Why should I obey a court order? The salutary tale of Mr John Jones
Courts make orders all the time, and the court expects people to do what they are ordered to do. The consequences of not complying with a court order can be serious, as demonstrated by the recent case of Jones v Hamilton (acting through his Trustees in Bankruptcy)  EWHC 1216 (Ch), which started with the sale of land in Luxembourg for over €100 million and ended with Mr Jones being committed to prison for 12 months.
What is a Penal Notice?
An order is an order and should be obeyed. However, the consequences of failing to comply depend on the type of order. Whilst a failure to comply with, for example, a court direction may have serious procedural consequences (which deserve an article in themselves), the most serious consequences are reserved for orders with a penal notice attached.
A penal notice is a notice on the face of the order telling the party that if they do not comply, they may be held in contempt of court and punished by a fine, the seizure of assets or imprisonment.
What is a Freezing Injunction?
A freezing injunction is an order from the court prohibiting a party from dealing with or disposing of their assets until trial or further order. Typically, a freezing injunction will have a penal notice attached.
Accordingly, if a party does not comply with a freezing injunction, that party may be subject to committal proceedings for contempt of court. Committal is the most serious sanction that a civil court can impose. The penalty can be a fine, the seizure of assets or imprisonment.
Where a party gives an undertaking direct to the court, there is no need for a penal notice to be attached in order to bring committal proceedings for breach of that undertaking.
How do I apply for Committal?
The process for applying for committal is set out in Part 81 of the Civil Procedure Rules. The committal application should usually be made in the same proceedings in which the breached order was made.
The following general principles apply:
- Despite being a civil remedy, the criminal burden of proof (beyond all reasonable doubt) applies
- Procedural compliance is very important since a person’s liberty is at stake
- Generally, the Applicant will need to prove that the Respondent:
- Knew about the order (this is why orders with a penal notice should almost always be personally served)
- Did an act prohibited by the order
- Intended to do the prohibited act
- Knew the facts that would make the prohibited act a breach of the order
So, the act must be deliberate rather than just inadvertent, but an intention to commit a breach is not relevant.
In relation to breaches of freezing injunctions that consist of the dissipation of assets, a Respondent can generally expect to receive an immediate custodial sentence. In deciding the appropriate sanction, the court will take into account:
- How far the breaches were deliberate or planned
- How prolonged and extensive they were
- What role the Respondent had in those breaches (for instance, whether he instigated them or acted under pressure from others)
- What the risk of harm was
- Whether any actual harm resulted
The following case study usefully illustrates the serious consequences of failing to comply with an order.
Jones v Hamilton: case study
Mr Jones and Mr Hamilton had been business partners. They made significant investments in property involving complex structures and profit share agreements. Their relationship eventually broke down and extensive litigation followed, including three separate trials. Mr Hamilton had originally sought a declaration of his interest in various companies, and an account of profits due from the sale of a plot of land in Luxembourg, which was sold for in excess of €100 million.
Throughout the proceedings, various steps were taken to preserve Mr Jones’ assets. The court ordered a freezing injunction and an asset preservation order against Mr Jones, and Mr Jones gave an undertaking to the court that he would not dissipate a certain sum. The purpose of these orders was to prevent funds being dissipated. In particular, the asset preservation order prohibited Mr Jones from taking steps to dispose £2 million of a specific tranche of money paid to a company of which he was the majority shareholder.
In April 2019 Mr Jones was ordered by the court to pay Mr Hamilton around £1.85 million as part of a profit share agreement. Having obtained the freezing orders to preserve Mr Jones’ assets, Mr Hamilton was therefore rightly expecting to receive payment of the judgment debt. However, in breach of the court orders, the funds had been dissipated.
A committal application was made against Mr Jones for contempt of court. There were 15 grounds of contempt, including breaches of the freezing injunctions, breaches of an undertaking given by Mr Jones, and signing a false affidavit of assets.
The contempt trial took place in February 2023. Judgment was handed down on 24 May 2023 and Mr Jones was found guilty of contempt of court on 8 of the 15 grounds of breach, including grounds which had involved Mr Jones making various payments from funds which had been frozen. Mr Jones admitted to having used frozen funds to “invest” in a diamond worth €51 million, known as the Black Falcon diamond.
Some of the Judge’s comments included:
- “This argument, which evidently came to Mr Jones late in the day (it is nowhere reflected in his earlier affidavits) is disingenuous to the point of absurdity. It is also wholly inconsistent with the contemporary documentation, which shows that the debt for the last instalment of the share purchase, having been assigned to Andromeda. Was not discharged but in effect re-financed to a later date against the security of the Black Falcon diamond.”
- “But in any event, this convoluted argument is wholly misconceived and still more fanciful than argument concerning the HPPEI debt.”
- “Instead, he effectively chose to ignore the order and acted in sustained and contumacious breach of it. The fact he should now be seeking to excuse his conduct by far-fetched arguments, which he clearly would have been told at the time unstainable had he consulted the lawyers who were advising him, to my mind shows the extent to which he seeks to evade the consequences of the orders made against him.” (Emphasis added)
At the sanctions hearing, Mr Jones was committed to prison for a period of 12 months (which would be reduced to nine months if he paid £1 million towards the judgment debt within 2 weeks). Mr Jones was also ordered to pay 80% of the costs incurred in the contempt of court proceedings on the standard basis.
Mr Jones failed to pay the £1 million and was therefore committed to prison for 12 months on 7 August 2023.
The case was dealt with by a team at Freeths led by David Marsden, property litigation partner. David Marsden was instructed by Ed Thomas and Matthew Carter (as Trustees in Bankruptcy) of Mazars LLP, who have expertise in ensuring compliance with orders.
For further information regarding anything covered in this article, please contact David Marsden.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
‘Doing the right thing’ is at the heart of Freeths. Find out more about our excellent client service and the strong set of values that guide the way we work.
Talk to us
Freeths are a leading national law firm with 13 offices across the UK. If you have a query about our services or just want to find out more, why not give us a call?
Contact: 03301 001 014