UK (Aid) Ltd v Mitchell & Ors

Contempt of court requires proof to the criminal standard. A worldwide freezing order extends to assets held in another name where the respondent has direct or indirect power to dispose of or deal with them as his own. It also requires candid and complete disclosure of assets and traceable property within the respondent’s knowledge, custody or control.

Deliberate concealment, false affidavits and transactions designed to place assets beyond reach may justify an immediate custodial sentence. The court may take account of later admissions, co-operation and purging of contempt, particularly where the penalty has a coercive purpose. A respondent is not liable for contempt unless the breach was established as deliberate or otherwise accompanied by the required knowledge.

UK (Aid) Ltd, in insolvent liquidation, applied to commit Martin Mitchell and Steven Silverman for contempt of court. The alleged contempts concerned breaches of worldwide freezing and disclosure orders made on 24 July 2006.

The orders restrained dealings with worldwide assets and required disclosure of personal assets, assets controlled indirectly, and property derived from funds misappropriated from the claimant. Mr Mitchell admitted extensive failures to disclose assets, false statements in affidavits and dealings with frozen assets. The case against Mr Silverman concerned his alleged involvement in transfers from an account of Madison Properties UK Ltd and failures to disclose interests in relevant accounts.

The central issues were whether the alleged breaches were proved to the criminal standard, whether the relevant accounts and assets fell within the orders, and what penalty, if any, was appropriate.

1. The court found all adverse findings to be made to the criminal standard. The freezing order restrained dealings with assets over which a respondent had direct or indirect power to dispose of or deal with them as his own. That included accounts for which a respondent was a signatory, even where he denied beneficial ownership.

2. Mr Mitchell had failed to disclose substantial assets and information required by the order. His disclosure was incomplete and false. He concealed interests in property, bank accounts, companies and traceable assets. He also instructed or participated in transfers intended to place assets beyond the claimant’s reach after service of the order.

3. Mr Mitchell’s repeated false affidavits did not purge his earlier contempts. The court rejected his explanations based on ill-health and found a sustained attempt to frustrate the freezing and disclosure obligations. His admissions and later co-operation were relevant to penalty, but did not remove the seriousness of the breaches.

4. The court accepted that a committal penalty may contain punitive and coercive elements. A respondent who remains unwilling to comply may receive a penalty designed to secure compliance, with relief possible if compliance follows. Here, the breaches were grave and sustained. The court considered that no coercive element was required if Mr Mitchell undertook to co-operate fully with the liquidators, but the seriousness of his conduct nevertheless required custody.

5. Mr Mitchell was committed to prison for eight months.

6. As to Mr Silverman, the court found that transfers from the Madison Properties UK account to him and the failure to disclose that account were breaches of the order. However, the evidence did not establish beyond reasonable doubt that he knew the account fell within the order or that the breaches were deliberate. The alleged contempt concerning the £300,000 transfer was also not proved. No penalty was imposed on him.

The judgment records an earlier summary judgment in the same proceedings. On 8 May 2007, the court entered summary judgment against Mr Mitchell and Leslie Silverman and ordered an interim payment of £5.5 million: [2007] EWHC 1052 (Ch). The present judgment determined the committal applications.