Background
Bank of Cyprus obtained judgment against Yiannakis Sofroniou in 2017 for €708,721.49 and registered the judgment in the King’s Bench Division, securing an interim charging order over Sofroniou’s 50% interest in residential property at 10 Sherlock Mews, London. Gordian Holdings Limited, a Cypriot company acquiring non-performing loans, was substituted as judgment creditor. In March 2026, Sherlock Mews was sold for £1,925,000, with Sofroniou receiving net proceeds of £475,446.10.
Sofroniou claimed to have spent approximately £467,000 of the net proceeds within nine days of the sale, providing only a one-page statutory declaration without supporting documentation. Gordian sought a proprietary injunction to freeze the remaining proceeds and an order requiring detailed asset disclosure. The court also noted Sofroniou’s prior conduct: attempting to transfer his property interest to avoid the charging order, making misleading representations to HM Land Registry to remove the restriction protecting Gordian’s interest, and selling the property without notifying Gordian (which learned of the sale only three days after completion).
The Court’s Holding
The High Court, applying the American Cyanamid test, held that Gordian has a serious issue to be tried and continued the proprietary injunction freezing Sofroniou’s share of the net proceeds. Drawing on Buhr v Barclays Bank PLC [2001] EWCA Civ 1223, the court found that when property subject to an equitable charging order is sold, the chargee retains a proprietary interest in the proceeds—either through a continuing security interest in the “fruits of the mortgaged property” or through a constructive trust if the sale was unauthorised. This proprietary right gives Gordian a strong claim to the proceeds regardless of Sofroniou’s personal insolvency.
On the balance of convenience, the court found overwhelming factors favoring the injunction. Sofroniou’s demonstrated conduct—the failed property transfer, the misleading Land Registry submissions, the undisclosed sale, and the implausible claim of spending £467,000 in nine days—established a high risk of asset dissipation. The court noted that while proprietary injunctions do not require proof of dissipation risk (because the applicant already owns the asset), such risk is an important factor in deciding the balance of convenience. The court was satisfied that Gordian had financial standing to support a cross-undertaking in damages.
On the asset disclosure order, the court rejected Sofroniou’s one-page statutory declaration as grossly inadequate. The order required identification of all transactions exceeding £2,000, full documentation, and an affidavit. Sofroniou provided none of this. The court stated that the claim of spending nearly all proceeds in nine days was “not credible” and that Sofroniou was “not taking seriously his obligations.” Rather than commence contempt proceedings, the court re-issued the asset disclosure order, directing that banks assist Sofroniou in obtaining statements, and giving him a final opportunity to comply properly.
Key Takeaways
- Equitable chargees retain a proprietary interest in proceeds when charged property is sold, either through automatic succession to the proceeds or via constructive trust of unauthorised dispositions.
- Courts grant proprietary injunctions more readily than personal ones because the applicant’s claim is already secured in law, not contingent on solvency.
- A debtor’s pattern of conduct—attempting transfers, misleading authorities, undisclosed sales, rapid dissipation—supports continued asset preservation orders and weighs heavily in the balance of convenience.
- Asset disclosure orders must be strictly complied with: summary statements without documentation, affidavit, or particulars will be rejected, and courts will enforce compliance through renewed orders or contempt proceedings.
- Banks will be directed to provide statements to judgment debtors to facilitate compliance with court orders, notwithstanding any asset freeze.
Why It Matters
This decision reinforces the principle that secured creditors do not lose their proprietary interest merely because the underlying asset is sold. The continuation of the charging order’s effect into the proceeds—either through automatic law or equitable doctrine—gives judgment creditors powerful remedies to reach assets. For practitioners, the case clarifies that proprietary claims warrant stronger interim protection than personal claims, and that courts will scrutinise a debtor’s conduct for signs of dissipation. The judgment also establishes that courts will strictly police asset disclosure compliance and will not accept bare assertions unsupported by documentation.
The decision also has practical significance for enforcement: it shows how charging orders, properly registered, survive sale of land and attach to the proceeds, making them effective tools against debtors who attempt to frustrate collection through property transfers. The court’s willingness to re-issue disclosure orders rather than move immediately to contempt demonstrates a preference for compliance over punishment, but also a clear expectation that debtors will engage seriously with disclosure obligations on the second opportunity.