Whether it is Court proceedings to protect the company’s interests, regulatory intervention or simply bad luck in the form of claims for accidently injury to employees or damage to property, litigation is increasingly an inevitable (and usually unwelcome) part of a running a business.
Corporate officers and in-house lawyers will look to their solicitors and barristers to guide them through the intricacies of Court proceedings and rules. However, responsibility for the company’s conduct in litigation ultimately rests with the company and the Court will look to the company officers or executives to justify that conduct.
Corporate officers therefore need to be aware that they may personally be made responsible, with criminal sanction, if they do not obey the Court strictly when conducting litigation on behalf of the company even if they are acting in the company’s best interests.
A salutary reminder
HM Solicitor General vs. Dodd demonstrates the seriousness of the issue. A tableware company launched a new design of beer glass that was quickly copied by a competitor who launched its own model.
Naturally, the company asked the competitor to cease copying its design and threatened litigation. It is worth noting at the outset that the company’s claim was a good one the competitor had copied the design and the threatened litigation was destined to succeed.
Nonetheless, the competitor resisted the company’s requests. Angered by what had happened, the CEO and Sales Director sought to improve the company’s chances in litigation by asking distributers to provide them with emails to support their case. On receipt, they changed the dates on the emails and submitted false affidavits stating that the emails had been unsolicited.
Before the case was determined, both directors admitted that they had lied in their evidence and had tampered with the emails. Therefore, the competitor was not prejudiced by their conduct and the Court hearing was fair. As noted above, the company’s claim still succeeded.
However, the ultimate success of the claim did not excuse the directors’ conduct. Despite admitting their wrong-doing and showing genuine remorse, submitting evidence of good character, the Court hearing not being prejudiced, and the claim they had sought to ‘improve’ being valid, the directors were sentenced to prison for six and two months respectively.
The Court re-emphasised the well-established principle that litigants must behave with openness, transparency and honesty. Placing false evidence before a Court breached that requirement and had to be punished.
What is contempt of court
The term ‘contempt of court’ covers a multitude of sins but in general terms it covers conduct that amounts to disobeying a Court order or an interference with justice.
Corporate officers need to be particularly mindful of this rule when signing documents that will be filed with Court as part of litigation, such as witness statements, disclosure statements and statements of case. These documents are all made under a statement of truth, which means that if any of the information included in it is false, the signatory can be held personally liable for contempt. This is the case even where the company’s solicitors have drafted the statement for the individual (as recently illustrated in Cavendish Holdings vs. Makdessi)
On a similar basis, where the Court orders a company to do or not do a certain thing, such as to provide disclosure, an act of non-compliance with that order by an officer can result in personal liability for contempt of court.
It is critical, therefore, that Company officers and executives engaged in litigation:
- Take legal advice about the implications of signing documents containing statements of truth;
- Satisfy themselves that such documents do not contain any false information. If in any doubt do not sign the document; and
- Take legal advice in respect of the implications of and how to comply with Court orders.
Matthew Walker is an associate and Lloyd Nail a solicitor in the Dispute Resolution Group at leading UK law firm Burges Salmon LLP.