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Attorney(S)
- MR SHAW appeared on behalf of the CLAIMANT
- MR CUNINGHAME appeared on behalf of the FIRST DEFENDANT
Judges
- MR JUSTICE LAWRENCE COLLINS
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Crystal Mews Ltd v. Metterick & Ors
Smart Summary
Factual and Procedural Background
The Revenue alleged that Company A was used as a vehicle for missing trader intra-community VAT fraud, disallowing its VAT input tax claims related to purchases from Company B and assessing Company A for approximately £31.7 million in VAT. In February 2006, the Revenue issued a winding-up petition against Company A and successfully applied for the appointment of a provisional liquidator. Following this, the provisional liquidator obtained a first freezing order against the company's de facto and de jure directors, including Defendant A but excluding Defendant B, limiting the order to £200 million.
Subsequent investigation revealed substantial payments from Company A to Defendant B, including dividends and transfers to Spanish lawyers linked to a property acquisition in Defendant B's name. Based on this, the provisional liquidator secured a second freezing order limited to £600,000, specifically targeting Defendant B’s Spanish bank account. Defendant B was joined to the proceedings and represented at an inter partes hearing where the order was continued.
Company A later applied for committal orders against Defendants A and B for breaches of the first and second freezing orders. The breaches involved withdrawals totaling approximately €250,000 from the Spanish account and £20,000 from a UK bank account, both made with knowledge of the freezing orders. Defendant A admitted to encouraging and permitting these withdrawals, while Defendant B admitted to the withdrawals themselves.
Legal Issues Presented
- Whether Defendants A and B were in contempt of court by breaching the freezing orders.
- What penalties or orders are appropriate following the admitted contempts.
- How to apply principles governing committal for contempt in the context of freezing injunction breaches.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Lightfoot v Lightfoot [1989] 1 FCR 305 |
Purpose of contempt penalties: punishment and coercion to secure compliance with court orders. |
Supported the dual purpose of contempt sanctions in the court’s reasoning on penalties. |
| Robinson v Robinson [2001] EWCA Civ 2098 |
Reinforcement of contempt penalties serving both punitive and coercive functions. |
Referenced to underline the principles guiding contempt sanctions. |
| Hale v Tanner [2000] 1 WLR 2377 |
Suspension of custodial sentences as a first step to secure compliance. |
Used to justify the suspension of a custodial sentence for one defendant. |
| Gulf Azov Shipping Company v Idisi [2001] EWCA Civ 21 |
Appropriateness of committal for breach of freezing injunctions; suspension of sentences conditional on purging contempt. |
Guided the court’s approach to sentencing and suspension of sentences. |
| Pospischal v Phillips (The Times, 20 January 1988) |
Immediate prison sentence necessary for breaches involving asset dissipation under Mareva injunctions. |
Supported the imposition of immediate custodial sentences in serious breaches. |
| Hudson v Hudson [1996] 1 FCR 19 |
Imposition of immediate prison sentence for breach of Mareva injunction involving withdrawal and spending of funds. |
Illustrated seriousness of breaches warranting immediate imprisonment. |
| Aquilina v Aquilina [2004] EWCA Civ 504 |
Custodial sentences should be as short as possible consistent with the circumstances. |
Informed the court’s balancing of sentence length. |
| Re M (Contact Order) [2005] EWCA Civ 615 |
It is wrong to impose custodial sentences if a fine is appropriate and the contemnor cannot pay the fine. |
Considered in the context of sentencing options and financial capacity. |
Court's Reasoning and Analysis
The court found that both Defendants deliberately breached the freezing orders with full knowledge of their existence. Defendant A actively encouraged and permitted Defendant B to withdraw substantial sums from the frozen accounts, frustrating the purpose of the orders. Defendant B acted on Defendant A’s instructions and provided untruthful evidence, further demonstrating contempt. The court emphasized the dual purpose of contempt sanctions: punishment and coercion to protect the court’s authority and the interests of the claimant.
The court considered relevant factors including prejudice to the claimant, deliberateness of the breach, culpability, cooperation, and the contemnors’ understanding of the seriousness of their conduct. It rejected suggested mitigating factors such as timing of contract and solicitor’s absence. Defendant A was deemed to have committed serious contumacious conduct warranting immediate imprisonment. Defendant B’s health and subordinate role led the court to impose a suspended sentence conditional on partial repayment and future compliance.
Holding and Implications
The court committed Defendant A to eight weeks’ imprisonment for serious contempt involving deliberate breaches of freezing orders. Defendant B was committed to eight weeks’ imprisonment suspended on terms including repayment and monthly payments into the frozen account.
The decision directly enforces the court’s authority over freezing injunctions by imposing custodial penalties for deliberate breach, underscoring the seriousness with which such orders are to be treated. No broader legal precedent was established beyond the application of established principles to the facts.
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