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
MRS JUSTICE ROSE
HC13F00948

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/11/2014

Lord Justice Jackson:

1. This judgment is in six parts:

Part 1. Introduction	Paragraphs 1 to 7
Part 2. The facts	Paragraphs 8 to 16
Part 3. The present proceedings	Paragraphs 17 to 31
Part 4. The appeal to the Court of Appeal	Paragraphs 32 to 51
Part 5. The appellant's skeleton argument	Paragraphs 52 to 57
Part 6. Executive summary	Paragraphs 58 to 62

Part 1. Introduction
2. This is an appeal against a decision that the first defendant in a chancery action is guilty of two contempts of court by reason of untruthful statements in his affidavit. The main issue is whether the judge's findings of contempt can stand despite a number of procedural irregularities which are now admitted.
3. The claimants in the action and the respondents to this appeal are (1) Invideous Ltd ("Invideous"), (2) Invideous Dooel-Skopje ("IDS") and (3) Pierre Andurand ("Mr Andurand"). Invideous Ltd changed its name to Inplayer Ltd on 2^nd October 2014. I shall continue to refer to that company by its original name.
4. The defendants in the action are (1) Jack Thorogood ("Mr Thorogood"), (2) NOVP Dooel-Skopje ("NDS"), (3) Igor Micov ("Mr Micov"), (4) NOVP Ltd ("NOVP") and (5) NOVP LLC ("NL"). Mr Thorogood is the only defendant alleged to have been in contempt. He alone is appellant in this court.
5. Other companies who will feature in the narrative are Dolphin Television Ltd ("Dolphin") and Technicolor Media Services Limited ("Technicolor").
6. I shall refer to the European Convention on Human Rights as "ECHR". The ECHR article 6 provides:

"Right to a fair trial

1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.

…

3. Everyone charged with a criminal offence has the following minimum rights:

(a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him;

(b) to have adequate time and facilities for the preparation of his defence;

(c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require;"

7. After these introductory remarks I must now turn to the facts.
Part 2. The facts
8. Invideous Ltd ("Invideous") was incorporated on 1^st July 2010. The business of Invideous was concerned with monetising video content on the internet. The nature of that business is more fully described in paragraphs 8 to 12 of the judgment below, but the details are not relevant to the present appeal.
9. Invideous had a wholly owned subsidiary company, Invideous Dooel-Skopje ("IDS"), which was incorporated in Macedonia. IDS employed the technical people who designed and developed the products which Invideous marketed in the UK. Mr Igor Micov was the manager of IDS in Macedonia.
10. There were four principal shareholders of Invideous namely Mr Jack Thorogood, Mr David Goffin, Mr John Doyle and Mr Michael Wells. Mr Thorogood, Mr Goffin and Mr Wells were directors of the company.
11. Mr Thorogood was the active director of Invideous, who worked full time for the company and oversaw its operations. The other directors and shareholders provided financial backing through the medium of a company which they controlled called Dolphin Television Ltd ("Dolphin"). Between July 2010 and June 2011 Dolphin made interest free loans totalling £467,000 to Invideous.
12. In June 2011 a potential investor, Pierre Andurand, came onto the scene. Nicolas Granatino, an associate of Mr Andurand, approached Mr Thorogood. He said that Mr Andurand was willing to invest £900,000 in the business. A period of discussion and negotiations then followed.
13. On 22^nd November 2011 Mr Thorogood entered into a written service agreement with Invideous, setting out his obligations as director. Mr Thorogood was also appointed manager of IDS. In December 2011 Mr Andurand invested the promised £900,000 in Invideous. On 8^th December 2011 Mr Doyle, Mr Goffin, Mr Wells, Mr Andurand, Mr Thorogood and Invideous entered into a shareholders' agreement. Under that agreement Mr Goffin and Mr Andurand each held 30% of the shares of Invideous. Mr Thorogood held 11.65 %.
14. During 2012, unknown to the other directors and shareholders, Mr Thorogood and Mr Micov set up another business operating in the same field as Invideous. Mr Thorogood established three companies to run the new business. They were NOVP Ltd ("NOVP"), a UK company, NOVP Dooel-Skopje ("NDS"), a company incorporated in Macedonia, and NOVP LLC ("NL"), a company incorporated in Delaware, USA. Mr Micov became the manager of NDS. I shall refer to the new business operation which Mr Thorogood and Mr Micov set up as the "NOVP business".
15. In February 2003 there was a falling out between Mr Thorogood and his colleagues in Invideous. On 25^th February 2013 Mr Thorogood resigned as a director of Invideous. On 28^th February 2013 he resigned as director of IDS.
16. At about the same time the other directors of Invideous discovered about the NOVP business which Mr Thorogood had been operating since 2012. They took the view that this was a serious breach of his duties as director and under the shareholders' agreement. Accordingly they commenced the present proceedings.
Part 3. The present proceedings
17. On 1^st March 2013 Invideous, IDS and Mr Andurand made a "without notice" application for an injunction. The matter came before Mr Justice Mitting, who granted an interim injunction restraining Mr Thorogood from competing with the claimants and requiring him to deliver up all material belonging to the claimants.
18. On 8^th March 2013 the claimants issued a claim form in the Chancery Division of the High Court, naming Mr Thorogood as first defendant, NDS as second defendant and Mr Micov as third defendant. Shortly afterwards they joined NOVP as the fourth defendant and NL as fifth defendant.
19. The return date for the interim injunction was 8^th March 2013. There seems to have been a short delay. The next hearing took place on 11^th March. On that occasion the court made an order by consent continuing the injunction until trial or further order. This order plays a crucial role in the present appeal. I shall refer to it as "the consent order". Paragraph 8 of the consent order provided:

"The First Defendant do within 7 (seven) days of the date of this order provide and swear an Affidavit detailing each and every breach by him of the Shareholders' Agreement, including:

a. Details of discussions or correspondence (in any form) that the First Defendant (or anyone acting on his instructions or on his behalf) has had with each employee of the First and/or Second Claimants in the preceding 6 months in connection either with the termination of their employment with the First and/or Second Claimants or any offer of employment with the Second Defendant;

b. Details of any discussions or correspondence (in any form) that the First Defendant (or anyone acting on his instructions or on his behalf) has had with any client or partner of the First and/or Second Claimants in connection either with the termination of the provision of services to that client or partner by the First and/or Second Claimants, or in connection with the transfer (or possible transfer) of that client or partner's business to the Second Defendant or any other business (including, for the avoidance of doubt, any attempt by the First Defendant (or anyone acting on his instructions or on his behalf) to solicit or entice the client or partner to do business with someone other than the First and/or Second Claimants (whether that attempt was successful or not)."

20. On 15^th March 2013 Mr Thorogood filed an affidavit, as required by paragraph 8 of the consent order. In paragraph 10 he stated:

"NOVP did not begin trading until November 2012. Until very recently, it has had only one client, and that client is not a client of IL or ID (nor has it ever had any connection with IL or ID)."

It is common ground that the client to whom Mr Thorogood was referring in that paragraph was Technicolor.

21. In paragraph 14 of his affidavit Mr Thorogood stated that he had terminated the employment of numerous employees of IDS in or around February 2013. He gave the names of those employees and summarised the conversations which he had had with each person.
22. On 28^th March 2013 Mr Justice Sales made an order reformulating the existing injunction, so as to clarify what Mr Thorogood was prohibited from doing. Paragraph 15 of Mr Justice Sales' order stated that a business would be in competition with Invideous if it involved:

"The provision to clients of online video platforms and/or online video platform services, including, in the context of provision of such platforms, and/or services, online pay-per-view, online advertising software, monetization solutions, online storage, transcoding, embeddable players, bandwidth, custom app creation, 3^rd party OVP integrations, API or multi-channel publishing."

23. The claimants took the view that Mr Thorogood was not complying with any of the orders made by the court. Accordingly on 24^th April 2013 they applied to commit him to prison for contempt of court.
24. The contempt application came on for hearing before Mr Justice Vos on 13^th June 2013. There was insufficient time to deal with the matter on that occasion. Mr Justice Vos ordered that the committal application be adjourned to be heard at the same time as the trial of the action.
25. On 15^th July 2013 the claimants amended their application to commit. They asserted that Mr Thorogood had committed two separate contempts, namely carrying on a competing business and failing to take reasonable steps to ensure that the other defendants complied with the court's orders.
26. Both the hearing of the committal application and the trial of the action commenced before Mrs Justice Rose ("the judge") on 6^th September 2013. The claimants were represented by counsel. Mr Thorogood appeared in person. The other defendants did not appear and were not represented. The trial lasted for nine days. Mr Granatino, Mr Goffin and an expert witness, Mr Jezequel, gave evidence for the claimants. Mr Thorogood gave evidence in his own defence.
27. The judge handed down her reserved judgment on 11^th October 2013. In relation to the substantive issues tried, she held that Mr Thorogood was in breach of his contractual and fiduciary duties in the following respects:

i) setting up and working for NDS;

ii) pursuing a prospective deal with Technicolor on behalf of NDS rather than Invideous;

iii) pursuing business opportunities with a company known as Nexeven on behalf of NDS, rather than Invideous;

iv) dismissing or arranging the dismissal of employees of IDS in October 2012, so that they could be re-employed by NDS.

28. In relation to the committal application, the judge rejected all the allegations of contempt which had been advanced by the claimants in their application. Instead of dismissing the contempt application the judge went on to consider two further instances of contempt, which she found proved. These were:

i) paragraph 10 of Mr Thorogood's affidavit sworn on 15^th March 2013 was untruthful and a deliberate act of disobedience to the consent order.

ii) paragraph 14 of Mr Thorogood's affidavit sworn on 15^th March 2013 was deliberately untrue and misleading. It omitted the names of ten members of staff whom Mr Micov had dismissed from the employment of IDS and re-employed on behalf of NDS during October and December 2012. Mr Micov had done this on the instructions of Mr Thorogood. Mr Thorogood was thereby in breach of the consent order.

29. On 28^th November 2013 the judge granted retrospective permission for the claimants to re-amend their committal application so as to include the contempts which she had found proved. Mr Thorogood then prepared a witness statement for the sentencing hearing.
30. On 18^th February 2014 the judge heard submissions in relation to sentence. She then delivered a further judgment in which she sentenced Mr Thorogood to 42 days imprisonment for the first contempt and 28 days imprisonment for the second contempt. She directed that the prison sentences should run concurrently. Very wisely the judge granted bail pending appeal.
31. Mr Thorogood is aggrieved by the two findings of contempt. Accordingly he has appealed to the Court of Appeal.
Part 4. The appeal to the Court of Appeal
32. By a notice of appeal dated 3^rd March 2014, Mr Thorogood appealed to the Court of Appeal against the committal order. He asserted that the judge's decisions were demonstrably wrong and that there were serious procedural mistakes and other irregularities in the proceedings.
33. Shortly after commencing his appeal Mr Thorogood obtained legal aid. Accordingly both sides have been represented in the Court of Appeal.
34. It is not easy to isolate the real issues in this appeal from the lengthy and non-compliant skeleton argument prepared by Mr Adam Tear, who represents Mr Thorogood. At the start of the appeal therefore the court in discussion with Mr Tear identified his four essential complaints. They are:

i) The allegations of contempt were not formulated or notified to Mr Thorogood until after the hearing at which the judge found these instances of contempt to be proved.

ii) Because the trial and the committal hearing took place at the same time Mr Thorogood was effectively compelled to give evidence.

iii) Mr Thorogood was unrepresented, because no-one told him of the availability of legal aid in contempt proceedings.

iv) The claimants did not obtain permission to make a committal application in accordance with CPR rules 81.12 and 81.14.

35. I shall refer to these four complaints as grounds (i), (ii), (iii) and (iv).

Ground (i)

36. Mr Julian Milford for the claimants (who did not appear below) concedes that there has been a breach of article 6.3 (a) of the ECHR. Mr Thorogood was not told of the allegations against him until after being found guilty.
37. Mr Milford was right to make that concession. I would add that it is also a principle of common law which predates the Human Rights Act 1998 that every accused person is entitled to be informed of the charges which he faces.
38. Mr Milford submits that despite the procedural irregularity the judge's decision should stand. The case against Mr Thorogood on both contempts was very strong. Furthermore he had and took the opportunity to put forward his substantive defence in respect of paragraphs 10 and 14 of his affidavit during the sentencing hearing.
39. I am afraid this will not do. A judge hearing a committal application should confine himself or herself to the contempts which are alleged in the application notice. If the judge considers that other alleged contempts require consideration, the correct course is to invite amendment of the application notice and then provide any necessary adjournment so that the respondent can prepare to deal with those new matters. I therefore uphold the first ground of appeal.

Ground (ii)

40. A person accused of contempt, like the defendant in a criminal trial, has the right to remain silent: see Comet Products UK Ltd v Hawkex Plastics Ltd [1971] 2 QB 67. It is the duty of the court to ensure that the accused person is made aware of that right and also of the risk that adverse inferences may be drawn from his silence.
41. If the committal application is heard at the same time as other issues about which the alleged contemnor needs to give evidence, he is placed in the position where he is effectively deprived of the right of silence. That is a serious procedural error: see Hammerton v Hammerton [2007] EWCA Civ 248. This is precisely what happened in the present case. Furthermore no-one told Mr Thorogood that an alleged contemnor has the right not to give evidence.
42. If the contempt application had been the subject of a separate hearing and Mr Thorogood had been informed of his right not to give evidence, he might have exercised that right. He could then have dealt with the contempt allegations by way of submissions. In that regard it should be noted that the judge based her two findings of contempt upon answers which Mr Thorogood had given under skilful cross-examination.
43. Mr Milford points out that Mr Thorogood was reminded of his right not to incriminate himself. That is true, but it is not sufficient. Mr Thorogood should have been told that he was not obliged to give evidence. Furthermore the litigation should not have been managed in a way that forced Mr Thorogood into the witness box.
44. Mr Milford submits that even if there had been a separate hearing of the contempt application, the result would have been the same. If Mr Thorogood gave evidence, he would have been caught out in cross-examination. If he had declined to give evidence, the court would have drawn adverse inferences.
45. What Mr Milford says may well be true. Indeed, as things have turned out, Mr Thorogood may be a very lucky man. Nevertheless there can be no question of upholding findings of contempt against a person who has been deprived of valuable safeguards in the circumstances of this case.
46. I therefore uphold the second ground of appeal.

Ground (iii)

47. A committal application has the character of criminal proceedings. The alleged contemnor is therefore entitled to legal aid, so that he can be properly represented: see Kings Lynn v West Norfolk Council v Bunning (Legal Aid Agency, interested party) [2013] EWHC 3390 (QB); [2014] 2 All ER 1095.
48. Unfortunately no-one told Mr Thorogood of his right to legal aid during the first instance proceedings. Mr Thorogood subsequently learnt of his entitlement, with the result that he now has legal aid and is represented in this court.
49. Mr Milford accepts that the hearing below proceeded without anyone telling Mr Thorogood of his right to legal aid in relation to the contempt application. Mr Milford also accepts that Mr Thorogood should have been told of his entitlement and then given an opportunity to instruct lawyers of his choice. Therefore there has been a breach of common law principles of fairness and ECHR article 6.3 (c).
50. I therefore uphold the third ground of appeal.
51. In the result the judge's findings of contempt cannot stand. It is not necessary to deal with the fourth ground of appeal, on which we have not heard full argument.
Part 5. The appellant's skeleton argument
52. I have protested previously about the poor quality and excessive length of some skeleton arguments in this court. On occasion the Court of Appeal has deprived successful parties of the costs of preparing their skeletons. So far, unfortunately, this message has failed to reach the profession. Mild rebukes to counsel and gentle comments in judgments have no effect whatsoever. Therefore, with regret, I must speak more bluntly.
53. The rules governing skeleton arguments for the Court of Appeal are contained in paragraph 5 of Practice Direction 52A and paragraph 31 of Practice Direction 52C. (Paragraph 32 deals with supplementary skeleton arguments.) These rules do not exist for the benefit of judges or lawyers. They exist for the benefit of litigants, namely (a) to ensure that their contentions are presented most effectively to the court and (b) to enable the court to deal with its caseload expeditiously, bearing in mind that there is always a queue of appellants and respondents waiting for their matters to be heard.
54. In essence an appellant's skeleton should provide a concise, user friendly introduction for the benefit of the three judges who will probably have had no previous involvement in the case. The skeleton should then set out the points to be argued clearly and concisely, with cross-references to relevant documents and authorities, in the manner prescribed by Practice Direction 52A paragraph 5. The skeleton should not normally exceed 25 pages. Usually it will be much shorter. In a straightforward case like this the skeleton argument would, or at least should, be much less than 25 pages.
55. As anyone who has drafted skeleton arguments knows, the task is not rocket science. It just requires a few minutes clear thought and planning before you start. A good skeleton argument (of which we receive many) is a real help to judges when they are pre-reading the (usually voluminous) bundles. A bad skeleton argument simply adds to the paper jungle through which judges must hack their way in an effort to identify the issues and the competing arguments. A good skeleton argument is a real aid to the court during and after the hearing. A bad skeleton argument may be so unhelpful that the court simply proceeds on the basis of the grounds of appeal and whatever counsel says on the day.
56. The appellant's skeleton argument in this case does not comply with the rules. It is 35 pages of rambling prolixity through which the reader must struggle to track down the relevant facts, issues and arguments.
57. Although the successful appellant in this case is entitled to his costs, he will not recover the costs of the skeleton argument against the respondents to the appeal.
Part 6. Executive summary
58. The claimants applied to commit Mr Thorogood, the first defendant, to prison for contempt of court. The contempt application was heard at the same time as the trial of the action. Mr Thorogood was unrepresented at the hearing.
59. The judge rejected the allegations of contempt which the claimants advanced, but found two other contempts proved. She sentenced Mr Thorogood to a total of six weeks imprisonment, stayed pending appeal.
60. In my view the judge's decision cannot stand for three reasons:

i) Mr Thorogood was not informed at any time before judgment of the two alleged contempts which the judge found proved.

ii) Mr Thorogood was not informed of his right not to give evidence. Being unrepresented he would not know of that right. The litigation was so managed that Mr Thorogood had no choice but to give evidence.

iii) Mr Thorogood was not informed of his entitlement to legal aid. As a result he was unrepresented when facing the equivalent of a criminal charge.

61. The appellant's skeleton argument does not comply with the rules. Therefore the appellant will not recover the costs of his skeleton argument against the respondents.
62. If my Lords agree, this appeal will be allowed and the findings of contempt will be quashed.

Lord Justice Lewison:

63. I agree and I specifically endorse paragraphs [52] to [57] of Jackson LJ's judgment.

Lord Justice Treacy:

64. I agree with both judgments.