This is an appeal from an order made by Mr Justice Zacaroli on 28th June 2018, whereby he sentenced the appellant, following contempt proceedings, to a sentence of 13 months' imprisonment each, for seven contempts in all, to run concurrently.

The facts which underpin the proceedings are set out with clarity and economy in the judge's judgment and I substantially take the background to this appeal from the judge's first, liability, judgment.

The respondents are engaged in quantitative investment research and software development. They specialise in developing algorithmic investment strategies that allow computerised buying and selling of stocks and shares without human intervention. The strategies that are developed are highly confidential and the cost of developing them significant.

In order to protect the commercial sensitivity of the investment strategies that the respondents develop, they are stored in encrypted form and obfuscated, or disguised, so that the characters are unrecognisable.

Mr. Xu, the appellant in this matter, is a Chinese national who worked for the respondents as a quantitative analyst between October 2012 and 5th August 2014. Over a period of several months, prior to the termination of his employment, Mr. Xu, using hacking software specially designed by himself, wrongfully accessed and “reverse engineered” the respondents' computer codes and in doing so gained unencrypted access to a total of 55 strategies by decoupling and unobfuscating them. The result was that he had access to substantial amounts of highly confidential information.

Whilst he was doing this, Mr. Xu was simultaneously communicating with recruitment and other consultants and potential employers in the quantitative finance market with the intention of utilising the information he had obtained in order to benefit himself in the employment market.

In July 2014, Mr. Xu purchased a one-way ticket to Hong Kong and provided his mother and parents-in-law, (who had been in the United Kingdom for his wedding,) with a considerable quantity of computer equipment and hard drives to take back to Hong Kong and China prior to travelling there himself.

On the morning of 6th August 2014, having left a letter of resignation on his line manager’s desk, Mr. Xu flew to Hong Kong. His sudden departure led the respondents immediately to commence proceedings for breach of confidence and breach of contract.

On 14th August 2014, Mr. Xu was arrested in Hong Kong. He remained in custody there until he was extradited to the United Kingdom on 11th December 2014. Subsequently, on 30th June 2015, Mr. Xu pleaded guilty to offences under the Fraud Act 2006 and was sentenced to four years imprisonment. Although he admitted accessing and viewing the 55 strategies, for the purposes of his plea at the criminal proceedings, Mr Xu expressly denied having taken copies of all the strategies, admitting to copying only those three strategies in respect of which handwritten notes had been found at his home.

Mr. Xu was subsequently made the subject of a Serious Crime Prevention Order (SCPO) on 3rd July 2015. By the order he was required to disclose the location of the confidential information and to identify the persons who had possession of, or access to it. He failed to do so.

On 29th July 2016, the respondents began a private prosecution on the basis that Mr. Xu had breached the terms of the SCPO. Following a trial by jury, Mr. Xu was acquitted on three counts, but found guilty on two other counts and was sentenced to a further 18 months' imprisonment.

By their verdicts, the jury rejected Mr. Xu's denial of having taken copies of the respondents' intellectual property and found, by implication, that it had been proved, beyond all reasonable doubt, that he had taken copies of strategies above and beyond the three handwritten copies which had been seized from his home.

At a hearing on 16th May 2017, His Honour Judge Tomlinson made a confiscation order against Mr. Xu in the sum of £37,208.91. The benefit of his crime was declared, for the purposes of that confiscation hearing, to have been over £31 million. The figure was agreed for the purposes of the confiscation hearing only.

On 1st June 2017, His Honour Judge Tomlinson ordered the SCPO to continue, somewhat varying its terms, and making a fresh order which was issued on 7th July 2017.

Moving forward to this year. On 29th January 2018, in civil proceedings brought by the respondents, the judge made an order requiring Mr. Xu to state, “to the best of his information, knowledge and belief what copies of the respondents' confidential information he had taken and what had become of the copies and the names of those who have or had had the confidential information in their possession”. That order dated 9th January 2018, is known as the “January Order” and is the order in relation to which these committal proceedings were subsequently launched.

Meanwhile, on 15th September 2017, the Secretary of State for the Home Department communicated to the respondents her decision, dated 11th September 2017, that Mr. Xu be deported to China. In subsequent judicial review proceedings, the respondents challenged that decision on the basis that their private interest in protecting their confidential information outweighed the public interest in the deportation of the appellant as a criminal who has been sentenced to a four-year sentence of imprisonment.

The judicial review claim was heard and dismissed by Supperstone J on 20th December 2017. Whilst leave to appeal to the Court of Appeal was granted by my Lord, Lord Justice Singh, the appeal was withdrawn on 9th July 2018 by consent. The order records as following:

On 13th April 2018, summary judgment was granted to the respondents in their parallel claim made for repayment of bonus and salaries paid to Mr. Xu and a final injunction was made against him.

On 10th April 2018, the respondents issued the present committal applications. The Secretary of State was informed of the committal proceedings but has chosen to play no part in them.

On 19th June 2018, Zacaroli J conducted a hearing in order to determine whether the breach of the January order had been established to the necessary criminal standard of proof, namely beyond all reasonable doubt. This judgment was handed down as a separate liability judgment in which, as I have already recorded, he found Mr. Xu to be in contempt of court on a total of seven counts. Whilst split into a number of separate counts and recorded individually on the face of that order, the essence of each count was largely the same, namely that Mr. Xu had failed to disclose what he did with the copies of the respondents' confidential information which he had stolen in August 2014 and that, in having failed to provide that information, he was in breach of the January Order.

The judge at the conclusion of the liability judgment, looking at the totality of the contempt, was satisfied that Mr. Xu had taken copies of the claimants' confidential information and said:

The sentence imposed by the judge was one of 13 months' immediate imprisonment. The judge in his judgment properly divided his consideration as to sentence between the punitive element and the coercive element. In respect of the punitive element, the sentence of the court was, in effect, one month.

This matter has come before the court on 31st July 2018 and Mr. Cragg, Queen's Counsel on behalf of the appellant, having acknowledged that a month has now passed since sentence, takes no further point today as to the punitive element of the sentence.

Turning then to the coercive element. The judge did not accept, contrary to counsel’s submission, that the coercive element had been exhausted the judge, pointing out that this was the first time that the possible coercive effect of committal for contempt has arisen.

The judge dealt in his judgment with the heavy emphasis placed by Mr. Cragg on the lack of evidence as to quantification of either damage to the respondents or profit to Mr. Xu.

The judge accepted, that if it were the case that even if the appellant were able to use the information, it had in fact by now lost all its value such that the respondents would suffer no damage, then there would, arguably, be no purpose in “coercing” him to provide the details of the confidential information he had stolen. The judge accepted that if established, that would be a factor pointing away from a coercive prison sentence.

The judge held, however, that that point had not been reached for a number of reasons which he set out in full in his judgment between paragraphs 35 and 41. However, in summary:

The judge was unimpressed by arguments that a coercive sentence should not be made as a confiscation order has been made and the appellant has been the subject of a "relentless pursuit by the claimants", which included challenging the deportation order made by the Secretary of State. The judge regarded the actions of the respondent company as understandable given what is at stake.

The judge carefully considered whether to suspend the sentence and reminded himself of the need to impose the shortest sentence commensurate with its purpose. He gave weight to the diminishing prospect of harm over time before concluding, at 53:

Having confirmed to the court this morning that he has no instructions from Mr. Xu to seek to purge his contempt by providing the information required by the January Order, Mr. Cragg has helpfully distilled his eight grounds of appeal into three specific challenges to the judge's judgment, which, he submits, should lead this court to conclude that the judge had been wrong to apply any coercive sentence in relation to the contempt.

The three areas in respect of which Mr. Cragg says the judge fell into error are:

In support of his argument that the time has passed for any coercive sentence, Mr. Cragg took the court to Wilkinson v Anjum and another[2011] EWCA Civ 1196, [2012] 1 WLR 1036, in particular to the judgment of McFarlane LJ, at 26:

Mr. Cragg also took the court to the following passage, starting at paragraph 36:

Mr. Cragg submits that the judge failed properly to carry out this task. The judge approached the matter in his judgment in this way:

The fact that this was the first time there has been committal proceedings is, says Mr. Cragg, only part of the picture. The court, he says, must look at everything that has happened to the appellant, including the criminal convictions, the confiscation order and summary judgment, together with what he had described as “the relentless pursuit” of Mr. Xu by the respondents by way of keeping him under surveillance and challenging the deportation. Further, he said, the judge should have had in mind the fact that Mr. Xu is now apparently penniless and is away from his family in China. All these, he says, when put together should have led the judge to conclude that “enough is enough” in Wilkinson terms and that, as he put it, “there is no point in passing a coercive sentence on a man who has unequivocally demonstrated that he is not going to be coerced”.

I do not, with respect, accept Mr. Cragg's argument. In my judgment, the judge was correct in finding that this was the first time that the possible coercive effect for contempt of court has arisen. The judge, with meticulous care, differentiated between the punitive and coercive elements of his sentence; the criminal conviction and the sentence of imprisonment substantially wiping out the punitive element of the contempt sentence.

Similarly, the confiscation hearing arose directly from the criminal conviction and the civil judgment which had resulted in a quantified award in respect of bonus and salary paid to the appellant reflects a wrong in relation to which the respondent had secured a civil remedy.

In my judgment, it would be wrong for the court to jumble together all the disparate aspects of the various proceedings which Mr. Xu has brought upon himself and, in doing so to allow him successfully to submit that because he could, at various stages and in various proceedings, have disclosed information about the confidential information he had stolen, that each of those orders (or proceedings) should now be regarded as having had a coercive element and, as a consequence, these first, contempt proceedings should now be regarded as being at the end of the line rather than the beginning.

In my judgment, the SCPO, which is designed to prevent the commission of crime, had no relevance to the civil proceedings and I can see no reason why a civil court should be prevented from punishing the appellant for breach of its own order because of the existence of the SCPO.

In his written submissions, Mr. Peto QC on behalf of the respondents, said "The suggestion that the sentence should be reduced to reflect Mr. Xu's obstinacy and ruthless determination to flout court orders is misplaced. It amounts to rewarding bad behaviour." I agree.

In the context of this case, Mr. Cragg's argument that “enough is enough” amounts, in my judgment, to the singularly unattractive submission that because Mr. Xu is absolutely determined not to disclose any information, or in any way to purge his contempt, the court may as well be pragmatic and accept that making an order of coercive imprisonment is simply pointless. The time may come, in line with Wilkinson and other cases, when it is no longer proportionate to make such orders, but this is the first time that a coercive order for imprisonment has been made in contempt proceedings and in my judgment the judge was right in regarding that as a matter of considerable significance.

It is submitted that the judge was wrong in deciding that there was sufficient evidence of harm which justified the making of a coercive order. The judge made findings of fact in respect of harm:

Mr. Cragg took the court to the Secretary of State's skeleton argument in the (now withdrawn) appeal against the judgment of Supperstone J in the judicial review proceedings. He did so to support his argument that there was no evidence in support of harm to the respondents and submitted that they, the respondents, had failed to provide any evidence of harm when they had been in a position to do so. It would be wrong, Mr. Cragg submitted, “to send a man to prison without a figure”. With respect to the skill with which Mr. Cragg put his argument, it is in my judgment unsustainable because:

In any event, in my view, there is no question of it being necessary for harm to be established by reference to a specific figure. I can do no better than the judge did at paragraph 35, where he refers, by analogy, to the well-recognised difficulties in ascribing a value to potential damage in applications made for injunctions in general “theft of confidential information” cases.

The final limb of Mr. Cragg's argument is that committal proceedings are public law proceedings and therefore the public interest goes beyond the interest of the parties and can, he submits, therefore extend to the sentencing exercise. In those circumstances, Mr. Cragg says, the judge was wrong in making an order of imprisonment at a time when he knew that the SSHD had decided that it was in the public interest for the appellant to be deported. The judge, having had this very submission made to him, did not agree, saying:

I agree with the judge. In my judgment, there is no reason why the normal deportation procedure should not be followed (as reflected in the judicial review appeal consent order), namely that the appellant will be deported upon completion of his sentence of imprisonment.

It is important to note that the Secretary of State addressed the issue of deportation in the judicial review which took place before these contempt proceedings. At that stage the Secretary of State said that the public interest outweighed the respondents' private interest in pursuing their litigation. The Secretary of State, as I have already noted, was subsequently informed of the committal proceedings and chose not to attend to argue, as he could, that the public interest in deporting the appellant should now not only outweigh private litigation, but also the court's right to punish a contempt. In any event, Mr. Cragg clarified that he was not going so far as to say that the judge would have been bound by the Secretary of State's views as to where the public interest lies, or that the public interest in deporting the appellant necessarily prevents the judge from sentencing the appellant in committal proceedings.

In my judgment, the judge was entitled to consider the appropriate sanction within the proceedings before him.

In my judgment, the judge's judgment was an exemplar of a sentencing judgment. He set out the law and applied it with care, taking into consideration each of the submissions made on behalf of the appellant before concluding that the sentence of 12 months as a coercive element was the right and proportionate sentence in all the circumstances. In my judgment, none of the three matters upon which Mr. Cragg relies, taken either individually or together, serve to undermine his conclusions. In my judgment, the judge made a proportionate order of imprisonment which, in the circumstances, was inevitably to be served immediately by Mr Xu.

In those circumstances, I would dismiss the appeal.

I agree.

I also agree.