England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		25th April 2008

MR. JUSTICE MORGAN:

The application

1. This is an application brought by Mr. Shah as the liquidator of Devonshire Property Project Limited which I will call "the company" against two respondents, Mr. & Mrs. Karia. The liquidator's application is to commit Mr. & Mrs. Karia to prison for contempt of court for failing to comply with earlier orders of the court. I can indicate at once that, in relation to Mrs. Karia, things have moved on from the time the application was originally made. Today the court is only concerned in her case with a claim by the liquidator that she should pay the costs for part of the period involved with this application. Conversely, the application against Mr. Karia is fully effective and is contested.

Background

2. The company was ordered to be wound up on 2nd November 2005. The order was made on the petition of a creditor, a Mrs. Cheddah. Mrs. Cheddah had also petitioned for the bankruptcy of Mr. Karia and he has been adjudicated bankrupt. The only director of the company was Mr. Patel. It is clear from the investigations carried out by the liquidator that Mr. Patel has acted at all times under the direction of Mr. Karia. Mr. Karia never became a director of the company but it is clear that all the activities of the company were carried out by Mr. Karia. At the hearing of this application Mr. Comiskey appeared for the liquidator and Mr. Becker appeared for Mr. & Mrs. Karia.

The issues which arise in the case of Mr. Karia

3. The first issue is: have the requirements of the Rules been complied with in relation to the order which is said to have been breached by Mr. Karia? The second issue is: do I have the power to dispense with any relevant requirement of the Rules that has not been complied with? The third issue is: should I dispense with any such requirement? The fourth issue is: has the liquidator proved the alleged breaches of the court order or any of them? The fifth and last issue is: what sentence is appropriate for any breach of the order that is proved?

The order and dispensation

4. The order which is relevant in the case of Mr. Karia is an order made by Chief Registrar Baister on 25th January 2007. I will refer later in this judgment to the terms of that order and the circumstances in which it was made but at this stage I will deal with the issue as to whether the requirements of the Rules were complied with in relation to that order. The relevant Rules for present purposes are the Rules of the Supreme Court, Order 45, rule 5 and rule 7. Order 45, rule 5:

"(1) where –

(a) a person required by a judgment or order to do an act within a time specified in the judgment or order refuses or neglects to do it within that time or, as the case may be, within that time as extended or abridged under a court order or CPR rule 2.11; or

(b) a person disobeys a judgment or order requiring him to abstain from doing an act,

Then, subject to the provisions of these rules, the judgment or order may be enforced by one or more of the following means, that is to say ...

(iii) subject to the provisions of the Debtors Act 1869 and 1878, an order of committal against that person or, where that person is a body corporate, against any such officer."

5. Order 45, rule 7 reads as far as material, starting with subrule (2):

"(2) subject to paragraphs (6) and (7) of this rule, an order shall not be enforced under rule 5 unless –

(a) a copy of the order has been served personally on the person required to do or abstain from doing the act in question; and

(b) in the case of an order requiring a person to do an act, the copy has been so served before the expiration of the time within which he was required to do the act. ...

(4) there must be prominently displayed on the front of the copy of an order served under this rule a warning to the person on whom the copy is served that disobedience to the order would be a contempt of court punishable by imprisonment, or (in the case of an order requiring a body corporate to do or abstain from doing an act) punishable by sequestration of the assets of the body corporate and by imprisonment of any individual responsible. ...

(6) an order requiring a person to abstain from doing an act may be enforced under rule 5 notwithstanding that service of a copy of the order has not been effected in accordance with this rule if the court is satisfied that pending such service, the person against whom or against whose property is sought to enforce the order has had notice thereof either –

(a) by being present when the order was made; or

(b) by being notified of the terms of the order, whether by telephone, telegram or otherwise.

(7) The court may dispense with service of a copy of an order under this rule if it thinks it just to do so."

6. It is now accepted on the facts of this case by the liquidator that he did not comply with rule 7(2) nor rule 7(4). In relation to service of the order of 25th January 2007, the order was not served personally on Mr. Karia but it was sent to him by post. However, it is clear that he received it and it seems very likely that he received it without delay and without difficulty. The order was sent to him by recorded delivery on 6th February 2007. It is also accepted that the order of 25th January 2007, as served on Mr. Karia, did not comply with the requirements as to penal notice. I have read those requirements from rule 7(4).
7. The order of 25th January 2007 extended to two pages. There was no penal notice on the front of the order. Instead in paragraph 5 there appeared the words:

"The Second and Third Respondents are liable to committal to prison if they do not comply with paragraphs 3 and 4 of the order."

I interpose that it is paragraph 3 that matters in the present case. Paragraph 5 of order was in bold type. Although paragraph 5 did not repeat verbatim the words of rule 7(4) I take the view that the substance of rule 7(4) was communicated by the words used.

8. I now need to consider what powers the court might have to dispense with the requirements of the Rules, those requirements not having been complied with. I have already read rule 7(6). It is not argued that rule 7(6) covers the present case. Rule 7(6) is restricted to dealing with orders to abstain from doing an act. The order in the present case is an order to do an act.
9. There was discussion as to whether rule 7(6) shows that one cannot dispense with service of an order where the order requires the doing of an act. Such a reading would plainly conflict with rule 7(7). The way in which rule 7(6) and rule 7(7) coexist is that under rule 7(6), where the criteria stated are satisfied, the applicant for a committal is entitled to proceed without service of the order. Where rule 7(7) applies the court has a discretion which it may or may not exercise in favour of an applicant.
10. I have already read rule 7(7). This gives the court power to dispense with service if the court thinks it just to do so. The rule is not confined to orders to abstain from doing an act and would seem therefore to apply to orders to do an act. If the court is persuaded to dispense with service then the rule as to the endorsement of a penal notice simply falls away. Rule 7(4), as to the penal notice, only applies to an order served under rule 7. However, I should refer to a note in the White Book which has been drawn to my attention. The note to Rules of the Supreme Court Order 45, rule 7 includes this paragraph:

"The court had no discretion to dispense with the requirement for the display on the front of the copy order in a prominent manner of the warning that disobedience would be a contempt of court punishable with imprisonment."

The authority cited is the case of Moerman-Lenglet v. Henshaw reported in The Times 23rd November 1992.

11. I have also looked at the way in which the matter is described in Arlidge Eady and Smith on Contempt, third edition at paragraph 15-24. The authors say in relation to the requirement of a penal notice:

"An order served must be endorsed on the front with the penal notice as prescribed by the rules. The discretion under CPR Sch 1, Ord 45.7(6) includes the power to waive the failure to incorporate the requisite penal notice but only in the case of a prohibitory order. Also in Moerman-Lenglet v. Henshaw, Chadwick J held that the court had no discretion to dispense, in the case of a positive order, with the requirement that a penal notice had to be displayed prominently on the front of the copy of the order served. The copy served had been endorsed only in accordance with the previous unamended rule, and that was held to be insufficient to meet the requirements."

12. Before I consider that authority further I should point out one further matter. The order in the present case requiring Mr. Karia to do an act did not say that the act must be done within a specified number of days following service of the order. Instead it specified the time and date by which the act was to be done.
13. I now consider the decision of Chadwick J in Moerman-Lenglet v. Henshaw. I have been provided with the transcript of that judgment. The order in that case was an order to do a positive act within seven days after service of the order. The order was personally served. However the form of the penal notice in the order as served was an out-of-date form and did not use the up-to-date wording required by the rule at the time of service of the order. Chadwick J held that the wording actually used would not do. He held that rule 7(6) did not apply because the order in his case was to do an act, not to abstain from doing an act. He also held that they could not dispense with service under rule 7(7). He said this:

"... nor is rule 7(7) available. Although the court may dispense prospectively with service of a copy of an order under this rule if it thinks it just to do so, it can hardly be appropriate to make such a dispensing order when the terms of the order itself require compliance only within seven days after service of the order. A fortiori it could not be appropriate to make a dispensing order retrospectively in such a case. If there were to be no service of the order the obligation would never commence and the defendant could hardly be said to have been in breach of it".

14. It seems to me, with respect, that Chadwick J's comment is entirely soundly based, but it is not a comment which justifies the note in the White Book or the note in Arlidge Eady and Smith. The point being made by the learned judge is that if the terms of the order specify the time for compliance as so many days from service of the order it is a nonsense then to dispense with service of the order. The time for compliance would simply never arise, being measured as it is from service of the order.
15. What Chadwick J is not saying is that rule 7(7) does not apply to orders to do an act, nor is he saying that it only applies prospectively and not retrospectively. It seems to me that the note in the White Book and the comment in Arlidge Eady and Smith are incorrect and I would recommend that they be amended.
16. The matter is taken further by the decision of the Court of Appeal in Davy International Ltd v Tazzyman [1997] 1 WLR 1256. There the Court of Appeal, after reviewing conflicting authority, held that rule 7(7) allowed the court in an appropriate case to dispense with service even though the order required the doing of an act and even though the dispensation with service was retrospective and not just prospective.
17. With the assistance of those authorities I conclude that I do have power in the present case to dispense retrospectively with service of the order of 25th January 2007 on Mr. Karia and to proceed to determine whether Mr. Karia breached the order and, if so, what the appropriate sanction should be. If I do dispense with service of the order I necessarily dispense with the requirement of a penal notice under rule 7(4) which only falls to be complied with in relation to an order served under rule 7.
18. The next question is should I retrospectively dispense with service under rule 7(7)? I can only do so where I find it is just to do so. This involves a balancing exercise and there are factors which pull either way. I will first list the reasons why I should not dispense with service:

(a) the requirements of the rules are important safeguards to a person such as Mr. Karia;

(b) the purpose of the safeguards is self evident;

(c) a finding of contempt of court is a very serious matter with very serious consequences;

(d) normally one should adopt a strict approach to the requirements of the rules;

(e) it ought to be possible for the applicant for committal to get it right and to comply with the rules, the court ought not to be too ready to relax the requirements;

(f) often if the applicant fails to comply with the rules he has only himself to blame and

(g) the court is able to require strict compliance even where the respondent to the application does not raise the point himself.

19. I will now list the reasons why I should dispense with service:

(a) Mr. Karia was in court when the order of 25th January 2007 was made against him;

(b) it was not the first order made against him with a view to obtaining information from him;

(c) the order as drawn up came promptly to his attention and he had ample time to comply with it;

(d) the fact that the order was not personally served did not mislead him in any way and did not place him under any kind of disadvantage;

(e) the penal notice was in the wrong place but it was still prominent on page 2 of a two-page order and was in bold type;

(f) the penal notice did not follow the precise words of rule 7(4) but it expressed the substance of the rule and stressed the gravity of the consequences of non-compliance;

(g) the application to commit has been before the court a number of times already and a resolution of the matters involved is overdue;

(h) Mr. Karia, who has been advised by counsel, did not himself raise the point at any time;

(i) the point was only raised by the deputy judge who heard this matter a week ago and adjourned the hearing for other reasons; and

(j) Mr. Karia wanted the matter to proceed and his counsel did not try to dissuade me from dispensing with the requirements of the rules.

20. In my judgment, the reasons in favour of dispensing with the requirements of the Rules substantially outweigh the reasons against. In these circumstances I will dispense with the requirements of the Rules as to service of the order of 25th January 2007. In particular I make that dispensing order with retrospective effect. That disposes of any requirement as to the endorsement of a penal notice on the form of the order.
21. Did Mr. Karia breach the order of 25th January 2007 as alleged? For this purpose I need to recite some of the history of the matter. As I have indicated the company went into liquidation on 2nd November 2005. Mr. Karia filled in a questionnaire as to the activities of the company. He was then interviewed by an examiner on 1st December 2005. Mr. Karia's answers to the examiner, as recorded by the examiner, include a number of statements to which it is relevant to refer. Mr. Karia was asked about certain withdrawals of funds from the company and where the money went. What Mr. Karia said was:

"£75,000 was paid by the company to Mr. Maitland of Maitland Estates, North Circular, Bounds Green. He has done a runner. One of his business neighbours says he has taken money from a lot of people. The company paid five or six large cheques to Maitland some time after Mrs. Cheddah invested. The payments were for investing in apartments which were being repossessed. I met Maitland at the viewing of these properties. The company invested in four projects with Maitland. I do not know where these properties are really. It was invested on his say so. He did not give any paperwork but promised to send it on which never happened. I realized he had left his trading premises in March and April 2005 and the shop was closed."

22. He also said this in answer to questions from the examiner:

"The company failed because I made a misjudgment about Maitland and I now realize that he conned the company as well as others as I understand from his neighbours. At the same time I would like to say that Mrs. Cheddah made the same mistake as I did except that I did not run away but gave her a guarantee for which I was made bankrupt and am going to lose my house."

23. On 11th July 2006 the liquidator applied to the court for orders that Mr. Patel, the sole director of the company, and Mr. & Mrs. Karia provide information to the liquidator. On 14th September 2006 Mr. Registrar Rawson made a number of orders against, amongst other persons, Mr. Karia. I will not recite the full terms of the orders but they dealt with requirements on the part of Mr. Karia to give information about the activities of the company and, in particular, the withdrawal of money from the company.
24. Mr. Registrar Rawson also ordered that Mr. Karia and the other two respondents attend for a private examination on 30th November 2006, although that was later adjourned to 9th January 2007. On 9th January 2007 Mrs. Registrar Derrett made orders against the second respondent, Mr. Karia, amongst others. Again he was ordered to provide information about, amongst other things, cash withdrawals from the company's bank account. The order made on 9th January was in the form of an unless order, that is if Mr. Karia did not comply he was to be liable to committal to prison. Paragraph 5 of the order of 9th January 2007 also referred to the possibility of the respondents being committed to prison.
25. That order of 9th January 2007 led to Mr. Karia putting in, in the form of a letter, what has been described as an affidavit by Mr. Karia. It is in the form of a letter but it is said to have been sworn before a notary public. I need to read one statement in that document. It is in these terms:

"(ii) The company was making investments in certain properties and that I was told would yield substantial profits. The cash was drawn out for investments and was collected by a courier once a week. I have a witness whom I am trying to locate as she was working in the office with me and since then has gone broad. She was from Europe."

26. Mr. Karia did attend for a public examination before Chief Registrar Baister on 25th January 2007. I have been provided with a transcript of the answers he gave to the questions put to him at that examination. At page 60 of the transcript questions were put to him as to the withdrawals of cash said to be for the purpose of investments. I will not read the full text of the answers into this judgment, suffice to say that the case being put by Mr. Karia was that payments of cash were made to Maitland. The cash was delivered to Maitland by a courier. It was not a case of Mr. Maitland receiving a cheque from Mr. Karia, which I think had been suggested when Mr. Karia had earlier been questioned by the examiner. It seems likely that Mr. Karia changed his evidence on this point because by the time of the public examination it was clear that the bank account did not disclose the use of a cheque at the relevant time which could have been for a large sum payable to Mr. Maitland.
27. Mr. Karia referred in a number of places during his public examination to large sums of cash going to Maitland or Maitland Estates. It was put to him that it was fairly incredible that he would have entrusted large sums of cash to a courier to transfer the money across London, particularly without any associated paperwork either from the courier or from Mr. Maitland, but Mr. Karia persisted in his account.
28. While I am reading from that transcript I should also refer to a passage at page 66 because it is material to another point to which I will return. At page 66 Mr. Karia indicated that he had bank accounts at Lloyds bank, HSBC and Barclays Bank.
29. Finally, at page 73 of the transcript he was asked about the statement which he made when asked by the examiner. The statement had referred to Mr. Maitland doing a runner and five or six large cheques being paid to Maitland. He said he did not understand why he had said that he had paid five or six cheques because all the money had gone in cash as he had earlier described.
30. At the end of the hearing before Chief Registrar Baister the learned registrar made the order which is now central to this application to commit. He ordered that the private examination of Mr. Karia be adjourned generally with liberty to restore. He then made this order which I will read in full:

"The Second Respondent shall, within 21 days of the provision of the Company's bank statements to the Second Respondent's solicitors, file and serve an affidavit setting out to the best of his knowledge and belief:

(i) Mr. Maitland's full name and address.

(ii) Details of all joint and personal bank or building society accounts which are or have been held in his name from 1 October 2002 to the present, including the name of the bank or building society and the account name, sort code and account number.

(iii) The names and address of all creditors of the company from 1 October 2002 to the present, including any creditor who has been paid.

(iv) The names and address of all investors in the company from 1 October 2002 to the present, including any investors who have had their money returned.

(v) Full details of all properties in which the company invested.

(vi) A detailed explanation of all monies paid into and withdrawn from Company accounts.

(vii) The name and address of the courier company referred to in his affidavit."

31. The liquidator did not receive an answer complying with the order of 25th January 2007, or indeed any answer, prior to 3rd April 2007 on which day he issued an ordinary application to commit Mr. Karia and Mrs. Karia to prison for failure to comply with the order of 25th January 2007. That application has been amended and reamended and I will in due course go to the present form of that application.
32. Following the issue of the application to commit Mr. Karia to prison for breach of the order of 25th January 2007, Mr. Karia did supply an affidavit sworn on 26th April 2007. I will need to return to other paragraphs of this affidavit when I deal with the individual breaches alleged, but I will focus in the first instance on the statements made by Mr. Karia in the affidavit as to the withdrawals from the company; putting it in plainer language, his statement as to where the money went. What he said was this:

"The cash withdrawals from the Bank Statements disclosed are as explained in my interview where money is collected by a courier company arranged for and by Mr. Maitland. The money was delivered by the courier company to Mr. Maitland for investment or repossessions."

33. Naturally the liquidator followed up this suggestion that substantial sums of money had gone to a Mr. Maitland. The liquidator was able to trace Mr. Maitland and was able to interview him and in due course Mr. Maitland has prepared a witness statement to assist the court in connection with the present committal application. I will not read out substantial parts of Mr. Maitland's witness statement but I will attempt to summarise it.
34. Mr. Maitland gives an account of his connection with Mr. Karia. He accepts that he knew Mr. Karia, although he knew him under his first name rather than his second name. Mr. Maitland had been told what Mr. Karia had said about Mr. Maitland and Mr. Maitland records his reaction to what had been said about him. Initially he thought that the allegation was a simple mistake on somebody's part. When the liquidator explained precisely what was being said Mr. Maitland, very much taken aback, says he was stunned. He said in his witness statement that he wanted the court to know that Mr. Karia's account was an outrageous lie. He then goes into detail as to why there is no truth, says Mr. Maitland, in any of the allegations against him.
35. Interestingly, one of the things Mr. Maitland did was to contact another person, Miss Carol Bentley. Carol Bentley contacted Mr. Karia, at least so far as Mr. Maitland understood. Mr. Karia said to Carol Bentley that there was a misunderstanding. Mr. Maitland's name had been mistakenly picked up by the liquidator and I will refer in a moment to what Carol Bentley has said in her own witness statement about that. Mr. Maitland goes on to give details as to lack of substance in the case. He says that he is disgusted that Mr. Karia has tried to blame the affair on him. He says the allegation is outrageous and defamatory. He says he is not a dishonest or deceitful person and the whole affair has left him deeply angry and upset. He has considered taking action but so far what he has done is to prepare this witness statement.
36. I also have witness statements from investors whose money was received by Mr. Karia or his company, namely Mr. Eram Ayu and a Mrs. Cheddah who, of course, was the petitioning creditor in this case.
37. As indicated, I also have a witness statement from Miss Carol Bentley. She describes how Mr. Maitland contacted her, plainly very upset and angry at being brought into this affair by Mr. Karia. Mr. Maitland, she confirms, asked her to contact Mr. Karia, which she did. Mr. Karia told Miss Bentley that he had not blamed Mr. Maitland. He explained that Mr. Maitland's name was a name that had simply come to the attention of the liquidator when going through all the company records. Miss Bentley said this was very unfair on Mr. Maitland and Mr. Karia agreed with her. At the end of the conversation Mr. Karia said he would contact the liquidator to make sure that the liquidator understood that Mr. Maitland had nothing to do with the company and the suggestion made against Mr. Maitland was without any foundation.
38. At yesterday's hearing of this application to commit Mr. Karia, the witnesses to whom I have referred on behalf of the liquidator were present in court; so too was Mr. Karia. Although Mr. Karia had not, as he was required to do, elected to have witnesses present for cross-examination, as I have indicated the witnesses were present and, in particular, Mr. Maitland was present. Mr. Maitland was ready and willing to give evidence on oath to corroborate the matters as in his witness statement. For my part I was interested to hear from Mr. Maitland, given the great disparity in the evidence which I have read from Mr. Maitland and from Mr. Karia. Somewhat surprisingly Mr. Karia, through his counsel, was somewhat reluctant to cross-examine Mr. Maitland. Mr. Karia's counsel suggested that a cross-examination of Mr. Maitland would be, as he put it, academic. After some prompting from the court Mr. Karia's counsel agreed he would put his case to Mr. Maitland. Mr. Maitland came forward, took the oath, gave evidence in accordance with his witness statement and was available for cross-examination. It was put to him that his evidence was untrue and he denied that. That was Mr. Maitland's evidence.
39. Mr. Karia was in court, as I have indicated. He declined to give evidence. I pointed out to him (through his counsel), as I thought it only fair, that if he did not give evidence I may have difficulty in giving any weight to the statements in his affidavit. The liquidator's counsel was ready and willing, indeed eager, to cross-examine Mr. Karia. Mr. Karia made the decision not to give evidence and did not tender himself for cross-examination.
40. Before I make any findings of fact in this case I remind myself that the burden of proof, in relation to an alleged contempt of court by breaching a court order, requires proof beyond reasonable doubt. I will now make my findings in relation to the allegation so far as it concerns Mr. Maitland.
41. The relevant part of the order which Mr. Karia was to comply with is the order that he file and serve an affidavit setting out "to the best of his knowledge and belief … a detailed explanation of all monies paid into and withdrawn from company accounts."
42. Amongst the things Mr. Karia had to do was to swear an affidavit setting out to the best of his knowledge and belief an explanation of the sums withdrawn from the company accounts. I have already read what Mr. Karia said about the cash being couriered to Mr. Maitland. I have no hesitation in accepting the evidence of Mr. Maitland that Mr. Karia's statement is a complete fiction. The statements made in the affidavit were a deliberate lie by Mr. Karia. He did not, therefore, comply with the order of 25th January 2007 which required him to give an explanation to the best of his information and belief. To tell a deliberate lie cannot be compliance with an order to answer questions to the best of your knowledge and belief. He therefore committed a breach of the order of 25th January 2007.
43. I should also record at this point that I regard this as a serious breach of the order. First of all, Mr. Karia did not cooperate with the liquidator by giving an honest explanation. Secondly, what he did was worse, so far as the liquidator was concerned, than if Mr. Karia had simply refused to answer the question. The lie Mr. Karia told put the liquidator to the trouble of pursuing Mr. Maitland and having to satisfy himself that Mr. Maitland was not involved and was of no interest to the creditors of the company. The fault was considerably aggravated by the unjustified blaming of Mr. Maitland who I find was completely innocent of any wrong-doing. I fully understand Mr. Maitland's indignation of what Mr. Karia has done to him.
44. I will now deal with the other allegations of breach which I will be able to take rather more quickly. For this purpose I need to go to the re-amended application which sets out what is said to be the breach of the order on the part of Mr. Karia. The part of the order which is next relevant is the part which required Mr. Karia to say to the best of his knowledge and belief details of all joint or personal bank or building society accounts which are or have been held in his name from 1st October 2002 to the present, including the name of the bank or building society and the account names, sort code and the account number.
45. In relation to that part of the order what Mr. Karia did in summary was he identified a branch of Barclays Bank where he had an account and a branch of Lloyds Bank where he had an account. He did not identify any other branch of any other bank. He did not refer to the HSBC account which he had revealed at the time of the public examination, to which I have referred. He also did not say, as the question required him to say, whether the account was in his sole name or in joint names. In those two respects I find that he did break the order as regards details of bank accounts. It is also the case that the order required him to give the sort code and account number and he did neither of those.
46. However, before I find him to be in contempt of court by breaching the order I must be satisfied beyond reasonable doubt that when he prepared his affidavit in April last year he knew the sort code and account number. I think it is quite likely that he did. If this case had to be resolved on the balance of probabilities I think I would come to the conclusion that he probably did know that information and declined to give it. That is material to what might happen in the future as regards purging his contempt. I stop short of making the finding beyond reasonable doubt that in April of last year Mr. Karia knew the sort code and account number. No doubt he could have obtained them, he could have contacted the bank, but he was not required by the order to take steps to ascertain the information. He was required to state something to the best of his knowledge and belief so, whilst I think Mr. Karia may be rather fortunate in my finding, I stop short of finding him to have broken the order in those respects.
47. The next part of the order I need to deal with is that he was required by the order to give the names and addresses of all investors in the company from 1st October 2002 to the present, including any investors who have had their money returned. I will not read out the answer that Mr. Karia gave. He listed names. In the case of the names, judging from the names given there was at least one company, probably more than one company. In the case of individuals, with the exception of one gentlemen called Raj Patel, the other individuals did not have their first names but only, in most cases, an initial and in some cases not even that. As to addresses, in one case the words "no address" are used, in other cases no address is stated. In the remaining cases the address is given "as London" but without any further details of the address in London.
48. I am going to approach this allegation of breach very much in the same way as I approached the case of the sort codes and account numbers. I think it is quite likely (and this is relevant for purging any contempt in the future) that Mr. Karia could have done far more than he has done but, reminding myself that I must be satisfied beyond reasonable doubt that he knew more in April of last year and failed to provide it, I stop short of making that finding.
49. The next part of the order which I am asked to deal with is to turn again to the part which required Mr. Karia to give a detailed explanation of all monies paid into and withdrawn from the company's accounts. Taking this shortly, in the re-amended application in (iii) at paragraphs (a), (b) and (d) there are identified the allegations of non-compliance with the order. The non-compliance is said to follow from putting the words of the order "required to be complied with" with the words used in the affidavit of Mr. Karia. I can take this shortly because I accept what is said in the re-amended application as correctly and accurately describing respects in which Mr. Karia has failed to comply with what the order required. As regards paragraph (iii), I mentioned (a), (b) and (d). That is because (c) is the separate allegation as to cash being couriered to Mr. Maitland which I have already dealt with.
50. To the extent that I have indicated I find that Mr. Karia is in contempt of court and has broken the order and much the most serious breach is the failure to say where the money went, implicating, as he did by a lie, Mr. Maitland.

Sentence

51. I have been referred to a number of authorities either for the purpose of identifying the general principles or providing helpful illustrations of how different courts have reacted to different sets of facts in other cases. I will mention briefly one or two matters which arise from the authorities cited to me. I was taken to the case of Hale v. Tanner [2000] 1 WLR 2377. That was, on its facts, not like the present case. It concerned breach of a non-molestation order. In her judgment, Hale LJ at page 2380 letter F to G indicated that the comments she wished to make were only in the context of family cases. None the less it was cited to me by counsel for the liquidator and counsel for Mr. Karia did not suggest that the comments were not of assistance to me at least in some respects provided I took care to distinguish the present type of case from a non-molestation order type of case.
52. Approaching the case with that in mind, there are statements which I find do assist me in coming to a conclusion. I will not read out any lengthy passage, but I will refer to a number of points which seem to emerge. Hale LJ pointed out that imprisonment is not to be regarded as an automatic consequence of the breach of an order. However, there is no principle that imprisonment is not to be imposed on the first occasion. She pointed out that the range of options is very much narrower than in a criminal court, but none the less there was a range of things that the court could consider: it could make no order; it could adjourn; it could fine; it could make a mental health order and, of course, it could make an order that the contemnor be sentenced to imprisonment.
53. The next matter she mentioned was that if the court is satisfied that imprisonment is appropriate, the length of the committal shall not be decided by reference to whether or not the order is to be suspended. She also made a point which (it is clear from the authorities generally) applies across the board in cases of contempt. There are two objectives when selecting the sentence for contempt of court. The first is to mark disapproval of the disobedience of the order. The second is to secure compliance with the order in the future. That second objective is sometimes described as a coercive element in the sentence. It was also pointed out that the length of the committal has to bear some reasonable relationship to the maximum two years which is available.
54. Hale LJ then considered the cases in which suspension might be appropriate and she mentioned aggravating and mitigating factors. She also indicated the desirability of the court explaining its reasons for its choice of sentence.
55. I was also referred to the decision of Lawrence Collins J in Crystalmews Ltd v Metterick [2006] EWHC 3087 Ch That was a case of a freezing order where the sums involved were very substantial. The breaches of the order were that the respondents to the application had dissipated assets or disposed of assets or dealt with assets. At the time of the hearing before the learned judge, both respondents admitted they had broken the order.
56. Beginning at paragraph 8 and continuing to paragraph 12 of his judgment, the learned judge, in what I might say is a typically helpful way, summarized a great body of authority as to the approach that a court should take and, of course, he was doing so in a context which was not a family law context.
57. I have in mind what was said in these helpful passages, although I will not read them into this judgment. At paragraph 13 of his judgment he listed a number of matters; not all of them apply or are relevant in the present case but I will read his list as I was invited to address these different points. The learned judge said this:

"First, whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy. Second, the extent to which the contemnor has acted under pressure. Third, whether the breach of the order was deliberate or unintentional. Fourth, the degree of culpability. Fifth, whether the contemnor has been placed in breach of the order by reason of the conduct of others. Sixth, whether the contemnor appreciates the seriousness of the deliberate breach. Seventh, whether the contemnor has cooperated."

58. I was also shown the case of Shalson v Russo [2002] EWHC 399 (Ch), a decision of Neuberger J. That was a case where Mr. Russo had been ordered to disclose certain matters and had not done so. In relation to his failure to disclose certain matters he was sent to prison for two years. He had also broken the order in other respects, but in those other respects the sentence of the court was very much shorter, two weeks in one case and six weeks in another.
59. The two-year sentence, it was plain, included a punitive element and a coercive element. Some considerable time into his sentence Mr. Russo applied to be released from prison and have the sentence discharged. The learned judge went into the circumstances in which it is appropriate to discharge a sentence of imprisonment in respect of someone in contempt of court. He discussed the punitive element and the coercive element. One feature of that case was that Mr. Russo still had not complied with the order and the prospect of him doing so after the hearing was far from certain. The learned judge declined to discharge the sentence of imprisonment.
60. More briefly I will mention three other cases where different judges have had to grapple with the question of sentencing someone who had committed a breach of a court order. The cases are LTE Scientific Limited v. Thomas [2005] EWHC 7 QB, Daltel Europe Ltd v Makki [2006] EWCA Civ 94 and Lexi Holdings Plc v. Luqman [2007] EWHC 1508. Indeed in the last case Henderson J in what was a reserved judgment, dealing with the matter with very great care, sentenced for individual breaches; the longest sentence for any breach was 18 months. I was told by counsel for the liquidator, and indeed it is my own understanding, that when judgment was handed down the judge's provisional sentence of 18 months was increased to two years so that was an illustration of a case where the maximum penalty was awarded.
61. I was asked to look in particular at the seven matters referred to by Lawrence Collins J in the Crystalmews case and I will go through those matters. The first is whether the liquidator has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy. I have no hesitation in saying that the liquidator has been prejudiced, so too have creditors and so too has Mr. Maitland. The liquidator is an officer holder. It is his function to investigate matters with a view to getting in the assets of the company so that the creditors may receive something from the liquidation of the company.
62. Mr. Karia has completely refused to cooperate. He still does not disclose what happened to the money. He must know. He has told a deliberate lie. The fact that he has told a deliberate lie indicates to me that he knows very well where the money is. He could be more forthcoming. His attitude prevents the liquidator finding where the money is. It has also increased the costs of the liquidation. If any money is recovered the costs will eat into the recovery and the creditors will suffer as a result.
63. As to Mr. Maitland, I have already referred to the very unpleasant, indeed nasty, allegations which were potentially very damaging to Mr. Maitland. One function of this judgment is to clear Mr. Maitland's good name and so it may be that that particular harm will not endure.
64. The next matter is whether the prejudice is capable of remedy. The prejudice incurred to date perhaps cannot be undone but so far as Mr. Maitland is concerned he will have the satisfaction of knowing that he was believed on his oath and Mr. Karia was not believed. Further, if Mr. Karia were to disclose where the money went then that element of prejudice would be remedied.
65. The second matter raised by the Crystalmews case is whether Mr. Karia has acted under pressure; that is not applicable here.
66. The third matter is whether the breach was deliberate or unintentional. I find it was deliberate and wilful and, indeed, not only was it a refusal by him to disclose, he indulged in a not very clever deliberate lie which put people to greater difficulty and expense.
67. The fourth matter is the degree of culpability. I will not repeat my remarks already made indicating I regard this as a bad case.
68. The fifth matter is whether Mr. Karia has been placed in breach by reason of the conduct of others; that is not applicable here. What he has done has been his own free choice.
69. The sixth matter is whether the contemnor appreciates the seriousness of the deliberate breach. He has shown no sign of that. At the hearing yesterday his counsel invited me to accept the truth of his affidavit and to regard Mr. Maitland as having told lies to the court. One of them has to be telling lies and if I accepted Mr. Karia's account the inevitable consequence was I would find Mr. Maitland had misled the court. In other words, Mr. Karia has compounded the fault by persisting in it in the face of the court. There is no admission of fault. There is no statement of intention to comply with the order in the future.
70. The seventh matter is whether the contemnor has co-operated. I have said enough to indicate he has done the opposite.
71. Mr. Karia's counsel addressed me on sentence and on suggested mitigating circumstances. I was asked to take into account the fact that all the harm had been done to creditors of the company before the order was made and before the order was breached. It was said therefore that the breach did not cause the harm and, therefore, I should regard this as a less serious case. What this submission overlooks is that Mr. Karia's refusal to say where the money went may be preventing the liquidator from recovering some of that money from the company and paying it to the creditors.
72. It was also suggested that I should be wary of exposing Mr. Karia to double jeopardy. I would be wary if I were to expose him to double jeopardy. It was suggested that Mr. Karia may very well be disqualified as a director and so I should not treat him so seriously for his contempt of court. He would be punished in due course when he was disqualified as a director. The two jurisdictions do not really overlap. If and when any question of disqualification arises hereafter it is suggested that Mr. Karia should then be treated more severely on that occasion because he was in contempt of court, it could obviously be pointed out that I am sentencing him today for that contempt of court and he should not be sentenced a second time for that contempt of court, but none of that prevents me dealing with him in the way appropriate for the contempt which I have found.
73. In coming to my conclusion I am influenced by the total lack of co-operation to date, the lack of apology, the lack of any stated intention to comply with the order in the future and the particularly nasty and damaging lie about Mr. Maitland. My sentence has both an element for punishment and an element of coercion with a view to making Mr. Karia comply with the order of 25th January 2007 in the future.

My decision on sentence

74. Taking all the above matters into account I sentence Mr. Karia to twelve months' imprisonment for his contempt in refusing to explain to the best of his knowledge and belief the withdrawals from the bank account. A shorter period than twelve months would be appropriate for the punitive element alone. However, I would not want to see Mr. Karia serve a short sentence of imprisonment, continue to refuse to disclose where the money went and then leave prison to enjoy the funds he has refused to disclose. The coercive element of the order persuades me I should settle on a sentence of twelve months.
75. I will also sentence, but perhaps less relevantly, in relation to the other breaches of the order which I have found. All of these sentences are to run concurrently. I sentence Mr. Karia to one week for the breach of the order in that he did not disclose the name of the bank accounts, that is whether it was in his sole name or in joint names; I sentence him to one week for not disclosing details of the HSBC account; I sentence him to one month for the breach which is set out in paragraph 3(iii)(a) of the re-amended application; I sentence him to one month for the breach in 3(iii)(b) of the re-amended application; I sentence him to one month for the breaches in 3(iii)(d) of the re-amended application.
76. Mr. Karia's counsel has asked me to suspend these sentences. I expect the suggestion is that if Mr. Karia were belatedly to comply with the order he need not serve any part of the sentence. As the sentences include an important element for punishment it is not, in my judgment, an appropriate course to suspend the sentences.
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