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	England and Wales High Court (Family Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> Cherwayko v Cherwayko (No 3) (contempt in financial remedy proceedings and costs) [2015] EWHC 2482 (Fam) (21 August 2015) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2015/2482.html Cite as: [2015] EWHC 2482 (Fam)

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IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21 8 2015

Mrs Justice Parker DBE :

1. I have found beyond reasonable doubt that H has breached the order of Mr Justice Roderic Wood on 6 May 2015 to attend court and to file the statement specified and the order of Mr Justice Hayden on 4 June 2015 to provide specified information, and the undertaking given to Mr Justice Mostyn on 26 February 2015 to lodge with W's solicitors share certificates in respect of not fewer than 5,000,000 of his shares in Mart Resources Inc, to stand as security for his obligations (to make capital payments to W) such shares to be held in escrow pending H's compliance in full (with payment of the lump sums).
2. H's breach of the orders to attend and produce documents/information is not trivial. A non-paying spouse in H's position is able to frustrate the court's process and enforcement unless such orders are complied with. Attendance is particularly important. If a party is present the court can compel evidence to be given, and can impose various sanctions in aid of enforcement, such as a temporary restrictions on leaving the jurisdiction until such information is provided.
3. Mr Watson has advanced a number of points on behalf of H on which he seeks to mitigate H's breaches, and in particular to avoid an immediate custodial penalty. H's assertions are wholly untested and untestable without oral evidence and intervention by the court to compel the production of further information and documents in consequence of what comes to light during the process. This case further exemplifies the problems that can be caused by non-attendance, and by disclosure not being subject to the court's control.
4. This was of course not the first occasion on which H had breached such an order. The first enforcement application was issued after H had failed to deal with Stewarts' letters chasing explanation and payment leading to orders to file a statement and attendance. H belatedly filed his affidavit dated 17 December 2014 following the hearing before Mostyn J on 10 December 2014 which he did not attend although his legal team did.
5. I know from Mostyn J's judgment that H asserted that he had not attended because he was undergoing medical treatment in the United States of America. From Mostyn J's doubts expressed about whether that was indeed so, I conclude that no medical evidence was provided for the court on that occasion. As before me H had made no attempt to provide documentation and evidence as ordered by Mostyn J. If it is said that he had parted with Vardags as a result of simple inability to pay their fees, in itself a debatable assertion, since H had access to funds for that purpose, and it may be that he was simply unwilling to pay them. Maybe there were other reasons lying behind their parting, I do not know. As before Mostyn J, H was grossly in breach of the orders for payment, and had made no attempt to bring this matter back to court or to communicate with the wife or her advisers in any way in order to explain his alleged difficulties in respect of compliance with any of the orders made. Like Mostyn J, I regard H's contempt as blatant and defiant.
6. I note that Mostyn J regarded the 2014 breach as meriting a sentence of imprisonment of six months, but in the light of H's belated attempts to comply, and in the circumstances at that time, considered that the balance between coercion and punishment at that time merited suspension of the order.
7. W only issued her second enforcement proceedings after H had again failed to respond to solicitor's correspondence.
8. Now that the matter comes before me I am faced with not just identical contempts, but H's breach of his undertaking. The whole purpose of the undertaking was to provide security for W's claims. H's actions have utterly frustrated that purpose. It is quite plain that he lied in order to achieve realisation of the shares, and that this was a carefully coordinated and executed plan. It is impossible for the court to tell whether there is any merit or truth at all in H's argument that his financial difficulties led him to take this step, but I have very considerable doubts. His affidavit and the information/documentation contained in it and its exhibits are presented in such a way that it is impossible for the court to form any educated view as to his financial affairs. I recorded in the main judgment that I had not been able to make any sense of H's finances from the exhibits to his affidavit filed before me. The exhibited material, mainly statements relating to a number of bank and credit card accounts worldwide operated by H but held in the name of various entities in various locations and jurisdictions (H's address been c/o these entities) does not give any picture of anything other than the most limited aspects of his more minor expenditure on himself and others. Some large unexplained credits, are, if they relate to the shares, unidentifiable; H asserts that these documents show that he has only small credit balances, if at all, on his disclosed accounts. It is not possible to check the assertion that this is all H has, or that the share proceeds were paid into any of these accounts. I note that H discloses an earned income of over $800,000 per annum. He does not suggest that this has been utilised for the support of W and the children.
9. H's failure to attend makes evaluation of his assertions impossible. There is no evidence whatsoever to support his case that he intended to comply with the disclosure/information orders by 19 June 2015. He made no attempt to inform W or her solicitors of the steps that he was taking to obtain replacement certificates and destroy the security. H asserts now that he thought that he was not in breach of the undertaking in respect of the share certificates as he used the majority of the proceeds to pay of the outstanding mortgage on the former matrimonial home. His failure to disclose to W's legal advisers what he was doing is in that context inexplicable. He had every opportunity to access legal advice from Vardags at the time.
10. There is a dearth of authority as to actual term as opposed to principle in respect of breaches of orders for enforcement in financial remedy cases. I note that in Young v Young (reported at [2013] EWHC 3637 (Fam)) Moor J activated a suspended six month's penalty of imprisonment in its totality imposed (incidentally by me) on the first contempt application for breach of an order to provide financial disclosure/discovery.
11. Mr Watson has sent in detailed and referenced written submissions following the circulation of the main judgment, for which I am most grateful, and has declined my offer of an oral hearing. I have read and reread them whilst reflecting on the penalty. There is no discourtesy meant by failure to pick up every point in this judgment: I have borne them all in mind.
12. Mr Watson refers to Hale v Tanner [2000] 2 FLR 879, Lomas v Parle [2004] 1 FLR 812, and Murray v Robinson [2006] 1 FLR 365. He reminds me that the sentencing exercise is intended to mark the court's disapproval, and also to secure future compliance. The length needs to bear some reasonable relation to the 2 year maximum. The court should explain whether factors are aggravating or mitigating.
13. There are a number of stages:

i) The court does not have to commit to prison, but there is no principle that the term should not be immediate on the first breach.

ii) The alternatives are limited.

iii) The court can make no order, adjourn, fine, requisition assets and make a mental health order.

iv) The length of a term of imprisonment must be decided without reference to whether it is to be suspended.

v) The length of the term depends on the court's objectives.

vi) It must bear some reasonable relationship to the two year maximum.

vii) Suspension powers are wider than in the criminal context.

viii) Length of suspension needs to be considered separately, though may be linked to continuing compliance with the underlying order.

ix) The court must consider the context.

x) The court cannot ignore parallel proceedings, and the court will not want the contemnor to be punished twice for the same events.

xi) The court should explain the reasons for its choices.

14. H has not offered any opportunity for his case to be tested. That it is his choice. The court is not bound to accept his account save, perhaps, where it is corroborated by a wholly independent and reliable source:-

i) H's assertions and account are untested and untestable in his absence.

ii) The documents selected by H do not self-evidently answer all the questions as to his true means.

iii) His lack of information as to how he was endeavouring to meet W's award and failure to provide the information and documents is inconsistent with an honest and transparent account.

iv) He failed to disclose that he had taken steps to realise the shares

v) He has absented himself from court hearings and provided information (limited and self serving) only at the last minute and under compulsion.

vi) H's actions deprive W of any effective financial remedy.

Mitigation

(i) Failure to disclose

15. Mr Watson submits that H could not comply with the orders to disclose and to provide information because the freezing order prevented him from paying his solicitors. That is mere assertion. The furthest Mr Watson can go is to say that it "is assumed that in the lead up to 19^th "(i.e. June, when they came off the record)" they would have been waiting to see if funds materialised before carrying out further work." H claims that his solicitors, a well-known 'high-end' specialist matrimonial firm, just stopped doing the work shortly before 19 June without warning or explanation. There is no support for H's claim in this regard, which is frankly incredible.
16. Mr Watson submits that compliance was not long delayed before W took enforcement proceedings and that H was, through his solicitors, on the verge of compliance. There is absolutely no support for that latter assertion, and the history points against it.
17. H asserts that the bank would not advance funds in the light of the freezing injunction, and Mr Watson asserts that banks often act conservatively even if the order provides for withdrawals for exceptions. No evidence whatsoever is provided to support that assertion, or H's assertion that he was unable as opposed to unwilling to pay Vardags.

(ii) Failure to attend court

18. H relies as mitigation on his assertion that he has been busily engaged in negotiating the sale of Mart Resources to a third party and is required to be present at meetings in Dubai and Africa. Once more, this assertion is wholly lacking in any corroboration or any support at all. Furthermore, H has at no stage of taken up the option in the order of Roderic Wood J 6 May 2015 to refix the date to take account of and manage his commitments. H has still not provided any medical support for his purported ailments, and the furthest he can go in any event is to assert that he had been advised to 'limit' his travel, which he is still undertaking. In any event, attendance at court was and is a priority.
19. I conclude that H has no intention of attending court here. Hollow apologies are easy to advance on paper. They mean nothing.
20. Mr Watson submits that H's failure to attend court has not obstructed the course of justice in any way. That submission is unsustainable. Absence seriously impairs W's ability to enforce, and demonstrates H's obstructiveness.

(iii) Breach of undertaking

21. Mr Watson mitigates in respect of the breach of the undertaking relying on H's inability to pay W the lump sums as a result of the deterioration in his finances. It is relevant that this asserted problem has never been raised with W's solicitors. H asserts that the share price has declined from $1.44 per share to $0.80 per share. It is of course common knowledge that the oil industry has suffered over the last 12 months due to probably irresistible global forces, but no particularity has been given by H as to how this has affected his financial position. H produces as a print out from a website, unattributed, and unauthenticated, a document entitled "share price" dated 30 June 2015, entitled "crude oil futures", perhaps showing a fall of about 30%, but otherwise unexplained. He produces nothing which specifically relates to the sale of Mart shares. If there is any entry relating to the sale of Mart shares in his bank statements it is unidentified and unexplained from any independent source.

(iv) No intention not to pay W

22. H asserts in his statement and Mr Watson repeats that he obtained the duplicate certificates and realised the shares not to avoid paying W but in order to pay her. Again that claim, easy to make, is not supported in any way, and not particularised. H asserts that he had realised £1,000,000 and paid it to W. There is no documentary or supporting evidence whatsoever to support H's case as to the date on which H realised the shares, the price at which he realised them, and what was the source of funds from which H paid W. Again, H's solicitors did not inform W's solicitors what H was doing, nor did he disclose these purported transactions in his December 2014 affidavit. Mr Watson asserts that H should be given credit for acknowledging in his witness statement that he did obtain duplicate certificates. He does indeed acknowledge that he obtained them, but does not acknowledge that he did so in reliance of a perjured affidavit. He could not avoid admitting to realising the shares in the light of the evidence produced by W.

(v) Sentence should be suspended

23. Mr Watson submits that exceptional circumstances are not needed to suspend a custodial sentence and that suspension is the best way of ensuring compliance. Suspension of sentence by Mostyn J did not secure compliance with the subsequent payments to W, or with the subsequent orders for attendance and documentation/ disclosure. The subject of the matter of the undertaking has been destroyed and there is nothing in the undertaking with which H can comply.

(vi) Consequences of imprisonment for H

24. Mr Watson submits (although not on instructions) that an immediate sentence, if passed, will give H an incentive to remain outside the jurisdiction and become a fugitive. The term 'fugitive' is something of a misnomer since H has presently severed his links with this jurisdiction and English civil orders are likely to prove very difficult to enforce outside this jurisdiction or perhaps the EU. Mr Watson suggests that a suspended sentence will give H a greater opportunity of redemption, and to engage with the court process, but this assumes that H wants to redeem himself, and that he will engage more than minimally than at present. Mr Watson's instructions are that H could be ruined financially if he is imprisoned. I have no evidence as to this.

(vii) H's suggestions for making payments to W

25. H states through Mr Watson (again without any corroboration) that on the sale of Mart he would obtain:

£337, 371 Share options

£500, 000 Potential severance

£51, 959 Mart Shares

£889, 330 Total

26. H offers to make up the shortfall between that sum and £1.7 million presently owed (namely just over £800,000) by liquidating sufficient other assets, with full information being given to W as to the progress of the sale, although it may take approximately 6 months to sell the Signet and Regalis shares. H gives a purported explanation as to why he has not been able to do this before, but again it is just his say-so. I see no sign that this is a genuine proposal.
27. I note that this is a different timescale from that proposed at the 3 July hearing, when Mr Bowers invited me to adjourn the committal hearing until the end of July on the basis that by then H hoped to have been able to organise his affairs so as to pay W.
28. I have no confidence at all in this suggestion, which is not backed by any concrete proposal nor security, (in any event in the context of this case any security would have to be ironclad), nor, in the light of the history, in the reality of any information or transparency.

(viii) Suspension will assist compliance

29. Mr Watson submits that the previous suspended sentence handed down by Mostyn J prompted compliance: in fact H had already partially complied before the hearing, and that gave Mostyn J reason to consider suspension appropriate.
30. Lastly Mr Watson submits that H will be in a better position to honour W's payments if he is not imprisoned. That assumes that H has a genuine intention and wish to do so. The history leads me to the opposite conclusion.
31. I see no sign of more than token contrition in H; and his actions are typical of a cynical and determined non-payer and manipulator who will advance any argument to the court.

(ix) Double jeopardy

32. I do not know whether W will bring committal proceeding against H in respect of the asserted deficiencies in disclosure in his 17 December 2014 statement. H did not inform W or Stewarts about obtaining replacement certificates and sale of the shares. I regard this factor as negating H's mitigation rather than a separate factor for which I sentence H. It will be for Mostyn J to determine whether H breached his order and if so what penalty follows. There is no current double jeopardy.
33. It is unusual for a court to take this view, but I can see no grounds for mitigation of H's contempts, save that he has now purported to provide disclosure, but which cannot be evaluated due to its lack of corroboration and his absence.
34. I regard a number of factors referred to above and below as aggravating the contempt/breaches:

i) A planned undermining of the undertaking and dishonesty in devising and executing the plan to realise the shares and failure to disclose it,

ii) Breach of trust of both the court and W,

iii) Failure to meet obligations to W and children and indifference to them,

iv) Blatant disregard of court orders/undertakings,

v) Undermining the court process,

vi) Obstructiveness, obfuscation, dilatoriness, and lack of transparency in responding to allegation of breach of undertaking/ orders,

vii) Lack of contrition,

viii) Failure to take responsibility for breaches.

Sentence

35. An order for fine or requisition of property is wholly unrealistic since H is outside the jurisdiction and his assets cannot be traced so as to implement the financial remedy order, and enforcement is probably an impossibility.
36. The fact that H may escape implementation of a custodial penalty by remaining outside the jurisdiction is no reason for not imposing an immediate custodial sentence. He may not be able to remain outside it for all time. The court has power to extend a Bench Warrant in certain circumstances so the penalty has the capacity to remain effective.
37. Each of these breaches merits a term of immediate imprisonment by way of penalty. The previous history justifies, if not demands, that the time for suspension is passed. H has continued to show contempt for this court and its process and has shown that he is untrustworthy. Imprisonment is proportionate and failure to imprison, immediately, would be disproportionate. Although I am bound by the statutory limit of two years in respect of each breach, I have to have regard to whether I should order the terms to be served consecutively or concurrently. I am also entitled, as in a criminal case, to have regard to the totality.
38. The two breaches of the orders for attendance and disclosure of information are interlinked although separate in nature. This was a grave and second breach.
39. Encouragement, and chances to comply with the underlying order, has not worked.
40. I regard the total term for the breaches of the orders to attend and disclose documentation/information as meriting a sentence of nine months imprisonment on each of the orders to be served immediately but concurrently. That has regard to the totality.
41. The breach of the undertaking is an even more serious matter. It precedes the breaches of the orders. It merits a longer sentence. I regard 12 months as appropriate. In my view it is so breathtaking and fundamental a breach and so separate in contemptuous conduct from the two breaches of the order that a consecutive term is merited to mark and reflect that feature and I so order. In the context of a financial remedy order to take such steps as to negate the effect of the award after the initial enforcement proceedings is about as serious as can be. W relied on that undertaking. She thought that the shares were secure. It was not for her to second guess what H might do to undermine it. The fact that W (and of course the parties' children) may not be reduced to complete penury by his actions by comparison with others is irrelevant. These sums were agreed and are their entitlement. It would wrong to consider a case of this nature as less serious than contempts involving for instance personal violence because financial claims are "only money".
42. H will most likely have to serve only half the term. He is able to apply to purge his contempt whether or not there is any effective way in which his wrongdoing can be redressed.

Costs

43. Mr Watson accepts that H should pay W's costs but on the standard basis, because:

i) He has not been guilty of litigation misconduct, or certainly not to a high degree.

ii) The case is not out of the norm (by which Mr Watson my also be implying, not out of the norm for committal proceedings).

44. He refers me to a recent decision of Wilkie J which pulls the threads together of the themes in cases concerning indemnity costs (Siegel v Pummell [2005] EWHC 195.)
45. Mr Watson submits that W has not wholly succeeded as:

i) no order for enforcement has actually been sought or made.

ii) presumably W accepts that H's assets cannot easily be realised and he has little liquid capital.

iii) there was no misconduct in the committal proceedings.

iv) W failed to specify the nature of the breaches in the application notice.

46. H accepts that there is a direct link between his conduct and the application for a freezing injunction.
47. W has had to bring these proceedings directly as a result of H's conduct in failing to pay agreed lump sums and maintenance (in spite of his lavish income) and destroying agreed security arrangements. The court can have regard to pre-action conduct leading to proceedings.
48. H's conduct in destroying agreed security is unprecedented in my experience and at the extreme end of the spectrum in financial remedy proceedings, where bad behaviour to a former spouse or partner and disregard for the wellbeing of the children is unfortunately common. H has shown no true regret but insouciance and indifference.
49. In the absence of the security it was easy for H to flout the financial remedy order. W's application to enforce gave her the opportunity to seek H's attendance at court and disclosure. This was a necessary and effective application that led to a substantive order in aid of enforcement.
50. W does not accept that H's assets cannot be realised and that he has little liquid capital. She does accept that his assets and capital are not easily visible: thus the orders for attendance and disclosure. She has not achieved a victory, pyrrhic (per Mr Watson) or otherwise. She is attempting to obtain compliance with a court order step by step, so far frustrated by H's machinations.
51. H's failure to attend coupled with his submission of a statement and exhibits which needed, to do justice to his case, to be carefully read, but which complicated and obscured the facts, has certainly increased judicial work on this case although it may not in fact have increased W's costs due to its late submission. From my experience of H's litigation stance however in the last two hearings I accept that this case has required out of the ordinary attention to detail so as to prepare for the unexpected and a contest on all fronts.
52. H has taken every possible point to deny responsibility for his actions. I have accepted that Mr Watson had a point with regard to the contents of the application notice, but his argument did not prevail on the facts. The legal argument needed to be further researched on both sides.
53. H's conduct which led to the proceedings and during them has been so exceptional and unreasonable even in the context of a committal application that an indemnity order on both the enforcement and committal applications is inevitable.

Summary assessment

54. Mr Watson has submitted a detailed analysis of W's Form H and proposed summary assessment. I am aware that Mr Bentham is away. I cannot fairly rule on either party's case as to quantum and summary assessment without his response.