Charities and internal investigations
One of the trends over the last few years in civil fraud cases has been the increase in applications to the Court for defendants in civil fraud proceedings to be committed to prison for contempt of court (“Committal Applications”). Cases against a number of “Oligarchs” for breaches of freezing orders spring to mind.
However, recent cases show that the increase in Committal Applications is not just in fraud proceedings.
There are two types of contempt of court – criminal contempt and civil contempt. This blog is confined to dealing with civil contempt. Civil contempt is conduct that is not, in itself, a crime but is punishable by the court in order to ensure that its orders are observed. It is the act of deliberately failing to obey or respect the authority of a court of law or legislative body.
All allegations of contempt, both civil and criminal, must be proved to the criminal standard, namely, beyond reasonable doubt; this standard applies even where the applicant seeks only a non-custodial penalty.
Contempt of court is punishable by a fine, sequestration of assets and imprisonment:
It has been suggested that the Court should bear in mind the desirability of keeping offenders, and particularly first-time offenders, out of prison. In November 2017 in Official Receiver v. Brown  AER (D) 97 (Nov), the Judge said that "in line with general sentencing principles, if the appropriate period of imprisonment under consideration is 12 months or less, the court should further consider whether a shorter term will sufficiently meet the sentencing objectives, especially if the contemnor has not previously experienced imprisonment". In that case, the Judge reduced a term of 12 months by 4 months expressly in recognition of the fact that Mr Brown had not previously experienced prison.
The relevant factors to take into account when sentencing for contempt include the following:
In Official Receiver v. Brown (referred to above) (November 2017) Mr Brown was a bankrupt who was found guilty of contempt of court for failures to comply with obligations under the Insolvency Act 1986, including failing to provide a statement of affairs to the Official Receiver (the “OR”) (s.288), failing to deliver possession of his estate and all books and records to the OR (s.291) and otherwise failing to provide information to the OR/his trustee in bankruptcy (s.333). Mr Brown persistently refused to accept the validity of court orders concerning the bankruptcy, he didn’t purge his contempt, he only cooperated at a late stage and there was little mitigation. The Judge imposed a custodial sentence of eight months.
In Universal Business Team PTY Ltd v Lawrence Moffitt (December 2017) Mr Moffitt had obstructed the Claimant’s attempts to enforce a Search Order which resulted in two further court orders being made. The Claimant alleged that the defendant was guilty of thirteen contempts of court, and the defendant pleaded guilty to the majority of these contempts, including failing to permit entry to the defendant’s premises, failing to deliver up items and to provide information ordered, Tweeting in breach of the Search Order, failing to permit execution of the Search Order and deliberately destroying evidence. The Judge said that although imprisonment was always a punishment of last resort, in this case it was the only option; a failure to obey a search order had to be sanctioned. The Judge imposed a custodial sentence of fourteen months.
In Patel v Patel and others  EWHC 3229 (Ch) (December 2017) four defendants faced committal proceedings for bringing a fraudulent claim relating to what was found to be a forged will (first defendant) and giving false evidence to the Court by way of statements of case, witness statements, affidavits and oral testimony (all 4 defendants). The Judge said:
"in any proceedings of whatever sort, be they civil or criminal, putting false evidence knowingly before the court is capable of undermining the integrity of the court process and is extraordinarily serious.”
In mitigation the second, third and fourth defendants expressed profound regret at their actions, acknowledged their guilt shortly after changing legal advisers, and gave evidence of the serious impact on them of the committal proceedings and their own difficult personal circumstances.
The first defendant was held to be “the architect of a dishonest scheme to mislead the court”. He brought the fraudulent claim, he was held to have forged a will, he coerced the other defendants to lie to the court, he tried to postpone the committal hearing and he did not take an early opportunity to acknowledge his guilt.
The second, third and fourth defendants were each sentenced to three months in prison, suspended for twelve months. The first defendant was sentenced to twelve months in prison, to be served immediately.
As Mr Justice Norris said back in 2015 “A contempt of court is not a wrong done to another party to the litigation. It is an affront to the rule of law itself and to the court". The message being given by the Court is loud and clear – if you breach orders of the Court you do so at your peril and you face imprisonment for doing so. To have the best chance of defeating a Committal Application or to minimise the sanctions likely to be imposed by the Court, it is crucial that a defendant seeks legal advice at an early stage in the committal proceedings. If the defendant is not able to fund legal representation he/she should apply for publicly funded representation expeditiously.
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