ABC & Ors v CDE & Ors

A person may be held in contempt for deliberately doing an act which breaches a court order while knowing the order’s terms. The claimant need not prove an intention to disobey the order, and an honest belief that the act was permitted is no defence.

A freezing order’s exception for dealings in the ordinary and proper course of business depends on the true nature of the transaction. It does not protect a sham transaction devised to remove assets from the order’s reach.

A defective penal notice does not automatically prevent committal. The court may enforce the order where the defect caused no prejudice or injustice, having regard to the interests of the contemnor, other parties and the administration of justice.

The First Claimant applied for the First Defendant to be committed for contempt of court. A freezing order prohibited dealings with the Defendant’s assets, including a specified property in Riga, subject to an exception for dealings in the ordinary and proper course of business.

The alleged contempts concerned a purported loan, settlement agreements transferring the Riga property, conduct in Latvian proceedings, and use of a power of attorney. The Defendant denied the loan was sham, denied authorising the relevant acts, relied on the ordinary-course exception, and argued that the penal notice was defective.

The central issues were whether the alleged conduct was proved to the criminal standard, whether it breached the freezing order, and whether the court could enforce the order despite the defect in the penal notice.

1. The court found, to the criminal standard, that the alleged Hartmanis loan was not genuine. It was devised to facilitate the transfer of the Riga property beyond the reach of the freezing order.

2. The Defendant had granted a power of attorney in terms wide enough to authorise representation in the Latvian proceedings. He understood its content and had not given a more limited mandate. His failure to challenge promptly the Latvian order transferring the property materially supported the inference that he authorised or permitted the relevant conduct.

3. The forged signatures on the settlement agreements did not prevent findings of contempt. The Defendant had authorised or procured third-party conduct implementing the transfers and had authorised his representative to agree to the first settlement. He also authorised the application to the Latvian land register and failed to revoke the power of attorney until after the first hearing.

4. The ordinary-course exception applied in principle to the Riga property because the property was not excluded from that exception. It did not assist the Defendant on the facts. A sham transaction designed to remove an asset from the freezing order was not a dealing in the ordinary and proper course of business.

5. Following Stancomb v Trowbridge Urban District Council [1910] 2 Ch. 190, Director General of Fair Trading v Smiths Concrete: re Supply of Ready Mixed Concrete [1992] QB 212 and In Re: Agreement of the Mieage Conference Group of The Tyre manufacturers’ Conference Ltd. [1966] 2 AER 849, knowledge of the order and intention to perform the act constituting the breach were sufficient. It was unnecessary to prove an intention to disobey the order, and belief that the act was lawful was no defence.

6. The penal notice failed expressly to warn the Defendant that he might be imprisoned for breaching the order, contrary to RSC Ord.45 r.7(4). Nevertheless, applying the approach in Sofroniou v Szgetti [1991] FCR 332, Nicholls v Nicholls [1997] 1 WLR 314 and Bell v Tuohy and others [2002] 1 WLR 2703, the court exercised its discretion to enforce the order. The Defendant knew that imprisonment was a possible consequence and suffered no prejudice or injustice.

7. The Defendant was therefore found in contempt. The appropriate penalty was reserved for later consideration after formal hand-down and submissions.