mr Feng was unable to come to England because he could not obtain a visa. Directions were given in relation to filing of evidence and permitting Mr Feng to give evidence by video-link at the trial.

Mr Feng’s application for a visa to visit the United Kingdom was in fact made some time before the date of the Deputy Master’s order. He applied for a visa to visit the United Kingdom for 20 days, the stated reason for the visit being tourism. The decision refusing the application was given on 21 February 2017. The reasons for the refusal were put to Mr Feng in cross-examination and include the following passage:

“You have provided a bank statement in your name from Bank of China (account number xxxx) and another from China Construction Bank (account number xxxx). Neither of these bank statements show regular deposits consistent with your salary as claimed and instead contain large deposits for which the provenances are not clear and in amounts not commensurate with your claimed income. For example, on 23/9/16, a total of 1,630,000 RMB (£191,764.71) was deposited to the Bank of China account, an amount which represents over 181 times your stated monthly salary. The documents you have provided do not demonstrate you receive the income you have stated or the origins of the funds deposited to your accounts.

…”.

Mr Dong’s application to set aside the interim charging order is based upon his assertion that he disputes the judgment debt. However, in light of the striking out of his appeal against that judgment, his application cannot succeed on that ground.

With hindsight, it is a matter of regret that two further directions were not given in advance of the trial. First, it would have been preferable if the parties had been required to serve short points of claim and defence, a practice that is desirable where an issue is to be tried as to beneficial ownership under CPR 73.10A(3), because it ensures the issues the court must determine are brought into proper focus. Secondly, the parties could have been directed to provide a limited form of disclosure, namely service of all of documents upon which they intended to rely. Such a direction makes the task of the court easier where it appears the documents produced are selective. In this case, the documents relied on by Mr Feng are not given any context in the form of contemporaneous communications relating to their creation and alleged implementation. Thus, they appear in an evidential vacuum that is only partially filled by oral evidence. Nevertheless, the NCA does not challenge the authenticity of these documents. Instead, it challenges whether they were implemented either at all, or in a manner that is effective under English law.

The NCA was represented by Mr Albert Sampson and Mr Feng was represented by Mr Jacob Gifford Head. The NCA called Alexander Woods who is employed by the NCA. He has no first-hand knowledge about the circumstances in which Mr Dong became the registered proprietor and later transferred the title to Mr Feng. He was, however, able to assist about later events and was a helpful witness.

Mr Feng gave evidence by video-link through an interpreter present in the court. Mr Feng did not have the trial bundle in paper form in front of him and was reliant upon finding the relevant documents from an electronic version of the bundle. That, along with the blunting effects of evidence by video-link, the occasional loss of the signal and the need to use an interpreter made taking his evidence a difficult affair. It also emerged part way through his evidence that members of his family, and possibly others, were present in the room with him as a quasi-audience. It was much more difficult than in more conventional circumstances for the court to form a clear impression about him as a witness due the combined masking effects of the video-link and the interpreter.

The NCA’s case largely turns of three documents; the title entries showing Mr Dong as the registered proprietor of the Property, initially subject to a charge but shortly after the purchase free from any charge, the solicitor’s attendance note and the transfer form TR 1 transferring title to Mr Feng. Mr Feng’s case, which is supported by Mr Dong, is also based in a series of documents in Mandarin Chinese that were exhibited to the statement Mr Feng made in 2012. In each case a translation has been provided.

The title to the Property showed Mr Dong as the registered proprietor with effect from 18 November 2008. The transfer appears to have been dated 10 September 2008 and the purchase price was £512,500. It can be assumed that was the date of completion. The registered title gives no indication that he held the property on trust. The Property was purchased in part with funds borrowed from Bank of Ireland. There is little information about the loan but it can be inferred that Mr Dong must have made an application for the loan and stated to the lender that he was to be the beneficial owner. In any event, the mortgage was redeemed in full on 8 December 2009, just 15 months after the purchase.

In the absence of a requirement to register the position as to beneficial ownership there is no presumption in law that beneficial ownership matches the legal title. (Footnote: ² ) Section 58 of the Land Registration Act 2002 deals only with the register being conclusive as to the legal estate. The NCA’s case is that Mr Dong was the beneficial owner at the date of the transfer into his name, and at date of registration, and has remained the beneficial owner ever since. It seems to me that even, without a legal presumption arising from his registration as the proprietor, a claimed mismatch between legal and equitable interests requires to be strictly proved.

The attendance note is the key element of the NCA’s case put alongside the fact that the transfer of the Property dated 20 November 2011 from Mr Dong to Mr Feng was for nil consideration. The attendance note, if it is an accurate record of what Mr Dong said to his solicitor, clearly records him as wishing to retain a beneficial interest in the Property at the time of transfer to Mr Feng. Mr Dong said to his solicitor not only that “his brother” was to hold the property on trust for him but also that he would be looking to transfer the Property to his children when they reached the age of 18. Mr Feng is not a blood relative of Mr Dong. The NCA’s explanation for the use of the word brother is that it is a loose description of the relationship that arises under the concept of “guanxi”. Mr Feng explains the concept in his witness statement in the following way (there is no reason not to accept his evidence on this point):

“In China the business culture is based on associations of trust and especially important is the concept of “guanxi”, which literally means relationships. In the Chinese cultural and business world there will invariably exist a network of relationships among various parties that co-operate together and support one another. The concept of “guanxi” connotes a series of relationships in which there are mutual obligations and favours owed between the parties concerned. The Chinese people prefer to deal with people they know and trust and in business it is like being friends, and friends can count on each other in good and tough times”.

The maker of the attendance note, Joyce Lim, was not called to give evidence at the trial to explain, amongst other things, her use of the term “brother” in the attendance note. She was at the time the sole principal of J Lim (Legal) Limited trading as Lim & Partners Solicitors. Apart from the attendance note there is only her letter to the Land Registry dated 20 May 2011 dealing with registration. Other than dealing with routine matters, the letter only states that Ms Lim had been informed the current market value of the property was in the region of £600,000. That information could only have come from Mr Dong.

The transfer is silent as to beneficial interests and the register is equally silent. However, the NCA relies on what it says is a presumption in the case of a gratuitous transfer that the property transferred is held on a resulting trust for the transferor. (Footnote: ³ ) Although Mr Gifford Head conceded that such a presumption exists, the legal position is far from clear and on one view the presumption that arises on a voluntary transfer of land was abolished with effect from 1 January 1926.

S.60(3) of the Law of Property Act 1925 (“LPA”) provides that:

“In a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee.”

It is of interest, however, that the heading to s.60 is unusually explicit in describing the subject matter of the section as:

“Abolition of technicalities in regard to conveyances and deeds”. [my emphasis]

The need for s.60(3) arises from the repeal of the Statute of Uses 1535 confirmed in s.207 and Schedule 7 of the LPA. Prior to its abolition, the convention was for a conveyance to include words to the effect that the property was conveyed for the use or benefit of the grantee. This may fairly be described as a technicality and the draftsman of the LPA was concerned to clarify the position arising from the repeal of the Statute of Uses. It would have been very easy for the draftsman to have said that the presumption to which the sub-section is addressed is abolished. After all the LPA consolidated the fundamental reforms to the way in which land was held and conveyed and is explicit about change where it needs to be. Instead the sub-section says a resulting trust is not to be implied “merely by reason of” a failure to use a time-honoured conveyancing formula.

The provision is discussed in Snell’s Equity 33^rd Ed at 25-017. The editors record that s.60(3) has been held by the court to mean that no resulting trust in favour of the grantor arises on a voluntary conveyance of a freehold estate. They refer to Lohia v Lohia [2001] EWCA Civ 1691 where the point was considered by the Court of Appeal, the deputy judge at first instance having reviewed a number of authorities and academic works as well as the monograph by Dr Chambers on Resulting Trusts. The deputy judge concluded that “… on a plain reading of Section 60, the presumption has been abolished”. However, in the Court of Appeal Mummery LJ declined to express a view about whether s.60(3) had that effect because it was unnecessary to do so for the disposal of the appeal.

The Editors of Snell observe in referring to the decision of the deputy judge:

“This literal interpretation produces the anomaly that a resulting trust of real property would be precluded by the provision where on the same facts a trust of personal property would arise. The preferable interpretation would be that the provision merely introduces the possibility that the grantee may take the beneficial interest in the land even though the words “to the use or benefit of the grantee” are not expressed in the conveyance. That is to say, the provision was only intended as a conveyancing reform to simplify the words of limitation in the conveyance, not to preclude the application of the substantive law of resulting trust to voluntary conveyances of land.”

Limited further assistance can be obtained from speeches in two appeals before the House of Lords. In Tinsley v Milligan [1994] 1 AC 340 at 371 Lord Browne-Wilkinson described the literal interpretation of s.60(3) as being “arguable” without expressing any further view on the topic which was not on point in the appeal. More recently, in Prest v Petrodel Resources Ltd [2013] 2 AC 415 Lord Sumption JSC at [49] took it as read that equity would presume a resulting trust upon a voluntary transfer without discussing the authorities or acknowledging that there was an alternative view.

Halsbury’s Laws 5^th Ed Vol 98 at [145] comments:

“The probable effect of [s.60(3)] is that there will be no resulting trust on a voluntary conveyance unless it has been expressly conveyed upon trusts which fail to dispose of the entire equitable interest.”

Footnote 4 when referring to Prest v Prestodel Resources Ltd observes that s.60(3) was overlooked by the Supreme Court.

It is not in doubt that extrinsic evidence may be adduced, whether or not the presumption exists, to determine the existence or otherwise of a resulting trust (see Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 312F per Lord Upjohn, Ali v Khan [2002] EWCA Civ 974 at [24] and Lewin on Trusts 9-007, 9-012 and 9-017). However, it must often be the case that a party seeking to contend there is a resulting trust following a voluntary conveyance has a limited ability to produce extrinsic evidence. The grantor, and sometimes the grantee, hold all the cards. A third party will usually hold no cards at all. The presumption has the potential to even out the evidential imbalance without leading to an unfair starting point. The presumption is not irrebuttable and amounts to little more than starting point and may be displaced by evidence. As Lord Upjohn put in in Vandervell v Inland Revenue Commissioners:

“… this is only a presumption and can easily be rebutted. All the relevant facts and circumstances can be considered in order to ascertain A’s intentions with a view to rebutting this presumption.”

However, whether such a presumption has survived s.60(3) is a “controversial question” (Lewin on Trusts – 9-012) and described as “a debatable question” by Russell LJ in Hodgson v Marks [1971] Ch 892 at 933. Such doubt is very unhelpful to the first instance judge. At first blush, it is surprising that the proper construction of s.60(3) has not been resolved by the court over 90 years after it came into force. However, the reason is likely to be because, over time, presumptions have become less important as the court has become more able, and willing, to consider evidence from wider sources, such as hearsay evidence. The less strict are the rules of evidence, the less importance presumptions become. The presumption under consideration here, provides little more than a starting point and may be easily displaced.

I propose to proceed on the basis that the presumption remains in being despite what has been described as the literal effect of the words in s.60(3). I acknowledge, however, that the court has only received limited submissions on the point in this case and that the deputy judge in Lohia reached a contrary view after having a wide range of authority cited to him. I consider I am entitled to reach a contrary view giving due weight to the view expressed by the learned editors of Snell. The point, after all, is one of statutory interpretation. A literal interpretation of s.60(3), even if that is the right approach, does not to my mind inevitably lead to the result that the presumption has disappeared. Due weight must be given to the words used in the sub-section and their context. S.60 appears in the LPA the part dealing with “Conveyances and other Instruments” running from s.51 to s.75. As the heading suggests this part of the act is largely concerned with the nuts and bolts of conveying interests in land. Examples of the approach taken by the draftsman can be seen from sections 53 and 54 that are followed by the saving provisions of s.55. To my mind it is hard to escape from the conclusion that the heading to s.60 meant exactly what it said. This is borne out by sub-sections (1) and (2) of s.60 both of which deal with what may fairly be described as technicalities.

Furthermore, it seems to me that the mischief towards which s.60(3) is aimed is the failure to include formula of words in a conveyance, namely the failure to say that the property is not expressed to be conveyed for the “use or benefit” of the grantee. Put another way, if it had been the intention of the draftsman to do away with a presumption of law of long standing, it might have been expected that the Act would have said so in terms and it would be even more surprising for the presumption to have been abolished only in relation to land with a saving provision for chattels. Furthermore, there would be no good reason to abolish the presumption in this limited way given that the interest in land being conveyed without consideration might be worth very much less than the value of some types of chattel.

The NCA’s case is therefore:

Of these propositions, only the fifth is in issue between the parties. Mr Sampson relies upon passages in Lewin on Trusts 19^th Ed. at 9-010 and 9-017:

These passages do not sit entirely easily with the view taken in Snell’s Equity 33^rd Ed. at 25-11 and 25-013:

It seems to me that the better view is the one expressed in Snell both as to whether it is only the transferor’s intention that is relevant and whether acts and declarations subsequent to the transfer may only be admissible as evidence against the party who made them. Both the restrictions referred to in Lewin are highly artificial in an era in which the court will admit a wide range of evidence and accord such weight to it as it thinks fit. In a similar way to the reduced importance of presumptions, where the court is trying the establish what was intended at the time of the transfer, it should be free to have regard to all facts and circumstances that may shed light on the question, subject only to the requirement that establishing intention is an exercise of looking objectively at the facts. Evidence of subjective intention, which will inevitably be self-serving, is not admissible.

Mr Alexander Woods is unable to provide any direct evidence relating to the property. However, there are matters he raises in his two witness statements that are worth highlighting.

The FTT held that the mortgage on the Property was redeemed on 8 December 2008. It appears this must be an error because the redemption statement clearly states 8 December 2009. The decision also notes that a payment from Mr Dong’s account of £234,999 on 29 August 2008 appears to relate to the purchase of the Property and a payment of £315,737.45 appears to relate to redemption of the mortgage on 8 December 2009.

Mr Feng relies upon five documents:

The two investment agreements are expressed to be subject to the laws of China. Each of the other agreements is likely to be governed by the law of China. In the usual way, in the absence of any evidence about the provisions of Chinese law, the court presumes that the relevant law is the same as English law.

Investment agreement [1] is dated 15 February 2008 and is not directly connected with the Property. It concerns an agreement between Mr Feng and LH to invest in the Yichang Sanxin Construction Engineering Limited Liability Company with LH holding shares in that company on behalf of both investors.

The Agreement of Cooperation dated 3 July 2008 pre-dates the purchase of the Property. It provides that the Property is to be acquired with funds provided by FG and LH (RMB 5,000,000 yuan). It does not say anything directly about the name in which the title is to be held. It goes on:

“2.

After buying the said estate, [FG and LH] will appoint [Mr Dong] to rebuild it and [Mr Dong] is capable of exercising the right of possessory [sic], use as well as disposition. The said estate will be rebuilt as the pre-sample used before real estate development.

3.

[FG and LH] … totally enjoys 90% profits of the above-mentioned estate while [Mr Dong] enjoys 10%.”

Investment Agreement [2] dated 28 October 2009 is also unconnected with the Property. It is in the nature of a joint investment arrangement between FG and Mr Feng under which shares in a company are to be held in the name of FG.

The Voluntary Divestment Agreement dated 20 January 2011 between FG and Mr Feng evidences Mr Feng’s agreement to give up his interest in the shares held in the name of FG but it does not say what effect this is to have. This is explained in Mr Feng’s evidence as the means by which payment was made by Mr Feng to acquire FG’s interest in the Property. It has to be seen in the context of the Estate Transfer Agreement that is dated just a few days later.

In the Estate Transfer Agreement dated 25 January 2011, FG, LH and Mr Dong are described as Party A and Mr Feng as Party B. It provides:

“Party A three members has built estate in England under cooperation relationship, which is ceased now. In the process of handling common assets, Party A and Party B have reached the following agreements voluntarily on the matter of estate transfer.

1.

The said [Property] was purchased and rebuilt by Party A of three persons in the name of [Mr Dong], and will be transferred to Party B … after being agreed by the said three persons at the price of RMB10,000,000 yuan. Party B shall pay 80% of this purchasing money as of RMB8,000,000 yuan within 15 days since this agreement is signed. 10% as of RMB1,000,000 yuan shall be paid while the ownership of the said estate is registered in Party B’s name … and the rest 10% of the purchasing money as of RMB1,000,000 yuan shall be paid on the day Party B … goes to England and takes over the estate formally. In case Party B … overdue, he will be requested to pay 2% penalty to party A per month.

2.

The estate ownership shall be registered in [Mr Feng’s] name timely after the agreement signed. And Party A, with the representative of [Mr Dong], shall be responsible for handling the registration and make the said ownership in [Mr Feng’s] name. Before party B immigrates to England or his children go to study in England, [Mr Dong] shall be in charge of looking after and maintaining the said estate, as well as reporting to [Mr Feng] the maintenance costs, marketing value changes on time.

3.

[Provides an obligation by Party A to help Mr Feng in connection with obtaining an English visa for him or his children or arrangements for his children studying in England].”

It is probable that the translations of these agreements are imperfect; however, they convey their sense adequately. The NCA does not assert either that the agreements are of no legal effect or a sham. Whatever doubts there may be about the oral evidence provided by Mr Feng and Mr Dong, the agreements cannot be impugned although when put together they form a remarkably convenient pattern. The issue for the court is whether the agreements have the effects claimed of them by Mr Feng and Mr Dong and, importantly, whether they were they performed.

It seems to me it is most helpful to start with Mr Dong’s evidence because the essential starting point for the NCA is that Mr Dong beneficially owned the Property when it was registered in his name. If he was not the beneficial owner upon the purchase (it is not suggested he acquired an interest at a later date) then the NCA’s case is bound to fail because he had nothing to give away in 2011 when he executed a transfer in favour of Mr Feng.

Mr Dong has not made a witness statement that sets out his case in any detail. However, his evidence emerged from cross-examination by counsel for the NCA and counsel for Mr Feng. He maintained that he did not acquire the Property beneficially in 2008 but, rather, it was bought in his name as “trustee” because FG and LH were not in this country. He also says that the money for the purchase came in part from the mortgage and part from FG and LH, and their contributions were paid into his account. The mortgage was then paid off with further funds from them. Mr Dong relies on the Agreement of Cooperation dated 3 July 2008 which is about two months before the purchase was completed.

Mr Dong was adamant that he did not move into the property until 2012 and it was not a question of the property being refurbished but, rather, it was completely rebuilt. He managed the project. The idea appears to have been, according to him, to use the property as a show house to demonstrate the quality of property that could be produced to suit Chinese tastes. He says he had no interest in the Property which he held for FG and LH. He was entitled, however, to 10% of the proceeds of sale. In short, Mr Dong’s evidence is that the Agreement of Cooperation is a genuine document and the arrangement it reflects was implemented. Mr Dong did not contribute to the purchase cost and never had an interest in the Property.52Mr Dong’s attempt to explain the attendance note was at odds with the statements it records. Initially he accepted he had a telephone conversation with the solicitor but later said he had only spoken to the solicitor face to face. He said the solicitor must have wrongly recorded what he told her due to her failure to understand him. Ms Lim was provided with proof of Mr Feng’s identity and it seems to me inherently unlikely that she would have thought Mr Feng was Mr Dong’s brother in a literal sense given the difference of name and much more likely she was using the term brother as a way of indicating the was a guanxi relationship between the two men.

There was debate about Ms Lim’s ability to communicate with Mr Dong because she was not a Mandarin Chinese speaker. It was suggested that she may have misunderstood what Mr Dong told her. This seems to be wholly implausible. Mr Dong was unable to provide an explanation about why, in a multi-cultural city such as London, he would have chosen to appoint a solicitor with whom he could not communicate accurately concerning an asset said to have a value in the region of £600,000 (or more). Equally, it seems to me that Ms Lim was not likely to have accepted instructions from a client she could not understand, or make herself understood.

Although the document is heading telephone attendance note, it is plainly a record of a meeting – hence the opening words: “Attending Mr Dong personally”. The heading describes the transaction as “transfer of equity” but the body of the note refers to Mr Dong wishing to “change the name on the title deed” and goes on to record Mr Dong saying that Mr Feng was “holding the property on trust for him”. The use of the present tense is not significant as it could mean that Mr Feng was holding the property on trust before the name on the title was changed. It must mean that Mr Feng was to hold the property on trust after the transfer.

It is of interest that Ms Lim provided advice to Mr Dong about the wisdom of a Trust Deed being executed to record the beneficial interests. Mr Dong rejected both that advice and the suggestion a restriction should be recorded on the title. Mr Dong has been convicted of a money laundering offence which involves hiding illegal sources of money. It is of the essence of the business carried on by Mr Dong that he concealed the true sources of the very large sums of money that passed through his hands. The concealment of the true beneficial ownership of the Property by rejecting advice about the execution of a trust deed, or the registration of a restriction, chimes with the approach which, of necessity, Mr Dong adopted in his business.

A copy of the attendance note was sent to Mr Feng in 2012 after he served evidence in connection with his proposed application to vary the freezing order (the application was not made). No comments were provided by his solicitors.

It also appears to me that Mr Dong, who chose to give evidence through an interpreter, has minimised his ability to speak and understand English. He has appeared at several earlier hearings before me and was able to follow what was happening and to communicate with the court without the assistance of an interpreter. He has submitted documents in the course of the proceedings and signed them with no indication they have been translated for him.

Mr Dong was cross-examined by both counsel and I formed a very unfavourable impression of him as a witness, even after making allowances for the mediating effect of an interpreter. He was often evasive in answering questions and I consider he was did little to help the court. His attempts to deny what is attributed to him in the attendance note made by his solicitor were particularly unimpressive. I reject Mr Dong’s evidence about the circumstances in which the Property was registered in his name and later transferred to Mr Feng

Mr Feng has provided two witness statements and, in addition, he set out his case at some length in a letter to the court dated 4 April 2017. All three of these documents are written in excellent English and bear no sign that they have been translated into Mandarin Chinese before he signed them. Mr Feng said in evidence that in each case the document had been translated from English into Chinese and he had checked the Chinese version for accuracy. However, he was unable to produce those versions.

There is also a difficulty in relation to ancillary documents that are in Chinese. In some cases, translations into English have been produced but not in every case. Mr Feng said he sent English translations of every document in Chinese to his solicitor and it must have been the solicitor’s choice to leave out some of the translations. This is unlikely. There are other aspects of Mr Feng’s evidence that are unsatisfactory. For example, he deals in his statements with the purchase of the Property in Mr Dong’s name in 2008. He now says he had been a friend but not a business associate of Mr Dong since 2006. Notably he now seeks to distance himself from Mr Dong’s business although in his 2012 statement he describes Mr Dong as a friend and business associate. Under cross-examination, Mr Feng accepted that he has no first-hand knowledge about that period. His statement deals with the way in which funding was provided by FG and LH for the purchase of the Property based upon what he has been told by them. He sets out a schedule of payments made “with the help of friends and business associates” between 7 August and 24 December 2008 amounting to £541,499, However, the documents he exhibits to evidence these payments do nothing to authenticate them and the figure is not explained.

Mr Feng’s statements describe his business investments in China and he confirms the two Investment Agreements, the Divestment Agreement and the Estate Transfer Agreement. He says that he became interested in buying a property in the United Kingdom because he wanted his daughter aged 15 to study here. In his recent statement he also says he was considering moving his family here despite having never visited the United Kingdom. He agreed to buy the Property for RMB10,000,000 yuan pursuant to the agreements made on 15 and 20 January 2011 with FG and LH. By that means he says he paid the agreed sum and the title to the Property was transferred to him for consideration, albeit that Mr Dong, the registered proprietor received no part of the consideration. The Estate Transfer Agreement was the means by which the Property was acquired by him and he left it to Mr Dong to put the agreement in to effect.

According to his evidence, his daughter was not interested in studying in the United Kingdom and he dropped the idea of moving his family to the UK. He says he was unaware of the level of rents and was content to allow Mr Dong to occupy the Property rent free. He became aware of the freezing order when he had found a possible purchaser for the Property whose name he was unable recall when he made his second statement. However, at the trial he claimed he was able to recall the name of the person concerned without explaining how his memory had improved over time.

It seems to me that the court must be cautious about forming an adverse impression about Mr Feng due to the circumstances in which his evidence was given. If it is ever helpful to rely upon impressions of the witness’ ‘demeanour’ (a word which can be used to mean anything and nothing), it is near impossible to do so in these circumstances. However, that said, I was not impressed by Mr Feng as a witness. He was at times evasive in answering questions and I formed the impression that he was only prepared to provide the court with the information he thought would help his case, rather than seeking to help the court. Furthermore, some of his evidence was contradictory. An example of this is his evidence about who paid for the costs of refurbishment of the Property and other works. It is not unfair to describe his evidence on this subject as muddled and confused. Other concerns about his evidence include:

I consider Mr Feng’s evidence was unreliable.

In substance, Mr Dong supports Mr Feng’s case although he does not accept that he was a business associate of Mr Feng. I accept that Mr Dong undertook, or at least supervised, an extensive building project at the Property after it was purchased in 2008. The degree of his involvement however, and his choice of materials and finishes, suggests strongly that the project was not a venture in which he merely had a 10% interest in the proceeds of sale after the property was eventually sold.

Critically, the evidence of the funds to purchase the Property and to carry out the rebuilding and fitting out having come from LH and FG is wholly inadequate. It requires clear and cogent evidence that they were the real funders and the evidence that has been produced comes nowhere near to reaching this standard. All the court is provided with is assertions in oral evidence and documents relating to a series of transfers that are impossible to decipher. It is said that funds were remitted by a series of un-named friends, relative and business associates. I am left with the impression that Mr Dong and Mr Feng have chosen which parts of their case will be supported by documentary evidence (the agreements are convenient examples of this) and those where detail will be omitted.

Section 53(1) LPA requires that the creation of a trust must be signed in writing. This does not affect resulting or implied trusts – s.53(2). The Co-operation agreement is not consistent with the facts and does not amount to writing that supports the existence of a trust of the Property. Under its terms Party B, said on two occasions in the text to comprise three people whereas only FG and LH are named as Party B, were to be the buyers of the Property. Nothing is said about title being registered in Mr Dong’s name and him holding it on trust for FG and LH and I do not consider the agreement can be construed to give it that effect. Paragraph 3, is more consistent with the creation of an interest in the profits from the venture, rather than giving FG and LH beneficial ownership. The agreement has the appearance and feel of a funding arrangement rather than, as Mr Dong claimed in evidence, an arrangement that enabled FG and LH to acquire the property beneficially. The logic of the agreement, if it had the effect Mr Dong and Mr Feng contend, would have led to title being registered in their name. Set against Mr Dong’s propensity to deceive, as is evidenced by his conviction for a very serious money laundering offence, and his explicit statements in 2011 that he was the beneficial owner, I am satisfied that on acquisition the legal title matched the beneficial interests. Mr Dong was the beneficial owner of the property and the agreement he had with LH and FG was merely a contractual arrangements that did not affect ownership of the Property, either at law or beneficially.

I would only add that the failure to call FG and LH to give evidence about the purchase of the Property and the circumstances in which the Co-operation Agreement was executed has not aided Mr Feng’s case although it is unnecessary to draw an adverse inference.

I turn to deal with the transfer in 2011. The starting point is the presumption that a resulting trust arose because the transfer was gratuitous. It is however readily displaced by contrary evidence. There are two key documents in place. First, the attendance note and, secondly, the Estate Transfer Agreement.

Mr Gifford Head is right to submit that the court should consider carefully what weight is to be placed on the content of the attendance note. Mr Dong has been convicted of a serious offence involving dishonesty and deception. Why, Mr Gifford Head submits rhetorically, should it be assumed that Mr Dong is on this occasion telling the truth? This is a point with real force. The NCA is also criticised because it made no effort to call Ms Lim to give evidence. To my mind such a criticism is without any real foundation in light of acceptance by Mr Feng that the attendance note is an accurate record of what Mr Dong said and the advice he received. It is most unlikely that Ms Lim would have any independent recollection of such a modest transaction that took place six years ago.

I am not persuaded that I should have little regard to what is recorded in the attendance note. The occasion was a private meeting between Mr Dong and Ms Lim. He would have had no expectation that a note of the discussion would have been made and later considered in the context of these proceedings. The attendance note records Mr Dong’s stated intention on the day he signed the TR1 and there is no good reason to think that on this occasion he was seeking to mislead when speaking in private to his solicitor. Although its contents are hearsay, notice of intention to rely on it was given in the NCA’s evidence and, importantly, Mr Feng had an opportunity to comment upon it in 2012 but did not do so.

It is possible to conclude readily that what Mr Dong said to Ms Lim accords both with his intention and Mr Feng’s. He was aware of Mr Dong’s involvement with the property, that it had been refurbished by Mr Dong and that he was in occupation. Importantly, Mr Dong was able to occupy the property with his family rent free. Mr Feng’s evidence his daughter’s wish to be educated here and later changed of heart is not accepted. Mr Dong treated the Property as his own and Mr Feng knew this.

The NCA does not dispute the authenticity of the Estate Transfer Agreement. Notably, the agreement is dated 25 January 2011 and the delay of four months in executing the transfer is not explained. In any event, I conclude the agreement is ineffective for two reasons.

First, when the property was acquired in 2008, Mr Dong became the beneficial owner. FG and LH did not acquire a beneficial interest and, therefore, they had no interest in the Property to be transferred to Mr Feng. Only Mr Dong had a legal and beneficial interest and his intentions were explained to his solicitor. This is sufficient to put the Estate Transfer Agreement on one side.

In the alternative, I accept Mr Sampson’s submission that the Estate Transfer Agreement is, in any event, ineffective. It is an executory agreement that relates to a future transfer. The circumstances in which the transfer took place strongly point to the Estate Transfer Agreement not having been implemented. These include:

I conclude that Mr Dong became the beneficial owner in 2008 and remained the beneficial owner despite the transfer of the legal title to Mr Feng. I will dismiss the applications made by Mr Dong and Mr Feng.

The court has a broad discretion to make the interim order final. I can deal with this aspect of the determination briefly.

The statutory test is set out in s.1(5) of the Charging Orders Act 1979:

“(5)

In deciding whether to make a charging order the court shall consider all the circumstances of the case and, in particular, any evidence before it as to—

(a)the personal circumstances of the debtor, and

(b)whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”

The court has limited knowledge of Mr Dong’s circumstances. He is married with children and will be serving a lengthy period in prison. Although his personal circumstances are very much reduced, his interests carry little weight in view of his conviction and his attempt to mislead the court about his interest in the Property.

There are several creditors of Mr Dong whose interests need to be taken into account:

I am satisfied that the interim charging should be made final. The NCA has pursued these proceedings since 2012. It has a final judgment. Hogan Brown and Bank of Scotland are creditors of Mr Dong and I am satisfied that they are not likely to be unduly prejudiced by making the interim order final. In the case of the other persons I have listed above, I am not satisfied that they are in fact creditors but, even if that is wrong, their failure fully to engage with the application and to provide assistance to the court, has the result that I have no basis for concluding they will be unduly prejudiced.

I will make the interim charging order final. I will consider what ancillary orders should be made on, or after, the handing down of the judgment. If an order for costs is made in favour of the NCA, and a payment on account is made, I will consider whether the charging order should be enlarged to take account such an order.