Crystal Mews Ltd v Metterick & Ors

Penalties for contempt of a freezing order serve punitive and coercive purposes. Serious, deliberate flouting may warrant immediate imprisonment, but the custodial term should be as short as the circumstances permit. Suspension may secure compliance. Relevant considerations include prejudice and its remediability, pressure, deliberateness, culpability, the conduct of others, appreciation of the breach’s seriousness and co-operation. Inability to pay an otherwise appropriate fine, or difficulty in fining a person whose assets are frozen, does not itself justify imprisonment. Where several contempts arise from the same act, punishment should reflect their substance and concurrent terms may be appropriate. Serious effects on health, acting on another’s instructions and concrete repayment proposals may justify suspension on conditions.

Crystal Mews Ltd faced a Revenue winding-up petition following VAT assessments of about £31.7 million arising from alleged missing trader intra-community fraud. Its provisional liquidator obtained a freezing order against its directors, including Mr Metterick. After discovering substantial payments to Mrs Metterick purportedly as dividends, and a payment towards a Spanish property in her name, the liquidator obtained a second freezing order covering her assets, including a Spanish bank account.

Mr Metterick admitted four contempts arising from his involvement in the withdrawal of 250,589 Euros from that account to complete the property purchase. Mrs Metterick had been found in contempt for the withdrawal with knowledge of both orders. She also admitted withdrawing £20,000 from her Nationwide account with knowledge of the second order. This hearing determined the appropriate penalties, including whether imprisonment should be immediate or suspended on repayment conditions.

1. Mr Metterick was committed to prison for eight weeks immediately. Mrs Metterick was committed for eight weeks, suspended on repayment conditions. Mr Metterick’s four contempts arose from the same act and were punished concurrently. Punishment should address the substance of the contempt, without an additional penalty merely because the act breached both an order against him and an order against another person.

2. Contempt penalties punish defiance and seek to secure the protection afforded by the injunction. Serious contumacious flouting justified immediate committal, applying the criterion stated in Gulf Azov Shipping Company v Idisi, [2001] EWCA Civ 21. Any custodial term should be as short as possible consistently with the circumstances, as stated in Aquilina v Aquilina, [2004] EWCA Civ 504. Section 14(1) of the Contempt of Court Act 1981 limited immediate imprisonment to two years. Section 258 of the Criminal Justice Act 2003 entitled a person committed for contempt to unconditional release after half the term.

3. Execution of a custodial sentence could be suspended for such period or on such terms as the court thought fit under CPR schedule 1, RSC order 52, rule 7(1). The court referred to the guidance in Hale v Tanner, [2000] 1WLR 2377, that suspension was usually the first means of attempting to secure compliance.

4. An unlimited fine or sequestration was also available. Where a fine was appropriate, inability to pay it should not lead to imprisonment, consistently with the principle in Re M (Contact Order), [2005] EWCA Civ 615. The court accepted that difficulty in fining a person whose frozen assets were clearly below the injunction’s maximum sum likewise did not justify custody.

5. The relevant considerations included prejudice and its remediability, pressure, deliberateness, culpability, others’ conduct, appreciation of seriousness and co-operation. Both defendants deliberately withdrew funds with knowledge of the orders and intended to undermine them. Their admissions, made almost immediately before the hearing, merited very little reduction. There was little prospect of remedying the breaches, and the Spanish property purchase was expected to produce a loss. The pre-existing purchase contract and the solicitor’s holiday were rejected as mitigating factors.

6. Mrs Metterick’s health had been seriously affected by the proceedings, and she had acted on Mr Metterick’s instructions. Those matters, together with family offers to contribute towards restoring the £20,000, justified suspension. The conditions required £5,000 to be returned to her frozen account and £400 monthly to be paid into it. The suspension period and deadline for the initial repayment remained for argument.

• High Court (Chancery Division): Peter Smith J appointed a provisional liquidator in February 2006. A first freezing order against the company’s directors was subsequently obtained and later continued by David Richards J.
• High Court (Chancery Division): Etherton J made the second freezing order on 23 March 2006. Lightman J continued it at an inter partes hearing on 4 April 2006 and joined Mrs Metterick to the proceedings.
• High Court (Chancery Division): Lawrence Collins J found Mrs Metterick in contempt in a judgment dated 25 October 2006. The present judgment determined penalties following that finding and the defendants’ admissions.