The National Crime Agency v Nuttall & Ors

By this Part 8 claim the National Crime Agency (“the NCA”) seeks a recovery order under the Proceeds of Crime Act 2002 (“POCA”), s.266. The claim is valued at some £6,500,000 and relates to recoverable property said to be linked to a Mr Jonathan Nuttall. The NCA’s claim is fixed to be tried by a High Court Judge for 13-15 days, commencing on or around 30 April 2019. The issue before me is whether to grant the

The NCA has carried out an extensive civil recovery investigation into the activities of Mr Nuttall and his family and associates. Its case is that he has benefitted to a very large extent from money laundering, mortgage fraud and contravention of the Company Directors Disqualification Act 1986.

In aid of its investigation, the NCA obtained two Property Freezing Orders under POCA, s.254A, one granted by Phillips J on 19 October 2015 (and subsequently extended by Garnham J) and one granted on 14 July 2017.

On 18 July 2017 these proceedings were issued. The NCA’s Points of Claim against all the Defendants run to some 66 pages plus schedules.All the Defendants are said to be linked to Mr Nuttall. Mr Nuttall is not a Defendant himself, as he is said to have arranged his property in such a way that he does not hold legal title to it. The estimated value of the claim at around £6,500,000 comprises (i) Mr Nuttall’s property portfolio (valued at around £5,500,000); and (ii) a further £1,000,000 that he is said to have paid to the Fifth Defendant.

At the time the claim was issued, Towerdene had been struck off the Companies House register and dissolved, such that its assets vested in the Bona Vacantia Division of the Crown (“the BVD”).

On 8 May 2018 the NCA issued an application for summary judgment on its claim against Towerdene. The application was supported by the ninth witness statement of Ruth Davison of the NCA. At the time the application was made, although several of the other Defendants had served Points of Defence to the NCA’s Points of Claim, Towerdene had not. The BVD and other Defendants had not sought to oppose the application. The Bereweeke Trust (the Second Defendant), which held the shares in Towerdene prior to its dissolution, had taken a neutral stance in relation to the claim.

On 11 June 2018 Master Davison granted the NCA’s application and made the recovery order sought in respect of Towerdene on the papers.

On 9 July 2018 Towerdene was restored to the Companies House register.

On 10 July 2018 Towerdene issued an application to set aside the 11 June 2018 order on the basis that it did not appear that Master Davison had been made aware that it had in fact filed evidence in response to the application in the form of a statement from Timothy Becker (one of its former directors) and that the parties had thus sought to have the issues resolved at a hearing. Towerdene also argued that summary judgment was not appropriate because it had a real prospect of successfully defending the claim and because there were other issues that meant the case should proceed to trial.

On 16 July 2018, following receipt of the application, Master Davison stayed the power of the trustee under the recovery order.

The 10 July 2018 application came before me on 6 December 2018. By then it had become apparent that Master Davison had not in fact been fully apprised of Towerdene’s position before making the 11 June 2018 order. Accordingly, at the outset of the hearing on 6 December 2018, the 11 June 2018 order was set aside by consent and I was invited to consider the 8 May 2018 summary judgment application afresh.

In addition to the contents of its 8 May 2018 application, the NCA relied on the fourteenth and fifteenth witness statements from Ms Davison, dated 15 and 28 November 2018. In addition to the contents of its 10 July 2018 application, Towerdene relied on witness statements from Dilipkumar and Ravin Kotecha dated respectively 14 and 15 November 2018, and two statements from Mr Nuttall dated 14 and 30 November 2018.

The NCA’s claim against Towerdene relates to (i) freehold property situated at Flats 2 and 3 Embley Green and Embley Kirby, Embley Park, Romsey SO51 6DL; and (ii) lease property situated at Embley Kirby, Embley Park, Romsey SO51 6DL (known collectively as “the Embley Park properties”). Towerdene is the registered owner of these properties. The NCA argues that:

Towerdene denies both of the allegations. In summary, it avers that:

There was no significant dispute between the parties as to the appropriate legal framework. As is well-known, CPR Part 24.2 provides that the court may give summary judgment against a Defendant on the whole of a claim or on a particular issue if “(a) it considers that…(ii) that defendant has no real prospect of successfully defending the claim or issue, and (b) there is no other compelling reason why the case or issue should be disposed of at a trial”.

The notes to the White Book confirm that in order to defeat an application for summary judgment, is it sufficient for a respondent to show some prospect of success. That prospect must be “real”, meaning that the court will disregard prospects which are false, fanciful or imaginary. A respondent has to have a case which is better than merely arguable (International Finance Corp v Utexafrica Sprl [2001] CLC 1361 and ED and F Man Liquid Products Ltd v Patel [2003] EWCA Civ 470). A respondent is not required to show that the case will probably succeed at the trial, which is the criterion used to determine success at trial: rather, the criterion which the judge has to apply at the CPR 24 stage is “the absence of reality” (Lord Hobhouse of Woodborough, Three Rivers DC v Bank of England (No. 3) [2003] 2 All ER 513).

ED and F Man Liquid Products Ltd supports the proposition that the overall burden of proof rests on the applicant to establish that there are grounds to believe that a respondent has no real prospect of success and that there is no other reason for a trial. The court must apply a negative test. The standard of proof required of the respondent is not high. The respondent’s case must carry some degree of conviction, but the court is not required to accept without analysis everything said by a party in his statements before the court.

An application for summary judgment is not appropriate to resolve a complex question of law and fact, the determination of which necessitates a trial of the issues having regard to all the evidence (Apvodedo NV v Collins [2008] EWHC 775 (Ch)).

The parties agreed that it is relevant that this is a complex case of fraud. Counsel for Towerdene referred to the case law about the standard of proof imposed on a claimant alleging fraud in civil proceedings. Phipson on Evidence (19^th Edition) at paragraph 6-57 indicates that where a serious allegation of fraud is made in a civil case, such as an allegation of criminal conduct, the standard of proof remains the civil standard but the civil standard is flexible in its application. This means that if a serious allegation is made, more cogent evidence may be required to overcome the unlikelihood of what is alleged, in order to prove the allegation (see, for example, the explanation of the concept by Lord Nicholls in H (Minors) [1996] AC 563). It has also been held that the more serious the consequences for an individual if allegations are proved, the stronger the evidence must be before a court will find the allegation proved.

Esprit Telecoms UK Ltd v Fashion Gossip Ltd (2000) LTL 27 July 2000 was a case which involved arguments around developing areas of law. Both counsel relied on House of Lords authority to support competing submissions as to the law of restitution and unjust enrichment. Judge LJ, with whom Ward LJ agreed, concluded that the legal issues needed to be considered and decided in light of the facts found at trial. He went on to say that “while never suggesting that it may never be appropriate” he was “troubled about entering summary judgment in a case where the success of the claimant’s case involves, as this one does, establishing allegations of dishonesty and fraud, which are strongly denied, and which cannot be conclusively proved by, for example, a conviction before a criminal court”. Ward LJ concluded that it would not be right to make findings that were tantamount to the carrying out of criminal offences without an oral hearing (transcript, pages 11-12). It was also a feature of that case that from earlier comparable cases there had been “a demonstrable difference in the judicial reaction to very similar factual situations” (page 14). Finally, there had been earlier cases involving the same protagonists on which some reliance was placed, but where it was noted that there had been no express finding of dishonesty against the key alleged perpetrator at which he had had the opportunity to give evidence orally (page 15). Ward LJ reiterated the key principle that summary judgment is appropriate in “plain and obvious cases” (page 15).

The Director of the Assets Recovery Agency v Woodstock [2006] EWCA Civ 741 established the proposition that summary judgment can be appropriate in recovery order cases. However the summary judgment that had been given at first instance was overturned by the Court of Appeal on the grounds that while there were “certainly grounds for suspicion” as to whether the source of certain income was criminal conduct, as Hughes LJ explained it was “simply not possible to say that [the persons in question] were bound to be disbelieved or that the Director was bound to succeed on some other basis”. He continued that “it may well be possible to say in some cases that a story which is advanced by a defendant is so obviously untrue that it is fanciful to suggest that it might be accepted” and in such a case summary judgment would be appropriate. However, the case advanced in Woodstock was not such a case: rather, “[t]his was a story which, however flimsy in might in some senses appear, needed to be tested at trial” (transcript, page 6).

In general terms, the NCA has referred to SOCA v Azam [2014] EWHC 272 in which Andrews J concluded at paragraph 157 that “the evidence strongly points towards Mr

As to the mortgage fraud allegation, the NCA submitted that:

As to the redemption monies allegation, the NCA argued that:

To the extent that the NCA’s investigation was challenged by Towerdene on the basis that it had relied on evidence provided by Philip Nuttall, an allegedly unreliable witness, the NCA stated that this was simply incorrect: Ms Davison had explained in her fifteenth statement that the NCA’s investigation was not instigated in response to nor is it reliant upon Philip Nuttall’s evidence at all.

The NCA also placed reliance on Towerdene’s conduct of the claim. It highlighted the fact that despite all persons with a potential interest in Towerdene defending the claim having been made aware of the claim from its issue in July 2017, it was only in its application dated 10 July 2018 that it asserted it had a substantive defence to the claim. Insofar as Towerdene suggested in the initial evidence of Mr Becker that it was struck off the Register as a result of the NCA’s actions this was not correct and indeed his evidence that prior to the striking off, Towerdene had been entirely compliant, was not correct. The NCA indicated that it had been in correspondence with Towerdene for some time about its reinstatement to the Companies Register, which it was repeatedly said was not possible for financial reasons, but these appeared to be capable of prompt resolution once the summary judgment application was issued. The NCA submitted that Towerdene’s reinstatement to the Companies Register was a calculated and transparent attempt to obfuscate matters and prevent judgment being entered. It was said that the late provision of Mr Nuttall’s witness evidence in support of Towerdene’s position underscored the suggestion that keeping Towerdene dissolved was a tactical decision, so that it could not take an active role in the claim at an earlier stage, rather than it facing any genuine hindrance to doing so.

Overall the NCA submitted that there was far more here than the “fog of suspicion” described in Woodstock; rather the documents showed beyond a shadow of a doubt that there had indeed been the mortgage fraud alleged and that the redemption monies were the proceeds of crime. The NCA only needed to prove one of the allegations, but they could in fact prove both. Towerdene had failed to advance any defence, let alone one with a real prospect of success, or any other reason why the matter should nevertheless proceed to trial.

Towerdene’s counsel submitted that limited regard should be had to the observations of Andrews J in Azam, given that Mr Nuttall was not a party to the case. Instead, consideration should be given to the fact that has he has given signed witness evidence in these proceedings that bear directly on the issues in this application.

As to the mortgage fraud allegation, Towerdene submitted that:

As to the redemption monies allegation, Towerdene submitted that:

Counsel for Towerdene also noted that although similar allegations of mortgage fraud and regarding the redemption monies had been made against Mrs Nuttall, despite her bare denial to the allegations, the NCA has not sought summary judgment against her.

Overall Towerdene submitted that the NCA’s case on the mortgage fraud allegation is demonstrably weak and that it had a reasonable prospect of defending that and the redemption monies allegation, such that summary judgment was not appropriate.

Counsel for Towerdene also argued that in practice courts are particularly reluctant to grant summary judgment in fraud cases, because of the difficulty in establishing that the respondent has no real prospect of successfully defending the claim or issue. He submitted that the tenor of the judgment in Esprit Telecoms is to the effect that an allegation of fraud or dishonesty may itself provide a compelling reason why the case should be disposed of only after consideration of all the evidence at trial, for the purposes of CPR 24.2(b). This, he argued, provided a further basis for denying the application for summary judgment.

The case law on summary judgment applications in fraud cases, as summarised above, makes clear that (i) the issue for me to determine is whether the NCA has proved that the points now advanced by Towerdene in its defence have no real prospect of success, in the sense that they are merely false, fanciful or imaginary, have “the absence of reality” and/or have no real degree of conviction; (ii) if there remain complex questions of law and/or fact, summary judgment is not appropriate; and (iii) where, as here, serious allegations of fraud are made, with potentially significant consequences for an individual, more cogent evidence than usual is required to meet the civil standard of proof.

Overall, having considered all of the evidence and submissions in the context of that legal framework I am not satisfied that the NCA has discharged this burden. I consider that significant factual disputes remain that can only properly be resolved at trial. In light of those disputes, I cannot say at this stage that the NCA has proved that Towerdene has no real prospect of success.

First, with respect to the mortgage fraud allegation:

I note in this regard that the parties relied for opposing propositions on the 24 January 2013 letter from AIB: the NCA argued that it was proof of the fraud, whereas Towerdene submitted that it showed the reverse, and that the AIB had no such concerns. In this regard the case seems similar to Esprit Telecoms UK Ltd, where summary judgment was held to be inappropriate in part because both counsel relied on House of Lords authority to support competing submissions as to the law, and because different judges in some of the earlier cases had reached different conclusions on very similar factual situations.

Second, with respect to the redemption monies allegation, while I have found this a harder issue to decide, on balance it seems to me that this matter is not capable of summary determination. Both parties agree that the chain of transactions suggests that chronologically the Kotecha funds left the account before the redemption monies were paid. However I consider that the “tracing” issue of whether the Kotecha funds were de facto used to pay the redemption monies (because it was in the knowledge that they were coming/had come in that other payments were made), or whether they are properly regarded as used for something entirely separate (namely a payment towards Embley Manor, or indeed something completely different), is one that can only be determined by the trial judge who has access to all the evidence.

On the latter issue, I note that the NCA may wish to question Mr Nuttall at trial as to his potentially conflicting accounts in this claim and the claim against the First Defendant as to whether the monies paid out shortly after the Kotecha loan came in were used for Embley Manor or not. Although the NCA rightly accepted his evidence on this issue for the purposes of this application, this dispute illustrates the general complexity of this case and the need for the evidence to be fully tested, including with oral evidence, at trial. That principle carries over, as I have said, to the issue of what the Kotecha loan was properly regarded as being used for.

In light of the fact that Mr Nuttall was not a party to the Azam case, in accordance with the approach taken in Esprit Telecoms, it does not seem fair to give significant weight to the observations made about him in that case at this stage.

Overall this case seems to me on all fours with Woodstock, where although there are “certainly grounds for suspicion”, it is not possible to say at this summary stage that Towerdene has no real prospects of success. Accordingly, I am not persuaded that summary judgment is appropriate under CPR 24.2(i)(a).

Given my conclusions on limb (a) of CPR 24.2(i), it has not been necessary to give detailed consideration to the further arguments advanced under limb (b). However, it could also be said that the factual disputes referred to above are in themselves a reason for the matter to go forward to trial. The fact that this is a fraud case, alone, would not in my view have provided such a reason.

The parties will now need to agree directions for the trial of the claims against Towerdene. I am told by counsel for Towerdene that these directions should be straightforward. This issue should not therefore put the trial fixture, which plainly affects all the other Defendants as well as Towerdene, at any risk.