Court of Appeal Clarifies Director Liability for Corporate Contempt & Sentence Parameters

Introduction

The case of ADM International SARL v Grain House International SA & Anor represents a comprehensive examination of legal principles pertaining to contempt of court, particularly in the context of corporate non-compliance with court orders and the consequent liability of corporate officers. It expounds on the enduring doctrine of the court’s inherent jurisdiction over contempt, director liability for corporate contempt, and the parameters for sentencing in such matters. This article navigates the pertinent aspects of the judgment to elucidate the legal principles applied by the Court of Appeal in reaching its decision.

Key Facts

The essence of the dispute revolves around Grain House International SA (GHI) and its CEO, Mr. Boutgueray, appealing a High Court decision that found both in contempt of court in four respects. The origins of the contempt charges stem from a series of contractual disputes between GHI and ADM International SARL, subsequent arbitration awards, and the failure to comply with orders for asset disclosure (ADO) and a worldwide freezing order (WFO).

GHI and Mr. Boutgueray’s contempts pertained to the improper redaction of credit facilities (Contempt 1), failure to supply complete bank statements (Contempt 2), failure to disclose encumbrances on properties thereby misrepresenting their unencumbered value (Contempt 3), and trading in breach of the WFO (Contempt 4). Additional liability was ascribed to Mr. Boutgueray under the principle of director liability for corporate contempt (Contempt 5).

Legal Principles

Inherent Jurisdiction and Director Liability for Corporate Contempt

The court’s inherent jurisdiction to punish for contempt is a long-standing principle, and the case reiterates that directors or other officers of a corporation can be held liable for civil contempt if a corporation breaches court orders. This contingent liability, referred to as ‘the responsible persons liability principle’, is a matter of substantive law independent of procedural rules, and existed prior to the 1860 Act, the Rules of the Supreme Court, and the Civil Procedure Rules. The court underscored that this principle remains unaffected by the 2020 revision of the Civil Procedure Rules.

Importantly, liability under this principle does not require an intention to breach the order; rather, it necessitates that the director or officer knew of the order and was responsible for the corporation’s breach—demonstrating culpable conduct, such as failure to take reasonable steps to ensure compliance with the court’s orders.

Ambiguity in Court Orders

The court considered the principle that one cannot be held in contempt for breaching an ambiguous court order. The judgment clarified that where an order is ambiguous, and a defendant’s conduct breaches the order upon its proper construction, the defendant is in contempt—a principle driven by the intent of the act or omission constituting the breach and the objective interpretation of the order. However, where a defendant acts on a reasonable but mistaken belief concerning the meaning of the order, such understanding may influence the sanction imposed for the contempt but does not negate the contempt itself.

Sentencing for Contempt

The court adhered to established principles for sentencing in contempt cases. It emphasized that a judge must consider various factors and that an appellate court is generally reluctant to interfere unless an error of principle occurs, immaterial factors have been considered or material factors omitted, or the decision is plainly wrong. The application of these principles can engender few successful challenges to sentences deemed excessive.

Outcomes

On appeal, key outcomes included:

• The quashing of the finding and sentence for Contempt 3 (the failure to disclose encumbrances) on the grounds that the court incorrectly interpreted “value” as “unencumbered value” instead of “market value” in the ADO.
• A reduction of the fine imposed on GHI from £75,000 to £50,000, reflective of the successful appeal on Contempt 3 and considering the principle of totality.
• A dismissal of the appeal against sentencing for Mr. Boutgueray under Contempt 4 (breach of the WFO by trading), affirming the 6 months imprisonment sentence, given the deliberate and serious nature of the breach.

Conclusion

The Court of Appeal’s judgment in ADM International SARL v Grain House International SA & Anor serves to reinforce the fundamental principles surrounding contempt of court and director liability for a corporation’s contempt. The court’s meticulous dissection of these principles and the application to the facts of the case illustrate the judiciary’s commitment to uphold the administration of justice and the responsibilities that directors and officers bear in ensuring that legal entities abide by judicial mandates. The elucidation of legal principles concerning ambiguous court orders and sentencing for contempt further emphasizes the court’s dedication to principled decision-making. The outcomes of this case provide a coherent guide for legal professionals in navigating the potentially complex intersection of corporate action and legal compliance.