This case was heard by the Court of Appeal and the lead judgment was given by Carr LJ (approved by Snowdon and Asplin LJJ), who considered when, how and why an application for civil contempt of court may be an abuse of process.
In summary, where an application for civil contempt of court is procedurally correct, and is properly arguable on the merits, then the fact that the applicant may be motivated by a personal desire for revenge did not make the application an abuse of process of the court. An applicant is not under a duty to act as a wholly disinterested party or as if they had no legitimate private interest in the outcome of the application.
Background
In November 2019, Navigator Equities (the appellant) brought committal proceedings against Mr Deripaska (the respondent) in respect of alleged breaches of undertakings.
The appellant and the respondent had been involved in a long-running dispute, whereby the appellant had obtained an arbitral award against the respondent in the sum of USD95 million. During the course of the Arbitration Act proceedings, the appellant feared that they would have difficulties enforcing the award against the respondent’s assets in Russia and there was a real risk that he would take steps to repatriate assets to Russia. As such a worldwide freezing order (WFO) was imposed in the sum of £87.5 million, which expressly discounted the value of any of the respondent’s “assets based in Russia regardless of whether such assets are through shares in companies outside of Russia”. In exchange for the appellant withdrawing their application to continue the WFO, the respondent gave various personal undertakings to the court relating to certified shares in a Jersey registered company, EN+Group plc, of which he was the ultimate beneficial owner.
The alleged breaches of the undertaking arose when EN+Group plc was redomiciled to Russia via a special resolution. It was alleged that the respondent breached the undertakings by procuring the vote (as the ultimate beneficial owner) in favour of the proposed redomiciliation, or in the alternative failing to block the proposal (due to a two thirds majority being required and the respondent’s having a controlling interest of 53%). The appellant alleged that as a result of the redomiciliation the shares in EN+Group plc Jersey had been cancelled and replaced with shares in a company located in Russia and as such the protection the undertaking had been intended to provided was now worthless.
The appellant applied for an order that the respondent make a payment into court for the full amount of the award. The respondent paid the sums due and the undertakings were subsequently discharged by consent.
Following the above, the appellants made an application for contempt of court as, despite the respondent making the payment into court, they had been caused significant losses by reason of the respondent’s alleged breaches, namely the incurring of substantial legal costs in the sum of £1 million in multiple jurisdictions. The respondent alleged that that application for contempt was an abuse of process and made an application to strike out the application.
In the first instance, Baker J (the judge) dismissed the contempt application as an abuse of process and allowed the respondent to strike out the application on the same basis. In his reasoning, Baker J stated that:
- The appellants had a subjective motive in bringing the application which he found to be a desire for revenge and personal animosity towards the respondent.
- The appellants had failed to comply with the “quasi-prosecutorial” duties owed by them and it was incumbent for those bring an application for contempt of court to “act generally dispassionately” and “as guardians of the public interest”.
The appeal
The Court of Appeal held that the High Court’s judgment was premised on a “fundamental misunderstanding” as to the factual basis of the alleged breaches and their consequence (the essential purpose of the undertakings had been to secure the assets outside Russia against which the appellants could enforce), and errors in law relating to the duties owed by applicants bringing civil contempt proceedings.
The Court of Appeal confirmed that, whilst civil contempt of court is sometimes described as “quasi-criminal/prosecutorial” due to the penal consequences, they are not to be equated with private prosecutorial proceedings.
The judge had applied the wrong standard to the appellants’ conduct and had conflated the principles for criminal contempt of court with those applicable to civil contempt. Part II of the CPR 81 (this case concerned the pre-1 October 2020 rules) does not require a civil litigant to assume the role of a “quasi-prosecutor” nor does it require them to act dispassionately as they are not acting solely in the public interest.
The judge had incorrectly concluded that the appellant’s subjective motive for bringing committal proceedings was relevant and it could by itself render the application an abuse of process. With regards to an applicant’s motive, Carr LJ stated, “where a civil contempt application:
- Is made in accordance with the relevant procedural requirements.
- Is properly arguable on the merits (by reference to the necessary constituents of a claim for contempt); and
- Has the effect (and so at least the objective purpose) of drawing to the attention of the court to an allegedly serious contempt
Then the fact that the application is motivated, by a personal desire for revenge on the part of the applicant is not a good reason for striking out the application as an abuse of process” as any private litigant will have an interest in the enforcement of a court order or undertaking which has been made to protect its interests.
Conclusion
This judgment is useful for those considering making an application for contempt of court and the issues to have in mind.
Practitioners are advised to remember there is an important distinction between civil contempt (that is, committal proceedings arising out of a breach of a court order or an undertaking) and criminal contempt (that is, an action that goes beyond non-compliance with an order and interferes with the administration of justice).
With regards to civil contempt, if an application is:
- justified as matter of procedure and substance and
- is not being pursued for an illegitimate purpose
Then an applicant has a right to bring it, irrespective of their personal animosity or subjective motive.
Guidance for practitioners
Whilst this case was brought prior to the 1 October 2020 changes, it still provides useful guidance for solicitors considering making an application for contempt of court within civil proceedings.
In particular, at paragraph 81 of the judgment, Carr LJ reconfirmed the general propositions in law in relation to civil contempt are as follows:
- The bringing of a committal application is an appropriate and legitimate means, not only of seeking enforcement of an order or undertaking, but also (or alternatively) of drawing to the court’s attention a serious (rather than purely technical) contempt. Thus, a committal application can properly be brought in respect of past (and irremediable) breaches.
- A committal application must be proportionate (by reference to the gravity of the conduct alleged) and brought for legitimate ends. It must not be pursued for improper collateral purpose.
- Breach of an undertaking given to the court will be a contempt. Breach of a court undertaking is always serious, because it undermines the administration of justice.
- The meaning and effect of an undertaking are to be construed strictly, as with an injunction. It is appropriate to have regard to the background available to both parties at the time of the undertaking when construing its terms. There is a need to pay regard to the mischief sought to be prevented by the order or undertaking.
- It is generally no defence that the order disobeyed (or the undertaking breached) should not have been made or accepted.
- Orders and undertakings must be complied with even if compliance is burdensome, inconvenient and expensive. If there is any obstacle to compliance, the proper course is to apply to have the order or undertaking set aside or varied.
- In order to establish contempt, it need not be demonstrated that the contemnor intended to breach an order or undertaking and/or believed that the conduct in question constituted a breach. Rather, it must be shown that the contemnor deliberately intended to commit the act or omission in question. Motive is irrelevant.
- Contempt proceedings are not intended as a means of securing civil compensation.
- For a breach of order or undertaking to be established, it must be shown that the terms of the order or undertaking are clear and unambiguous; that the respondent had proper notice; and that the breach is clear (by reference to the terms of the order or undertaking).
