HM Revenue & Customs v Munir

Sentencing for civil contempt is directed at the contempt of court and the rule of law. Where compliance can no longer be secured, the penalty is punitive rather than coercive. Imprisonment is available for a first offence and is appropriate where the contempt is deliberate, serious and involves the misuse of a position of trust to defeat the purpose of a court order. The sentence must be the minimum commensurate with the gravity of the breach and must not be manifestly discrepant with the sentence for a comparable criminal offence. Relevant considerations include the nature and consequences of the contempt, culpability, good character, absence of premeditation and admissions. Officers who deliberately dispose of company assets so as to thwart a provisional liquidator may cross the custody threshold even where they do not personally receive the money.

HMRC brought committal proceedings against three officers of Parkwell Investments Ltd after a provisional liquidator had been appointed to protect the company’s assets. Despite being served with and having the order explained to them, the respondents authorised three payments totalling substantial sums from company accounts to a Dubai company. The payments deprived the provisional liquidator of access to the funds and effectively cleared the company’s cash assets.

At the hearing, each respondent admitted specified knowing breaches, while maintaining that the purpose was to preserve the company’s trading position. The central issue was the appropriate sanction for the admitted contempts, including whether imprisonment was required and the proper starting point and mitigation.

The court sentenced each respondent to six months’ imprisonment, of which three months were to be served before unconditional release.

1. A contempt of court is an affront to the rule of law and the court, rather than merely a wrong to the opposing party. The purposes of punishment may be punitive or coercive. Since the payments could not be undone and there was no realistic prospect of recovery, only the punitive purpose was relevant.
2. The sentence had to be proportionate to comparable criminal offending, had to reflect the seriousness and deliberate nature of the breaches, and had to be the minimum commensurate with their gravity. Imprisonment was permissible up to two years, but the custody threshold had to be crossed.
3. There is no rule preventing imprisonment for a first offence. The court assessed the nature and consequences of the contempt and the respondents’ culpability. Their good character, lack of premeditation and late admissions afforded mitigation, although the admissions were made only at the door of the court.
4. The respondents had used positions of trust to dispose of company money and to thwart the provisional liquidator. The fact that the payments benefited a supplier rather than the respondents themselves did not remove the seriousness of the conduct. It amounted to preferring one creditor and depriving the general body of creditors of assets.
5. A starting point of nine months was appropriate. R v Kerling, [2011] EWCA Civ 182, showed that the starting point was not excessive, while Thomas v Jakes, [2012] EWHC 525, was considered as a further comparator. A 20 per cent reduction was allowed for the admissions, producing six-month sentences.

Not stated in the judgment.