Edward Levey acted for Discovery Land Company, a U.S property development company, in its application to have Mr Stephen Jones, of Jirehouse solicitors, committed to prison for contempt of court as a result of his failure to comply with the disclosure obligations contained in a freezing injunction.

The application arose out of DLC’s purchase of Taymouth Castle in the Highlands of Scotland.  During the course of the transaction, more than £10 million of client funds was dissipated and a further £5 million was borrowed and secured against the property without DLC’s consent.

DLC obtained freezing injunctions and disclosure orders against Jirehouse.  However, in breach of the disclosure orders, Mr Jones failed to explain what had happened to the missing monies and, in breach of his undertakings, he failed to pay certain monies into court.

Following a three day hearing, Mr Jones was found to have acted in contempt of court in relation to each of the four charges brought against him.

Sentencing Mr Jones to an immediate term of imprisonment of 14 months, Mr Justice Zacaroli said that “a breach of the disclosure obligations in a freezing order is an attack on the administration of justice which usually merits an immediate sentence of imprisonment of a not insubstantial amount”.

The judge went on to explain that “disclosure obligations in aid of a freezing injunction are of the greatest importance to enable a claimant and the court to police the injunction and enforce it against third parties.  That is particularly so where the injunction is in aid of a proprietary claim and the claimant is seeking to discover what has happened to money which should have been held for it but has been dissipated.”

The judge also rejected the argument advanced on behalf of Mr Jones that an obligation to pay money into court falls within section 4 the Debtors Act 1869 such that a person cannot be imprisoned for contempt as a result of a failure to comply.

A copy of the substantive judgment is available here and a copy of the sentencing judgment is available here.

For further information regarding Edward’s civil fraud practice, please contact his clerk, Sian Huckett.