The case of Templeton Insurance Limited -v- (1) Thomas (2) Panesar [2013] EWCA Civ 35 is a good example of the extent to which the Court will exercise its powers against those who persistently refuse to obey Court Orders. It is also an interesting case in which the Court reaffirmed the fact that lists of contacts represent the goodwill of an organisation and therefore become an asset of that organisation; they do not belong to the individuals who collected them together.
Background
The Claimant issued proceedings against MotorCare Warranties Ltd claiming that the Defendant had not been accounting to it for the full amount of the premium for insurance policies being sold in its name. The Claimant obtained an interim Freezing Injunction against the Defendant under the terms of which the Defendant was prevented from disposing of any of its assets in England and Wales.
It appears that shortly after the Injunction was obtained, two of the Defendants, Mr Thomas and Mr Panesar, set up a new company and started trading by using lists of contacts belonging to the Defendant. The Claimant alleged that the Defendant was in contempt of Court and the Court imposed custodial sentences of nine and four months. The Defendants appealed, arguing that the list of contacts that they had used was not a company asset and that they were therefore not in breach of the terms of the Freezing Injunction.
The Court of Appeal rejected that argument. It held that the goodwill clearly belonged to the company and not to the individuals and that by transferring the list of contacts, which amounted to the entire business of the Defendant, into a new company, they had knowingly breached the Freezing Injunction with the deliberate objective of defeating its application. It therefore upheld the decision that the Defendants were in contempt of Court.
Conclusion
Although this case involved the business of a company, it is likely that a Court would take a similar view even if the business was operated through a partnership or limited liability partnership. The sentences imposed on the Defendants are a useful reminder that Courts are prepared to deal seriously with breaches of any Freezing Injunctions. The Court stated that it must be borne in mind that breaches of Freezing Orders, unlike many other contempts, are nearly always “spawned in darkness”, and therefore will be hard, and sometimes impossible, to detect until it is too late. Therefore “it must now be accepted that the attack on the administration of justice which is made when a Freezing Order is breached usually merits an immediate sentence of imprisonment of some not insubstantial amount”. This is a very clear warning to anyone tempted to ignore the effect of a freezing injunction served upon them.