Enforcement administrator allowed appeal against sheriff’s decision he was not entitled to house sale fund

About this case:

• Citation:
  [2023] SAC (Civ) 34
• Judgment:
  External link
• Court:
  Sheriff Appeal Court
• Judge:
  Sheriff Principal Catherine Dowdalls KC

In an unopposed appeal, enforcement administrator Bill Cleghorn argued that the sheriff had failed to appreciate the wide powers given to him by virtue of his role, and that the fund was “realisable property” in terms of the Proceeds of Crime Act 2002.

The appeal was heard by Sheriff Principal Catherine Dowdalls KC, with Owen KC appearing for the party minuter and appellant.

No legitimate objection

The action commenced in 2008 by the Bank of Scotland to determine the rights of the first and second defenders, the Crown Office and convicted fraudster Donna McCafferty, to the proceeds of a sale of certain heritable property in East Kilbride. The first defender was called as possibly having a claim to the fund in medio following upon their registration of a proceeds of crime order against the second defender.

Bank of Scotland was exonerated and discharged from the process in 2021. The appellant was sisted as a party to the action by interlocutor dated 1 October 2021. A diet of debate on the appellant’s preliminary pleas took place on 30 May 2022, at which the appellant argued he had a right to take possession of the whole fund by virtue of his appointment as enforcement administrator in terms of the Proceeds of Crime Act 2002.

It was held by the sheriff that the fund was not “realisable property” in terms of the 2002 Act, and the terms of an interlocutor from Glasgow Sheriff Court dated 22 July 2016 appointing the appellant as enforcement administrator did not identify the sums that had been held by the pursuer and came to form the fund in medio. He considered it inconsistent with the nature and purpose of an action of multiplepoinding to characterise the fund as “free property held” by the second defender in terms of section 149 of the 2002 Act.

For the appellant it was submitted that the sheriff erred in proceeding on the basis that he had no claim to the whole fund. He had been given wide powers to realise, manage and take possession of realisable property. The interests of third parties were preserved in respect of the value of their interest in the property, thus there could be no legitimate objection to his recovery of the sum.

Perfectly clear

In her decision, Sheriff Principal Dowdalls began: “While the language of ‘realisable property’ used in section 128(6) was not repeated in the interlocutor, it was perfectly clear what was intended. Read applying common sense and by reasonable interpretation, the interlocutor was sufficient to bring any free property held by the second defender under the enforcement administrator’s powers.”

She continued: “The substantive decision of the sheriff on 24 May 2023 was the refusal of the appellant’s motion for a diet of debate and the fixing, before answer, of a proof of the parties’ respective averments. In this respect, the sheriff erred. The second defender avers that she is entitled to the whole of the fund in medio, by reason of the fund being comprised of the proceeds of sale of property in which only she had an interest. What those averments amount to is admission that the fund in medio is comprised of property belonging to her.”

Noting the effect of this on the claim, Sheriff Principal Dowdalls said: “The second defender’s averments relate, in effect, to the competency of the appellant’s claim. That claim is competent by reason of the powers conferred upon him by the July 2016 interlocutor. There is no need to look behind that interlocutor. Those averments are therefore irrelevant.”

She added: “There is no plea taken by the second defender as to the relevancy of the appellant’s pleadings. The basis upon which the appellant advances his claim to the fund in medio has been discussed. For the reasons set out above, the sheriff also erred in reaching the conclusion that he did.”

The Sheriff Principal concluded: “The fund in medio is comprised of property belonging to the second appellant. The appellant is entitled, by reason of his appointment as enforcement administrator, to take possession of the fund in medio. Once the appellant has taken possession of the fund in medio, being an amount which is the realisable property of the second defender, it must be applied by the appellant in terms of section 130 of the 2002 Act.”

The appeal was therefore allowed and the case remitted to the sheriff in order to meet the requirements under Ordinary Cause Rule 30.2 before decree could be pronounced in favour of the appellant.