Back office Ltd v Mr James Percival and Others (Defendants 1, 4, 5 and 6/Respondents)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Slade DBE,Mrs Justice Slade |
| Judgment Date | 03 December 2013 |
| Neutral Citation | [2013] EWHC 3776 (QB) |
| Date | 03 December 2013 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ12X01775 |
[2013] EWHC 3776 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Slade DBE
Case No: HQ12X01775
Kathleen Donnelly (instructed by The Wilkes Partnership LLP) for the Claimant
Edward Pepperall QC (instructed by Shakespeares Legal LLP) for the Defendants
Hearing date: 24 th October 2013
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
In a judgment handed down on 23 rd May 2013 Mr Percival and Liquidity Group Solutions Limited ('Liquidity') were found to be guilty of contempt of court. Contempt of court by the two directors of Liquidity, Mr Tipper and Mr Foulsham, in their personal capacity was not established. At the conclusion of the subsequent hearing to determine the penalties for the contempts the gravity of breach of undertakings given to the court was made clear to Mr Percival and to Mr Foulsham, who was present on behalf of Liquidity. They were informed that a penalty of committal to prison for contempt would not be imposed. At the hearing to determine the penalties for the contempts, as at the previous hearing, the Claimant/Applicant, Back Office Limited ('Back Office'), was represented by Miss Donnelly and the Defendants/Respondents by Mr Pepperall QC.
The evidence relating to the application for committal for contempt is set out in the judgment of 23 rd May 2013 and will not be repeated here. The circumstances in which Liquidity and Mr Percival gave the undertakings which they were found to have breached are set out in paragraph 2:
"Back Office is a Birmingham based company which provides payroll services. Mr Percival, the First Defendant, and Mr Richardson were salesmen. Mr Tipper, the Fourth Defendant, was its Managing Director and Mr Foulsham, the Fifth Defendant, its Relationship Manager. The individual Defendants and Mr Richardson all tendered their resignations over a short period of time in February and March 2012. They went to work for Liquidity, a newly formed company which also offers payroll services. Back Office commenced proceedings alleging that in breach of their contracts of employment and fiduciary duties, Mr Foulsham and Mr Tipper took steps to set up Liquidity, a competitor company, whilst still working for Back Office, and that Mr Percival participated in those acts. Further it is alleged that all individual Defendants had breached the post-termination provisions of their contracts of employment. Back Office sought injunctive relief against them. At a hearing on 11 th July 2012 before HH Judge Seymour QC sitting as a High Court Judge Mr Percival, Mr Willars (the third Defendant), Mr Tipper, Mr Foulsham and Liquidity gave undertakings ('the undertakings'):
"…not to solicit or deal with any of the clients listed in the confidential Annex to this Order until 5 March 2013."
The 279 clients listed in the confidential Annex ('the prohibited clients') were those to whom Back Office had provided chargeable services between 24 th February 2011 and 29 th March 2012. The action was stayed on the terms of the Schedule to the Order. The Schedule set out the terms of settlement of the claim and included the payment by Mr Tipper, Mr Foulsham and Liquidity of a sum of money to Back Office and the release of the First, Third, Fourth and Fifth Defendants from the covenants in clauses of their contracts of employment."
Mr Percival and Liquidity are to be dealt with on the basis of the findings of contempt made against them. Mr Percival was liable for his own acts. The finding of contempt by Liquidity was:
"…established by the acts of its agents Mr Richardson and Mr Percival attempting to solicit the business of prohibited clients on 12 th and 21 st February 2013 respectively."
Mr Richardson and Mr Percival were working as salesmen for Liquidity. On 12 th February 2013 Mr Richardson contacted Mr Turner of Jobsworth and Mr Wormleighton of Gemdrive to solicit their business for Liquidity. Jobsworth and Gemdrive were prohibited clients on the Annex to the Schedule to the Order of 11 th July 2012.
On 21 st February 2013 Mr Percival contacted Mr Turner in his capacity as a director of Jobsworth. Mr Turner sent an email on 12 th February 2013 to Mr Percival complaining about the "disgusting sales pitch" of Mr Richardson. He complained that Mr Richardson had denigrated Back Office. I found in paragraph 63 of the previous judgment:
"…by an email of 21 st February 2013 Mr Percival contacted Mr Turner in his capacity as a director of Jobsworth, a prohibited client on the Annex. Whilst he also apologised for the approach Mr Richardson made to Mr Turner, on the evidence I am satisfied so that I am sure that by his email of 21 st February 2013 Mr Percival intended to solicit Jobsworth's business for Liquidity."
Contempt of court by Mr Tipper and Mr Foulsham was not established. It was not shown to the requisite standard:
"71. …that either of them authorised the acts of Mr Richardson and of Mr Percival in attempting to solicit prohibited clients. Nor is it established that they could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them."
Submissions of the parties
I have already determined that a custodial sentence is not warranted for the breaches of the undertaking proved in this case.
In deciding the penalties to be imposed on Mr Percival and Liquidity I will also consider the appropriate Order for costs. Mr Pepperall QC made it clear that the costs ordered against the Defendants would be borne by Liquidity. Mr Percival would not be expected to meet any liability for costs.
Counsel agreed that the factors which may be taken into account in determining sanctions were those set out by Lawrence Collins J (as he then was) in Crystal Mews Ltd v Metterick and others [2006] EWHC 3087 (Ch) at paragraph 13:
"The matters which I may take into account include these. First, whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy. Second, the extent to which the contemnor has acted under pressure. Third, whether the breach of the order was deliberate or unintentional. Fourth, the degree of culpability. Fifth, whether the contemnor has been placed in breach of the order by reason of the conduct of others. Sixth, whether the contemnor appreciates the seriousness of the deliberate breach. Seventh, whether the contemnor has co-operated."
Miss Donnelly recognised that Back Office had not been prejudiced by the breaches of the undertakings which had been established. Mr Turner and Mr Wormleighton had thought ill of the approaches made to them by Mr Percival and Mr Richardson and no business was won from them by Liquidity. The contemnors had not acted under pressure and the breaches were deliberate acts.
Miss Donnelly submitted that neither Mr Percival nor Mr Tipper for Liquidity showed real appreciation of and apology for the seriousness of their acts. Whilst Mr Percival apologised for his breach in paragraph 17 of his affidavit of 20 th March 2013 he qualified the apology by saying that his contact with Mr Turner was to "set the record straight" and that he contacted him as a director of a company not in the Annex.
Miss Donnelly submitted that the way in which Mr Tipper gave evidence at the hearing in April displayed a degree of arrogance and lack of regard for the court process. In paragraph 61 of the judgment following that hearing I observed that comments made by Miss Donnelly about the way in which Mr Tipper gave his evidence were justified. The first apology he made for Liquidity's breach of the undertaking was after the company had been found to be in contempt of court.
The financial circumstances of Mr Percival and Liquidity are relied upon in order to mitigate any penalty that may be imposed. Miss Donnelly drew attention to a feature of the second affidavit of Mr Tipper sworn on 30 th May 2013. At paragraph 10 Mr Tipper referred to "Preliminary Accounts" for the period January 2012 to 31 st July 2012. Mr Tipper stated that the accounts were being finalised and he anticipated that they would be submitted to Companies House "in the course of next week". He referred to the draft accounts as showing "a substantial loss…of over £400,000".
Mr Mason of Back Office discovered from Companies House that in fact accounts for Liquidity in respect of the period January 2012 to 31 st July 2012 had been filed. They appear to show that they were signed and approved by the directors, Mr Tipper and Mr Foulsham, on 14 th November 2012. These do not show a substantial loss but shareholders' funds of £10,325. It was only after these accounts were referred to in the Claimant's submissions on sanction and costs that Mr Tipper sought to explain his failure to refer to them and the variation from profit to loss. In his affidavit of 17 th July 2013, he said at paragraph 7 that statutory accounts were filed in November 2012. At that time Liquidity were uncertain whether the legal fees for the litigation with Back Office could be classified as a business expense and the "advice from our accountants…was to include the legal fees as debtors". The documents exhibited to the second affidavit were a draft of the revised accounts.
Miss Donnelly submitted that the evidence originally given by Mr Tipper was misleading and designed to show that Liquidity did not have the means to...
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