Templeton Insurance Ltd (Respondent / Claimant) v Anthony Thomas and Another

JurisdictionEngland & Wales
JudgeLord Justice Rix,Lady Justice Black,Lord Justice Lewison
Judgment Date05 February 2013
Neutral Citation[2013] EWCA Civ 35
Docket NumberCase No: A3/2012/2051
CourtCourt of Appeal (Civil Division)
Date05 February 2013
Between :
Templeton Insurance Limited
Respondent / Claimant
and
(1) Anthony Thomas
(2) Harbinder Singh Panesar
Appellants / Defendants

[2013] EWCA Civ 35

Before:

Lord Justice Rix

Lady Justice Black

and

Lord Justice Lewison

Case No: A3/2012/2051

A3/2012/2053

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

MR JUSTICE EDER

2009/915

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr B Quineyand Mr M Atkins (instructed by LG Williams & Prichard) for the First Appellant

Mr M Gadsden (instructed by Vale Solicitors) for the Second Appellant

Mr Matthew Cook (instructed by Nelsons Solicitors Ltd) for the Respondent

Hearing dates : Tuesday 25th September 2012

Lord Justice Rix
1

These are the appeals of Anthony Thomas and Harbinder Singh Panesar against the findings of contempt of court made against them by Mr Justice Eder: see his judgment dated 28 March 2012, [2012] EWHC 795 (Comm), (the "contempt judgment"). There are alternative appeals against the judge's sentences of committal to prison for 4 months in the case of Mr Thomas, and 9 months in the case of Mr Panesar: see the further judgment dated 19 July 2012, [2012] EWHC 2309 (QB), (the "sentence judgment").

2

The committal proceedings were brought by Templeton Insurance Limited ("Templeton"), the claimant in an action against Mr Thomas and Mr Panesar and other defendants. The outcome of that action can be found in the judgment of Mr Justice Simon dated 3 December 2010, [2010] EWHC 3113 (Comm), where he found Mr Thomas and Mr Panesar to have been liable for fraudulent misrepresentation.

The essential background

3

Mr Thomas is the father-in-law of Mr Panesar. Both of them were involved in a family business known as Motorcare Warranties Limited ("Motorcare"), established in the 1990s by Mr Thomas in order to sell mechanical breakdown insurance policies ("MBI") through a network of several hundred appointed representatives, mainly car dealers. Motorcare was authorised by the FSA to conduct insurance business until authorisation was withdrawn on or about 25 May 2010. Its agents were all registered with the FSA as its appointed representatives.

4

In 2003 or 2004 Mr Thomas handed over the running of the business to his son-in-law, Mr Panesar, although he continued to play a major role in it. He and his wife between them owned 100% of Motorcare, in equal shares.

5

Beginning in about 2004, the policies were insured by the claimant (here the respondent), Templeton. Motorcare acted as Templeton's agent in selling the policies. The relationship between Motorcare and Templeton was governed by annual contracts or "slips". Motorcare was authorised to sell the policies, at a premium determined by it, to receive the premium, and to act as claims administrator. The premium for which Motorcare was responsible to Templeton, however, was fixed by their contracts. Each month Motorcare was supposed to remit to Templeton any excess of such premium over claims paid to the insureds.

6

The agents were employed or contracted and paid by a service company, A Thomas Associates Ltd ("ATA"). There were barely any documents to explain the precise role played by ATA, but Simon J found that Motorcare paid it the balance of funds not remitted to Templeton, in order to pay the costs of the administration which it provided. Thus wages and/or commission were paid to the agents by ATA rather than by Motorcare.

7

In 2007, not long after the renewal of their relationship for a further year, the emergence of substantial losses led Templeton to an investigation and to the conclusion that Motorcare was acting outside its authority, providing false information about losses, and not accounting properly for premium. In the course of meetings with Mr Thomas and Mr Panesar, Mr Thomas relied on a forged document to pretend that a departure from the terms of the slips had been authorised.

8

Templeton commenced proceedings and on 8 July 2008 obtained a freezing injunction against Motorcare. The injunction, which included the usual penal notice, prevented the disposal of "the property and assets of [Motorcare's] business". Para 22 of the order provided: "Effect of this Order: It is a Contempt of Court for any person notified of this Order knowingly to assist in or permit a breach of this Order. Any person doing so may be sent to prison, fined or have his assets seized." There is no dispute that the order was duly served on Messrs Thomas and Panesar (who were also made defendants and the subject of the order so far as their personal assets were concerned).

9

Following a three week trial Simon J concluded that Motorcare had underpaid Templeton by over £2.3 million; that Mr Thomas had continued to play a major role during the relevant period; and that Messrs Thomas and Panesar had obtained the 2007 renewal of the relationship by fraud.

10

Templeton's application to commit Messrs Thomas and Panesar arose out of their alleged involvement in the creation of a "phoenix" company, Motorcare Elite 2008 Limited ("Motorcare Elite"), in order to siphon off the business of Motorcare and thus avoid the strictures of the freezing order. The judge, Eder J, had to consider Templeton's complaints that Motorcare's network of agents, office premises, staff, telephone number, website addresses, website text and product documentation were all moved over to Motorcare Elite. Templeton alleged that this was a dealing with or disposal of Motorcare's assets inter alia in the form of its goodwill.

The judge's findings

11

Mr Thomas gave evidence before the judge, but Mr Panesar did not. They had both given evidence at the trial before Simon J, and his findings were treated as binding. Simon J held that both men were unreliable witnesses whose evidence was evasive, internally inconsistent and contrary to contemporaneous documents. They had relied on forged documents. He rejected Mr Thomas's attempt to distance himself from relevant decision making. Eder J also found Mr Thomas to be a most unsatisfactory witness. Mr Panesar, who had made two affidavits for the committal hearing, sought to excuse his failure to attend the hearing to give evidence on the ground of ill-health: but Eder J concluded that this was unjustified, and that Mr Panesar had deliberately absented himself. Appropriate inferences could therefore be drawn against him.

12

Motorcare Elite had been incorporated within a few days of the injunction, ie as early as 14 July 2008. It was jointly owned in equal 25% holdings by Mr and Mrs Thomas and Mr Panesar and his wife, Mr Thomas's daughter. Mr Panesar played a crucial role in setting it up, and was its sole director. His wife was the company secretary. Mr Thomas was also directly involved, contrary to his evidence that he was not. The judge rejected the evidence that Motorcare had been put out of business by the freezing order and that that was why Motorcare Elite had been set up. The judge also rejected the evidence that Motorcare's name and brand had been destroyed: that was incoherent in the light of the adoption of its name within that of the new company. Thus a new insurer, AXA, had been found to replace Templeton within a very short time. There was no reason why Motorcare could not have continued to trade in the ordinary and proper course of business with AXA as its new insurer. As it was, AXA was obtained to act as the new insurer for Motorcare Elite's new business. The judge concluded:

"In my judgment, the only reason for setting up Motorcare Elite was to carry on the business previously carried on by Motorcare outside the purview of the freezing injunction; and that was done knowingly by both Mr Panesar and Mr Anthony Thomas with that deliberate intention in mind."

13

There was in fact a considerable pause before Motorcare Elite could lawfully commence selling insurance, because first it had to obtain FSA authorisation, and likewise its agents had to be registered with the FSA. This was not achieved until 1 April 2010. It was only thereafter, on 25 May 2010, that Motorcare's FSA authorisation was withdrawn, at its own request. As of 1 April 2010 Motorcare Elite had 365 (or 293, the judge said that he did not have to resolve the dispute about numbers) FSA appointed representatives, all of whom had also been FSA appointed representatives for Motorcare immediately prior thereto.

14

The judge observed that lack of documentation caused uncertainty about Motorcare's trading in the intervening period. He was prepared to assume that a reputable insurer such as AXA would not have been prepared to act in association with Motorcare Elite before the latter had been properly authorised by the FSA to sell insurance. It was however unnecessary to decide whether Motorcare had been the operator of the scheme in the meantime. What was nevertheless clear, and was clear from Mr Panesar's own affidavit evidence, was that he and Mr Thomas had taken active steps to convince Motorcare's agents to transfer to Motorcare Elite. The judge cited inter alia the following passage from Mr Panesar's affidavit (which Mr Thomas in his affidavit, for his own part, confirmed):

"Fortunately, as we and particularly Anthony Thomas…established good relationships with many of the agents long before we did business through Motorcare Warranties, those agents indicated to us that they would be willing to sell policies for Motorcare Elite…Thereafter it took a considerable amount of time to register all of the agents as representatives of Elite with the FSA…it was only because we had established good relationships with many of our commission agents prior to incorporating Motorcare that we were able to convince them that...

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  • Concurrent Duties
    • United Kingdom
    • Wiley The Modern Law Review No. 82-1, January 2019
    • 1 January 2019
    ...131 LQR 213; C. Mitchell,‘Stewardship of property and liability to account’ [2014] Conv 215 (on the judgment of theCourt of Appeal: [2013] EWCA Civ 35; [2013] PNLR 19).132 n 78 above.36 C2019 The Author. The Modern Law Review C2019 The Modern Law Review Limited.(2019) 82(1) MLR Aaron Tayl......

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