Court of Appeal upholds power of English Court to commit a foreign director for contempt

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The Court of Appeal has unanimously upheld the High Court’s decision that the Managing Director of the Claimant (domiciled and resident in Saudi Arabia) could be served with committal proceedings for contempt of cour

BACKGROUND

In the lower court, the Claimant companies obtained a ‘without notice’ injunction against the Defendants. This was cancelled when the judge at first instance found that the Claimant companies were in breach of their obligations to give full disclosure. They had also misled the court and broken an undertaking to preserve evidence. Consequently one of the Defendants asked the court to punish the Claimant companies for contempt of court. Additionally, the Defendant made an application for committal (imprisonment) of  the Claimants’ Managing Director. This was on the basis that he was also in contempt of court , although he was not personally bringing the case in his name. The judge ordered service of the application for contempt on the director out of the jurisdiction.

The director appealed to the Court of Appeal. He argued that the Court had no power to make any order against him because he was outside the territorial jurisdiction.

CASE

Dar Al Arkan Real Estate Development Co & Anor V Al Refai & Ors [2014] EWCA Civ 715

http://www.bailii.org/ew/cases/EWCA/Civ/2014/715.html

 

COMMITTAL

Under CPR r81.4 a committal order can be made against the director of a company which is in breach of a judgment, order or undertaking.

The Court of Appeal accepted that the legislative intention behind the provision must include dealing with contempt of its orders by companies with foreign directors. Although CPR r81.4 does not specifically state that it is effective out of the jurisdiction, if this was not the case, the power of the English courts to ensure compliance with its orders would be

significantly weakened”.

The Court of Appeal distinguished the position where it had previously been decided that the English courts did not have jurisdiction to order the examination of a foreign director of a debtor company under CPR r71. The rationale was the nature of committal proceedings is very different from the power of the court under Part 71 to obtain information from judgment debtors.

The Court of Appeal upheld the Judge’s exercise of discretion to allow service out of the jurisdiction of the Notice of Committal. This was because the application constituted a “Claim Form” under the definition in CPR r6 as it commenced “proceedings”.

The Court of Appeal also referred to Article 22(5) of Regulation 44/2001 of the Brussels I Regulation. This states that, in proceedings concerned with the enforcement of judgments, the courts of the Member State in which the judgment has been or is to be enforced shall have exclusive jurisdiction,

regardless of domicile”.

The trial judge held that this Article did not apply because the director was not domiciled in a European Union Member State.

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The judge said that he was bound by the Court of Appeal’s decision in Choudhary & Ors v Bhatter & Ors [2009] EWCA Civ 1176. The Court of Appeal however indicated that, in view of ECJ decisions, there was a “compelling” argument that Choudhary was incorrectly decided and that the English courts did have jurisdiction under the Article, no matter where the defendant is domiciled.

As such, there was no reason not to extend the jurisdictional rule to parties and directors domiciled outside of the EU. Their non-domiciliary status is irrelevant and does not limit the Court’s powers to enforce its orders.

COMMENT

It would have been damaging for compliance with  the Overriding Objectives to deal with cases justly, and unfair if there was a weakened regime  for directors resident abroad, or directors of foreign companies.

The decision shows that the court is prepared to extend the reach of sanctions where this is in the public interest. Ultimately this could result in committal for contempt of court, even for a foreign director,  where there is continued disobedience of a court order.

 

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