England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30/03/2010

Peter Smith J :

INTRODUCTION

1. This judgment is in respect of the First Claimant's application issued on 12th February 2010 for an order that the suspension of the execution of my order dated 30th April 2009 be lifted with the result that the suspended sentence of imprisonment for contempt of court for 12 months made by that order take immediate effect.
2. A previous application on the issue came before me on 29th January 2010 and I gave directions as to the issuing of the application, filing of evidence in support and the filing of evidence in reply. The Claimant is represented by Mr Baldwin QC. The First Respondent appeared in person. The Second Respondent Separator Spares International (UK) Ltd ("SSI (UK)") appeared by its Director Ms Julie Shotter. The other director Brett Anthony Nicholls did not appear.
3. At the end of the hearing I intimated to the First Respondent that I was satisfied beyond reasonable doubt that he had not complied with the conditions attached to the suspension of the order for imprisonment. Accordingly I intimated that I would therefore lift the suspension and send him to prison when I hand down this judgment subject to what might be said on his behalf in mitigation at that time.
4. This judgment sets out the reasons for my determination.

BACKGROUND

5. The Claimant is involved in the business of the design, manufacture and sale of mechanical devices including marine separators.
6. A company Separator Spares International Ltd ("SSI") also carried on the business of manufacturing and supplying spare parts for inter alia marine separators. Mr Pacy the First Respondent was a director and shareholder of SSI. On 15th April 2008 the Claimant instituted proceedings against SSI and Mr Pacy for breach of confidence, infringement of copyright, inducing breach of contract and a common design to commit the same acts. It sought injunctive relief, delivery up, damages or profits and all necessary and consequential accounts and enquiries.
7. On 9th April 2008 Floyd J made a Search Order ("the Search Order"). The events which occurred on the execution of the Search Order led the Claimant to issue an application on 5th November 2008 to commit Mr Pacy to prison for contempt of court for being in breach thereof. Norris J on 27th November 2008 made directions for the hearing of that application. Ultimately it came on before me on 29th-30th April 2009. I refer to my judgment of 30th April 2009. That judgment sets out the background to Search Orders and the details of the breaches of the Search Order which were admitted by Mr Pacy (and which I would have found beyond reasonable doubt had been committed in the light of the evidence of the Claimant). It is plain that Mr Pacy deliberately obstructed the order and its execution. He did this because he knew that he had thousands of copies of the Claimant's technical drawings in his possession at his business premises. He hid the copies of those drawings on a website which was only accessible by a link on the computer system in his office. He made arrangements with Mr Nicholls his IT manager (and now a director of SSI (UK)) that in the event of an emergency call Mr Nicholls would delete all indications on SSI's computer of the existence of any connection to the website where the copies of the drawings were being hidden. It was therefore an extremely serious contempt and ordinarily ought to have led to an immediate period of imprisonment. At the hearing however Mr Pacy admitted the contempts and offered to assist the Claimant in its investigation and enforcement of the misuse by a number of companies and organisations (of which SSI was one) worldwide of the Claimant's drawings. The Claimant accepted undertakings as embodied in the order I made on 30th April 2008 ("the Undertakings Order"). By the Undertakings Order Mr Pacy undertook:-

"… that he will without limit in time provide all necessary co-operation and information, including the provision of evidence:-

(a) identifying all those persons firms or companies in any part of the world who are using, have used or have had drawings or other documents containing technical information belonging to [the Claimants];

(b) as to what has become of and the whereabouts of such drawings and documents; including the backup tapes (for the Separator Spares International Ltd servers) that he claims to have destroyed."

8. On the proffering of that undertaking which I accepted I made an order committing Mr Pacy to prison for contempt for a period of 12 months for each of his contempts sentences to be concurrent.
9. I directed further that there would be another hearing before me in or about October 2009 when I should consider further the sentences imposed and the continuation of the suspension. I directed the Claimant's solicitors to produce a report concerning the compliance by Mr Pacy with the undertakings for the hearing.
10. I suspended the execution of the order for imprisonment on condition that Mr Pacy complied with the undertakings. He was ordered to pay the Claimant's costs on an indemnity basis to be assessed if not agreed.

SUBSEQUENT EVENTS

11. The Claimant contends that Mr Pacy has not complied with the undertakings. Thus it seeks lifting of the suspension of the order for imprisonment. It does not seek a further committal arising out of any alleged breach of the undertakings.
12. Pursuant to the Undertakings Order the Applicant's solicitors Lovells prepared a Report dated 23rd December 2009 wherein they set out numerous alleged failures on the part of Mr Pacy to comply with paragraph 3 of the Undertakings Order.
13. The reconsideration of the Undertakings Order came before me on 29th January 2010. Mr Pacy appeared in person. On that day I made an order ("the Directions Order") requiring the Applicant to issue and serve a Notice of Application seeking the enforcement by committal or otherwise of the Undertakings Order with an affidavit in support. I provided for Mr Pacy to file evidence in reply and directed the hearing be listed before me with the usual provision requiring deponents to attend for cross examination.
14. I also directed that the provision of requests for information formed part of the undertaking given by Mr Pacy in the Undertakings Order to co-operate with the Claimants and required him to disclose all the information documents relating thereto in his control. The relevant documents are set out in the schedule to the Directions Order as follows:-

"Schedule

Set out a list of all persons firms or companies who have supplied or offered to supply parts for Alfa Laval separators to Separator Spares International (UK) Limited ("SSI (UK)") or to you, to Julie Shotter, to Brett Nicholls or any person associated with SSI (UK),

setting out in respect of each person supplying or offering parts:

(a) their full names and contact details (and in the case of companies, the names of their senior managers);

(b) the type and numbers of each part supplied or offered by each such person (by reference to the relevant Alfa Laval part number and SSI (UK) part number);

and

(c) the dates of supply or offer to supply.

The list should clearly identify all persons supplying or offering to supply parts for SU machines.

With respect to any persons in this list who did not previously supply or offer to supply parts to Separator Spares International Limited, you must identify when those persons first commenced supply of first offered to supply parts so SSI (UK)."

15. Mr Pacy had during the course of correspondence following interviews which took place between him and the Claimant's solicitors following the Undertakings Order declined to provide any information in respect of SSI (UK) contending that the provision of such material would be a breach of confidence and the material was confidential to it. Messrs Lovells had pointed out in correspondence that Mr Pacy could have applied to court to deal with that issue to enable limited protected disclosure to take place. In the event he chose not to do so. However by paragraphs 7-10 of the Directions Order I required such material to be produced but provided that it would remain confidential to the solicitors and counsel for the Claimant and should not be referred to in open court without my permission. The hearing before me on 12th March 2010 took place in private and pursuant to that order Mr Pacy and SSI (UK) purported to provide the material which I ordered to be produced by the relevant provisions in the Directions Order.

EVIDENCE

16. The substantive evidence in support of the Claimant's Application was the third affidavit of Alastair Clifford Shaw sworn on 12th February 2010. He (amongst other things) exhibited the Report dated 23rd December 2009 and confirmed its veracity. He also produced transcripts of meetings that had taken place Lovells and Mr Pacy on 29th May 2009, and 30th June 2009. The application was further supported by an affidavit from Richard Edward Kelly sworn on 5th March 2010. He is the managing director of Alfa Laval Limited and he set out information he had about the supply by third parties of parts which could only be manufactured it was contended using the Claimants' drawings.

THE RESPONDENTS' EVIDENCE

17. Mr Pacy swore an affidavit pursuant to the Directions Order on 23rd February 2010 which purported to show that he had complied with the Undertakings Order and purportedly in compliance with the Directions Order. He and Mrs Shotter also swore a joint affidavit on 3rd February 2010 purporting to provide all the material which SSI (UK) was ordered to produce pursuant to the Directions Order.
18. The Claimant relied on further affidavits sworn by Mr Shaw on 5th March 2010 and an affidavit of 10th March 2010 sworn by Martin Clive Humphreys. He is the Claimant's technical manager and has worked for them for 30 years. He prepared a table setting out details of numbers of parts for some of the separator models in the Claimants range. That material was then used by the Claimant's lawyers (subject to the confidentiality) to analyse the material provided by Mr Pacy. That led to a schedule which is annexed to Mr Baldwin QC's skeleton argument which identified by the reference to the part numbers set out in Mr Humphreys' exhibit to his affidavit which parts had been supplied by SSI (UK) to SSI Poland and which had been supplied to SSI (UK) by SSI Poland.
19. Mr Pacy only chose to cross examine Mr Humphreys. The purport of the cross examination was to seek to attempt to show that the parts that were being supplied could have related to a non Claimant product.
20. Mr Pacy did not challenge any of the contents of the Report. It follows that I accept beyond reasonable doubt that the Report has identified numerous failings on the part of Mr Pacy to co-operate as required by the Undertakings Order.
21. Further he had given differing answers as to suppliers on different occasions. Mr Baldwin QC annexed as annex 1 to his skeleton argument the differing answers which he had given at the earlier meetings when compared with his affidavit. This too was not challenged.
22. His affidavit in purported compliance with the Directions Order did nothing of the sort. His purported compliance is exhibits SSISL01 and SSIPO02. The former simply consists of the name of every person or organisation with whom SSI has had dealings printed off no doubt from its computer database. The Undertakings Order required him to identify persons, firms or companies who are using or have used, have or have had drawings or other documents containing technical information belonging to the Claimants. The schedule to the Directions Order required him to set out in a list all persons, firms or companies who have supplied or offered to supply parts for the [Claimants separators] to SSI (UK). It was required to set out in respect of each such person the full names, contact details, the type and numbers of each part supplied by reference to the Claimant's relevant part number and SSI (UK) number.
23. Mr Pacy's exhibit as I have said simply lists everybody with whom SSI (UK) appears to have had a business relationship. Thus British Telecom is listed as is HSBC as is Sage whose sole connection appears to be to provide the software to enable SSI (UK)'s accounting system to operate. There has been no attempt to comply in my view with the requirements of the schedule to the Directions Order. This is a further example of the failure on the part of Mr Pacy to co-operate as required by the Undertakings Order. It is a continuance of the failures on his part as set out in the Report (which as I have said has not been challenged).
24. Mr Pacy was cross examined. He accepted that (for example) he did not disclose any emails which would have been required to be disclosed relating to supply or offers to supply. He had not provided details of persons who had offered to supply products (as opposed to the general printout of everybody who had had dealings with SSI (UK). He acknowledged that he would have received such offers but he had not provided the emails in respect of those. In an attempt to recover the position when he re-examined Mrs Shotter after her evidence he tried to give fresh evidence suggesting that the emails would not have been kept on the system. However as Mr Pacy knows full well (from his experiences when the search order was executed) there are ways for emails to be recovered even when they have apparently been deleted. I simply did not believe him on this or anything else.
25. Equally once again belatedly he attempted to suggest that the undertakings were so wide that it was impossible to comply with them. I do not accept this either. If that was the position he ought never to have proffered the undertakings. Had he said when the Undertakings Order was made that the undertakings could not be complied with I would not have accepted the undertakings. In that eventuality however absent such undertakings Mr Pacy would have had nothing to offer and he would have been sent to prison immediately. I do not accept in any event that his excuse as to complexity is correct. Mr Humphreys for example was able to compile his list of parts exhibited to his affidavit in less than a day. It is quite clear what the undertakings in the Undertakings Order and the schedule to the Directions Order require. It was up to Mr Pacy to identify all the sources of supply and what they have supplied and of offers to supply. It is insufficient simply to provide a generalised list of everybody who has had business contact with SSI (UK) and expect the Claimant (restricted because of the confidentiality order to a certain extent) to reconstruct retrospectively from those documents and try and discern who has supplied what products and in particular what SU separator products. The whole object of the exercise was for Mr Pacy to provide assistance for the Claimant in tracking down and pursuing the other companies involved in the business of manufacturing products using the Claimants' confidential information and infringing their copyright. Mr Pacy was caught out and he ought to have co-operated by in effect providing the material that would enable the Claimants to pursue all the others with whom he was initially acting in concert.
26. Nothing provided by him is of any assistance to the Claimant and in my view is a blatant non compliance with the undertakings and the schedule to the Directions Order.
27. It is quite clear that Mr Pacy knows a lot more than he has so far revealed. I can only conclude that his purported compliance was simply a smoke screen to avoid the sentence of imprisonment.
28. This is graphically demonstrated by exhibit ACS22 to Mr Shaw's third affidavit. That sets out in tabular form questions put to Mr Pacy and his answers. He was cross examined on the answers analysis on pages 10, 13, 14, 15, 16 and 19. The inadequacy of the responses is demonstrated by that table and Mr Pacy provided no credible explanation as to why this material was not forthcoming. He did not in my view challenge successfully any of the summary observations set out in column 5 to those documents.

CONCLUSION

29. The inevitable conclusion is that Mr Pacy has deliberately not complied with the undertakings he gave in the Undertakings Order and further he has deliberately not complied with the schedule to the Directions Order. Overall I conclude therefore that the conditions upon which the sentence of imprisonment was suspended have not been complied with.

STANDARD OF PROOF

30. In my view the standard of proof for establishing a breach of the condition as opposed to establishing a contempt or a further contempt is the civil standard see Phillips & Anr v Symes & Anr [2003] EWCA Civ 1769 at paragraph 51 as follows:-

"51 Several points strike us immediately:

i) The perfectly proper desire to trace and preserve the partnership assets has led to a number of different techniques being used at once, in such a way that it is difficult to work out the proper and fair procedures for determining the various issues before the court It is necessary to draw careful distinctions between the four issues raised in the applications before the judge:

a. Is Mr Symes in breach of the undertakings given on 22 May? Initially both parties sought a ruling on this, the claimants with a view to lifting the suspension of the committal and Mr Symes with a view to lifting the committal (but it appears that Mr Symes has withdrawn his application).

b. Is Mr Symes in breach of the order made on 22 May? The claimants have alleged that he is and want a ruling with a view to a further committal on that.

c. Is Mr Symes in breach of other orders, or otherwise guilty of contempt of court, as particularised in the points of claim?

d. Should Mr Symes be cross-examined generally on his evidence by reference to matters raised in the points of claim and skeleton argument of 11 August 2003?

ii. Where someone has purported to comply with either undertakings or orders to make disclosure by affidavit, we doubt whether it is right to place the deponent in the position that, unless he is prepared to be cross examined on his affidavits, they count for nothing at all. On the other hand, without cross examination, the court is entitled to attach little weight to them: see Comet Products UK Ltd v Hawkex Plastics Ltd [1971] 2 QB 67, CA.

iii. Where a party comes to court alleging that those affidavits do not comply with an undertaking or an order, the burden of proving this will obviously lie on that party. The standard of proof will depend upon the purpose for which the allegation is made. If it is for the purpose of supporting a fresh allegation of contempt with a view to obtaining a fresh order for committal, then clearly it will be to the criminal standard. If it is for some other purpose, such as obtaining an order for further affidavits, the civil standard will suffice. We are not aware of any authority dealing with the standard of proof to which non-compliance with the conditions of suspension of a committal order must be proved. Yet this is a question which theoretically arises every time a suspended committal order is used to secure compliance with some procedural requirement, an everyday occurrence in county courts up and down the land. The committal order has already been imposed, following the proof of a contempt to the criminal standard. A breach of condition may or may not involve a further contempt of court, but the application is not to impose a further sentence but to implement the one which has already been imposed. It is not self-evident that proof to the criminal standard is required. In practice, we suspect that the difficulty is more apparent than real: it will usually be obvious whether or not the condition has been complied with.

iv. Whatever the position in relation to the privilege against self incrimination in proceedings alleging further contempts, there can be no such privilege in proceedings concerned with whether or not the conditions of suspension have been complied with. The relevant contempt has already been proved and the only question is implementation of a sentence already imposed. The right time to worry about whether committal is the right order is when the committal order is made. Thereafter, it would not be right to ignore the fact that the committal order has been made and treat any subsequent application in relation to it as a fresh application to commit.

 v. The judge was right to refer to the width of the court's discretion when ordering "post judgment" cross examination for the purpose of assisting execution. However, we are troubled about blending cross examination of that more general kind with cross examination aimed either at establishing a breach of the conditions of a suspension or at establishing further contempts of court."

31. Mr Baldwin QC fairly and properly pointed out that it is possible to submit that this paragraph of the judgment of the court is not clear as to what standard is to be applied to establishing non compliance with the terms of suspension. I do not accept that. It seems to me to be plain that the court was differentiating between contempt and all other applications arising out of non compliance with orders. The former clearly requires proof to the criminal standard. As regards all other orders the Court of Appeal expressed the view that the civil standard applied to any other purpose save seeking an order for committal. The Claimants could have sought a further committal order by reason of the breaches of the undertakings. Had it done so it would have been necessary for that breach to be proven to a criminal standard. It however has chosen not to do so.
32. In any event as Waller LJ pointed out in paragraph 51 (iii) the difficulty is more apparent than real. It is usually clear whether or not a condition has been complied with.
33. That is the position in this case. If contrary to my view that the standard of proof required is to the criminal standard I am quite satisfied to that standard that the Claimant has made out its case that Mr Pacy has not complied with the undertakings as proven by the evidence summarised above nor has he complied with the further requirements specified in the Directions Order. Nevertheless as I have said the Claimant is not seeking further sanctions as a result of that. Accordingly on that material I am satisfied that Mr Pacy is simply not interested in seeking to comply with the undertakings which he voluntarily gave to avoid going to prison. In those circumstances as I said to him when I reserved the judgment subject to any factors of mitigation it is inevitable that I will lift the suspension when I hand down this judgment. As I indicated to him two areas of mitigation are capable of being considered. First he could make a final proper attempt to comply. Second there might be personal circumstances (of which I am unaware) which would make an immediate sentence of imprisonment inappropriate. I indicated however to Mr Pacy that all the options were reserved and even if he did comply between the hearing and the handing down of this judgment it did not necessarily follow that the suspension would not thereby be lifted.
34. The Court does not send a person to prison lightly. However as I said in my earlier judgment search orders can only be effective if parties subject to them comply. If they take deliberate steps not to comply (as occurred in this case) the Court almost inevitably will consider an immediate sentence of imprisonment to be appropriate.