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High Court Shows Contempt for Those Willing to Risk Abuse of Contempt

Following on from our recent update about the new rules relating to the addition of contempt wording to statements of truth and evidence in civil proceedings, the recent decision in Integral Petroleum SA V Petrogat FZE and another demonstrates the impact of this change going forward.

In this case, the High Court granted an application to commit two third parties to prison for contempt of court. The courts’ increasingly strict approach in relation to contempt applications serves as a cautionary tale for any party subject to a court order containing a penal notice.

Background

The claimant, Integral Petroleum SA, made an application for two individuals to be committed to prison for contempt of court. The respondents, Ms Sanchouli and her father, were de facto directors of the defendants, Petrogat FZE and San Trade GmbH, overseeing the companies’ day-to-day business.

In the underlying proceedings, Integral had purchased oil from the defendants. Subsequently, the destination of the cargo on the bill of lading had been changed to Iran however. Integral argued this was a result of fraudulent correspondence by San Trade and obtained an injunction to prevent the cargo being transported to Iran. The injunction contained a penal notice and was served on both the defendants and the respondents.

Integral believed Ms and Mr Sanchouli had not complied with the order and made a committal application, and they in turn argued that the application should be struck out on the grounds that:

  1. it was an abuse of process, as it was being used as a threat improperly to obtain a more favourable settlement of the underlying dispute
  2. Integral had failed to specify the “full grounds” on which the application was made, in breach of CPR 81.10(3)(a).

The Judgment

The Honourable Mr Justice Foxton granted the application. As to the allegation it was an abuse of process, the court ruled the issue of contempt had been raised legitimately to incentivise the respondents to comply with the injunction. They were not prepared to characterise Integral’s motive as improper.

Whilst the court agreed that Integral had failed to comply with the CPR requirements, this did not prejudice Ms and Mr Sanchouli. Instead, the court exercised its discretion to waive the procedural defect and gave Integral permission to amend the application notice.

Despite the injunction, Ms and Mr Sanchouli had taken steps to divert part of the cargo to Iran and had failed to sign a letter as required by the injunction order. Whilst the court acknowledged that committal orders were only intended for exceptional cases, it was deemed appropriate in this case because of the deliberate breaches of the injunction and in circumstances where the court orders had been designed to hold the ring whilst the commercial dispute was being determined. Even when the respondents were acting on the basis of what they genuinely believed to be their rights within the commercial dispute and had offered their apologies. However, the court considered there to be mitigating factors and sentenced Ms and Mr Sanchouli to suspended sentences of three and two months’ imprisonment respectively.

Practical implications going forward

This case reaffirms the courts’ strict treatment of contempt applications and its willingness to find individuals in contempt, even in circumstances where the application does not fully comply with the relevant CPR provisions.

Within the Judgment, the court acknowledged applications for committal for contempt of court have become an increasingly common feature of High Court litigation. We expect this trend to continue, particularly in light of the new rules which state explicitly that an individual providing a false statement of truth may be at risk of being held liable for contempt of court, as covered in a recent Perspective

Related Lawyers: Samantha Hewitt, John McElroy
Related Practice Areas: Commercial Disputes

Related Lawyers