Integral Petroleum SA v Petrogat FZE & Anor

Contempt of court must be proved by the applicant beyond reasonable doubt. The court may rely on cumulative evidence and draw inferences, but must be sure of every essential element; each individual item of evidence need not itself meet that standard. A company director may be liable where aware of the order and responsible for the company’s breach, including wilful failure to take reasonable compliance steps. A prohibitory injunction is strictly construed and does not ordinarily impose positive obligations. A time-limited mandatory order creates one breach if not obeyed by the deadline; later failure to cure it is not a further breach of the original order. Committal proceedings may be addressed in settlement negotiations, but must not be used to bully a respondent. Particularisation defects may be waived where no injustice results.

Integral applied to commit Ms and Mr Sanchouli, alleged de facto directors of Petrogat and San Trade, for contempt of court. The application arose from injunctions made during a dispute concerning the diversion of oil cargo to Iran. The orders prohibited steps directing delivery to Iran and required signed letters. The cargo was diverted and the letters were signed late.

The Third Parties sought to strike out the proceedings as an abuse of process and for inadequate particularisation. An earlier judgment had held that the reference to a director in CPR 81.4(3) was not limited to de jure directors and that Ms and Mr Sanchouli were arguably de facto directors: [2018] EWHC 2686 (Comm). The central issues were the proper use of committal proceedings in settlement negotiations, the adequacy of the application notice, and whether the alleged breaches were proved against each respondent.

Disposition. The applications to strike out the committal proceedings failed. Contempt was proved against Ms Sanchouli on three grounds and against Mr Sanchouli on two grounds. Committal was appropriate, but sentencing and consequential matters were adjourned for further submissions.

1. Applicable principles. The applicant bore the burden of proof and the criminal standard applied. The court could draw inferences from cumulative evidence, although each evidential fact did not itself require proof beyond reasonable doubt: JSC Mezhdunarodniy Promyshelnniy Bank v Pugachev [2016] EWHC 192 (Ch); JSC BTA Bank v Ablyazov (No 8) [2018] 1WLR 1331. The mental element was intention to perform the act or omission and knowledge of the facts making it a breach, not an intention to breach the order: Sectorguard Plc v Dienne Plc [2009] EWHC 2693 (Ch).
2. Abuse and particularisation. Committal proceedings must not be used as a lever to bully a respondent into settlement. However, because settlement of commercial litigation will ordinarily need to address an outstanding committal application, references to its disposal or timing did not by themselves establish an improper purpose. The court found no real and substantial purpose of forcing settlement. The application notice sufficiently particularised the failure to provide the required letter, but the allegation that the Third Parties caused, enabled or permitted shipment to Iran was too general. The defect caused no injustice and was waived under paragraph 16.2 of Practice Direction 81, subject to an amended notice.
3. Construction of the injunctions. The Morgan Injunction was prohibitory. Strictly construed, it required the Defendants to refrain from taking further positive steps and did not require them to interrupt an existing shipment. The Waksman Injunction, by contrast, required the Schedule C letter to be signed forthwith.
4. Findings. Ms Sanchouli deliberately failed to sign the Morgan letter, instructed or permitted post-injunction steps to facilitate the shipment of 38 rail cars to Iran, and deliberately delayed signing the Waksman letter. Mr Sanchouli was not proved to have known of the Morgan order in time to comply with its initial deadline, but knowingly participated in the later diversion strategy and jointly decided to delay signing the Waksman letter. Mere failure after the original deadline to cure an existing breach did not establish a further contempt under the original order.

This was a first-instance committal hearing. The judgment records an earlier decision by Moulder J concerning the status of the Third Parties as de facto directors: [2018] EWHC 2686 (Comm). Permission to appeal that decision was rejected by Flaux LJ on 23 January 2019. The present judgment determined the strike-out applications and the merits of the committal allegations.