The power of English courts to freeze assets is global in scope and breach of such orders can result in heavy fines and even loss of liberty. However, in one case, the Court of Appeal has ruled that a businessman was wrongly handed a prison sentence on the basis of inadequate evidence.
Businessman A and his overseas company had been issued with a freezing order after businessman B won a substantial arbitration award against them. The order was subject to a proviso that businessman A and the company could continue to dispose of assets in the ordinary and proper course of business.
Two payments, totalling more than $2 million, were later made from the company’s funds to another oversees corporation and its subsidiary. Businessman A and the company argued that those payments fell within the proviso in that they had been made to pay off a secured loan and to cover office rent and associated costs.
Businessman B launched committal proceedings, arguing that the recipients of the payments were both either owned or controlled by businessman A. The alleged loan repayment was a fiction; the rent allegedly due was grossly inflated and documents associated with the payments were bogus and a sham. The company received a substantial fine and businessman A was hit with an eight-month prison sentence after a judge found both of them in contempt of court.
Upholding their appeal, however, the Court noted that contempt has to be proved to the criminal standard – beyond reasonable doubt. The issue as to whether the sums were paid in the ordinary and proper course of business was fact-sensitive and there was insufficient evidence on which businessman A’s explanations for the payments could be safely rejected.