After successfully obtaining recognition of an arbitral award and a freezing order, Eldwick recently acted for a Claimant in securing findings of contempt of court against a Respondent leading to the Commercial Court imposing a 15-month immediate custodial sentence.
Background to the case
Following a fully contested hearing before the German Institution of Arbitration (“DIS”) seeking partial payment under an agreement, on 24 August 2023 the arbitral tribunal ordered the Respondents, Pardus Wealth Limited and Gregory Bryce, to pay the claimant €250,000 by way of debt and €54,271.51 in costs (the “Award”). On 2 October 2023, the Claimant successfully made an application in the Commercial Court to have the Award recognised pursuant to section 101 of the Arbitration Act 1996 and for judgment to be entered accordingly. The Claimant then commenced a second DIS arbitration on 26 October 2023, seeking payment of the remaining €2.75 million under the agreement.
During its enforcement of the Award in England, the Claimant discovered that there was a real risk of unjustified dissipation of assets by the Respondents. Accordingly, the Claimant made an application for a freezing injunction in the Commercial Court, which was granted by Mr Justice Bright on 17 November 2023 (the “Freezing Order”).
The Freezing Order restrained the Respondents from disposing of or diminishing the value of their assets up to €3,054,271.51. In addition, the Freezing Order contained disclosure orders in standard terms designed to further and police the Freezing Order by requiring the Respondents to identify assets exceeding £10,000 in value and swear to an affidavit setting out this information.
On 23 December 2023, the Claimant commenced contempt proceedings under CPR rule 81, seeking the committal of Mr Bryce in relation to his breaches of the Freezing Order, including the associated policing disclosure orders requiring him to disclose his assets (the “Contempt Application”). The Contempt Application alleged that Mr Bryce had breached the Freezing Order by diminishing the available equity in the property known as Saffron House; by failing to provide disclosure of his assets; and failing to swear and serve an affidavit setting out his assets exceeding £10,000.
The Contempt Application was heard before Mr Justice Bryan on 30 and 31 October 2024 and the sentencing hearing was heard on 7 February 2025.
Contempt for breaching freezing orders
In order to establish contempt for breaching the terms of an order, such as a freezing order, the following elements of contempt need to be proven: (i) the defendant knew of the terms of the order; (ii) the defendant acted (or failed to act) in a manner which involved a breach of the order; and (iii) the defendant knew of the facts which made their conduct a breach.
The applicable standard of proof is the criminal standard i.e. a breach must be established beyond reasonable doubt. Whilst each of the elements of contempt must be proved to the criminal standard, it does not mean that every fact or piece of evidence relating to each element must itself be proved beyond reasonable doubt. The Court may draw necessary inferences having regard to the whole of the evidence, provided it reaches its conclusion upon the criminal standard of proof.
In establishing whether each of the elements has been proven beyond a reasonable doubt, the Court will have regard to the following established principles:
- In relation to the first element, that the defendant had notice of the order, it is necessary, in practical terms, for the claimant to show to the criminal standard that the order in question was served.
- In relation to the second element, that the defendant acted (or failed to act) in a manner which involved a breach, this is primarily proven by the evidence placed before the court. A defendant is entitled, but not obliged, to give written and oral evidence in his defence. Whilst a defendant has the right to remain silent, the Court may draw adverse inferences from silence.
- In relation to the third element, that the defendant knew of the facts that made their conduct a breach, a lack of understanding of what an order requires, and by extension a lack of intention to breach it, does not prevent an individual from being in breach of the order. Contempt may therefore be committed in the absence of willful disobedience on behalf of defendant, however, intent does have a bearing on the sentence.
In the present case, Mr Justice Bryan in his judgment on the Contempt Application found that all the required elements of contempt were clearly established beyond reasonable doubt.
Sentencing Principles
Once a finding of contempt has been made, a hearing will be held where the Court will consider the appropriate sanction which should be imposed on the contemnor.
The Court has the power pursuant to section 14(1) of the Contempt of Court Act 1981 to impose a sanction of imprisonment of a fixed term not exceeding two years. It is open to the Court to suspend prison sentences or to impose an unlimited fine. In contempt cases, the object of the penalty is both punitive and coercive. The punitive element punishes conduct that is in defiance of the Court’s order and deters others from disregarding court orders. The coercive element holds out the threat of future punishment as a means of securing compliance with order, for example by encouraging the contemnor to purge their contempt.
There are no formal sentencing guidelines for contempt proceedings, with the sanction being fact-specific. However, the Court will adopt an approach analogous to that in criminal cases, assessing the seriousness of the conduct by reference to the offender’s culpability and the harm caused, intended or likely to be caused. If the contempt is so serious that only a custodial sentence will suffice, the Court will impose the shortest period of imprisonment which properly reflects the seriousness of contempt with due weight being given to matters of mitigation. Once the appropriate term has been arrived at, consideration should be given to suspending the term of imprisonment.
Whilst the appropriate sanction is always fact-specific, there have been several cases which have identified the seriousness of breaching a freezing order, including the disclosure provisions relating thereto. The authorities have identified that breaches of this nature “usually merits an immediate sentence of imprisonment of a not insubstantial amount” (Asia Islamic Trade Finance Fund Ltd v Drum Risk Management) and “normally attracts an immediate custodial sentence which is measured in months rather than weeks and may well exceed a year” (JSC BTA Bank v Solodchenko)
In these circumstances, breaches of freezing orders often result in the imposition of custodial sentences.
Judgments
Following a two-day hearing, on 31 October 2024 Mr Justice Bryan handed down his judgment in the Contempt Application (the “Contempt Judgment”). The Contempt Judgment found that Mr Bryce had committed a contempt of court in three ways: (1) Mr Bryce had failed to comply with paragraph 8 of the Freezing Order; (2) Mr Bryce had failed to comply with paragraph 10 of the Freezing Order in failing to swear and serve an affidavit setting out the information required by paragraph 8 of the Freezing Order; and (3) Mr Bryce had entered into a loan extension which incurred additional fees and decreased the available equity in the property known as Saffron House, in breach of paragraph 4(1) of the Freezing Order.
Whilst Mr Bryce had provided an email with lists of assets and an extremely belated filed affidavit, Mr Justice Bryan in the Contempt Judgment found that the list of assets email was “so general as to be useless for the purpose of policing the Freezing Order” with the purported explanation for not swearing an affidavit found to be “a conscious decision not to comply” and “a deliberate breach”. Mr Justice Bryan went on to find that Mr Bryce knew that entering into a loan extension would amount to a breach of a Freezing Order and found that the explanations offered by Mr Bryce as to why assets, most notably a property in Tenerife had not been disclosed, were “not credible”.
On 7 February 2025, following a one day hearing, Mr Justice Bryan handed down his judgment in which he considered the appropriate sanction to be imposed on Mr Bryce (the “Sanction Judgment”).
In his Sanction Judgment, Mr Justice Bryan found that he is in “no doubt whatsoever that Mr Bryce’s offending consisting of three separate serious breaches of a freezing order, in circumstances where there are continuing and unremedied breaches, is so serious that appropriate punishment can only be achieved by an immediate custodial sentence”. In the circumstances, Mr Justice Bryan passed an immediate custodial sentence of 15 months’ imprisonment.
Finally, Mr Justice Bryan granted an indemnity costs order in the sum of £98,314.76.
Conclusions
The recent judgments handed down by Mr Justice Bryan demonstrate the importance of complying with not only the asset freezing provisions within freezing orders but the disclosure obligations contained therein. Disclosure obligations in aid of freezing orders are of great importance as they enable a claimant and the court to police orders of this nature, and enforce them against third parties.
Whilst any breach of a court order is serious, breaches of freezing orders and disclosure orders within freezing orders are regarded very seriously and likely to result in custodial sentences.
A copy of the Contempt Judgment can be found here and a copy of the Sentencing Judgment can be found here.
For more information on the enforcement of arbitral awards and freezing orders, please read the following articles: “How are Arbitration Awards enforced in England and Wales” and “Freezing Orders: A Complete Guide”
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