Mark Alexander Newson-Smith v Alawi Quais Abdul Mumem Al Zawawi (2017)
Permission to bring committal proceedings against a director of two companies was refused as the proceedings would not serve the public interest; there was a risk that the applicant, who was a judgment creditor of the companies, was trying to pressurise the director into paying a debt he was not liable for. There was no strong prima facie case that the director had knowingly or recklessly made false statements in the course of CPR Pt 71 proceedings brought by the judgment creditor; he might have been careless, but that was insufficient for a finding of contempt of court.
The applicant applied for permission to initiate committal proceedings for contempt of court against the respondent company director.
The applicant had loaned money to a company (D1), guaranteed by a second company (D2) and by the individual (D3) who had founded the group of companies. They did not repay the loans and the applicant sued for repayment. Judgment was entered against D1, D2 and D3 for over £3 million, but they did not pay. The applicant initiated CPR Pt 71 proceedings to obtain information from D1 and D2. The respondent, who had been a director and shareholder of D1 and D2, was ordered to attend for oral examination and to produce documents. Further disclosure orders were made over the course of two years, along with certain costs orders against the respondent. The applicant applied for permission to bring contempt proceedings against the respondent, alleging that he had (i) made false statements via a letter from his solicitors stating that D1 had not transferred money to other group companies, when evidence showed otherwise; (ii) put forward a false case as to his knowledge of the loans and the applicant, although they had been mentioned in certain emails he had received; (iii) been false and misleading in his witness statements about how the loan money was spent; (iv) put forward a false case in his oral evidence about the companies' inability to repay the loans, as another group company had made a profitable sale that could provide the relevant funds.
(1) To establish contempt, a false statement had to have been made with the intention that, or knowledge that it was likely that, it would interfere with the administration of justice. A false statement was one which was not true, and which when made the maker knew was not true or did not honestly believe to be true. There was a dividing line between recklessness, which was sufficient for contempt, and mere carelessness. It was not enough for recklessness that the maker did not take sufficient steps to check whether the statement was true; there had to be a conscious engagement with the issue which was the subject of the statement before it could be said that the statement, if untrue, was made recklessly and thus without an honest belief in its truth. Anything less than conscious engagement was likely carelessness, JSC BTA Bank v Solodchenko  EWCA Civ 829 followed and Berry Piling Systems Ltd v Sheer Projects Ltd  EWHC 347 (TCC) applied (see paras 7-12 of judgment).
(2) The first loan had not been paid into an account in D1's name, so it was true that D1 had not paid out any other company in the group. The applicant had not shown even a prima facie case that a false statement was made. Further, the respondent had not written the letter that stated otherwise; his solicitor had, on instructions from D3. There was no evidence that the respondent knew the statements were being made, and a mere failure to check the contents of his solicitor's letter could only realistically amount to carelessness. Moreover the evidence disproving the statement in the letter had been disclosed at the same time as the letter; there was no intention to mislead, nor had the applicant been misled. There had been no interference with the proceedings (paras 56-60).
(3) The master conducting the Pt 71 examination had stopped short of making any adverse credibility finding against the respondent, but had criticised him for being careless in his evidence preparation. The court was not persuaded that the respondent's credit was so low that it could disregard his affidavit evidence. Contemporaneous evidence tended to support the respondent's case that he had no involvement in or knowledge of the loans. There was no strong prima facie case that he had lied about his knowledge. The evidence pointed to carelessness: he had made statements that could readily be disproved and had volunteered further documents (paras 65-66).
(4) The respondent's witness statements set out what he had been told about the money by D3. Unless the applicant could show that the respondent was lying about what he had been told, there was nothing objectionable in the statements. As for the argument that the respondent knew that the group had made substantial profit on another sale, the documents did not show that that sale had taken place. There was no strong prima facie case on any ground and permission for contempt proceedings was refused (paras 69-71, 78-80).
(5) Regardless of the evidential position, it would be disproportionate for the application to continue to a committal hearing. The proceedings had taken up a vast amount of court time. Committal proceedings would not serve the public interest. The respondents' failings had been met with hefty disclosure and costs orders. There was a risk that the applicant had brought the application out of a vindictive desire to harass the respondent and pressurise him into paying a judgment debt that he was not liable for. There was also no explanation for the delay in bringing the application. The overriding objective would not be served if permission were granted (paras 82-86).