Klotho Brands Limited v Kevin- Gerald Stanford

In contempt proceedings for breach of an injunction, the court may dispense retrospectively with personal service where the respondent had actual knowledge of the order and suffered no prejudice. A person must obey an order of a competent court unless and until it is set aside, varied or overturned. The court assesses the substance of communications, not merely disclaimers that purport to deny an intention to breach. An indirect assertion of rights or interests in property falls within an injunction restraining assertions of rights in that property. Civil contempt requires proof to the criminal standard that the respondent knew the order, acted in breach of it, and knew the facts making the conduct a breach; it is unnecessary to prove that the respondent understood the conduct to be contemptuous.

The claimant applied to commit the defendant for contempt, alleging breaches of a 2022 declaration and permanent injunction concerning shares in All Saints Retail Ltd. The injunction followed an uncontested Part 8 trial in which the defendant’s allegations of fraud and resulting loss of title were rejected. The defendant did not attend the contempt hearing. He disputed service, relied on a change of name, alleged that the earlier order had been obtained by fraud, and contended that later communications were notices under the Proceeds of Crime Act 2002 rather than assertions of rights in the shares.

The issues were whether the court should proceed in his absence, dispense retrospectively with personal service of the earlier order, and whether the communications breached the injunction.

1. Procedure and service. The court proceeded in the defendant’s absence after considering the written material and the relevant authorities. The defendant had actual knowledge of the hearing and the order. Personal service of the 2022 order was dispensed with retrospectively because its terms had been effectively communicated and the defendant showed no prejudice or unfairness. Service was not invalidated by use of a former name. A change of name does not alter legal personality, rights or liabilities.
2. Continuing obligation to obey the order. The 2022 order had not been appealed, set aside or materially varied. The court therefore could not go behind it. An injunction made by a court of competent jurisdiction had to be obeyed unless and until displaced. The absence of the judge’s signature did not invalidate the order because CPR rule 40.2 required sealing, but not judicial signature.
3. Contempt test. Civil contempt was established to the criminal standard where the applicant proved that the respondent knew the order’s terms, acted in a manner involving breach, and knew the facts making the conduct a breach. It was unnecessary to prove that he believed his conduct was a breach or was contumacious. The evidence could be assessed cumulatively.
4. Breach. The January letter asserted that the banks had never obtained lawful title and that fraud had preserved the defendant’s equitable interest. The May notice asserted that the shares remained criminal property, that title was irrecoverably defective, and that the 2011 agreement could not transfer good title. Each was an indirect assertion of rights or interests in the shares and therefore breached the injunction. Disclaimers of intention to breach did not alter that conclusion. The communications had to be construed as a whole, but substance prevailed over form.
5. Proceeds of crime. Section 340 of the Proceeds of Crime Act 2002 did not impose a duty to issue the notice. Sections 337 and 338 were facilitative provisions, not mandatory duties, and the notice did not satisfy their statutory conditions.
6. Disposition. The court found, to the criminal standard, that the defendant had committed contempt by preparing and sending both documents. The hearing was adjourned for consequential matters, including sentencing.

This was a first-instance contempt application. The court’s findings concerned alleged breaches of the order dated 5 April 2022, made after the earlier Part 8 proceedings reported at [2022] EWHC 850 (Ch). Consequential matters, including sentencing, were adjourned.