Committal proceedings against ex directors, employees or franchisees – Don’t be shy to give it the boot

11 Feb 2015

It is all too common now for those who have represented an ex director, employee or franchisee who has been accused of breaching obligations owed by them to another contracting party, which has been "successfully" resolved by the giving of undertakings, to then have to study the Application for Committal which lands on the doormat. In light of Hamblen J’s dicta in PJSC Vseukrainskyi Aktsionernyi Bank v Sergey Maksimov & Others [2014] EWHC 4370 (Comm), those advising both the applicant and the respondent to such applications have had an important consideration re-stated; should it really be (or have been) lodged?

Hamblen J endorsed what Briggs J (as he then was) had to say in rather more detail about this topic in Sectorguard plc v Dienne plc [2009] EWHC 2693 (Ch) before going on to say (at paragraph 28):

“…An increasing amount of this court's time is being taken up with contempt applications. Claimants should give careful consideration to proportionality in relation to the bringing and continuance of such proceedings. In appropriate cases respondents should give consideration to applying to strike out such applications for abuse of process. The court should be astute to detect when contempt proceedings are not being pursued for legitimate aims. Adverse costs orders may follow where claimants bring disproportionate contempt applications.”

In employment/quasi employment and franchise disputes the penchant for an application to commit to be launched when there is little more than (at best) a technical breach; or, (at worst) a suspected breach for which there is no real evidence, ought now be stemmed.

This is because it appears that the judiciary are almost encouraging that such applications are met with an application to dismiss for an abuse of process and/or strike out, together with a favourable costs award for the respondent to the original application. Whilst giving rise to perhaps interesting questions of law and tactics as to how best to advise a client when they suspect that undertakings have been breached which they were supposed to benefit from, the stand back guidance for now is clear in respect of these commonplace applications; it is no longer (if it ever was/should have been) a first port of call.


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