Two significant contempt applications for breach of a court order or an undertaking given to the Court have been determined in the last 18 months:
- That brought by the four Business Mortgage Finance PLCs (“BMF”) against former banker, Rizwan Hussain (where a contempt based on multiple breaches of injunction was established and upheld on appeal) which was heard before Miles J at first instance (“BMF Liability”) and then before the Court of Appeal (“BMF Appeal”);[1] and
- That brought by Navigator Equities Limited and Vladimir Chernukhin against Oleg Deripaska (where breach of undertaking was alleged but HHJ Pelling KC (sitting as a Judge of the High Court) found in Mr Deripaska’s favour on liability at the recent trial) (“Deripaska”).[2]
Anna Dilnot KC and Alexander Riddiford represented BMF and Anna Dilnot KC and Katherine Ratcliffe represented Deripaska in the above litigation.
These cases raised a number of common and lesser-known procedural traps, as well as some more technical issues arising in relation to sanction and appeal, including the following which should be borne in mind by prospective applicants. This article is a summary of the more detailed work accompanying the talk.
a. Application notice
What must be pleaded in a contempt application is what the defendant needs to know to be able to defend himself: Deripaska at [45]. Unlike ordinary commercial cases, the applicant absolutely cannot go beyond the four corners of the application notice (including the ‘charge sheet’ annexed thereto) and must confine itself solely to the contempts actually alleged in the notice.[3] Late shifts in case will not be tolerated, and defendants should not be shy about taking the point.
Where foreign law is to be relied upon to make good a central allegation in the claimant’s case as set out in the application notice, at the very least the claimant should identify succinctly in the application notice what law (and which provision) is relied upon and what its effect is alleged to be: Deripaska at [45]. Often expert evidence will also be required because for contempt applications heightened standards of procedural fairness must be observed and the Court must be satisfied to the criminal standard that the case advanced has been made out: Deripaska at [46].
b. Burden of proof
A claimant must prove its case to the criminal standard (beyond reasonable doubt i.e. so that the Court is ‘sure’), rather than the civil standard (balance of probabilities), in respect of each of the basic elements which fall to be established on a contempt application: the defendant (1) knew the terms of the order (2) acted (or failed to act) in a manner involving breach of the order and (3) knew of the facts making their conduct a breach. The difficulty involved in meeting the criminal standard should be appreciated (and respected) at the outset.
The BMF case was based wholly or mainly on circumstantial evidence. Naturally, given the criminal standard of proof, a contempt application with this feature faces a high evidential hurdle. In a case based wholly or primarily on circumstantial evidence, the Court must assess the evidence cumulatively rather than in a piecemeal fashion (see the BMF Appeal [114], [116]).
The criminal standard of proof also has a part to play in certain discrete procedural contexts. For example, in the context of the Court’s power to dispense with service of the order alleged to have been breached, the test is, in essence, whether the Court is satisfied beyond reasonable doubt that the defendant was aware of the terms of the Order when they breached it. The test is expressed in terms of whether ‘injustice’ has been caused to the defendant by the claimant’s failure to effect personal service (BMF Liability, at [58]). However, as Nugee LJ held in BMF Appeal at [82], that test will in practice be satisfied whenever the Court is satisfied, beyond reasonable doubt, that the defendant “had actual knowledge of [the order’s] terms before the dates of the alleged breaches”.
c. Tone of the evidence
The Deripaska contempt application was originally struck out by Andrew Baker J in 2020 as an abuse of process and on the basis that the claimants had brought it in an aggressive and partisan fashion ([2020] EWHC 1798 (Comm) at [159]). The order striking out the contempt application was overturned by the Court of Appeal ([2021] EWCA Civ 1799 at [132]).
When the Deripaska matter returned to the Commercial Court for trial, HHJ Pelling KC took a similar view to Andrew Baker J about the tone and content of the claimants’ affidavit evidence. Following the dismissal of the contempt application, the Court ordered the claimants to pay indemnity costs in relation to the contents of the affidavit evidence filed in support.
Therefore, while various commentators have interpreted the judgment of the Court of Appeal as taking a more relaxed view of the tone of evidence in support than had Andrew Baker J, that interpretation (a) is not supported by the Court of Appeal’s judgment and (b) cannot stand in view of the indemnity cost order at trial. Claimants need to be careful therefore that the tone of the evidence remains even-handed and moderate; avoid in particular describing anything as “flagrant”; and be careful when describing the defendant, particularly when using findings made by other courts when seeking to undermine credibility. In any event, findings made by judges in other cases and procedural contexts are likely to be of very limited relevance, if any, on a contempt application.
d. Other procedural pitfalls
There are numerous other procedural traps particular to contempt applications, or of particular significance in this context. Those featuring prominently in the BMF case included the following:
- Personal service of the contempt application: personal service of the application is required, but CPR 81.5(1) provides that the Court may dispense with personal service or, as occurred in the BMF case a few months before trial,[4] permit alternative service “in accordance with Part 6”. Alternatively, where a legal representative for the defendant is on the record in the proceedings in which, or in connection with which, an alleged contempt is committed, the contempt application and evidence in support may be served on the representative for the defendant “unless the representative objects in writing within seven days of receipt of the application and evidence in support” (CPR 81.5(2)).
- Personal service of the injunction: even more fundamental, since this topic goes to the first limb of the substantive test on a contempt application based on a breach of injunction (see above), is that an injunction alleged to have been breached must have been personally served on the defendant prior to breach. However, as confirmed in BMF, the Court retains the power to dispense with personal service, including retrospectively at trial, if satisfied beyond reasonable doubt that the defendant was on notice of the injunction and its terms at the date of breach (see BMF Appeal, [71], [79]). It is prudent for a claimant who cannot effect personal service to build up an evidential picture of alternative methods of service and/or other evidence that the defendant was on actual notice of the injunction at the time of breach which will satisfy the Court at trial, beyond reasonable doubt, that the defendant was indeed on notice of the injunction at the relevant time.
- Independent legal advice/legal aid: it is also advisable for claimants, in any case where the defendant is not legally represented, to advise the defendant in every letter to seek independent legal advice and that the defendant may have a right to Legal Aid. The fact that the claimants in BMF had assiduously followed this course in correspondence over a period of several months, avoided adjournment of the trial when the defendant sought legal representation and legal aid for the first time at the start of the trial.
e. Bench warrants
A bench warrant under CPR 81.7(2) is potentially a very useful tool for securing the attendance of a defendant at trial (or indeed at any point of the committal process), and can be made on or without notice. Bench warrants will only be granted where ‘necessary’,[5] however, and are very much the exception rather than the rule.
The events leading up to the trial in the BMF matter show the lengths a claimant may need to go to in order to preserve confidentiality in the application for a warrant. In that case the claimants’ strategy depended on proceeding without notice, given that the defendant was evasive and a known flight risk. The claimants lodged their application (by e-filing as instructed) and indicated clearly that the matter was without notice and that the application was strictly confidential; however, despite that (and other measures taken to preserve confidentiality), the Court office inadvertently placed the application on the open Court file, such that it was immediately picked up by the defendant (who had set up alerts for new filings in the matter). The error enabled the defendant to attend the hearing of the application (remotely) and to give the Court all manner of (entirely false) assurances so as to avoid the issuing of the bench warrant. Subsequently he shook off the claimants’ surveillance, gave false information as to his whereabouts, and then refused to attend trial or disclose his whereabouts to the Court. Miles J then duly issued a bench warrant, and subsequently a further warrant for forced entry at a specified address (where the defendant was believed to be located); but by that point it was too late.
f. Sentence/appeal
Any individual found to be in contempt has an automatic right to appeal on both liability and sentence (the position on liability being confined by the Court of Appeal in BMF). Appeals on interlocutory matters, or by corporate defendants, require permission.
As to sentence, it is critical for a claimant to be clear, before issuing a contempt application, what are the limits of the sanctions that can be imposed even if the application is successful. Imprisonment is not the only option and will only be granted where the custody threshold is passed (and even then a sentence can be suspended).
It was argued on behalf of the contemnor in BMF (both at first instance and on appeal), that the Claimants had acted improperly in positively seeking the maximum sentence, which is 2 years imprisonment (having regard to the Claimants’ ‘quasi-prosecutorial’ role[6]). BMF resisted the allegation on the basis of the reasoning of the Court of Appeal in Deripaska by which that Court rejected the notion that an applicant was obliged to pursue a contempt application as a disinterested quasi-prosecutor. That submission was accepted by Miles J and the Court of Appeal, with Arnold LJ concluding (BMF Appeal, at [131]) that “there was nothing improper in the Issuers suggesting to the judge that the maximum sentence be imposed”.
In reality, however, the contemnor will only ever serve a maximum of half of the prison sentence imposed because they are entitled to automatic release without conditions after serving half of that time (section 258 of the Criminal Justice Act 2003).
Written by Anna Dilnot KC, Alexander Riddiford and Katherine Ratcliffe.
[1] See in particular (i) Miles J’s rulings at first instance: [2022] EWHC 449 (Ch) (“BMF Liability”); and [2022] EWHC 661 (Ch) (“BMF Sanction”) (there are also several interlocutory decisions on e.g. alternative service, recusal and extensions to the general civil restraint order jurisdiction); and (ii) the Court of Appeal’s dismissal of appeal on liability and sanction: [2023] 1 W.L.R. 396 (“BMF Appeal”).
[2] [2023] EWHC 788 (Comm).
[3] Re L (A Child) [2016] EWCA Civ 173 at [75(iii)]; Kea Investments Limited v Watson [2020] EWHC 2599 (Ch) at [220].
[4] [2021] EWHC 2766 (Ch), at [40]-[45], applying the principles set out by Popplewell J in Générale v Goldas [2017] EWHC 667 (Comm) under CPR 6.15/ 6.27.
[5] Hanson v Carlino [2019] EWHC 1399 (Ch).
[6] Per Nicklin J in Oliver v Shaikh [2020] EWHC 2658 (QB) at [16].
This note is provided free of charge as a matter of information only. It is not intended to constitute, nor should it be relied upon as constituting, legal advice, and no responsibility is assumed in relation to the accuracy of the contents of the same as regards anyone choosing to rely upon it.
