Director and shareholder found in contempt for disposing of company's good will
In Templeton Insurance Ltd v Motorcare Warranties Ltd & Ors  EWHC 795 Mr Justice Eder heard an application for committal for contempt of court based on the alleged breach (or involvement in a breach) of a freezing injunction.
Motorcare sold breakdown insurance and had acted as an agent for Templeton. In 2008 Templeton brought a High Court claim against Motocare alleging it had not fully accounted to it for its premiums, had sold policies excluded by the terms of its agency, and had provided false information. On 8 July 2008 Templeton obtained a freezing injunction over Motorcare's assets. The injunction prohibited Motorcare from dealing with or disposing of its assets, in particular those of its business. Crucially, it did not prevent Motorcare from carrying on its day to day business.
Templeton succeeded in its claim in December 2010 and it was found that it had been underpaid by Motorcare by £2.3 million. A judgment on quantum for fraudulent misrepresentation is still outstanding.
shortly after the trial Motorcare went into liquidation. It emerged that a week after the freezing injunction had been granted that Mr Harbinder Panesar (the managing director of Motorcare) and Anthony Thomas (a major shareholder of Motorcare) had set up a new business called Motorcare Elite 2008 Limited. Motorcare transferred its entire business - its representatives, its website, office premises, telephone number, email address and staff - to the new company.
Templeton brought the application for committal on the basis that everything of value (effectively the goodwill) had been disposed of contrary to the provisions of the freezing injunciton and that Mr Panesar and Mr Thomas were responsible for the breach/had allowed it.
Eder J agreed, finding that Motorcare had been crippled and could not continue to trade with the result that it became worthless and any "goodwill" vanished. In conclusion, Eder J stated:
"...Mr Panesar and Mr Anthony Thomas are both in contempt of court in that they carried out the acts which I have described above which acts constituted a wilful interference with the administration of justice in particular the freezing injunction granted by Nelson J. on 8 July 2008 and thereafter continued; that such acts permitted or assisted in the breach of the freezing injunction; and that such acts were done with the intention to interfere with or impede the administration of justice. Further, insofar as may be necessary, it is also my conclusion that Mr Panesar in his capacity as Director of Motorcare is also in contempt of court in wilfully failing to take reasonable steps to ensure that the freezing injunction was obeyed."
sentencing has been adjourned.
A full copy of the judgment can be found at the below link:-
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