Background
HRP Complete Solutions LLP, referred to as the Old LLP, beneficially owned three residential properties in Chatham, Kent. In an earlier liability judgment, the High Court held that a 2015 declaration of trust purporting to transfer the beneficial ownership to HRP Complete Solutions (Kent) LLP was invalid. The court declared that Andrew Phillips and Bond 58 Homes Ltd held the properties on trust for the Old LLP.
The court subsequently directed the defendants to account for the properties’ income and expenditure from 31 October 2015 and for money received through a 2023 remortgage of 130 Castle Road. The defendants failed to provide the required verified accounts. Helen Ross, pursuing a derivative claim for the Old LLP, relied on letting-agent records, bank statements, estimated market-rent evidence and disclosure obtained from the mortgage lender.
The Court’s Holding
Master Teverson held that the original order required a common-form account of income actually received, not an account on the basis of wilful default. Although the defendants’ noncompliance was serious and unexplained, the court granted limited relief from sanctions so it could consider previously disclosed letting-agent and bank records. Those records were not treated as a substitute for a verified account.
Using the available records and reasonable projections to fill evidential gaps caused by the defendants’ failure to account, the court found net property income of £251,849.74 through July 2026, before any mortgage-interest deductions. The court directed Phillips to produce verified evidence establishing whether specified NatWest payments related to two of the properties; absent compliance, no corresponding deductions would be allowed. Interest on the final balance was set at 4% annually from 1 January 2021.
The court separately ordered the defendants to account for £74,373.06 released through the Castle Road remortgage, with interest at 4% from 1 July 2023. It refused to admit Phillips’s late attempt to assert a lower sum because an earlier order expressly debarred the defendants from presenting evidence or a positive case after failing to provide the required account. The proceeding was to return for determination of any mortgage-interest deductions and consequential matters.
Key Takeaways
- An order for an account of income and expenditure ordinarily calls for a common-form account unless an account based on wilful default is expressly sought or directed.
- Serious noncompliance may justify evidential sanctions, though the court can grant narrowly confined relief where excluding existing records would make the accounting exercise artificial.
- When the accounting party fails to provide a verified account, the court may use the best available evidence and reasonable projections to fill resulting gaps.
Why It Matters
The decision illustrates how the High Court can reconstruct trust-property income when those responsible for accounting fail to comply with disclosure and verification orders. It also distinguishes an ordinary account of actual receipts from the more demanding wilful-default basis.
The judgment further shows the practical force of debarring orders: unsupported evidence offered at the hearing could not displace lender records showing the amount of equity released. The property-income figure remained subject to possible mortgage-interest deductions at a restored hearing.