Podstreshnyy v Pericles Properties: the serious consequences of disobeying disclosure orders

04 June 2019
Author: JHA

The recent judgment in Podstreshnyy v Pericles Properties Ltd [2019] sends a clear message as to how seriously the UK courts take the deliberate breach of disclosure orders made in the context of freezing orders.  

In Podstreshnyy, the claimant claimed against the defendants for rent received and said to be held on trust for the claimant, who had employed the defendant agency as its letting agent.  In February 2018 freezing injunctions were granted requiring the defendants to disclose details of their assets in England and Wales.  The defendants were ordered not to dispose of, deal with or diminish the value of any of their assets to the value of £100,000.  Judgment was subsequently entered against the contemnor in the sum of £112,452.40.

Committal applications for contempt were submitted when the contemnor failed to provide disclosure of information, in breach of the Court orders, and failed also to disclose ownership of three properties.  The application alleged that the contemnor had breached the Court’s orders by marketing two of the three properties for sale without both notifying the claimant of the existence of the properties and of the attempts to sell them.  The applicant also alleged that the contemnor failed to make an interim payment of costs of £5,000 and made withdrawal of more than £60,000 from her accounts during the period of the freezing orders.

The Court held that there had been a clear failure by the contemnor to disclose ownership of the three properties, sources of income and bank accounts, or to make an interim payment of costs in the terms ordered.  While the Court was unconvinced that steps taken to market properties amounted to dealing within the terms of the freezing order - the marketing steps had fallen short of formal acts, such as the appointment of solicitors or the sending out of contracts for sale – and held that a failure to make an interim payment of costs as ordered was not obviously contempt, the contemnor’s withdrawal of £60,000 was, however, significant in the context of the amount of the claimant’s claim.

In its judgment, the Court outlined the guidelines for the imposition of a custodial sentence: it upholds the authority of the court and underlines the significant public interest in ensuring that court orders are obeyed.  Of the sanctions available, and while imprisonment was always the last resort, the contemnor’s breaches had been serious and deliberate, with the intention of depriving the claimant of the money to which he was entitled.  Taking account of mitigating factors, which included increased disclosure, an admission, an apology, a willingness to co-operate and the care of a dependent child, the Court concluded that a custodial sentence of nine months was appropriate.

The message from the Court following this case is clear: if a freezing order of the Court is breached, a contemnor does so at his or her own risk and may face imprisonment for doing so.  After all, a contempt of court is, in the words of Mr Justice Norris in 2015, “not a wrong done to another party in the litigation.  It is an affront to the rule of law itself and to the court”.

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