03/04/24

Common Intention Constructive Trust | Confiscation Proceedings

Common Intention Constructive Trust | Confiscation Proceedings
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A common intention constructive trust is a legal concept that arises automatically, without the need for a prior written Declaration of Trust, when parties have not formally documented their agreement. It occurs when it would be unjust for one party to disregard the other's beneficial interest in an asset.

The shared intention for both parties is to gain a beneficial interest in an asset, with the party seeking redress having acted to their own disadvantage based on that intention.

In R v Moore, Parker v Financial Conduct Authority [2021] EWCA Crim 956], the recognition of a common intention constructive trust played a pivotal role in the handling of Confiscation Proceedings under the Proceeds of Crime Act 2002 ('POCA') following the conviction of the defendant, Michael Moore, for multiple fraud offences.

Naz Maqsoom provides a general summary of the case and explain how KANGS can assist in any POCA and Confiscation Proceedings

R v Moore, Parker v Financial Conduct Authority [2021] EWCA Crim 956

Factual Background

Michael Moore, a convicted fraudster, had defrauded a number of elderly and vulnerable victims by selling them worthless investments, for his own financial gain.

One of the victims was Mr Parker, an elderly disabled man, although he was not one of the victims of the frauds that Moore was prosecuted for. Consequently, his loss was not documented within the subsequent Confiscation Proceedings.

In 2010, Moore persuaded Mr Parker to loan £320,000 to his company Manor Rose Ltd to enable it to purchase land. Shortly afterwards, Mr Parker was persuaded to invest in the purchase of Bockingford Court to enable it to be refurbished and sold on at a substantial profit.

It was understood by Mr Parker that Manor Rose would repay his loan by using it towards the purchase of the property. It was agreed that Mr. Parker would possess a share in the property commensurate with his investment.

Mr Parker was advised that Moore’s stepfather was also investing on the same basis, but he was not informed that Moore intended to occupy the property as his matrimonial home. Such an occupation contradicts the alleged intention to purchase the property for renovation and resale.

Nothing was recorded in writing. The amount of Mr Parker’s funds invested in the property eventually amounted to £260,000, representing 40% of the total purchase price and 70% of the deposit.

The Confiscation Proceedings

Following Moore’s conviction for fraud involving a number of offences against other victims, other than Mr Parker, the Prosecution commenced proceedings under POCA against him to recover all assets acquired through his criminal activity including Bockingford Court.

During the proceedings, the Prosecution maintained that Mr Parker was not entitled to claim any interest in Bockingford Court, relying upon the lack of any contemporaneous written documents to confirm the agreement which Mr Parker maintained had been formed with Moore.

At the conclusion of the POCA proceedings, the Judge disagreed with the Prosecution submissions of fact and believed Mr Parker in relation to the circumstances of the purchase of the property and that, upon sale, he expected to receive a share reflecting his financial contribution.

However, having disagreed with the Prosecution upon the facts, the Judge concluded that Mr Parker had no legal or beneficial interest in Bockingford Court in view of the lack of documentary evidence and that his funds had been mixed with those of other investors.

This decision therefore resulted in Mr Parker losing all his investment and he appealed to the Court of Appeal.

Appeal to the Court of Appeal

The situation presented to the Court of Appeal involved a situation where the judge had made findings of fact, supporting Mr Parker. However, the subsequent judgment rendered by the judge did not concur with those facts.

Accordingly, Mr Parker's case was that the Judge had been wrong to find that Moore and his wife were the only persons with a beneficial interest in the property.

It was argued on behalf of Mr Parker that he had obtained an interest in Bockingford Court through a common intention constructive trust by virtue of the express agreement made between himself and Moore as to the use of his funds to invest in the property. He relied on the principle that a common intention constructive trust will arise where a party has acted to their detriment in reliance upon a common intention that he or she will acquire an interest in a property. [McGuinness v Preece [2016] EWHC 1518 (Ch).]

Following the consideration of substantial detailed submissions by all parties, the Appeal was summed up by the following statement which clearly outlines the classic nature of a common intention constructive trust:

‘The issue at the heart of this appeal can be identified as follows: if A gives B money for the express purpose of using it only to purchase an identified property as an investment, A and B agree that A will have an interest in the property pro rata to his financial contribution, and the money is then used to buy the property, does A have a beneficial interest in the property? The answer is yes. It would be surprising if it were otherwise. A has acted to his detriment in consenting to the use of his money to fund the purchase, in reliance on the express promise of an interest in the property. It makes no difference to that answer that the property was subsequently purchased in the name of C, who was B's nominee or agent.

This was a classic example of a common intention constructive trust, with Mr Moore's intention being objectively evinced by what he expressly agreed, said and did at the time, which was consistent with Mr Parker's understanding of the arrangement between them. His subjective intention, even if different, is irrelevant. The money went to the conveyancing solicitors and was used for its intended purpose; Mr Moore did not take the money and use it for some other purpose, such as purchasing different land – had he done so, there would undoubtedly have been a trust. Mr Parker is no worse off because the oral agreement was performed.

Mr Parker's appeal is allowed. By virtue of the operation of a common interest constructive trust, Mr Parker was entitled to 70% of the net proceeds of sale of Bockingford Court, and Michael and Carly Moore were each entitled to 15%.’

Unfortunate Outcome | POCA Third Party Proceedings

As the result of administrative failings, Mr Parker’s appeal to the Appeal Court was delayed with the result that by the time his Appeal had successfully concluded in his favour, Bockingford Court had been sold and the proceeds of sale paid out to other victims who had suffered as the result of Moore’s criminal activity.

The existence of a pending Appeal does not automatically stay the operation of a Confiscation Order and there was no remedy available to enable Mr Parker to recover the funds of which he had been defrauded.

How Can We Assist?

KANGS enjoys an enviable nationwide reputation for its work involving the defence of those charged with financial fraud of every description. The KANGS team brings extensive expertise across all facets of POCA and has participated in numerous high-profile and complex Confiscation Proceedings which have been brought before the courts.

We possess extensive expertise in civil fraud and asset recovery cases, as well as navigating the intricate technicalities of POCA, particularly concerning 'Third Party' claims similar to that pursued by Mr Parker mentioned above, in an effort to retrieve misappropriated funds on behalf of our clients.

Should you require our assistance, please contact us using the details below.

Tel:       0333 370 4333
Email: info@kangssolicitors.co.uk

We provide an initial no obligation consultation from our offices in London, Birmingham, and Manchester. Alternatively, we provide initial consultations by telephone or video.

Hamraj Kang

Hamraj Kang
Senior Partner

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Tim Thompson

Tim Thompson
Partner

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Nazaqat Maqsoom

Naz Maqsoom
Associate

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