Hart v Hart [2018] EWHC 548 (Fam)

[2018] EWHC 548 (Fam)

Case No BM11D02463

IN THE HIGH COURT OF JUSTICE

FAMILY DIVISION

Venue Bristol Civil and Family Justice Centre,

Redcliff Street,

Venue Bristol. BS1 6GR

Date 23 rd February 2018

Before

HIS HONOUR JUDGE WILDBLOOD QC

Sitting as a Judge of the High Court

Between

Karen Jayne HartApplicant

John Ralph Hart1 st Respondent

Brondesbury Limited2 nd Respondent

Susan Byrne3 rd Respondent

Halesowen Estates Limited4 th Respondent

Peter Mitchell (instructed by Irwin Mitchell LLP) for Applicant

Grant Armstrong (instructed by The Law Practice) appeared for each of the Respondents

JUDGMENT

HHJ Wildblood QC :

[1]Introduction - On 15th September 2016 Mrs Karen Jayne Hart applied for committal and other orders against her former husband, John Ralph Hart, and his sister Susan Byrne as a means of enforcing a financial remedies order made by me in divorce proceedings between Mr and Mrs Hart. She also sought enforcement orders against a company called Halesowen Estates Ltd by way of the imposition of a fine, the sequestration of assets or such other sanction as the court considers just. Mrs Hart alleges that Mr Hart has acted in breach of an undertaking which is recorded in the substantive financial remedy order and which was necessary to render effective the transfer of shares in a company to Mrs Hart; she also alleges that the Respondents have each acted in breach of subsequent enforcement orders that were made on 24th February 2016 and 29th July 2016. The undertaking and each relevant order bore appropriate penal notices and was served on the Respondents. For reasons that I will explain, this judgment relates only to the allegations of contempt against Mr Hart; I have had to adjourn the issues relating to Mrs Byrne and Halesowen Estates Ltd.

[2]After a procedure lasting 3½ years the substantive financial issues arising from the divorce were listed before me for resolution in May 2015, leading to a final order being made by me on 25th June 2015. Significant delay and expense were caused in the interlocutory stages of the proceedings by Mr Hart’s failure to give adequate information or comply with court orders. At the substantive hearing before me his evidence was manifestly unsatisfactory, his disclosure was shown to be profoundly inadequate and I rejected many of his contentions. He is an exceptionally poor and untruthful witness. Mrs Hart is at the opposite end of the spectrum of veracity. She is reliable and truthful; she has also been exceptionally patient with Mr Hart in these proceedings.

[3]Both parties sought permission to appeal against my substantive decision of June 2015 and, on 26 February 2016, Kitchin LJ granted Mrs Hart permission to appeal but refused the application for permission by Mr Hart. On 24 May 2016 the President further rejected the application for permission by Mr Hart at an oral hearing. The appeal by Mrs Hart was dismissed by the Court of Appeal on 31st August 2017.

[4]These committal proceedings relate to the order that I made transferring to Mrs Hart the shares of Mr Hart in a company called Drakestown Properties Ltd (see paragraph 13 of the substantive order of 25th June 2015 at C4) and the undertaking that Mr Hart gave in order to render that transfer of shares effective. As this judgment will show I am sure that Mr Hart has done his utmost to prejudice Mrs Hart and to put her under pressure by failing to comply with his undertaking and with the subsequent enforcement orders that I have made. Further, he has simply not engaged properly in these extremely serious committal proceedings or complied with orders made on the adjournment of them.

[5]Every effort has been made by Mrs Hart, her legal team and by me to avoid this case reaching this crisis point. There have been a number of hearings within these committal proceedings (which I will describe later) and, on each occasion, it has been obvious that Mr Hart has not produced information that he should have produced in compliance with the undertaking that he gave and, later, the orders that I have made. On each occasion that the case has returned before me orders have been made with the intention of ensuring that Mr Hart’s default is remedied. That has all been to no avail. Nobody wishes to see an 83-year-old man (or a 65-year-old woman, Mrs Byrne) facing a committal application. However, despite frequent court hearings, orders and the clearest possible warnings (e.g. see the transcript of 28th March 2017, p90) Mr Hart has not done what he was ordered to do or what he undertook to do. Enough is now enough. As I will explain he is now in very serious and sustained contempt of court.

[6]The delay in the provision of information has caused obvious prejudice and expense to Mrs Hart. The most clamant example of prejudice is that she was unable to submit accounts for Drakestown Properties Ltd for the year ending 31st December 2015 until further information had been produced as a result of the hearing in March 2017 and faced intervention by HMRC. The accounts that she has filed for both 2014 and 2015 have had to bear a caveat due to the lack of information that she has had. But she has also been unable to deal with demands for rates and subsidence issues; she has also been left without any proper financial records of the company. Even the company computers were removed and computer records have never been provided.

[7]Another feature of this case is that it has produced a huge volume of material – I now have ten lever arch files and two smaller files in the bundle. To tie down what has and what has not been disclosed by Mr Hart is a massive exercise and it is necessary to blow aside any number of smoke screens that Mr Hart has erected. I now know this case extremely well together with the personalities involved, having spent many days hearing the original application and, later, the many enforcement hearings. The end result, in my opinion, can be stated very simply: i) Mr Hart has always been in very firm control of his financial empire. He is a successful and canny business man who knows every aspect of his businesses and how they run. ii) He saw Drakestown Properties Ltd to be part of his financial empire. He was in very firm control of that company and knows precisely how it operated. iii) Mr Hart bitterly resents the order that I made in the financial remedy proceedings and thinks that Mrs Hart has secured a very unfair advantage as a result of it. iv) Drakestown Properties was part of a structure of companies run by Mr Hart. It was managed under the guise of Halesowen Estates Ltd (which he controlled) and money received from it was paid to Dudley Estates Ltd (which is owned as to 99.5% by Brondesbury Ltd, as trustee of the 2011 settlement). Mr Hart controls that settlement – as I said in the substantive judgment, Mr Hart ‘regards every penny within it as his money’. v) When Mrs Hart took over Drakestown Properties Ltd she needed the company documentation, both past and present. She could not operate the company without full information about it. Amongst other things she needed to be able to file accounts, deal with tenants, deal with liabilities, engage with suppliers, organise staff and continue the operating system. vi) When Mr Hart and Mrs Byrne were forced by an order of the Chancery Division to give up possession of the premises of Drakestown property Ltd, they caused the office to be stripped of essential company records and computers. vii) Mr Hart knew that Mrs Hart needed that information, which he undertook to give and which he was ordered to give. Having stripped out the office he has steadfastly declined to give the information that she needs. It was Mr Hart who gave the original undertaking. The order of 24th February 2016 was by consent (save as to costs). In relation to the order of 29th July 2016 one of the preambles reads that Mr Hart and Mrs Byrne ‘confirmed that the documents set out in paragraph 6 were available and could be provided’. The clearest examples of the failure of Mr Hart and Mrs Byrne to comply with the undertaking and orders is that they have not provided Mrs Hart with any computerised records (i.e. electronic information), any written ledger books (which Mr Hart says were kept by hand), satisfactory VAT records or satisfactory bank records. None of the company computers have been left for Mrs Hart. I do not believe Mr Hart when he says that invoices were not kept about VAT inputs and outputs – not least because it is a requirement of law (as counsel acknowledged) that such records be kept and Mr Hart said that the company had been inspected a number of times by the HMRC without issue. viii) It is and always has been entirely within Mr Hart’s power to provide the information which has been sought and ordered. He has simply chosen not to do so. It was his undertaking. The orders were directed at him, Mrs Byrne and Halesowen Estates Ltd. He regards every penny of this corporate structure as his financial empire and has a deep commitment to the protection of it.

[8]In parallel to these enforcement proceedings is an application by Mrs Hart to set aside some of the capital provisions of the original order on the basis of alleged non-disclosure that; i) there is a substantial claim against the company for outstanding rates; ii) the company premises are in a poor state of repair; iii) seven long leases had been created; iv) there is subsidence affecting some of the units. I am only asked to give directions about that at this hearing.

[9]Position of Mrs Byrne and Halesowen Estates Ltd – As I will go on to describe the three Respondents appeared by the same solicitors and counsel (Ms Seddon) on 6th March 2017. On 27th March 2017 they instructed new counsel (Mr Trevis) through the same solicitors. At this hearing, after an agreed adjournment to reflect his commitments, Mr Armstrong represented them. I have raised with each counsel whether there is any suggestion that Mrs Byrne and the company were wrongly joined to these proceedings and was told in March that there was not and at this hearing that the matter had not been considered by Mr Armstrong but without submission that there was any form of misjoinder.

[10]However, also at this hearing I raised with Mr Armstrong whether he was satisfied that there was no conflict between Mr Hart and the other Respondents. For instance was there any suggestion from Mrs Byrne that she acted under the domination of Mr Hart or at his direction? I am afraid that I am deeply critical of the fact that the issue of conflict had not been considered before and that it took me to raise the point just before Mr Armstrong began his closing speech. Potential conflict should be one of the very first things that a lawyer considers when being instructed to act for more than one party. The debate about the issue is on the transcript and therefore I will not say more other than recording that it led to me being told that there was a possibility of conflict and that Mrs Byrne needed to be advised by others.

[11]Law - The following principles of law are agreed and are taken from paragraph 32 of Mr Mitchell’s helpful note: i) The first task for the court is to identify, by reference to the express language of the order, precisely what it required the Respondents to do. That is a question of construction and, thus, a question of law; ii) The next task is to determine whether the Respondents have done what was required of them and, if they have not, whether it was within their power to do it. Could they do it? Were they able to do it? These are questions of fact; iii) The burden of proof lies throughout on Mrs Hart: it is for her to establish that it was within the Respondents’ power to do what the order required, not for the Respondents to establish that it was not within their power to do it; iv) The standard of proof is the criminal standard, so that before finding the Respondents guilty of contempt the court must be sure: -(a) that they have not done what they were required to do and

(b) that it was within their power to do it. v) If the court finds the Respondents guilty the judgment must set out plainly and clearly (a) the court’s finding of what it is that the Respondents have failed to do; and (b) the judge's finding that they had the ability to do it.

[12]Mr Mitchell also accepts that ‘the court must find that the facts set out in [Mrs Hart’s] application are proved as at the date of it (i.e. 15th September 2016). She cannot, and does not, rely on any subsequent conduct to support her case (although subsequent matters may be relevant to sentence and, in particular, as to mitigation, aggravation and/or whether to suspend the sentence.)’.

[13]I will now give the detail of the case.

[14]Drakestown Limited – This company lies at the heart of this application.I described it in this way in the judgment that I gave on 20th May 2015:

‘The shares in this company are held equally by Mr Hart’s sister Susan Byrne and by R Grayson. However, it is accepted by Mr Hart that the shares are held by them for the equal and joint benefit of Mr and Mrs Hart. Drakestown Ltd owns two commercial properties…which have a combined value of £2.885 million and also has significant liabilities. The properties were both bought in 1989 and are called Baron’s Court (which consists of nine industrial units) and Queen’s Court (which has 71 industrial units). The principal activity of the company is ‘the rental of industrial units’

. The accounts record that the company is under the control of ‘Mr John Hart and Mrs Karen Hart’. I do not accept that it is a complicated company to operate and I note that Mrs Byrne is currently described as the director [D1931]. On the basis of Ms Round’s net asset valuation at F15 the company has a current value of £1.59 million’.Queens Court is in West Bromwich and Barons Court is in Walsall Wood.

[15]The undertaking - in order to render the transfer of shares in Drakestown Properties Ltd effective, Mr Hart was called upon and gave an undertaking ‘to take all steps necessary (including, for the avoidance of doubt, the provision of information and documentation and the notification of third parties of the cessation of his interest in Drakestown Properties Ltd) to ensure that the Applicant is forthwith hereafter able to conduct the efficient and effective management of Drakestown Properties Ltd and its assets’.

[16]Mr Armstrong submitted in closing that ‘the undertaking is far too wide’ and that the terms of it are far too vague to found the basis of a committal application. He also submitted that there is a lack of ‘time reference’ within the undertaking and therefore Mr Hart could not be held to it. This led him to say that the undertaking was the point of departure for the subsequent enforcement orders since they flowed from it.

[17]This is the first time that the point has been taken despite the number of hearings that there have been and the number of lawyers that have been involved. I reject Mr Armstrong’s argument. The undertaking was drafted deliberately in terms that were wide because of the broad nature of the responsibilities which needed to be imposed upon Mr Hart and which he accepted. The obligation was to ensure that the Applicant is forthwith hereafter able to conduct the efficient and effective management. Thus the undertaking took effect forthwith since Mrs Hart was to benefit from it immediately. The language used is plain and has always been plainly understood by Mr Hart.

[18]In order to manage a company efficiently and effectively you must have the records and you must be able to keep proper accounts. In particular you must keep records that are required by law to support the company accounts and tax returns. In relation to a rental company like this you must have the licences both old and new and you must be able to trace where money has gone. Mr Hart has denied this to Mrs Hart.

[19]The operation of the company - The transfer of the shares in Drakestown Properties Ltd to Mrs Hart represented a significant part of the financial benefit intended to be conferred upon Mrs Hart within the divorce proceedings. The transfer should not have been complex and, as counsel who appeared on Mr Hart’s behalf in March 2017 (Mr Trevis) himself said, it is not a difficult company to run. Mrs Hart should have had no difficulty running the company with the assistance of the management agents that she sensibly appointed as long as she had the information necessary for her to do so. However, to run a company that lets out units it is obvious that it is necessary to have the company computers, leases (both old and new), the licences (both old and new), the accounting records, the banking records, the tax records, the details of the liabilities and commitments of the company and details of those who owe the company money. Mr Hart has chosen not to give these to Mrs Hart. There has been a long running battle about the production of old licences and leases. On 22nd February 2018, in his evidence, Mr Hart stated that the licences that were granted were of one year’s duration (save for the seven long leases). It simply defies logic or reality that previous licences would not be retained. As I put to him myself when he gave evidence, if a new licence were to be granted today it would make no sense to rip up the licence that expired yesterday. Mr Armstrong submitted in closing that it was perfectly understandable that a small company like this would not retain historic licences and leases. I reject that submission – the primary trading of this company was in the rental of units and so it would have been ridiculous for the company to have disposed of old licences and leases immediately upon expiry. I have no doubt at all that there were copies of old licences that could and should have been disclosed and that Mr Hart and Mrs Byrne had the power to effect that disclosure.

[20]It is perfectly plain that the company was controlled by Mr Hart before the transfer of shares to Mrs Hart. Mrs Hart says at C43:

‘Whatever the Respondent says about his business interests, it is in reality he who manages every aspect of the company’s affairs. He is on site most days, arranges how it all works and who is who’

. I believe her. I do not believe for a moment Mr Hart’s pretence that he left all the running of the company to others. There was an office in the company premises which was fully staffed. The staff did the administrative work and kept records. They operated the computers. Their work involved the creation of records and other documents (otherwise, why have office staff?). None of this has been disclosed in a way that has allowed Mrs Hart to run the company effectively.

[21]On paper, Drakestown Properties Ltd used to be managed by the company called Halesowen Ltd (the company that is Fourth Respondent to this enforcement application). The shares in Halesowen Estates Ltd are held, nominally, by Mrs Byrne and, at the time of the hearing in May 2015 at least, Mrs Byrne was also the only listed director. However, when Mrs Byrne gave evidence at that hearing she was unable to explain any aspect of the accounts and knew very little about the company. I had and have no difficulty in accepting Mrs Hart’s evidence that it was Mr Hart who controls that company also and the records that it kept. That view is reinforced by the explanation that Mr Hart gave at the hearing in March 2017 about how Drakestown’s income was applied – Halesowen Ltd collected the rents, paid them to the trust company, Dudley Estates Ltd (which he controls) which then re-applied some of the income to Drakestown (see response xv in Mr Hart’s statement of 22nd March 2017).

[22]An important feature of this case is that the accounting year for Drakestown Properties Ltd ends on 31st December. Thus, the transfer of the shares in the company effected by my order of 25th June 2015 fell in the middle of the accounting year. I accept that, because Mr Hart has failed to provide information and documents to Mrs Hart relating to the company, she was not able to file accounts for the year ended 31st December 2015 until well beyond their due date. Those accounts should have been prepared by 30th September 2016 at the latest. HMRC gave the company until the end of April 2017 to file the accounts warning that, in default of the accounts being filed then, there was a risk of penal sanctions and also of the company being struck off. At the hearing before me in March 2017, more documentation was produced that allowed accounts, with a caveat, to be filed just before that deadline. The information should and could have been produced by Mr Hart at the time of the transfer of the shares to Mrs Hart and, in any event, as ordered by me in the enforcement orders; it is contemptuous that it was not.

[23]The accounts for the year ended 31st December 2014 had to be submitted after Mrs Hart took the company under her control following the order of June 2015. In the end the accounts had to be submitted with a covering caveat stating that they had been prepared on the basis of incomplete records. Mrs Hart should never have been put in that position. In the important letter from her accountants at 3-1327 Mr Campbell says:

‘the statutory accounts [for 2015] must be filed prior to September 2016, in order to avoid any Companies House penalties. Due to the fact that there was a delay in filing the 2014 accounts the penalties for the late filing of the 2015 accounts would double. Meaning that the penalties start at £300 and escalate to £3,000 if they are six months late’

. Therefore, Mr Hart put Mrs Hart in a position where, in relation to the 2015 accounts, she was facing a repeat of the difficulties that she faced with the 2014 accounts.

[24]During the March 2017 hearing I heard evidence on behalf of Mr Hart from a Mr Parkar who is a chartered accountant with King and King Accountants. He is responsible, with others, for preparing the accounts relating to the companies under Mr Hart’s control. He and his colleague have both produced evidence to state that ‘the statutory accounts are prepared from incomplete records’ (see Mr Parkar’s statement of 2nd March 2017, his oral evidence and the letter from Mr Kalinsky dated 3rd March 2017). The fact that accounts were prepared in the past on the basis of incomplete records does not mean that Mrs Hart should be required to continue that practice, particularly as someone who is taking over the business and starting afresh. The intention of the undertaking was to put her in a position in which she could conduct the efficient and effective management of the business – that includes preparing proper accounts based on complete records. She should have been put in a position whereby she could submit audited accounts to the Revenue.

[25]Mr Parkar said that fully audited accounts were prepared for Drakestown for the year to 31.12.2010 and he accepted that, for those to be prepared, full documentary evidence must have been supplied to the accountants (e.g. invoices, receipts, etc). Thus, evidence to support audited accounts was kept up to 2010 and I have no doubt that it continued to be kept. Mr Parkar said that, after that date, the accounts for Drakestown had been prepared on the strength of bank statements and VAT returns only (the incomplete records to which I have referred). However, he agreed with me that, if he had been acting for someone who bought this company part way through the accounting year (i.e. someone who was in the equivalent position of Mrs Hart) it would have been negligent to prepare accounts based on bank statements and VAT returns submitted by the previous owner only. Further, even if the previous owner, Mr Hart, did choose to submit accounts based on incomplete information, there is no reason why the new owner, Mrs Hart, should be forced to continue that practice especially where she had the benefit of the undertaking and orders of February and July 2016.

[26]Thus, information has been available in the past to produce proper audited accounts (2010) and there is no reason why it should not be available now. It would be negligent, I agree, for an accountant to prepare accounts of the company now based only on VAT returns and bank statements relating to the time when Mr Hart ran the company, particularly given the very poor and distrustful relationship between these former spouses. Mrs Hart could certainly not be expected to do so. In any event, a complete set of bank statements was only produced during the period of the adjournment of the hearing in March 2017 (i.e. with Mr Hart’s statement of 22nd March 2017), therefore even the incomplete records were denied her until then.

[27]Transfer and possession - Mr Hart transferred his shares in Drakestown Properties Ltd to Mrs Hart on 23 July 2015 but did not give up possession of the premises until 11th November 2015. There is no valid explanation at all for why he did not do so earlier. I have no doubt that this was part of the picture of Mr Hart putting pressure on Mrs Hart as an expression of his resentment of the fact that the company had been transferred to her. On 31st July 2015 an email was sent by Mrs Byrne which is at 1:75; in that letter it is stated ‘having carefully read the order there is clearly nothing in the order to give up possession of the office situated at Queens Court. There is nothing in the order that states provide information and documentation relating to Drakestown Properties Ltd’. At the time Mrs Byrne was not bound by any orders and was not party to any undertakings. However, the letter is an indication of how the order was being obstructed. When Mr Hart was asked questions about this on 28th March 2017 he could not explain the contents of the email [p13 of the transcript of that day]. The office for the company at Queen’s Court is a part of the Company premises and so, of course, possession had to be given up. Mr Hart, his companies and Mrs Byrne had no right to remain there. It did not belong to them.

[28]Chancery proceedings - In order for Mrs Hart to obtain physical possession of the company premises she had to take proceedings in the Chancery Division and, on 30th October 2015 [C1:77], Mr Hart was ordered by HHJ Purle QC to vacate the company premises and did so on 11th November 2015.

[29]The order in the Chancery proceedings also recorded the following: i) A declaration that Halesowen Estates Ltd is not and has not since 19 August 2015 been Drakestown Properties’ managing agent and does not have authority to act on behalf of Drakestown Properties. ii) Undertakings by Mr Hart and by Mrs Byrne on behalf of herself and Halesowen Estates Ltd as follows: a) That they would deliver up to Drakestown Properties all the physical and electronic documents and records including bank details and bank books, and any other items, which belong to Drakestown Properties that are in their possession or under their control by no later than 4 pm 11th November 2015; b) that they would each, by no later than 4 p.m. on 18th November 2015 swear, serve and file an affidavit deposing to the following matters:(i) a list of all the bank accounts held by Drakestown Properties, the account numbers, sort codes, name and address of the branch at which the account is held;

(ii) a list of all the leases or licences granted to occupiers of the Queen’s Court and Barons Court trading estate with sufficient particulars to identify the names of the occupiers and the terms of the agreement, annexing copies of the written agreements where they exist;

(iii) a list of all the chattels, including but not limited to all documents and other records, bank details and bank books relating to Drakestown Properties that are in the possession of Mr Hart or Mrs Byrne and the location of those items;

(iv) What steps the defendants have taken to provide Mrs Hart with all the documents and information she needs to conduct the efficient and effective management of Drakestown Properties Ltd. Of course, I am not dealing with any suggested breaches of the order that was made in the Chancery proceedings. I refer to the terms of that order though as part of the history of the steps that Mrs Hart has had to take to achieve what is due to her. Mr Hart sought to contend that he had complied with paragraph a) of that order (above) – see page 14 of the transcript of 28th March 2017. He did not do so. On page 15 of that transcript he said that he did deliver up all bank statements because he gave two statements and that was ‘all that we had’; that was not so. Only in March 2016 were more bank statements produced [1-97] and, later a bank mandate was given (see 1-16 on 4th May 2016). It was not until March 2017 that a large amount of bank statements were produced.

[30]What was left when vacant possession was finally given? - When giving oral evidence before me in March 2017 Mrs Hart said that at 1-96 there is a copy of a document that was left in the offices of Drakestown Properties on 11th November 2015 when she gained possession of the company. It reads:

‘As requested by the court: (1) we have left the bank statements of Drakestown Properties Ltd; (2) we have left all tenants leases and licences and site revenues: (3) we have left all chattels including main desk, telephones, security alarm intact, security number….; (4) we have taken all steps required under the court order. We have informed HMRC that Drakestown Properties Ltd is no longer part of the group and are now responsible for their own VAT. Kidderminster Properties Ltd have paid security staff wages together with site cleaner and part-time roofer’s wages. Dudley Estates Ltd have cancelled their credit account with E-on for electricity on-site and with South Staffordshire water. The telephone contracts have been cancelled. Mrs Susan Byrne is available to assist in any enquiries you may have’

. In oral evidence in March 2017 Mr Hart suggested that Mrs Hart did not need bank statements [p16 of the transcript for 28.03.2017]. That suggestion is completely wrong. Even King and King, the then company accountants, required bank statements to produce accounts which they described as being based on ‘incomplete records’. Mrs Hart did not even have those incomplete records.

[31]From pages 1-106 to 2-825 there are documents which are the leases and licences that were left in the office on 11th November 2015; they were all the current licences and leases. Mrs Hart has never been provided with the historic leases and licences that she has sought, repeatedly. Not only has it been made plain to Mr Hart by orders that he must produce historic leases and licences but common sense dictates that is so. This is a company that rents out premises. The new owner, Mrs Hart, must have historic information about deposits, liabilities for rates, liabilities for repairs, liabilities for utilities, etc if she is to run the company effectively. I have no doubt that Mr Hart is perfectly aware of that but has chosen not to provide the information despite orders that he must. In his affidavit at 1:79 Mr Hart does not say that the information relating to leases and licences is beyond his knowledge – the order of 24th February 2016 states:

‘if any party’s case is that a particular matter is beyond their knowledge, they must say so and identify any person or persons who, in his opinion, holds the required information’

. He has simply chosen not to produce them for the past 2 ½ years.

[32]In his oral evidence in March 2017 Mr Hart said that historic leases and licences had, in fact, been left in Unit 55. He had never said that before and his affidavit stated that they left all of the documents in the office [1-80]. There was no prior mention of Unit 55. Further, historic leases and licences were not referred to in the note that was left behind for Mrs Hart. He said that the historic leases and licences were drawn up by office staff and copies would have been retained by the tenants / licensees but that is no answer at all to his responsibility to produce them and it is not for Mrs Hart to track down tenants and licences and ask them for copies of past licences etc. I do not believe Mr Hart did leave documents in Unit 55 in the way that he alleges, in any event. It is inconceivable that this would not have been mentioned before or that important company documents would be dealt in this way. Further, I believe Mrs Hart when she says that the historic licences / leases were not left for her when she finally gained possession; she would have no reason at all to invent an allegation that she did not have these.

[33]Mrs Hart says, and I accept that, notably absent from the documents that were left for her were: i) Any rent ledgers; ii) Any historic bank statements; iii) Any historic leases/licences iv) Any contracts with third parties (including, for instance, the utility suppliers, and the contract between Drakestown Properties Ltd and Halesowen Estates Ltd) and the employees of/contractors to the company; v) Any books or accounts (including a list of the company’s creditors and debtors or any ledger showing transactions between Drakestown Properties Ltd and its agent, Halesowen Estates Ltd); vi) Any invoices from suppliers to the company.

[34]In his oral evidence in March 2017 Mr Hart was asked where the rent invoices were. He accepted that he would have had them but said that he did not know where they were now. He said that the office staff held them. In February 2018 he said that he had asked Wendy Fletcher if there were any other documents and she told that there were not. I do not believe him. I do not accept that there were no rent invoices. Mr Hart knows full well that company records must be kept (not least for tax purposes – e.g. in the event of a tax inspection). It is plain from the documents that Mr Hart has produced that historic bank statements exist. The suggestion that historic licences and leases were not kept is risibly untrue – of course they were kept as essential company records. Further there must have been documents relating to creditors and debtors as there must have been invoices from suppliers. In February 2018 Mr Hart said that there were handwritten ledger books kept; they have never been disclosed and cannot have simply disappeared. They were not left behind from Mrs Hart when Mr Hart vacated the business premises.

[35]The failure to provide those essential documents was a clear breach of his undertaking in the substantive order. I find that Mr Hart caused the office at Drakestown to be stripped out of records and documentation save to the very limited extent of the documents that were referred to in the above note that was left in the office for Mrs Hart. Blowing aside the smoke screen the only documents that Mrs Hart received were: i) two bank statements and ii) current licences and leases. How was she supposed to manage the company effectively or efficiently with that?

[36]First committal application - Alleging therefore that Mr Hart was in breach of the undertaking at paragraph 12 of the ancillary relief order of June 2015, Mrs Hart issued an application for his committal on 1st October 2015. In support of that application she had sworn an affidavit dated 24 September 2015 [C42] in which she contended that Mr Hart had taken no steps to assist with the transfer of Drakestown Properties Ltd to her and had ‘indeed done his utmost to frustrate my attempts to gain effective or even any management control’ of the company’. I have no doubt that is precisely what Mr Hart did do.

[37]At C46 Mrs Hart said: ‘it is my case that, at the very least, the undertaking required the respondent to provide:(i) a list of the occupiers of company property, particularising the basis of their occupation, and the quantum and current status of the payments they make in respect of their occupation;

(ii) a list of company employees and (if applicable) contractors, together with copies of the contract under which they work;

(iii) a list of third parties with whom the company has a contractual relationship;

(iv) details to enable me to operate the company bank accounts;

(v) a list of the creditors and debtors of the company;

(vi) particulars of any obligations which the company is under - for instance in respect of its repairing or insuring obligations;

(vii) sufficient information to enable me (or agents whom I may wish to appoint) to make contact with any of the people I have referred to above, and thereafter to carry on business with them’.

[38]Also, in her first affidavit, Mrs Hart stated that she had appointed agents to manage the company for her. The agents are called CP Bigwood and Mr Brian Bentley of that firm attempted to gather information relating to Drakestown. At C48 Mrs Hart alleges that ‘once the respondent realised whom Mr Bentley was, he barred him from entering the premises or from speaking to any of the occupiers, making threats that if anyone spoke to any occupiers he would get them thrown off site’. At C47 Mrs Hart also says that her solicitors wrote to Mr Hart on 7th July 2015 requesting copies of all service agreements in the name of the company; in her first affidavit she alleged, correctly, that Mr Hart had failed to provide any documents in response.

[39]24th February 2016 - Mr Hart and Mrs Byrne attended the resultant committal hearing on 24th February 2016. Mr Mitchell, acting for Mrs Hart, produced a list of information and documentation sought by Mrs Hart. After discussion, Mr Hart and Mrs Byrne agreed to provide that information. The order made that day is at page C8 of the bundle. By paragraph 3 of the order [C9] and also by agreement, Mrs Byrne and Halesowen Estates Ltd were joined to the proceedings by agreement.

[40]Paragraph 4 of the order of 24th February 2016 directed that Mr Hart, Mrs Byrne and Halesowen Estates Ltd should each file and serve an affidavit providing full details of 22 matters that are listed in the order [C9]. The order also specifically directed in paragraph 5 that ‘on or before 4 p.m. on 31st March 2016 the First Respondent, Third Respondent and Fourth Respondent are to deliver up to the Applicant such of the records as are currently in their possession, custody or control’; the word ‘records’ was expressly defined in the order as including ‘the accounting records, the Board records, the correspondence and those documents and records referred to in Paragraph 3(x) of this order’. The reference to 3(x) is a typographical error and plainly means 4(x) – see C10.

[41]The order of 24 February 2016 contained a number of relevant definitions beyond ‘the records’ which included: i) ‘the accounting records’ shall mean those records and documents which a company requires in order to compile its accounts including (but not limited to) those documents which companies are required to maintain and retain in order to satisfy the revenue authorities that its accounts are accurate and/or that it has deducted and/or remitted the appropriate amount of tax from its employees; ii) ‘the board records’ shall mean the documents and records recording the meetings and resolutions of the company and its board of directors; iii) ‘correspondence’ shall mean all written communications between the company and any third-party (including, but not limited to written communications between the company and the employees and or the contractors).

[42]A penal notice was attached to the order of 24th February 2016 [C8] and a direction was made for the hearing of a further directions appointment on 4th May 2016 to cover the eventuality that further enforcement steps might be needed [C11]. Mr Hart was directed to pay Mrs Hart’s costs of £15,000.

[43]Response to the order of 24th February 2016 - Mr Hart’s affidavit was dated 11th March 2016 [C1:79]; the affidavits sworn by Mrs Byrne (one on her own behalf [C1:90] and on behalf of Halesowen Estates Ltd [C1:93] were dated 17th March 2016. On 27th April 2016 the solicitors for Mrs Hart wrote separate letters to Mr Hart and Mrs Byrne expressing their opinion that Mr Hart and Mrs Byrne were in breach of the order of 24th February 2016 (the letter to Mr Hart is in the bundle at [3:1227] and that to Mrs Byrne is at [3:1234]0. The letters amount to a detailed explanation as to why the affidavits that had been sworn by Mr Hart and by Mrs Byrne were inadequate and also state:

‘paragraph 5 [i.e. of the order] required you to deliver up the Records (as defined). You have delivered nothing more than the limited and wholly inadequate documentation you left at the premises when you vacated on 11th November 2015’

. When I asked Mr Hart whether that was correct – that he had not produced any more information as a result of that order- he said that he thought that he had produced everything that he could. What Mr Hart said is simply not true, as his own statement of 22nd March 2017 shows. The affidavits that were produced were patently inadequate. Further, I accept Mr Mitchell’s point that the affidavits did not say that further documentation (e.g. historic licences as Mr Hart now suggests) had been left at the premises - if they had left more documents at Unit 55 they would have said so immediately.

[44]Mr Armstrong sought to suggest that the affidavits were, on the face of the terms of the order of 24th February 2016 and in the terms that they had produced, compliant with that order. He also sought to suggest that, by reference to Rule 37.17 of Family Procedure Rules 2010, that a committal application relating to the contents of the affidavit required leave of the court because it was ‘a committal application in relation to a false statement of truth’. I am afraid that I regard that submission, which was advanced without any prior notice to me or Mr Mitchell so that it could be researched, as totally misconceived. The committal on this aspect of the case arises through non-compliance with the order, not on the basis of falsity of a sworn statement. Mr Hart had been required to provide information and simply did not do so.

[45]Again, I am left in no doubt that Mr Hart acted in contemptuous disregard of the order of 24th February 2016.

[46]The £1.638m claim - On 4th May 2016 a hearing took place at which I was informed that solicitors called the Law Practice (who still act for Mr Hart) had written a letter, dated 22nd April 2016, claiming that Drakestown Properties Ltd owed over £1.638m to various companies with which Mr Hart and Mrs Byrne are closely associated and which are controlled by Mr Hart [2:826]. By paragraph 2 of the order I made an injunction forbidding Mr Hart, Mrs Byrne and Halesowen Ltd from making, pursuing or enforcing or in any way advancing any claims they may have against Drakestown Properties Ltd or causing or permitting any company of which they are a shareholder, director or shadow director to bring any such claims. As I will explain later in this judgment, it was known at the time of the hearing in May 2015 that Drakestown owed money to other companies but the sum claimed of £1.638m was about £500k more than was stated then.

[47]Attached to the letter of 22nd April were hundreds of pages of documents that, it is said, justified the claim that was being made against Mrs Hart by the companies that Mr Hart controls. I have no doubt at all that this claim was being driven by Mr Hart. Thus, when Mr Hart wanted to make a claim against Mrs Hart, it was possible for him to produce a very large amount of documents, including invoices, to support that claim in the way that he wished to advance it. It further shows that invoices are available and were kept within this corporate structure.

[48]Although the letter contained the deluge of documents, Mrs Hart has never been provided with a proper explanation of how the figure of £1.638 has been calculated and that puts Mr Hart in breach of the order of February 2016 since it is detail of a company creditor. How can Mrs Hart respond to the claim for such a large sum when it has never been properly explained? The timing of that demand was no mistake. I find that Mr Hart was attempting to put Mrs Hart under as much pressure as he could.

[49]Order of 4th May 2016 - On 4th May 2016 I directed that there should be a hearing on 10th June 2016 and extended time for compliance with the order of 24th February 2016 until 18th May 2016, without prejudice to the rights of the Respondents to argue that they had already complied with it. No further information was provided as a result of that order of 4th May.

[50]At C6 Mrs Hart says that, when she left court on 24 February 2016 she was hopeful that Mr Hart would produce the information that he had been ordered to provide. She contends that the affidavits that were then filed by the respondents were wholly inadequate and amounted to a ‘breach of virtually every provision of’ paragraphs 4 and 5 of the February order’. I have no doubt that she is right so to contend.

[51]VAT – as I have said, a particular difficulty arose in relation to VAT that was payable by Drakestown Properties Ltd. In relation to that, Mr Hart did produce a letter dated 27th July 2016 with a number of attachments (see 3-1242 – 3-1325). Two days after that letter was sent the hearing on 29th July 2016 took place at which Mr Hart was ordered to provide more VAT information [C17] but did not do so.

[52]At 3-1326 there is an important letter from Mrs Hart’s accountants, Phoenix Business Associates Ltd, explaining the deficiencies in the information concerning VAT. The accountants say: ‘in short, neither 30 November 2015 VAT return or the 31 December 2015 statutory accounts can be prepared until we have the following records from the previous directors/owners: 1. Detailed VAT workings for the quarter ended 28th of February 2015, including rental invoices and purchase invoices thereon; 2. Detailed VAT workings for the quarter ended 31 May 2015, including rental invoices and purchase invoices thereon; 3) detailed VAT workings for the quarter ended 31 August 2015 including rental invoices and purchase invoices thereon; 4) schedules of income, schedules of expenditure, rental invoices and purchase invoices for the period first September to 11 November 2015, to allow us to prepare 30 November 2015 VAT return. The VAT workings are not to be confused with the copy VAT returns, which we have. The workings give the breakdown of the figures on the VAT returns’.

[53]At 3-1328 there is a further letter from Mrs Hart’s accountants, dated 28th July 2016 (and therefore written before the hearing on 29th July 2016). The letter refers further to the deficiencies in the information relating to VAT and says: ‘I have compared the information recently provided by Mr Hart with the invoices accompanying the solicitors’ letter to Drakestown Properties Ltd dated 22 April 2016 (and said to evidence the claims by closely connected companies against Drakestown Properties Ltd). Having done so only served to heighten further my concerns about the record-keeping of Drakestown Properties Ltd, the transactions it is said to have entered into with other closely connected companies and the accuracy of its returns to HMRC. There are many instances of invoices which are used to support the claim against Drakestown Properties Ltd which do not feature in the VAT records and vice versa. In the absence of a complete set of records, I cannot begin to advise the company what properly should feature in its return to HMRC or to the extent to which (if at all) it is properly indebted to other companies’.

[54]At C12 Mrs Hart says this about the need for the order of 29th July 2016: ‘at court on 29 July 2016, amongst other things, I was concerned because HMRC had made it clear that they would take action against Drakestown Properties Ltd if I had not submitted the return for the quarter ending 30 November 2015 by 4 August 2016. The information which my accountant required to complete the return was explained to the court in the presence of the first and third respondents with reference to my accountant’s letter of 27 July 2016 exhibited pages 1326-1328. They readily agreed that that information/documentation was available to them (a concession which, I contend, is also evidence that there is a breach of the paragraph 5 of the order of 24 February 2016) and, after some persuasion, that they would produce it by 4 PM on 2 August 2016. In the event they have produced absolutely nothing. I have been provided with no information and no documentation. I exhibit at pages 1333 - 1345 the correspondence between my solicitors and the first respondent which followed from his failure to produce the required documentation and information by 2 August 2016 (as he had been ordered to do). As at the date of this affidavit, I confirm that no information or documentation has been received from the first respondent, third respondent or fourth respondent pursuant to paragraph 6 of the order of 29 July 2016… I contend that the failure to provide the information… by the due date, or at all, is malicious and wilful’.

[55]As part of the information that was provided on 22nd March 2017 Mr Hart produced some further information about VAT payments. At documents JH-1742 to 1746 there are details of two cheques that HMRC were told were paid by Drakestown. The payments suggested by those cheques were then entered into the VAT records – p1432. However, an inspection of the company bank account as disclosed does not show those cheques going through the account upon which the cheques were written – JH-142. The effect of this is that deductions were made from VAT (p1432) for purchases that were either never made or were never properly recorded. I am not able to say whether the cheques were forged (as Mr Mitchell suggested) but this does highlight just how much information Mrs Hart needs in relation to the company if she is now going to operate it effectively and how careful she has to be about accepting the information provided by Mr Hart.

[56]29th July 2016 - It was not until 29th July 2016 that the case came back before me; the order that I made that day is at C15. By then, therefore, Mrs Hart was saying that she lacked information that was necessary to complete the VAT returns for the company and, she said, she faced prosecution by HMRC. An order was made for the provision of further information which is set out in paragraph six of that order [C16]; paragraph 5(ii) of the order contained a recital that Mr Hart and Mrs Byrne confirmed that the documents in paragraph six were available and could be provided [C16]. Paragraph two of the order also recorded an undertaking by Mr Hart and Mrs Byrne that replaced the injunction of the order of 4th May 2016 (preventing the collateral attack on Drakestown Properties Ltd by the commencement of proceedings against it).

[57]When asked about this order during oral evidence on 22nd February 2018 Mr Hart accepted that he had not produced the information as ordered and suggested that he had been mistaken in saying that he could provide it. He suggested that he had provided all that he had. That is simply not true. At C17 the order required him to produce VAT input records and he did not do so – this was for the period when Mrs Hart had to file accounts for the company. Mr Hart accepted that to fail to keep VAT records would have been a criminal offence and he said that the company kept all appropriate records. He accepted that it is a requirement of VAT recording that evidence relating to inputs and outputs is kept (in the way that barristers, for instance, have to keep that information). I do not accept that Mr Hart could not provide the information sought and I do not accept that VAT returns were based only on bank statement entries (which, as disclosed, are an incomplete record of where funds have gone).

[58]The information under the July order was to be provided by 2nd August 2016. A penal notice was added to the order – C15 and I ordered Mr Hart to pay the costs of Mrs Hart which I assessed at £8,400 for the July hearing [C18] and £7,200 for the adjournment of a hearing that had been listed for hearing on 10th June 2016. He has not complied with that order and is in contemptuous disregard of it.

[59]Unsurprisingly, on 29th July 2016, I was informed that Mrs Hart intended to pursue a further application for the committal of Mr Hart and Mrs Byrne and breach proceedings against Halesowen Estates Ltd. Therefore, I gave directions that the particulars of breach were to be filed and served by Mrs Hart on or before 16th September 2016 [C16].

[60]Further, at the time of the order of 29th July 2016, Mr Hart had still not paid the lump sum of £273,000 plus interest. By paragraph 14 of the order of 25th June 2015 Mr Hart had been ordered to pay the sum plus interest by 1st June 2016. By paragraph 16 of the June 2015 order it was provided that, in default of payment of the lump sum by the due date, the Florida property, known as 9800 SW 110 Street, would be sold to release money to pay the sum and that Mrs Hart should have conduct of the sale.

[61]There is no excuse for Mr Hart’s failure to pay the lump sum on time. He is a man of considerable wealth, as I found at the substantive hearing and he has been left with the lion’s share of the parties’ assets. The protestations that he makes of being financially constrained are entirely false. He chose not to pay the lump sum.

[62]Therefore, by the July 2016 order Mr Hart was also required to take steps by 2nd September 2016 to enable Mrs Hart to market the Florida property if he had not paid the lump sum together with interest by 31st August 2016. Mrs Hart alleges that Mr Hart failed to provide Mrs Hart with a set of keys to the property and obstructed her attempts to market it; he finally paid the balance of the lump sum (due originally on 1st June 2016) in two tranches– the first payment, without interest, was made at the end of August 2016. The interest was only paid on 24th January 2017. Thus, technically, by not paying the interest and not handing over the keys to the Florida property he was in breach of the July order although Mr Hart applied to set aside the interest provision and I did not dismiss that application until January. On the scale of things, this failure to comply with the July order is a minor disobedience.

[63]Having been ordered to file the information by 2nd August 2016 Mr Hart emailed Mrs Hart’s legal team to seek more time saying:

‘it is unrealistic that I would be able to produce the required documents within such a short time span. I need time to go into the archives and get the required information. I would need till at least the end of August to comply with what is needed’

. He was given more time. When asked about this in evidence, Mr Hart said that there was no archive; by that he meant that he would have to go into his sister’s loft to see what information was there. If that had been the case it would not have taken until the end of August to carry out that exercise.

[64]This committal application - In support of her committal application, Mrs Hart filed a second affidavit which is at C1. She says that between the date upon which she gained possession of the premises (11 November 2015) and the hearing on 24 February 2016 no further information or documents relating to the company were provided to her. At C3 she says that, as a result she struggled to manage the company and goes on to list a number of specific difficulties that she had at C4. She refers to the breaches of the July 2016 order.

[65]Set aside application by Mr Hart - For some time since the making of the substantive order of 25th June 2015 Mr Hart had been suggesting that he had grounds to apply to set aside that order. After a hearing on 1st November 2016 Mr Hart made three applications - to delete the provision of interest on the lump sum in the order of June 2015, to strike out the committal application and to release a number of companies from undertakings [B13]. I dismissed each of those applications and directed that Mr Hart should pay the costs of Mrs Hart assessed at £6,031.20.

[66]The orders that are said to have been broken. The committal application at B1 cites the undertaking in the order of 25th June 2015 which I have set out above and other specific paragraphs of the orders of 24th February 2016 and 29th July 2016.

[67]In relation to the order of 24th February 2016 it cites paragraphs 4 and 5 as varied by paragraph 4 of the order of 4th May 2016. Paragraph 4 of the May order merely varied the time for compliance with paragraphs 4 and 5 of the February order from 31st March 2016 to 18th May 2016. Therefore, in their amended form, Paragraphs 4 and 5 of the February order provided [C9]: i) By paragraph 4: ‘On or before 4 p.m. on 18th May 2016 the first respondent, third respondent and fourth respondent shall each file and serve an affidavit providing full details of: [23 matters that are then set out at C9-11]’. ii) By paragraph 5: ‘on or before 4 p.m. on 18th May 2016 the first respondent, third respondent and fourth respondent is to deliver up to the applicant such of the records as are currently in their possession, custody or control’.

[68]In relation to the order of 29th July 2016 the committal application cites paragraphs six and eight. Paragraph six provided that the first respondent, third respondent and fourth respondent were to provide specific documentation that is then set out at C17. Paragraph eight of the order relates to the keys to the Florida property and other aspects of the proposed sale of it.

[69]The application at B2 contends that Mr Hart is in breach of the undertaking given on 25th June 2015 and of each of the above paragraphs of the orders of 24th February 2016 and 29th July 2016. It contends that Mrs Byrne is in breach of paragraphs 4 and 5 of the order of 24th February 2016 (as varied by the May order) and paragraph 6 of the order of 29th of July 2016. It alleges that Halesowen Estates Ltd is in breach of paragraphs 4 and 5 of the order of 24th February 2016, as varied, and of paragraph 6 of the order of 29th of July 2016.

[70]Rates - Mrs Hart says, rightly, that, due to the lack of information about historic licences, she has not been able to defend a claim by Sandwell Council for arrears of rates on the company units and she has had to pay £4,971 p.m. for 12 months - £59,652 in total – for an historic liability that arose prior to when she took over Drakestown. The liability had not featured previously in the statutory accounts of the company and so she had not known about it before taking the company over. Mr Hart suggested that a defence to that action would have been that someone else was liable for those rates (i.e. the tenant) however he has not provided her with documentation that allows her to defend the claim (i.e. the historical lease / licence), and, as a result, the company itself had to pay the rates.

[71]Accounting records - I do not accept that the records were only kept ‘by hand’ as suggested by Mr Hart at 1-79 and also in his oral evidence on 22nd February 2018. In his own statement dated 3rd March 2017 he said that figures were ‘entered into a Sage accounting system and sent to Drakestown Properties Ltd…. the licence for that programme has since expired and has been disposed of. A new Sage programme was adopted and a transfer of old data did not take place. I no longer have access to the information entered into the system’. I do not believe for a moment that, if one accounting system expired, the whole of the company records would have been lost. I regard it as inconceivable that this loss of data would have occurred and, if it did, Mr Hart would have stated that very clearly indeed from the start. Even if that were true (which it isn’t) the material that would have been used to enter information onto the Sage programme must have existed; he said that he did not know where it was. The only places that the information can be must be in the offices of one of the other companies controlled by Mr Hart, in the possession of Mr Hart, in the possession of Mrs Byrne or with some agent of the company (e.g. accountants). Wherever they are Mr Hart could have obtained them if he wanted to.

[72]Mr Hart was asked how Halesowen accounted to Drakestown for money that it collected. What records were kept (not least so that accounts for both companies could be drawn up)? He said:

‘You can find it in the bank statements’

. The bank statements are those of Halesowen Estates that can be found at JH-162 onwards. The entries in those bank statements that are not redacted are those which relate to rent paid. Although he said that there were no cash payments [1-80] for rent, that was not correct [JH-210 and JH-356]. But, more importantly, Mrs Hart has calculated (and Mr Trevis, counsel for Mr Hart agreed) the receipts in to Halesowen Estates account total £258,455 for 1st January to 31st December 2013. The rent received in the accounts for that period can be seen at JH-1187 - £362,699. Therefore, Mr Hart was asked, where did the rest of the money received go? He said that he did not know the explanation for the shortfall. The shortfall is greater than might appear from the figures because the figure of £258,455 would include the VAT (of about £51,691) that was paid whereas the figure of £362,699 would not include VAT. Asked: ‘where is the rest of the income?’ he could not explain it. Further, the 2013 rent received figure was in fact lower than the 2012 rent received figure (JH-1187). The figures for rent received were 2012 – 396,795, 2011 – 420,035, 2010 (audited) 456,217. Therefore, says Mrs Hart, where has the rest of the money gone? There is no satisfactory answer from Mr Hart about this. This is a significant amount of money (about £150k over a year in 2013) and cannot simply have disappeared. It must have gone somewhere, and Mr Hart has not explained this. It suggests that there was some arrangement that Mr Hart had for the payment of rent from Drakestown units elsewhere and that incomplete records have not been provided as ordered.

[73]The above issue (£258,455 cf £362,699) created some heated debate in closing submissions with Mr Armstrong submitting that the alleged non-disclosure could not possibly have been established to the criminal standard and, therefore the issue should be ignored. I do not accept his analysis. This is not an issue about whether there is more money in the pot. It is an issue about whether Mr Hart has provided the information that he was ordered to produce. The bank and rent invoice records are not adequate and this is an example of just how unreliable they are. There is no explanation about where about £150,000 went.

[74]There was another issue that arose in March 2017 in relation to the records. Mr Hart was asked when giving evidence to look at 3-1316 – it shows the rental income that was received and, therefore, it should be possible to see the entries on that page being paid into the bank. Mrs Hart’s accountant has been through that page and found that out of 37 entries there he can only account for 18 payments into the bank account. Mr Hart was asked to look at the bank account at JH-614 and it is plain that some rent received could not be seen going into the redacted bank account statements that have been disclosed. In closing Mr Armstrong said that the exercise carried by Mrs Hart’s accountant was incorrect because some of the entries in the unredacted bank statements (which he had seen) would account for these payments. I think that it is very unfortunate that this arose in closing speeches in the way that it did (bearing in mind that it related to evidence that was given eleven months before). However, I do not feel confident about making findings in relation to this point.

[75]Particulars of breach - at C 19 there is a 23-page document setting out the particulars of alleged breaches relied upon by Mrs Hart. The document begins by setting out the terms of the orders allegedly broken and then goes on to set out alleged breaches which I have summarised in the tables below (the ‘company’ is Drakestown Properties Ltd). I have condensed it into a table later in this judgment.

[76]The March hearings –The committal application was eventually listed to take place on 6th March 2017. At 17.52 on the last working day before the hearing (Friday 3rd March), Mr Hart produced an affidavit. Of course, he was under no compulsion to file anything in response to the committal application, but his timing is very difficult to understand– the hearing has been listed for four months.

[77]At 16.53 on that same Friday I was sent a position statement by Ms Seddon, who was the instructed as counsel for Mr Hart, which she was candid enough to describe as a holding position and which included the following:• The 1st, 3rd & 4th Respondents have complied with the order of the court on 24th February 2016 and filed Affidavits setting out the details requested. If those details are insufficient for the Applicant to conduct the efficient and effective management of Drakestown Properties Ltd and its assets, then they will provide any further details (if they are able) to enable her to do so.

• They regret that the details presently provided are insufficient as they believed they were sufficient.

• In compliance with the order they have organised a meeting between the company accountants employed when the 1st Respondent was managing the company with the accountants presently employed by the Applicant. They understood that during that meeting, information requested was provided or was to be provided and since has been provided.

• The 1st, 3rd & 4th Respondents are willing to provide information to enable the Applicant to complete her tax return for the company during the tax year in which the 1st Respondent was in charge for some part of that year (2015/2016). Information before that time is unreasonable and not proportionate as audited tax returns have been filed and accepted by H.M.R.C. for tax years 2014/2015.

• The 1st, 3rd & 4th Respondents are willing to provide information to enable the Applicant to complete VAT returns from the time the 1st Respondent filed the last return until the Applicant took over management of the company.

• Information prior to this return is not reasonable or proportionate.

• There is no impending tax enquiry nor any known likelihood of there being one. Thus, information during the time when the 1st Respondent managed the company to enable him to file tax returns and VAT returns on behalf of the company is not needed by the Applicant, nor is it reasonable and proportionate to request such information.

[78]Having spent a long time reading the papers before the commencement of the hearing on 6th March and having looked further into the case overnight after the adjournment that day, I prepared a list of documents and information that, it seemed very clearly, had not been produced by the Respondents. My intention was to make very sure that there was no doubt about what it was being said had not been produced (i.e. to make sure that Mr Hart knew in one clear list exactly which documents Mrs Hart was alleging had not been disclosed).

[79]At the hearing on 6th March 2017 it became apparent very quickly that Mr Hart had failed to instruct counsel, Ms Seddon, adequately. That led to the adjournment of the hearing on 7th March 2017. I relisted the case to continue part heard on 27th and 28th March 2017 and then received email applications from Mr Hart for adjournment which I refused. He then instructed different counsel, Mr Trevis, on Friday 24th March 2017.

[80]The order of 7th March 2017 is important because it lists documents that Mr Hart agreed to provide (based on the list that I had distributed) and which he plainly should have provided before in compliance with his undertaking and the orders of 24th February and 29th July.

[81]The list that was produced by Ms Seddon and Mr Mitchell was agreed without admission from Mr Hart that it represented an acceptance of past breach; that said, it is obvious that this information should have been provided before and its absence was a clear breach of the requirements on Mr Hart. By the list it was agreed that the following information would be provided: i) A list of all bank accounts owned or operated by the Company between 1st January 2010 and 11th November 2015 (to all include all bank accounts used by the Fourth Respondent to receive or pay monies as agent of the company) together with a complete set of statements for the period between 1st January 2010 and 11th November 2015 for each account listed; ii) The Company’s accounting records for the period from 1st January 2010 to 11th November 2015; iii) The Company’s VAT records (to include the supporting records and workings) for the period from 1st January 2010 to 11th November 2015; iv) The Company’s Insurance records (and specifically those items referred to in the letter dated 29th April 2016 from Irwin Mitchell to the First Respondent); v) The leases and licences entered into by the Company in the period from 1st January 2010 to 11th November 2015; vi) Details of deposits paid and deposits returned in respect of the leases/licences of the Company’s premises in the period from 1st January 2010 to 11th November 2015 (to include evidence of the bank account or accounts into which the deposits were paid and/or from which they were returned); vii) Notices to and/from the Company’s tenants and licensees for the period from 1st January 2010 to 11th November 2015; viii) Correspondence with the Company’s tenants, insurers, accountants and other companies with which the Company was in a contractual relationship at any time in the period from 1st January 2010 to 11th November 2015; ix) Correspondence and contractual arrangements with security companies and staff employed by or for the benefit of the Company; x) Communications with HMRC relating to the Company for the period from 1st January 2010 to 11th November 2015; xi) Records of the Company’s cash receipts and payments for the period from 1st January 2010 to 11th November 2015; xii) All documents in which can be found the Company’s debtors and creditors for the period from 1st January 2010 to 11th November 2015; xiii) All documentation relating to the claim for £1.638 million, including the basis of the management charges paid by the Company to Halesowen Estates Ltd and a copy of the ledger in which all transactions undertaken by Halesowen Estates (or any other group undertaking) on behalf of Drakestown Properties Ltd are recorded; xiv) A list of all contractors – all people with whom the company has been in a contractual relationship – and invoices and receipts arising from the goods and/or services supplied to the Company by or to those persons in the period from 1st January 2010 to 11th November 2015; xv) Details of how Halesowen Estates Ltd accounted to the Company for rents received (to include copies of statements for all accounts into which rent monies were received (statements may be redacted so as to protect non-Drakestown transactions)); xvi) All communications with Sandwell BC and Walsall BC (including, but not limited to) all demands for rates, communications concerning void rates and evidence of payment of rates; xvii) Documents numbered 1, 2 and 4 in the letter from Irwin Mitchell to the First Respondent dated 14th December 2016.

[82]On 22nd March 2017 Mr Hart filed a statement in purported compliance with the order of 7th March. With it came four lever arch files of documents that could and should have been disclosed before. Mr Hart said in evidence that the documentation in the four lever arch files that accompany the statement came from King and King, the accountants. I do not accept that explanation. Mr Parkar had said that the documentation that was held by the accountants was returned to the company after the accounts were prepared; therefore, it did not come from them. Mr Hart said that bank statements had been obtained directly from Lloyds bank.

[83]I wish to take each head in turn: i) Bank statements have now been produced for the period requested. However, it is obvious that these statements could and should have been produced previously (i.e. they were available). Bank statements were essential to the preparation of the 2014 and 2015 accounts and Mr Hart must have known that. There is no answer at all as to why they were not produced earlier. ii) Accounting records have been produced for the period from 1st January 2010 to 31st December 2014. Again, there is no reason why those should not have been produced earlier. In his statement Mr Hart says that there was a meeting between accountants on 14th November 2016 in which it was suggested that Phoenix (Mrs Hart’s accountants) had all the information necessary to prepare VAT returns for the quarter ended 31st November 2015 and for the accounts for the year ending 31st December 2015. Quite simply, that is not the case. The accounts for the year ending 31st December 2015 could not be prepared on the then current information. If there was information that could be produced in relation to the accounts up to 31st December 2014 then there must be information for the accounting period that followed. Therefore, information in relation to that later period could and should have been produced but it was not. iii) VAT records have now been produced for the period 1st January 2010 to 11th November 2015. Those records could and should have been produced earlier. Evidence to support inputs and outputs has not been produced however and must have been retained. iv) Details of only one historic insurer have been given and, as a result, Mrs Hart has been unable to make insurance claims in relation to subsidence in some of the units (this has been a very long running issue and so Mr Hart has known for a long time that Mrs Hart needs these insurance details). The letter from Irwin Mitchell to Mr Hart at 3-1232 deals with the subsidence claim and sets out three categories of documents that were sought from Mr Hart in relation to it - i) detailed copies of maintenance records going since 2006: ii) details of any previous substance claims; and iii) the previous policy inception date. The same enquiries were made of Mrs Byrne - 3-1239. The information has not been provided. The difficulty that this has created for Mrs Hart is clearly stated in the letter at 3-1232:

‘Our client has recently discovered that part of the estate at Queens Court is affected by subsidence. She has claimed against her insurance policy but the claim is currently being resisted because (say the insurers) it is historic, and either has been the subject of a claim or should have been.’

On 22nd February 2018 Mrs Hart gave evidence about the particular difficulties with subsidence that have affected Units 19 and 20. v) Historic leases and licences have not been produced because, Mr Hart says, they have not been retained. I do not believe him. Of course, historic leases and licences must have been retained, as I have already set out.

[84]On 28th March 2017 Mr Hart was giving evidence for a long time and, by about four o’clock, was plainly exhausted [p85 of the transcript]. The hearing could not proceed and, therefore, it was adjourned part heard. I therefore suggested that time should be taken to agree the information that was still outstanding and to record it in writing [p90 of the transcript of 28th March]. I said this: ‘Therefore, once again an opportunity presents itself for Mr Hart and Ms Byrne to put right any deficiencies in the information that they have provided. That would not answer any contempt that has occurred, but it would certainly be a point that would be highly relevant to any issues of mitigation and it would also, I am sure, influence Mrs Hart and her advisors as to whether they wish to pursue to the final straw every aspect of the committal applications that they have brought. What I am therefore going to suggest is that some time is taken now…to tidy up what is outstanding still by way of information and if Mr Hart and Mrs Byrne get this wrong they know what is coming’.

[85]Following the hearing there were discussions between counsel and a list was drawn up [C18] by which counsel agreed that, if the information recorded in that documents was produced, Mrs Hart would not purse her committal application. It has not been produced. Unfortunately, the order adjourning the hearing was never drawn up. Mr Armstrong then became instructed but due to his other commitments a hearing in July 2017 had to be adjourned and the case could not be relisted until 22nd February 2018.

[86]22nd February 2018 - Mr Hart completed his evidence. I have referred to much of it already, but things descended to an absurd level when Mr Hart said that there were no notices relating to tenants and there are no ledgers about the movement of money between the companies within this corporate structure. I do not believe that for a moment. There must have been some notices given to tenants (e.g. at the expiration of licences) and there must be records of how money moved between the companies because, without it, accounts could not be prepared, VAT returns could not be prepared and there could be no financial control of the companies.

[87]Mr Hart accepted that Mrs Hart does not have the documents to track or understand the movement of moneys between Drakestown Properties Ltd and other companies in the company structure. He agreed that the bills of Drakestown Properties were paid by other companies in the structure, but Mrs Hart has not been provided with information to explain the flow of funds. Plainly, she should not have been in that position and Mr Hart could and should have provided the information about it.

[88]Tables - In order to make some sense of the amount of material and allegations I created three tables at the hearing in March 2017 and released them to counsel. I will set them out now and state my conclusions about breach within them so that matters are clear. The table is necessarily an abbreviation of a large amount of material and, in the light of submissions that Mr Armstrong made, it is necessary for anybody reading this judgment to look at the full terms of alleged breaches when considering the nature of the breaches alleged. Of course the time for deciding whether the contempt has been established is the time that the committal application was made but I also want to set out whether breaches have been remedied since (and have therefore created a column about that).

[89]The table relating to the order of 24th February 2016, which by amendment set the date for compliance at 18th May 2016 is as follows: Para. number in schedule of breaches (they begin at para 10) Para. of order Requirement of order (some words are specifically defined in the orders and they are in inverted commas). Alleged breach as at date of committal application (15.9.2016). Is the breach proved? Info. produced since? Mr Hart 10(i) Para 4 (i) Full details of the procedures by which the ‘company’ maintained ‘accounting records’. No meaningful information provided. Yes. The affidavits that were filed by Mr Hart and Mrs Byrne in March 2016 were manifestly inadequate and failed to give any reliable details (see para 2). There was a correct letter, dated 27th April 2016, from Irwin Mitchell explaining the default [3-1227]. The extension of time [p13 File 1] produced nothing. Only in part. Contradictory evidence given by H: i) told kept by accountants; ii) then kept by staff; iii) kept in book ledgers; iv) kept in computer records. 10

(ii) Para 4 (xii) of 24.2.16 Full details of the current whereabouts of the ‘records’, the ‘board records’ and ‘the correspondence’. Past leases and licences, documents recording payments from occupants, documents recording payments made or due to the company, documents recording payments made or due from the company and terms of contractual relationships between the company and any third-party not produced. Yes. No credible evidence has been given. 10

(iii) Para 4(xvi) Full details of the means by which Halesowen Estates Ltd accounted to the company for the monies received or paid by it on the company’s behalf. Information not provided – see 1-80. Yes. Bank account statements not produced until March 2017. No credible evidence given as to whether this is the only bank account used for collection of rent. Yes, in part. Records incomplete. 10

(iv) Para 4 (xxv) Full details of the means by which Halesowen Estates Ltd accounted to the company for the monies received or paid by it on the company’s behalf. Information not provided, see 1-80. In particular information as to: a) the method by which Halesowen Estates Ltd and the company maintains their records and exchanged information so as to enable each to know what was due and owing as between them at any time and b) the means by which Halesowen Estates Ltd made payment to and received payment from the company. Yes. No credible evidence given. Yes. 10

(v) Para 4 (xxvi) The identity of the bank account or accounts used by the company. Failed to identify the account or accounts used by Halesowen Estates Ltd to receive or pay monies on behalf of the company. Yes. The bank account records are not complete. Disclosure not given until March 2017 but no satisfactory information about where money went. Yes. 10 (xvi) Para 4 (xxvii) A complete list of the ‘records’ which were in his possession, custody or control as at 4 p.m. on 22 July 2015 and, in each case, the current location of each such record. Failed to produce the information required. Yes. Yes. No credible evidence given. 10 (xvii) Para 5 Deliver up to Mrs Hart such of the ‘records’ as were then in his possession, custody or control. Failed to produce the information required. In particular has not delivered to Mrs Hart: a) a complete set of the bank statements of the company; b) a complete set of the historic leases and licences of the company’s property; c) any rent book or ledger; d) the accounting records prepared by hand by Wendy Fletcher; e) a complete set of the accounting records of the company; f) a complete set of the correspondence of the company. Yes. Yes.

[90]In relation to the order of 29th July 2016, for which the date of compliance was 2nd August 2016, the table is as follows: Paragraph of order Requirement of order (some words are specifically defined in the orders and they are in inverted commas). Alleged breach as at time of committal application on 15th September 2016. Is the breach proved? Has the information been provided since the committal application? Allegations against Mr Hart 17 Para 6 i) produce to Mrs Hart the underlying rental invoices and purchase invoices to support the input VAT claimed on invoices from Ryan Estates Ltd, Sandwell Developments Ltd and Kidderminster Properties Ltd for the period 1.9.15 to 11.11.15 ii) produce to Mrs Hart the purchase invoices and rental invoices for the company for the period 1.9.15 to 11.11.15. iii) disclose to Mrs Hart the identity of the entity or entities: a) to whom the rental income of the company was paid; b) who paid the purchase invoices from Ryan Estates Ltd, Sandwell Developments Ltd and Kidderminster Properties Ltd; for the period 1.9.15 to 11.11.15. Information not provided Yes. These at (i) and (ii) have never been provided. (iii)(a) not proved – the answer he gives is Halesowen Estates. (iii)

(b) Proved. Information never given. Yes. 18 Para 8 i) provide to Mrs Hart a set of keys to the Florida property by 4 p.m. on 2.9.16. or at all. ii) afford Mrs Hart and any realtor appointed by her to market the Florida property, free (or any) access to it for the purpose of marketing or selling it. Not complied with. Yes. But lump sum paid just in time. Breach relates only to the non-payment of interest and Mr Hart had applied to set aside interest provision. No.

[91]In relation to the undertaking given in the order of 25th June 2015, the allegations relate, of course, to Mr Hart only and the table is as follows: Paragraph of document setting out alleged breaches. Paragraph of order Requirement of undertaking Alleged breach Is the breach proved? 22. Para 12 of the order of 25.6.2015 Take all steps necessary (including, for the avoidance of doubt, the provision of information and documentation and the notification of third parties of the cessation of his interest in the company) to ensure that the Applicant is forthwith hereafter able to conduct the efficient and effective management of the company and its assets’. The applicant contends that this undertaking obliged Mr Hart to produce promptly on demand, and independent of the February order, May order and July order, the records, accounting records, board records and correspondence for the company. The failure of Mr Hart to produce any of those documents is a breach of his undertaking independent of and separate to his breaches of the February order, May order and July order as set out and particularised above’. Yes. As set out in the narrative of this judgment. Multi-facetted breach. Each aspect of the information sought was necessary for the efficient and effective management of the company.

[92]Conclusion – I am satisfied so that I am sure that Mrs Hart has proved with ease that Mr Hart has acted in contemptuous disregard of the undertaking that is recorded in the substantive order and of the orders dated 24th February 2016 and 29th July 2016 as set out in the tables above. I have no doubt at all that Mr Hart has had it in his power to produce the information that he has been required to give and to remedy the contempt that he has committed. He has chosen not to do so. It is not for me to try to guess where the records are now.

[93]As to the level of contempt I find: i) Mr Hart’s contempt was persistent and continued from the time of his undertaking to the time of the committal application. Since that application he has only remedied his contempt in part (as shown in the tables). ii) During the course of his oral evidence in March 2017 and February 2018 he gave untruthful evidence on many issues in an attempt to conceal his contempt. iii) He has shown no remorse about his failure to comply with his undertaking or with the two enforcement orders. iv) His contempt has been motivated by a wish to demonstrate his resentment against Mrs Hart about the financial orders that were made in these proceedings in her favour. He has sought, deliberately, to obstruct her in the efficient running of the company. v) His contemptuous actions have brought very significant pressure and expense upon Mrs Hart, as he intended they should.

[94]Within the context of financial proceedings I therefore regard Mr Hart’s contempt as extremely serious. I give forewarning that my current very clear opinion is that a substantial and immediate sentence must be imposed either by way of a significant term of imprisonment, a significant financial penalty or both.

[95]Whilst typing this judgment I have been informed that Mr Hart concedes that he must pay the costs of these committal proceedings. I agree.

[96]I will now adjourn to hear submissions about sentence and I will hear submissions about that on another day, together with any submissions that are advanced on behalf of Mrs Byrne and Halesowen Estates Ltd as to their respective positions. HHJ Stephen Wildblood QC 23rd February 2018

Cited in 1 later judgment

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