England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE PURLE Q.C.)

		Royal Courts of Justice Strand London WC2A 2LL
		20 June 2013

Lord Justice Lloyd:

1. This appeal is brought by the defendant in the proceedings against an order of HHJ Purle Q.C., made on 9 November 2012, by which the defendant was ordered to be committed to prison for 24 months for contempt of court consisting of his breaches of an earlier order of the same judge made on 6 December 2011 by way of a disclosure order ancillary to a freezing order.
2. The defendant appeals as of right because the order is a committal order, but it needs to be said that, despite the order having been made last November, he has not served any part of the sentence, since despite another order of the judge requiring his attendance at the committal hearing, he was absent from that hearing and he is understood to be, and to have been since before that date, outside the jurisdiction of this court. It may very well be that he has not the slightest intention of coming within the jurisdiction if and for so long as the committal order stands.
3. As I say, the appeal is as of right, and it was therefore not necessary for Mr Thursfield's appeal to be subjected to the preliminary consideration of a member of the court as to whether permission to appeal should be granted, and if so on what terms. That is the effect of the present rules, which require permission to appeal for almost all appeals, with only three particular exceptions, one being an appeal against a committal order because of the issue as to the liberty of the subject: see CPR 52.3(1)(a)(i).
4. On this appeal, Mr Thursfield's arguments have been ably presented in writing and succinctly orally this morning by Mr Andrew Maguire. Mrs Thursfield's position has been presented in writing by Mr Ashworth QC, from whom we have not found it necessary to call for supplemental oral submissions.
5. The parties to the proceedings were married, but the marriage was dissolved by an order of a court in the State of Michigan in the United States in 2005 following the parties having entered into a settlement agreement as regards their divorce proceedings, which had been acrimonious. If it was hoped that this agreement would bring an end to the bitter dispute between the parties, that hope was not realised.
6. Mrs Thursfield, the claimant, brought proceedings in the State of Michigan for breach of contract against her former husband, alleging, among other things, failure to disclose assets. In August 2006 she secured a judgment in her favour, but this was followed by further applications and orders, culminating in an order dated 3 January 2011 giving judgment in her favour against the defendant for sums in the region of US$5.8 million, said to be the equivalent (I am not sure at what date's exchange rates) to about £3.5 million.
7. The defendant appealed against that order. The appeal was dismissed for want of prosecution in March 2011, but the appeal was then reinstated later that year, and the appeal is still pending. The appeal does not challenge the whole of the judgment. We have been told that HHJ Purle was satisfied that, even if Mr Thursfield's appeal were wholly successful, there would be a liability on his part in favour of the claimant of the order of US$240,000. HHJ Purle heard an application for summary judgment on Monday of this week, Mrs Thursfield seeking judgment for the whole amount due. He did not make such an order, but he did make an order for an interim payment of $240,000, together with costs assessed at some £37,000 or so, otherwise adjourning the application.
8. All the appellant's documents relating to this appeal have made much of the proposition that the Michigan appeal is expected to come on shortly. It was hoped, on one side at any rate, that it would come on in the spring of this year but it still has not come on. We have not seen evidence about what is likely to happen. Mr Maguire was able to tell us that the respective US attorneys who have the conduct of the appeal differ in their view as to how long it is likely to be before the appeal comes on for hearing and in turn how long it is likely to be, or may be, before judgment is given. He says that, taking those two factors together, we are talking about a range of between two months from now to get to judgment on that appeal and, at the other end of the scale, the more cautious end, possibly up to 9 or 10 months. There is a further appeal to the highest appellate level in the State of Michigan, but permission would be required for such an appeal and we have no indication how long that might delay the final and conclusive resolution of this dispute in Michigan.
9. In the meantime, in May 2011, Mrs Thursfield brought proceedings here to enforce the US judgment that she had by then obtained. HHJ Purle granted a freezing order, and I think I am right in saying that there is also a freezing order in the State of Michigan. There was a hearing before Judge Purle on 8 July 2011. The freezing order was then continued until a date in September and then it was extended until after the full hearing that was planned for the end of November 2011. That hearing took place over four days (28 and 29 November and 5 and 6  December 2011), and on the last day HHJ Purle made an order in favour of the claimant, maintaining the freezing order in position, and he also made the disclosure order, breach of which led to the committal order which is under appeal. He ordered Mr Thursfield to provide certain information as to his assets and as to the source of the funding that had taken place for his legal expenses in the present litigation.
10. Mr Thursfield appealed against that order and sought a stay of the obligations under it pending the appeal. Lewison LJ granted permission to appeal, but adjourned the question of a stay. Etherton LJ at an oral hearing dismissed the application for a stay and furthermore, on the application of Mrs Thursfield, ordered security for the costs of the appeal. Mr Thursfield chose not to provide that security, so the appeal was struck out, but he also failed to comply with the disclosure order despite the refusal of a stay.
11. Accordingly, in July 2012 Mrs Thursfield applied to commit Mr Thursfield to prison for breach of the order. The committal application came before Judge Purle for the first time, I think I am right in saying, on 22 August 2012. By that time, Mr Thursfield had just sworn two affidavits in response, one of them I think that day or the previous day. They were served on that day. He was not present in court.
12. The judge adjourned the application to 9 November 2012. He gave directions about evidence and he ordered that Mr Thursfield must attend the hearing. In the meantime, before the matter came on, on 9 November Mr Thursfield swore one further affidavit and his solicitors provided some further information. Shortly before the hearing was due, Mr Thursfield's solicitors informed those acting for Mrs Thursfield that Mr Thursfield would not be attending the hearing and that counsel would be applying for an adjournment of the hearing.
13. On 9 November, as forecast, Mr Thursfield was absent from the court notwithstanding the judge's order. Mr Maguire applied on his behalf for an adjournment pending the hearing of the outcome of the Michigan appeal, a point which could have been made at the hearing in August but was not. The judge heard that application and gave a short judgment declining the application for the adjournment, and he therefore proceeded to hear the application on its merits.
14. In his second judgment of that date, having heard submissions on both sides, he held that Mr Thursfield was in breach of the disclosure order and that, even with the benefit, such as it was, of the information supplied at the latest stage in his last affidavit and the information given by his solicitors, the information disclosed was inadequate to comply with the obligations under the order.
15. Having held that there had been breaches of the order, which were continuing, and that accordingly Mr Thursfield was in contempt of court, he considered penalty, and he made the order that Mr Thursfield be committed to prison for 24 months, of which he described 12 months as being attributable to the punitive element of a committal order and the remaining 12 months as attributable to the coercive aspect of such an order.
16. By the present appeal, which as I have said is brought as of right, Mr Thursfield does not challenge the finding that he is in breach of the disclosure order and that he is therefore in contempt of court. It is put on two distinct grounds: the first is the judge's refusal to adjourn the case; and the second, which is really the substance of the appeal, such as there is any, is that the sentence was manifestly excessive.
17. The application for an adjournment before the judge was put on the basis of the pending appeal in Michigan. The judge refused that application, both because it was made so late and because, even if the appeal in the United States were to succeed, there would be an outstanding liability of Mr Thursfield to his former wife, and the disclosure order might still be useful.
18. Mr Maguire did not amplify in his oral submissions the points made in his skeleton argument to the effect that the judge ought to have adjourned the hearing. Given that the Michigan appeal hearing is still awaited, it seems to me that it would have been eccentric (to say the least) for any judge to have acceded below to the application for an adjournment. There is no substance in that ground of appeal.
19. Mr Maguire did float, in support of that ground, the proposition that the judge, on adjourning the hearing, could have ordered further compliance with the order in the meantime on the basis that committal should be a last resort. That overlaps really with points that he makes in support of his second ground of appeal, but even if it had any substance, it would be undermined by the fact that the defendant has failed to take any steps, however late and even pending the appeal, to comply with the disclosure order. I need say no more about the judge's refusal of the adjournment application.
20. So far as sentence is concerned, as I say the judge gave a second judgment, which is a good deal longer. He referred to Mr Thursfield's inadequate compliance, particularly in an affidavit sworn on 21 August 2012, with the disclosure order as regards how his legal representation was being funded, who provided the funds, the terms on which the funds are being provided and, to the best of his knowledge, the source of the funds of the provider.
21. In response to that obligation, Mr Thursfield said only that they were funded by his present wife, Rachel. There has since been no attempt to comply with the other aspects of that particular order, even in the face of the judge's inevitable holding that the information given failed to comply properly with the order because of its failure to address the other aspects of that part of the order, and despite the absence of any challenge on appeal to the finding of breach.
22. The judge described that breach as "plain, manifest and deliberate". Mr Maguire takes no issue with that, and it would be impossible for him to do so in any event. Later in his judgment, the judge identified other breaches of other parts of the disclosure order, into the detail of which I need not enter. These too are not disputed on appeal.
23. In the following part of the judgment, the judge dealt in detail with the inadequacy of Mr Thursfield's purported compliance with the disclosure order and the falsity of some of his explanations. Again, I need not go into any detail of that because that aspect of the judgment is another which not challenged in any way.
24. Then, at paragraph 46 of his judgment, he turned to the question of sentence. He referred to the guidance given in a number of recent cases, several of them arising from the massive saga of litigation brought by the JSC BTA Bank of Kazakhstan against a number of its former officers, litigation which has occupied the Commercial Court, the Chancery Division and the Court of Appeal for a great deal of time.
25. Of these cases, the judge mentioned two recent cases in the Court of Appeal. For my part I find most helpful, as I think the judge did, the judgment of Jackson LJ in JSC BTA Bank v Solodchenko [2011] EWCA Civ 1241; [2012] 1 WLR 350. In his judgment, my Lord reviewed a lot of the recent authorities as to contempt cases involving breaches of freezing orders, sometimes involving a breach of the freezing order aspect itself, sometimes involving breaches of disclosure obligations. At paragraph 55 of his judgment, to which Judge Purle referred in his judgment, my Lord derived a number of propositions concerning the sentence for civil contempt when that contempt consists of non-compliance with the disclosure provisions of a freezing order. So, as the judge found, this passage is of particular and immediate relevance to the present case. My Lord made the point that freezing orders are made for good reason in order to prevent the dissipation or spiriting away of assets and that "any substantial breach of such an order is a serious matter, which merits condign punishment." Condign punishment normally means a prison sentence, though there may be cases where a fine is sufficient. I then quote again:

"(3) Where there is a continuing failure to disclose relevant information, the court should consider imposing a long sentence, possibly even the maximum of two years, in order to encourage future co-operation by the contemnor."

26. My Lord went on to make the point at paragraph 56 that the court may well, in the case of continuing breach, indicate what portion of the sentence should be regarded as "punitive" and what portion of the sentence the court might consider remitting in the event of prompt and full compliance thereafter, which might be called "the coercive aspect".
27. With the benefit of that guidance, Judge Purle proceeded to refer to a number of characteristics of the case before him. He regarded the failure of the defendant to attend the hearing in face of an order requiring him to do so as an aggravating factor. He said that the punishment in the present case should be at the higher end of the scale. He rejected the idea of giving Mr Thursfield a last opportunity to comply or of suspending any sentence. He indicated, as I have said, that his sentence would be 24 months, which is of course the statutory maximum for a committal order, but that 12 months of that should be regarded as the punitive element; the second period of 12 months is a coercive measure, which he held was appropriate. Thus, while the overall sentence is at the statutory maximum, if Mr Thursfield were belatedly to comply and to comply properly, he would be able to apply to be released after serving half of the sentence.
28. Mr Maguire puts the appeal on the basis that this sentence, being at the statutory maximum, is plainly and manifestly excessive. He relies on a number of analogies. He points to the fact that, although the liability on the Michigan judgment in this case is based on a contractual agreement between the parties, the agreement was in the context of matrimonial proceedings and it is therefore in one sense a family case. The underlying dispute was certainly a family dispute. That being so, he prayed in aid the observations of Hale LJ (as she then was) in the case of Hale v Tanner [2000] 1 WLR 2377. That is a case which is helpful in its proper context, but it seems to me of no conceivable relevance to the present context. I derive no assistance from it.
29. In his skeleton argument, he raised a number of points, to which Mr Ashworth's response in his skeleton was that these were points either not taken at all or barely taken before the judge, and therefore the judge can hardly be criticised for not having taken them into account. Even if they had been raised before the judge, it seems to me they would have been of no substance. Thus, Mr Maguire argues that primacy should have been given to the coercive element of the sentence. As it seems to me, that is a matter of judgment. In support of that, Mr Maguire cited a case on very different facts in the Court of Appeal to which I was party. That is so different that I find it not at all helpful.
30. It is said that the judge should have taken account of the defendant's age, which is 67, of his "previous good character", of his admission in the affidavit sworn in October 2012 of a failure to comply, and of the fact that he had made an attempt to comply. For my part I see no reason why the judge should have made any allowance for the defendant's age. This is not a case in which there is any evidence-based argument as to personal factors of ill-health or otherwise of any relevance to the punitive operation of a committal order.
31. It may be that Mr Thursfield has been, in other respects, of what might be called good character, but so far as the litigation is concerned, including what little we know of the litigation in Michigan, and certainly in the UK proceedings, his failure to comply with orders has been persistent and protracted, and I find it impossible to regard him as being of "good character" in that respect. Likewise what one might call "attempts" to comply with the order were manifestly inadequate, as the judge observed, and his acknowledgement of such failure was belated and also in itself inadequate.
32. I also do not accept the proposition that the judge should not have regarded the defendant's failure to attend as an aggravating factor. Indeed, we raised with Mr Maguire the question of whether it was proper for Mr Thursfield to bring this appeal, which of course he does as of right, while having been in defiance of the order to attend before the judge at the committal hearing, and remaining out of the jurisdiction so that he can decide whether or not he submits himself to the committal order, which will stand notwithstanding this appeal. For my part, I see no reason why Judge Purle should not have treated it as an aggravating factor. The fact that at the time of the hearing before the judge there was no money judgment in this jurisdiction in favour of Mrs Thursfield against her former husband is neither here nor there as regards the significance of the breach of the disclosure order.
33. Mr Maguire referred in his skeleton argument, by way of contrast, to a wide variety of other cases including some in the JSC BTA Bank saga. I derive no assistance from any of them and I deprecate the citation of cases which are really said to be precedents or guidance on the facts. Each case, particularly of committal, depends on its own facts, and a comparison with the facts of other cases, unless they are so closely related as to be in effect the same case, where there might conceivably be arguments as to inconsistency between different contemnors in relation to the same contempt, seems to me to be altogether unhelpful.
34. Mr Maguire concluded his skeleton argument by submitting, on a variety of bases, that, rather than leaving the committal order in place, the court should either order the defendant to file further evidence to comply with the parts of the disclosure order with which he had not yet properly complied or should suspend the committal order, giving him a further opportunity to comply.
35. I have to say I find that submission remarkable given the unchallenged finding of breach and that it has been open to the defendant to put in further evidence at any time by way of compliance, ever since the judge's order was made. That order was not stayed pending the first appeal against the order and it has not been stayed at any stage since. If Mr Thursfield had any serious intention to comply in that respect, he should have done so long ago.
36. In his succinct submissions to us orally this morning, Mr Maguire has majored on the fact that the Michigan appeal is most unfortunately still pending. He has told us about the forecasts has to how long it may remain outstanding. He says that Mr Thursfield is optimistic that his appeal will succeed and that a liability of $5.8 million or thereabouts plus interest will be reduced to a matter of some six figures, which, taking into account what has already been received by Mrs Thursfield, would leave outstanding no more than something of the order of the $240,000, which Judge Purle three days ago ordered Mr Thursfield to pay by 1 July.
37. So long as any sum remains outstanding which is not challenged, it may be that the disclosure order remains of value to Mrs Thursfield in her considerably troubled attempt to enforce her ex-husband's obligations under the settlement agreement. The position might conceivably be different if Mr Thursfield had taken the opportunity, which has been open to him for months if not years, to pay the amount that, on any footing, is not at issue under the Michigan appeal, in which case he might be able to say that the outcome of the Michigan appeal makes the difference between there being some amount due from him to his ex-wife and there being no remaining amount due to his ex-wife. That is not the case.
38. Equally, as I have said, he could have complied with the disclosure order, which is still binding on him, and he could in some sense, therefore, if he had done it properly, have drawn the sting of the contempt which he has been found to have committed. He could have done so before the committal order was made, and he could have done so at any time during the several months since the committal order was made. In such a case, it may be that a court on appeal would take a different view of the substance of the appeal against the committal order.
39. As it is, Mr Thursfield remains unquestionably indebted to his wife in a certain amount for which she has now obtained an order of the judge. He remains in contempt and in breach of the disclosure order, and it seems to me that despite the submissions, both written and oral, which Mr Maguire has ably made on his behalf, there was no error of principle of any kind in the judge's assessment of the proper penalty to be imposed for these breaches. There is clearly no error of principle, nor is it a case where one can, I think, legitimately say that the order was manifestly excessive.
40. It may be that if the judge had expressed his two-year sentence as being entirely punitive, then some exception could have been taken to such a formulation. But that was not the judge's approach. Equally, it may be that a different judge would have imposed a shorter sentence or a differently formulated sentence. But it seems to me that the judge was entitled to regard these breaches as serious and to take into account the fact that Mr Thursfield remained in breach, that he had put forward some half-hearted attempts to go some way towards compliance in the face of the committal application, but that he remained in breach of the order and that the court ought to impose a significant penalty, both in order to punish and in order to impose upon Mr Thursfield an inducement, even at the 11th hour and the 59th minute, to comply with the disclosure order, which he did by formulating his sentence as being as regards 12 months punitive and as regards a further 12 months coercive. I see no error in principle and no manifest excess over what was appropriate in that sentence.
41. Accordingly, I would dismiss this appeal.

Lord Justice Jackson:

42. I agree that this appeal should be dismissed, for the reasons given by Lloyd LJ. I only wish to comment on one aspect of this appeal. The appellant did not attend the hearing before HHJ Purle on 9 November 2012 despite the direction of the court that he should attend. The appellant has not subsequently submitted to the jurisdiction of the court or served any part of the sentence imposed.
43. As the law now stands, a contemnor who has been sentenced to a term of imprisonment has a right of appeal to the Court of Appeal without any need for permission (see section 13 of the Administration of Justice Act 1960 and Rule 52.3(1)(a)(i) of the Civil Procedure Rules 1998). If there were a requirement for permission, I have little doubt that, in a case such as this, any grant of permission would be made subject to a condition that the appellant must attend the hearing of his appeal in person.
44. It is repugnant to the proper administration of justice that a contemnor can flout orders of the court, then absent himself from the committal hearing, then avoid serving whatever prison sentence is imposed and then finally avail himself of the procedures of the Court of Appeal, whilst enjoying the shelter of some safe haven overseas.
45. I respectfully suggest that this case and some other recent cases arising out of banking fraud call for the attention of law reformers. It may be thought that persons who have been committed to prison for contempt should only be entitled to appeal with permission. Even if it is not thought appropriate to impose a general requirement for permission in committal cases, I would suggest that at the very least there should be a permission requirement in cases where the appellant has refused to submit to the jurisdiction of the court.
46. In the present case, we have of course heard the appellant's appeal despite his absence. As stated at the start of this judgment, I entirely agree that Mr Thursfield's appeal should be dismissed.

Lord Justice Beatson:

47. I agree with the judgment of Lloyd LJ as to the disposition of this appeal. I also agree that the position of a person in contempt who has absented himself merits the attention of law reformers. There is a need to balance the paramount importance which the court must attach to the observance of court orders and the interests of justice to an individual. These courts are well used to dealing with those who have not complied with orders. In the litigation involving the JSC BTA bank, there have been attempts, refused by this court, to impose conditions on a contemnor's appeal.
48. For the reasons given by Jackson LJ, it is, in my view, also appropriate for it to be examined whether a further restriction would assist the court in ensuring that it is able to give paramount importance to observance of court orders.
49. If the interests of the justice of the person who has lost always outbalance any other consideration, the fact that the court is hearing applications from such persons and appeals from those who in effect choose which orders they comply with would risk the reputation of the court and are an affront to the administration of justice.

Order: Appeal dismissed