Contempt of court: Jailhouse rock

From adjudication to prison? Now that would be a big, big turn of events, wouldn’t it? It’s what the loser in a recent adjudication said should happen to two directors in the winner’s company. It wanted these two chaps banged up and came to the High Court for that. I told you about the adjudication on this page a year ago. It was between Berry Piling Systems Ltd and Sheer Projects Ltd. Berry claimed it was owed £75,000. More like £20,000, said the adjudicator and ordered Sheer to pay up. Berry had done the secant piling for Sheer on a smart South London home, all bells and whistles.

You might have thought that the modest award of £20,000 would wing its way to Berry without more ado. No. Sheer dug in. It believed the adjudicator, John Price, had gone wrong. So refused to pay. Berry came to the High Court to enforce the award. Sheer defended. One of the defences was that Berry’s finances were such that they would never be able to repay this £20k if the arbitration now afoot showed that the £20k order was wrong. Berry fought off that notion by the written evidence of the two directors. So the court ordered Sheer to obey the adjudicator’s award. But sheer doggedness drove Sheer. They paid but didn’t give up. A year later Sheer is back in the Technology & Construction Court seeking permission to apply for the two, now former, Berry directors, to be commited to prison or fined or both. Sheer says the two chaps told untruths in their written evidence at the enforcement proceedings.

How can fibs in the adjudication process lead to prison? According to Sheer, the two Berry directors Christopher Berry and Peter Death made signed witness statements to the court saying Berry was a solvent firm with good prospects. Sheet said they later found out these were false statements or statements made to the court without an honest belief in their truth. This amounts to contempt of court - serious stuff.

Contempt of court covers all sorts of misbehaviour. Put simply, if you sign a witness statement intended to go into court and it is eventually shown beyond reasonable doubt that you knew what you were saying was untrue or (and this rider is important) when you signed you consciously had no idea whether it was right or wrong, it is contempt of court. The consequences may well be the clink clunk of a prison door or an unlimited fine … or both.

The judge concluded that there was a prima facie case but not a strong one. He refused permission to continue with the committal proceedings

Now, let’s see what happened in this affair. The first step is getting permission from the court to bring committal proceedings. It has to be shown that those against whom committal is sought have been told that this process is in the nature of criminal proceedings and that the outcome may be prison or fine or both. Then the task is to show the judge that there is a “strong prima facie case”. At this particular hearing, Sheer introduced expert opinion of an accountant. The judge was at once on guard. The expert report failed to state what instructions were given; in other words, what was the expert asked to do and what to consider. It looked to be that his task was extremely limited; nor did it reveal whether additional forensic investigation was done or required. The judge could see that the expert’s conclusions and condemnation of the directors were based on an analysis of seven debts. The expert said that because of these debts, Mr Berry and Mr Death should or must have known that they were worth nothing and would never be recovered. That would mean that their witness statements were wrong and in contempt of court. The expert said that the “witness evidence was incompatible with what they knew or should have known about the finances of the company”. The judge could see from the expert accountant’s remarks that if they “should have known”, this has, at best, the ingredients of a complaint of carelessness by Mr Berry and Mr Death. The judge concluded that there was a prima facie case but not a strong one. He refused permission to continue with the committal proceedings.

The judge also remarked that it would be wholly disproportionate for this matter to proceed to a committal hearing. The amount of money at issue was £20,000. Thus far, the legal costs were upwards of £60,000. He foresaw costs in a committal lasting four or five days being £150k per party. This was disproportionate, did not make sense. Enough said … this time at least.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple