Out-Law / Your Daily Need-To-Know

Courts increasingly willing to 'show teeth' against those that fail to comply with disclosure orders, says expert

Out-Law News | 13 Sep 2016 | 3:33 pm | 2 min. read

A new ruling shows that UK courts are increasingly willing to "show their teeth" in cases where people and businesses fail to comply with court orders, a civil fraud and asset recovery specialist has said.

Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com, said that it was traditionally difficult and costly to obtain committal orders, which enable courts to enforce previous orders that have not been complied with. He said he welcomed the fact that it was now easier to obtain committal orders.

Sheeley was commenting after the High Court in London granted loan provider Kevin Taylor a committal order enforcing a previous court ruling in which Taylor won damages against a yacht manufacturer, its UK holding company and its two sole directors, over failure to repay a loan.

Taylor had previously provided a bridging loan to Van Dutch Marine for which the company, its holding company and their sole directors, Hendrik Erenstein and Ruud Koekkoek, were jointly and severally liable for repayment.

Taylor won the right to freeze some of the companies' assets and to the disclosure of certain financial information relevant to their  affairs, as well as to an undertaking which entitled Taylor to receive details of the companies' income and expenditure, earlier this year. However, Taylor did not receive the information he was entitled to receive under the terms of the disclosure order, according to the High Court's ruling. This included details of the sale of two Van Dutch Marine yachts, it said.

In his ruling Mr Justice Warren said that Erenstein and Koekkoek were "plainly in contempt of court" because there was "a wilful failure" on their behalf "to take reasonable steps to prevent the breach of an order". The men were "served with all relevant orders but have not taken adequate steps to ensure compliance with them", the judge said.

Mr Justice Warren served Erenstein and Koekkoek with suspended prison sentences as a result of their offences of contempt of court.

Defendants, even foreign defendants, now need to be extremely worried as they can no longer just ignore High Court orders," Sheeley of Pinsent Masons said. "The old fashion strategy of avoiding the hearing and claiming financial hardship is no longer good enough. As demonstrated by this case the court will still make committal orders in face of such statements."

Sheeley said that freezing and disclosure orders are "the most powerful weapons a victim has" to recover assets as they entitle those victims to freeze funds owned by fraudsters and identify all of their other worldly assets.

"Such draconian orders with such far reaching disclosure makes recovering assets a lot easier and places the victims in a position of knowledge, when usually they are at their most vulnerable," Sheeley said. "Such information greatly assists in enabling settlement agreements to be reached quickly with the fraudster. However, time is of the essence and speed is key so victims should contact civil fraud solicitors as soon as they suspect a fraud has happened to maximise their chances of successfully recovering their assets."

"Judgments, such as the present one, are a massive victory for victims in general and should be applauded," he said.