Kea Investments Ltd v Watson

Sentencing for civil contempt requires assessment of the contemnor’s culpability and the harm caused, intended or likely to be caused. The court must then decide whether a fine is sufficient; imprisonment is justified only where it is not. Deliberate breaches of disclosure obligations supporting enforcement of a judgment are serious, particularly where they conceal assets and deprive the judgment creditor of a valuable opportunity to seek recovery. Personal mitigation may reduce the custodial term and may justify suspension, although mitigation will usually be reflected in the length of the sentence. A notification undertaking is a species of freezing undertaking, and disclosure orders made to assist enforcement may be comparable in seriousness to disclosure provisions in freezing orders.

The applicant sought committal of the respondent for contempt of court. In the earlier judgment, [2020] EWHC 2599 (Ch), the court found several breaches of an April order, but none contumacious, and one deliberate and contumacious breach of a November order: failure to disclose and provide bank statements for an account held in the respondent’s mother’s name which was, in substance, money at his disposal.

The present judgment concerned the appropriate sentence, including culpability, harm, aggravating and mitigating factors, the custody threshold, the length and suspension of any custodial term, and whether execution should be stayed pending appeal.

1. Sentence for contempt. The court applied the principles in JSC BTA Bank v Solodchenko and Liverpool Victoria Insurance Co Ltd v Khan. The court must assess culpability and harm, intended or likely harm, and then determine whether a fine would suffice. If so, imprisonment cannot be justified.
2. Seriousness. Following Financial Conduct Authority v McKendrick, breach of a court order is inherently serious because it undermines the administration of justice. A notification undertaking is a species of freezing undertaking, following Holyoake v Candy. Disclosure orders made after judgment to enable enforcement were not materially different in principle from disclosure provisions in a freezing order and were more serious than equivalent pre-judgment asset-preservation orders.
3. Harm. The respondent’s non-disclosure deprived the applicant of the opportunity to investigate and seek to secure approximately NZ$400,000 held in the account. It was unnecessary to decide whether recovery proceedings would have succeeded. Deprivation of the opportunity itself constituted real prejudice.
4. Aggravating and mitigating factors. The court applied the factors identified in Crystal Mews Ltd v Metterick, Aspect Capital Ltd v Christensen and Asia Islamic Trade Finance Fund Ltd v Drum Risk Management Ltd, including deliberateness, culpability, prejudice, cooperation, admission, apology, remorse, character and responsibility. The breach was deliberate, personally attributable and designed to conceal an asset. The respondent’s personal mitigation was taken into account in fixing the term.
5. Sentence and suspension. The custody threshold was crossed. The court imposed four months’ imprisonment, reduced from six months or more because of personal mitigation, to be served immediately. Applying Templeton Insurance Ltd v Thomas and Liverpool Victoria Insurance Co Ltd v Khan, suspension was not appropriate because mitigation had already been reflected in the shortened term.
6. Stay pending appeal. The court held that it had jurisdiction under its inherent jurisdiction and the Civil Procedure Rules to stay execution, but refused a stay. There was no realistic prospect of success sufficient to justify granting relief at first instance, and any application for temporary release should be made to the Court of Appeal.

The judgment followed the court’s earlier committal judgment in the same proceedings, [2020] EWHC 2599 (Ch), which found one contumacious breach. The respondent was informed of his right to appeal to the Court of Appeal within 21 days.