This post reports on several recent decisions regarding the circumstances in which a company's directors and officers can be committed for contempt, and the steps needed to pursue committal proceedings.
- Directors and officers can still be committed for breach of orders made against a body corporate
- When can breach of disclosure orders be punishable as contempt?
- Penal notices must be attached to the order approved by the court, not added later
- High Court dispenses with Hague Service Convention requirements and allows email service of a committal application in Ukraine
1. Directors and officers can still be committed for breach of orders made against a body corporate
A recent High Court decision has answered an important question that had arisen following the October 2020 revamp of the procedural rules governing contempt in civil proceedings, in CPR Part 81 (Olympic Council of Asia v Novans Jets LLP and others [2023] EWHC 276).
The new Part 81 includes provision for contempt proceedings to be brought against directors or officers of a body corporate (CPR 81.2). However, there is no wording replicating a previous Part 81 provision expressly providing that corporate officers could be committed for breach of an order made against a body corporate.
This caused some concern as to whether that important power had been removed by the rule change, particularly given the legislative clarity that is usually required in order to make individuals susceptible to criminal punishment.
Mr Justice Foxton addressed this issue in the context of contempt proceedings against a Limited Liability Partnership (LLP), and an individual defendant as the guiding mind of the LLP, for breach of court orders.
He noted that the new rules expressly stated that they did not alter the substantive law of contempt, but also observed that it was not entirely clear whether this provision was in fact part of the substantive law (under either the historic rules or the common law of contempt).
However, having analysed the new Part 81, he concluded that although it "is not as clear as it could be", the revisions have not changed the existing position as to the circumstances in which a director or other officer may be committed in relation to the breach of an order made against a company.
It was therefore not necessary to determine whether there is any special rule of liability of corporate directors for contempt at common law, independently of the provision in the rules.
The decision also confirms that, for this purpose, a 'director or other officer' includes a de facto director, but not a shadow director. In the context of an LLP, it includes those who had similar responsibilities and primary control as the directors or other officers have for a company.
2. When can breach of disclosure orders be punishable as contempt?
Foxton J's judgment in Novans Jets (above) is also of interest for its discussion of when a court order for disclosure of information or documents can potentially be the subject of civil contempt proceedings.
The decision highlights the distinction between:
- orders to disclose documents or information in support of injunctive relief or enforcement proceedings, which are coercive in nature; and
- standard disclosure orders made to assist the court in its adjudicative function.
Contempt sanctions against a party will usually only be appropriate in the case of the former. In the latter case, a party's breach can usually be adequately sanctioned by the trial judge drawing adverse inferences or limiting the party's ability to pursue/defend the claim.
Here, Foxton J considered the status of post-judgment orders requiring the unsuccessful corporate defendant to disclose information to assist in the assessment of damages. Those orders clearly fell into the "adjudicative" category and could not be relied on as the basis of committal proceedings simply by asking the court to dispense with the requirement for a penal notice to have been served with the order. Although there may be some circumstances where the court would make a coercive order (amenable to the contempt jurisdiction) regarding a "standard" disclosure order made for adjudicative purposes, such an order would clearly be conceived and "badged" as such.
By the time Foxton J was considering the issue, the defendant had repeatedly failed to comply with the order, and the disclosure obligation had subsequently been reiterated in further sets of orders (by another judge) which were clearly "badged" as coercive and served with a penal notice. However, those further orders still did not support a committal application because, on the particular facts surrounding the making of the orders and the terms of the penal notices, Foxton J was not satisfied to the high standard required that it would not be unfair on the individual.
The court noted that, in those circumstances, any contempt action against a director or officer would need to be pursued under the more exacting "wilful interference" basis for contempt which applies to non-parties at common law, if it could be proved that the individual knowingly assisted someone (the company) the subject of an order to breach that order.
3. Penal notices must be attached to the order approved by the court, not added later
Another decision last year considered the role of penal notices in a different scenario. In Re Taray Brokering Ltd [2022] EWHC 2958 (Ch), the allegedly breached orders were coercive and they had been served with a penal notice. However, the penal notice had not been appended to the order when it was formally authorised by the court and had only afterward been added to the top of the document by the party serving it.
His Honour Judge Pearce analysed the wording of the revised CPR Part 81 (in force since October 2020) and noted that the new rules referred to a requirement for applicants to confirm that the underlying order "included a penal notice". In his view, that indicated that a penal notice should be regarded as part of the order itself, with the result that if an order approved by the court did not include a penal notice, a party was not at liberty to add one. If it wished a penal notice to be added, it would need to apply to the court to vary the order.
The judge considered that, to the extent that previous authority suggested otherwise, it was either distinguishable (as being prior to the new wording of Part 81) or wrongly decided.
The decision has caused some surprise, with several commentators suggesting that the judge's conclusion that the penal notice is technically part of the order is not necessarily supported by other provisions in Part 81, and that the result is a departure from common practice. Another court might take a different view but, for the moment, practitioners should ensure that if they envisage an order potentially being the subject of contempt proceedings if breached, a penal notice is included with the document approved by the court.
4. High Court dispenses with Hague Service Convention requirements and allows email service of a committal application in Ukraine
The Novans Jets proceedings referred to above also produced a separate decision of interest, regarding the service requirements when pursuing a committal application (Olympic Council of Asia v Novans Jets LLP and others [2022] EWHC 2910 ).
The defendant was domiciled in Ukraine, which is party to the Hague Service Convention – meaning that service there should be effected through official channels under the procedures set out in the Convention. The English courts have held that exceptional circumstances are required before they will grant permission for service by an alternative method to those procedures.
Here, the High Court found that exceptional circumstances did exist and refused to set aside an order retrospectively permitting service of the committal application by email. Although practical difficulty and delay in effecting service under the Convention will not usually in itself amount to exceptional circumstances, the court noted that contempt applications should be dealt with expeditiously, to uphold the authority of court orders, and was satisfied that the high threshold was met here given:
- evidence that serving foreign process in Ukraine currently might take much longer than usual – potentially in excess of a year
- there were some grounds to believe the defendant may attempt to frustrate service
- there was no doubt that emailing the documents had been effective in bringing the application to the defendant's notice.
The court also retrospectively dispensed with the usual requirement that the underlying orders the subject of the contempt action had been served personally. It was satisfied, to the criminal standard, that the orders' material terms had been effectively communicated to the individual defendant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
