Olga Olita Sellers v Artem Podstreshnyy
| Jurisdiction | England & Wales |
| Judge | Lady Justice Rose,Lady Justice Davies,Lord Justice Henderson |
| Judgment Date | 10 April 2019 |
| Neutral Citation | [2019] EWCA Civ 613 |
| Docket Number | Case No: A3/2019/0400 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 April 2019 |
[2019] EWCA Civ 613
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mrs Justice Falk DBE
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Henderson
Lady Justice Nicola Davies DBE
and
Lady Justice Rose DBE
Case No: A3/2019/0400
Stephen Fidler (solicitor advocate of Stephen Fidler & Co) for the Appellant
Sarah Bousfield (instructed by Devonshires) for the Respondent
Hearing date: 19 March 2019
Approved Judgment
The Appellant, Ms Sellers, appeals against the order of Falk J made on 14 February 2019 by which concurrent custodial sentences were imposed on Ms Sellers for three breaches of freezing orders, those sentences being two sentences of nine months and one of six months imprisonment, resulting in an overall period of nine months imprisonment. Ms Sellers argues that the sentences were too long and that they should have been suspended. At the end of the hearing of the appeal, the Court announced its decision rejecting the contention that the sentences should be suspended but allowing the appeal to the extent of reducing the two nine month sentences to six months each. These are my reasons for coming to that decision.
Background
Ms Sellers ran an estate agency business through the company Pericles Properties Ltd (‘Pericles’) of which she is the sole director and shareholder. Pericles acted as letting agent for, amongst other landlord clients, the Respondent Mr Podstreshnyy in respect of his property at One St George's Wharf, in Vauxhall London. Pericles received rent from Mr Podstreshnyy's tenants at the property. Those monies were not handed over to Mr Podstreshnyy as they should have been but rather were paid to and spent by Ms Sellers. Once this was discovered, Mr Podstreshnyy sought a pre-action interim freezing injunction from the court. The first order made in the proceedings was that of Nugee J following a without notice hearing on 7 February 2018 (‘the Nugee injunction’). It displayed the penal notice prominently in appropriate terms on the front page, set the return date for 21 February 2018 and contained the following provisions:
i) (by para 6) Ms Sellers' and Pericles' assets within the jurisdiction were frozen up to the value of £100,000;
ii) (by para 8) monies in a named bank account with Lloyd's Bank were expressly covered by the freezing order;
iii) (by para 10) Ms Sellers and Pericles were ordered to provide to Mr Podstreshnyy's solicitors immediately and to the best of their ability information about all their assets in the jurisdiction, giving the value, location and details of all such assets up to the value of £100,000;
iv) (by para 12) Mrs Sellers was permitted to spend a reasonable sum towards her living expenses and she and Pericles were also permitted to spend a reasonable sum on legal advice and representation. Before spending any such sums, Ms Sellers and Pericles were required to inform Mr Podstreshnyy's solicitors where the money was to come from;
v) (by para 13) Pericles was permitted to deal with or dispose of any of its assets in the ordinary and proper course of business but before spending any money the company was required to tell Mr Podstreshnyy's solicitors where the money was to come from;
vi) (by para 15) the order was to cease to have effect if Ms Sellers and/or Pericles provided security by paying £100,000 into court or by some other agreed method;
vii) (by Schedule B) Mr Podstreshnyy gave the usual cross undertaking in damages and undertook to issue and serve a claim form as soon as practicable.
Nugee J also granted an order for third party disclosure against Lloyd's Bank to obtain bank statements for the account of which Mr Podstreshnyy was aware. These statements were provided by the bank and disclosed the existence of another bank account in the name of Ms Sellers personally. They showed that substantial sums had over time been moved from the Pericles account to Ms Sellers' personal account.
Ms Sellers was served with the Nugee injunction on 15 February 2018. She made no attempt to provide information about her assets or Pericles' assets as she had been ordered to do. At the return date hearing before Barling J on 21 February 2018, Ms Sellers was present and represented by a solicitor she had by then instructed. Outside court Ms Sellers produced a witness statement made on her own behalf and on behalf of Pericles. In that statement she made many complaints about the procedure followed by Mr Podstreshnyy to obtain the Nugee injunction and described how the freezing of the bank accounts had disrupted her business and resulted in lost sales. There was no information in there about her assets or the assets of Pericles. Barling J made an order on 21 February 2018 (‘the Barling injunction’) displaying prominently the appropriate penal notice. One of the recitals in the Barling injunction emphasised for Ms Sellers’ benefit the importance of complying with the court's order: (referring to Ms Sellers and Pericles as ‘the Respondent’):
“Upon the Respondent's non-compliance with the disclosure obligation and the court reminding the Respondent's legal representatives that this usually merits an immediate sentence of imprisonment of a not insubstantial amount in order to encourage compliance”
The Barling injunction (by para 1) continued in force the freezing order made in the Nugee injunction, increasing the value frozen to £112,000. It also provided at para 2 that all other parts of the Nugee injunction, including the requirement at para 10 that the Respondents must immediately and to the best of their ability inform Mr Podstreshnyy's solicitors of all of their assets within the jurisdiction, continued in force. The Barling injunction was served on Ms Sellers via her solicitor on 23 February 2018. I note here that neither the Nugee nor the Barling injunctions required the information about the assets to be provided or confirmed in any particular form.
Shortly after the hearing before Barling J, Ms Sellers completed but did not sign an admissions form admitting £70,000 of the debt. In the pages of the form dealing with her finances, she described herself as an estate agent but in the box for her annual turnover she put “t.b.a”. She claimed to have only £500 in a bank account and indicated that she was living in rented property. Her only income was from state benefits, namely income support, child benefit and housing benefit. In the boxes for her outgoings she included rent and other household expenses amounting to more than her monthly income. She also listed various debts, for rent arrears, council tax and utilities as well as substantial credit card debts. The forms indicated that she and Pericles could only afford to pay off the admitted portion of the debt in monthly instalments of £5000 starting at the beginning of 2019.
In the light of the information in the admissions form, Mr Podstreshnyy obtained judgment against Pericles for part of his claim by order of Master Price dated 20 April 2018. Judgment was entered in the sum of £89,727.49 with execution of about £20,000 of the sum claimed being stayed because Pericles asserted a counterclaim arising from purchases and repairs it said it had paid for and that allegedly fell to be deducted from the rental monies owed. Pericles was ordered by Master Price to serve an amended Defence and Counterclaim by 4 May 2018. A schedule of monthly instalment payments was ordered for the payment of the judgment debt. The order provided that this did not preclude any application for a charging order to secure the amount of the debt immediately due. Ms Sellers was granted permission to defend the total value of the claim. No pleading was in fact served by Pericles in accordance with Master Price's directions.
At some point Mr Podstreshnyy became aware that Mrs Sellers and her former husband Mr Sellers jointly owned three properties in Cheam. These properties (‘the Cheam properties’) comprise the freehold of premises at 10 Station Way, Cheam, SM3 8SW which Ms Sellers owns with Mr Sellers in equal shares, a leasehold commercial property in the ground floor of the premises also owned jointly in equal shares and a residential flat on the upper floor of the premises, the address of the flat being 9 Cheam Court. Ms Sellers still owns the legal title to the flat jointly in equal shares with Mr Sellers. As part of the settlement of their matrimonial proceedings, Ms Sellers was to buy Mr Sellers’ share. She still owes about £10,000 of that purchase price, having paid the majority of it using funds loaned to her by her brother. Title has not been transferred into her name but will be transferred by Mr Sellers if and when he receives the balance of the purchase price.
It therefore became apparent to Mr Podstreshnyy that Ms Sellers had breached the Nugee and Barling injunctions in a number of respects. On 14 June 2018 Mr Podstreshnyy issued committal proceedings against Ms Sellers supported by an affidavit of David Pack, a solicitor with Devonshires who were now instructed by Mr Podstreshnyy. The following day there was a hearing before Morgan J of an application by Mr Podstreshnyy for an order that unless Ms Sellers and Pericles serve defences to the claim, judgment be entered for the remainder of the monies claimed. At that hearing Ms Bousfield, appearing for Mr Podstreshnyy, told Morgan J that Ms Sellers had taken no steps to comply with the information provisions in the Nugee and Barling injunctions and that an application for committal had been issued the previous day. Morgan J stressed in Ms Sellers' presence the importance and seriousness of the orders that had been made. He told her that there was well established precedent for someone who breaks such an order...
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