Maximum Custodial Sentence Imposed For Contempt Under New CPR 81 - XL Insurance Company SE V IPORS Underwriting Ltd, Paul Alan Corcoran & Others [2021] EWHC 1407 (Comm)

• Published date: 03 June 2021
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Financial Services, Fund Management/ REITs, Compliance, Corporate and Company Law, Contracts and Commercial Law, Court Procedure, Trials & Appeals & Compensation
• Law Firm: Quadrant Chambers
• Author: Mr Joseph England

OVERVIEW

In one the first reported cases dealing with contempt under the new CPR 81 for serious breaches of a freezing order, Mrs Justice Cockerill DBE, the Judge in Charge of the Commercial Court, handed down an immediate maximum 2-year custodial sentence for multiple and persistent breaches of a freezing/proprietary injunction.

Background

The underlying proceedings concern claims by the Claimant insurer ("XL") for misappropriation of c.'10 million of its premium funds - funds that Mr Corcoran's coverholder company was contractually obliged to hold on trust for XL once received from insureds before remitting them to XL. XL's case is that the funds were instead transferred in large part to Mr Corcoran and expended for personal purposes.

In support of the proceedings, XL obtained a number of proprietary and freezing injunctions in 2017 (and disclosure orders) including against Mr Corcoran personally and the corporate defendants that he controlled.

In early 2021, XL brought an application for contempt of court against Mr Corcoran for breaches of the injunctions in relation to: (a) disposing of assets in breach of the prohibitions on doing so; and (b) his failures to comply with the disclosure obligations in the injunctions, including general asset disclosure, disclosure relating to XL's proprietary funds and for providing no affidavit in respect of those matters.

Grounds for Contempt and the Defendant's Response

The injunctions contained the standard provision prohibiting disposing, dealing with or diminishing assets held by or behalf or Mr Corcoran, subject to a maximum sum '4.5 million. The exceptions to the order, allowing Mr Corcoran to expend a reasonable sum on legal representation and '500 a week on ordinary living expenses, were subject to him first informing XL where the money was to come and stated that the monies could not be sourced from XL's proprietary funds (subject of course to Mr Corcoran's right to apply to vary the order to seek to use such funds).

Despite Mr Corcoran's lack of disclosure, disclosure obtained by XL from non-party banks showed that Mr Corcoran had expended funds from a number of accounts, including at Nationwide and Coutts, of which XL was not aware and which Mr Corcoran had failed to disclose. One had in fact been set up since the injunctions had been made against him and after his main account at NatWest, of which XL was aware, had been frozen.

The payments were spent on a variety of luxury expenditure without informing XL, including multiple payments at Selfridges and the Savoy Hotel, c.'30,000 on a hotel in Paris and c.'10,000 on Manchester United football tickets. XL relied on a large number of payments to support the counts of contempt but, to avoid any arguments about them being living expenses, selected payments only over the '500 limit in the injunctions for such spending.

XL also alleged contempt...