A High Court decision provides a stark reminder to businesses of the importance of obtaining legal advice on the effect of court orders.
A shareholder and a director of a company were each found to be in contempt of court after a freezing injunction over the company's assets was breached. Although sentencing was adjourned, the judge expressly stated that imprisonment was an option in this case.
The respondents 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 that they were done with the intention of interfering with it.
The judgement also provides useful clarification of the duties of company officers when the company's assets are subject to an injunction. In particular, it confirms that someone who is not party to an order may be found liable for contempt only if it is shown that he intended to interfere with or impede the administration of justice.
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. All 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. If your business deliberately breaches a court order, you will 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. If any individual within the business intentionally deals with frozen assets, you will be held in contempt of court.
If you want any more information please contact Justin Selig