Makdessi v Cavendish Square Holdings BV & Anor (Commital)

Permission for a private litigant to bring committal proceedings based on a false statement of truth depends on whether the proceedings serve the public interest. The court must exercise considerable caution and require a strong prima facie case that the statement was false and known to be false.

Relevant considerations include the statement’s clarity and significance, the maker’s knowledge and status, its consequences, how long and in what circumstances it was maintained, and any explanation. Retraction before trial does not preclude committal proceedings, particularly where the statement has already caused substantial expenditure or use of court resources. Failure to give an early warning is relevant but not necessarily decisive.

Mr Makdessi appealed against Burton J’s decision, reported at [2012] EWHC 4305 (COMMERCIAL), granting Cavendish permission to apply to commit him for contempt. The proposed application concerned a statement of truth verifying his Defence and Counterclaim. Cavendish alleged that his denial of substantial involvement in the competing Carat business after June 2008 was knowingly false.

Mr Makdessi later admitted continuing involvement in Carat’s affairs. He challenged the permission decision on ten grounds, including reliance on documents not properly exhibited, insufficient consideration of his evidence, lack of an early warning, oppression, overlap with unresolved contractual issues, retraction before trial and disproportionate use of court resources.

The central issue was whether the judge had erred in deciding that the public interest justified permitting the committal application.

1. Appeal dismissed unanimously. The judge applied the correct principles and was entitled to conclude that the public interest justified granting permission to bring committal proceedings. Permission required considerable caution and a strong prima facie case. It did not require the court to determine whether contempt had actually been proved.

2. The critical question was whether committal proceedings served the public interest. Relevant considerations included the statement’s significance and clarity, the strength of the evidence that its maker knew it was untrue, the maker’s status, the seriousness of the consequences, the period and circumstances in which the statement was maintained, and any explanation for it. Applications should not become routine whenever pleadings verified by statements of truth appear inaccurate shortly before trial.

3. There was a strong prima facie case that Mr Makdessi’s verified denial was knowingly false. The evidence indicated substantial and active involvement in Carat after June 2008. His own evidence accepted that he continued responding to Carat’s operational needs. The statement concerned matters peculiarly within his knowledge and was material to whether he was a Defaulting Shareholder. Maintaining it caused the respondents to investigate and prepare to prove the extent of his activities, with substantial resulting cost and use of court resources.

4. Civil Procedure Rules rule 81.14(1) required every document relied upon in support of the permission application to be exhibited to the supporting affidavit. As Part 81 was a specific, self-contained regime governing a quasi-criminal procedure, it prevailed over the more general rule 32.6. The failure to exhibit some emails did not invalidate the decision because the judge independently found the remaining evidence sufficient, Mr Makdessi had answered the disputed material, and the omission was subsequently remedied.

5. An alleged contemnor’s retraction before trial does not itself make committal proceedings inappropriate. Such a rule could encourage false statements to be maintained until the last moment. Nor must the statement have affected the outcome of a trial. Its effects upon costs, preparation and court resources may be important.

6. The absence of an earlier warning was not decisive. In the circumstances, Mr Makdessi was an experienced businessman represented by leading lawyers and did not require a reminder that a knowingly false statement of truth could lead to committal. The timing of the application alongside settlement correspondence did not establish oppression or improper motive.

7. Whether contempt was ultimately proved, and any resulting sanction, remained for determination at the substantive committal hearing.

• Court of Appeal (Civil Division): The court unanimously dismissed the appeal and upheld permission to apply to commit Mr Makdessi for contempt: [2013] EWCA Civ 1540.

• High Court, Commercial Court: Burton J granted Cavendish permission to apply for committal in respect of the statement of truth verifying parts of Mr Makdessi’s Defence and Counterclaim: [2012] EWHC 4305 (COMMERCIAL).