UK Court of Appeal confirms extra-territorial reach of contempt proceedings

In Dar Al Arkan Real Estate Development Co and another v Al-Sayed Bader Hashim Al Refai and others [2014] EWCA Civ 715, the English Court of Appeal confirmed that contempt proceedings are extra-territorial, by holding that such proceedings may be brought against a foreign director of a foreign company which was a party to an English court action and which had failed to comply with a court order.  The decision is likely to have precedent value in cases in which the Hong Kong courts have to determine the extra-territorial reach of contempt proceedings.

The claimants were two companies incorporated in Saudi Arabia and Bahrain and each brought a claim for breach of confidence, defamation and other torts against the Defendants.  'A', domiciled and resident in Saudi Arabia, was a director of both claimant companies. Prior to the commencement of the proceedings, the claimants applied without notice for interim injunctive relief. At the injunction hearings, they gave undertakings to the court and were subjected to an order to preserve certain computer hard drives and data. At a later hearing for the discharge of the injunctions, the judge found that the claimants were in breach of the undertakings and the court order. The defendants subsequently applied for a declaration that the claimants be held in contempt of court for the breaches and be punished by way of fine, and, importantly, that A, as a director of the claimant companies, be punished for the contempt by imprisonment. A argued that as he was a foreign person domiciled outside England and could not be served with proceedings in England, the principle of English law against the extra-territorial application of legislation prevented a committal order being made against him. Under the Civil Procedure Rules in the UK (the "CPR"), Rule 81.4 provides that, if a person disobeys a court order, the order may be enforced by an order for committal to prison. Where the person is a company, CPR 81.4(3) extends the court's power to order committal against a director of that company. In the present case, as A was not a party to the existing proceedings, the application had to be served on him personally. CPR 6.36 gives the court power to grant permission to serve proceedings on a person domiciled outside the EU on various grounds, including that there be a 'real issue' between the parties.

At first instance, the Judge held that he did have the power to hear committal proceedings against A, and A appealed. The Court of Appeal upheld the decision, stating that CPR 81.4(3) has extra-territorial effect, on the basis, inter alia, that (a) the legislative intention behind this rule was that it had such effect, and (b) public policy requires that court orders should not be disregarded, and therefore, foreign directors of a company guilty of contempt should also be subject to contempt proceedings.

It was further held that an application for committal is the commencement of proceedings and therefore included in the meaning of "proceedings" within CPR 6.2. Consequently, the application to serve the proceedings on A qualified as a claim form (i.e. a writ of summons or originating summons) under CPR 6.36. As there was a 'real issue' between A and one of the defendants, namely whether the jurisdiction to seek a committal order existed, the first instance judge had been entitled to grant permission for service of the proceedings out of the jurisdiction.

Position in Hong Kong

In Hong Kong, Order 11 rule 9 applies to service abroad of originating summons to punish a party or non-party for contempt. Further, a director of a body corporate can be liable for contempt committed by a body corporate in two ways, either under Order 45, rule 5(1)(ii) of the Rules of the High Court or as a person who aids and abets the contempt. The Hong Kong Court has previously held that it would be proper for a court to grant leave to serve a summons outside of the jurisdiction under Order 11, rule 9 on a non-party who is guilty of contempt of court (see A & Another v C [2007] HKEC 1438).

Comment

The decision emphasises the importance of complying with court orders and confirms the power of the UK courts to deal with foreign-domiciled directors of corporate claimants who might otherwise act as if they were outside the court's reach.  Given the position in Hong Kong described above, this decision is likely to have precedent value in cases in which the Hong Kong courts have to determine the extra-territorial reach of contempt proceedings.

If you wish to discuss, please contact Gareth Thomas or Dominic Geiser of our Hong Kong Dispute Resolution team.