Lloyds TSB Commercial Finance Ltd. v Melia & Ors

This is an application for committal or fine of the first, second and sixth defendants for contempt of court by failing to comply with orders of this court requiring the provision of information. The background to the application is as follows.

In October 2007 the claimant entered into a Receivables Finance Agreement (a form of factoring agreement) with a company called Rapid Recruitment Limited (“RRL”). Under this agreement RRL assigned its invoices to the claimant in return for prepayment by the claimant of the assigned invoice value less a specified percentage. The agreement was supported by deeds of indemnity from a Mr Dale Welleton and another man.

In April 2008 RRL instructed the claimant to make the prepayments to the second defendant, Ready To Trade llp. As a result, the claimant made prepayments totalling just under £170,000 into the second defendant’s bank account. As has subsequently emerged, the second defendant paid about £95,000 of that money to the sixth defendant, Hawk Employment Services Limited (formerly known as ACE Employment Services Limited and therefore referred to for convenience as “ACE/Hawk”).

The claimant came to the conclusion that RRL was engaged in fraud. There was evidence that RRL was dishonestly submitting false invoices to the claimant and was thus obtaining payments to the second defendant to which it was not entitled. A substantial sum of money had been paid out which the claimant naturally wished to recover. The claimant accordingly commenced proceedings against RRL and in August 2008 recovered judgment for £275,670.18, which remains unsatisfied.

Also in August 2008 the claimant wrote to the first defendant putting him on notice of the claim which it was intended to make against him. The claimant sent copies of this letter to three addresses at which the first defendant was thought to reside. Plainly at least one of them was received, because the first defendant replied with a short and wholly unhelpful letter, which he explains by saying that he was angry at having unfounded allegations made against him. Significantly, his letter did not show his own address.

The claim against this defendant and six others was commenced on 13^th January 2009. It is a claim in fraud and a claim to trace the monies fraudulently obtained from the claimant. An important part of the claim is to try to trace what has become of the monies paid by the second defendant to the sixth defendant. Judgment in default has been entered against the second and sixth defendants, but they are not thought to have any assets.

This defendant, the first defendant Nigel Melia (also believed to be known as Nigel Jones) is said by the claimant to have been a shadow director of RRL. That allegation is denied. It is however admitted that he is the only member of the second defendant (the limited liability partnership to which the proceeds of the fraud were paid) and the only director of the sixth defendant (the limited company to which the second defendant paid more than half of the relevant monies). Counsel for the claimant submits, with justification, that the second and sixth defendants are, in reality, corporate manifestations of the first defendant.

I do not think it necessary to go into more detail about the nature of the proceedings. It will be apparent that the claimant’s case is that the first defendant is the man who could best explain what has happened to the monies which the claimant paid out as a result of the fraud, and could best assist in the actual recovery of the claimant’s loss.

On 20^th January 2009 the first defendant acknowledged service and indicated his intention to defend. He gave an address for service, but it is now admitted that he already knew that he would be leaving that address by about the end of the month of January, which indeed he did. It is further admitted that he never informed the court of his new address, and never wrote to the claimant at all.

As I understand it, the acknowledgement of service was accompanied by a letter from the first defendant dated 26^th January. It was addressed to the court and gave no indication of the first defendant’s address. In it, the first defendant denied any wrongdoing. He gave an account of the nature of his business which in my view shows a considerable degree of acumen. At two different points in this letter the first defendant asserted that he had only ever banked with Barclays Bank and that all his accounts had been held at a Sheffield branch of Barclays, for which he gave the sort code. The letter also referred to Mr Welleton, of whom the first defendant said that he had known him for about 15 months and could not believe that he would act fraudulently. Mr Welleton was said by the first defendant to be a friend of “my new partner, Miss Hawker”. When I enquired at an early stage of the hearing whether that meant Miss Hawker was a business partner or a personal partner, counsel took specific instructions from the first defendant and responded that she had at one stage been both but that there was no longer any relationship between them.

Also on 26^th January McCombe J, on the application of the claimant, made orders against various of the defendants. I do not need to go into the details of all these orders, save to say that they enabled the claimant to obtain from the relevant banks statements of at least some of the accounts held by some of the defendants. The orders also included orders against the first, second and sixth defendants requiring them to disclose certain information. That aspect of McCombe J’s orders then came before His Honour Judge Seymour QC, sitting as a Judge of the High Court, on 9^th February 2009. It is the order made by His Honour Judge Seymour on that day which is the foundation of the present committal.

It is necessary for me to read in full the relevant paragraphs, namely paragraphs 4 to 7 of that order. Before doing so, I should explain that paragraph 10 of Judge Seymour’s order referred to the privilege against self-incrimination. I should also say that the first defendant has not at any stage sought to rely on that privilege as a reason for non-disclosure. His case is that he has done nothing wrong and so cannot be in any danger of incriminating himself.

Paragraphs 4 to 7 of His Honour Judge Seymour’s order are as follows:

“4.

Unless paragraph 10 applies, the First and Second Respondents and each of them do disclose to the Appicant forthwith

(a)

the sums of balances at present standing in any account in the name of the First and/or Second Respondent, and/or any account controlled by or for the benefit of the First and/or Second Respondent at any bank or building society or similar institution;

(b)

The reason for each payment made by the Second Respondent to ACE Employment Services Limited (also known as Hawk Employment Services Limited) between 1^st April 2008 and 30^th June 2008 from the Second Respondent’s account number 70023027 at Barclays Bank;

(c)

the reason for a payment on 14^th May 2008 in the sum of £2,557.60 from the Second Respondent’s account number 70023027 at Barclays Bank, and full details of the identity of the recipient of that payment referred to in the relevant statement as 018176APS;

(d)

the reason for the following debits recorded in the statements for the Second Respondent’s account number 70023027 at Barclays Bank and full details of the identity of the recipient or beneficiary in each case of the payment made:

(1)

28th May 2008: debit in the sum of £7,563.86 described as “Tenterden 32 Chq”;(2) 3rd June 2008: debit in the sum of £8,751.90 described as “Tenterden 33 Chq”;(3) 10th June 2008: debit in the sum of £18,176.24 described as “Tenterden 31 Chq”;(4) 11th June 2008: debit in the sum of £3,000.00 described as “100015”;(5) 16th June 2008: debit in the sum of £6,000.00 described as “Tenterden 33 Chq”;(6) 17th June 2008: debit in the sum of £3,461.36 described as “100018”;

(e). the full identity and address of Chris Barltrop and the reason for a payment to him of £8,200 on 16th June 2008 from the Second Respondent’s account number 70023027 at Barclays Bank;(f). the reason why payments from the Applicant were directed to account number 10857960 at Lloyds TSB Bank Plc and account number 60872474 at Barclays Bank Plc, both accounts being described in BACS payment instructions given as accounts belonging to the Second Respondent, but which in fact were both accounts in the name of Salman Iftekhar of 45 Woodland Avenue, Slough, Berkshire, SL1 3BX.

5.

Unless paragraph 10 applies, the First and Second Respondents are to provide the information ordered in a witness statement exhibiting any relevant documents, to be filed with the court and served on the Applicant’s solicitors by 4pm 13th February 2009.DISCLOSURE OF INFORMATION BY THE SIXTH RESPONDENT6. Unless paragraph 10 applies, the Sixth Respondent must disclose to the Applicant forthwith:

(a). copy statements from 1st April 2008 to date in respect of any bank account, building society account or other account which received payments from the Second Respondent’s account number 70023027 at Barclays Bank;(b). the reason for each payment from the Second Respondent’s account number 70023027 at Barclays Bank to the Sixth Respondent;(c). all facts within the Sixth Respondent’s knowledge as to the present whereabouts of the sums paid from the Second Respondent’s account number 70023027 at Barclays Bank to the Sixth Respondent.

7.

Unless paragraph 10 applies, the Sixth Respondent is to provide the information ordered in the form of a witness statement made by the First Respondent (being the only director of the Sixth Respondent) and exhibiting any relevant documents, such witness statement to be filed with the court and served on the Applicant’s solicitors by 4pm 13th February 2009.”

It will be apparent that in what I have just read the references to the first, second and sixth respondents are references to the first, second and sixth defendants.

That order made by His Honour Judge Seymour was endorsed with a penal notice in the following entirely clear terms:

“Penal Notice.

If you Nigel Melia, or you Salman Iftekhar neglect to obey this order by the time stated, you may be held to be in contempt of court and may be imprisoned, fined or have your assets seized. If you ReadyToTrade llp neglect to obey this order by the time stated, you may be held to be in contempt of court and may be fined, your members may be sent to prison or your assets may be seized. If you, Hawk Employment Services Limited, neglect to obey this order by the time stated, you may be held to be in contempt of court and may be fined. Your directors may be sent to prison or your assets may be seized.”

I have read the evidence of Mr Paul Grove, which establishes that this order was personally served on the first defendant on the evening of 10^th February. The first defendant accepts that this is so. Moreover, he also expressly accepts the claimant’s contention that, by reason of his positions in the second and sixth defendants, personal service on him is effective service on each of those defendants. Thus, there is no doubt that valid service of the order of 9^th February had been effected on all three defendants with whom I am concerned.

On 10^th February the first defendant telephoned the court. He did so not because of the order made the previous day (which had not yet been served upon him) but because he had just received documentation relating to the order made by McCombe J on 26^th January. He said he needed more time to comply with that order. He was advised to write to the court, and did so later the same day. By the time he had completed that letter he had been served with the order of 9^th February. Nonetheless, on the following morning he posted his letter to the court, asking for more time, and did nothing more. His case is that he was acting without legal advice or assistance, did not appreciate that he should have done more and was, not unreasonably, expecting to hear from the court with a revised date by which he had to comply with the order against him.

On the first defendant’s behalf it was accepted before me that he could legitimately be criticised for not doing anything more to comply with the order of 9^th February, but it was admitted that I should accept that he had genuinely done all that he believed to be necessary and that any failing on his part was not deliberate. However, it must in my view be borne in mind that although not legally represented, the first defendant has been in business dealing with large sums of money and in his business dealings has shown a considerable degree of acumen. It must also be borne in mind that he had deliberately adopted a policy of not revealing his own address on correspondence and had deliberately refrained from making any attempt to contact the claimant’s solicitors.

None of the three defendants filed any witness statement with the court by 4 p.m. on 13^th February 2009 or at all. None of them communicated with the claimant. The claimant therefore issued this application, seeking committal of the first defendant and fining of the second and sixth defendants for contempt of court in failing to comply with the order of 9^th February. The application was issued on 11^th March, returnable on 24^th April. Once again, I am satisfied by the evidence of Mr Grove and of Mr Bruce Bickerdyke that service of the application was properly effected on all three defendants. Once again, that is expressly admitted by the first defendant.

The application came before Cranston J on Friday 24^th April. The first defendant had by this stage obtained publicly funded legal representation. As a result of the submissions made on the first defendant’s behalf, Cranston J adjourned the matter to Friday 1^st May to be heard by him unless he was unavailable. He ordered the first defendant to file by 4 p.m. on Wednesday 29^th April an affidavit dealing with two specific matters: the circumstances of the first defendant’s telephone call of 10^th February and subsequent letter to the court, and details of the attempts he said he had made to find a firm of solicitors to act for him before being able to instruct his present solicitors.

Cranston J also ordered the first defendant to file by 4 p.m. on Thursday 30^th April the witness statement which the order of His Honour Judge Seymour had required him to file about two and a half months earlier.

On the afternoon of 30^th April the first defendant filed an affidavit which was intended to comply with all aspects of Cranston J’s order in a single document. This affidavit said, in essence, that the time within which he had to comply with his obligations had been reduced by the late arrival or non arrival of application notices and orders. It also made the point that he did contact the court on 10^th February and wrote the next day to request more time, but heard nothing more from the court before being served with the application for committal. It follows that, on his own account, he had taken no active step between 11^th February (when he sent his letter to the court) and 25^th March (when he was served with the notice of the committal application). He apologised if, through unfamiliarity with legal procedure, he had inadvertently taken the wrong course. He said that he had no intention at any stage of disobeying the court. He also said that he had not acted in any dishonest or fraudulent way.

Finally, in his affidavit of 30^th April the first defendant said that he had provided such very limited information as he could in compliance with the order of 9^th February. He produced a bundle of exhibits which included statements of a bank account of the sixth defendant.

The matter came before me on Friday 1^st May. The claimant had, of course, had only a very short time since the previous afternoon to consider the contents of the first defendant’s affidavit. The claimant noted that the affidavit identified for the first time a bank account held by the first defendant at a branch of Barclays Bank at Ashford in Kent. Paragraph 55 of the affidavit identified this account by sort code and account number. For convenience I will refer to it as “account 7970”. Paragraph 59 said that he had no other personal account.

The claimant then pointed to the following features of the affidavit.

For those reasons, the claimant contended that the first defendant had only complied in part with the order of 9^th February. It was submitted to me that the first defendant knew more than he was letting on and that incomplete or inaccurate compliance with an order was to be treated as non compliance – see Bird v Hadkinson [1999] BPIR 653. I was invited to view this as a case in which the first defendant should be cross-examined on his affidavit.

Mr Rowntree on behalf of the first defendant asked me to allow the first defendant a short time in which to file a second affidavit responding to those points. I granted that request. Over the short adjournment the affidavit was prepared and filed. In brief, it dealt with the claimant’s points as follows.

It was apparent that a great deal of work had been done by Mr Rowntreee and his instructing solicitors in a short space of time in order to present this evidence. That is consistent with the obvious efforts they had already made in preparing for the hearing after being instructed at a late stage.

On the basis of that affidavit, Mr Rowntree submitted that there had now been belated compliance with the order of 9^th February; that the only continuing breach was a technical one brought about by the first defendant’s inability to obtain a complete set of the statements of the ACE/Hawk bank account; that the first defendant had believed he was doing all that was required of him and had no intention of breaching the court order; and that the first defendant offered a sincere apology for any respect in which the court felt he had failed to do all that he should. In the course of these submissions, Mr Rowntree, on specific instructions, indicated that past breach of the order of 9^th February was now admitted, but submitted that the order had now been complied with save in the one technical respect In those circumstances, he submitted that imprisonment, even if suspended, would be a disproportionate penalty.

Those submissions were attractively and persuasively put. However, in the course of them the claimant’s counsel, Mr Miller, had been receiving further instructions as a result of ongoing enquiries. It now emerged that the ACE/Hawk account statements showed payments both to and from an account at the same Ashford branch of Barclays Bank with a number ending 6112, and that the 6112 account was an account in the name of the first defendant. Thus, it transpires that there are two accounts in the name of the first defendant at the Ashford branch in Kent, both of which were in use in January 2009 when he wrote to the court, presumably from his home in Kent, saying he had only ever banked in Sheffield.

After a short break to take instructions, Mr Rowntree indicated that the first defendant wished to give evidence to explain about this further account, which I note is designated a “day-to-day savings account”. From the witness box the first defendant told me, on his affirmation, that this was an account which he must have set up but which Mr Welleton operated. Mr Welleton was able to do so because the first defendant had provided him with the means to access the account online, which meant, in fact, that Mr Welleton had free access to all the first defendant’s online banking. The first defendant admitted his first affidavit had been wrong when it said he only had one account, but he said he had forgotten about this one, an omission for which he apologised. He also asserted that he was “here to help” and not trying to hide anything.

When cross-examined about this, I have to say that the first defendant was unable to give any satisfactory answers as to how he could possibly have forgotten this account or be ignorant of the transactions on it. He said at one stage that he could not explain why he had set the account up in the first place. He then gave an explanation to the effect that Mr Welleton had difficulties in opening an account in his own name. He said he had acted out of friendship, but was unable to explain why he had permitted Mr Welleton access to his own online banking. He succeeded only, to my mind, in linking himself ever more closely to Mr Welleton and the sixth defendant.

He also revealed that, quite contrary to the instructions he had given Mr Rowntree earlier in the day, he did still have a relationship with Miss Hawker. It transpired that he is married to her and has been since last year. He admitted that he had lied about her because he believed he would not qualify for public funding if he revealed not only his own financial position but also hers. That lie is not, of course, a subject of the present committal application, and in supplementary submissions this morning Mr Rowntree has submitted that I should leave it entirely out of my consideration. I entirely agree that I must not take it into account as any part of the committal application, but I cannot accept the proposition that it is wholly irrelevant to the first defendant’s credibility. I regard it as a revealing indication of his unwillingness to disclose matters which he thinks will be contrary to his interests. That said, I agree with Mr Rowntree’s further submission that it is the revelation of the further bank account in the first defendant’s name which is of the greater significance.

I remind myself that, where contempt of court is alleged, the court should adopt the criminal standard of proof. For the reasons I have already given, including the admissions to which I have referred, I am satisfied so as to be sure that the first, second and sixth defendants were properly served with both the order of 9^th February and the present application. I am also satisfied so as to be sure that each of those defendants has failed to comply with the order of 9^th February in that each failed to make the necessary witness statements by 13^th February. The failure was deliberate, in the sense that it was not accidental. In the case of the first defendant, that breach is admitted. In the case of the other two, it is arguably admitted on their behalf by the first defendant and, in any event, is clear beyond any doubt.

In relation to the second and the sixth defendants, I accordingly find it proved that they are each in contempt of court by reason of their failure to disclose information as required by the order of 9^th February. However, on the information before me, neither of these defendants has any assets and it would be fruitless for me to fine either of them.

So far as the first defendant is concerned, his admission of a breach of the order of the court is limited to an admission of a failure to provide the necessary information until 30^th April and 1^st May, and an admission of a minor, and technical, continuing breach in failing to provide a complete set of the statements of the sixth defendant’s bank account. However, in the light of all the evidence I have read and heard, including, of course, the first defendant’s own oral evidence, I am sure that his contempt of court is substantially more serious than he has been prepared to accept. I am sure that, even now, he has failed to make full disclosure of the matters which he was required to disclose. Having heard his woefully unsatisfactory evidence about the 6112 account, and bearing in mind that he only mentioned that account at all because the claimant had discovered its significance, I am sure he knows more than he has thus far admitted. I do not believe that he has had nothing to do with the operating of the 6112 account. On the contrary, I am sure he knows all about it and is well aware of the movements of money between that account and the ACE/Hawk account. I am sure he is in continuing breach of paragraph 6(c) of the order of 9^th February, because I am sure that, as the director of the sixth defendant, he is able to provide more information than he has done as to the present whereabouts of the sums paid from the second defendant to the sixth defendant. It follows that he is also in breach of paragraph 7 of the order in this respect as well as in the respects which he has admitted.

Furthermore, I am sure that the breach of the order which he admits is more serious than he would wish me to think. In the light of all the evidence, I have come to the conclusion that I can give very little weight to the fact that he wrote asking the court for an extension of time within which to comply with the order of 9^th February. In my view that was a stalling tactic, and he was happy to take advantage of the fact that he did not hear anything further for some weeks. I simply do not believe that when he filed his first affidavit he had forgotten or failed to notice on the bank statements the payments of maintenance to his former wife or the transactions between his 7970 account and the ACE/Hawk account. Nor do I believe that when he filed his second affidavit he had forgotten about his 6112 account. In my view, he has adopted a policy of disclosing as little as possible, and has deliberately failed to mention matters which he knows to be relevant but about which he thinks the claimant does not know.

For those reasons, I find it proved that the first defendant is in contempt of court by reason of his breaches of the order of 9^th February in

I should add, for the sake of clarity, that paragraph 4(a) of the order was not the subject of this committal application.

I have given careful thought to the sanction I should impose for this contempt of court. An important aspect of a committal application is to ensure compliance rather than to punish. That is a consideration which would have weighed heavily with me if I had been able to accept as correct, or possibly correct, the submissions to the effect that the first defendant had done all he honestly believed he had to do, had never intended to hide anything, and had belatedly complied. But the foundation for those submissions was always doubtful, and was destroyed by the emergence of the 6112 account. As I have said, I am sure the contempt of court is more serious than he admits. Moreover, it is in my view important to make clear to the first defendant that the orders of the court must be obeyed. I cannot ignore what I find to have been a deliberate breach of the court’s order. Nor can I ignore the fact that when belatedly he purported to comply with the court’s order, the first defendant filed two affidavits, both of which I have found to be deliberately untruthful in some respects. It is not for him to decide what information he chooses to impart and what he does not. It is not for him to choose to withhold disclosure whilst claiming that he is trying to help and has nothing to hide. In my judgment, even a suspended sentence will not be sufficient to bring that home to him.

I conclude that there must here be an immediate sentence of imprisonment for what I regard as a serious contempt of court. I bear in mind that, in part, the first defendant did, at least belatedly, comply with the order, and I bear in mind other points well made on his behalf by Mr Rowntree, who, if I may say so, has represented the first defendant as effectively as anyone could have done in the circumstances. In all the circumstances of the case, I do not think a long sentence is needed.

Mr Melia, stand up for a moment, please. For the contempt of court which I have found proved against you, I order that you be committed to prison for 56 days. Sit down again, please.

I have already indicated that the claimant is not aware of any assets of the second and sixth defendants. That being so, and having regard to the sentence I have just imposed on the first defendant, I think it appropriate in the cases of the second and sixth defendants to make the findings of contempt of court which I have indicated, but to make no other order save as to costs.

As to costs, notwithstanding that the second and sixth defendants have no known assets, my provisional view is that it is appropriate for all three defendants to pay the claimants’ costs on the indemnity basis. I will hear further submissions as to this, as to any further order which may be sought, and as to my powers in respect of the first defendant’s admission of obtaining public funding on the basis of a false representation.