England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		08/06/2018

Mr Justice Stuart-Smith:

1. This is an application to commit the Defendants for contempt of court. The Claimant contends that the Defendants have acted in contumacious breach of undertakings given to the Court in 2014 by the Second Defendant on his own behalf and on behalf of the First Defendant.

The Factual Background

2. The Claimant is a major supplier of liquid petroleum gas ["LPG"] in the United Kingdom and elsewhere. Specifically, the Claimant supplies LPG in cylinders which are clearly marked and remain the property of the Claimant at all material times. When cylinders are empty, the consumer will return the empty cylinder and be provided with a full cylinder, for which a charge is made. This process is done by the Claimant itself; but in addition the Claimant (and other similar organisations) will authorise dealers to provide LPG in its cylinders in the same way pursuant to contracts which make clear that the cylinder remains the property of the Claimant and that cylinders are not to be filled with any substance other than LPG provided by the Claimant without their prior consent.
3. From time to time people other than the Claimant or its authorised distributors see a commercial opportunity in the unauthorised refilling of the Claimant's cylinders. This opportunity for others constitutes a direct threat to the Claimant's legitimate business against which the Claimant takes action, by litigation if need be. The unauthorised filling of cylinders, if not properly regulated, can give rise to significant risks of fire or explosion. The risk arises if the wrong gas is used; or if the cylinder is overfilled; and the risks are exacerbated if the filling takes place with the cylinder lying on its side rather than upright. It is not necessary to set out the risks in greater detail here. When filling is carried out by authorised suppliers, there will usually be a check of the weight of the cylinder to ensure that it is filled to the desired extent.
4. In 2014 the Claimant discovered that the Defendants were filling their cylinders without authority at two sites, one in Leicester and the other in Birmingham. The premises had tanks and equipment for the supply of autogas – that is propane which is intended for use in LPG-powered motor vehicles. Test purchases were made which demonstrated that the Defendants' businesses were also filling cylinders and selling gas in the Claimant's cylinders without authority.
5. The Second Defendant is the sole director and guiding mind of the First Defendant. Having heard and seen him give evidence, and heard other evidence about his abilities, I am satisfied that he speaks very poor English and that his reading of English is genuinely slow and hesitant. But I am equally satisfied that he has abilities that enable him to live normally in the western world he now inhabits, to operate bank accounts and bank cards with full understanding of the transactions into which he enters, to run businesses and to protect his own interests, making use of others to explain things to him if he does not understand. His Counsel places his lack of conventional sophistication and literacy at the centre of his defence to the Claimant's application to commit him for contempt. Having indicated my overall view just now, I shall return to this issue later.
6. The Claimant's solicitors wrote on 19 March 2014 to the Defendants at both sites, with the letters being marked for the attention of the Second Defendant. The letters set out the nature of the Claimant's business and interest in the filling of cylinders and explained the dangers of unlawful filling. They demanded signed undertakings and required the Defendants to stop supplying gas in Flogas cylinders immediately. They threatened injunctive proceedings if their legitimate demands were not met and invited the Defendants to obtain independent legal advice. The Defendants did not reply. The Claimant's solicitors wrote again on 17 April 2014 to the Defendants at each site serving Proceedings, which had been issued that day. The Particulars of Claim alleged the unlawful supplying of LPG by the Defendants that I have summarised above and claimed damages, an account of profits, a permanent injunction, exemplary damages, interest and costs. Once again, the Defendants did not reply.
7. On 23 April 2014, the Claimant's solicitors wrote yet again to the Defendants at each site marked for the attention of the Second Defendant. This time they stated their intention to apply to the High Court for an injunction to prevent the Defendants' unlawful activities. They continued:

"In order to avoid the substantial costs that will be involved in the injunction application, we enclose further draft undertakings which we require you to sign and return to us by close of business, Monday 28 April 2014. In the absence of our receiving the same by the said date, we will issue an application for injunctive relief on behalf of our client without further notice. The costs of and caused by such application will be sought from yourself."

8. The draft Undertaking to be given to the Court, as sent by the Claimant's solicitors, had a penal notice in conventional and clear terms addressed to both Defendants. The notice to the Second Defendant stated the risk of a fine or imprisonment if he disobeyed the undertakings. The penal notice was in bold and underlined type and was on the first page of the document. The undertakings included at paragraph 1.1 that:

"[The Defendants] will not fill, sell, lease to third parties, supply, distribute, deliver, collect, store, market or otherwise deal or offer to deal in any liquid petroleum gas cylinders owned by [the Claimant] (or any of its associated companies and brands, as set out in [an attached schedule]) either at their registered addresses, or any other address from which they conduct their business, on [sic] vehicles owned or leased by [the Defendants] or at any third party sites whatsoever."

9. On 24 April 2014 the Second Respondent sent two letters to the Claimant's solicitors. Each was typed and expressed in good English and was signed by the Second Defendant. In the first, he described himself as a director of the First Defendant and said that he was replying to the letters of 19 March and 17 April 2014. He said that "for health and business reasons" he had not been aware of the initial letter until after receipt of the later letter "enclosing the writ". He said he had been in hospital with serious health problems in the latter part of March and, after some recuperation at home, had been in Germany "for some time". While denying the allegations, he said that if he had attended to the letters he would have been "only too pleased to agree to the terms of the undertaking". He accepted that "through the neglect of the business, a writ has been issued incurring legal costs to your clients. If these are kept to a minimum, I will have no alternative but to agree for their payment. I will probably have to agree to pay these in instalments depending on the amount."
10. In his second letter of 24 April 2014, the Second Defendant wrote that he had now received the solicitors' letter of 23 April 2014. He continued:

"Having considered the matter of the undertakings, I see no reason not to provide a personal undertaking as sought, even though I do not trade under my personal name.

… Any persons who have been supplied Flo gas [sic] related products would have been in error and are very few and far in between. The Company's staff have now been notified and given strict instructions not to breach the undertakings. ….

In any event, the undertakings are now enclosed on the basis that you "suspend" the court proceedings and not proceed to judgment. Of course, you will be at liberty to continue and re-instate the proceedings in the event of any breach."

11. The Second Defendant signed the undertakings in the form described above and dated his signature 24 April 2014. The Claimant's solicitors replied on 1 May, acknowledging receipt of the two letters of 24 April 2014 and outlining the need for a Tomlin Order as the matter had settled. They said that they would let the Second Defendant have details of their costs soon, noting that he had accepted responsibility for them and that provision could be made for costs to be assessed if not agreed. They then sent the Tomlin Order, which was in conventional form, on 9 May 2014. The Second Defendant signed the Consent Order, dating his signature 11 May 2014. He signed the Schedule twice, once on his own behalf and once on behalf of the First Defendant. He also signed a further form of undertaking twice, once on his own behalf and once as director of the First Defendant. He dated the new undertaking 11 May 2014. It was similar in substantive content to the one he had signed on 24 April 2014. It carried the same penal notice on its first page as the 24 April 2014 form of Undertaking and included the same paragraph 1.1 as set out above.
12. On 22 May 2014 the Claimant's solicitors sent a breakdown of their costs in the sum of £13,910.55 and offered to accept £12,000 in settlement of their costs. On 28 May 2014 they sent the sealed Tomlin Order and chased for a reply to their letter of 22 May. A further chaser was sent on 3 July 2014. These three letters were all sent to the Defendants' Leicester address marked for the attention of the Second Defendant. A reply in his name from that address was sent (under an undecipherable pp signature) on 10 July 2014 saying that he was shocked by the scale of the costs and contending for post-issue costs only. The letter concluded by saying "I have already agreed to your undertakings." There were subsequent negotiations involving correspondence signed by the Second Defendant, culminating in an agreement recorded by the Claimant's solicitors on 2 December 2014 after a conversation with a Mr Singh, who was said to have been acting with the second Defendant's authority and on his behalf. The agreement was for an immediate payment of £6521.95 followed by 6 monthly payments of £1000 and a final payment of £991: a total of £13,512.95. The continuing correspondence then records that the initial payment and subsequent instalments were paid, though some instalments were paid late.
13. In 2016 and 2017 the Claimant received information from several sources that the Defendants were again filling Flogas cylinders without authority. The Claimant resolved to carry out test purchases again and, as before, instructed third party agents to carry out the purchases.
14. There were a number of sources of hearsay evidence available to the Claimant which, singly and cumulatively, reinforced the Claimant's view that unlawful filling of cannisters was being carried out by the Defendants. The first attempt to make test purchases occurred in the two months up to October 2016. On 20 October 2016 Mr Eccles, the Claimant's asset manager, sent an email to a colleague in which he said:

"We have done 3 video test purchases in the last 2 months which have come back showing them refusing to fill our cylinders so we are holding off further purchases for now. We got them 18 months ago filling ours at Leicester and Birmingham and it cost them £18,000 and a legal undertaking so it is possible they are filling but not ours or that they will only fill people they know."

15. In a further email sent on 29 August 2017, Mr Eccles wrote:

"It does seem to be ongoing but several attempts at test purchases have proved that they are not filling for just anyone. … We will however periodically visit and try but the last attempts were called off after four visits when the place was locked up during advertised opening hours. … Once out of summer I will attempt another test purchase in the hope that they become careless when it gets busy."

16. Mr Eccles' evidence about these two emails was unsatisfactory. I have no good reason to hold that either of the emails was deliberately misleading. I conclude and find that there were three attempted test purchases in about the two months before the first email when agents went to the Defendants' premises hoping to have Flogas cylinders filled but were refused. These are the attempts that are referred to in the October 2016 email, and are confirmed by the reference in the second email to several attempts proving that the Defendants were "not filling for just anyone." Separately, I find that there were occasions (on unidentified dates, but probably after 20 October 2016) when visits were paid to the Defendants' premises, but the premises were found to be closed during advertised opening hours.
17. As predicted in Mr Eccles' second email, the Claimant tried again, this time with success. On 3 November 2017, Mr Morrish drove to the Defendants' Leicester premises with an empty 19kg Flogas cylinder in the boot of his car. He asked an employee if he could have the gas bottle filled and was told that would be fine. After he had placed his car close to the LPG pump, the employee opened the boot and shifted the gas cylinder. The employee then attached the cylinder to a hose from the pump and filled it. The gas cylinder remained horizontal as he did so, but it could readily be identified as a Flogas cylinder as it lay in the boot. The employee measured the amount he was putting into the cylinder by reference to the dial on the pump. The cylinder was not weighed at the premises. When returned to the Flogas depot, the cylinder was weighed and was found to be 5.9kg underweight: this was equivalent to a 30% underfill. Mr Morrish was charged £18. The video footage taken by Mr Morrish evidences that this appeared to be treated as an entirely routine transaction in all respects by the employee. 3 November 2017 was a Friday. It is the Second Defendant's evidence that he would not be there on a Friday. It was also his evidence that he trusted his employees and that they would pass on monies received in his absence to him.
18. On 9 November 2017 a different agent, Mr Grey, went to the Leicester premises with an empty Flogas cylinder. He was waved over to the gas filling station but, when he asked the employee to whom he spoke whether he could fill a gas cylinder, the employee said that he was "unable to do this". When asked why, he said that Mr Grey would have to purchase one of the cylinders that was in a secure store if he wanted gas. Mr Grey then left. The identity of the employee is not known, and it is not known if he was the same person as served Mr Morrish. The Defendants point out that 9 November 2017 was a Thursday and say that it is likely that the Second Defendant would have been present on site.
19. On 24 November 2017 Mr Morrish returned to the Leicester premises with an empty Flogas cylinder. Another customer arrived before him and can be seen in video footage carrying a 13kg Calor cylinder and a 19kg Flogas cylinder into the site to be filled, which is what happened. When it was his turn, Mr Morrish spoke to the same person as had filled his cylinder on 3 November 2017. The employee filled the cylinder while it was standing upright in the boot of the car. Once again the employee filled the cylinder by reference to the gauge on the pump. On this occasion Mr Morrish was charged £20. As before, the video footage of the transaction gives the impression that both Mr Morrish's transaction and the other customer's transaction were treated as entirely routine. 24 November 2017 was a Friday.
20. In order to fill the Flogas cylinders the First Defendant made use of an adapter with a left-hand thread. It was not an adapter that would otherwise be commonly used for the supply of LPG by the Defendants, although Mr Kirk accepted that it could possibly be used legitimately to fill the fixed gas cylinders in camper vans. I am not persuaded that the adapter was either obtained or substantially used for filling camper van cylinders. There is no evidence from the Defendants of any significant trade in filling camper van bottles, and it is evident that the adapter was attached to the hoses as a matter of routine. It stretches credulity well beyond breaking point to suggest that the adapter just happened to be attached to the hoses on each occasion that Mr Morrish attended because they had been used for filling camper van cylinders and had not been removed. The natural inference from the evidence about the uses to which the adapter could be put and the use to which it was seen to be put is that its primary, if not sole, purpose was the unlawful filling of gas cylinders.

The Issues

21. The Defendants accept the evidence of Mr Morrish in the respects that I have set out above. They also accept that, on that evidence, there were at least prima facie breaches of the undertakings on 3 and 24 November 2017. No further breaches are accepted. They submit that the issues for the court are, first, to determine the circumstances in which the undertakings were given (and whether the Second Defendant understood what he was signing) and, second, to determine the extent to which either the First and/or Second Defendants may properly be held to be responsible for the breaches that occurred on 3 November and 24 November 2017.
22. The sales to or witnessed by Mr Morrish are the bedrock of the Claimant's allegations of contemptuous breaches of the undertakings provided in 2015. The specific allegations of contempt that the Claimant sets out to prove about those transactions are set out in detailed Particulars of Contempt:

"23.1 The First Defendant, by its employees or agents (including but not limited to the Second Defendant) breached … the Undertakings to the Court by filling clearly marked Flogas Cylinders, selling LPG to members of the public and the enquiry agent by means of such filling of Flogas Cylinders and in such circumstances, the First Defendant otherwise dealt with and/or offered to deal in liquid petroleum gas cylinders owned by the Claimant.

23.2 The Second Defendant, as the sole shareholder, sole director and controller of the First Defendant, breached Paragraph 1.1 of the Undertakings to the Court by causing the First Defendant, its servants or agents to fill clearly marked Flogas Cylinders, sell LPG to members of the public and the enquiry agent by means of such filling of Flogas Cylinders and in such circumstances, the Second Defendant otherwise dealt with and/or offered to deal in liquid petroleum gas cylinders owned by the Claimant.

23.3 Further or alternatively, by failing to take all (or any) proper steps to ensure that no employee or agent or any other person of any nature whatsoever who had access to the LPG filling facilities at the premises of the First Defendant, filled or offered to fill cylinders which were the property of the Claimant and/or to take all proper steps to ensure that such persons did not deal or offer to deal in cylinders that were the property of Flogas, the Second Defendant: (1) breached the clear and express terms of Paragraph 1.1 of the Undertakings provided to the Court (and signed by the Second Defendant); and/or (2) helped or permitted the First Defendant to breach Paragraph 1.1 of the Undertakings provided to the Court."

23. I shall refer to other Particulars of Contempt and the evidence advanced in support of it below.

The Principles to be Applied

24. The burden is on the Claimant to prove any breach of the undertakings beyond reasonable doubt. For present purposes it is sufficient to adopt the summary provided by Proudman J in Farnsworth v Lacy and others [2013] EWHC 3487 (Ch) at [20]:

"A person is guilty of contempt by breach of an order only if all the following factors are proved to the relevant standard: (a) having received notice of the order the contemnor did an act prohibited by the order or failed to do an act required by the order within the time set by the order; (b) he intended to do the act or failed to do the act as the case may be; (c) he had knowledge of all the facts which would make the carrying out of the prohibited act or the omission to do the required act a breach of the order. The act constituting the breach must be deliberate rather than merely inadvertent, but an intention to commit a breach is not necessary, although intention or lack of intention to flout the court's order is relevant to penalty."

Factual Findings in relation to the Particular of Contempt

25. Adopting the approach summarised above, the first issue raised by the Defendants is whether the Second Defendant is to be treated as a person who had received notice of the order and undertakings. It is submitted that he comes from a completely different world, one in which business is conducted on trust, and almost entirely by word of mouth and in which the formal expression of law is unusual to the point of being alien. It is submitted that all over the country, within certain closed and close-knit communities, there are successful businesses which are run in precisely these circumstances. I accept the general thrust of the submission, but the specific question here is whether and to what extent the Second Defendant understood the terms of the undertakings he gave and their significance.
26. The starting point, in my judgment, is the Second Defendant's acceptance that he is generally able to recognise what is important and to get help when it is required. Separately, he said that he realised he had a problem when the Claimant's solicitors started writing to him in March 2014 and that he needed help. I accept his evidence up to this point. I also accept that he obtained help via a neighbour from a Mr Gurmeet Singh. However, I am quite unable to accept his evidence that he would simply pass on any correspondence to Mr Singh who would say that he would sort it out and produce correspondence for him to sign. The Second Defendant accepts that he was "broadly aware of the gist of the correspondence" but says that Mr Singh did not "read the contents of every letter to [him]". Even in a culture that operated by word of mouth and on the basis of trust, I cannot accept that the Second Defendant was so lacking in curiosity that he did not ask what the correspondence was about, despite knowing that he had a problem sufficiently serious to make him ask others for help. And, if he asked, there could be no reason at all why Mr Singh would not explain what was going on, even if he had not already volunteered it. The correspondence that he signed itself evidences clearly that the Second Defendant was closely involved in its production. The information that he had been ill and had been in Germany can only have come from him, as he accepted. The need to explain his delay in replying arose from an understanding of the seriousness of the situation in which he and his businesses found themselves.
27. In his evidence the Second Defendant accepted that he was clear in understanding that the Claimant had objected to its cylinders being filled by the First Defendant and that by the settlement he had agreed to pay money to the Claimant; and also that he had agreed that the activity must cease. The agreement that the activity must cease was contained in the Undertaking to the Court, which he signed. He knew he had signed the Undertaking, because he said so subsequently when trying to negotiate the question of costs; and he knew the seriousness of the situation because on returning the first signed Undertaking on 24 April 2014, he emphasised that he had given his employees "strict instructions" that they were not to breach the undertakings that he had given.
28. Mr Singh was not called to give evidence. There was a suggestion that he may be in India, but the investigations made by the Defendants to find out where he may be and, if possible, to get his evidence before the court were minimal and unsatisfactory. What is known about Mr Singh is that he was a person to whom the Second Defendant went for help on the recommendation of a neighbour; and that, if he drafted the letters which the Second Defendant signed, he has a good command of English and had a clear understanding of (a) the nature of the claim that was being brought against the Defendants and (b) the steps they were taking to settle the claim, including by the giving of the Undertaking to the Court. That brief description is not readily consistent with the suggestion that he would not have explained what was going on to the Second Defendant, whether or not he was specifically asked to do so.
29. I find myself driven back time and again to the fact that, whatever the cultural differences, the Second Defendant knew (putting it at its lowest) he had a problem that was involving him and his businesses in formal litigation which had significant financial consequences and meant that he was not to sell gas in Flogas cylinders. I am unable to accept that the Second Defendant was so incurious as to go through the entire process without checking what was happening with Mr Singh. And had he made any enquiry at all, as I am sure he must have done, I am equally sure that Mr Singh would have explained the significance of the Undertakings to him before he signed them, and that he did so. In explaining the significance of the Undertakings, I am also sure that Mr Singh would have explained the Penal Notice and that he did so. I therefore conclude and find, applying the criminal standard of proof, that the Second Defendant knew the terms and significance of the Undertaking to the Court, including the significance of the Penal Notice.
30. The second questionn is whether the First and/or Second Defendant did an act prohibited by the order. Since the Defendants accept that the sales on 3 and 24 November 2017 provide prima facie evidence of breach, it is necessary to decide which of the Defendants were responsible for the sales and, secondly, whether they should be regarded as isolated incidents.
31. The sales on 3 and 24 November 2017 were directly carried out by employees of the First Defendant. The Defendants point to the evidence that the Second Defendant would be away on Fridays, not least because of religious observance and by reference to a credit card transaction carried out in Birmingham at 8.32 pm on 24 November 2017. They also point to the refusal of an employee to serve Mr Grey on 9 November 2017, a Thursday when (it is said) the Second Defendant was or may have been at the premises. However, the Second Defendant was the director and guiding mind of the First Defendant. He trusted his employees and was closely involved with the running of the business. For the reasons set out elsewhere in this judgment, I have come to the conclusion that the filling of cylinders was a routine operation at the Leicester premises. I am cautious about placing too much weight on impressions given by the Second Defendant when giving evidence, because of the significant language difficulties he was experiencing; but I saw nothing to suggest that he was not completely on top of the running of his business, informal though it was in many ways. That being the case, and since (on the evidence of his letters in 2014) he had given strict instructions that the employees were not to fill cylinders in breach of the undertakings he had given, I find it impossible to accept that his employees would have done so as a matter of routine without him knowing of it. I therefore conclude, again applying the criminal standard of proof, that the filling of cylinders was carried out with his knowledge and approval.
32. I have referred to various sources of information that led the Claimant to believe in 2016 and 2017 that the Defendants were filling their cylinders in breach of their undertakings. Those sources of information were itemised at [17]-[21] of the Particulars of Contempt and in the evidence of Ms Hanna and Ms Print that were served with the Particulars. The Defendants attacked their evidence on the basis that it did not in all cases evidence specific breaches of the Undertaking, or that it was too vague to be relied upon for the purposes of proving separate instances of contempt, and that it was based upon hearsay. In my judgment the real value of the evidence is in providing support for the appearance on 3 and 24 November 2017 that the transactions being observed were matters of routine for the employees. I rely upon the evidence for that purpose, which in turn supports the finding that the Second Defendant was aware of and endorsed the continued practice of filling cylinders. I do not propose to engage in a minute analysis of each item of evidence with a view to eking out further specific instances of contempt because the nature of the evidence was largely general i.e. to the effect that people knew that they could readily get cylinders filled at the Defendants' premises and would do so.
33. Based on all the evidence, therefore, I conclude that the acts of filling the cylinders on 3 and 24 November 2017 were acts for which the First and Second Defendants were responsible and which were intentional. I find that, as a matter of intended business practice, the Defendants had and used a special adaptor the primary purpose of which was to enable them to fill cylinders from their autogas tank for profit. I also find, on the basis of my conclusions about the Second Defendant's knowledge and understanding of the 2014 Undertaking to the Court, that the acts were done in circumstances where he personally and as the guiding mind of the First Defendant knew full well that filling cylinders as was done on 3 and 24 November 2017 was a breach of the Undertaking. As before, I make these findings applying the criminal standard of proof.
34. I therefore find that the Claimant has proved to the criminal standard that the First and Second Defendants have acted in contemptuous breach of the 2014 undertaking as alleged in paragraphs 23.1-23.3 of the Particulars of Breach: see [22] above.

Penalty

35. I will hear Counsel for the Defendants further on the question of penalty. These are serious contempts committed for financial gain. In relation to the First Defendant, any submissions should address the prospect of a financial penalty and should provide any evidence of means upon which the First Defendant wishes to rely. In relation to the Second Defendant, I indicated at the end of the trial that I would not impose an immediate custodial sentence of imprisonment. All other options are open. Submissions should have regard to the principles identified in several authorities and conveniently summarised in Crystalmews Limited v Metterick [2006] EWHC 3087 at [8] and [13] per Lawrence Collins J.