Back Office Ltd v Percival & Ors  EWHC 1385 (QB)
Application for committal and/or fines for contempt arising from alleged breach of undertakings where a team of ex-employees of the applicant set up a rival business. One individual and the defendant business were found to be in contempt.
The defendant individuals had all left the applicant business in short order and went to work for the defendant business (also a party to these proceedings). The applicant initially sought to enforce post-termination provisions and undertakings were given, following a hearing, that the defendants would not 'solicit or deal' with a defined list of clients until a date in March 2013. The applicants suspected that these undertakings were breached and brought this application. The application included the new business as a defendant on the ground that it was liable for the acts of its employees.
In this judgment Slade J reviews the submissions of the parties on, among other things, the meaning of solicitation, corporate liability and intentionality. She then provides a through review of the facts before stating at  that
"In order to succeed in their application for committal for contempt for breach of their undertakings.... [the applicant] must establish that each of the Defendants against whom such an Order is sought had broken their undertakings. The breaches must be established to the criminal standard"
She then notes that it was the conduct of the two commission based sales people that formed the basis of the allegations and that
"If they did not behave as alleged or if the conduct of one or both of them did not constitute a contempt of court, the applications against the two directors and [the defendant business] will also fail."
On the facts of this case she finds that the actions of one of the sales team constituted contempt but the considers the issue of corporate liability. After reviewing the various authorities including Hone v Page, Ready Mixed Concrete (No2) and Stancombe, she concludes that the fact that the salesman may have acted in breach of an instruction did not excuse the defendant business from liability for contempt of court. However the individual directors were found not guilty as the evidence did not establish that they had authorised the acts nor could have foreseen the possibility of the acts occurring.
Neutral Citation Number:  EWHC 1385 (QB)
Case No: HQ12X01775
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MRS JUSTICE SLADE DBE
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BACK OFFICE LIMITED (Claimant/Applicant)
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(1) MR JAMES PERCIVAL; (2) MR MATEUSZ RYCHLY; (3) MR RICKY WILLARS; (4) MR JONATHAN TIPPER; (5) MR JAMES FOULSHAM; (6) LIQUIDITY GROUP SOLUTIONS LIMITED (Defendants 1, 4, 5 and 6/ Respondents)
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Kathleen Donnelly (instructed by The Wilkes Partnership LLP) for the Claimant
Edward Pepperall QC (instructed by Shakespeares Solicitors) for the Defendants
Hearing dates: 25th and 26th April 2013
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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.
MRS JUSTICE SLADE DBE
MRS JUSTICE SLADE:
- Back Office Limited ('Back Office') applies for an order for the committal and/or a fine against the First, Fourth, Fifth and Sixth Defendants (Mr Percival, Mr Tipper, Mr Foulsham and Liquidity Group Solutions Limited ('Liquidity')) for breach of undertakings given by each of them to the court on 11th July 2012. The undertakings were given after Back Office had issued proceedings against the individual Defendants for breach of their contracts of employment or fiduciary duties and against all Defendants for conspiracy to wrongfully interfere with the business of Back Office.
- 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 11th 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 24th February 2011 and 29th 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.
- Back Office suspected that the undertakings had been broken and issued the current proceedings for contempt on 21st March 2013 ('the application'). In the course of the hearing before me there was reference to previous contempt proceedings which had been withdrawn.
- The list of 279 prohibited clients on the Annex included Jobsworth Recruitment Solutions Limited ('Jobsworth') and Gemdrive Logistics Limited ('Gemdrive').
- The allegations of contempt of court are based on the conduct of Mr Percival and Mr Richardson, working as sales agents for Liquidity, in allegedly soliciting prohibited clients and the alleged authorisation by Mr Tipper and Mr Foulsham of such conduct or their alleged failure to take reasonable steps to prevent it. It is alleged that Liquidity is liable for the acts of the Defendants and Mr Richardson as their agents or employees.
- In respect of each of the individual Defendants, Back Office contends that contempt has been committed by the following acts or failures to act:
i) By Mr Richardson in a telephone call to Mr Turner on 12th February 2013 attempting to solicit the business of Jobsworth, a prohibited client;
ii) By Mr Richardson leaving a telephone message for Mr Wormleighton on 12th February 2013 in which he attempted to solicit the business of Gemdrive, a prohibited client;
iii) By Mr Percival sending an email to Mr Turner of Jobsworth on 21st February 2013 which included material intended to solicit his business;
iv) By Mr Richardson contacting other prohibited clients on 12th February 2013 to divert business away from Back Office;
v) By Mr Tipper and Mr Foulsham as directors of Liquidity, wilfully breaching the undertakings by ordering or directing the alleged contact with prohibited clients and/or by failing to take reasonable steps to prevent such contact.
It is alleged that Liquidity is in contempt as liable for the acts of its employees Mr Richardson and Mr Percival acting in the course of their employment.
- The following affidavits were lodged on behalf of Back Office: those of Mr Mason a director of the company, of 1st and 28th March 2013, Mr Turner a director of Jobsworth of 1st March 2013, of Mr Powell, a director of Get Me Staff Recruitment Limited ('Get Me Staff'), and those of Mr Woolf and Mr Smart, process servers and Miss Outram a solicitor relating to service of the application. The following affidavits were lodged on behalf of the Defendants; those of Mr Tipper, Mr Richardson and Mr Foulsham all of 19th March 2013 and Mr Percival of 20th and 22nd March 2013. Mr Richardson, Mr Percival, Mr Foulsham and Mr Tipper gave evidence at the hearing before me.
- The evidence in Mr Mason's affidavits was not challenged but it was submitted by Mr Pepperall QC that it did not establish the allegations of contempt. The references in his affidavits to what Mr Richardson had said to Mr Turner on 12th February 2013 were hearsay. His affidavit did not add anything to the other evidence of what Mr Richardson said to Mr Wormleighton of Gemdrive on that day. Mr Richardson's message to Mr Wormleighton was recorded. The voicemail was played in court.
- Mr Pepperall QC accepted that the Court can have regard to the affidavit of Mr Turner. However the fact that he was not called and could not be cross-examined affects the weight to be attached to it. Mr Pepperall QC pointed out that Mr Turner's evidence of what a director of Liquidity was alleged to have said to Mr Richardson was hearsay. Further, in assessing the strength of Mr Turner's evidence, I was invited to take into account that he appeared poorly disposed to Mr Richardson and to have good relations with Back Office. As for the evidence of Mr Powell of Get Me Staff, Mr Pepperall QC contended that there could be no breach of the undertakings in relation to Get Me Staff Recruitment Services Limited, a prohibited client, as in paragraph 3 of his affidavit he explained that it had gone into liquidation. Thereafter Mr Powell traded through a new company, Get Me Staff, which was not a prohibited client. Mr Powell was not solicited by Mr Percival as he had already decided to give Liquidity his business. Further it was submitted that Mr Powell's evidence should be viewed in the light of the circumstances set out in paragraph 10 of his affidavit; Mr Powell and Liquidity had fallen out spectacularly. He was likely to be ill-disposed to them.
- There was no longer an issue between the parties as to whether the application had been served. Mr Pepperall QC submitted that Back Office could not rely on the evidence of the process servers on issues of credit. However, evidence elicited in cross-examination, including that about service, could be relied upon for that purpose.
- Miss Donnelly counsel for Back Office and Mr Pepperall QC for the Defendants were agreed that the applicant in contempt proceedings can only rely on the grounds set out in its application notice and the affidavit evidence filed (CPR r.81.28(1)). It is the breaches of the undertaking alleged in the application which have to be established. Contempt of court must be proved to the criminal standard (PD 81 para 9). The Court must be sure that the allegations are made out.
- Save in the case of the corporate Defendant, Liquidity, Miss Donnelly and Mr Pepperall QC further agreed on the principles of law to be applied in determining the liability of these Defendants for the alleged acts of contempt.
- The "time-honoured" test of solicitation articulated by Cotton LJ in Trego v Hunt  AC 7, 65 LJ Ch 1, [1895-9] All ER Rep 804 is that there should be a "specific and direct" appeal made to a potential customer. In [QBE Management Services Ltd v Dymoke]()  IRLR 458, Haddon-Cave J observed at paragraphs 184-5 that a helpful recent statement of the test of soliciting was to be found in Equico Equipment Finance Ltd v Enright Employment Relations Authority (Auckland NZ (17th July 2009) cited by HHJ Simon Brown QC in Baldwins (Ashby) Ltd v Maidstone QBD 3rd June 2011 (unreported)) paragraph 21. The New Zealand court held:
" In my view, "canvass" is synonymous with soliciting. Both words involve an approach to customers with a view to appropriating the customer's business or custom. I consider a degree of "influence" is required. There must be an active component and a positive intention."
- An applicant need not prove that a contemnor intended to breach a court Order (Masri v Consolidated Contractors International Company SAL  EWHC 1024 (Comm)  All ER (D) 133 (Oct) Christopher Clarke J at paragraphs 150 to 155). However, in this case, particular states of mind of Mr Richardson and Mr Percival, whom it is alleged approached the prohibited clients, were pleaded in the Notice of Application. Where a specific intent or a state of mind is alleged in a Notice of Application for committal for contempt, Mr Pepperall QC submitted that the applicant is required to establish that basis of the asserted contempt. Of Mr Richardson the Notice states that on 12th February 2013 he "attempted to solicit the business of Jobsworth" (para 1). Further it is alleged that on the same day he attempted to solicit the business of Gemdrive (para 2). Of Mr Percival it is alleged that an email he sent to Mr Turner on 21st February 2013 "included material intended to solicit Mr Turner's business…"
- Companies may be liable for the acts of their servants or agents. In this case it was agreed that Mr Richardson and Mr Percival were agents of Liquidity. Further, it was agreed that in order to establish contempt by a corporate body it is necessary to show that the breach of an undertaking was carried out by a servant or agent in the course of their service or agency. It is at this point that Miss Donnelly and Mr Pepperall QC part company. Miss Donnelly submitted that the third ingredient for liability of a proprietor of a business for contempt of court identified by Slade J in Hone and Another v Page  FSR 500, p 507 that:
"(c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them."
applied only to individuals who were proprietors of a business. The first two elements are:
"(a) the persons who did the acts were his servants or agents, (b) the acts were done in the course of the service or agency."
It was not a required ingredient of liability for contempt by a corporate Defendant such as Liquidity.
- Miss Donnelly submitted that corporate bodies will be considered in contempt if the terms of an injunction (or undertaking) are broken by deliberate act of their agents or servants acting in the course of their employment, regardless of whether the act in question was authorised or indeed expressly forbidden by the company. Reliance was placed on the dictum of Warrington J in Stancombe v Trowbridge Urban District Council  2 Ch 190 at 194 in which he held:
"…if the act is in fact done, it is no answer to say that, done, as it must be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant through carelessness, neglect or even in dereliction of his duty."
Miss Donnelly pointed out that the Court of Appeal in Attorney-General for Tuvalu and Another v Philatelic Distribution Corp Ltd and Others  2 All ER 216 recognised that the principle in Hone v Page does not apply to corporate defendants. Lord Justice Woolf held at p.222c:
"Where a company is not involved the principle is clearly stated in Hone v Page  FSR 500…"
Further Miss Donnelly submitted that the dictum of Warrington J in Stancombe received the endorsement of the House of Lords in In Re Supply of Ready Mixed Concrete (No. 2)  1 AC in the speech of Lord Nolan at page 481D. Accordingly, to establish the liability of Liquidity in contempt for the actions of Mr Richardson and Mr Percival it was not necessary to show that the Company had authorised their acts of contempt or failed to take all reasonable steps to prevent foreseeable breaches of the undertakings.
- Mr Pepperall QC submitted that the principles in Hone v Page apply to the corporate Defendant, Liquidity. He submitted that for Back Office to establish that Liquidity were in contempt of court they not only have to show that the persons who did the prohibited acts were the servants or agents of the company and that the acts were done in the course of the service or agency but also that Liquidity either authorised the acts or could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them. Mr Pepperall QC relied upon the judgment of Megaw J in In Re Galvanized Tank Manufacturers' Association's Agreement  2 All ER 1003 in which he held at page 1009:
"…a company which has given an undertaking to the court must be treated as having failed lamentably and inexcusably in its elementary duty if it fails to take adequate and continuing steps to ensure, through its responsible officers, that those officers themselves, and anyone to whom they may delegate the handling of matters which fall within the scope of the undertaking, do not forget or misunderstand or overlook the obligations imposed by such undertakings."
- Miss Donnelly and Mr Pepperall QC were agreed that Mr Foulsham and Mr Tipper as directors of Liquidity would be liable in contempt where, being aware of the undertakings, they actively assisted in their breach or wilfully failed to take steps to ensure they were complied with. The basis for the liability of directors in contempt was explained by Woolf LJ in Tuvalu.
- Mr Pepperall QC contended that in order for Mr Foulsham and Mr Tipper to be personally liable for contempt it must be established to the requisite standard that Liquidity was liable for the acts of Mr Richardson and Mr Percival and that the directors did not take reasonable steps to ensure compliance with the undertakings. In the circumstances in this case, reasonableness can be looked at retrospectively.
- References in the following paragraphs are to the submissions of counsel on the findings of fact they seek to have made and not to my findings.
- Miss Donnelly invited me to find that all of the Defendants gave the undertakings willingly understanding what they meant. The sales agents, Mr Richardson and Mr Percival, were driven by the need to make contact with potential clients and to conclude sales as they were remunerated by commission. There was an obvious temptation for them to contact prohibited clients. Liquidity was a small company and it is likely that Mr Foulsham and Mr Tipper would have known of what their sales agents were doing. Mr Foulsham held internal sales meetings.
- No meeting was held specifically for the purpose of telling salesmen not to contact prohibited clients. This may have been raised at a general meeting on 12th July 2012 at which those who attended were given a copy of the Annex. Mr Richardson knew from the meeting that he could not deal with prohibited clients. The Order which included the undertakings may also have been communicated to staff as an attachment to a Memo of 16th July 2012. There was no mention in the affidavits that the Memo was distributed more than once. Mr Foulsham and Mr Tipper took no other steps to ensure compliance with the undertakings.
- The email from Mr Turner of 12th February 2013 recording what Mr Richardson said to him in a telephone call earlier that day states that Mr Richardson said in response to asking whether his director knew "of his disgusting sales pitch" a director told him to contact prohibited clients. Mr Richardson is a relatively junior member of staff. It is not credible that he would telephone Mr Turner of Jobsworth, a prohibited client on the Annex, if that conduct had not been sanctioned by a director.
- The voicemail Mr Richardson left for Mr Wormleighton of Gemdrive, another prohibited client, on the same day on which he contacted Mr Turner, was a clear solicitation. He made no mention of contacting Mr Wormleighton as a director of an associated company of Gemdrive.
- There is no evidence to support the assertion of Mr Richardson that he searched on RiskDisk for companies associated with directors of the prohibited clients and contacted them in that capacity. Back Office asked for any RiskDisk searches made on behalf of Liquidity for any such associated companies. Liquidity stated that they obtained them and they showed a blank. These search records had not been disclosed.
- Mr Percival said that he had not obtained Mr Richardson's account of his conversation with Mr Turner before replying to him. Mr Percival's email to Mr Turner of 21st February 2013 contains a paragraph the only purpose of which was marketing. Further it contains a false statement that the 12 months in which they were not allowed to deal with a list of clients was up when the period was only going to expire on 5th March 2013.
- On 12th February 2013 Mr Richardson solicited the business of two prohibited clients. The email from Mr Turner of that date states that Mr Richardson told him that he would spend the day contacting other prohibited clients. It is likely that he did so.
- Miss Donnelly contended that the Defendants had done their best to come up with an explanation for the contact made with Mr Turner and Mr Wormleighton. There can be no doubt that the explanation that they were contacted in their capacity as directors of companies associated with those on the Annex is not credible.
- Counsel made submissions on other indicators of what she contended was a lack of credibility of the individual Defendants and Mr Richardson. These included evidence regarding the service of the application and the failure by Mr Richardson to identify any other companies associated with those on the Annex. Miss Donnelly also submitted that in giving his evidence, Mr Tipper displayed a degree of arrogance and lack of regard for the court process. Both he and Mr Foulsham gave oral evidence which differed from some of the evidence in their affidavits.
- The evidence established that Mr Richardson and Mr Percival were soliciting the business of prohibited clients and that Mr Foulsham and Mr Tipper either authorised such solicitation or failed to take reasonable steps to prevent breaches of the undertakings. In addition Liquidity is liable for the acts of their servants or agents.
- Mr Pepperall QC submitted that the evidence establishes that Mr Richardson was strongly advised not to deal with prohibited clients. He was told he had to stay away from those clients. Counsel acknowledged that Mr Richardson had some difficulty with the questions put to him. There were some differences between his evidence and that of others as to whether he was given just the Annex at a team meeting on 12th July 2012 or the Order with the Annex.
- Mr Pepperall QC submitted that the Court cannot be sure that Mr Richardson said to Mr Turner that his director told him to approach clients. As for the telephone message for Mr Wormleighton, Mr Richardson was looking to establish a connection with him rather than worrying about obtaining business. The Court could not be sure that Mr Richardson was seeking to solicit the business of Gemdrive. The only evidence against Mr Percival is his LinkedIn reply to Mr Turner. Mr Turner was asking for a response to his complaint about the telephone call from Mr Richardson. The passage in his email in which Mr Percival is positive about Liquidity should be read in the context of replying properly to the complaint Mr Turner made about Mr Richardson. Mr Pepperall QC submitted that in any event what Mr Percival wrote was not a direct and specific appeal for the business of Jobsworth. Accordingly it was not solicitation as explained by Haddon-Cave J in QBE Management Services (UK) Ltd v Dymoke  IRLR 458 paragraph 184.
- As for the allegations against Liquidity, Mr Pepperall QC submitted that the evidence establishes that at a team meeting on 12th July 2012 those attending were provided with a copy of the Annex. On 16th July 2012 they were issued with a copy of the Order and a memo or script. The only evidence of any communication being made with prohibited clients was a general "marketing blast" which was not repeated. In September 2012 when Liquidity was approached by a client on the Annex they called their solicitors in. The 16th July 2012 Memo was re-issued. The steps taken by Liquidity to ensure that there was no solicitation of prohibited clients had worked well for seven months. It was not foreseeable that one or two members of the sales team would breach the undertakings on 12th February 2013. Their actions were not indicative of a sales campaign to solicit the business of prohibited clients. It cannot be said that the steps taken by Mr Foulsham and Mr Tipper were not reasonably sufficient to prevent breach of the undertakings.
- On 11th July 2012 Mr Percival, Mr Tipper, Mr Foulsham and Liquidity undertook to the Court not to solicit or deal with any of the clients listed in the Annex until 5th March 2013. In order to succeed in their application for committal for contempt for breach of their undertakings set out in the Application Notice of 21st March 2013, Back Office must establish that each of the Defendants against whom such an Order is sought had broken their undertakings. The breaches must be established to the criminal standard: the Court must be satisfied so that it is sure that the Defendant against whom or which such an Order is sought has committed the breaches of undertaking alleged in the application notice and supporting affidavits.
- The alleged conduct of Mr Richardson and Mr Percival forms the basis of the application against each Defendant. If they did not behave as alleged or if the conduct of one or both of them did not constitute a contempt of court, the applications against the two directors and Liquidity will also fail.
- The following facts are not in issue or are not challenged on the evidence. Mr Richardson and Mr Percival were the only two salesmen working for Liquidity at the material time. They were engaged as agents remunerated solely by commission. Part of their commission was based on contacts they made with clients or potential clients and part on sales they concluded. They were therefore incentivised to make sales.
- Mr Richardson and Mr Percival reported to Mr Foulsham. They were given a relatively free rein in how they did their work. Sales meetings with Mr Foulsham took place from time to time.
- After entering into the undertakings on 11th July 2012, Mr Foulsham and Mr Tipper decided that it was necessary to make all Liquidity staff aware of the restrictions they were subject to. Such a meeting was called by Mr Tipper and Mr Foulsham. It took place on 12th July 2012. Mr Richardson and Mr Percival were amongst those who attended. Whether other matters were discussed at the meeting or whether it was solely for communicating the effect of the undertakings, it is not in dispute that staff were informed that agreement in the litigation with Back Office had been reached and that Liquidity and those working for them were not to approach or deal with until 5th March 2013 companies on an Annex to the Order which had been made settling the litigation.
- Mr Foulsham and Mr Tipper stated in their affidavits that at the meeting the staff were given a copy of the Annex and were told that they were not to approach or deal with companies on an agreed list until 5th March 2013. In paragraph 9 of his affidavit Mr Foulsham stated:
"What we therefore did was convene a meeting of all staff at which we informed them that we had reached an agreement with Back Office. That agreement meant that we were not (as a company or individually), to approach or deal with a number of companies which had been put on an agreed list. To avoid any doubt or confusion arising, each member of staff (including Tom Richardson and James Percival) was personally provided with a copy of the Annex and both Jonathan Tipper and I explained to all staff, the seriousness and importance of complying with the Annex. They were also told that the restrictions remained in place until 5th March 2013."
Mr Foulsham further stated in his affidavit:
"10. …Having provided all staff members with a copy of the Annex and explained the terms of the restrictions, Jonathan Tipper and I decided that there was no reason for us to put specific processes in place to deal with the Court Order."
In his affidavit Mr Tipper stated at paragraph 6:
"…both James Foulsham and I felt it necessary to convene a meeting of all Liquidity staff to bring to their attention the terms of the Order and the restrictions that we were subject to. We explained the seriousness of the Order and that we were restricted (both individually and as a company) from contacting a number of companies until 5 March 2013 and that those companies were listed in an Annex. To avoid any doubt or confusion all staff were given a copy of the Annex (which included Tom Richardson and James Percival). In addition, I would add that James Percival would already have known of the terms of the Order as he was a named party to the settlement reached."
Mr Tipper continued at paragraph 7:
"We are a small company and as the staff fully understood what they had been told, James Foulsham and I did not consider it necessary to put any additional processes in place."
Mr Richardson stated in his affidavit:
"5. I cannot recall when, but I have been given a copy of the Annex referred to in the Claimant's Application dated 4th March 2013 by either James Foulsham or Jonathan Tipper.
- I was not given a copy of the Order but I was told to steer clear of the companies listed in the Annex until 5th March 2013."
- Mr Richardson gave oral evidence consistent with those passages in his affidavit. However the oral evidence of Mr Tipper and Mr Foulsham was that at the meeting on 12th July 2012 members of staff were given a copy of the Order as well as the Annex. This was not consistent with their affidavit evidence. Further, neither mentioned in their affidavits a Memo dated 16th July 2012 under cover of which members of staff were sent a copy of the Order. They gave oral evidence that the Memo was sent out again later in the year although it was not re-dated. There is no reference in their affidavits to the Memo being sent out again.
- I find that at the meeting on 12th July 2012 members of staff were provided with a copy of the Annex but not of the Order. This is consistent with the affidavit and oral evidence of Mr Richardson and the affidavits of Mr Foulsham and Mr Tipper but not with their oral evidence. Their affidavit evidence was clear that the Annex was given out. They clearly knew the difference between the Annex and the Order but did not state in their affidavits that the Order was given out either at the meeting or by memo subsequently. Further, I find that whilst the Order may have been circulated with the Memo on 16th July 2012 it was not circulated again later in the year. This was not referred to in any affidavit nor is there any documentary evidence to support such an assertion.
- Jobsworth was a prohibited client on the Annex. Mr Turner was a director of that company. He was also a director of Jobsworth Limited which was not on the Annex. Mr Wormleighton was a director of Gemdrive a prohibited company. He was also a director of Digitac Limited ('Digitac') which was not on the Annex.
- Mr Richardson agreed that on 12th February 2013 he telephoned Mr Turner and Mr Wormleighton to solicit business for Liquidity. He stated that he did so to promote Liquidity to associated companies of those he was precluded from dealing with. He asserted that he was not soliciting the business of Jobsworth and Gemdrive.
- Mr Richardson's approach to Mr Wormleighton was recorded on his voicemail. The voicemail was played in court and a transcript is in the documents. Mr Richardson said:
"Hi Gary, it's Tom phoning from Liquidity… erm… I'm sure you remember me, I used to be your account manager at Backoffice and I sort of came in and saw you erm a while back… erm… It's basically just to let you know, I'm sure you are aware anyway, we have had a bit of a restrictive covenants so I've, I've had to sort of erm stay away from Backoffice's clients for a while… erm… That date is up in the next week or two so I'm looking to erm sit down with you again hopefully and basically give you an offer that's much more financially attractive to you than the one that Backoffice could give you erm and obviously the piece (sic) of mind that Liquidity are in a much more stable position than Backoffice erm… You know all, you know all the problems that they've had over the last sort of year now erm so that that sort of put their umbrella company into administration erm poor poor funding of their account erm and basically a lack of expertise in the company because it's all at Liquidity now so I want to come and sit down with you. I want your business and I want to give you an incentive that can't be matched elsewhere, particularly by Backoffice, erm and you know that pursuing the customer services by Tom 'cos you've dealt with me before and you know how I er how thorough I am with things like that erm… could you give me a call back mate…"
Mr Richardson does not and cannot challenge the contents of his message to Mr Wormleighton.
- Earlier in the day he telephoned Mr Wormleighton, 12th February 2013, Mr Richardson telephoned Mr Turner. At 10:22am that morning Mr Turner wrote an irate email to Mr Percival complaining about the "disgusting sales pitch" of Mr Richardson. He complained that Mr Richardson had denigrated Back Office. Mr Richardson gave evidence that he could possibly have referred to Paymaster, an associated company of Back Office which had gone into liquidation. He said that in his eyes it was a factual statement to say that Back Office was unstable. It is clear that Mr Richardson made denigrating statements about Back Office to Mr Turner. Shortly after his call, Mr Turner sent an email to Mr Percival complaining of Mr Richardson's conduct. He wrote:
"Rather than looking at profiles on linked in i suggest you rethink the ethics of your sales team.
Some little scroat from your company has called up today giving me a five minute talk on why Back Office are such a bad company and how they are unstable, when it was his visit that made us move away from them in the first instance.
To then tell me (as an owner of a company in an industry that is prone to unethical behaviour) that he was gleefully now spending a day calling ex Back Office customers "to ruin them" as his covenant was now up made me feel physically sick to my stomach.
I asked him if his director knew of his disgusting sales pitch to which he boastfully told me it was his director who had told him to do it.
Everyone needs new business but are you really that desperate to blatantly bad mouth another firm?
As it happens we have been looking for a new company to process our temporary plans, and whilst i hadnt (sic) considered liquidity, i had no real thoughts either way. Now you can guarantee hell will freeze over before we come to you.
By the way i would be interested to see if the gentleman in question did manage to fit the items i mentioned in the orifice i suggested.
Your thoughts if you have any."
- I find that Mr Richardson mentioned the restrictive covenant (undertaking) to Mr Turner. He does not challenge this but stated that he did so to explain why he had not been in contact with him. I find that he did assert when the undertaking would expire. Mr Richardson denied that he told Mr Turner that it was up that day, 12th February 2013. I find that he is likely to have said to Mr Turner as he had later that day to Mr Wormleighton, that it was up in the next week or two. This was inaccurate as the undertakings would only be up on 5th March.
- Mr Turner asserted and Mr Richardson denied that he said that his director told him to undertake the sales pitch. There is insufficient evidence on which to conclude that a director told Mr Richardson to carry out the sales pitch.
- Mr Richardson gave evidence that he contacted Mr Turner and Mr Wormleighton to solicit the business of companies associated with those on the list but not the prohibited clients on the Annex. He said that it was his idea to do so and that if a director of a company on the Annex had other companies he would plan to target them. He said that if he had a company in mind he would do "due diligence". In his oral evidence Mr Richardson said that it was on 12th February 2013 he thought of the idea of contacting associated companies of prohibited clients or their directors. He also said that he would or may have asked James Ashton, who did minor administration tasks, to carry out a search. Mr Richardson stated in his affidavit that he would have carried out a RiskDisk search on Gemdrive to find out Mr Wormleighton's associated businesses. Digitac was an associated business. Whilst records of searches on RiskDisk can be obtained, none alleged to have been obtained or used by Mr Richardson were disclosed. In oral evidence it was said that an enquiry by Liquidity of RiskDisk drew a blank.
- Mr Turner alleged that Mr Richardson told him on 12th February 2013 that he was spending a day calling ex-Back Office customers "to ruin them" as his covenant was up. Mr Richardson gave evidence that he "probably used the Annex to assist" him in "targeting". He made up to ten calls on 12th February. He suggested that he used the Annex to contact associated companies. These were not on the list.
- I find that on 12th February 2013 Mr Richardson contacted Mr Turner and Mr Wormleighton in an attempt to solicit the business of Jobsworth and Gemdrive, prohibited clients on the Annex. There is no evidence whatsoever that Mr Richardson was soliciting the business of Jobsworth Limited or Digitac. There was no mention of Digitac in his voicemail message to Mr Wormleighton. Mr Richardson referred to being Mr Wormleighton's account manager at Back Office. There is no evidence that he had ever dealt with Mr Wormleighton to do business with Digitac. Mr Richardson does not assert that he mentioned their associated companies either to Mr Wormleighton or Mr Turner. Mr Richardson's explanation that he searched for associated companies of those on the Annex or connected with directors of those companies was not supported by RiskDisk records. He said that he carried out "due diligence" on Digitac, the company whose business he said he was seeking by contacting Mr Wormleighton. If he had, he would have seen that the company was inactive. The RiskDisk printout of 14th March 2013 exhibited to Mr Mason's affidavit states "This Company appears financially valueless".
- I do not find credible Mr Richardson's assertion that he was attempting to obtain the business of Jobsworth Limited and Digitac and not their associated companies on the Annex, which were prohibited clients. None of the evidence supported his explanation. I am satisfied so that I am sure that on 12th February 2013 Mr Richardson attempted to solicit for Liquidity the business of Jobsworth and Gemdrive.
- However the evidence does not support to the requisite standard of proof a conclusion that Mr Richardson contacted other prohibited clients on the Annex. Nor does the evidence establish to the requisite standard that Liquidity's directors, Mr Foulsham or Mr Tipper sanctioned Mr Richardson's contact with prohibited clients on the Annex.
- Mr Percival responded by email of 21st February 2013 to Mr Turner's emailed complaint of 12th February 2013 about Mr Richardson's conduct. I set out the whole email, omitting a telephone number, so that the balance of the positive sales pitch for Liquidity with the apology for Mr Richardson's "sales technique" can be considered. Mr Percival wrote:
"Firstly, let me apologise for my colleagues (sic) sales technique, he's new to the position having previously account managed and has probably gone a bit OTT on what other companies don't do rather than what Liquidity do, which in the first year of trading is go from strength to strength paying 200 temps in week 1, to 2100 by Xmas.
The growth of the company has been based upon the core foundations of experienced and knowledgeable personnel coupled with a state of the art cloud based payroll platform which enables ourselves, our clients and our temporary workers complete control over their own accounts in real time. Because of this and our next & same day banking facilities it allows for industry leading deadlines for have (sic) new starters registered, payroll plans submitted and amendments to be carried out. We GUARANTEE that whatever the circumstances, temps get paid on Friday, if they're happy, our clients are happy and in turn we are happy. It is services like these that have enabled us to sit in front of the likes of Thorn Baker & HRGO who have taken a keen interest in what we can offer their businesses respectively.
As you know, Liquidity Group were handed a list of clients that we were not allowed to deal with for 12 months to which we have adhered to. You may also be aware that the members of staff that left the previous company were nearly all of a senior position and so had been at the forefront of bringing the previous companies (sic) clients on board and had built up many years of friendship. Throughout the 12 months, we received many calls from clients wanting to move their business to Liquidity but in line with our covenants we had to let them down. Now the 12 months is up, I would suggest it foolish for us not to revisit those clients and others that we thought required our services, of which we feel are superior to the market as a whole.
Again I can only apologise for my colleagues (sic) gung ho approach, but he will learn from this experience moving forward."
- In his affidavit Mr Percival stated that he was unable to reply to Mr Turner's email of 12th February 2013 immediately as he was in Kent that day. He then "spent a few days thinking carefully about how I should respond to what was a complaint". He stated:
"My purpose in responding was only to give him a better impression of Liquidity rather than his feelings following the sales pitch from Tom."
Mr Percival apologised to the Court for contacting James Turner.
- In contrast to his written evidence, Mr Percival said in his oral evidence that when he wrote the email of 21st February 2013 to Mr Turner he was not thinking. He wrote it straight off. He just started writing. Mr Percival stated that he wrote the email to Mr Turner without seeking an explanation from Mr Richardson. He said that he knew Mr Turner had other companies in addition to Jobsworth and he would have expected Mr Richardson "to do due diligence". He said it was not his intention to pitch for business in the email. Mr Percival could not explain why he wrote in the email of 21st February 2013 that the twelve month restriction on soliciting prohibited clients was up when this was not correct.
- By his email of 21st February 2013, Mr Percival was clearly intending to solicit the business of Jobsworth. He had given an undertaking to the Court not to solicit or deal with prohibited clients on the Annex until 5th March 2013. The major part of his email is concerned with promoting Liquidity. He wrongly claimed that the twelve month restriction on dealing with clients of Back Office was up. He expressly stated that now that the twelve months was up it would be foolish not to revisit those clients. Jobsworth was one of those prohibited clients. It is plain that his pitch was for the business of Jobsworth. There is no suggestion that he was pitching for business of an associated company with whom Liquidity had always been free to do business. There would have been no need to mention when the restriction in the undertaking was up if he had been pitching for the business of a company not on the Annex.
- Contrary to the oral evidence of Mr Foulsham and Mr Tipper, I have found that at the meeting on 12th July 2012 the staff of Liquidity were only provided with the Annex but not the court Order. I have also found that even if a memorandum to staff to which the Order was attached was circulated on 16th July 2012 it was not circulated again later in the year. The Memo from the Operations Manager, Ricky Williams is dated 16th July 2012 and stated:
"As most of you are aware we have agreed an out of court settlement with Back Office Ltd. Enclosed is a copy of the court order from (sic) which we all must adhere to.
In summary we must not:
- Make any disparaging comments about Back Office Limited or Roger Mason.
- Solicit or deal with the clients in the enclosed Annex.
I will be walking round your desks later today to make sure you each understand the seriousness of this memo, make sure you read it in full before I talk with you."
Mr Foulsham said that he and Mr Tipper saw the Memo before it was sent out. The Memo did not state that staff had been given a copy of the Order a few days earlier.
- Mr Foulsham stated that in September 2012 some prohibited clients on the Annex rang Liquidity. It is not suggested that Liquidity then dealt with those clients. Whilst no steps were taken by Mr Foulsham and Mr Tipper to monitor compliance with the undertakings, they stopped "sales blasting" by Liquidity. Mr Foulsham said that a sales blast had led to the previous application for committal for contempt.
- Mr Foulsham said that he thought Mr Percival had told them about his email of 21st February 2013 and that he and Mr Tipper were satisfied by Mr Percival's explanation that Mr Richardson was targeting associated companies but not prohibited clients on the Annex. Mr Foulsham said that he respects Mr Percival and Mr Richardson. He had worked with them long enough. He thought that as directors he and Mr Tipper had done all they could to ensure compliance with the undertakings.
- Mr Tipper stated in his affidavit that he had rejected an approach in August 2012 from a prohibited client. Two other prohibited clients contacted Mr Percival in about November 2012 but he rejected their approach. Mr Tipper also stated that Liquidity's solicitors had been called in to conduct an audit of compliance with the undertakings when one of the prohibited clients on the Annex had received a marketing blast.
- Despite justified comments by Miss Donnelly about the way in which Mr Tipper gave his evidence and about his and Mr Foulsham's reaction to attempts to serve them with the Application it has not been established to the requisite standard that they failed to take reasonable steps to ensure that the undertaking given by Liquidity was obeyed. They commented with some justification that it appeared that no breaches of the undertaking had occurred for seven months. Mr Foulsham and Mr Tipper trusted Mr Richardson and Mr Percival and did not anticipate that they would breach the undertakings, although being remunerated by commission, the temptation was there.
- Mr Percival admitted at paragraph 27 of his affidavit of 20th March 2013 that he contacted Mr Turner and, "on the face of it, it would appear to be in his capacity as director of [Jobsworth]", a prohibited client. He stated in paragraph 27:
"I never intended to breach the Order and was only ever replying to an email message sent to me by James Turner (which invited a response). In hindsight, as I have said above, I should not have been drawn into the matter and should have left things as they were."
At paragraph 17 of his affidavit Mr Percival apologised to the court for communicating with Mr Turner.
- In my judgment based on my findings of fact, by an email of 21st 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 21st February 2013 Mr Percival intended to solicit Jobsworth's business for Liquidity. In the words of Cotton LJ in Trego v Hunt he made a "specific and direct" appeal to Jobsworth with a view to obtaining their business for Liquidity. The basis of the allegation of contempt against Mr Percival is made out to the requisite standard of proof. I find that Mr Percival was in contempt of court by sending his email of 21st February to Mr Turner in which he intended to solicit the business of Jobsworth, a prohibited client.
- I am satisfied so that I am sure on the evidence that Mr Richardson telephoned Mr Turner on 12th February 2013 in an attempt to obtain the business of Jobsworth, a prohibited client, for Liquidity. I have found that the evidence does not support the assertion of Mr Richardson that he had contacted Mr Turner to solicit the business of an associated company of Jobsworth. Mr Richardson agrees that the purpose of his call to Mr Turner was to solicit business for Liquidity. He was attempting to solicit the business of a prohibited client.
- It is clearly established on the evidence that by his voicemail on 12th February 2013 Mr Richardson was attempting to solicit business for Liquidity from Mr Wormleighton. I have found as a fact that he was doing so in an attempt to obtain the business of a prohibited client, not that of an associated company to which no reference was made in his message.
- Mr Pepperall QC contended that for Liquidity to be held liable in contempt Back Office must establish all the elements referred to in Hone v Page including that Liquidity either authorised conduct consisting of breaches of the injunctions by its agents or could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them.
- Lord Donaldson MR in In Re Supply of Ready Mixed Concrete  QB 213,  ICR 229 in the case of S Ltd relied on the passage cited by Mr Pepperall QC in Hone v Page to conclude at page 255C that a corporate respondent to contempt proceedings was not liable for the acts of its employees where the company:
"…did not authorise the acts, but on the contrary expressly forbade them and foresaw the possibility of such acts but, as the court found, took reasonable steps to prevent them…"
In allowing the company's (S Ltd's) appeal from a finding of contempt he held:
"…Slade J's formulation [in Hone v Page] cannot stand with the law as the court below interpreted it. I have no doubt that Slade J's formulation is wholly correct."
Accordingly the Court of Appeal held that the third element identified in Hone v Page had to be established for a corporate defendant to be liable for contempt of court.
- Following the judgment of the Court of Appeal in Ready Mixed Concrete in the case of S Ltd, two other companies R Ltd and P Ltd in a similar position appealed the findings of contempt against them. The Court of Appeal allowed their appeals In Re Supply of Ready Mixed Concrete (No. 2)  ICR 57. The House of Lords allowed the appeal of the Director General of Fair Trading and held both R Ltd and P Ltd guilty of contempt of court in that their employees rendered them liable for disobeying injunctions against them (In Re Supply of Ready Mixed Concrete (No. 2)  1 AC 456). Lord Nolan held at page 481:
"Given that liability for contempt does not require any direct intention on the part of the employer to disobey the order, there is nothing to prevent an employing company from being found to have disobeyed an order 'by' its servant as a result of a deliberate act by the servant on its behalf. In my judgment the decision in Stancombe's case is good law, and should be followed in the present case. The employees of the respondent have, by their deliberate conduct, made their employees liable for disobeying the orders of 14 March 1978 and 29 March 1979. The respondents are therefore guilty of contempt of court."
Lord Nolan held that Stancombe illustrated that liability of a corporate body for contempt can arise in the case of a servant acting in the course of his employment but in dereliction of duty. No distinction is to be drawn between liability for the acts of a servant and those of an agent.
- The dictum of Warrington J in Stancombe at page 194:
"…if the act is in fact done, it is no answer to say that, done, as it must be, by an officer or servant of the council, the council is not liable for it, even though it may have been done by the servant through carelessness, neglect or even in dereliction of his duty."
was approved by the House of Lords in Ready Mixed Concrete (No. 2). The reliance of the Court of Appeal in Ready Mixed Concrete  ICR 229 on Hone v Page in holding that S Ltd was not guilty of contempt of court is inconsistent with the judgments of the House of Lords in the cases of R Ltd and P Ltd. The judgment of the Court of Appeal in  ICR 229 (S Ltd) was overruled and that in R Ltd and P Ltd  ICR 57 reversed. The third ingredient for establishing liability for contempt of court set out in Hone v Page applies, as in that case, to an application for contempt only to respondents who are individuals not companies. As Woolf LJ observed in Tuvalu:
"Where a company is not involved the principle is clearly stated in Hone v Page  FSR 222c."
Where contempt against a corporate defendant is alleged, the editors of Arlidge, Eady and Smith on Contempt Fourth Edition citing In Re Ready Mixed Concrete (No. 2) (Pioneer Concrete)  1 AC 456 contra  1 QB 213  ICR 229, observe at 12-106:
"Neither would it suffice for the corporation to plead that it forbade its employees to act in breach of the order or that it took reasonable steps to achieve compliance."
Such action by a company does not afford it a defence to liability for contempt.
- Accordingly in my judgment the liability of Liquidity for contempt has been established by the acts of its agents Mr Richardson and Mr Percival attempting to solicit the business of prohibited clients on 12th and 21st February 2013 respectively. They were engaged as salesmen and were acting within the scope of their authority. As in Stancombe, the fact that they may have acted in dereliction of duty, or in their case, in breach of an instruction does not excuse Liquidity from liability for contempt of court.
- Whilst establishing the third principle outlined in Hone v Page is not necessary for the liability of Liquidity, it is for establishing the liability of Mr Foulsham and Mr Tipper for contempt of court. The evidence does not establish 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.
- Mr Percival and Liquidity Group Solutions Limited are guilty of contempt of court.
- Contempt of court by Mr Foulsham and Mr Tipper has not been established. The applications against them are dismissed.
Published: 10/06/2013 13:06