The use of contempt and other sanctions in modern commercial fraud cases

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Paul McGrath QC, Essex Court Chambers and Bernard O'Sullivan, Olswang LLP take a practical look at how litigators can use an application for or threat of committal and other sanctions as a tactic to dispose of litigation.

The expense of international commercial fraud litigation has encouraged many litigators, in the last decade or so, to employ what might be called "sanction-focused litigation"where the focus is not necessarily on proceeding to a full trial of the action but on asserting (appropriate) pressure on the defendant through court-ordered sanctions for disobedience to court orders. These sanctions include contempt of court but extend much further as discussed below. This has led to the possibility of avoiding the trial process altogether or significantly reducing its scope by pursuing a strategy that results in the court imposing a penalty including imprisonment for contempt on the defendant.

Increasingly what may have in the past been viewed as an incidental positive side benefit appears to have now become a strategic objective in itself with the proceedings set up to use sanctions as a tool to bring about a quick end or apply pressure for a negotiated settlement. This strategy, when invoked appropriately and proportionately, can be a useful additional route to resolve complex and costly disputes. But it is important that the "tail is not permitted to wag the dog": the sanction-focused strategy must not become the sole focus or aim of the overall litigation.

This article seeks to examine these developments. It explores the recent explosion of contempt applications in civil fraud cases. It then discusses the strategies for applying pressure that have been used to date including cross-examination, applications surrounding legal funding and the use of unless orders as an alternative to contempt. Finally, it considers if these remedies may be more practical and cost-effective, and concludes with a discussion as to whether the English courts have gone too far or not far enough.

Background

Heavy commercial fraud litigation very often commences with the claimant obtaining a freezing order (usually worldwide) with ancillary disclosure provisions, and possibly also a search order. Compliance is almost immediately challenged, first through correspondence and then possibly through further specific orders. Almost inevitably, there is scope for argument. Compliance is not necessarily straightforward in complicated multi jurisdiction matters. In addition, defendants, particularly foreign defendants, often do not understand the English litigation cards on the table culture of openness, and compliance. Their instinct is to deny the opposing party access to information. All of this opens up the possibility of sanctions litigation.

A trend can be detected in recent reported decisions where judges are simply becoming increasingly upset with the flouting of their orders. This manifests itself in a variety of ways from the creation of ever more complex variations of remedies, such as wide-ranging interim receivership orders, to a range of sanctions litigation (see box, Available relief in sanctions litigation).

Available relief in sanctions litigation Committal for civil contempt.

• Cross-examination on assets.
• Debarring orders.
• Limiting access to funds for legal costs.
• Pressure on defence lawyers through funding or disclosure.

There has been a marked increase in the number of reported cases of contempt being used in civil law matters. It appears that applications for contempt have become fashionable, particularly following the high profile case of JSC BTA Bank v Ablyazov [2011] EWCA Civ 1386where four defendants were held to be in contempt in a series of different applications (but also where one other defendant was able to defeat an application for committal). Remember that Ablayazov was an extreme case with extreme facts.

Contempt

This article discusses certain common features that appear from the recent case law, and places these in the context of using the remedy to shorten the litigation process. It does not explain the procedures for contempt applications. For information on these procedures, see Practice notes:

• Contempt of court: overview.
• Contempt of court: committal applications and proceedings under CPR 81.
• Contempt of court: general rules about committal and writs of sequestration.

Timing

A failure to respond to a disclosure order is regarded as a clear case where it is appropriate to bring committal proceedings pre-trial and quickly. The objective at this stage is actually and tactically to secure compliance with the order to enable the claimant to take steps to secure the assets. This justifies moving so quickly. But allegations of false information being provided on disclosure must be clear-cut to justify pre-trial committal. Otherwise you risk being pulled down a timely and expensive cul de sac.

In JSC BTA Bank v Solodchenko and others (No 2) [2011] EWCA Civ 1241, the contempt application was issued against Mr Kythreotis only 15 days after disclosure was due under the freezing order. No question was raised about such a speedy application, but this was against a background of complete silence from Mr Kythreotis right up until the eve of the committal hearing itself, and where it was clear he had been personally served with the order. For more information, see the first instance decision, JSC BTA Bank v Solodchenko [2010] EWHC 2404 (Comm).

In contrast with Solodchenko (No 2), the allegation of non-compliance was less clear-cut in JSC BTA Bank v Ereshchenko [2013] EWCA Civ 829: had false answers been given in response to a disclosure order? The underlying facts of the case were closely aligned to those relied on in the application for committal and the application was made before all the evidence (and documents) was available (even if after cross-examination on the answers had taken place). It would have been more appropriate to bring the committal proceedings after trial. The trial judge put it clearly and in so doing shows the limits of the use of contempt in sanctions litigation:

"A committal of this kind needs to be clear - beyond reasonable doubt. Finely balanced judgments about a witnesses'state of knowledge at particular times against the backdrop of years of complex documentation have no sensible place in such an application."(JSC BTA Bank v Solodchenko and others [2012] EWHC 1891 (Ch), Vos J at paragraph 159.)

Will the respondent attend?

Although the court has discretion to proceed in the absence of a respondent, authorities say it will only do so in "exceptional circumstances"(Stepanovs [2010] EWHC 794 (Ch)). That said, such exceptional cases do appear to be more common. Possible effects of the failure of a respondent to attend include:

• Ill health, an oft-given excuse, will be properly tested. In the absence of hard evidence, the court is entitled to assume that the absence is a result of a deliberate decision not to give evidence and to draw an adverse inference from it. (Templeton Insurance Ltd v Motorcare Warranties Ltd [2012] EWHC 795 (Comm).)
• Failure to attend is regarded as an aggravating factor when considering sentence (Thursfield v Thursfield [2013] EWCA Civ 840).
• If a respondent fails to attend but puts in affidavit evidence, the failure to be available to be cross-examined on that evidence, may mean little or no weight attaches to that evidence (Phillips v Symes [2003] EWCA Civ 1769).

Claimants should consider carefully before embarking on what might well be a heavily contested contempt application. In Daltel Europe v Makki [2006] EWCA Civ 94, there was a 16-day trial on the committal motion alone (and that was also after there had been private cross-examination through Insolvency Act procedures). In Ereshchenko, there was an eight day trial after three days of earlier cross-examination. In both cases there were appeals. Heavy applications are distracting, expensive and time-consuming and may not necessarily be in line with a claimant's overall objectives (and certainly not in line with an objective of securing an effective, cost-saving alternative to a full trial).

Contempt litigation can be time-consuming

The success of this strategy is very dependent on choosing the right type of clear breach upon which to bring the contempt application, ignoring the temptation to include several others that may be of more marginal importance and/or give rise to more serious debate.

Sentencing

For standard criminal cases the Sentencing Council issues definitive sentencing guidance to which the court must have regard to. There is no such guidance for civil contempt. A short judgment of Collins J (as he then was) in Crystal Mews v Metterick [2006] EWHC 3087 (Ch) is the most cited case setting out factors the court ought to take into account. These include:

• Whether the claimant has been prejudiced.
• The degree of culpability.
• The involvement of others in the contempt.
• Cooperation from the contemnor.
• Appreciation of the seriousness of the breach.

Irrespective, it is not possible to divine too much of a pattern on sentencing save that while there are outliers, it does appear that the Ablyazov cases are emblematic of what appears to be a trend towards harsher sentences (see box, Modern trends in sentencing). Early comments that all sentences of imprisonment should in principle be "as short as possible"(Claire A v George A [2004] EWCA Civ 504) now seem to be replaced with a greater willingness to impose what would, in standard criminal law cases, be regarded as substantial sentences (equating to actual or even grievous bodily harm convictions).

The possibility of harsher sentences than in the past may attract applicants to issue more contempt applications as a means of pressurising defendants. It will be an important test for the court to ensure that only appropriate and severe examples of contempt are met with the harsher sentences imposed in the extreme case examples. Anything else would be to encourage a rush to issuing ill-advised contempt applications.

Can the claimant force service of a custodial sentence?

In civil law cases where contempt is alleged, there is no concept of pre-committal custody. (The court always has a discretion to order someone to be held in the cells but this is rarely used and usually only where there has been contempt in the face of the court. Although passport orders can be made at the outset of a freeze/search order case, up until now this has only been a short-term position designed to secure immediate initial compliance with the orders.) As a result, respondents, who may be labelled "bail risks"in standard criminal cases, are left free. So in JSC BTA Bank this led to Mr Ablayazov being free to escape the jurisdiction at the last moment.

Linked to this is the fact that there is no extradition in contempt cases. So the ability to get a defendant (particularly a foreign defendant) to serve his sentence through this route is not there. That said debarring orders may be available where a contemnor has not surrendered to custody in the face of an order for committal. There is no doubt that the courts are seriously upset when a contemnor flees the jurisdiction and that this upset manifests itself in the subsequent orders the courts are willing to grant. Once a contemnor flees he will, almost inevitably, lose the underlying litigation.

Recusal

Recusal issues might also raise themselves depending on the factual matrix. Smith J recently recused himself from hearing a pre-trial committal application because he had already made findings on the factual allegations (Dar Al Arkan [2014] EWHC 1055 (Comm)).

Eder J refused to follow the reasoning of that judgment but nonetheless recused himself (with reluctance) on the basis that the respondent's allegations of bias were tantamount to actual bias, not merely apparent bias (Otkrite v Urumov 2014 EWHC 1323 (Comm); this judgment was handed down on 29 April 2014).

These decisions should be contrasted with the Supreme Court suggesting that in the absence of special circumstances, the trial judge is likely to be best placed to hear contempt applications (Fairclough Homes Ltd v Summers [2012] UKSC 26).

If judges unfamiliar with the background are to hear contempt applications, then this is likely to increase the time taken for hearing, drive up costs and potentially reduce prospects of success.

Appeals

Many committal cases go to the Court of Appeal. This is because, unusually, where a committal has been ordered, appeal is as of right and there is no need for permission. So claimants looking to use committal as a means of short circuiting the trial process must factor in the higher than normal likelihood of an appeal.

On the other hand, contemnors on appeal should have regard to frequent reference to the unhappiness of the Court of Appeal that every conceivable point is taken on appeal. Parties would be wise to desist from doing this because increasingly it is being taken as a reason for higher ranger of sentence (Ablyazov; Templeton). Recently, the Court of Appeal called for law reform in this area either with a general requirement for permission or a specific permission requirement where the appellant has refused to submit to the jurisdiction of the court (Thursfield).

Modern trends in sentencing

The modern approach of the court appears to be harsher than in earlier years, with a trend to longer sentences. The following cases illustrate this:

• JSC BTA Bank v Solodchenko and others (No 2) [2011] EWCA Civ 1241. At first instance, no penalty was imposed other than indemnity costs on the basis that the defendant had complied with the disclosure obligations by the time sentence came to be passed. But on appeal, a 21-month sentence was passed on the basis that it turned out that the"compliance"was incomplete after all and had been by the provision of false information.
• Templeton Insurance v Anthony Thomas [2013] EWCA Civ 35. This case involved the transfer of goodwill of a business to a phoenix company. Sentencing proceeded on the basis that there was no actual loss to the claimant or profit to the contemnors. Even so, the starting point for sentences was 12 and six months which were reduced by the trial judge to nine and four months because of personal mitigation. On appeal, these sentences were suspended partly because of serious post-judgment personal events (medical) and partly because in that particular case "the proper course lay in mercy rather than justice" (Rix J at paragraph 50). Note that mercy appears to be the exception rather than the rule.
• Thursfield v Thursfield [2013] EWCA Civ 840. Here there was a continuing failure to provide disclosure under a freezing order. A sentence of 24 months was imposed; the court said half of this was punitive and half was coercive. The sentence was upheld on appeal affirming Jackson LJ's guidance in Solodchenko [No 2] that where there is a continuing failure to disclose, the courts should consider long sentences. Failure to attend was rightly regarded as an aggravating factor. There was a hint that had there been compliance by the time of the hearing then the court may have been more sympathetic to the appeal on sentence.

An early approach

Contrast these examples with Gulf Azov Shipping v Idisi [2001] EWCA Civ 21, a decision of Moore-Bick J (as he then was) in 2000. There were a large number of heads of contempt found, including:

• Permitting or procuring the disposal of $350,000.
• Diversion of ongoing payments so as not to be caught by the freezing order.
• The breach of an anti-suit injunction.
• Failure to make full disclosure of assets.

The findings were therefore clearly quite serious. But the sentence was merely three months and this would be discharged if the defendant satisfied stipulated conditions (essentially compliance) by a fixed date about ten weeks in the future. The focus was purely on the coercive element of sentencing and the defendant was given a chance to remedy his wrongs. Even then, if there was no compliance, the sentence can fairly be described as modest. (Gulf Azov Shipping v Idisi [2001] EWCA Civ 21.)

Other sanctions

Contempt proceedings are typically costly and time-consuming applications. Relative to the prospects of a substantial trial estimated to last several months, the cost and effort involved in invoking the contempt process may be justified and indeed proportionate. Often, however, there are steps that can be taken falling short of invoking the contempt procedures which can place the defendant or, equally importantly, those associated with the defendant, under significant pressure during the preliminary stages in litigation with the hope it secures an early settlement of the dispute.

Cross-examination guidelines

• Broad discretion based on justice and convenience.
• Exception and not the rule.
• Usually only ordered if likely to further aim of order (for example, identify additional assets subject to the freezing order).
• Must be proportionate and just: no ulterior purpose or aim.
• Prior disclosure of assets in excess of frozen amount is no formal bar on cross-examination.

(Jennington v Assaubayev [2010] EWHC 2351 (Ch), Vos J).

Cross-examination on assets

Having obtained a disclosure order ancillary to the freezing order, and having challenged in correspondence the defendant's purported compliance with it, the situation may be ripe to seek an order for cross-examination of the defendant as to his assets. Whether this formally qualifies as a sanction as such, as opposed to a remedy to obtain full disclosure, may not practically matter since it operates like a sanction in placing considerable pressure on the defendant. It puts the defendant in the witness box, in front of the judge, at a very early stage in circumstances where the judge will be able to form a view as to the honesty and credibility of the defendant. This is the last place a true fraudster would wish to find himself. It may prove very difficult for the defendant subsequently to alter that impression as the litigation proceeds, therefore contributing to an early settlement. Potentially, it is a powerful weapon but the court must be astute to ensure it is not abused so as to place illegitimate pressure on a defendant to settle litigation.

The court has a discretion to order cross-examination of a defendant as to his asset disclosure, but will exercise that discretion sparingly. Cross-examination is the exception and not the rule when it comes to dealing with a failure properly to disclose assets. It will only be ordered if there is strong evidence to show the defendant has not complied with his disclosure obligations and there is a real prospect cross-examination may yield information as to the existence of further assets that would fall within the ambit of freezing order.

Careful consideration must be given to the coordination of a strategy that entails both cross-examination and potentially a contempt of court application. It is a surprisingly common misunderstanding that the answers given under cross-examination may be deployed in any subsequent contempt hearing. They cannot, unless the court orders otherwise (British Sky Broadcasting Group plc and others v Digital Satellite Warranty Cover Ltd and others [2011] EWHC 3062 (Ch)). Further, if a clear decision to proceed with a contempt application has been made, the court is likely to be more reluctant to grant an order for cross-examination.

Assuming that the criteria for this order is satisfied, an order for cross-examination can be a very cost-effective means of asserting pressure directly onto the defendant himself in the hope it may aid settlement.

Debarring orders

If the defendant has failed to comply with an order, such as for disclosure, it is often possible to seek an unless order, requiring compliance against the threat of a sanction such as the defendant being barred from defending the claim. This sanction has a cost advantage over the following types of application:

• Application for contempt. This is likely to involve expensive and time-consuming satellite litigation.
• Application to cross-examine. This involves the expense of preparing for an oral hearing for the cross-examination.

An application for an unless order is likely to be cheaper than either an application for contempt or cross-examination. It therefore provides a very important weapon in the armoury of the commercial fraud litigator and one that should be seriously considered before some of the more expensive alternatives.

The court has an inherent jurisdiction to ensure its orders are effective and complied with by the defendant and "to do what is just and convenient, and necessary, to protect its own orders and to give effect to the interests of justice"(JSC BTA Bank v Ablyazov (No 8) [2012] EWCA Civ 1411 Rix LJ at paragraph 168). Given the draconian nature of the relief typically obtained in the first instance, and the seriousness of the underlying claims and allegations, a failure by the defendant properly and honestly to comply with his obligations under such relief will, in turn, be treated very seriously indeed by the court. It is not to be equated with a failure to comply with other orders providing for the general directions to trial, in which, at least pre-Mitchell, the courts have shown a tendency to extend time for compliance.

For present purposes, of particular importance is the ability and willingness of the court to strike out a defence or otherwise debar a defendant from taking part in the trial if to do so would be both necessary and proportionate and is in response to conduct on the part of the defendant which has created a substantial risk of injustice or an unfair trial (JSC BTA Bank v Ablyazov (No 8), Rix LJ at paragraph 82). This is not a recent phenomenon (see Hadkinson v Hadkinson [1952] P 285). However, it is perhaps fair to note an increased willingness to deploy this sanction (Lexi Holdings plc v Luqman [2007] EWCA Civ 1501; Tarn Insurance Services Ltd v Kirby and others [2009] EWCA Civ 19).

It will form an important part of any successful application for such a debarring order to highlight a clear connection between the consequence of failing to comply with the order and the claimant's ability to pursue the case to trial and enforcement of judgment. It is more likely that a failure to disclose assets alone may sound in a sanction relating to the use of funds for legal fees and expenses but a serious and deliberate refusal to comply with a freezing order may persuade a court to adopt a more draconian response.

Limiting access to funds for legal costs

An increasingly popular response to a defendant's failure to comply with his disclosure obligations under a freezing order is to seek an order barring or limiting access to disclosed funds to meet ongoing legal costs. The competing interests and strategies are clear.

On the defendant's side, he may not have disclosed his full assets but he knows that if he is permitted to use those assets he has chosen to disclose to meet ongoing living and legal costs and expenses, the pot ultimately available for satisfaction of any judgment will dwindle by the week. If this is allowed to happen, the defendant is placed in a strong negotiating position. On the other side, if the claimant can limit the defendant's access to disclosed assets to meet those expenses, the incentive to settle is very much placed on the defendant.

In trying to balance these competing interests, the court must be astute to ensure that a defendant is denied access to such disclosed funds only when there is cogent evidence that he has failed to make full disclosure of his assets. Should the court bar access for other reasons, the court runs the real risk of undermining the careful balancing of interests sought to be achieved by the standard form draft order and its clear exceptions.

Typically, the context in which this situation arises is not an application by the claimant to bar the defendant from using other funds but an application by the defendant to use certain funds which have been caught by the order. In these circumstances, the defendant has the burden of establishing, using "proper" or "credible"evidence, that there are no other available assets to meet such expenses (SFO v Smith [2005] EWCA Civ 1564; Fitzgerald v Williams [1996] QB 657). A recent example of the court preventing access to frozen funds where the defendants have failed to comply with disclosure obligations is JP SPC 4 and others v Timothy Schools and others [2013] EWHC 4248 (Ch).

Pressure on defence lawyers through funding or disclosure

Modern strategies in heavy commercial litigation do not focus solely on exerting pressure on the defendant himself. It would now appear to be part of the recognised strategy to place those advising the defendant under pressure, no doubt in the hope that this might facilitate an early settlement of the litigation. We will leave to others the thorny questions of the ethics of this approach: much will depend on a detailed understanding of the facts of each individual case. What can be said is that it does happen.

On occasion, the focus of any application may, in conjunction with other strategies or on its own, be centred on the lawyers advising the defendant, rather than the defendant himself.

The aim may be to seek information in the possession of the solicitors about their client. In JSC BTA Bank v Solodchenko and others [2011] EWHC 2163 (Ch), that aim was only partially successful with Henderson J agreeing to order the solicitors to disclose all contact details they had for the (missing) defendant but refused to disclose all information about the assets of the defendant or information as to how fees were being paid on the grounds of legal advice privilege. But in JSC BTA Bank v Ablyazov and others [2011] EWHC 2664 (Comm), Clarke J granted an order for solicitors to identify the ultimate source of third party funding because of concern that the company through which payments were made may have been beneficially owned by the defendant and therefore being used to circumvent the freezing order. Recently, the authors have seen a freezing order where third party funding of litigation costs was anticipated from the outset and full disclosure obligations were imposed effectively "just in case".

Of greater concern, however, is where the strategy involves challenging the defendant's solicitors directly as to their receipt of funds and any potential liability to the claimant arising from that receipt. The following two potential, and distinct, situations arise:

• Where the allegation is that the solicitors have received payment from the proceeds to which the claimant asserts a proprietary claim.
• Where the allegation is that the solicitors have received funds which derive from an entity beneficially owned by the defendant and therefore caught by the freezing order but which has not yet been disclosed.

In the first situation above, the claimant must have a proprietary claim up and running and be able to present some credible evidence that it can trace the proceeds of that claim to the monies received by the defendant's solicitors. If the claimant can establish that the solicitors have the requisite level of knowledge that the monies they received arguably derive from the proceeds of fraud, they face a potential liability based on having knowingly or unconscientiously received the proceeds of a fraud (Carl Zeiss Stiftung v Herbert Smith & Co and another (No 2) [1969] 2 Ch 276). The solicitors, on the other hand, will contend that they received the fees as legitimate consideration for the work done and therefore no liability arises under the knowing receipt category, and/or they are otherwise entitled to rely on the defence of bona fide purchaser for value without notice. It is a sad indictment of our civil process system that notwithstanding having standard form draft orders which expressly reserve the right for a defendant to use frozen monies to meet legal expenses or other ongoing costs, the court has failed to protect that right by permitting, at the stage of the monies in the hands of the solicitors, a further challenge by the claimant as to the entitlement of the defendant's solicitors to use the released funds for the purpose for which they were released, namely to meet legal fees of the solicitors (United Mizrahi Bank Ltd v Doherty and others [1998] 1 WLR 435, at 441G-H).

In the second situation above, the claimant must establish that the solicitors have received monies which properly fall within the terms of the freezing order but have not been disclosed by the defendant. In this scenario, the burden is on the claimant to establish that the solicitors are effectively in contempt of the freezing order. While it will be a rare occasion when the claimant can prove that a solicitor had the requisite (high) level of knowledge needed to establish liability for interference with a court order (see Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28), nevertheless considerable pressure can be brought to bear on the defendant's solicitors by raising and pursuing such allegations, making it difficult for the solicitors to focus on their client. Use of this tactic has been prevalent in recent high profile fraud litigation. Given the high evidential threshold required to establish a third party interference with the court order, it is to be hoped that the court will not tolerate claimants raising such allegations, even in correspondence, without proper evidential support. Anything else runs the real risk of inappropriate pressure being exerted on the defendant's legal team.

Discussion

There is little doubt that what we call "sanctions litigation"is now considered a strategic objective. To that end, claimants create the circumstances in which a defendant will breach his orders. Obviously, the defendant must play his part by non-compliance, but those advising the defendant must be aware of this tactic and ensure that the defendant does not readily fall into the carefully constructed trap. In particular, complete failure to provide disclosure leaves the door absolutely wide open to a finding of contempt or to one of the unless orders leading to the defence being struck out or a prohibition on the use of funds. Compliance, even something less than full compliance, can completely take the wind out of these strategies. Remember that, in principle, a defendant ought to be able to live his life (whatever the style he had been living) under a freezing order with access to funds to pay legal fees. That is the presumption. The burden is only reversed if the claimant can point to a failure to comply typically with the disclosure order under the freezing order.

Are contempt applications worth it? There is a lot of rigmarole to go through. The burden of proof is high and, save in relation to obvious breaches, may be difficult to reach. Can trial objectives be met in easier, cheaper or more effective ways? Consider the following:

• It is a very nice backdrop to have your opponent committed for contempt but has it taken you further forward? There are cases where threat of imprisonment will lead to disclosure being provided, monies remitted and so on. If the defendant is outside of the UK, then it may be more of a long-term game. But if the strategic objective is to use sanctions litigation as a means to short circuit the litigation process, then it may be that other sanctions relief will be less risky and possibly more effective. It is easy to get bogged down in a contempt case.
• Where there is an obvious case (no disclosure has been provided) then committal for contempt may be the way to go. Difficulties of proof are readily overcome: a process server providing proof of service of the freeze plus confirmation of non-compliance. In such a case, one is unlikely to have a long contested hearing on facts.
• Where the issues may be capable of becoming more contested, then one has to wonder at the utility of contempt proceedings. They can themselves become long and expensive long drawn out proceedings and, as Ereshchenko shows, they are not always guaranteed to win even in an extreme case such as JSC BTA Bank. In these cases, it is suggested that clearly practitioners should consider alternatives.
• Some clients follow the policy of aggressively pursuing the maximum remedies. If the clients wish to pursue this strategy, so far there is no real sign of the courts stopping that (but in KJM Superbikes Ltd v Hinton [2008] EWCA Civ 1280, Moore-Bick LJ did speak of the obvious need to guard carefully against "vindictive litigants"(at paragraph 17)). The anomaly is that most criminal litigation is commenced by public bodies exercising judgment that they are in public interest. Even private prosecutions (which are rare) can be taken over by the AG. In contrast, there is no public control or filter in civil contempt cases, save for the courts who are not entirely disinterested since it is their own orders which it is alleged to have been breached.
• Ultimately, this strategy will only be pursued if it is considered successful by the clients. This success is often hidden behind confidential settlements and compromises behind closed doors.

Have the courts gone too far?

The answer to this question is likely to depend on which side of the fence you typically operate. For claimants, there is something refreshing about the court's newfound enthusiasm to develop sanctions to deal with defendants who wish to defy the court's orders, providing real bite to the court's orders. This approach is generally to be welcomed. From the defendant's perspective, there must be some concern that this enthusiasm for sanctions for breach does not result in defendants being barred from defending claims or using their funds for litigation fees on what may be viewed as reasonably minor breaches of court orders.

As with all novel developments in the law, there is a need for some time to allow matters to settle down. Importantly, it needs to be appreciated that cases such as the remarkable Ablyazov litigation are not commonplace. They represent the extremes of what may occur and it should not be thought that sanctions considered appropriate in that litigation may be equally appropriate in a different fact-situation where the default is not on the same scale. Indeed, to apply some of the same strategies in another case may well amount to an abuse of the process if the facts do not fall into the same extreme category as Ablyazov. Until this is appreciated, it is likely that mistakes will be made but it is to be hoped these will be worked out as the developments settle down and are better understood.

Reproduced from Practical Law Dispute Resolution with the permission of the publishers. For further information visit www.practicallaw.com or call 020 7202 1200.