Asset freezing orders are an essential tool in the enforcement of judgment debts and those who breach them can expect severe punishment. In one case, a bankrupt who was subject to such an order when he took steps to put an inheritance from his mother beyond his creditors’ reach received a stiff prison sentence.
The bankrupt, who owed a judgment debt in excess of £3.7 million, was subject to an asset freezing order that forbade him from disposing of, dealing in or diminishing the value of his assets. A few months after the order was made, he inherited more than £300,000 from his mother. He did not inform his trustee in bankruptcy of that fact and took steps to dispose of his inheritance to his wife and brother.
After two of his creditors lodged an application to have him committed to prison for contempt, he acknowledged that he had breached the order. He claimed, however, that he had acted in accordance with his mother’s wish that his wife, who was in poor health, should be provided for. He said that he truly believed at the time that he was not breaching the terms of the order by waiving his inheritance.
Ruling on the matter, a judge found that he at all material times knew perfectly well that his inheritance was caught by the freezing order. Its terms were not complex and would have been readily understandable by a professional man of his intelligence. By seeking to dispose of his inheritance, he had knowingly, deliberately and contumaciously breached the order.
The judge took into account his mitigation: he had made limited admissions; most of the money had in the event been recovered by his trustee in bankruptcy; he and his family were in serious financial straits; and he acted as primary carer for his wife. The seriousness of his contempt nevertheless demanded a custodial sentence. The judge sentenced him to five months’ imprisonment.