England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Case No. HC0101770 The Royal Courts of Justice Strand London WC2A 2LL
		19th April 2002

1. MR JUSTICE NEUBERGER: This is an application by the defendant, Random House Limited, to commit the first claimant, Rupert Allason, to prison for contempt of court on his own part and because of the alleged contempt of court of the second claimant, Westentel Research Limited ("the Company").
2. The alleged contempt is failure to obey an order, in particular paragraph 4 of an order, made by Lloyd J on 18th March 2002, and in particular a failure to give disclosure of, and in relation to assets in that order.
3. The application arises from proceedings brought by Mr Allason and the Company ("the claimants") against Random House for breach of copyright. That action was, so far as Mr Allason and the Company were concerned an unmitigated disaster. It culminated in a comprehensive dismissal of their claim by Laddie J on 16th October, in a judgment in which he made severely adverse findings against Mr Allason's reliability.
4. Inevitably, an order for costs against the claimants followed. Mr Allason stated as early as 10th December 2001 that he was prepared to detail his financial position if necessary. Because of concerns about whether or not Mr Allason would be unable to, or would render himself unable to, meet any liability for costs, Laddie J ordered affidavits to be sworn by Mr Allason on behalf of himself and the Company, as to their assets, by 11th March 2002 and to pay £140,000 to Random House on account of costs by 14th March 2002. That order has not been drawn up because, although a draft order was prepared promptly by Random House following the judgment, its terms were not agreed by Mr Allason.
5. On 8th March 2002, Mr Allason prepared and served an affidavit purportedly to comply with the order of Laddie J. He said he was in a position to supply his own tax returns for the period from the year 1999/2000 and 2000/2001, and then stated that he had no interest in any freehold or leasehold properties. He said he was unable to provide his bank statement by 11th March. So far as the Company was concerned, he said:

"I am unable in the time allowed to supply the management account, as the company's bookkeeper is on holiday, nor the bank statements which are in her possession."

6. He then dealt with a property legally owned by the Company, which he occupies, which he said is held on trust for his children. Only documentary evidence provided related to that property. By 14th March, the date stated by Laddie J, no part of the £140,000 had been paid.
7. Random House then applied without notice for a freezing order and a disclosure order against Mr Allason and the Company. On 18th March 2002, Lloyd J made an order which effectively froze their assets up to the value of £210,000. Clause 3.1 of the order provided:

"This order does not prohibit [Mr Allason] from spending £1,000 a week towards his ordinary living and business expenses, and also a reasonable amount on legal advice and representation. But before spending any money he must tell [Random House's] legal representatives where the money is to come from."

8. Paragraph 4 deals with it in these terms:

"The claimants must:

(1) Inform [Random House] in writing at onceof all their assets in England, Wales andelsewhere, whether in their own names ornot, and whether solely or jointly owned,giving the value, location and detail ofall such assets.

(2) Confirm the information in an affidavitserved on Random House's solicitors byMonday 25th March 2002 at 12 noon.

(3) Make and serve on [Random House's]Solicitors by Monday 20th March 2002 at12 noon a further and better affidavitsetting out remainder of the matters toqualify the order Laddie J made on 27thFebruary 2002, exhibiting copies of allrelevant documents together with the copyof the tax return of [Mr Allason]For this year, 1998/1999."

9. The order that Laddie J referred to was the draft order which had never been completed. Having read the transcript of the judgment of Laddie J, there can be no dispute about what was required. It included details of all bank, building society and other accounts presently held by Mr Allason and so held within the last two years and, in the case of the Company full management accounts and details of all other property, whether real or personal, and details of all bank accounts held or held within the last two years.
10. Mr Allason purported to comply with this order only on 11th April 2002. That followed an application by Etherton J by Random House on 26th March 2002; he granted further relief, and ordered an expedited hearing in connection with the committal application which is now before me.
11. The affidavit put in by Mr Allason on 11th April 2002 purported to explain "the delay in supplying information" and provided further information as to assets. Mr Allason said that he was providing bank statements since July 2001, and in relation to the Company he stated said there were no management accounts. He then said that he supplied the bank statements. He then went on to say that neither claimant had any other bank account.
12. Random House contends that Mr Allason is in contempt, and its allegations can be divided into two categories. The first is that there has been a culpable delay in providing information in accordance with the order of Lloyd J, and the second is that even the information supplied on 11th April is defective. The general thrust of Random House's complaint is that Mr Allason, who appears in person as he has done throughout these proceedings, is dishonest and persistently dishonest in terms of hiding and not revealing assets, with a view to making it as difficult as possible for Random House to recover anything like £140,000 to which they are entitled, so that they are persuaded settle at a much lower figure.
13. Mr Stephen Bate, who appears on behalf of Random House, is anxious to emphasise that Random House are not out to get Mr Allason, but feel that they are left with no alternative but to take the step of seeking a committal order with a view to using the court's power to commit for contempt to achieve their end, namely getting their money. I accept that, although I believe that Mr Allason does not. It is in a sense supported by the fact that, in his closing submissions, Mr Bate accepted that, if terms could be framed which would enable full information to be obtained from Mr Allason, they would not press for his imprisonment, at any rate at this stage.
14. As I say, there are two components to Random House's application. The first is the delay; it is said that there are no proper grounds for Mr Allason's failure to comply with the order before 11th April a reasonable time. The second is that when he did purport to comply, in his affidavit of 11th April, there was still inexcusable failure to comply. In my judgment, both limbs of that contention are made out, albeit that the second limb, failure to disclose assets, is not made out to the full extent contended for by Random House.
15. In considering this application, I have to balance the fact that Mr Allason is a litigant in person, without lawyers acting for him or advising him, against the fact that Mr Allason is an intelligent and educated person, who is not unfamiliar with legal proceedings. It seems quite clear that Mr Allason was aware of the precise terms and effect of Lloyd J's order, at least by 22nd March. It may be no more than an unfortunate slip that, in his affidavit of 11th April, he says he was not aware of the order until 25th March, and I am prepared to accept that it is an unfortunate mistake and no more than it that. On any view, it is clear from his own e-mail to Random House's solicitors that it was on 22nd March that he down-loaded a copy of Lloyd J's order, which had been e-mailed to him by Random House's solicitors.
16. It is right to mention that Random House's solicitors could, and, with wisdom of hindsight, should, have given a little more information to Mr Allason earlier than when they did give him information. They should have informed him on the telephone, on the evening that Etherton J made his order, that they were seeking his committal for contempt, and that he had the right to set aside Etherton J's order. But I do not think that this assists Mr Allason in this application, because he was not prejudiced by it, nor do I think that it should count against Random House. Mr Shotnes, Random House's solicitor, I have no doubt, did his best in difficult circumstances. He had to prepare a full affidavit and had difficulties as I understand it, getting the order e-mailed to Mr Allason. He had had a five minute conversation with Mr Allason. While it would have been better if he had told Mr Allason those two facts on the telephone, I do not think his understanding, even if it was wrong, that Mr Allason could only speak for a short time, was unreasonable. Nor do I think that it was unreasonable for him to think that Mr Allason would shortly see the relevant documents, because Mr Shotnes told him that he was e-mailing all the documentation, as he indeed did.
17. I think, therefore, that it would be wrong to treat anything done on behalf of Random House in this connection as worthy of criticism, although as I say, with wisdom of hindsight it could have been better done in one or two respects. In any event, I do not think that Mr Allason was prejudiced.
18. It seems to me that one does not have to be very intelligent to appreciate that the order made by Lloyd J was a very serious document, particularly so far as Mr Allason was concerned. The first page, in common form, advised the respondents (that is Mr Allason and the Company) to read the order and the guidance notes very carefully. This was in bold type with the word "Important" above it. It also informed Mr Allason in large letters that failure to observe the order could lead to him being held in contempt of court and being imprisoned or fined.
19. The order is not a very long and complicated document for somebody of Mr Allason's intelligence and experience. The terms of paragraph 4 are quite clear. Mr Allason has suggested that he could not comply with the order promptly because he was in the United States, because he was travelling, because he could not get all the documents together, and because had difficulties swearing an affidavit. As an explanation as to why Random House had to wait until 11th April before he complied with any part of paragraph 4 of the order I find that wholly unsatisfactory. I appreciate that it may have been difficult for him in the USA to get the information to the Random House as quickly as if he was in England. The words "at once" obviously have to be given a sensible reading. They do not run from the moment the order is made; they run from the date the order is communicated. Something can be done "at once" more quickly if one is in one's solicitors' offices in London than if one is in the middle of the north Atlantic. In Mr Allason's case, he was in the United States; the idea that he was in difficulties in giving much information very quickly is fanciful, if he had wanted to.
20. The fancifulness of the notion that he was not in a position to comply promptly is underlined, as Mr Bate says, by an aspect to which I have not so far referred. Mr Allason was seeking to enter into an individual voluntary arrangement, an IVA which can be sought by someone who is liable to be bankrupted. It is a way of achieving a more friendly and less drastic resolution of affairs than a bankruptcy order.
21. The IVA application was made on 8th March and was supported in the usual way by a proposal, and supported by an affidavit sworn by Mr Allason on the same day. The nominee in respect of this IVA was a Mr Kevin Goldfarb, a chartered accountant and licensed insolvency practitioner, who stated that he considered the proposals and believed then to be viable, fair to the creditors, fair to the debtor, an acceptable alternative to bankruptcy and fit to be considered by creditors. The IVA is not before me formally. All I would say about that is that there may be more than one opinion about the fairness, fitness or acceptability of the proposal IVA. The proposal indicates, according to the statement of affairs sworn by Mr Allason, that there would be no assets available on bankruptcy, and that his unsecured creditors were a little over £1,175,000. The supposed attraction of the IVA to the creditors was that, if they agreed to it, a friend of Mr Allason, a Mr Lever, would pay £20,000, of which about £4,500 would go to the costs of the IVA, leaving the sum of £15,422 to be distributed between all his creditors, a dividend of 1.31% per cent.
22. Reserved out of the proposed arrangement were Mr Allason's shares in the Company and his shares in another company he owned called Westintel Ltd ("WTL"). It was Mr Allason's income should effectively be excluded on the basis that there would be no surplus and therefore no voluntary contribution.
23. On Mr Allason's own evidence, it does seem as if the statements in the proposal are inaccurate. In his statement in support of the IVA he said that he holds 76 shares in the Company and 100 shares in WTL. That is not what is said in the statement of affairs where it is the other way round. In fact, it now appears that he has 100 shares, namely all the issued shares, in both companies, because he says that his wife has transferred her 24 shares in the Company to him. He also tells me today that 99 of his 100 shares in WTL are in some way secured or transferred to a Mr Harvey who was recorded in the proposed IVA as a person who had privately lent money to Mr Allason.
24. The point Mr Bate emphasises about the IVA, for the purpose of the present application, is that Mr Allason was in a position to swear an affidavit on 8th March 2002 giving details, albeit not all of them accurate, of his assets, the very thing he was then ordered to do, as he knew, by the latest 22nd March, by Lloyd J. Yet he did not comply with that order in any way until 11th April.
25. The excuses Mr Allason puts forward in his affidavit simply do not bear analysis. He starts by saying that he did not know about the order until he down-loaded it on 25th March. I have dealt with that, and I am prepared to accept that was a mistake; the correct date was 22nd March. Then he says that he had intended to come back to London earlier. He says that he was still in America on 8th April. But, as Mr Bate points out, given Mr Goldfarb's involvement, if Mr Allason was taking the order as seriously, he would have at least telephoned Mr Goldfarb, or would have put Random House's solicitors in touch with Mr Goldfarb, so that Random House had evidence with regard to assets.
26. Freezing orders and disclosure orders, such as that made by Lloyd J, are a serious invasion of an individual's privacy and freedom, and in some cases those against whom they are made have considerable cause for complaint and concern. They are, however, orders of the court and are justified where a person is, or appears to be, seeking to avoid his liabilities. When the court makes such orders, it is very important that they are complied with and complied with promptly. If it transpires that such an order should never have been made or was unfairly made, then a defendant should be entitled to be fully compensated for any damage suffered, and any claimant who wrongly obtains such an order does so very much at his peril. That does not alter the fact that such orders are only granted when they appear to be justified, and, when they are granted, they should most certainly be complied with and taken seriously. I regard Mr Allason's delay in complying with the order, with no remotely justifiable excuse, as a quite unacceptable and serious contempt.
27. I turn to the contents of his affidavit of 11th April. In my view, it is clear, even on his own evidence, that there has been a failure to reveal assets. First of all, there is a bank or some similar account, which in the last two years ago has produced interest to Mr Allason. That should have been revealed; it has not been. Secondly, Mr Allason owns all or some of the shares -- on his own evidence it would now seem all of the shares -- in both WTL and in the Company should have been disclosed. At first sight that does not look a very significant breach because, as he says, Random House knew that he had shares in those two companies because they had done carried out searches at Companies House. I have to say that the result of those searches raises almost more questions about the share ownership than it answers because of the somewhat inept way in which some of the entries have been drafted.
28. Ignoring that, it seems to me that Random House who most certainly entitled to know, both because they did not know and because Lloyd J said they should be told, the value of those shares. They are suggested to have nominal value in Mr Allason's IVA proposal. On his evidence the shares in WTL cannot have such a low value. His case is that all his copyrights and other IP rights were vested in the Company, but, sometime last year, they were transferred to WTL. I find it impossible on this evidence to understand how the shares in WTL do not have substantial value. Unlike Mr Allason, according to the evidence he has so far produced, and unlike the Company on the evidence he has so far produced, WTL does not have an overdraft. It does not appear to have any liabilities, yet it has substantial assets. In those circumstances, his shares in WTL must have value.
29. I am very dubious about Mr Allason's suggestion that 99 of the WTL shares have been pledged or transferred as he suggests. It is inconsistent with the records at Companies House. It is also inconsistent with his sworn evidence in the IVA. Indeed it could not be clearer in his IVA: in more than one place it is made clear that the shares are not charged. Even if they are charged, (a) not all the shares are charged, and (b) the fact that they are charged would not mean that they had no value. It is just the sort of information which is plainly required from him under the order.
30. The other alleged failures on Mr Allason's part to give disclosure give me more problems. Some of them have not been pursued by Mr Bate in closing, and quite rightly so. I am in real confusion on the evidence that I have heard as to who owns the copyright of the various books published by Mr Allason, whether under his own name or under the pseudonym Nigel West. I have no clear notion as to whom his lecture fees and interview fees are paid. I am unclear as to what sums he has obtained by way of advances and where they have gone. On his evidence, taking it at its most favourable to him, i.e., so as to minimise his contempt, they are all the property of WTL. But if they are, then, as I say, WTL's shares have a substantial value. Whatever the truth, there is a plain contempt.
31. The second point raised by Mr Bate is Mr Allason's failure to record trust income. It is clear that he received trust income for every year up to the last tax year, and I share Mr Bate's scepticism as to whether he really has not received any this year. But it requires more than scepticism before I can say that I am satisfied so that I am sure (because the criminal burden applies) that he has received trust income this year.
32. I am satisfied that he has also failed to declare an asset, because he has a contingent interest in a trust which owns the company which owns the house in which he lives in in the country. To my mind that is an understandable failure. He has no right to receive any money, and no interest in the trust, unless and until his former wife dies. Mr Bate is right to say that is a contingent asset which should have been disclosed, but I can understand a lay person taking the view that it is of no value at the moment. I am not sure whether Mr Allason really thought that, but I am prepared to give him, indeed he is entitled to, the benefit of the doubt.
33. Mr Bate also contends that it is pretty clear from the negotiations following the judgment of Laddie J, that Mr Allason had the ability to find substantially more money than he now suggests is available to him. Having read the correspondence, I think there is a great deal to be said for these suspicions, but again I emphasise that suspicions are not enough; I have to be certain. I have strong suspicions that Mr Allason has not come clean in more ways than I have identified. But strong suspicions, as I say, are not enough.
34. It follows, therefore, that to a substantial extent I find that, in view of the lateness and casualness with which Mr Allason failed to comply with the order of Lloyd J, and the incomplete way with which he has now complied with the order of Lloyd J, he is in contempt of court and therefore he is, in principle, liable to be committed to prison. The question is whether he should go to prison.
35. The purpose of the contempt jurisdiction, so far as the court is concerned, is to make it clear to a party who fails to comply with a court order that he should have complied, and, where he has still not complied, that he should comply. In a case such as this, there is an element of punishment, but an even more important element of coercion. The other party in this case, Random House, has an obvious interest in having the order enforced, if necessary by imprisonment. I mentioned earlier that Random House would not seek to put Mr Allason in prison at this stage, if a more effective and less unkind way can be found of getting him to comply. I share that view, and I have been giving some thought to the appropriate course to take. I think some might regard the contempts, which I have identified as established, as making it inevitable that Mr Allason should go to prison.
36. I have however decided that he should be given a last chance on the following basis. I have found that, even now, he has failed to give certain information that he certainly ought to have given, and to have given some time ago. I also suspect that there are available to him other assets and sources of funds which have not so far been found. What I propose to do is to give him a period, perhaps 18 days, to produce an affidavit which gives the following information. The identity of the owners of the shares in WTL and in the Company and the assets of those two companies. The value, in so far as he can give it of those two companies, and, if he is not the beneficial uncharged owner of those companies' shares (which are registered in his name) who is the owner and who, if anyone, is the chargee of them. He must also provide documentary evidence (if it exists) to support the contention that he is not the owner and to support the contention that they are charged to somebody. He must explain to whom they are charged, why and on what terms. He must also provide evidence of the account from which the interest, recorded in his tax return, was paid. He must also explain more fully, by reference to documents, what copyrights he has; approximately what they are worth and who is entitled to them, if it is not Mr Allason who is the owner, he must, with any of the documentary evidence available, state the owner of the copyright. He must also state his other sources of income and whether the income goes to the Company or WTL or himself. The current evidence is wholly insufficient and in something of a mess, although, as I have said, Mr Allason's ultimate position appears to be that the copyright is owned by WTL. If so, I wish to see the documents, and Random House should certainly see them if there are any.
37. So far as this contempt application is concerned, and subject to further argument, if Mr Allason complies with those requirements, which I would expect to be set out in a formal order, I would not propose to make any order against him in relation to this application, other than to require him to pay the costs on an indemnity basis.
38. If Mr Allason does not provide all this information, then I will have to reconsider whether to send him to prison. In other words, I am taking the unusual course, having found contempt, of adjourning this application for some 18 days so that if Mr Allason provides all the information which he should have, and has not, provided then I will not send him to prison. If he does not provide all the information that he can, then I can see little alternative to sending him to prison, unless he has a good explanation. I should like to add this: if Mr Allason gives the necessary information, that will be the end of this application. But he should be aware that there is nothing to prevent Random House making further investigations. If, as a result, they can establish, on a later application, that Mr Allason has not been frank, even on the evidence he produces as a result of what I am ordering today, and that there are other assets he has failed to identify, then I think a judge would have little option but to send Mr Allason to prison for a significant period.
39. In other words, this is Mr Allason's last chance. It is not merely a question of giving the information which I have specified (and such further information as Mr Bate may now persuade me is appropriate). It is also a question of Mr Allason having a last chance, if he has not so far come clean about all of his assets, of coming clean. If Mr Allason comes clean and reveals assets that he has so far hidden or not revealed, then this is his good luck in the sense that he now has this last chance to reveal them. He will have been in contempt in not revealing them and he will be confessing to that contempt by admitting he has other assets that he has not so far revealed. However, in my judgment, he should be allowed to get away with that at this stage without further sanction, because, as Mr Bate says, the most important consideration from the point of view of Random House and, indeed, of the court, is that the court order should be obeyed. If, in the knowledge that this is his last chance to reveal any other assets without having to go to prison, Mr Allason reveals them, then this contempt application and the contempt jurisdiction will have done their job. I do emphasise that, if he has other assets that I have not heard about or have not found to be established beyond reasonable doubt, and he does not reveal them in the affidavit he has got to produce within 18 days, and it is subsequently discovered that he has got them, then he could expect that a contempt application would lead to his imprisonment for quite a long time.
40. I think that is the best way of dealing with this difficult case. I should have mentioned one further allegation. Although I am very suspicious about Mr Allason's evidence that he does not own Westentel BVI ("BVI") in whose name his motor car is registered, I am not satisfied so that I am sure, because there is no specific evidence, that he does own BVI. It provides a very good example for my point. If he does not admit to owning BVI in 18 days time, and in, say, three months there is evidence which is brought before the court on a contempt application by Random House to show that he clearly does own BVI, then, to put it bluntly, his feet will not touch the ground. This is his last chance. (Discussion followed)