Admiral Scaffolding Group Limited v Simms & Ors

In an application concerning a freezing undertaking, a contempt finding may be arguable where the defendant’s assets, valued at the date of the alleged breach, arguably exceeded the undertaking’s threshold without counting a disputed loan. The court may adopt a commonsense approach to valuation. If the contempt finding may have influenced refusal to vary the undertaking, the variation application should be reconsidered after the contempt appeal. A refusal to order a preliminary issue is a case-management decision. The Court of Appeal will not interfere where it was reasonably open to the first-instance judge, even if another judge might have exercised the discretion differently. Reasonable living and legal expenses should ordinarily be addressed expressly in the order.

Three defendants sold shares in Admiral Scaffolding Company Limited to the claimant. The price was subject to adjustment by reference to interim accounts, and the defendants disputed whether those accounts required an audit.

Mr Bostel was subject to a freezing undertaking requiring him to maintain unencumbered assets worth at least £175,000. Garland J found him in contempt because a loan to his wife was treated as having no value, and refused to vary the undertaking to permit living and legal expenses. The judge also refused to order a preliminary issue concerning the accounts, estoppel and rectification. The defendants sought permission to appeal those decisions.

The Court of Appeal allowed the appeal in part. Lord Justice Peter Gibson gave the judgment, and Lord Justice Clarke agreed.

1. There was a real prospect of success on the challenge to the contempt finding. On the facts found, Mr Bostel’s assets at the relevant date may have exceeded £175,000 even if the loan to his wife were excluded. That issue required consideration on appeal. The court was more doubtful about the argument that the loan had no value, but would not prevent that argument being advanced. Judges dealing with contempt may adopt a commonsense approach to valuation.
2. The refusal to vary the freezing undertaking may have been influenced by the contempt finding. The application to vary was therefore adjourned to the hearing of the contempt appeal, when it could be considered in light of the result. The court also indicated that informal arrangements permitting reasonable expenditure should be formalised. For the future, the usual proviso permitting reasonable living and legal expenses should be included.
3. The refusal to order a preliminary issue was a case-management decision. Although another judge might have reached a different conclusion, the decision was open to Garland J, who was familiar with the case and well placed to assess whether a preliminary trial would produce practical advantage. There was no real prospect of appellate interference.
4. Any objection to the continuation of the audit by Grant Thornton should have been pursued by appealing the earlier direction requiring the audit. It was not an appropriate basis for indirect interference with the later case-management decision.

Permission was refused on the preliminary-issue point. Costs were reserved to the appeal court.

• Court of Appeal (Civil Division): On 8 June 2001, the court allowed the appeal in part in [2001] EWCA Civ 908. Costs were reserved to the appeal court.
• Queen’s Bench Division: Garland J made orders on 19 December 2000 and 12 January 2001. He found Mr Bostel in contempt, refused to vary the freezing undertaking, and refused to order the trial of a preliminary issue.