NAVIG8 CHEMICALS POOL INC v (1) NU TEK (HK) PVT LTD (2) INDER SHARMA (2) MURUGAIYAN KARTHIKEYAN (2016)

The claimant applied for the respondents to be held in contempt of court for failure to comply with disclosure obligations in a worldwide freezing order.

 

The claimant had obtained an arbitration award against the first respondent Hong Kong company. The Hong Kong court gave permission to enforce the award as a Hong Kong judgment. The company filed an annual return showing that the second respondent was the sole director. The claimant obtained a worldwide freezing order with a penal notice attached. The freezing order required the company to provide details of its assets within four days and confirm them on affidavit within eight days. The company failed to comply. The freezing order was continued and the company was ordered to provide asset disclosure. The company filed a notice of change of director claiming that the second respondent had resigned shortly before the arbitration award had been given, and had been replaced by the third respondent. The company then filed an amended return showing that the third respondent was the sole director. The time for providing asset disclosure expired. Over a month later the second respondent filed a notice of resignation. He was the chairman and managing director of the company’s Indian parent company. The respondents were served with the committal application but did not attend the hearing.

 

HELD: (1) The court was satisfied to the criminal standard that the second respondent had been the sole director at all material times, and that his purported resignation was an attempt to evade his obligation to ensure the company’s compliance with court orders. In any event, given that he was the chairman and managing director of the parent company, he remained in effective control and was a shadow director of the company. The respondents had been made aware of the instant hearing, but had chosen not to attend. There was no doubt that the company was in deliberate and contumelious breach of the freezing order. The second and third respondents had been well aware of the company’s disclosure obligations, which had to be complied with by a director or officer swearing an affidavit. Both must have known that it was incumbent on one or other of them to comply with the order. Accordingly, it was appropriate to find that all three respondents were in contempt of court, IPartner Pte Shipping Ltd v Panacore Resources DMCC [2014] EWHC 3608 (Comm) applied.

 

(2) When deciding whether to proceed in the contemnor’s absence, the court adopted the checklist in R. v Jones (Anthony William) [2001] EWCA Crim 168, [2001] Q.B. 862, Hayward applied. The respondents had been notified of the hearing and had had plenty of time to comply with the freezing order, or file evidence at the instant hearing. No good reason had been advanced for their non-attendance and they had deliberately chosen to absent themselves. An adjournment was not likely to secure their attendance. There was no disadvantage to the respondents in not being able to present their account of events. The disclosure of assets by the respondents was a critical element in ensuring the efficacy of court orders. Any delay could cause the claimant considerable prejudice in trying to enforce the award. There would be no undue prejudice to the forensic process, as the respondents had not sought to challenge any of the claimant’s evidence, and the claimant had complied with its obligation to bring the court’s attention to any potentially adverse evidence. The overriding objective clearly pointed to proceeding in the respondents’ absence.

 

(3) When considering whether committal was the appropriate remedy, the court applied the principles in Asia Islamic Trade Finance Fund Ltd v Drum Risk Management Ltd [2015] EWHC 3748 (Comm), Drum applied. The second respondent’s breach had been deliberate and wilful and the extent of his culpability was very great, even if he had ceased to be the sole director. He remained chairman and managing director of the parent company, with ultimate control over the company. He could and should have ensured that the company comply with the order. It was an extremely serious breach. Failure to comply with the disclosure obligations in a freezing order was an attack of the administration of justice, Drum applied. The second respondent was committed to prison for 18 months. With regard to the third respondent, it could be said that he was an employee and unlikely to do anything unless the second respondent agreed. Whilst that did not extinguish his breach, his culpability was not as great. He was sentenced to 12 months’ imprisonment.

 

Application granted

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