INSOLVENCY
Creditors - interpretation - medium-term notes - priority of payment to senior creditors - interpretation of clause in trust deed - indenture - security trust deed

Whistlejacket Capital Ltd (in receivership) sub nom Neville Barry Khan (2) Nicholas Guy Edwards (appellants in appeal 0631) (3) Nicholas James Dargan (respondents to appeal 0801) (Claimants) v (1) interested party A (respondent to appeal 0631) (2) Bank Of New York (appellant in appeal 0801) (interveners): CA (Civ Div) (Lord Chief Justice Phillips of Worth Matravers, Lords Justice Jacob, Lloyd): 22 May 2008

The first appellant receivers (W) and the second appellant interested party (B) appealed against certain parts of the judge's directions ([2008] EWHC 463 (Ch)) concerning priority as between different creditors following a company's insolvency. The company, a structured investment vehicle, was in receivership. W had brought proceedings for directions as to how they should proceed in circumstances where the company's assets were inadequate to meet its liabilities, in particular those under US medium-term notes with different maturity dates. The holders of the notes were 'senior creditors' of the company. Priority between creditors was disputed and turned on the wording of an indenture and a security trust deed, which set out the terms of the relevant debt obligations. The interested parties were senior creditors (X and Y) who represented the interests of holders of notes which matured on a certain date and those which matured up to a month afterwards. The interests of those who held longer-dated notes were represented by W.


The judge found, in favour of X, that under clause 6 of the security trust deed W were obliged to distribute money received by them pari passu to senior creditors whose debts were then due for payment, without taking into account amounts not yet due, and that W had no power to hold money back from distribution to those then entitled. He further found that the indenture had the effect of making Y's notes payable a month after X's notes. W appealed against the judge's order in respect of the effect of the trust deed and the priority to be given to X. B, who was in a similar position to Y and was joined to the proceedings in Y's place, appealed against the judge's decision on the indenture. W contended that clause 6 of the trust deed was only concerned with priority and that it did not impose any obligation to pay money out at any particular time; all it did was to prescribe to whom money should be paid out as and when it was available to be paid out.



W submitted that, although no money could be paid out in respect of amounts owing by the company which had not yet fallen due for payment, when deciding how much was to be paid out, W nevertheless had to take into account liabilities to senior creditors which had yet to fall due. X argued that clause 6 did not impose an obligation of payment and did not allow for retention of sums which could and should otherwise be made as part of payments already due. X contended that the date at which it was to be determined what sums were due and payable to senior creditors was the date of receipt of the relevant money by W. In respect of the indenture, B submitted that there was nothing in the documentation to suggest that the maturity date of notes could be brought forward.



Held: (1) Clause 6 of the trust deed dealt only with priority of payment not with time of payment. As regards priority of payment it prescribed only the position as between successive classes of creditor, as set out in several sub-clauses, but not within such classes. The clause could only have the effect of prescribing priority within such classes if it imposed an obligation as regards the timing of payment in addition to an obligation as to who should receive payment. To construe it as regulating the priority within a particular class on the basis of chronological order of payment dates could only be as a result of, at most, an incidental effect of the clause. The provisions could not properly be construed as having such an effect because, if it had been intended to, the clause would have been more explicit about how it worked. The clause did not, therefore, prescribe priority within the class of senior creditors based on timing of payments due. The judge had, therefore, been wrong about the effect of clause 6 and W's appeal against his conclusions in that respect was, accordingly, allowed.



(2) While B's submission that the maturity date of notes could not be brought forward was a powerful one, it was a less cogent point when the priority of payments was considered. As priority of payment out of an inadequate fund had now been found not to depend on the maturity date, the provisions of the indenture were of bare importance. B's appeal against the judge's conclusion in respect of the indenture was dismissed.



Appeal allowed in part.



Robin Dicker QC, Barry Isaacs (instructed by Clifford Chance) for the first appellant; Thomas Ivory QC, Orlando Gledhill (instructed by Cleary Gottlieb Steen & Hamilton) for the second appellant; Susan Prevezer QC, Paul Stanley (instructed by Bingham McCutcheon) for the respondent.





CIVIL PROCEDURE

Costs - discretion - percentage increases - success fees - entitlement to success fee under Civil Procedure Rules

Kilby v Gawith: CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls, Lady Justice Arden, Lord Justice Dyson): 19 May 2008

The appellant (G) appealed against a costs decision made in favour of the respondent (K). G and K had been involved in a road traffic accident. G admitted liability and K, who had the benefit of before-the-event insurance, entered into a CFA with her solicitor. Quantum was agreed and G agreed to pay costs but disputed the success fee fixed at 12.5% of the fixed recoverable costs by virtue of rule 45.11(2) of the Civil Procedure Rules. K issued costs proceedings and G contended that the court had a discretion whether or not to allow a success fee and at what level. The costs judge ruled that rule 45.11(2) was not discretionary. A district judge dismissed G's appeal.



Held: The costs judge and district judge had reached the correct conclusion for the reasons they gave. Rule 45.11 had to be construed by reference to its ordinary natural meaning in the context of the rules as a whole. While rule 45.11(1) provided that a claimant 'may recover a success fee' the natural meaning was that a claimant was entitled to claim a success fee. Rule 45.11(2) provided that the amount of the success fee 'shall be' 12.5%, which meant that where a success fee was recovered it had to be 12.5%. If the draftsman had meant for there to be a discretion to grant a success fee he would not have fettered that discretion by specifying the amount. The purpose of the rules was to provide fixed levels of remuneration, Nizami v Butt [2006] EWHC 159 QB, (2006) 1 WLR 3307 and Lamont v Burton [2007] EWCA Civ 429, (2007) 1 WLR 2814 applied. The approach to before-the-event insurance in Sarwar v Alam [2001] EWCA Civ 1401, (2002) 1 WLR 125 did not lead to the conclusion that rule 45.11(2) should be construed any differently, Sarwar applied.



Appeal dismissed



Jeremy Morgan QC (instructed by McCullagh & Co) for the appellant; Nicholas Bacon (instructed by Camps) for the respondent.





SENTENCING

Custodial sentences - murder - offences against the person - permanent injuries - racism - unlawful wounding - attempted murder

R v (1) Mamoon Hussain (2) Delwar Hussain (3) Sodrul Islam: CA (Crim Div) (Lord Justice Moses, Mr Justice Openshaw, Sir Richard Curtis): 20 May 2008

The appellants (H) appealed against concurrent sentences of 18, ten and four years' imprisonment imposed for attempted murder, wounding with intent and violent disorder respectively. A group of young people, all of whom were white, had been confronted by a group of Asian males. Some members of the Asian group began to taunt and racially abuse them and a fight broke out. One of the Asian group had a dar, a type of machete used in Bangladeshi cooking, with which he cut a man's head open, breaking his skull. Others then attacked the victim by kicking him. A second victim was then struck on the head causing a head wound. The second victim was not left with any permanent or life-threatening injuries. H were arrested in a nearby street shortly after. They claimed that others were responsible for the offences. When sentencing H, the judge took into account the following factors: (i) none of H were the principle offender; (ii) the case against H was based on joint enterprise; (iii) the offences were not premeditated; (iv) none of H were responsible for the racial hatred; and (v) periods of indefinite detention were not appropriate. H submitted that the judge had erred by (1) following R v Ford (Kevin) [2005] EWCA Crim 1358, (2006) 1 Cr App R (S) 36; and (2) failing to allow a deduction for only half of the sentence to be served in order to differentiate between murder and attempted murder.


Held: (1) The judge did not use an appropriate route in sentencing because the instant case was not one of particularly high seriousness, Ford distinguished. (2) As the instant case was clearly distinguished from Ford, H should have been due for release on licence halfway through their sentences pursuant to section 244 of the Criminal Justice Act 2003. (3) Having had regard to the factual findings of the judge and of Ford, which required the sentencing judge when sentencing for attempted murder to have regard to what the sentence should have been for murder, sentences of 18 years' imprisonment were too high and were replaced with sentences of 15 years. The sentences for unlawful wounding were also manifestly excessive and were replaced with sentences of eight years. The sentences for violent disorder were not altered.



Appeals allowed.



J Swain for the first and second appellants; A Wiseman for the third appellant.





IMMIGRATION

Abuse of process - attempts - defences - false instruments - obtaining services by deception - passports - refugees

R v Fregenet Asfaw: HL (Lord Bingham of Cornhill, Lord Hope of Craighead, Lord Rodger of Earlsferry, Lord Carswell, Lord Mance): 21 May 2008

The appellant refugee (X) appealed against a decision ([2006] EWCA Crim 707, [2006] Crim LR 906) upholding her conviction for attempting to obtain services by deception. X was an Ethiopian national who had intended to travel to the US on forged documents and seek refugee status there. She arrived in the UK on a forged passport and successfully passed through immigration control at Heathrow Airport. When she attempted, later in the same day, to depart for the US, she was arrested for using another forged passport.


She was acquitted of using a false instrument with intent after she raised the defence in section 31 of the Immigration and Asylum Act 1999. She pleaded guilty to attempting to obtain services by deception following the trial judge's ruling that the section 31 defence was not available in respect of that offence. The Court of Appeal dismissed her appeal against conviction but allowed her appeal against sentence, substituting an absolute discharge. The issue for determination was whether, to the extent that the protection given to a defendant by section 31 did not match that which the UK was bound in international law to give by article 31 of the Convention relating to the Status of Refugees 1951 (United Nations), our domestic law gave the defendant any remedy. The Crown argued that the offences committed by X fell outside both article 31 and section 31 because they were committed in the course of trying to leave the country, not in the course of entering the country or as a result of X's illegal presence in the country. The Crown argued that the words of article 31 showed that the immunity of a refugee was limited to offences of entering and being illegally in a country, thus excluding offences committed when leaving an intermediate country in order to seek asylum elsewhere. X submitted that it was an abuse of the criminal process to prosecute her to conviction on the count of attempting to obtain services by deception.



Held: (Lords Rodger and Mance dissenting) (1) The decision in R v Uxbridge Magistrates Court Ex p Adimi [2001] QB 667 QBD had exposed a serious lacuna in the domestic law, which failed to give any immunity against criminal penalties in accordance with article 31. Parliament had swiftly enacted section 31 of the 1999 act to make good that omission. No indication was given of any intention to depart from Adimi, or to derogate from the UK's international obligations, as would be expected if that was the legislative intention. The intention was to reflect in statute the obligations undertaken by the UK in the convention. Section 31 should not be read as limited to offences attributable to a refugee's illegal entry into or presence in the UK, but should provide immunity from the imposition of criminal penalties for offences attributable to a refugee's attempt to leave the UK in the continuing course of a flight from persecution even after a short stopover in transit, Adimi approved. That interpretation was consistent with the convention jurisprudence and its humanitarian purpose. The jury had been fully entitled to acquit X on the count of using a false instrument with intent, as the Crown had accepted at the time, even though the offence was committed when she was trying to leave the UK after a short stopover in transit.



(2) The offence of attempting to obtain services by deception, although within article 31, was not listed in section 31. That must be regarded as an oversight, not a deliberate omission. If the count was included in the indictment to prevent X from relying on the defence which section 31 would otherwise provide, there would be strong grounds for arguing that that was an abuse of process.



The trial judge could not be criticised for acting in accordance with binding authority, in the form of R (on the application of Pepushi) v Crown Prosecution Service [2004] EWHC 798 (Admin), (2004) Imm AR 549, in rejecting X's preliminary objection to the count, Pepushi considered. However, he should have stayed further prosecution of the count, and if the jury acquitted X on the count of using a false instrument with intent, the stay should have been maintained. It was an abuse of process to prosecute her to conviction.



(3) (Per Lord Rodger) It was wholly consistent with the scheme of the convention that contracting states need only overlook the initial offence of entering and being present illegally. After a refugee arrived in a safe country, he was to present himself to the authorities without delay and explain his illegal entry or presence. He had no justification for committing further offences to escape persecution and was bound by the criminal law, just like anyone else in the country concerned. Article 31 had no application to a refugee, such as X, who entered the UK unlawfully and who then, very shortly afterwards, used a forged passport to try and leave, in order to travel to another country where she would like to claim asylum and settle.



Appeal allowed.



Edward Fitzgerald QC, Raza Husain, Richard Thomas (instructed by Moss & Co) for the appellant; Clare Montgomery QC, Julian Knowles (instructed by Crown Prosecution Service) for the respondent; Michael Fordham QC, Shaheed Fatima (instructed by Baker & McKenzie) for the intervener (UNHCR).