The High Court has imposed custodial sentences on two defendants who had been found to be in contempt of court after breaching a freezing injunction over a company's assets.
The shareholder and company director were sentenced to nine and six months respectively. The judge in the case considered the sanctions to be "the shortest possible sentences" in the circumstances.
The defendants were found to have taken steps to transfer the company's entire business to their new company. They had known that these steps were in breach of the injunction and they were done with the intention of interfering with it. The decision to impose custodial sentences highlights the importance for businesses of obtaining legal advice on the effect of court orders and the risks of non-compliance.
What is a freezing injunction?
The courts have a wide range of powers at their disposal to assist in the enforcement of their judgments, including freezing injunctions. A freezing injunction prohibits a party from disposing of, or dealing with, their assets. Many types of assets can be frozen, including:
- Bank accounts.
- Motor vehicles.
Penalties for breaching a freezing injunction
- Your business must comply with the terms of a freezing injunction. Deliberately breaching a court order may be in contempt of court. Sanctions for contempt include:
- fines; or
- seizure of assets.
- Your business must do all it can to prevent a breach of the injunction. A business has a duty immediately to withdraw authority from certain individuals (officers, servants or agents) to deal with the company’s assets if this is necessary to ensure compliance. If any individual within your business intentionally deals with frozen assets, knowing them to be frozen, you, he, and the business may be held in contempt of court.
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Mark is Head of Commercial Litigation at TS&P. Mark qualified as a barrister in 1975, and worked in ICI’s Company Secretary’s Department becoming a Solicitor in 1979. He has over 23 years experience of civil litigation, much of it commercial, sits as a Deputy District Judge and is the Past President of the Suffolk and North Essex Law Society.
The content of this checklist is for general information only and does not constitute legal advice. It states the law as at September 2012. We recommend that professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this checklist.