English Court of Appeal clarifies law on contempt post-2020 revisions

Breach of a court order can result in the non-compliant person being found guilty of contempt of court and imprisoned or fined. Such power of compulsion is a strong weapon the court can employ to ensure compliance with its orders.

In 2020, the English civil procedure rules relating to contempt were revised and simplified, which included the removal of a provision addressing director liability for a company's contempt of court.

In a recent case of ADM International Sarl v Grain House International SA and another [2024], the court reaffirmed that the principle that directors and officers can be liable for civil contempt in respect of orders made against the corporation was unaffected by the repeal of this provision.

Contempt of court

In general terms, a person to whom a court order is addressed is guilty of a contempt of court if they breach the court order (referred to as "civil contempt"). Third parties who have notice of a court order may also be guilty of contempt if they do something that is a wilful interference with the administration of justice (referred to a "criminal contempt").

Liability for civil contempt does not require an intention to breach (or knowledge that he is breaching) a court order; all that is required is an intention to do an act (or to omit to do an act) that is prohibited (or mandated) by a court order and to know the facts that made it a breach of the order.

By contrast, liability for a criminal contempt by a third party requires a wilful interference in the administration of justice, which requires an intention to breach the court order.

Since at least 1860, directors of a company to which a court order is addressed have been in what the defendant described as an anomalous position of potentially being liable for civil contempt.

Director and officer liability?

The defendant sought to argue that this director liability was derived from the Civil Procedure Rules (CPR) – and, in particular, CPR 81.4(3) that expressly provided that if a company disobeyed an order to do or not do something then a committal order may be made against any director or officer of the company.

This provision was repealed in 2020. It was argued by the defendant the repeal had the effect of removing the power of the court to find a director liable for civil contempt, leaving directors in the same position as any other third party to an order – namely, susceptible to criminal contempt only (which applied a higher standard of knowledge and intent).

The Court of Appeal held that a director's liability for civil contempt in relation to breaches of orders by a company was a matter of substantive not procedural law, so it does not (and did not) depend on the civil procedure rules.

Accordingly, the repeal of CPR 81.4(3) did not affect any change to the substantive law on contempt (in particular director liability).

Osborne Clarke comment

The decision of the Court of Appeal is a useful clarification of the law on contempt following the revisions to the civil procedure rules in 2020 and a reminder of the personal risks faced by directors should they fail to comply with court orders addressed to the companies they serve as officers of.