Hussain v Vaswani & Ors

Mr Hussain is a banker and investment manager. He was the tenant of an apartment owned by the Respondents (“the Vaswanis”) at 3 Riverlight Quay, London SW8 5BF (“the Apartment”). The rent reserved by the tenancy agreement was £1,950 per week. Mr Hussain ceased paying rent in January 2019. On 14 March 2019 the Vaswanis served notice to quit, but Mr Hussain failed to do so. On 1 May 2019 the Vaswanis brought possession proceedings. On 2 October 2019 District Judge Parker sitting in the County Court at Wandsworth made an order requiring Mr Hussain to give the Vaswanis possession of the Apartment on or before 16 October 2019 and to pay the Vaswanis £61,150 for rent appears and occupation rent of £277.80 per day from 23 September 2019 until he gave possession of the Apartment to the Vaswanis. DJ Parker refused permission to appeal.

On 14 October 2019 Mr Hussain filed an appellant’s notice seeking permission to appeal and a stay of execution. On 28 October 2019 Judge Lethem refused permission to appeal the money judgment, but listed the application for a stay of the possession order for a hearing which was subsequently fixed for 11 December 2019 and the application for permission to appeal that order for a hearing which was fixed for a date in February 2020. On 7 November 2009 the Vaswanis obtained a warrant of possession which was to be executed on 7 January 2020. Mr Hussain did not attend the hearing on 11 December 2019, having unsuccessfully sought an adjournment beforehand. In his absence Judge Lethem dismissed the application for a stay.

On 19 December 2019 Mr Hussain applied to aside the order made on 11 December 2019 pursuant to CPR rule 39.3 and for a stay of execution, but failed to give notice of the application to the Vaswanis. The application came before Judge Lethem on 2 January 2020. Mr Hussain gave different reasons for his non-attendance on 11

On 3 January 2020 the Vaswanis’ solicitors sent Mr Hussain details of the bank account to which the money was to be paid. On 6 January 2020 Mr Hussain attended court and informed Judge Lethem that the money had been paid. In support of this he produced a letter from Kilimanjaro Capital Management Ltd (“Kilimanjaro”) to himself dated 6 January 2020 stating that Kilimanjaro had historically been liable for payment of the rent on the Apartment, that it agreed to pay the sum of £92,500 and it expected the funds to reach the nominated account in short order and in any event within four working days.

On that basis, Judge Lethem held that, contrary to the submission of counsel for the Vaswanis, there had been a change of circumstances since 11 December 2019 which enabled him to revisit the order made on that occasion pursuant to CPR rule 3.1(7) and to grant Mr Hussain a stay of execution and suspend the warrant. As a condition of doing so, however, Judge Lethem required and accepted a further undertaking from Mr Hussain, namely to “pay monies to [the Vaswanis] for use and occupation at the rate of

At some point between 7 and 10 January 2020 Mr Hussain issued a claim against the Vaswanis in the High Court for the sum of £264,904. In addition, on 9 January 2020 he applied to the High Court for permission to appeal against Judge Lethem’s order dated 2 January 2020 seeking to be released from his undertaking and for that to be replaced by an undertaking to use his best endeavours to procure that Kilimanjaro made the payment. On 23 January 2020 Zacaroli J refused permission to appeal.

The sum of £92,500 was not paid by or on behalf of Mr Hussain by 9 January 2020 in accordance with his undertaking on 2 January 2020, and remains unpaid to this day. Nor was the weekly sum of £1,950 ever paid by or behalf of Mr Hussain in accordance with his undertaking on 6 January 2020, and all such sums remain unpaid.

On 21 January 2020 the Vaswanis applied for Mr Hussain to be committed to prison for contempt of court on four grounds, two of which were that that Mr Hussain had failed to comply with the undertakings given to the court on 2 and 6 January 2020. The third ground was that Mr Hussain had failed to comply with another undertaking allegedly given on 6 January 2010. The fourth ground was that Mr Hussain gave the undertakings on 2 and 6 January 2020 dishonestly in that he did not intend to comply with those undertakings.

In evidence served in answer to the committal application Mr Hussain contended in summary that he had never had the money to pay the sums in question, that he was the beneficiary of a discretionary trust of which Kilimanjaro was the trustee and that,

It also emerged that, at the time, Mr Hussain was a bankrupt whose discharge from bankruptcy had been suspended, a fact which he had not revealed to Judge Lethem on either 2 or 6 January 2020.

On 20 February 2020 Judge Lethem lifted the stay of execution due to Mr Hussain’s non-compliance with his undertakings. On 6 April 2020 Judge Lethem refused Mr Hussain permission to appeal against the order of DJ Parker.

At hearings on 6 and 7 April 2020 Mr Hussain indicated that he intended to apply to strike out the committal application, and he did so on the first day of the hearing of the substantive application before Judge Lethem on 15 June 2020. Mr Hussain contended that the County Court did not have jurisdiction to deal with the fourth ground, and only the High Court did. Judge Lethem accepted this and struck out the application so far as it concerned the fourth ground. Mr Hussain also contended that the first three grounds were precluded by section 4 of the Debtors Act 1869. Judge Lethem rejected this contention. Mr Hussain did not appeal against Judge Lethem’s refusal to strike out the first three grounds. Mr Hussain’s advocate explained to this Court that Mr Hussain now accepts that the Debtors Act did not preclude the court from finding that he was in contempt of court, although he maintains that it does prevent the court from imposing a sanction of imprisonment.

Later on 15 June 2020 Judge Lethem dismissed the third ground (as I have numbered it) of the application. On 16 June 2020 Judge Lethem adjourned the committal application to 24 June 2020 because of Mr Hussain’s non-attendance (due, according to Mr Hussain, to his ill-health). On 24 June 2020 the application proceeded, although again Mr Hussain did not attend (for the same reason).

On 1 July 2020 Judge Lethem delivered judgment finding both remaining counts of contempt proved, namely that Mr Hussain had breached the undertakings he gave on 2 and 6 January 2020. He also found (as matters relevant to sanction) that Mr Hussain had had no intention of honouring his commitments on either 2 or 6 January 2020 and that, together with Kilimanjaro, he had engineered the situation so as to achieve the end he wanted, namely the suspension of the warrant without the payment of any sums to the Vaswanis. The judge adjourned sentencing until 30 July 2020. On that occasion Mr Hussain again failed to attend (for the same reason), although he did serve a witness statement setting out his mitigation.

On 30 July 2020 Judge Lethem sentenced Mr Hussain to be imprisoned for a term of 12 months, of which eight months were punitive and four months were coercive (meaning that Mr Hussain could be released before service of the latter part of the sentence if he purged his contempt). I must consider the judge’s reasoning in more detail below, but in brief summary he concluded that the appropriate starting point was a sentence of 18 months, but that the sentence should be reduced to 12 months having regard to mitigating factors relied upon by Mr Hussain and the impact of Covid-19.

It is clear from Judge Lethem’s judgment on the strike out application that he did not accept that section 4 of the Debtors Act 1869 prevented him from imposing a sanction of imprisonment, which is no doubt why the submission was not renewed by Mr Hussain’s advocate on 30 July 2020. It is not in dispute that it is open to Mr Hussain to appeal against the order of 30 July 2020 notwithstanding his failure to appeal against the dismissal of the strike out application.

Mr Hussain’s first ground of appeal is that the court has no power to impose a sanction of imprisonment for a contempt of court consisting of a breach of an undertaking to pay a sum of money by virtue of section 4 of the 1869 Act unless one of the exceptions applies and none does in this case. Mr Hussain’s second ground is that, even if a punitive term of imprisonment can be imposed, a coercive term cannot. Mr Hussain’s third ground is that a term of 12 months is manifestly excessive.

CPR rule 81.4 provides, so far as relevant, as follows:

It is clear from this that an undertaking by a party to do or not to do an act may be enforced by an order for committal just as much as an order to do or not to do an act, but subject in both cases to the Debtors Acts.

Section 4 of the Debtors Act 1869 (as amended) provides, so far as relevant, as follows:

The Debtors Act 1869 was an important reforming piece of legislation. It largely abolished the practice of imprisoning people for non-payment of debts in prisons like the Marshalsea, so vividly described by Charles Dickens in Little Dorrit based on his experience of his father’s imprisonment there. It should be noted, however, that, even now, there are circumstances in which non-payment of debt can lead to imprisonment. In addition to the six exceptions listed in section 4, section 5 of the Act empowers courts in certain types of cases to commit to prison for a term not exceeding six weeks any person who defaults on the payment of a debt due pursuant to a court order where it is proved that the person in question has or has had the means to pay the debt.

There is a body of case law on the interpretation and application of section 4 of the Act. It was common ground between the advocates, however, that, somewhat surprisingly, there is no authority which is decisive of the issue which arises in this case. The most relevant authorities, which I will consider in chronological order, appear to be the following.

In Bates v Bates (1888) 14 PD 17 a wife petitioned for judicial separation from her husband on the ground of cruelty. An order was made that the respondent should pay the petitioner’s solicitor £41 odd to cover costs already incurred and should pay into court £40 as security for future costs alternatively give a bond. The respondent did none of these things and the petitioner applied for leave to issue a writ of attachment. Leave was granted by Butt J. The respondent appealed, relying upon section 4 of the Debtors Act 1869. Counsel for the petitioner conceded that the order could not be supported so far as it related to the order for payment of £41 odd. Subject to that, the Court of Appeal dismissed the appeal.

Cotton LJ said at 19:

Lindley LJ said at 20:

Bowen LJ said he was “of the same opinion”, thereby apparently agreeing with both judgments.

In my judgment the reasons given by Cotton LJ and Lindley LJ are different, but not inconsistent. Cotton LJ focussed on the fact that the respondent could have complied with the order by providing a bond, but had not done so. Nevertheless, he said that the object of the Act was to prevent imprisonment for non-payment of “ordinary debts” and section 4 had to be construed in that light. Moreover, he went on to say that an order to give security was not within section 4. Lindley LJ held that depositing money into court by way of security was not a payment of money within section 4. What is common to both judgments, and relevant for present purposes, is that the apparently wide words of section 4 must be purposively interpreted.

Mr Hussain’s advocate particularly relied upon Buckley v Crawford [1893] 1 QB 105, a case which was not cited to Judge Lethem on the strike out application. In that case Mr Buckley had obtained judgment against Mr Crawford. He attempted to execute the judgment against some goods, but the goods which had been seized were claimed by Mr Townend and the sheriff interpleaded. In the interpleader proceedings the master made an order directing the sheriff to sell the goods and pay Mr Townend. The order concluded with the words “[Mr Buckley] undertaking to make good any deficiency on sale”. The goods were sold and there was a deficiency of £139 odd. The master then ordered Mr Buckley to pay that sum to Mr Townend within four days. When Mr Buckley did not do so, Mr Townend applied for an order for committal. Bruce J made the order. The Court of Appeal allowed Mr Buckley’s appeal and set aside the order.

The judgment of the Court was given by Wills J, who said at 107:

As can be seen from CPR rule 81.4, it is no longer correct to say that an order for committal will only be made for breach of an order as opposed to an undertaking. Be that as it may, in that case the application before the court was not to commit Mr Buckley for breach of his undertaking, but to commit him for breach of the subsequent order to pay money to Mr Townend i.e. a judgment debt. It is therefore not surprising that the Court concluded that that was precluded by section 4 of the Act.

Counsel for the Vaswanis cited Cotton v Heyl [1930] 1 Ch 510 in his skeleton argument in support of a submission that, even if the undertakings were within section 4 of the Act, the exception contained in subsection (3) applied. Although this authority was not the subject of oral submissions from either advocate, it is perhaps the closest to the present case. Mr Cotton brought proceedings against Mr Heyl and a company which were compromised on the terms of a Tomlin order which contained an undertaking by Mr Heyl to pay Mr Cotton £1,000 forthwith and £4,000 out of the first monies received by or on behalf of Mr Heyl from the sale or licensing of certain patents. At that time, Mr Cotton was aware that Mr Heyl had already disposed of half of his interest in the patents. The £1,000 was duly paid. Subsequently Mr Heyl sold the remaining half of his interest for £10,000 payable in stages, but failed to pay Mr Cotton the sum of £4,000. Mr Cotton applied for an order for committal alternatively leave to issue a writ of attachment against Mr Heyl. Luxmoore J held that the undertaking was caught by section 4, but that the exception contained in subsection (3) applied, although he refused the order sought on a different ground (namely that no time for payment had been specified).

Although Luxmoore J said at 520 that he agreed that an undertaking to money could not be enforced by committal or attachment unless one of the exceptions applied, he did not give any reasons for that view. Having set out his reasons for concluding that subsection (3) applied, he said at 521-522:

It appears from this that Luxmoore J considered that an undertaking to pay money to a party was to be distinguished from an undertaking to pay money into court or into a joint account by way of security. Thus far his reasoning is clear and persuasive. It remains the case, however, that he did not give any positive reasons for concluding that an undertaking to pay money to a party was caught by section 4 unless one of the exceptions applied. In my view the most likely explanation is that, on the facts of the case, the undertaking appears to have been precisely equivalent to an order to pay the sums in question.

In re Hudson [1966] 2 Ch 209 is not an authority on section 4 of the Debtors Act 1869, but it is nevertheless relevant because it explains the distinction between an order to pay money and an undertaking to pay money. The plaintiff’s marriage had been dissolved and her former husband was ordered to pay her maintenance at a specified rate. The husband subsequently filed evidence that he was unable to comply with that order but offered to undertake to pay one-third of his income to the plaintiff. An order was made in 1939 in those terms, but there was no recital of consent by the plaintiff or other indication that the undertaking was part of a contractual bargain between the parties. The husband remarried and later died. The plaintiff claimed against the husband’s executrix, his second wife, an account in respect of arrears of maintenance payable under the 1939 order. Buckley J dismissed the claim on the ground that an undertaking to the court did not confer any personal right or remedy on any other party and that, since there was no evidence of any collateral contract between the parties which might have given rise to a debt recoverable at law, the plaintiff had no cause of action against the husband or his estate for any arrears.

In his judgment Buckley J analysed the differences between an order to pay money and an undertaking in a passage at 213-214 which merits quotation at some length:

It should appreciated that, in saying what he did about the enforcement of undertakings, Buckley J was not addressing the effect of section 4 of the Debtors Act 1869, which is not mentioned in his judgment and no doubt was not cited.

In Prosser v Prosser [2011] EWHC 2172 (Ch) a consent order was made in proceedings between two brothers which provided that the respondent should instruct the solicitors acting for him on the sale of his property that the proceeds of sale were to be remitted to a nominated bank account. The respondent did not comply with the order and the applicant applied for him to be committed to prison. One of the issues which Vos J had to consider was whether section 4 of Debtors Act 1869 prevented the order being enforced by committal, it being common ground that none of the exceptions applied.

Having considered Bates v Bates and an obiter passage from the judgment of Purchas LJ in Graham v Graham [1992] 2 FLR 406 at 414-415 commenting on Bates v Bates, Vos J said at [102]:

Vos J’s phraseology (in a judgment that was only reserved overnight and delivered orally) leaves open the position where there is an order for the payment of money to the claimant, but not of an ordinary debt.

Vos J went on to hold that section 4 did not apply because the order was one to give instructions to place monies in a deposit account when they arose by way of proceeds of sale of the property, and thus the case was analogous to Bates v Bates.

In Discovery Land Co LLC v Jirehouse [2019] EWHC 224 (Ch), [2020] PNLR 1 the claimant applied to commit a solicitor, Mr Jones, to prison inter alia for breaches of undertakings given personally by Mr Jones (as well as by his firm) to pay surplus funds from a transaction amounting to $9.3 million or the sterling equivalent into court and to procure repayment of a loan of £4.9 million to a lender called Dragonfly. Mr Jones failed to do so. One of the issues which Zacaroli J had to consider was whether section 4 of Debtors Act 1869 prevented the undertakings being enforced by committal. It was common ground that, in the light of Prosser v Prosser, section 4 did not apply to the undertaking in relation to the surplus funds, but it was argued that it did apply to the undertaking in relation to the repayment to Dragonfly.

Zacaroli J held section 4 did not apply for reasons he expressed at [111] as follows:

Turning to the present case, the undertakings in question were undertakings by Mr

Counsel for the Vaswanis accepted that section 4 would have prevented the Vaswanis from enforcing either the contractual debt owed by Mr Hussain under the tenancy agreement or the money judgment granted by DJ Parker by committal of Mr Hussain to prison; but he pointed out that the money judgment could be enforced by the processes available for that purpose such as a writ of control, a third party debt order or a bankruptcy petition. By contrast, as Buckley J explained in Re Hudson, the undertakings could not be enforced by those processes, but could be enforced by an application for Mr Hussain to be found in contempt of court and sanctioned accordingly. Counsel for the Vaswanis submitted that section 4 did not prevent Mr Hussain from being imprisoned for his contempts because the contempts did not consist of “making default in payment of a sum of money” within the meaning of section 4.

I accept this submission. As Bates v Bates makes clear, section 4 must be purposively construed. As Cotton LJ stated, its purpose is to prevent imprisonment for non-payment of ordinary debts. Thus, as the authorities make clear, it does not apply to orders or undertakings requiring the provision of security, whether way of payment into court or an appropriate bank account. I shall assume for present purposes that Luxmoore J was correct to decide in Cotton v Heyl that section 4 applies to an undertaking to pay money to a party which is otherwise precisely equivalent to an order to pay money to that party. I agree with Zacaroli J in Discovery v Jirehouse, however, that it is necessary not only to construe the undertaking, but also to take into account the context in which, and the purpose for which, it was given. In the present case, as counsel for the Vaswanis pointed out, Mr Hussain gave the undertakings in order first to establish a change of circumstances which would open the door to a reconsideration of the refusal of a stay and secondly to persuade the court to exercise its discretion in his favour by granting a stay. Thus the undertakings were the price Mr Hussain paid in order to obtain court orders in his favour and adverse to the Vaswanis. In such circumstances it is vital that the court should be able properly to enforce undertakings given to it. Mr Hussain did not comply with his undertakings. True it is that the non-compliance manifested itself in a failure to pay money to the Vaswanis, but in the circumstances that was not a failure to pay an ordinary debt. On the contrary, it was a failure to honour extra obligations to the court which Mr Hussain assumed, over and above the ordinary debts he owed, for the purposes of obtaining advantages in the proceedings.

Finally, I should address two remaining points. First, if (contrary to my conclusion) section 4 applies, I do not accept counsel for the Vaswanis’ alternative argument that the exception in subsection (3) applies. Mr Hussain’s evidence is that he was a beneficiary of the discretionary trust. There is no evidence that he was a fiduciary in respect of the monies in question. Counsel’s attempt to argue that he must have become a fiduciary because he was an undischarged bankrupt was imaginative but not persuasive. There was nothing to stop Kilimanjaro paying the Vaswanis on behalf of Mr Hussain, and as counsel for the Vaswanis himself submitted that would have amounted to compliance with the undertakings.

Secondly, if I am right that section 4 does not prevent Mr Hussain being imprisoned for breach of his undertakings, it makes no difference that part of the term was imposed for coercive rather than punitive purposes.

In Financial Conduct Authority v McKendrick [2019] EWCA Civ 524, [2019] 4 WLR 65 Hamblen and Holroyde LJJ stated:

It follows from that approach that there will be few cases in which a contemnor will be able successfully to challenge a sentence as being excessive. If however this court is satisfied that the sentence was “wrong” on one of the above grounds, it will reverse the decision below and either remit the case to the judge for further consideration of sanction or substitute its own decision.

In Liverpool Victoria Insurance Co Ltd v Zafar, at para 58 this court considered the correct approach to sentencing for a contempt of court involving a false statement verified by a statement of truth. We consider that a similar approach should be adopted when—as in this case—a court is sentencing for contempt of court of the kind which involves one or more breaches of an order of the court. The court should first consider (as a criminal court would do) the culpability of the contemnor and the harm caused, intended or likely to be caused by the breach of the order. In this regard, aggravating or mitigating factors which are likely to arise for consideration will often include some of those identified by Popplewell J in the Asia Islamic Trade Finance Fund case (see para 32 above). Having determined the seriousness of the case, the court must consider whether a fine would be a sufficient penalty. If it would, committal to prison cannot be justified, even if the contemnor's means are so limited that the amount of the fine must be modest.

Breach of a court order is always serious, because it undermines the administration of justice. We therefore agree with the observations of Jackson LJ in the Solodchenko case (see para 31 above) as to the inherent seriousness of a breach of a court order, and as to the likelihood that nothing other than a prison sentence

Mr Hussain’s advocate did not submit that Judge Lethem had made an error of principle or taken into account immaterial factors or failed to take into account material ones. He submitted that the sentence was outside the range of decisions reasonably open to the judge, and accepted that this test was essentially the same test as the “manifestly excessive” test applied by the Court of Appeal Criminal Division to criminal sentences. As the Court noted in FCA v McKendrick at [47], “it is the sentence actually imposed which must be outside the range reasonably open to the judge if an appeal is to succeed”. Thus the question is whether a sentence of 12 months was manifestly excessive for the contempts found proved.

Nevertheless, it is pertinent to consider how the judge arrived at the figure of 12 months. As noted above, he took as his starting point a sentence of 18 months. In arriving at this starting point, he took into account the following factors: (i) Mr Hussain had had no intention of honouring the undertakings when he gave them; (ii) Mr Hussain had failed to reveal crucial information concerning the source of the funds and his status as an undischarged bankrupt at the hearings on 2 and 6 January 2020; (iii) Mr Hussain had engineered the situation to achieve the end he wanted; (iv) there was an element of premeditation in Mr Hussain’s approach to the court; (v) Mr Hussain had given false evidence and thus had set out to deceive the court; (vi) Mr Hussain had been warned by the judge before giving oral evidence and before giving the first undertaking and thus could have been in no doubt as to the seriousness of the situation and the potential consequences; (vii) as a result the Vaswanis were considerably out of pocket (although the judge rightly excluded from consideration the consequences which arose after 20 February 2020 due to the stay on enforcement of the possession order which was imposed due to the Covid-19 pandemic); (viii) the sums in question remained unpaid without justification and thus the breaches remained unremedied; and (ix) Mr Hussain had not pleaded guilty to the charges, nor had he demonstrated any contrition or remorse. Overall, the judge’s assessment was that this was “a particularly egregious breach of undertakings, particularly bearing in mind the circumstances in which the undertakings were given”.

Mr Hussain’s advocate submitted that a starting point of 18 months was plainly excessive given that only two counts of contempt were proved, the contempts simply consisted of a failure to pay money and that 18 months was close to the maximum of 24 months permitted.

There is nothing in the point about the number of counts. The judge correctly considered each count separately and imposed the same sentence for each, to run concurrently. What matters is not the number of counts, but their gravity. It is true that the breaches comprised a failure to pay money, but as the judge explained there were considerable aggravating circumstances. As for 18 months being close to the maximum, the judge expressly acknowledged this. I agree that it is on the high side, but given all the circumstances identified by the judge I am not persuaded that it was outside the reasonable range of starting points. In any event, as I have already pointed out, it is the final sentence that matters.

As stated above, Judge Lethem discounted the sentence to 12 months. This was partly to reflect Mr Hussain’s mitigation that he was previously of good character, the effect of incarceration upon someone in his position, the effect on his future earning ability and, in particular, the fact that Mr Hussain suffers from diabetes and high blood pressure. In addition, the judge took into account the guidance given by the Sentencing Counsel on 23 June 2020 and in R v Manning [2020] 4 WLR 777 on sentencing during the Covid-19 pandemic to the effect that the impact of a custodial sentence is likely to be heavier at present than it would otherwise be.

Mr Hussain’s advocate submitted that a greater discount was required, given in particular that Mr Hussain was vulnerable to Covid-19. The judge took that fully into account, however, and applied a substantial discount of six months, one-third of his starting point.

It is also relevant to take into account the fact that, as I have already mentioned more than once, Judge Lethem apportioned the 12 months sentence into a punitive element of eight months and a coercive element of four months, thus enabling Mr Hussain to seek remission of the latter part if he purges his contempt.

In all the circumstances I am not persuaded that a sentence of 12 months divided in that way is outside the range of sentences reasonably open to the judge.

For the reasons given above, I would dismiss this appeal.

I agree.