Back Office Ltd v Percival & Ors

Penalties for civil contempt must reflect the seriousness and culpability of the breach. Relevant considerations include prejudice, pressure, deliberateness, culpability, responsibility for others’ conduct, appreciation of the breach and co-operation. Compliance with an undertaking cannot itself mitigate the breach. A fine may be imposed where the conduct crosses the required threshold of culpability, even though no loss has resulted. The penalty may be principally punitive where the restraint has expired. Misleading or materially incomplete evidence placed before the court to mitigate penalty may aggravate the response and justify indemnity costs.

The court had previously found Mr James Percival and Liquidity Group Solutions Ltd in contempt for attempting to solicit clients protected by undertakings given to the court. Contempt was not established against the company’s directors, Mr Jonathan Tipper and Mr James Foulsham, personally.

The present hearing concerned the penalties for the established contempts and the consequential costs orders. The issues included whether fines were appropriate, the relevance of the absence of commercial prejudice, the parties’ apologies and financial circumstances, and the appropriate basis and amount of costs.

1. Penalty. Breach of an undertaking given to the court was a very serious matter. The fact that the breach occurred near the end of the restraint period did not mitigate it. A defendant was not entitled to credit for complying with an order which it was already bound to obey.
2. The factors identified in Crystal Mews Ltd v Metterick and others [2006] EWHC 3087 (Ch) were relevant: prejudice and its remediability, pressure, deliberateness, culpability, responsibility for others’ conduct, appreciation of seriousness and co-operation.
3. The breaches were deliberate and sufficiently culpable to warrant fines. Mr Percival’s conduct was opportunistic and aggravated by deception. Liquidity was liable for the contumacious acts of its salesmen, although its liability was less serious than if it had ordered or encouraged the breaches. The absence of prejudice did not prevent a fine.
4. The voluntary extension of the restraint period did not amount to compliance with, or an apology for, the breaches. The public finding of contempt was not a sufficient penalty. The approach in R (on the application of Bempoa) v Southwark LBC [2002] EWHC 153 (Admin) was distinguishable because the defendants were not a public authority.
5. The purpose of the penalty was punitive because the restraint had expired. Consistently with Crystal Mews Ltd v Metterick and others and Phonographic Performance Ltd v Amusement Caterers Ltd [1964] Ch 165, the degree of culpability determined whether a fine was justified. Mr Percival was fined £1,200 and Liquidity £5,000.
6. Liquidity’s incomplete and potentially misleading evidence about its financial position was seriously reprehensible. It did not justify depriving the successful directors of their costs, but it took the case outside the norm for costs purposes. Applying Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson (a Firm) and others [2002] EWCA Civ 879, costs payable by Liquidity were ordered on the standard basis up to 29 May 2013 and on the indemnity basis thereafter.
7. Liquidity was ordered to pay Back Office’s costs, subject to detailed assessment, with £25,000 paid on account. Back Office was ordered to pay Mr Tipper and Mr Foulsham one quarter of the defendants’ costs up to the April hearing, together with the costs of their costs application, with £2,625 paid on account to each.

The judgment records an earlier liability judgment finding Mr Percival and Liquidity in contempt and dismissing the contempt allegations against Mr Tipper and Mr Foulsham personally. The citation of that earlier judgment is not stated in the judgment. The present decision determined penalty and costs.