Holding The Director In Contempt - Court Finds Director Deliberately Breached Freezing Order Against His Company

INTRODUCTION

In this publication we consider the recent case of Templeton Insurance Ltd v Motorcare Warranties Ltd and others [2012] EWHC 795 (Comm) in which the High Court ruled that a director and a shareholder were in contempt of court for breaching a freezing order made against their company.

BACKGROUND

The first defendant company, Motorcare Warranties (Motorcare) sold mechanical breakdown insurance policies through a network of car dealers and other representatives. The majority of the policies sold by Motorcare were underwritten by the claimant insurance company, "Templeton". A dispute subsequently arose between the parties over the payment of premiums. Templeton alleged that it was not receiving the full amount of the premiums and it issued proceedings against Motorcare seeking damages for fraudulent misrepresentation. It also pursued claims for deceit, knowing assistance and knowing receipt.

THE FREEZING INJUNCTION

Templeton obtained a freezing injunction against Motorcare preventing it from removing from the jurisdiction or in any way disposing of, dealing with, or diminishing the value of, other than by payment to Templeton, any of its assets in England and Wales. The injunction included a standard penal notice which stated that "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".

THE ALLEGED BREACH

Templeton alleged that the second defendant, Mr Thomas, who was a 50 per cent shareholder of Motorcare, and the third defendant, Mr Panesar, who was the director of Motorcare and Mr Thomas' son in law, had, within a week of the injunction being granted, set up a new company, "Motorcare Elite Ltd" and had transferred Motorcare's entire business to it. Although no monies or other tangible assets belonging to Motorcare were actually transferred, the new company took over Motorcare's office premises, staff, telephone number, website address, website wording and product documentation. The new company also held itself out as "Motorcare" and it worked with a number of agents and car dealers that had connections with Motorcare.

Templeton were successful at trial, although the determination of quantum and the misrepresentation claim were adjourned. However, by this stage, Motorcare had gone into liquidation, which left Templeton unable to enforce any judgment against it. Templeton, therefore, sought...