The Commercial Court bared its teeth as a director – whose company stood accused of ‘cynical asset stripping’ in an attempt to evade its debts – was threatened with imminent imprisonment for his failure to comply fully with an asset freezing order.
The company was claimed to have written off a multi-million-pound debt owed to it by another corporate member of the same group. A number of alleged creditors engaged in contractual disputes with the company argued that that was a deliberate manoeuvre designed to avoid enforcement of very substantial liabilities.
After proceedings were launched by the alleged creditors, the company was hit with a worldwide order freezing its assets to the tune of $3.25 million. The order was backed up by a requirement that the company disclose details, including the value and location, of all its assets around the globe worth more than $5,000.
In upholding an application by the alleged creditors, the Court was satisfied to the criminal standard of proof that, after initially making considerable efforts to comply with the disclosure requirements, the director and his company had reached a ‘deliberate decision’ to cease co-operation and had ‘wilfully failed’ to obey.
The Court gave the director and his company 14 days’ grace in which to achieve full compliance with the order. Failing that, the director was warned that there was a ‘very real possibility’ that he would be jailed for his contempt of court. Further attempts by the alleged creditors to establish contempt on the part of another company within the group and two of its directors were unsuccessful.