Michael Wilson & Partners Ltd v Sokol Holdings Incorporated & Ors

A freezing order permission to spend a reasonable sum on legal advice and representation ordinarily concerns the payment of money, rather than the mere incurring of a liability. In contempt proceedings, the material question may be whether the money used belonged to the restrained party. The court may require further underlying documentation where the evidence presently available is insufficient to determine whether its order has been breached. In assessing whether assets remain available outside the restraint, the relevant issue is asset headroom above the frozen amount, rather than the party’s general solvency.

Mr Emmott brought an application alleging fourteen contempts of court by Michael Wilson & Partners Ltd in connection with a freezing order. The allegations concerned failures to give notice of the source of money used for legal representation and payments allegedly made with the company’s money. The company disputed that its money had been used and relied on evidence that its assets exceeded the frozen amount.

The court considered the construction of the legal-expenses exception, the significance of liabilities as opposed to payments, the evidential issues concerning the company’s assets, and the information required to determine whether the freezing order had been breached.

1. Construction of the legal-expenses exception. Paragraph 13(1) of the freezing order was a permission, not itself a prohibition. In its context, references to spending a reasonable sum, spending money, and identifying where the money was to come from concerned the payment of money, rather than merely incurring a liability for legal services. The court did not determine allegations 7, 9 and 10 on the basis of the broader injunction because that was not how they had been advanced.
2. Central factual issue. In relation both to the outstanding notice allegations and to allegations 11 to 14, the material question was whether money actually used belonged to MWP. The evidence consisted principally of Mr Wilson’s assertions, challenged by scepticism and the absence of underlying documentation. The court considered that further reliable information was required to police its order.
3. Asset headroom. The relevant issue was whether MWP had assets above the amounts frozen by the order, not whether it was generally solvent or insolvent. The court referred to the treatment of the subject in JSC BTA Bank v Ablyazov [2015] UKSC 64, particularly paragraphs [21]–[34]. The available financial material indicated substantial apparent headroom, although it was historic and subject to challenge.
4. Further information and disposal. MWP was required to produce underlying documentation supporting the assertion that other people’s money had been used, together with the anticipated Ernst & Young audit opinion concerning the 2015 financial statements. If information was unavailable, a full and frank explanation was required. The approach was proportionate and fair. The application was stood over and no final contempt order was made. The judge indicated that, if the further information confirmed Mr Wilson’s evidence and an unqualified audit opinion was available, the contempt applications would be concluded with no order against MWP.
5. The claimant’s late application to amend the contempt allegations was refused.