The Court of Appeal has refused to reduce or suspend custodial sentences imposed on two people for breaches of freezing orders.
The decision emphasises how seriously the English courts take it when parties flaunt orders that freeze their assets. If a party needs an order to be varied, they should follow designated steps to ensure transparency and honesty before the court.
Relevant background facts
Mr Ouajjou and Ms Perez were committed to prison for nine months for contempt of court for breaching freezing orders.
On appeal, they admitted liability, but contested the sentences imposed. Their case was that the sentences ought to have been suspended, and in any event were too long.
The main breach of the freezing orders was the sale of a property in Madrid. Mr Ouajjou transferred his interest to Ms Perez, then the property was sold.
Initially this was part of a legitimate tax planning scheme, devised before the freezing orders were imposed. However, once the freezing order was granted, the scheme could not be implemented without breaching the orders.
First instance decision
In the first instance, the judge concluded that the contempt was so serious that only a custodial penalty would suffice, and that the lowest sentence which she could pass was a custodial sentence of nine months.
She considered that suspension of that sentence was not appropriate given the serious nature of the breach. Further, there was no point in suspending the sentence in order to encourage compliance with the order, a course which is sometimes taken, as the breach was not capable of being remedied.
The appeal
The appellants put forward ten grounds of appeal, none of which were successful.
Indeed, the Court of Appeal thought that the sentences imposed were ‘relatively lenient’ for this kind of case, which suggests that the judge did indeed take into account and gave appropriate weight to the matters on which the appellants relied.
The Court held that the transfer of the property to Ms Perez and the onward sale to a third party were ‘deliberate and substantial breaches of the freezing orders, carried out secretly and not disclosed for over a year.’
Further, the proceeds of the sale were paid into an account at a bank which was not referred to in the appellants’ disclosure and to which notice of the freezing orders had not been given.
What the appellants should have done
One of the appellants arguments was the if the property had not been sold voluntarily, the appellants’ creditor would have been able to force a sale through court proceedings in Spain. It is likely that they would have a received a lower price on a court-enforced sale.
However, the Court reminded the appellants of what they should have done in these circumstances. They should have made full disclosure of their proposed course of action to the English court with an application to vary the freezing orders so that a controlled sale could take place.
Conclusion
This case appeal shows how seriously the English courts take breaches of freezing orders. In his judgment, Lord Justice Males reminded the appellants that:
“A deliberate and substantial breach of a prohibition on dealing with assets in a freezing order will always be a serious matter which is likely to attract an immediate custodial sentence, and that sentence may well exceed one year.”
Further, submissions that a judge who has clearly taken a factor into account has given it insufficient weight is always likely to be a difficult submission for an appellant.
The appellants did not attend the hearing in person, which meant that their evidence could not be tested. This was harmful to their position in circumstances where some evidence “cried out” for cross-examination.
The English Courts value transparency and honesty in these situations and will vary orders in some circumstances, provided that all of the relevant facts are disclosed in good time. However, unrectifiable breaches will be dealt with seriously.
