Templeton Insurance Ltd v Motorcare Warranties Ltd & Ors

The original trial in this action was heard by Simon J. He delivered judgment on 3 December 2010: [2010] EWHC 3113 (Comm). The Claimant (“Templeton”) now seeks an order for committal against the 2^nd Defendant (Mr Anthony Thomas) and the 3^rd Defendant (Mr Panesar). In essence, the basis of the application is that both these parties are in contempt of court by reason of alleged breaches (or involvement in alleged breaches) of a freezing injunction granted by Nelson J on 8 July 2008. (I should mention that originally Templeton sought in addition an order for committal against the 4^th, 5^th and 6^th Defendants; but this was abandoned by Templeton at the commencement of the hearing before me, Templeton agreeing to pay a contribution of £1000 to these parties’ costs.) In summary, the factual background is as follows.

The Second to Sixth Defendants are members of the same family. Mr Anthony Thomas and Mrs Christine Thomas are husband and wife. Mrs Caroline Thomas and Mr James Thomas are their adult children. Mr Harbinder Panesar is Caroline Thomas’ husband. Thus, Mr Anthony Thomas is Mr Panesar’s father-in-law.

Motorcare Warranties Limited (“Motorcare”) was established in the 1990s by Mr Anthony Thomas. During the relevant period, Mr Anthony Thomas and his wife each owned 50% of the shares in Motorcare; Mr Panesar was the Managing Director; Mr James Thomas was another director; and Mrs Caroline Thomas was company secretary. Motorcare’s business was primarily in the sale of Mechanical Breakdown Insurance (“MBI”) policies which were sold through a network of several hundred appointed representatives (mainly car dealers) to their customers. In addition, Motorcare had agency arrangements with a number of self-employed sales agents who worked with the appointed representatives. There was some uncertainty as to the precise number of such agents but for present purposes I assume that there were, as stated in Mr Panesar’s affidavit, about 35 agents immediately prior to the grant of the injunction. The policies would either be sold to the customer by the dealer or given away “free” at the time the vehicle was sold. The business had been developed over the years by Mr Anthony Thomas who had been involved in the insurance industry for over 40 years. It was at all material times authorised by the FSA to conduct insurance business and continued to have that status until such authorisation was withdrawn on or about 25 May 2010. Motorcare is now in liquidation.

In about 2003 or 2004 Mr Anthony Thomas was looking to retire. An offer was received from one of the sales managers to buy the business for £1.2m but in the event Mr Anthony Thomas handed over the running of the business to Mr Panesar. Although Mr Anthony Thomas claimed to have little ongoing involvement in Motorcare thereafter, Simon J held, at the trial, that he “continued to play a major role in the running of the company, particularly in relation to the agreements with Templeton”.

A Thomas Associates Ltd (“ATA”) was a separate company which performed all the administration for Motorcare. There were virtually no documents to explain the precise nature of the role played by ATA. However, for present purposes, I am content to proceed on the basis (as stated by Mr Panesar) that the office staff and the agents were in fact contracted with ATA and all wages and commissions were paid from ATA’s bank account.

Templeton is an insurance company incorporated in the Isle of Man and authorised to write insurance business in the United Kingdom. Between July 2004 and July 2008, Motorcare acted as Templeton’s agent in selling MBI policies. The majority of Motorcare’s business consisted of selling these types of insurance policies and, prior to the termination of Motorcare’s relationship with Templeton in July 2008, the majority of Motorcare’s business consisted of selling insurance policies underwritten by Templeton.

The framework of the relationship between Templeton and Motorcare was set out in annual contracts referred to as “Slips”. Under the Slips, Motorcare was authorised to sell certain kinds of insurance policies underwritten by Templeton. Subject to the policies sold complying with the terms of the Slip, Motorcare was entitled to determine who to sell policies to and at what price, with Templeton only being entitled to the premium agreed with Motorcare as specified in the Slip - with the premium varying as a result of duration, claims limit, type of cover and type of vehicle. Motorcare also acted as claims administrator and, therefore, administered all claims received from customers, including making payments to customers in respect of valid claims, with these sums being offset against the sums due to Templeton. As a result, each month, Templeton was notified of the premium due on policies sold that month and claims paid, with a balance then being due from either Templeton or Motorcare. If the business was profitable, the payment should, of course, generally have been from Motorcare to Templeton.

The relationship between the parties started to fall apart in late 2007 (over three years into the relationship), when substantial losses started to be generated. As a result of this breakdown, Templeton began to demand and eventually managed to obtain more detailed information from Motorcare. This information led Templeton to conclude that Motorcare:

As the relationship between the parties broke down, there were a number of meetings between the parties at which Templeton sought explanations from Motorcare (via Mr Panesar and Mr Anthony Thomas) about these matters. Following one of these meetings, Templeton received a fax from Mr Anthony Thomas which purported to attach a letter from Templeton dated 5 November 2004 which appeared to authorise departures from the strict terms of the Slips. [There had been a change of management at Templeton, so the individuals dealing with the relationship in 2008 were not the same as those which dealt with the relationship in 2004]. This document was an obvious and poor forgery.

Against that background, Templeton commenced the current proceedings and on 8 July 2008 applied for and obtained the freezing injunction against Motorcare (and also against Mr Anthony Thomas and Mr Panesar). The freezing injunction against Motorcare – contained in paragraph 5 of the order - ordered Motorcare until the return date or further order not to “remove from England and Wales or in any way dispose of, deal with or diminish the value of, other than by payment to the Applicant, any of its assets in England and Wales”. This prohibition was stated to include in particular: “the property and assets of [Motorcare’s] business.” The freezing injunction contained the usual penal notice. The order also contained separate freezing injunctions in respect of the personal assets of Mr Anthony Thomas and Mr Panesar but there is no suggestion of any breach of those injunctions. Under the heading “Parties other than the Applicant and Respondent”, the order further provided as follows: “22. Effect of this Order: It is a Contempt of Court for any person notified of this Order knowingly to assist in or permit a breach of this Order. Any person doing so may be sent to prison, fined or have his assets seized.” There is no dispute that the order was duly served on both Mr Anthony Thomas and Mr Panesar shortly after it was made. Thereafter, by consent or at least without objection, the freezing injunction was continued beyond the return date.

In these proceedings, Templeton claimed, inter alia, payment of the full premium due under its contracts with Motorcare and damages for fraudulent misrepresentation in relation to the representations made to Templeton which induced it to renew the relationship in July 2007 ie Slip 4. In relation to the other Defendants, Templeton contended that Motorcare’s wrongs were orchestrated by the other Defendants and pursued claims against them for deceit, knowing assistance and knowing receipt.

Motorcare defended the proceedings on the basis that it had paid Templeton all sums properly due, since, to the extent that it had not complied with the terms of the Slips, these departures were known to and/or agreed by either Templeton or its agent. Motorcare also denied that the representations which induced Templeton to extend the relationship in July 2007 were made fraudulently. Mr Panesar accepted that he was involved in Motorcare’s business as Managing Director and relied on the same defences as Motorcare. All of the other Defendants other than Mr Panesar denied that they had any real involvement in Motorcare’s business at all.

Following a three week trial in November 2010, Simon J. concluded in summary that: (i) there had been no agreements or understandings which had permitted Motorcare to deviate from the contracts; (ii) Motorcare had underpaid Templeton by over £2.3 million; (iii) contrary to his evidence, Mr Anthony Thomas continued to play a major role in Motorcare during the relevant period; and (iv) the misrepresentations which had induced Templeton to extend the relationship in July 2007 were false and were known to be false by Mr Panesar and Mr Anthony Thomas, with the result that Motorcare, Mr Panesar and Mr Anthony Thomas were liable in deceit. Quantum in relation to that fraudulent misrepresentation claim was adjourned by Simon J. That hearing came before me earlier this week and I am due to give judgment on quantum shortly.

During the course of the trial, Templeton withdrew its claims against Mr James Thomas, Mrs Christine Thomas and Mrs Caroline Thomas. Before me, Mr Cook on behalf of Templeton submitted that this was because “…the evidence showed that, while they each had some involvement in Motorcare, they did not have the detailed knowledge of the contractual relationship with Templeton which would have been required for them to be knowingly involved in the wrongs by Motorcare”.

The nature and basis of Templeton’s application for committal are set out in Annex A to the Application Notice and in the 8^th affidavit of Mr Wells, who was the Managing Director until 27 October 2010 and remained a Director until 25 February 2011. In summary, it is Templeton’s case that within a week of the freezing injunction ie on 14 July 2008 another company ie Motorcare Elite 2008 Limited (“Motorcare Elite”) was set up and registered by (amongst others) Mr Anthony Thomas and Mr Panesar and that thereafter Motorcare in effect then transferred its entire business to Motorcare Elite. Since Motorcare’s business consisted primarily of the sale of insurance policies through a network of sales agents and several hundred appointed representatives, Templeton submits that in practice this involved these representatives being taken over by Motorcare Elite and selling insurance for Motorcare Elite rather than Motorcare. Further, it is Templeton’s case that Motorcare Elite also took over Motorcare’s office premises, staff, telephone number, website addresses, text for a website and product documentation and was allowed to hold itself out as the business known as “Motorcare” which had been doing this type of business for a number of years. There is no suggestion that any monies or other tangible assets belonging to Motorcare were actually disposed of or dealt with contrary to the freezing injunction. However, Templeton contends that this transfer of Motorcare’s business was a breach of the freezing injunction, since it involved the “disposal of” and/or “dealing with” Motorcare’s assets (in particular its goodwill) and that this took place with the knowledge and involvement of Mr Anthony Thomas and Mr Panesar. The essential complaint is that the Defendants did exactly what the freezing injunction was designed to prevent i.e. they moved everything of value out of Motorcare, so that Templeton ended up with a judgment against a company without any assets – since Motorcare went into liquidation shortly after the trial.

I should mention that Templeton originally made an application for committal against the Second to Sixth Defendants in relation to this alleged transfer in August 2010 with the intention that the committal application should be heard at the trial. Each of the Second to Sixth Defendants put in affidavit evidence in response to that application. However, at the start of the original trial before Simon J procedural objections were taken to the format of the application (namely that no draft order was attached to the application and the basis for the application was only described in detail in the evidence and not in the application itself) and Simon J. did not consider it appropriate for contempt to be considered at the same time as the trial (given issues like self-incrimination that would arise in the committal proceedings). Thereafter, Templeton issued the present formal application for committal.

The relevant applicable principles concerning the approach of the court in cases of contempt (in particular with regard to onus and standard of proof, inferences, circumstantial evidence and adverse inference) were considered and summarised by Christopher Clarke J in Masri v Consolidated Contractors Intl Co SAL & Ors [2011] EWHC 1024 (Comm) at paras 144-147. I do not understand that there was any dispute in the present case about such principles. But, in any event, I respectfully agree with the views there expressed and approach this case on the same basis.

However, there was an important dispute as to the legal basis of the present application for committal at least with regard to Mr Panesar. So far as that dispute is concerned, the starting point is to recognise that although Mr Anthony Thomas and Mr Panesar were both named Defendants in the proceedings when the original order was made by Nelson J and although that order contained separate freezing injunctions against both of those individuals so far as their own personal assets are concerned, the focus of the present application is not those freezing injunctions (as to which there is no allegation of breach) but rather the separate freezing injunction made against Motorcare (in paragraph 5 of the order) and the effect of paragraph 22 of the order as set out above.

Importantly, paragraph 5 of the order is directed – and directed only – at Motorcare. So far as Motorcare is concerned, the relevant principles – in particular with regard to mens rea - were again summarised by Christopher Clarke J in Masri v Consolidated Contractors Intl Co SAL & Ors [2011] EWHC 1024 (Comm) in the following passage:

“150.

In order to establish that someone is in contempt it is necessary to show that (i) that he knew of the terms of the order; (ii) that he acted (or failed to act) in a manner which involved a breach of the order; and (iii) that he knew of the facts which made his conduct a breach: Marketmaker Technology (Beijing) Co Ltd v Obair Group International Corporation & Ors [2009] EWHC 1445 (QB). There can be no doubt in the present case but that the judgment debtors have at all times been fully aware of the orders of this court. It is not and could not sensibly be suggested that the conduct of which complaint is made was casual or accidental or unintentional. However, the question arises whether it is, also, necessary to show that they acted knowing that what they were doing was a breach of, and intending to breach, any of the orders.

151.

In Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190 Warrington J, on an application for leave to issue a writ of sequestration which, under the then rules required "wilful disobedience" to an order, said:

“In my judgment, if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or she does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order. I think the expression "wilfully" in Order XLII R.31, is intended to exclude only such casual or accidental and unintentional acts as are referred to in Fairclough v Manchester Ship Canal Co"

152.

In Adam Phones Ltd v Gideon Goldschmidt and others [2000] CP Rep 23 Jacob J (as he then was) described two opposing lines of authority constituted by:

i)

Heaton's Transport (St Helen's) Ltd v Transport and General Workers Union [1973] AC 15, 108-110; Mileage Conference Group of the Tyre Manufacturers Conferences Agreement [1966] 1 WLR 1137; Spectravest Inc v Aperknit Ltd [1988] FSR 161 (Millett J) on the one hand and

ii)

Irtelli v Squatriti [1993] QB 83, on the other.

The former cases hold that there is contempt if an act intentionally done amounts to a breach of the order. In the latter case the Court of Appeal assumed that it was necessary to show contumaciousness. In that case, where committal to prison was sought, the defendants had done that which was a breach of the order (the creation of a further charge) but had produced some not particularly convincing evidence that they did not understand the order to preclude it and, since that evidence was not challenged, the court concluded that there was no knowing breach of the order.

153.

Jacob J said that, free from authority he would have sided with Irtelli but felt bound to follow the earlier cases, of which Heaton's was a decision of the House of Lords, particularly when Arlidge, Eady and Smith on Contempt of Court described Irtelli as a "doubtful case" and when the House of Lords in DG of Fair Trading v Pioneer Concrete [1995] 1 AC 456 had approved of what Warrington J had said in Stancomb v Trowbridge and said that it should be followed in that case.

154.

In Bird v Hadkinson [2000] CP Rep 21 Neuberger J also declined to follow Irtelli. In that case he had first to determine whether or not an obligation to give information about what had happened to various funds required that the information be accurate. He held that "at least on the face of it" an inaccurate answer did not comply with the terms of the order but said that if an inaccurate answer was given in good faith and after all reasonable enquiries it would either be a contempt of a most technical nature or there may be no contempt at all. As to the clash of authorities, he regarded himself as bound not to follow Irtelli having regard to Pioneer Concrete, in which the previous authorities were reviewed (and in which Lord Wilberforce observed that "liability for contempt does not require any direct intention on the part of the employer to disobey the order"). He observed that in Irtelli the previous line of authority had not been cited, that the case had been decided without opposition; and that what had been cited was Pioneer in the Court of Appeal, which the House subsequently reversed.

155.

I regard myself as similarly bound. I do so with less reluctance than Jacob J. In my judgment the power of the court to ensure obedience to its orders for the benefit of those in whose favour they are made would be inappropriately curtailed if, in addition to having to show that a defendant had breached the order, it was also necessary to establish, and to the criminal standard, that he had done so in the belief that what he did was a breach of the order – particularly when a belief that it was not a breach may have rested on the slenderest of foundations or on convenient advice which was plainly wrong.”

I respectfully agree with that analysis of Christopher Clarke J and his conclusions. However, as I have stated, it is important to note that paragraph 5 of the order of Nelson J is not directed specifically at Mr Anthony Thomas or Mr Panesar. In that context, the position of a third party or “stranger” has been summarised by Lord Hope in Att Gen v Punch Ltd [2003] 1 AC 1046 at [87]:

“The power to commit for contempt ensures that acts and words tending to obstruct the administration of justice are prohibited. So a stranger is liable for contempt if his act constitutes a wilful interference with the administration of justice by the court in the proceedings in which the order was made. It has also to be shown there was an intention on his part to interfere with or impede the administration of justice. This is an essential ingredient, and it has to be established to the criminal standard of proof. But the intent need not be stated expressly or admitted by the defendant. As is the case where the question of intention, or mens rea, arises in criminal cases, it can be inferred from all the circumstances including the foreseeability of the consequences of the defendant’s conduct: Att Gen v Newspaper Publishing Plc [1988] Ch 333, 374 – 375, per Sir John Donaldson M.R. ”

In my judgment, that statement of the law which is reflected in paragraph 22 of the Order of Nelson J summarises the correct legal basis for considering the potential liability for contempt of both Mr Anthony Thomas and Mr Panesar under the general common law.

However, it was Mr Cook’s submission that Mr Panesar stood in a different position by virtue of his status as a Director of Motorcare. In particular, it was Mr Cook’s primary submission that Mr Panesar stood in exactly the same position as Motorcare such that Mr Panesar could be liable for Motorcare’s breach of the freezing injunction solely by virtue of his office and knowledge that the order had been made and that, in particular, it was therefore unnecessary to show (to the criminal standard) that he had breached the order in the belief that what he had done was a breach of the order. In support of that submission, Mr Cook relied primarily on the terms of CPR Sch.1 Ord 45.5(1) which provides in material part as follows:

“5.

Enforcement of judgment to do or abstain from doing any act

(1)

Where-

(a)

………; or

(b)

a person disobeys a judgment or order requiring him to abstain from doing an act,

then, subject to the provisions of these rules, the judgment or order may be enforced by one or more of the following means, that is to say-

(i)…..

(ii)

….

(iii)

subject to the provisions of the Debtors Act 1869 and 1878, an order of committal against that person or, where that person is a body corporate, against any such officer.”

On behalf of Mr Panesar, Mr Gadsden disputed that the fact that Mr Panesar was a Director of Motorcare put him in any special position: he was in no different position from any third party or “stranger”. In particular, he relied upon the decision of Anthony Lincoln J in Director General of Fair Trading v Buckland [1990] 1 WLR 920 where it was held that an order for committal for contempt under the then identical R.S.C., Ord. 45, r. 5(1) could only be made against an officer of a company if that person had been “responsible” for the company's breach of the court's order so as to be liable under the general law of contempt; and that a director of a company, who, although aware of an order or its terms, remained passive in the sense that he did nothing to interfere with the administration of justice nor wilfully ignored any breach of the order was not, by virtue only of his office and his knowledge, liable to committal for contempt.

I reject these submissions of both Mr Cook and Mr Gadsden. The former go too wide; and the latter not wide enough. In my view the current position is as discussed and summarised in Aldridge, Eady & Smith on Contempt, 4^th Edition paras 12-112 to 12-116 in particular at para 12-115. As there noted, the Court of Appeal expressly disagreed with the views of Anthony Lincoln J in Director General of Fair Trading v Buckland in A-G ofTuvalu v Philatelic Distribution Corp Ltd [1990] 1 WLR 926 and held:

“In our view where a company is ordered not to do certain acts or gives an undertaking to like effect and a director of that company is aware of the order or undertaking he is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed, and if he wilfully fails to take those steps and the order or undertaking is breached he can be punished for contempt. We use the word ‘wilful’ to distinguish the situation where the director can reasonably believe some other director or officer is taking those steps. ”

As stated in para 12-115: “By virtue of these provisions a director can be liable for civil contempt without necessarily being in contempt under the general law”. I agree.

As I have stated, although no tangible assets were disposed of or dealt with, Templeton contends that the transfer of Motorcare’s business was a breach of the freezing injunction, since it involved the disposal of or dealing with Motorcare’s assets in particular its goodwill. In support of his submission that goodwill was an asset of Motorcare falling within the scope of the freezing injunction, Mr Cook relied upon the decision of the Court of Appeal in Darashah & Or v UFAC (UK) Limited & Or [1982] WL 222281. The point was considered by Lord Denning MR as follows:

“The point in this case is whether goodwill of a company is an “asset” sufficient to be caught by the Mareva jurisdiction. I think it is. Every businessman knows that goodwill is a valuable commodity. It consists not only of a list of customers but also the established connections with them. These connections bring in new orders and repeat orders.”

Both Ackner LJ and O’Connor LJ agreed. It is true that in that case the freezing injunction made express reference to goodwill ie the wording prohibited the Defendant from disposing etc of any assets “…and in particular from disposing of the goodwill of the [English] company…”. In the present case, there is no express reference to goodwill. However, the freezing injunction does make plain (in paragraph 5) that the prohibition extends to any of Motorcare’s assets and (in paragraph 6) that this prohibition includes in particular “the property and assets of [Motorcare’s] business.” As stated by Lord Denning, every businessman knows that goodwill is a valuable commodity and in the context specifically of Motorcare’s business, I am sure that both Mr Panesar and Mr Anthony Thomas understood that the goodwill of Motorcare’s business (including in particular its network of dealers and sales agents) was an important and valuable asset at the heart of the business which fell within the scope of the freezing injunction.

Before setting out the further relevant facts, I should say something about the “evidence” before me. First, there was no dispute before me that the findings reached by Simon J are, in effect, binding.

Second, the only witness called by Templeton was Mr Wells who was, as I have stated, previously its Managing Director and Director. His evidence was contained in his 8^th affidavit and he was cross-examined by both Mr Quiney and Mr Gadsden on behalf of Mr Anthony Thomas and Mr Panesar respectively. In broad terms, Mr Wells’ evidence fell into two main parts viz (a) evidence based upon his own investigations; and (b) conclusions or opinions which he had reached based upon those investigations. The former was plainly admissible and unobjectionable. However, the latter was in my view inadmissible and I have put that part of Mr Wells’ evidence out of my mind.

Third, I should mention that at the close of Templeton’s case, Mr Quiney made an application that I should, in effect, reject the application for committal on the basis of “no case to answer”. This gave rise to two main points in respect of which I gave rulings. First, a question arose as to whether Mr Quiney could make that application without having to elect that if such application failed he would not himself call any evidence. In the event, I ruled that he was under no obligation to elect. Second, a question arose on the hearing of the application of “no case to answer” as to whether Templeton could (as it sought to do) rely upon the affidavit evidence that had been sworn and filed by both Mr Anthony Thomas and Mr Panesar. In the event, I ruled that such evidence would have been inadmissible if it had simply been sworn and filed in accordance with the court’s order but that, consistent with the observations of Wall J in Re B (A minor) (Contempt: Evidence) [1996] 1 FCR 158, it was admissible because, in addition, it had been “used” by in particular Mr Quiney on behalf of Mr Anthony Thomas viz such evidence had been included without demur in the hearing bundles; I had been specifically invited by the parties (including by Mr Quiney in his skeleton) to read it in advance of the hearing and, as requested, I had done so; Mr Quiney’s skeleton (which I also read in advance of the hearing) not only requested that I read such evidence but expressly referred to certain passages in such evidence which he specifically relied on. Quite apart from the foregoing, I should note that Annex A relied specifically on such evidence (at least in part) without any objection having been taken; and Mr Cook opened the case relying upon certain parts of that evidence again without any objection having been taken. Accordingly, I rejected Mr Quiney’s application in relation to the admissibility of such evidence. I also rejected his application of “no case to answer” and the case then proceeded with Mr Quiney calling Mr Anthony Thomas to give oral evidence.

Fourth, in assessing the evidence, it is important to note that Simon J expressly held at paragraphs 101 to 104 of his Judgment that Mr Panesar and Mr Anthony Thomas were unreliable witnesses whose evidence was evasive, internally inconsistent and contrary to the contemporaneous documents; that, in particular, Mr Anthony Thomas’ evidence was unconvincing in the light of contemporaneous documents; and that the credibility of Motorcare’s case was undermined by the numerous changes of explanation for what occurred and the deployment of forged documents. Further, at paragraph 189 of the Judgment, Simon J found that Mr Panesar and Mr Anthony Thomas were closely involved in the running of Motorcare and made all the major decisions on Motorcare’s behalf; and expressly rejected Mr Anthony Thomas’ oral attempts to distance himself from the decision making. In my view, these findings are relevant and important in considering the present application. In any event and as set out below, I regarded Mr Anthony Thomas’ evidence as most unsatisfactory and, in some important respects, not credible. For example, in his second affidavit sworn on 14 October 2010, he stated that he was neither a shareholder nor a director of Motorcare and did not control it. It is correct that he was not a director. However, he was, as I have said, a 50% shareholder and his wife held the other 50% shareholding. Moreover, his statement that he did not “control” Motorcare is at best very misleading given the conclusion reached by Simon J. that he “continued to play a major role in the running of the company, particularly in relation to the agreements with Templeton”.

Fifth, it is important to note that immediately before Mr Anthony Thomas started to give evidence, Mr Quiney provided me with a letter dated 22 March 2012 from Dr D J L McGovern of the Cowbridge & Western Vale Group Practice, Cowbridge Health Centre which stated in material part as follows:

“I confirm that Anthony Thomas has been registered with our Practice since 1977. He was referred by my colleague to the Memory Clinic in Llandough Hospital on 1 August 2011. He was seen in the Memory Clinic on 9 March 2012. A diagnosis of Mild Cognitive Impairment was made. His memory and concentration is made worse in stressful situations and this will affect his ability to give evidence in Court.”

In assessing Mr Anthony Thomas’ evidence, I have sought to take this diagnosis into account. However, it seems to me that it does not explain the essential conclusions reached by Simon J nor my own independent conclusions with regard to the important aspects of his evidence before me.

Sixth, as to Mr Panesar, although there was put in evidence before me two main affidavits sworn by him for the purposes of these committal proceedings, he did not give oral evidence. I was initially told that this was because he had been admitted to an unidentified hospital for medical assistance. However, I was then told by Mr Cook that Mr Panesar had admitted himself voluntarily and not pursuant to the recommendation of any doctor; and that he could leave the hospital at any time if he wanted to. In any event, none of the foregoing was supported by any evidence. In particular, there was no medical certificate or other satisfactory evidence explaining the reason for his absence. Nor was there any application to adjourn the proceedings and although it might have been open for me to adjourn of my own motion in order to secure Mr Panesar’s attendance at a future date, Mr Gadsden and Mr Cook both confirmed that they were content to proceed in his absence and, in the event, I decided to follow that course. In light of the above, it seems to me that I can and should proceed on the basis that Mr Panesar’s absence is the result of his own deliberate decision not to give evidence; and that I am entitled to draw an adverse inference in the limited fashion identified by Christopher Clarke J in Masri para 147.

The precise scope, timing and sequence of events following the freezing injunction remain somewhat obscure. This is due to a number of factors. First, there has been virtually no disclosure from Motorcare or indeed any of the Defendants with the result that there is a dearth of relevant contemporaneous documents. Second, apart from Mr Wells, the only person to give oral evidence was Mr Anthony Thomas. However, as he appears to have done before Simon J., the thrust of much of Mr Anthony Thomas’ evidence was that the business was being run by Mr Panesar and that he ie Mr Anthony Thomas left it all to him. Like Simon J. even taking account the medical diagnosis referred to above, I do not accept that evidence as truthful. Third, as I have said, Mr Panesar did not give oral evidence with the result that various assertions which he made could not properly be tested and certain gaps and inconsistencies in the affidavit evidence remain unresolved. All the foregoing hampered the exercise faced by the court. Despite these difficulties, the background facts set out above and the further facts set out below were either not in dispute or are ones of which I am sure to the criminal standard.

The affidavit evidence of Mr Panesar was that the effect of the freezing injunction was that Motorcare simply could not continue to trade. I do not accept that evidence. Paragraph 13 of the Order expressly provided: “This order does not prohibit [Motorcare] from dealing with or disposing of any of its assets in the ordinary and proper course of conduct.” Thus, it was perfectly possible for Motorcare to trade in the ordinary and proper course. If there had been any particular difficulties in that regard, an application could have been made to the court. That never happened. What did happen is that Motorcare Elite was set up and incorporated within a few days of the freezing injunction ie on 14 July 2008. It was jointly owned in equal shares (ie 25% each) by Mr Panesar, Mr Anthony Thomas, Mrs Caroline Thomas and Mrs Christine Thomas, with Mr Panesar being its sole director and Mrs Caroline Thomas its company secretary. There is no doubt whatsoever that Mr Panesar played a crucial role in setting up Motorcare Elite. Mr Anthony Thomas’ evidence was, in effect, that he had no knowledge of Motorcare Elite being set up. I do not accept that evidence. As stated above, Mr Anthony Thomas and his wife each had a 50% shareholding in Motorcare. I accept that the value of such shareholding prior to the grant of the freezing injunction is debatable. It was Mr Anthony Thomas’ own evidence that the value of businesses like Motorcare was generally rated at perhaps 3 and a half times turnover. As I have stated, it was also Mr Anthony Thomas’ own evidence that an offer to buy the business for £1.2m had been made in 2004 although he maintained in cross-examination that this did not really reflect the value of Motorcare because, in particular, that offer was never carried through and, in any event, that figure included not only Motorcare itself but ATA and a property. Be that as it may, I have no doubt that prior to the grant of the freezing injunction the shareholding in Motorcare had a significant value even though it is impossible to say exactly what that value might be. As such, it seems to me completely implausible that Mr Anthony Thomas would not have taken a direct interest and active part in what was going to happen to the business after the grant of the injunction and the establishment of Motorcare Elite. I therefore reject the evidence of Mr Anthony Thomas to the contrary. Unlike Mr Panesar, he may not himself have signed any documents setting up Motorcare Elite but, in my judgment, I am sure that he agreed to and must have been directly involved in that exercise.

In his affidavit, Mr Anthony Thomas stated: “I believe [Mr Panesar] decided to set up [Motorcare Elite] out of necessity with [Motorcare] being effectively put out of business with the effect of the Freezing Order.” I do not accept that evidence. In my judgment, there is no basis for the assertion that Motorcare was effectively put out of business with the effect of the Freezing Order. In his oral evidence, Mr Anthony Thomas continued to assert that Motorcare was in effect “crippled” by the freezing injunction. I do not accept that evidence. In my judgment, that evidence was false and given by Mr Anthony Thomas knowing it to be untrue. It follows that Mr Anthony Thomas’ evidence that he believed that Mr Panesar decided to set up Motorcare Elite “out of necessity” for that reason is equally untrue and, again, given by Mr Anthony Thomas knowing it to be untrue.

In his 2^nd affidavit, Mr Panesar denied that Motorcare Elite could properly be described (as Mr Wells had done) as a “phoenix company” and that Motorcare Elite was formed to give the impression that it was in fact Motorcare and to carry on Motorcare’s business. On the contrary, it was Mr Panesar’s evidence in that affidavit that Motorcare Elite was a new company with a new underwriter, new business structure and new agreements with, in many cases new commission agents. Similarly, in both his affidavit and in oral evidence, Mr Anthony Thomas suggested that once Templeton ceased acting as insurer, Motorcare lost its most valuable asset and that Motorcare Elite would need to be a new business needing a new insurer. I accept that once Templeton ceased to act as insurer, Motorcare could only continue to carry on business by finding a new insurer to replace Templeton. However, a new replacement insurer (ie AXA) was found within a very short time. In my judgment, there is no reason why Motorcare could not have continued to trade in the ordinary and proper course of conduct with AXA as the new insurer. Therefore, I do not accept the thrust of the evidence of both Mr Panesar and Mr Anthony Thomas that there was any need to place the new business with AXA as the new insurer in a new company. In the course of evidence, Mr Anthony Thomas insisted that the business structure and arrangements with AXA as well as their systems were completely different. In particular, his evidence (like that of Mr Panesar) was that unlike the position with Templeton, all premiums were paid directly to AXA and they retained full control of all claims. That may well be so but, in my judgment, such differences do not of themselves provide any proper explanation or justification for setting up Motorcare Elite. In my judgment, the only reason for setting up Motorcare Elite was to seek to carry on the business previously carried on by Motorcare outside the purview of the freezing injunction; and that was done knowingly by both Mr Panesar and Mr Anthony Thomas with that deliberate intention in mind.

In the course of his oral evidence, Mr Anthony Thomas was cross-examined by Mr Cook with regard to the choice of the name of the new company ie Motorcare Elite. In my judgment, his evidence on this topic was not credible. At one stage, he said that the Motorcare brand had been blown apart in 2008. But if that had indeed been the case, it beggars belief that the decision was taken to include “Motorcare” as part of the name of the new company and, as appears below, to seek to rely upon the past reputation of Motorcare on, for example, the Motorcare Elite website. In response to further questioning, Mr Anthony Thomas insisted that the name was “useless” and he himself would never have used the name “Motorcare”. When asked further questions on this topic, he said that this was Mr Panesar’s decision and that he had tried to persuade Mr Panesar many times not to use the name. I do not accept that evidence. It may be that Mr Panesar played a leading role but, in my judgment, it is inconceivable that the decision to adopt and to use the name “Motorcare” as part of the name of the new company was taken without the active participation of Mr Anthony Thomas. In my judgment, that decision was taken and implemented jointly by Mr Panesar and Mr Anthony Thomas in order to facilitate so far as possible the transfer of the business to Motorcare Elite in the knowledge that this would interfere with the freezing injunction.

There is little, if any, evidence with regard to the actual conduct of the business after the freezing injunction. Arrangements were put in place to enable Templeton to handle the run-off of the existing business which had been placed through Motorcare. As I have said, Motorcare Elite was established on 14 July 2008 and at some stage shortly thereafter (the exact date is unknown), AXA in effect agreed to act as the new insurer although the precise contractual arrangements with AXA are also unknown. There were no documents to explain the position; and there is no evidence (not even accounts) to identify even in broad terms the manner in which this new business was conducted after July 2008 nor the volume of such new business. This is a big gap in the story. The evidence of Mr Anthony Thomas was that he thought that all sales (ie new business) after July were on behalf of Motorcare Elite. That evidence was, at best, puzzling. Indeed, it was Mr Cook’s submission that this could not be correct because Motorcare Elite was not authorised by the FSA to conduct insurance business until 1 April 2010; that AXA as a reputable insurer would not have conducted any business with Motorcare Elite without such essential authorisation; and that the new business must have been continued through Motorcare. That may well be so and, if so, Mr Anthony Thomas’ evidence that he thought that the sales after July 2008 were on behalf of Motorcare Elite was either untrue or based on a false premise. Moreover, it is important to note that a company like Motorcare Elite can only trade through appointed representatives and Motorcare Elite had no appointed representatives prior to 1 April 2010. However, on 1 April 2010, Motorcare Elite had 365 appointed representatives all of which were appointed representatives of Motorcare on that date. Motorcare then had its FSA authorisation withdrawn on 25 May 2010 (at its request) and so must have stopped trading by that date at the latest. (Mr Panesar raises some queries about the exact number of Motorcare representatives that became Motorcare Elite representatives on 1 April 2010 (he suggests it was 293, but then seeks to carve out 96 on the basis that they also did business with other warranty companies), this dispute does not seem crucial for present purposes.) Ideally, it would have been desirable to have further information on this point ie what was actually happening between July 2008 and April 2010 and to be able to clarify the position. In any event, what is clear is that if not before 1 April 2010 then at least from that date or shortly thereafter, Motorcare Elite began selling motor warranty insurance policies and that all of the appointed representatives approved to sell such policies on behalf of Motorcare Elite were also appointed representatives for Motorcare immediately prior to 1 April 2010.

However, in my view, the lack of information in relation to this period is not crucial for present purposes because it is clear from Mr Panesar’s own evidence that he took active steps to convince Motorcare’s commission agents to work for Motorcare Elite and that such attempts were ultimately successful. That is clear from both paragraph 20 and 34 of Mr Panesar’s 2^nd affidavit where he stated in material part as follows:

“20.

Since the making of the Freezing Order, I have worked very hard to convince commission agents that a new company, completely separate from Motorcare, with a new business structure and a new underwriter, would succeed. Fortunately, as we and particularly Anthony Thomas (who had been involved in the warranty business for 42 years before his retirement in 2004) established good relationships with many of the agents long before we did business through Motorcare Warranties, those agents indicated to us that they would be willing to sell policies for Motorcare Elite (2008) ltd (“Elite”). Thereafter, it took a considerable amount of time to register all of the agents as representatives of Elite with the FSA. The FSA were kept up-to-date in relation to Elite’s activities from inception, and worked with the company until authorisation was obtained earlier this year [ie 2010].”

“34…As mentioned above, it was only because we had established good relationships with many of our commission agents prior to incorporating Motorcare that we were able to convince them that the new company would be exactly that – new.”

Again, Mr Anthony Thomas sought to distance himself from these steps. I do not accept that evidence. In my judgment, the above evidence, read fairly, makes it plain that Mr Anthony Thomas played an important part in convincing the agents (and through them the dealers) to work for Motorcare Elite and any suggestion to the contrary is inherently implausible. As stated by Mr Panesar, it was, in particular, Mr Anthony Thomas who had established good relationships with many of the agents over a long period and, in my judgment, it is inconceivable that Mr Anthony Thomas would not have taken an important role in seeking to convince them to work with Motorcare Elite. This is consistent with Mr Anthony Thomas’ own evidence as set out in paragraph 14 of his most recent affidavit sworn on 24 February 2012 where he refers to a meeting which he attended at the Holiday Inn, Roose in August 2008 with (amongst others) Mr Panesar and a number of the agents. As there stated: “Harby [ie Mr Panesar] told me the meeting was happening but did not expressly invite me. I felt I should be there just to show my support by being present as I had worked with them for many years.” For the avoidance of doubt, it is plain from the subsequent paragraph (ie paragraph 15) that the meeting was concerned not only with the run-off with Templeton but also a meeting about Motorcare Elite and the new arrangements with regard to AXA going forward. I should note that it was Mr Anthony Thomas’ evidence in that same paragraph that beyond his presence at the meeting, he did not participate in any discussions other than catching up on old times with representatives he had known personally for many years. For the reasons set out above, I do not accept that evidence. In that paragraph he also states that this was the last time he attended any meetings of Motorcare Elite. In a formal sense that may be correct. It is also correct that there is no direct evidence to the contrary and there is a dearth of any other evidence to show specifically what Mr Anthony Thomas did or did not do thereafter. Be that as it may, it is important to remember that Mr Anthony Thomas was a 50% shareholder of Motorcare and I am sure that, at the very least, he could, if he had wanted to, have stopped the arrangements to transfer the business to Motorcare Elite. To that extent, even if Mr Anthony Thomas did not after August 2008 actively assist in such arrangements I am sure that he did, in effect, knowingly permit them to be implemented in breach of the freezing injunction.

Further, Mr Anthony Thomas confirmed in paragraph 6 of his earlier own 2^nd affidavit sworn on 2October 2010 as follows:

“6.

I have read through the Fifth Affidavit of Mr Harbinder Panesar and agree entirely with what is said therein. I was aware of the arrangements with regard to Motorcare Elite as set out in Mr Panesar’s affidavit. I did not myself regard these arrangements being in breach of the freezing order.”

(The reference to the Fifth Affidavit of Mr Panesar is a typographical error. It should refer to the 2^nd affidavit, as Mr Anthony Thomas accepted must probably be the case.) It seems to me that this statement is important for two main reasons. First, it confirms agreement with the affidavit evidence of Mr Panesar. Second, the thrust of the statement is not that he was not involved in those arrangements but that he did not regard them as being in breach of the freezing injunction. I do not accept that evidence. The connections established with these agents formed an important – indeed crucial – part of the goodwill of Motorcare and an important link between Motorcare and the representatives who actually sold the policies. As I have stated, those connections and goodwill constituted part of the assets of Motorcare. In my judgment, the steps that were taken to convince these agents (and through them the dealers) to work for Motorcare Elite were in plain breach of the freezing injunction and, so far as Mr Panesar and Mr Anthony Thomas are concerned constituted a wilful interference with the freezing injunction. Moreover, I am sure that both Mr Panesar and Mr Anthony Thomas knew full well that what they were doing was a breach of the order with the intention of interfering with the freezing injunction.

As indicated above, it is not clear to me when these agents (and the dealers) in fact started working for Motorcare Elite. I am prepared to assume that this did not in fact occur until after Motorcare Elite received the necessary FSA authorisation to conduct insurance business in 2010. This does not seem to me to matter. The freezing injunction was still in force at that time and, as I understand, it continued in force until on or about 25 February 2012 when it was discharged with prospective effect only at the request of the liquidator of Motorcare.

As explained by Mr Wells, Motorcare and Motorcare Elite used different website addresses. However, the Motorcare website automatically took customers to the Motorcare Elite website. Mr Wells exhibits to his statement screen prints from the former Motorcare website and the new Motorcare Elite website. This shows that with the exception of the logo, Motorcare Elite was using the same website text that Motorcare was using. Of particular significance is the fact that the Motorcare Elite website includes the same “About Us” text as Motorcare which describes Motorcare (in this context Motorcare Elite) as “an established family owned company that has built up an excellent reputation over the years”. The exact period when this arrangement was in place is uncertain but there is no dispute that it was in place at some stage. It was Mr Anthony Thomas’ evidence that he knew nothing about the website; and Mr Cook conceded that he could not rely upon the website arrangements in support of the application for committal against him. However, he did rely upon these arrangements as against Mr Panesar. In my judgment, I am sure that Mr Panesar must have been directly involved in the creation and use of the website arrangement. Given his position as Director of Motorcare Elite, the contrary is inconceivable. In my judgment, the website belonging to Motorcare was an important part of its assets and goodwill and the arrangements described above (including the mechanism for taking Motorcare site visitors directly to the Motorcare Elite site) constituted a “dealing with” if not “disposal” of the assets of Motorcare. Further, in my judgment, I am sure that Mr Panesar was aware that these arrangements were in breach of the freezing injunction and done with the intention of interfering with it.

As explained by Mr Wells, Motorcare Elite traded from the same address as Motorcare and used the same telephone number and email address as Motorcare had used prior to 1 April 2010. Again, in my judgment this constituted a breach of the freezing injunction and, so far as both Mr Panesar and Mr Anthony Thomas are concerned, an interference with the freezing injunction done by them with the intention of interfering with it.

On behalf of Mr Panesar and Mr Anthony Thomas, a number of additional points were raised which I should deal with briefly.

First, it was in particular Mr Gadsden’s submission that this particular application was oppressive and vengeful given, in particular, that (as noted in paragraph 1 above) an order for committal to prison was being pursued as against the 4^th, 5^th and 6^th Defendants right up until the commencement of this hearing. It may well be that that is how this application is perceived by the Defendants. However, regardless of such perception, it seems to me that the freezing injunction has become an important and crucial part of modern litigation. A claimant’s success on its substantive claim is generally worthless if there are no assets to meet that claim. It is for that reason that the jurisdiction in relation to freezing injunctions has developed in recent years and become such an important part of the administration of justice. In my view, the jurisdiction should be jealously guarded and, in appropriate circumstances, rigorously enforced. Breach of a freezing injunction is, in my view, a particularly serious matter as was recognised, for example, in the recent decision of the Court of Appeal: JSC BTA Bank v Solodchenko & Ors [2011] EWCA Div 1241 in particular at paras 45-58.

Second, Mr Gadsden also submitted that given the serious nature of the application focus and clarity are important. I agree. In particular, I agree that contempt proceedings will not (or at least should not) succeed when the order is unclear or ambiguous: see, for example, Federal Bank of the Middle East v Hadkinson [2001] 1 WLR 1695. However, in my judgment, that is not this case. As I have said, the Defendants did not here dispose of or deal with any tangible assets of Motorcare. But in my view, the order was clear and unambiguous and the actions that I have described constituted a clear breach of it and interference with it with the necessary wilful intention.

Third, it was suggested that whatever goodwill existed did not belong to Motorcare but instead belonged to ATA (because the agents were contracted with ATA not Motorcare) or Mr Anthony Thomas personally (because it was he who had known most of the agents for a very long time) or to the agents themselves (because it was they who had the direct links with the dealers). In that context, Mr Gadsden referred me, in particular to paragraphs 188-192 and 196 of the Judgment of Simon J. I do not agree. Nor do I consider that those passages from the Judgment of Simon J. are of any assistance in the present context. In my judgment, whatever the strict legal position, this business and its goodwill belonged to Motorcare. At the risk of repetition, as stated by Lord Denning in Darashah, such goodwill may consist not only of lists of customers but also the established connections with them. The connections between Motorcare and the agents and dealers formed part of the goodwill of Motorcare and as such formed part of Motorcare’s assets.

Fourth, the point was made that once Templeteon ceased to act as insurer and/or the freezing injunction was granted, Motorcare was in effect “crippled” and could not continue to trade with the result that it became worthless and any “goodwill” vanished. Thus it was suggested that thereafter there could be no breach of the injunction because there was no longer any extant “goodwill” which could be disposed of or dealt with ex hypothesi because it had already disappeared. I do not agree. I have already dealt in part with this point. In my judgment, the goodwill continued to exist – as is manifest, for example, by the attempts made to persuade the agents and dealers who had previously carried on Motorcare business to work for Motorcare Elite and the use of the Motorcare website to divert vistors to the new Motorcare Elite website.

Fifth, it was said that there was no relevant “goodwill” in any event because, the agents and the dealers could, if they wanted, terminate their relationship with Motorcare and transfer to work with Motorcare Elite. Again, I disagree. In my judgment, the fallacy in that point is that it is founded on a misunderstanding of the nature of the goodwill of any company. Again at the risk of repetition, such goodwill may consist of lists of customers or “network connections”.

For all these reasons, it is my conclusion that Mr Panesar and Mr Anthony Thomas are both in contempt of court in that they carried out the acts which I have described above which acts constituted a wilful interference with the administration of justice in particular the freezing injunction granted by Nelson J. on 8 July 2008 and thereafter continued; that such acts permitted or assisted in the breach of the freezing injunction; and that such acts were done with the intention to interfere with or impede the administration of justice. Further, insofar as may be necessary, it is also my conclusion that Mr Panesar in his capacity as Director of Motorcare is also in contempt of court in wilfully failing to take reasonable steps to ensure that the freezing injunction was obeyed.

Counsel are requested to agree a draft order for my approval (including costs) failing which I will deal with any outstanding issues.

As agreed by Counsel, the question of sentencing will be adjourned to a later date as to which I will hear further submissions. However, it is important to state that in the light of my conclusions, all options remain open including a sentence of imprisonment.