Crystalmews Ltd v Metterick & Ors

A third party who knowingly assists a breach of a freezing injunction is personally liable for contempt, whether or not the person bound by the injunction has had notice of it. The prosecution must prove the facts constituting contempt beyond reasonable doubt. A person cannot avoid liability by wrongly believing that an order binds only named parties, or only after personal service. An injunction may validly continue by reference to an earlier order where its effect is sufficiently clear, particularly where the affected party was represented and did not object. A provision protecting bona fide third parties from conflicting contractual or local-law obligations does not protect the respondent’s own withdrawal of frozen assets.

HM Revenue and Customs alleged that Crystalmews Ltd had been used for missing-trader intra-Community VAT fraud. Following the Company’s entry into provisional liquidation and the making of a winding-up order, freezing orders were made against its de facto director, Lee Metterick, and subsequently against his wife, Juliet Metterick.

The Company applied to commit both defendants for contempt. The alleged breaches concerned the withdrawal of €250,589 from a joint Spanish bank account to fund the purchase of Spanish property, and the payment of £20,000 to Mrs Metterick’s brother. The central issues were whether the orders were sufficiently clear and continuing, whether the third-party protection provision applied, and whether Mrs Metterick knew of the orders when the Spanish withdrawal was made.

1. Contempt and burden of proof. The Company had to establish beyond reasonable doubt the facts constituting contempt under Civil Procedure Rules, Schedule 1, RSC 52PD, paragraph 1.4. Under Z Ltd v A-Z and AA-LL [1982] QB 558, a third party is liable where, knowing the terms of the injunction, she wilfully assists the person bound by it to disobey the order.
2. Continuing order. The argument that the First Freezing Order became defective when continued by reference to the earlier order was rejected. The orders, read together, clearly continued the injunction. The defendants were represented when continuation was ordered, and the cases relied on concerned orders whose effect was materially harder to ascertain.
3. Third-party protection. The protection for bona fide third parties complying with contractual or local-law obligations applied to persons such as overseas banks. It did not protect the respondent’s own withdrawal of money from the Spanish account. The relevant breach was the withdrawal, not completion of the property purchase.
4. Knowledge and mistake. The judge found beyond reasonable doubt that Mrs Metterick knew of both orders when she withdrew the money. Her belief that an order did not bind a person who was unnamed or not yet served did not absolve her: Attorney-General v Times Newspapers Ltd [1992] 1 AC 191. Both Mr and Mrs Metterick were therefore guilty of serious contempts of court.
5. The question of penalty was adjourned for a further hearing. The possible restoration of the dissipated value was identified as relevant to penalty.