Power & Ors v Hodges & Ors

Contempt requires proof that the person knew of the order and knowingly failed to do what it required. An intention to breach, or an understanding that the conduct amounted to breach, is unnecessary, although it affects sanction. Civil contempt sanctions serve punishment, deterrence and coercion. The court must assess culpability, prejudice, mitigation, cooperation, admission and apology. Compliance after breach may remove the coercive element but does not necessarily eliminate punishment or deterrence. Deliberate non-compliance with a disclosure order made to assist liquidators may justify imprisonment. Suspension may be appropriate where immediate imprisonment would prejudice ongoing insolvency proceedings and the suspended sentence can promote future compliance.

The applicants were liquidators of Nixon & Hope Limited. They obtained orders requiring four former directors to disclose business records held on personal electronic accounts, with compliance to be funded through an independent electronic-disclosure expert.

The directors failed to comply with the original timetable. A further agreed order was also not complied with on time, although disclosure was eventually provided before the resumed committal hearing. The directors admitted contempt and sought mitigation. The central issues were whether contempt had occurred, the culpability of each director, and the appropriate sanction.

1. Contempt established. A person who knows of an order and knowingly fails to perform an act required by it is in contempt. It is immaterial that the breach was not intended or understood to be a breach, although those matters may affect the consequences. The penal notice gave fair warning of the potential consequences of non-compliance.
2. Purposes and approach to sanction. The purposes of sanction were punishment, deterrence and coercion. The court considered the guidance in JSC BTA Bank v Solodchenko (No 2) [2012] 1 WLR 350 and the related guidance in JSC BTA Bank v Ablayazov (No 7) [2012] 1 WLR 1988 and JSC BTA Bank v Ablayazov (No 8) [2013] 1 WLR 1331. Relevant matters included the seriousness and substantiality of the breach, prejudice, culpability, pressure or influence by others, cooperation, admission, apology, character and personal mitigation.
3. Individual culpability. The breaches by DV and PSS were aggravated by the prejudice caused, but their good character, eventual admissions and the mitigating circumstances made imprisonment inappropriate. DV was fined £1,800 and PSS £4,500, together with costs orders. RJH and RAH had led the formulation of the disclosure process and had no realistic basis for believing that their proposed funding arrangements could meet the timetable. Their breaches were deliberate and showed conscious disregard of the order and the rule of law.
4. Sanction for RJH and RAH. Disclosure having eventually been given, the coercive element fell away. RJH’s appropriate sentence was four months’ imprisonment after credit for his early admission and apology. RAH’s greater culpability and late admission justified six months’ imprisonment. The sentences were suspended for 18 months until 15 April 2017, subject to compliance with specified orders and the obligations under section 235(2) of the Insolvency Act 1986.