KB-2023-004010 - [2025] EWHC 2689 (KB)

A refusal to provide information in the context of a WFO is ordinarily treated as extremely serious and prima facie warranting a sentence of imprisonment. It has two elements at least. First, there is the defiance of the court order. Second, in order to police a WFO, it is essential that a claimant knows the nature and whereabouts of the defendant’s assets. Without this, a defendant is able to dissipate assets in breach of a court order without MGWL or the court knowing about it.

Thus, typically a penalty serves two purposes. The first is retrospective as a punishment for breach of the court order. The second is a form of coercion to encourage the defendant to observe the court order.

In the instant case, when the proceedings were discontinued in Scotland and the WFO in this jurisdiction fell away, the element of coercion was no longer required. Without a continuing WFO, the disclosure no longer served the purpose. It therefore follows that by the time of the penalty, the only purpose was to punish for the failure to provide disclosure of assets from the time of service until the WFO fell away.

MGWL made clear once the WFO had fallen away that it was no longer seeking a particular penalty and in particular it was not encouraging the court to impose a sentence of imprisonment. This was not surprising in the circumstances.

An order must be observed until such time as it is set aside, and it is no excuse to a defendant that the order should not have been granted. A defendant's remedy in those circumstances is to do what the other defendants did, namely to apply to discharge and, if appropriate, for a stay of the order until the discharge application.

That said, if the order should never have been imposed or would have been set aside if an application had been made, that may be a major matter in mitigation. That is because MGWL should not have had the benefit of the order, and therefore suffers no prejudice as a result of the non-disclosure.

In the instant case, MGWL should not have had the order in two senses. First, a possible inference from the discontinuance of the Scottish proceedings is that there was never a substantive basis for the original claim and therefore for the WFO. Whilst it would be argued that Mr Smith is in a slightly different position because he was for a few weeks a director of two companies registered in England and Wales, if he had any connection with England and Wales, it was very limited. There is no reason to believe that the Court would be likely to have reached a different conclusion on this issue from Mr Tinkler and the Court of Appeal’s view in respect of the defendants who successfully took the s.25 CJJA point.

Second, even if there had been a substantive basis, there is no basis for inferring that an application to set aside the WFO made by Mr Smith and CSM would not have had the same result as in respect of those defendants who did make the application, namely that it would have been set aside for failure to make full and frank disclosure. Nothing has been identified to show as regards the failure to make full and frank disclosure that the position would have been any different in respect of Mr Smith and CSM if they had made the application.

Whilst it is the case that it was found that there was a good arguable case on the evidence before Mr Tinkler and the Court of Appeal, that was before the decision to discontinue the proceedings in Scotland. For the reasons set out in the judgment of Lord Sandison, that cast a different light on the merits of the proceedings and at lowest raised serious questions about the true intentions of the proceedings. In any event, the effect of discontinuance is that Mr Smith and CSM have been deprived of their ability to show that the proceedings were, as they contend, without foundation and even fraudulent or for a collateral purpose.

In view of all of these matters, the Court has serious concerns about the motivation and intention of the Claimants in pursuing the Contempt Application once the injunction had been discharged by Mr Tinkler in respect of Mr Gollits, VDH AG and VDHI on their applications. Those concerns are exacerbated by MGWL continuing the WFO and continuing to pursue the Contempt Application once the Court of Appeal had dismissed the appeal on 8 August 2025. If there was a justification for this, it is not apparent to the court what it was, and since the set aside application was never contested following the capitulation of the Claimant, it will never become apparent.

Despite the above, as indicated above, a belief that an injunction should not have been ordered or that it was not properly served is not a defence to a contempt. The correct course is to seek the discharge and a stay in the meantime. Without this, the Court order must be obeyed. Further, it is not a defence that there was a concern that the information obtained would be misused. That might be a matter for a discharge or a variation of the WFO, but it is not an answer to a case of contempt. It is regrettable in this case that Mr Smith and CSM did seek to render ineffective the hearings before Ellenbogen J and Morris J and procured the adjournments. They are responsible for having done so. At that stage, there was still no application to set aside the WFO.

Against the background of those applications for adjournments, it might have been difficult if the Defendants had sought in a court hearing to seek a third adjournment to deal with the set aside application before the contempt. Soole J ruled on paper that they could not, and no attempt was made until after liability to have the set aside application heard before the outcome of the contempt hearing. I shall find below that some part of the costs of the contempt proceedings has been brought upon the Defendants by themselves.

In these extraordinary circumstances, a sentence of imprisonment, whether immediate or suspended would not be appropriate. Nor is it necessary to order a financial penalty in addition to such order as to costs as will be made. There are cases where the court takes the view that it is a sufficient penalty that a defendant has had to pay the costs of the committal proceedings or a part of them. This is reflected in Arlidge, Eady and Smith on Contempt 5^th Ed. at para. 14-154. This itself will be a punishment to Mr Smith and CSM and a substantial disincentive to other persons who ignore a court order instead of applying promptly for its discharge. It does not condone the failure or refusal to provide the information ordered by the court, but it does reflect upon serious concerns that the court has about the application for the WFO and its continuation.