Sectorguard PLC v Dienne PLC : Dienne PLC v Legion Group PLC (2009)
An application for the committal of the directors of a company for its failure to comply with an undertaking was struck out as an abuse because on the documentary evidence it had no real prospect of success; the undertaking on which it was based was incapable of performance.
The defendant in the first claim (D) applied to strike out an application brought by the claimant in that action (S) to commit to prison the directors of D following its failure to comply with an undertaking. S had brought a claim against D complaining that it had misused confidential information consisting primarily of a list of the names and addresses of S's customers and of prices being charged to them. A director of D (H) had undertaken on behalf of himself and D to disclose, on oath, the identity of all such customers that it had contacted and the precise nature of that contact. H had given evidence that the customer list had been used to send a mailshot to 500 of S's customers. Later, he realised that not all of the customers on S's list had been written to and no record of who had been contacted had been kept by D's employees, meaning that D could not comply with the undertaking. S brought an application for the committal to prison of all of D's directors for its failure to comply with the undertaking. D applied for a variation, modification or release of the undertaking, and to strike out S's application for committal. D submitted that (1) the committal application should be struck out because the undertaking could only be construed as a "best endeavours" undertaking and S did not allege a failure to use best endeavours; (2) alternatively, compliance with the undertaking was always impossible and failure to perform it was not a contempt; (3) the application disclosed no reasonable ground for alleging contempt against H personally and that for a director to be so liable for his company's breach required either proof of aiding and abetting or proof of wilful failure to take reasonable steps to ensure that the company obeyed the order in question.
(1) The question was what the undertaking would be understood to mean by a reasonable addressee with the same awareness of the relevant background as the parties, Attorney General of Belize v Belize Telecom Ltd (2009) UKPC 10, (2009) 1 WLR 1988 applied. It was clear that the undertaking had been given in unqualified terms. The difference between an unqualified undertaking and a best endeavours undertaking was very well understood by the legal profession, such that the recipient of an undertaking that did not contain the qualifying words "best endeavours" could reasonably assume that the giver of the undertaking had been advised as to the consequence of that omission. Further, it was a reasonable assumption that a competent business would retain reliable records of those to whom it had written; moreover, the undertaking had been given just after H had made a statement expressing no uncertainty about the customers' identities. (2) Failure to perform an impossible undertaking was not a contempt. The mental element required of a contemnor was not that he either intended to breach or knew that he was in breach, but only that he intended the act or omission in question and knew the facts which made it a breach, Adam Phones Ltd v Goldschmidt (1999) 4 All ER 486 Ch D applied. Nonetheless, even a modest mental element like that assumed an element of choice. An omission to do that which in truth was impossible involved no choice at all. Failure to comply with an order to do something, where the doing of it was impossible, could, therefore, constitute a breach of the order but not a contempt of court. However, it would not be appropriate to strike out the committal application on the basis of the impossibility of the undertaking, because it was not an issue that emerged either from the application or from the evidence in support. (3) An application for the committal of a company director in reliance on a breach by the company of an order or undertaking had to disclose a case establishing responsibility on the part of that director to ensure that the order or undertaking was obeyed, Attorney General of Tuvalu v Philatelic Distribution Corp Ltd (1990) 1 WLR 926 CA (Civ Div) applied, Biba Ltd v Stratford Investments Ltd (1973) Ch 281 Ch D considered. S's committal application sufficiently identified H as the person who had taken it upon himself to procure D's compliance with the undertaking. That was a sufficient identification of H as a director with relevant responsibility for the alleged contempt by D to avoid strike out of the application as against him on the basis of lack of reasonable grounds. (4) Courts should, in the exercise of powers of case management, be astute to detect cases where contempt proceedings were not being pursued for legitimate ends, Adam Phones applied and Bhimji v Chatwani (No1) (1991) 1 WLR 989 Ch D considered. Indications that contempt proceedings were not being pursued for such aims included: the pursuit of purely technical contempts, applications not directed at the obtaining of compliance and applications that had no real prospect of success on the documentary evidence. In the instant case, it was apparent from the evidence that the application had no real prospect of success, having been launched by S on the mistaken assumption that it did not matter whether the undertaking was capable of performance, providing that it could show that it had not been complied with. Such a determination was sufficient to render the application an abuse, and it would be struck out. Moreover, on the evidence it was likely that S was pursuing the application other than for the legitimate motive of seeking enforcement of the undertaking or bringing to the court's attention a serious contempt. Further, as S had no real prospect of showing that the undertaking was capable of being complied with, D would be released from it, Hudson, Re (1966) Ch 209 Ch D applied.
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