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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Templeton Insurance Ltd v Motorcare Warranties Ltd & Ors  EWHC 795 (Comm) (28 March 2012)
Cite as:  EWHC 795 (Comm)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| TEMPLETON INSURANCE LIMITED
|MOTORCARE WARRANTIES LIMITED
ANTHONY HOPKIN WILLIAM THOMAS
HARBINDER SINGH PANESAR
CAROLINE VICTORIA THOMAS
JAMES ANTHONY WILLIAM THOMAS
A. THOMAS ASSOCIATES LIMITED
MOTORCARE ELITE (2008) LIMITED
Mr Gadsden (instructed by Vale Solicitors) for the 3rd Defendant
Hearing dates: 22, 23 and 29 March 2012
Crown Copyright ©
Mr Justice Eder:
Motorcare Warranties Limited
A Thomas Associates Ltd
The relationship between Templeton and Motorcare
The breakdown of the relationship
a. had not been accounting to Templeton for the full premiums which were due under the Slips;
b. had been selling policies which were expressly excluded by the terms of the Slips and/or selling policies which did not have premiums specified in the Slips;
c. had been providing false information to Motorcare, including in particular false information about losses which induced Templeton to extend the relationship for a further year in July 2007. Given the other matters and the nature of the errors, Templeton concluded that this information must have been deliberately false.
The freezing injunction
The application for committal
"150. In order to establish that someone is in contempt it is necessary to show that (i) that he knew of the terms of the order; (ii) that he acted (or failed to act) in a manner which involved a breach of the order; and (iii) that he knew of the facts which made his conduct a breach: Marketmaker Technology (Beijing) Co Ltd v Obair Group International Corporation & Ors  EWHC 1445 (QB). There can be no doubt in the present case but that the judgment debtors have at all times been fully aware of the orders of this court. It is not and could not sensibly be suggested that the conduct of which complaint is made was casual or accidental or unintentional. However, the question arises whether it is, also, necessary to show that they acted knowing that what they were doing was a breach of, and intending to breach, any of the orders.
151. In Stancomb v Trowbridge Urban District Council  2 Ch 190 Warrington J, on an application for leave to issue a writ of sequestration which, under the then rules required "wilful disobedience" to an order, said:
"In my judgment, if a person or a corporation is restrained by injunction from doing a particular act, that person or corporation commits a breach of the injunction, and is liable for process for contempt, if he or she does the act, and it is no answer to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order. I think the expression "wilfully" in Order XLII R.31, is intended to exclude only such casual or accidental and unintentional acts as are referred to in Fairclough v Manchester Ship Canal Co"
152. In Adam Phones Ltd v Gideon Goldschmidt and others  CP Rep 23 Jacob J (as he then was) described two opposing lines of authority constituted by:i) Heaton's Transport (St Helen's) Ltd v Transport and General Workers Union  AC 15, 108-110; Mileage Conference Group of the Tyre Manufacturers Conferences Agreement  1 WLR 1137; Spectravest Inc v Aperknit Ltd  FSR 161 (Millett J) on the one hand andii) Irtelli v Squatriti  QB 83, on the other.
The former cases hold that there is contempt if an act intentionally done amounts to a breach of the order. In the latter case the Court of Appeal assumed that it was necessary to show contumaciousness. In that case, where committal to prison was sought, the defendants had done that which was a breach of the order (the creation of a further charge) but had produced some not particularly convincing evidence that they did not understand the order to preclude it and, since that evidence was not challenged, the court concluded that there was no knowing breach of the order.
???? Jacob J said that, free from authority he would have sided with Irtelli but felt bound to follow the earlier cases, of which Heaton's was a decision of the House of Lords, particularly when Arlidge, Eady and Smith on Contempt of Court described Irtelli as a "doubtful case" and when the House of Lords in DG of Fair Trading v Pioneer Concrete  1 AC 456 had approved of what Warrington J had said in Stancomb v Trowbridge and said that it should be followed in that case.
154. In Bird v Hadkinson  CP Rep 21 Neuberger J also declined to follow Irtelli. In that case he had first to determine whether or not an obligation to give information about what had happened to various funds required that the information be accurate. He held that "at least on the face of it" an inaccurate answer did not comply with the terms of the order but said that if an inaccurate answer was given in good faith and after all reasonable enquiries it would either be a contempt of a most technical nature or there may be no contempt at all. As to the clash of authorities, he regarded himself as bound not to follow Irtelli having regard to Pioneer Concrete, in which the previous authorities were reviewed (and in which Lord Wilberforce observed that "liability for contempt does not require any direct intention on the part of the employer to disobey the order"). He observed that in Irtelli the previous line of authority had not been cited, that the case had been decided without opposition; and that what had been cited was Pioneer in the Court of Appeal, which the House subsequently reversed.
155. I regard myself as similarly bound. I do so with less reluctance than Jacob J. In my judgment the power of the court to ensure obedience to its orders for the benefit of those in whose favour they are made would be inappropriately curtailed if, in addition to having to show that a defendant had breached the order, it was also necessary to establish, and to the criminal standard, that he had done so in the belief that what he did was a breach of the order particularly when a belief that it was not a breach may have rested on the slenderest of foundations or on convenient advice which was plainly wrong."
"The power to commit for contempt ensures that acts and words tending to obstruct the administration of justice are prohibited. So a stranger is liable for contempt if his act constitutes a wilful interference with the administration of justice by the court in the proceedings in which the order was made. It has also to be shown there was an intention on his part to interfere with or impede the administration of justice. This is an essential ingredient, and it has to be established to the criminal standard of proof. But the intent need not be stated expressly or admitted by the defendant. As is the case where the question of intention, or mens rea, arises in criminal cases, it can be inferred from all the circumstances including the foreseeability of the consequences of the defendant's conduct: Att Gen v Newspaper Publishing Plc  Ch 333, 374 375, per Sir John Donaldson M.R. "
In my judgment, that statement of the law which is reflected in paragraph 22 of the Order of Nelson J summarises the correct legal basis for considering the potential liability for contempt of both Mr Anthony Thomas and Mr Panesar under the general common law.
"5. Enforcement of judgment to do or abstain from doing any act
(a) ; or
(b) a person disobeys a judgment or order requiring him to abstain from doing an act,
then, subject to the provisions of these rules, the judgment or order may be enforced by one or more of the following means, that is to say-
(iii) subject to the provisions of the Debtors Act 1869 and 1878, an order of committal against that person or, where that person is a body corporate, against any such officer."
"In our view where a company is ordered not to do certain acts or gives an undertaking to like effect and a director of that company is aware of the order or undertaking he is under a duty to take reasonable steps to ensure that the order or undertaking is obeyed, and if he wilfully fails to take those steps and the order or undertaking is breached he can be punished for contempt. We use the word 'wilful' to distinguish the situation where the director can reasonably believe some other director or officer is taking those steps. "
"The point in this case is whether goodwill of a company is an "asset" sufficient to be caught by the Mareva jurisdiction. I think it is. Every businessman knows that goodwill is a valuable commodity. It consists not only of a list of customers but also the established connections with them. These connections bring in new orders and repeat orders."
Both Ackner LJ and O'Connor LJ agreed. It is true that in that case the freezing injunction made express reference to goodwill ie the wording prohibited the Defendant from disposing etc of any assets " and in particular from disposing of the goodwill of the [English] company ". In the present case, there is no express reference to goodwill. However, the freezing injunction does make plain (in paragraph 5) that the prohibition extends to any of Motorcare's assets and (in paragraph 6) that this prohibition includes in particular "the property and assets of [Motorcare's] business." As stated by Lord Denning, every businessman knows that goodwill is a valuable commodity and in the context specifically of Motorcare's business, I am sure that both Mr Panesar and Mr Anthony Thomas understood that the goodwill of Motorcare's business (including in particular its network of dealers and sales agents) was an important and valuable asset at the heart of the business which fell within the scope of the freezing injunction.
"I confirm that Anthony Thomas has been registered with our Practice since 1977. He was referred by my colleague to the Memory Clinic in Llandough Hospital on 1 August 2011. He was seen in the Memory Clinic on 9 March 2012. A diagnosis of Mild Cognitive Impairment was made. His memory and concentration is made worse in stressful situations and this will affect his ability to give evidence in Court."
In assessing Mr Anthony Thomas' evidence, I have sought to take this diagnosis into account. However, it seems to me that it does not explain the essential conclusions reached by Simon J nor my own independent conclusions with regard to the important aspects of his evidence before me.
"20. Since the making of the Freezing Order, I have worked very hard to convince commission agents that a new company, completely separate from Motorcare, with a new business structure and a new underwriter, would succeed. Fortunately, as we and particularly Anthony Thomas (who had been involved in the warranty business for 42 years before his retirement in 2004) established good relationships with many of the agents long before we did business through Motorcare Warranties, those agents indicated to us that they would be willing to sell policies for Motorcare Elite (2008) ltd ("Elite"). Thereafter, it took a considerable amount of time to register all of the agents as representatives of Elite with the FSA. The FSA were kept up-to-date in relation to Elite's activities from inception, and worked with the company until authorisation was obtained earlier this year [ie 2010]."
"34 As mentioned above, it was only because we had established good relationships with many of our commission agents prior to incorporating Motorcare that we were able to convince them that the new company would be exactly that new."
"6. I have read through the Fifth Affidavit of Mr Harbinder Panesar and agree entirely with what is said therein. I was aware of the arrangements with regard to Motorcare Elite as set out in Mr Panesar's affidavit. I did not myself regard these arrangements being in breach of the freezing order."
(The reference to the Fifth Affidavit of Mr Panesar is a typographical error. It should refer to the 2nd affidavit, as Mr Anthony Thomas accepted must probably be the case.) It seems to me that this statement is important for two main reasons. First, it confirms agreement with the affidavit evidence of Mr Panesar. Second, the thrust of the statement is not that he was not involved in those arrangements but that he did not regard them as being in breach of the freezing injunction. I do not accept that evidence. The connections established with these agents formed an important indeed crucial part of the goodwill of Motorcare and an important link between Motorcare and the representatives who actually sold the policies. As I have stated, those connections and goodwill constituted part of the assets of Motorcare. In my judgment, the steps that were taken to convince these agents (and through them the dealers) to work for Motorcare Elite were in plain breach of the freezing injunction and, so far as Mr Panesar and Mr Anthony Thomas are concerned constituted a wilful interference with the freezing injunction. Moreover, I am sure that both Mr Panesar and Mr Anthony Thomas knew full well that what they were doing was a breach of the order with the intention of interfering with the freezing injunction.
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