England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Rolls Building Royal Courts of Justice
		4th March 2016

SIR BERNARD EDER:

1. This is an application by the claimants for an order for committal of Mr. Waleed Mattar for the breach of an undertaking given in the course of the present proceedings by the defendant, Marketing Ways Services Limited.
2. The application was served by the claimants pursuant to an order dated 11^th February 2016 of Burton J, which provided in material part as follows:

"(1) The claimants may serve the contempt application and supporting evidence on the defendant/respondent and Mr. Waleed Mattar out of the jurisdiction by email to wmattar@marketingways.com.sa and wmattar@googlemail.com, and by post to Office B901 Tahliea Street, Bin Hamran Centre, Jeddah, Saudia Arabia and PO Box 286902, Riyadh 11323, Saudia Arabia.

(2) If service is effective in that manner then any further requirement for personal or other service is dispensed with."

3. That order was made by Burton J on the basis of the third affidavit of Peter J. Cassidy dated 3^rd March 2016. It is unnecessary to read out that affidavit in full. It is sufficient to say that it set out what appeared to be good reason for saying that if service was effected in the manner there referred to that would bring the application to the notice of the defendants and Mr. Mattar. I say "good reason" because the matter has some history.
4. Prior to 14^th January 2016 the defendants and, indeed, Mr. Mattar had been represented by English Solicitors – there had been a change of solicitors but they had been represented during the relevant period by English Solicitors. On 14^th January 2016 the firm of solicitors then representing the defendants gave notice of change of legal representative and gave an address to which documents about this claim should be sent as: Marketing Ways Services Limited, Office 8901 Tahliea Street, Bin Hamran Centre, Jeddah, Kingdom of Saudia Arabia. It also gave an email address of wmattar@googlemail.com.
5. Thereafter Phillips J made an order in these proceedings and that was sent by email on 21^st January to an email address wmattar@marketingways.com.sa and also another email address wmattar@googlemail.com. The email sent to the first email address bounced back, but the email sent to the latter email address did not bounce back and, indeed, shortly thereafter Mr. Mattar sent an email dated 26^th January from that email address.
6. Thereafter on 27^th January a letter came from Mr. Mattar on letterhead of Marketing Ways Services Limited from the address stated to be Kingdom of Saudia Arabia, PO Box 286902 Riyadh.
7. That is the history of the matter and, that being the case, I have no doubt whatsoever, on the information presently before me that Burton J was entirely justified in making the order that he did and that the documents sent in support of the present application were, and must have been, duly received and brought to the notice of Mr. Mattar.
8. What then happened in relevant respect is that this morning the court received an urgent email from Mr. Waleed Al Mattar, which stated in material part as follows:

"Dear Judge,

My former solicitors, King & Wood Mallesons kindly emailed me on 3^rd March to tell me that their court clerk had seen in the cause list that there was an application listed for 4 March at 11.30 to commit me to prison. I have not received notice of any application to commit me to prison, nor have I been served with any evidence from the applicants telling me what court order I am meant to have breached. I have no idea what it is that I am alleged to have done or failed to do that might lead me to be in contempt of court. Can you please adjourn the hearing so that I might be given this information and a fair opportunity to answer it?"

9. At my request that email was forwarded to the claimants' counsel, Mr. David Quest QC, and he now appears before me. He opposes that application for an adjournment for the reasons really that I have already given, and that is that Mr. Al Mattar on the evidence before me at least must have received the documents either at the Google Mail email address and at the two postal addresses. I should have said that there is a further affidavit from Mr. Cassidy which confirms that the relevant documents were served in accordance with Burton J's order. The other matter I should mention is that the email that the court received this morning did not come from either of the two email addresses that I have already mentioned but from another email address: wkmattar@me.com. It would appear that that is an entirely new email address not, I think, referred to before. He does not explain what has happened to his previous email address – if anything has happened to it, I do not know – and since the email did not bounce back it cannot be the case that it has closed. Equally, he says nothing at all about the documents that were sent by post.
10. For all those reasons I refuse the adjournment. In due course it may be necessary to consider what, if anything, to put into any order which I may make on the application to enable Mr. Al Mattar to purge any contempt that I may find him guilty of, but that is a matter to consider in due course once I have made such order as may be appropriate on the substantive application.
L A T E R
11. This is an application by the claimant for an order for committal of Mr. Waleed Mattar for the breach of an undertaking given in the course of the present proceedings by the defendant.
12. The defendant is a Saudi Arabian company. It is the main contractor on a Government project for the delivery of a slaughterhouse waste treatment facility in Mina, Saudi Arabia. Mr. Mattar is the Chief Executive and President of the defendant and, as explained later, the defendant has acted through him in all material respects in these proceedings.
13. Mr. Mattar does not appear before the court this morning. As explained in a previous Ruling, which I delivered earlier this morning, he applied by way of an email to the court for an adjournment of this application for committal. For reasons given in my previous Ruling, which I do not propose to repeat, I refused to grant that application.
14. I then heard Mr. Quest QC, on behalf of the claimant, in relation to this application. In advance of the application I should say that he, Mr. Quest, served a skeleton in the usual way. In advance of this hearing I read that skeleton carefully, and looked at some, at least, of the relevant documents. In the course of his submissions Mr. Quest has taken me through his skeleton and, in accordance with his duty when, in particular, a defendant/respondent does not appear, has, I think, fairly shown me the relevant documents and I have gone through the documents in that way.
15. This judgment borrows, in very large part, the facts and matters set out in Mr. Quest's skeleton, and I propose to continue by referring to the relevant facts and matters as there set out without further attribution.
16. The proceedings arise out of a subcontract between the defendant and the first claimant for the manufacture and supply of two rotary kiln incinerators for use in the facility. The first claimant, having delivered the incinerators, claims the unpaid balance of the price together with associated charges. The defendant disputes any liability and counterclaims damages for breach of the subcontract.
17. The present application concerns the operation of a performance guarantee arranged by the first claimant as security for its performance under the subcontract. The guarantee was issued to the defendant in the amount of £8.57 million by National Commercial Bank, Riyadh ("NCB") against a counter guarantee from Royal Bank of Scotland Plc which, in turn, obtained a standby letter of credit issued by RBS Citizens NA on the application of the second claimant, an affiliate of the first claimant. The defendant has made demand on the performance guarantee, but the claimants contend that the defendant did so fraudulently or in bad faith – a matter in issue in the main proceedings.
18. In October 2014 the parties agreed an order by which the defendant gave an undertaking to the court to the effect, in summary, that if it received payment under the performance guarantee then it would pay the money into court via its solicitors to stand as security for the claims and counterclaims. Until recently the claimants believed, based on what they had been told by the defendant, that no payment had been made. However, it has recently transpired that the performance guarantee was paid to the defendant in full in February 2015 but, in breach of the undertaking, the defendant has retained the money. That is by way of a summary of relevant events.
19. More specifically, the following is a brief history of the relevant events and, again, I take this brief history largely from Mr. Quest's skeleton.
20. On 16^th September 2014 the defendant, acting by Mr. Mattar, made a demand for payment by NCB of the full amount of the performance guarantee. The claimants considered that the demand had been made in bad faith. In summary the demand was made without any warning and without the defendant having intimated any claim under the subcontract, or any dissatisfaction with performance on the project. Moreover, when the claimants challenged Mr. Mattar about the demand he promised to withdraw it but it then failed to do so.
21. On 22^nd September 2014 the claimants applied without notice for interim relief. That application came before Walker J. He was satisfied that there was clear evidence of fraud and granted an interim injunction requiring the defendant, amongst other things, to withdraw the demand and not to make any further demand. Prior to the return date the parties compromised the interim application.
22. On 21^st October 2014 an order by consent was made in which the defendant and its then solicitors, King & Wood Mallesons, gave undertakings in the following terms in summary:

(i) The defendant would not make or pursue any demand under the performance guarantee unless it first requested NCB to pay the amount demanded directly to KWM.

(ii) If, notwithstanding that request, the defendant itself received any moneys direct from NCB under or in respect of the performance guarantee then it would forthwith pay those moneys to KWM.

(iii) KWM would pay into court any such proceeds it received to stand as security for any judgment or order in these proceedings.

By way of explanation, I should say that, as explained by Mr. Quest, KWM was involved because it was thought administratively easier for solicitors to handle the receipt and transmission of the funds.

23. On 10^th December 2014 the defendant applied to set aside the consent order on grounds of material non-disclosure. In the event, that application was dismissed by Teare J, and I say no more about it.
24. On 18^th February 2015 KWM wrote to the claimants' solicitors, Reed Smith, informing them that on 16^th February NCB had tendered a cheque for £8.57 million by way of payment under the performance guarantee. They said that the defendant had not, however, cashed the cheque because it was offered in full and final satisfaction of any disputes between the defendant and NCB, which was not acceptable to the defendant. KWM said that the cheque would be held by the defendant's Saudi lawyers pending the resolution of that dispute.
25. Shortly thereafter, but unbeknown to the claimants, it appears, as I shall explain shortly, that according to Barclays Bank the cheque was paid on 25^th February 2015.
26. Thereafter, on 17^th April 2015 there was a CMC at which Flaux J gave directions up to trial. In the course of the hearing there was a discussion about the status of the cheque. Mr. Richard Millett QC, the defendant's leading counsel at that time, reiterated that the defendant was not prepared to accept the cheque because of its claim against NCB and that the money had, according to the transcript: "got stuck for that reason". Flaux J pointed out that the defendant was subject to an order to the effect that if the money came to it then it had to be paid into court, to which Mr. Millett agreed, but said that the money "has not come to us".
27. On 19^th May 2015 the defendant served an amended defence and counterclaim; para. 40 reiterated that the defendant had not yet received payment under the performance guarantee.
28. At about the end of August the claimants first saw a copy of the cheque in disclosure. It was drawn by NCB on Barclays Bank Plc in the UK, payable to the defendant in the amount of £8.57 million. Shortly thereafter, on 4^th September 2015, and in response to an inquiry by the claimants' solicitors, Reed Smith, about the cheque, KWM said that it had no reason to suppose that the defendant's Saudi lawyers were not still retaining the cheque but would ask for confirmation.
29. On 27^th November 2015 the parties were due to exchange witness statements. However, on that date the claimants were informed that KWM had ceased acting for the defendant. No witness statements were offered for exchange.
30. In the light of that development the claimants applied for directions and for a variation of the 21^st October 2014 consent order. The application was heard on 17^th December 2015 by Cooke J. By that time new solicitors, Quigg Golden, had come on the record for the defendant. They said that they had been instructed that the cheque had already been presented. At the hearing Cooke J made an order inter alia that Mr. Mattar should provide a full explanation on affidavit of: (i) whether the cheque had been presented and, if so, when and where; and (ii) whether the cheque had been paid and, if so, when and what had become of the proceeds. He also amended the 21^st October 2014 order to replace KWM with Quigg Golden. He made a separate order directing the defendant to make an application for relief from sanctions in respect of its failure to serve witness statements, the hearing of which was listed for 20^th January 2016.
31. On 21^st December 2015 Mr. Mattar served an affidavit in purported compliance with the order of Cooke J. As regards the cheque he said in that affidavit:

"The cheque was with ANB Bank at the main branch in the Malaz District of Riyadh. I requested that it be cashed on Sunday, 13 October 2014 . . . I have not yet received the proceeds of the cheque."

32. On receipt of this affidavit Reed Smith contacted Barclays Bank to raise various queries including as to whether the cheque had in fact been presented and paid. Barclays declined to answer on the grounds of customer confidentiality. Reed Smith asked Quigg Golden to get the defendant's consent but it was not forthcoming. Reed Smith also raised the matter with KWM, who said that they were not previously aware that the cheque had been presented.
33. On 14^th January 2016 Quigg Golden informed Reed Smith that they would no longer be acting for the defendant and that he would act in person giving Mr. Mattar's email address as a contact. No application for relief from sanctions was made. On 20^th January 2016 the matter came before the court again when Phillips J made an order debarring the defendant from serving witness evidence and ordering Mr. Mattar: (i) to make a further affidavit stating inter alia what had become of the cheque and what reasons had been given for its non-payment; and (ii) to provide Reed Smith with a written consent on behalf of the defendant to Barclays answering the questions that Reed Smith had asked of it.
34. On 26^th January 2016 Mr. Mattar served a draft affidavit in which he said:

"As already stated in my affidavit dated 21 December 2015 the cheque was presented to ANB Bank at its main branch in the Malaz district of Riyadh on 13^th October 2014. Not being familiar with how banks deal with each other I do not know what physically became of it thereafter . . . The cheque has been met and accordingly this question ["what reason had been given for the non-payment of the cheque?"] is not applicable."

35. Mr. Mattar also gave the written consent to disclosure by Barclays as ordered. That was the first indication that the cheque had been "met".
36. Shortly thereafter on 29^th January 2016, having been provided with the defendant's consent, Barclays answered Reed Smith's questions. In answer to the question:

"Has the cheque which was apparently presented in October 2015 been presented to Barclays for payment and, if so, when?"

Barclays said:

"Yes – the cheque has been presented for payment and was paid on 25^th February 2015."

In accordance with its undertaking the defendant should therefore have paid over the money to KWM on or shortly after 25^th February 2015 so that they could pay it into court. Clearly that did not happen. As can be seen from their emails of 4^th September 2015 and 5^th January 2016, KWM were unaware that the cheque had been presented.

37. On 1^st February 2016, Reed Smith emailed Mr. Mattar and the defendant asking for an explanation as to why the proceeds had not been paid into court via KWM or Quigg Golden. No response was received.
38. It is against that background of the facts that the claimants now make this application for committal. As to the applicable rules, CPR 81.4(1) provides that if a person disobeys an order not to do an act that order may be enforced by an order for committal. Where the person is a company, CPR 81.4(3) provides that the committal order may be made against any director or other officer of the company. For the avoidance of doubt, it is important to note that by virtue of CPR 81.4(4) those rules to which I have just referred apply to undertakings given by a party as it applies to judgments or orders.
39. It is important to emphasise, as is now well established, that a committal application must be considered by reference to the criminal standard of proof. The requirements in that regard for a finding of contempt are those summarised by Christopher Clark J in Masri v Consolidated Contractors (International) Company S.A.R.L. [2011] EWHC 1024 (Comm) at para. 150, that is:

"In order to establish that someone is in contempt it is necessary to show that (i) that he knew of the terms of the order; (ii) that he acted (or failed to act) in a manner which involved a breach of the order; and (iii) that he knew of the facts which made his conduct a breach. . ."

40. For a director or officer of a company to be liable for contempt when an order is made against the company it is necessary to establish that they knew of the court order and were responsible for the company's breach. (See Dar Al Arkan Real Estate Development Co v Al Refai [2014] EWCA Civ 715 per Beatson LJ at para. 33).
41. As to these requirements, and bearing fully in mind the requirement that the criminal standard of proof applies, there can in my view be no doubt that Mr. Mattar was himself aware of the 21^st October 2014 consent order and the undertakings that it contained. He referred to them expressly in his own witness statement dated 10^th December 2014 in support of the defendant's application to set aside the consent order.
42. Equally, there can, in my view, be no doubt that the defendant did receive the proceeds of the cheque issued by NCB as payment under the performance guarantee. That is plain both by the terms of Mr. Mattar's own draft affidavit, dated 26^th January 2016, where he belatedly admitted that the cheque had been met; and, secondly, Barclays' statement that the cheque was presented and paid on 25^th February 2015. There is no reason to doubt that statement and Mr. Mattar has not suggested otherwise. There can be no doubt that the defendant did not forthwith pay the proceeds to KWM. Had it done so then KWM would, no doubt, have paid them into court pursuant to its own undertaking. However, KWM have said that they were unaware that the cheque had been presented.
43. Faced with the statement from Barclays Mr. Mattar has not sought to deny the breach or to offer any explanation. He has admitted that the cheque was met but not said what happened to the money. Further, there can be no doubt that Mr. Mattar both knew of and was himself responsible for the defendant's dealings with the cheque; that is clear from a number of facts:

(i) He is the founder, Chief Executive and President of the defendant.

(ii) He has represented the company in all material respects through this litigation, including signing the statement of truth on the defence, which falsely stated that the defendant had not received payment under the performance guarantee.

(iii) According to his own affidavit in December 2015, he personally requested the cheque to be cashed, although he there stated falsely that that request was made in 2015.

(iv) He has never suggested that any breach of the undertaking was the fault of another director or officer of the defendant if, indeed, there are any.

As from the date of the order in December 2015 the defendant was also in breach of that order insofar as there was a continued failure to pay the money to Quigg Golden.

44. There are, in addition, certain formal requirements that must be met, in particular the undertaking and application notice met the formal requirements of the rules. A penal notice is not required to enforce an undertaking (See CPR 81.9(2)) For the purposes of CPR 81PD 2.2 the 21^st October 2014 order contained a recital that the defendant understood the terms of its undertaking and the consequences of failure to comply with it. The application notice also complies with the requirement that all breaches relied on must be set out with proper particularity. It contains the prescribed warning about the importance of the application.
45. As to service of the undertaking, it is right to mention that CPR 81.7(3) requires the claimant to serve a copy of the undertaking on Mr. Mattar (although personal service was not required). It seems that there was no such formal service on Mr. Mattar as distinct from the defendant: the 21^st October 2014 order, having been agreed between the parties, was simply served on KWM, who were solicitors for MWS, and no doubt taking their instructions from Mr. Mattar himself.
46. In any event, under CPR 81.8 the court has a wide and unfettered unfettered discretion to dispense with service (including retrospectively) if satisfied that the respondent had notice of the order or undertaking. Here there can be no doubt that Mr. Mattar had notice of the order and the terms of the undertaking because, as I have already stated, he referred to it in his statement dated 10^th December 2014. Insofar as may be necessary, therefore, I would make an order retrospectively dispensing with any further service pursuant to CPR 81.8.
47. So far as the service of the present application for committal is concerned, I have already dealt with this in my earlier ruling and say no more about that.
48. For all these reasons I am satisfied so that I am sure to the criminal standard of proof that the defendant is guilty of the following contempts, that is: contempt 1, in breach of undertaking 2 in schedule A of the order of Eder J, dated 21^st October 2014, it received moneys under or in respect of the performance guarantee on or about 25^th February 2015 but did not forthwith pay those moneys to King & Wood Malleson; and contempt 2, in breach of para.5(a) of the order of Cooke J, dated 17^th December 2015, the defendant failed from 17^th December 2015 to pay the moneys received under or in respect of the performance guarantee to Quigg Golden.
49. I then turn to the question of sentence. As I have already stated, the sanction of a committal of a conclusion of guilt of contempt is enforceable against a director i.e. Mr. Mattar. As I have already explained, Mr. Mattar does not appear before me today. I have considered separately from the question as to whether or not I should hear the application for contempt of court, whether or not I should adjourn the question of sentencing to enable Mr. Mattar to appear before me to address me so far as may be necessary. In my view, having considered the matter carefully, I have decided to deal with sentencing at this hearing. I do so broadly for the reasons that I have already given in my earlier ruling.
50. On the material available to me I am sure that Mr. Mattar knew full well of this hearing due to take place today, and that he has had full notice of all relevant matters. Equally, on the evidence before me, I am satisfied that evidence that he has previously tendered to this court is untrue and that in accordance with the overriding objective, and to avoid further costs as well, that the right course is to continue to deal with sentencing. I should make plain, as I shall repeat in a moment, that both the defendant and Mr. Mattar in the usual way, will be given permission to apply to the court to clear their contempts as I have found them to be. I therefore propose to deal with sentencing now.
51. The court may punish a contemnor by committing them to prison for a fixed term of up to two years (see s.14(1) of the Contempt of Court Act 1981). There are no formal sentencing guidelines for contempt of court and each case must be considered on its own facts. Nevertheless, there are two sentencing objectives. First, to mark the court's disapproval of the disobedience of its order; and, secondly, if possible to secure compliance with that order for the future.
52. The range of considerations that may be relevant to take into account was summarised by Lawrence Collins J in Crystalmews Ltd v Metterick [2006] EWHC 3087 (Ch) at paras. 8 -13. These include the prejudice to the claimant and whether this is capable of remedy, whether the breach was deliberate or unintentional, the degree of culpability and whether the contemnor appreciates the seriousness of the deliberate breach and has co-operated. Imprisonment is appropriate "where there is serious, contumacious, flouting of orders of the Court", (see per Lord Phillips MR Gulf Azoz Shipping Ltd v Idisi [2001] EWCA Civ 21 at para. 72).
53. Mr. Quest has also referred me to a decision of the Court of Appeal in a case that I did at first instance, Templeton Insurance Ltd v Thomas [2013] EWCA Civ 35, but it is unnecessary to consider that further.
54. Here, it seems to me that Mr. Mattar's contempt is of the most serious kind.

(i) It was manifestly deliberate and done for very substantial financial gain.

(ii) By the contempt he has subverted a consensual arrangement which was intended to secure the proceeds of the performance guarantee in Court. If MWS retains those moneys then it may end up through its breach achieving a very large financial gain at the claimants' expense.

(iii) He deliberately concealed his actions from the claimants and, it would appear, from his own solicitors. He allowed his solicitors and counsel to unintentionally mislead the claimants and the Court.

(iv) He swore a false affidavit and signed a false statement of truth.

(v) He has offered neither explanation nor apology.

55. In those circumstances it is my conclusion that only an immediate custodial sentence would reflect the gravity of the contempt, and I bear well in mind that it is open for Mr Mattar to apply to purge his contempt if he returns the money, and a custodial sentence may act as an incentive for him to do that.
56. Further, it is my conclusion that, having regard to all the circumstances a sentence at the upper end of the 24 month range would be appropriate. In all the circumstances it is my conclusion that the appropriate prison sentence is a period of 18 months
57. It follows, therefore, and I hereby order that Mr. Mattar shall stand committed to Her Majesty's Prison, Pentonville, for a period of 18 months from the date of his apprehension. I will make further orders for the warrant for the committal of Mr. Mattar to be issued, and other ancillary orders on which I will hear Mr. Quest now.
_______________