Corbiere Ltd v Ke Xu

JurisdictionEngland & Wales
JudgeMr Justice Zacaroli
Judgment Date27 June 2018
Neutral Citation[2018] EWHC 1650 (Ch)
Date27 June 2018
CourtChancery Division
Docket NumberCase No: HC-2014-001924

[2018] EWHC 1650 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Zacaroli

Case No: HC-2014-001924

Between:
(1) Corbiere Limited
(2) Trenchant Limited
(3) Trenchant Employee Services Limited
Claimants
and
Ke Xu
Defendant

Anthony Peto QC, James LewisQC, Laura NewtonandRachel Scott (instructed By Allen & Overy LLP) for the Claimants

Stephen Cragg QC and Tom Wainwright (instructed By Imran Khan and Partners) for the Defendant

Hearing dates: 15, 18 and 19 June 2018

Mr Justice Zacaroli
1

In a judgment delivered on 19 June 2018, I found the defendant, Mr Ke Xu, guilty on seven counts of contempt. Although split into a number of separate counts, the essence of each count is the same, namely that Mr Xu had failed to disclose what he did with copies of the claimant's confidential information which he took in August 2014, in breach of an order of this court dated 29 January 2018 (the “January Order”).

2

Mr Xu maintains that he took no copies, but I have found, to the requisite standard of proof, that he did. Accordingly, his continued denial necessarily means that he has failed to comply with the January Order.

3

The legal principles applicable to sanction for contempt arising from breach of a court order were drawn together by the Court of Appeal in JSC BTA Bank v Solodchenko (No.2) [2011] EWCA Civ 1241, per Jackson LJ at [45] to [57].

4

In summary:

(1) The proceedings for contempt, in cases of breach of an order, fulfil the purpose, specifically, of upholding the authority of the court by punishing the contemnor and deterring others, and of providing an incentive for compliance.

(2) Freezing Orders (and I would add, orders such as the January Order) are made for good reason and any substantial breach is a serious matter which merits an appropriate sentence.

(3) An appropriate sentence for such contempt normally means a prison sentence (unless the circumstances – such as where the contempt has been purged and relevant assets recovered – justify a fine instead).

(4) Where there is a continuing failure to disclose relevant information, the court should consider imposing a long sentence, possibly even the maximum of two years, in order to encourage future co-operation by the contemnor.

(5) The court has the power (and may see fit) to indicate (a) what portion of the sentence should be served in any event as punishment for past breaches and (b) what portion the court might consider remitting in the event of prompt and full compliance thereafter.

5

I would add the following points of general application in cases of committal for contempt.

6

Section 14(1) of the Contempt of Court Act 1981 provides for a maximum sentence of two years imprisonment, which applies to a sentence given on any one occasion regardless of how many counts of contempt are in issue. A person is entitled to unconditional release, however, after serving half the sentence: see s. 258 of the Criminal Justice Act 2003.

7

In all cases the court should consider whether a prison sentence is necessary or whether as a sanction of last resort it can be avoided. If the court is to impose a custodial sentence then it must consider two further points. The term of imprisonment should be as short as possible commensurate with the gravity of the contempt and the need to deter the contemnor. It also must consider whether any term of imprisonment ought to be suspended and if so the terms of that suspension. Suspension of sentence serves a particular purpose where thecontempt is capable of being purged, by encouraging that to take place.

8

The list of factors which the court should take into account in considering sentence is not closed, but includes the following (set out in the guidelines attached as appendix 1 to the Judgment of Eder J in Otkritie International Investment Management Ltd v Gersamia [2015] EWHC 821 (Comm)):

(1) In relation to non-compliance with disclosure orders:

(a) The extent of the failure to disclose;

(b) How long it has lasted;

(c) How far it has caused or might have caused harm;

(d) Whether it was deliberate, and the reasons for it;

(e) Whether it has been accompanied by positively misleading disclosure (e.g. pretence that disclosure has been given);

(2) In all cases, relevant mitigating factors include:

(a) Whether, and if so when, the defendant has admitted the contempt;

(b) Whether the defendant has expressed remorse;

(c) Whether the defendant has, so far as he is able to, complied belatedly with the order or otherwise made amends for the wrong;

(d) The defendant's character and antecedents.

9

If these contempt proceedings stood alone then, taking into account all of these factors, I would have no doubt that a prison sentence was the only appropriate sanction, that there would be no sufficient reason to consider suspending it, and that the sentence would be towards the upper limit of the range. There has been a wholesale failure by Mr Xu to comply with the order for disclosure. Five months have passed since the making of the order but (as I will explain further) this is compounded by the fact that he has failed to comply with a Serious Crime Prevention Order (“SCPO”), made in related criminal proceedings, for essentially the same disclosure on 3 July 2015. The failure in this case is aggravated by the fact that the information Mr Xu did provide (namely that he did not take any copies of the confidential information) was false, as I have found in the main judgment finding him guilty of contempt, and as had been found by the jury in the criminal proceedings for breach of the SCPO.

10

As against this, there are no mitigating factors. Mr Xu has neither admitted his contempt nor expressed remorse. He has made no attempt belatedly to comply with the order. As to his antecedents, in July 2015 he was sentenced to four years imprisonment upon pleading guilty to fraud offences. Moreover, in sentencing the judge remarked (on the back of Mr Xu's written basis of plea) that it was not a case of copying and carrying away. That basis has, however, been proved false in light of the subsequent criminal conviction for breach of the SCPO, and my earlier judgment finding Mr Xu guilty of contempt.

11

There is, in this case, however, the important additional factor that essentially the same facts have given rise both (1) to the breach of the January Order and (2) to the breach of the SCPO, for which Mr Xu received a prison sentence of 18 months on 20 January 2017.

12

The SCPO, granted on 3 July 2015, required (by paragraph 11) that the defendant, within 28 days of the coming into force of the SCPO, disclose in writing to the Metropolitan Police Service Lifetime Offender Management Service:

“11.1 Details of all third parties to whom [the defendant] has at any time allowed possession of or access to the Intellectual Property; and 11.2 Details of all locations of all copies of the Intellectual Property.”

13

Mr Richard Spearman QC, sitting as a deputy High Court judge, in determining the claimants' application for summary judgment, concluded that “Intellectual Property”, as used in the SCPO, included the confidential information which is the subject matter of these proceedings. Despite the difference in wording, the disclosure sought by paragraph 11 of the SCPO was essentially the same as the disclosure sought by paragraph 1 of, and Schedule C to, the January Order.

14

The first point to make is that contempt proceedings and criminal proceedings have different purposes: see DPP v Tweddell [2002] 2 FLR 400, per Latham LJ at [14] – [16]:

“14. … As far as the proceedings for contempt are concerned, as Lady Justice Hale said in Hale v Tanner … there are two objectives. First, the court has to mark the court's disapproval of disobedience to its order; secondly, it has to consider how best to secure future compliance with the order. Those are two considerations which are quite different and separate from the considerations which are raised by a criminal charge. Unlike contempt proceedings, which are essentially proceedings between the court seeking to enforce its order and the contemnor, criminal proceedings are between the public and are concerned with different considerations.

15. The essential feature of a criminal charge is the attempt to protect public order; the necessity to punish offenders and in so doing both deter the offender and others from committing offences and therefore provide protection for the public. Incidentally, of course in relation to the sentencing process, there will be considerations relating to the rehabilitation of the offender. But the important feature of a criminal charge is the fact that it is seeking to ensure that there is proper sanction for those who break the law. Not a court's order, but the law.”

15

In light of those differences, Latham LJ concluded that the fact that a person had been found guilty of contempt of court was no bar to prosecuting authorities pursuing criminal proceedings based on the same underlying facts.

16

Nevertheless, a court sentencing for contempt, where the defendant has already been punished by a criminal court for the same acts or omissions, must be careful not to punish the defendant twice for the same conduct: see Slade v Slade [2010] 1 WLR 1262. The following principles are derived from that case:

(1) The court must have regard to the sentence passed by the criminal court.

(2) Given that the functions of the criminal proceedings and the civil proceedings are different, that does not require the civil court to decline to sentence at all, because of a prior criminal sentence arising out of the same conduct.

(3) It does mean, however, that the civil court cannot punish the defendant again for the same conduct.

(4) The sentence, therefore, must be only for such conduct as was not the subject of the criminal proceedings.

(5)...

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