Sectorguard Plc v Dienne Plc

An undertaking to the court is construed objectively in its context. An undertaking expressed without a best-endeavours qualification is ordinarily unqualified. However, failure to perform an undertaking that was impossible to perform is not contempt, because the alleged contemnor had no choice whether to comply.

A director is not liable merely because the company breached an order or undertaking. The committal application must disclose aiding and abetting, or a wilful failure to take reasonable steps to secure compliance. Committal proceedings are an abuse where they lack a real prospect of success, concern no serious or enforceable contempt, or are pursued for an illegitimate purpose. Impossibility of performance is good cause to release an undertaking.

Two related claims alleged misuse of confidential information. In the first, Sectorguard alleged that Dienne had used its customer information. Dienne had given an undertaking to identify all Sectorguard customers it had contacted as a result of the alleged misuse.

Sectorguard sought committal of Dienne and its directors for breach of that undertaking, and permission to bring contempt proceedings against John Hare for alleged false statements. Dienne and Mr Hare applied to strike out the committal application and to be released from the undertaking. They contended that the undertaking had been impossible to perform from the outset because the relevant records had been destroyed without identifying the customers contacted.

The court also considered whether the permission application should be adjourned in light of serious allegations that Sectorguard had misused private and privileged emails.

1. The application for permission under CPR 32.14 was adjourned. Such proceedings are public-law proceedings, in which the court considers the public interest rather than a private litigant’s interests. Applying KJM Superbikes Ltd v Hinton [2008] EWCA Civ 1280, the court held that the seriousness of alleged false evidence must be balanced against the risk of vindictive contempt proceedings. Sectorguard was allowed to answer the grave allegations bearing on its fitness to conduct public-interest litigation.

2. The court rejected the submission that the undertaking was confined to best endeavours. Construed objectively, applying Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, its unqualified language required identification of every customer contacted.

3. Nevertheless, a failure to perform an impossible undertaking may be a breach but is not contempt. The mental element identified in Adam Phones v Goldschmidt [1999] 4 All ER 486 presupposes a choice whether to perform the relevant act or omission. An impossible omission involves no such choice.

4. A company director’s liability for the company’s contempt requires a properly pleaded case of aiding and abetting or of wilfully failing to take reasonable steps to secure compliance. The court followed Attorney General for Tuvalu v Philatelic Distribution Corp Ltd [1990] 1 WLR 926. The pleading just sufficed against Mr Hare because it identified him as the director who had assumed responsibility for compliance.

5. The committal application for breach of the undertaking was struck out as an abuse of process. It had no real prospect of success against the consistent evidence of impossibility. Applying the proportionality principle in Jameel v Dow Jones & Co [2005] QB 946, the court held that contempt proceedings should not be used for technical, involuntary, or pointless breaches, particularly where they distract from the underlying dispute. The evidence also supported the conclusion that the application was being pursued for an illegitimate purpose.

6. Applying Re Hudson [1966] 1 Ch 209, impossibility was good cause to release Dienne from the obligation to identify customers contacted. The court reserved the separate issue whether the obligation to disclose business done with customers should remain.

not stated in the judgment.