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Committal applications in the absence of the defendant: two recent cases, by Ashley Cukier
Ashley Cukier considers two recent judgments of the High Court (Alfa Bank v Reznik  EWHC B21 (Comm) and Taylor v Van Dutch Marine & Others  EWHC 2201 (Ch)), which demonstrate the courts’ willingness, if the circumstances justify it, to hear committal applications in the absence of the defendant.
Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com or call 020 7542 6664.
The underlying facts of Taylor v Van Dutch
In Taylor v Van Dutch & Others  EWHC 2201 (Ch) the claimant had brought an underlying claim for repayment of a bridging loan facility for which the four defendants were jointly and severally liable. The defendants had never disputed liability under the loan agreement and had taken no steps to defend the claim.
In June 2016, a freezing order was made over three vessels owned by the defendants. A disclosure order containing a penal notice was also made, requiring the defendants to provide details of various assets and accounts. The order also required the third and fourth defendants (Dutch nationals, resident in Monaco, who owned and controlled the first and second defendant companies) to undertake not to make any payments out of the companies without the claimant’s prior approval. The disclosure order was not complied with. In July 2016, Norris J made further orders continuing and augmenting the June order, so as to include worldwide assets, and granted permission to the claimant to apply for contempt of court against all four defendants.
The claimant applied for committal of the third and fourth defendants for contempt of court for failure to comply with the disclosure orders that had been made in June and continued by Norris J in July. The application sought committal for the defendants’ contempt of court in (i) deliberately and consciously breaching the disclosure order and (ii) seeking deliberately and consciously to mislead the court prior to the making of the disclosure order with the intention of interfering with the course of justice.
On the eve of the hearing of the committal application, the defendants’ solicitor (who had, to a lesser or greater extent, been advising the defendants in respect of the contempt proceedings and the underlying proceedings) emailed the claimant stating that the directors were unable to attend the hearing of the committal application “due to their severe financial restraints”, questioning “the necessity and relevance” of many of the queries forming the basis of the disclosure orders, and asking for the freezing order to be lifted so that the defendants might resume their business and put together the funds to repay the claimant.
The underlying facts of Alfa Bank v Reznik
The background facts in Alfa Bank v Reznik  EWHC B21 (Comm) were not dissimilar: the claimant bank applied for committal of the defendant for contempt on the grounds that he had failed to comply with the asset disclosure provisions in a worldwide freezing order granted originally by Knowles J in April 2015 which was, subsequently, continued by him in May 2016.
The defendant was a Russian businessman. The bank had lent money to a Russian company (part of a group of companies believed to be owned by the defendant) in respect of which the defendant had given a personal guarantee, governed by English law. The bank accelerated the outstanding debt and made a demand under the guarantee. It was granted a worldwide freezing order in standard Commercial Court form, in aid of a claim by the bank in a London Court of International Arbitration (LCIA) arbitration, exercising the powers under section 44 of the Arbitration Act 1996 (AA 1996). The freezing order made by Knowles J restrained the defendant from dealing with or disposing of his assets up to an aggregate value of approximately US$15.5 million and EUR 2.23m, and required him to provide information regarding his assets, and to swear an affidavit setting out that information.
The defendant was personally served with the order, which contained a penal notice, in Russia. He did not provide the information required by the order, nor the affidavit. The bank therefore issued the committal application. The defendant was personally served with the application, accompanied with letters from the bank setting out the legal consequences of failing to comply, in Russia on 22 June 2016. The committal application, as the papers indicated, was due to be heard on 8 July 2016 and came before Blair J on that day. The defendant did not attend. This may have been because the defendant was subject to a restriction imposed by a Russian court as a result of unrelated litigation, which had restricted the defendant’s ability to leave the country. In light of this, Blair J adjourned the application, so that the defendant could be served with a letter explaining that his imprisonment was being sought, and so that a videolink facility could be provided for him to attend and participate in the reconvened hearing, from Moscow. On 3 August 2016, at the reconvened hearing before Popplewell J, the defendant did not attend.
The first issue: should the committal application hearing proceed in the absence of the defendant?
In both cases, the court was therefore faced with the initial question as to whether or not it would be appropriate to proceed to a full committal hearing in the absence of the defendant. The relevant legal principles were summarised by Cobb J in Sanchez v Oboz  EWHC 235 (Fam). The checklist of factors in Sanchez v Oboz reflects the factors set out by the Court of Appeal in R v Hayward  QB 862, more recently elucidated by Roth J in JSC BTA Bank v Stepanov  EWHC 794 (Ch) and by Briggs J, as he then was, in JSC BTA Bank v Solodchenko  EWHC 1613 (Ch).
In respect of the third and fourth defendants in Taylor v Van Dutch, Warren J set out the Sanchez v Oboz checklist at paragraph 54:
- Whether the respondents [to the committal application] have been served with the relevant documents, including the notice of this hearing.
- Whether the respondents have had sufficient notice to enable them to prepare for the hearing.
- Whether any reason has been advanced for their non-appearance.
- Whether by reference to the nature and circumstances of the respondents’ behaviour, they have waived their right to be present (i.e. is it reasonable to conclude that the respondents knew of, or were indifferent to, the consequences of the case proceeding in their absence).
- Whether an adjournment would be likely to secure the attendance of the respondents, or at least facilitate their representation.
- The extent of the disadvantage to the respondents in not being able to present their account of events.
- Whether undue prejudice would be caused to the applicant by any delay.
- Whether undue prejudice would be caused to the forensic process if the application were to proceed in the absence of the respondents.
- The terms of the overriding objective to deal with cases justly, expeditiously, and fairly.
Warren J’s assessment of the relevant factors was methodical. Turning to the third and fourth defendants’ conduct, and the evidence before the court, he explained, at paragraph 54, that:
- All of the defendants had been served with the relevant documents, including notice of the hearing.
- The defendants had had “more than sufficient notice” to enable them to prepare for the hearing, and had had “more than adequate opportunity to rectify their failures”.
- No reason had been advanced for the defendants’ non-appearance, “other than an alleged shortage of funds, as to which no evidence is given at all”.
- Any reasonable person, in the position of the defendants, advised by an English solicitor, “would surely realise that if they fail to attend, the Court may hear the application in their absence”; however the point was “not conclusive and could be said in many cases where a respondent fails to attend”. Accordingly, the judge “would attach no weight” to this factor in the present case.
- An adjournment would be “highly unlikely” to secure the attendance of the defendants, or facilitate their representation.
- The defendants had had “ample opportunity to present their account of events” and “ample opportunity to comply with the orders against them. The reality was that they had “not taken advantage of those opportunities”.
- Undue prejudice would indeed be caused to the claimant by any further delay. The claimant “will suffer prejudice so long as proper disclosure is not provided and an affidavit provided. Until then he will not be able properly to police the freezing order”.
- No undue prejudice would likely be caused to the forensic process if the application were to proceed in the absence of the respondents.
- Finally, as regards, the overriding objective to deal with cases justly, expeditiously and fairly, it would be fair to proceed in the absence of the defendants. “They have deliberately decided not to attend and have generally failed properly to engage in this application. They must know that the Court would ultimately proceed in their absence.”
Popplewell J, in Alfa Bank v Reznik, was similarly methodical in his assessment of the factors determining whether to proceed with the hearing of the application:
- In respect of the defendant’s absence, he was subject to a restriction imposed by the Russian court, and consequently his absence from the court room in England might have been explicable for that reason. However,
“…the videolink facility in Moscow has been made available pursuant to the order of Blair J and it is clear that Mr Reznik has decided not to avail himself of it… He has taken no steps, so far as the Bank is aware and so far as I am aware, to instruct solicitors or counsel within the jurisdiction, who could have represented him at this hearing. He has previously defended Russian proceedings and it is, in my judgment a proper inference to be drawn that he has the means to instruct representation, should he so desire. Indeed, legal aid might very well be available to him, even if he did not have the means. It would have cost him nothing to attend via the videolink even without English representation. The conclusion I draw is that, notwithstanding the travel restriction, I am sure that his absence and non-involvement can properly be said to be deliberate.” (Paragraph 17.)
- No further adjournment, which in any event had not been sought by the defendant, would improve the prospects of his appearing or otherwise engaging constructively with the application:
“His stance throughout these proceedings has been one of defiance, simply ignoring applications and orders and, in the case of this application, refusing to accept service. He has already had ample time to respond to this application and to serve evidence. He has repeatedly been invited to seek English law advice. There is no evidence that he has ever done so or will do so. It is fair to conclude that he has waived any right to legal representation.” (Paragraph 18.)
- The effect of the disadvantage to the defendant in not being able to give his account is not one that carried “any weight” in the discretion (as to whether to proceed or not) because his decision not to participate in the proceedings meant that he had, effectively, chosen not to give his account of events.
Given that the alleged contempt was “a serious one”, and in accordance with the public interest that ‘the hearing of [a] committal application should proceed within a reasonable time”, Popplewell J concluded that it was right to proceed to deal with the application.
The second issue: having established contempt, should the court proceed directly to sentencing?
In both cases, it was held that the contempts alleged in the applications had been proven to the requisite criminal standard.
Having established contempt of court, the learned judges had to determine whether or not to proceed directly to sentence, or whether to adjourn before proceeding to sentence.
As explained by Popplewell J, at paragraph 23, adjourning the application before moving to sentence “is sometimes appropriate in order to afford the contemnor an opportunity to purge his contempt, or to explain his position, or to adduce evidence of mitigating facts, all of which the court might want to take into account in determining the appropriate sentence”.
Similarly, per Warren J, at paragraph 58:
“It is appropriate, in a case where serious contempt has been proved in a respondent’s absence, for the court to pause before proceeding immediately to sentence and to consider whether the matter should in the alternative be adjourned… The purpose of adjourning would be to allow [the defendants] to comply with their obligations before sentence and for them to obtain legal representation to make any plea in mitigation.”
Neither judge was prepared to grant an adjournment in the circumstances. Warren J expressed his view that it was “unlikely” that the defendants would avail themselves of the opportunity presented by an adjournment, whilst Popplewell J stated that it was “apparent from the whole history of proceedings” that the defendant had no intention of complying with the relevant obligation in the worldwide freezing order, and had no intention of complying with the court: “His past behaviour suggests that he has no intention of engaging with this process from where he is in Moscow. The present application has already been adjourned once to no avail, and any continuing delay will, as I have explained, prejudice the Bank.” (Paragraph 23.)
The Van Dutch defendants were sentenced by Warren J to a term of imprisonment of six months. The defendant in Reznik was sentenced by Popplewell J (who, at paragraph 25, summarised the principles applicable to sentencing for contempt) to a term of imprisonment of 18 months.
Points of note for practitioners
Practitioners will note the robustness with which the court, in both cases, dealt with what it deemed to have been clear contempts. Whilst every case will turn on its facts, the body of authority on whether to hear applications for committal in the absence of a defendant is now well established, and enables the court to approach thorny matters, such as service and evidence, in a way which can accommodate and anticipate some of the more commonly run arguments by absent defendants (or their representatives).
The judgments of Popplewell J and Warren J are notable for the way in which they deal with the issue of service, inevitably a problematic area in applications for committal of an absent defendant.
- At paragraph 14 of his judgment in Reznik, Popplewell J made clear that the defendant’s efforts to evade service (of inter alia the letter explaining that his imprisonment was being sought, and outlining the videolink facilities being made available) would not thwart the hearing of the application. Notably, insofar as service of the letter was effected less than the 14 days in advance of the hearing as stipulated, Popplewell J ordered an abridgement of the 14 day period on the basis that the only reason for the period not having elapsed was the defendant’s attempts at evasion, and that, in any event, previous attempts to serve the application on 22 June 2016 and 19 July 2016 had been successful.
- Similarly, the provision of videolink facilities (and the courts’ willingness to avail themselves of such facilities when the circumstances require it) constitutes another powerful tool in the arsenal of applicants in committal applications. As Popplewell J explained (at paragraph15), with videolink facilities in place in Moscow to facilitate the defendant’s attendance, there was no reason why, even if there were restrictions of his movement outside Russia, the defendant could not have attended the hearing from Moscow. The reality was that the defendant “had not taken advantage of them”. Furthermore, such non-attendance, despite videolink facilities being in place, will of course weigh heavily in the court’s assessment of other factors (such as further adjournment or the inability to give an account of events) by which it has to determine whether or not to proceed with the hearing of the application.
The two cases also serve as useful reminders of the underlying evidential burden that falls upon applicants bringing applications for committal for contempt of court:
- As committal applications are quasi-criminal proceedings, the standard of proof is the criminal standard (beyond reasonable doubt / satisfied so as to be sure) and not the civil standard (balance of probabilities). Importantly, the criminal standard does not simply apply to the issue of whether or not the alleged contempts have been proven; it applies to every aspect of the case, including procedural matters such as service. Note the distinction drawn by Popplewell J in Reznik, at paragraph 7, between the WFO (worldwide freezing order) hearing before Knowles J, and the present hearing of the committal application before him: both courts were tasked with looking at the question of effectiveness of service; however Popplewell J, on near-identical facts, would need to assess the issue of service in accordance with the criminal standard of proof, rather than the civil standard by which service was assessed by Knowles J when granting the worldwide freezing order.
- Where the defendant is absent, and the court has deemed that there is no good reason to delay hearing of an application for committal, the court is perfectly entitled to take the evidence of the applicant (in the form of sworn affidavit) at face value, without the need for any detailed further enquiry. See Warren J in Van Dutch at paragraph 33: “He [the third defendant] has neither appeared before me, nor sought an adjournment of the hearing before me. I therefore take the evidence as it is. Insofar as factual matters are concerned, rather than the conclusions to be drawn from them, I have no reason to doubt any of the evidence which Mr Crean has given in any of his affidavits insofar as it is relevant to the application.”
- Any attempts by defendants to attack, or undermine, the quality or validity of evidence in underlying proceedings, is likely to be given short shrift by the court. In Van Dutch, a letter from the defendants’ solicitor expressed his clients’ view that the conduct of the claimants, in bringing the application, was “oppressive”, and that such oppressive conduct extended to the bringing of the underlying proceedings in the first place. As Warren J stated, at paragraph 34: “Those complaints (which I am bound to say I see as entirely unjustified) are irrelevant to the application before me, which is concerned with a failure by D3 and D4 to comply with the clear orders of the Court concerning disclosure.”
Some further, final, miscellaneous observations
- Both judges reiterated the dual purpose of committal, placing emphasis on the fact that a decision to commit for contempt of court is not made simply to punish; there are public policy reasons for ensuring that interim mandatory orders, such as freezing orders, are complied with. See, for instance, Popplewell J at paragraph 20:
“The alleged contempt in this case is undoubtedly a serious one, and most importantly, it is in accordance with the public interest that a hearing of this committal application should proceed within a reasonable time, because the purpose of committal is only in part to punish. One of the major purposes of committal is to encourage compliance with the order which has been breached, in order to give effect to the purpose for which that order was originally made. The WFO was made, in this case, in order to protect the Bank’s position against concealment and dissipation of assets and, as is well known, the asset disclosure aspect of the order is an important part of the protection which is afforded by any such order; without it the Bank are seriously prejudiced in being able to police the order and enable it to be an effective protection”.
Similarly, per Warren J at paragraph 57:
“The policy imperative to enforce interim mandatory orders of this court has been stressed by the Court of Appeal in JSC BTA Bank v Solodchenko  EWCA Civ 1241… Any deliberate and substantial breach of the restraint provisions or the disclosure provisions of a freezing order is a serious matter. Such a breach normally attracts an immediate custodial sentence… Freezing orders are made for good reason and in order to prevent the dissipation or spiriting away of assets. Any substantial breach of an order is a serious matter, which merits condign punishment.”
- It would appear that the sentence imposed on the defendant by the Court of Appeal in JSC BTA Bank v Ablyazov  EWCA Civ 1411 now stands as a form of yardstick for courts in relation to the term of imprisonment to be imposed for contempts of court. In Abylazov, the court held the contempts (against a background of fraud which, as Warren J observed, was not the case in Van Dutch) to be so egregious that a sentence of 22 months was imposed. In Van Dutch, where the conduct of the third and fourth defendants was held to be “nothing like as serious as that of Ablyazov”, the failure to comply, whilst “far from trivial” attracted a term of six months.
- Practitioners will also note the scorn with which the courts dealt with the suggestion, in both cases, that the defendants’ non-attendance was (at least in part) due to a lack of financial means. Per Warren J, in Van Dutch, at paragraph 37:
“It is difficult to imagine a more misconceived complaint or a more audacious and shameless request…The complaint is misconceived because the freezing order does not prevent transactions by D1 and D2 (or indeed any other group companies) in the ordinary course of business. In any case, if the Defendants have been unable to effect ordinary business transactions because of the reaction of third parties, such as banks, to the freezing order, it has always been open to the Defendants to request confirmation from C that such transactions are not prohibited. So far as I am aware, there has been no such request.”
Furthermore, as Popplewell J explained in Reznik, at paragraph 17, even in circumstances where it was highly likely that the defendant did have the means to instruct legal representation, “legal aid might very well be available to him, even if he did not have the means.” This, and the concomitant failure to attend even by videolink (“which would have cost him nothing…even without English representation”) meant that any financial arguments could properly ignored, and the failure to attend could “properly be said to be deliberate”.
- Whilst both courts imposed custodial sentences, both judges also made clear that post-sentence conduct might still result in a reduction, or indeed, a remission of some or all of the sentence. Per Popplewell J in Reznik, at paragraph 31:
“I should say finally, so that Mr. Reznik is aware of this when he reads this judgment, that I do not propose now to identify what element of that sentence would have to be served, in any event, for past breaches, should there now be full and prompt compliance with paragraphs 8 and 9 of the WFO. However, I would urge Mr. Reznik now to comply fully and promptly with those provisions so as to remedy his contempt. I should make clear that, if there were such full and prompt compliance, he will be entitled to seek to discharge or reduce the sentence of imprisonment which I have imposed and, should there be now full and prompt compliance, I would expect that a very significant proportion of that sentence would be remitted, although ultimately that will be a matter to be decided if those circumstances arise.”
Similarly, in Van Dutch, Warren J, at paragraph 58, suspended the sentence for one month:
“… to give D3 and D4 the same opportunity [to obtain legal representation] but with the difference that the onus will be on them to apply to the Court to remit, in whole or in part, the sentence, although they should understand that they will almost certainly need to show compliance by that time with the orders which have been made against them”.
As Warren J noted, however, the question of remission or reduction of sentence only becomes a possibility if, and when, the court is shown evidence of compliance from recalcitrant defendants.