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COVID-19 UK: Litigation – Court sentences directors in their absence for breaches of anti-suit injun…

COVID-19 UK: Litigation – Court sentences directors in their absence for breaches of anti-suit injun…

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In a judgment dated 2 April 2020, which only recently became available, a Commercial Court judge took the exceptional step of sentencing four absent respondents to prison for contempt of court (Dell Emerging Markets (EMEA) Ltd and others v Systems Equipment Telecommunications Services SAL and others [2020] EWHC 1384 (Comm)). Whilst the decision is fact-specific, it is also a clear signal that the English courts will not accept the COVID-19 pandemic as a blanket excuse for parties to refuse to engage with proceedings or to defy court orders.

Background

The four individuals concerned were, at the relevant time, directors and shareholders of Systems Equipment Telecommunications Services SAL (“SETS”), a Lebanese company which acted as a distributor of Dell products. After Dell terminated the distribution agreement, SETS issued proceedings in Lebanon in breach of a jurisdiction clause in the agreement. Dell obtained an anti-suit injunction in the English courts to restrain SETS from pursuing the Lebanese claim. When SETS continued its claim in breach of the injunction, Dell applied to the court for an order that SETS and the four directors were in contempt of court, for committal of the four directors to prison, and other remedies.

The hearing of the contempt application took place in February 2020. The respondents made a last-minute attempt to adjourn the hearing, which the judge rejected due to lack of evidence, following which the hearing proceeded in the respondents’ absence. In a judgment dated 31 March 2020, the judge found all respondents guilty of contempt of court. However, he adjourned the hearing of the applications for committal of the directors until 2 April 2020. The judge directed that the respondents must give advance notice if they intended to attend or be represented at the adjourned hearing, since special arrangements would need to be made in light of the COVID-19 pandemic. Due to the continuing lock-down in Lebanon, it was not possible to effect service of the judge’s directions through the usual notary public procedure or by post, but the directions were sent to several email addresses including the email address given in the respondents’ notices of change of solicitor. The judge was therefore satisfied that the respondents had had proper notice of the hearing.

The respondents did not reply and did not attend the adjourned hearing on 2 April 2020. The judge and the other parties attended the hearing by telephone. However, to satisfy the requirements of “open justice”, the hearing was played live in a court room and dial-in details were made available to media representatives on request.

The decision on committal

The judge acknowledged that proceeding with a committal application in a respondent’s absence is an “exceptional” course of action. However, applying the criteria established in earlier cases, he held that it was appropriate in the circumstances to proceed with the hearing. The respondents had been served with the relevant documents and had been given sufficient notice of the hearing. They had not given any good reason for their non-attendance and had chosen not to attend despite having been made aware of the consequences of doing so. There was no reason to believe that, if the hearing were delayed, the respondents would choose to attend the adjourned hearing. While there was some prejudice to the respondents, the judge considered this to be slight, since they had already put their factual case before the court. They had also had several opportunities to appear in the proceedings and had ignored an invitation to purge their contempt. Moreover, the judge took the view that further delay would undoubtedly prejudice Dell because it would give the respondents further opportunities to breach the anti-suit injunction, putting Dell to further trouble and expense.

Importantly, the judge did not consider that the difficulties resulting from COVID-19 were the cause of the respondents’ failure to attend the hearing. In his view, it was clear from the circumstances that the respondents had ceased to engage with the proceedings before the lock-down, and that it was their intention to ignore the processes of the court and to evade any sanctions for breaching court orders.

Considering sentencing, the judge said that, for contemptuous breaches of anti-suit injunctions, only a prison sentence was likely to suffice. Two of the SETS directors, who were deemed to be the “controlling minds” behind the breaches, received 18-month sentences. The other two directors received nine-month sentences for being wilfully complicit in and wilfully encouraging the breaches.

Implications of the decision

This judgment can be contrasted with the recent decision in Frejek v Frejek [2020] EWHC 1181 (Ch). In that case, the court heard a committal application by Skype in the contemnor’s absence but held that it would be too “extreme” to consider sentencing without first bringing him before the court. The decision in Dell is therefore an exceptional one which turns upon its particular facts. Had the respondents made any effort to engage with the court’s processes or indicated any desire to be represented at the hearing despite the challenges posed by COVID-19, it is likely that the judge would have reached a different decision. However, the decision in Dell is a warning to parties that the difficulties caused by the COVID-19 pandemic cannot be used as a cloak for repeated wilful breaches of court orders and refusals to engage with court processes.



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