BUSINESS MORTGAGE FINANCE 4 PLC & ORS v RIZWAN HUSSAIN

This is an approved transcript of the rulings I gave at the hearing to determine the right sanction for the Defendant’s contempts of court. When approving the transcript I have slightly elaborated some of the reasoning and have amended the wording but have not changed anything of substance.

This ruling should be read with my judgment of 2 March 2022 at [2022] EWHC 449 (Ch) (the “Judgment”) in which I found the Defendant to be in breach of my order sealed on 12 February 2021 (the “Injunction”).

The trial of the committal application took place in the Defendant’s absence. He did not give a proper reason for his failure to attend the trial. I concluded that he had waived his rights to participate and continued the trial in his absence.

When I gave judgment on 2 March I directed this sanctions hearing and ordered the Defendant to attend. I also set a timetable for the service of any evidence and skeleton arguments. Mr Hussain has not served any evidence. He has chosen again not to attend this hearing in breach of the order of the court. He has not explained his absence and I shall proceed without him. The Defendant was again represented by Counsel.

The relevant principles concerning sanction are well known and were not disputed before me. Counsel for both parties invited me to follow the recent summary given by Leech J in Solicitors Regulation Authority v Khan [2022] EWHC 45 (Ch) at [52] to [54]. I was also referred to many other cases including the recent decisions of the Court of Appeal in Financial Conduct Authority v McKendrick [2019] EWCA Civ 524, Liverpool Victoria Insurance Co Ltd v Khan [2019] EWCA Civ 392, and Navigator Equities Ltd v Deripaska [2021] EWCA Civ 1799 and shall follow their guidance.

One of the factors identified in the caselaw is the possible impact of the Covid-19 pandemic on prison conditions. In the criminal case of R v Manning [2020] 4 WLR 77, the Court of Appeal explained that the impact of the Covid-19 pandemic should be taken into account in relation to sentencing.

In Korta-Haupt v Chief Constable of Essex Police [2020] EWCA Civ 892, the Court of Appeal explained that there is no automatic Covid-19 discount and that the question is fact-specific. R v Manning was decided in the height of the pandemic and the public health emergency has largely dissipated since then. There is for instance published guidance showing that visiting has recommenced in many prisons.

As guided by the authorities, I start by considering the seriousness of the contempt and any harm caused by it. I shall make some general observations before turning to the helpful checklist of points set out in [53] of Khan .

First, the Defendant committed repeated and numerous breaches of the Injunction. This was not an isolated or momentary lapse. The Defendant was guilty of eighteen contempts (ignoring any overlap between contempts arising from the same facts).

Secondly, the Defendant’s contemptuous conduct started very shortly after he left prison where he was serving a sentence for an earlier (unrelated) contempt of court. He left prison on about 9 or 10 March 2021 and the breaches of the order started couple of weeks after that, more or less as soon as the Defendant was able.

Thirdly, I have already found that the breaches were deliberate. Indeed they were contumacious. The Defendant carefully premeditated and took a series of steps designed to undermine the protection given by the Injunction. This is not a case of a respondent to an order panicking or acting foolishly in the heat of the moment. The Defendant calculated exactly what he was doing and why.

Fourthly, the Defendant acted through others while hiding in the shadows. He used accomplices and companies in secretive jurisdictions where there are scant details of ownership or control. Indeed Centrum’s name was used without the knowledge or authority of the true owner and its name was forged on a relevant document. The Defendant knew that the various acts in the names of others against the Issuers breached the order and tried to disguise or conceal what he was doing.

Fifthly, the breaches were cynical. The Defendant said in an email of 21 April 2021 (see the Judgment at [50(iv)]) that he did not intend to breach the Injunction. Yet on the same day he wrote or caused letters to be written to the Issuers and Barclays in the name of Kipling Firs in breach of that order. Shortly after that he was asked by the Issuers by correspondence to desist from any further steps. He did not do so and indeed got on with orchestrating contemptuous conduct in the names of others almost immediately.

Sixthly, the Defendant’s breaches of the Injunction included causing or procuring four sets of court proceedings to be taken in the Business and Property Courts in the names of the Issuers without their authority. I am satisfied that the Defendant appreciated that the persons signing those cases for the Issuers lacked any authority. This was an interference not only with the Injunction but more broadly with the proper administration of justice. The cases taken without the Issuers’ authority were eventually struck out by the court on 26 January 2022.

Seventhly, the Defendant appreciated the consequences of breaching the Injunction. He is an intelligent man and a seasoned litigant. At the time of the trial in January 2021 he was indeed in prison for another contempt of court. He had been represented by lawyers in those committal proceedings. His email of 21 April 2021 shows that he understood that a breach of the Injunction could result in imprisonment.

Eighthly, the Defendant’s breaches of the Injunction involved the unlawful harassment of third parties and not just the Issuers. There were, as I have recorded in the Judgment, letters sent to Barclays, the bankers of the Issuers, demanding that steps be taken by them, including the provision of bank statements and the receipt and payment of sums of money. There were letters written to various service providers purporting to terminate their relationships with the Issuers and there was also a public announcement over the RNS. So this was not simply a case where the Issuers themselves were having to deal with correspondence from the Defendant’s mouthpieces. He caused very publicly the holding out of persons other than the proper directors as authorised to act for the Issuers. The Injunction was designed to prevent just this kind of unlawful harassment and confusion.

It is helpful at this point to return to the checklist of factors listed in [53] of Khan .

The first is prejudice and harm. There has first been damage to the administration of justice and the authority of the court. This is so wherever there is breach of an injunction. But it is amplified where there are repeated breaches and where the breaches of the order of the court are part of a preordained and calculated scheme. It is essential that orders of the court are to be complied with and that it is not for respondents to orders to treat them as optional or elective.

Moreover, as already explained, the steps taken by the Defendant included causing proceedings to be taken in the Business and Property Courts in names of but without the authority of the Issuers. That is not only a breach of the order but an interference with the proper administration of justice. These events have wasted judicial resources which would have been avoided if the Defendant had complied with the court’s orders.

There has also been serious prejudice to the Claimants. As noted, one of the purposes of the Injunction was to avoid the harassment and unlawful interference with the Issuers’ business. The Claimants are the issuers of publicly traded securities. They are entitled under the Injunction to the court’s protection from unlawful interference and for protection against the potential confusion caused in the securities markets by interlopers wrongfully claiming to be authorised to act for them.

The contempts that I have found proved are a continuation of an unlawful campaign of interference with their business. They have caused disruption and nuisance to the Issuers. The Claimants have been put to enormous costs in dealing with the steps taken, caused, or procured by the Defendant.

Counsel for the Defendant suggested that the prejudice to the Claimants was only about costs and that not too much weight should be given to it. I reject this argument.

First, I do not think that the prejudice to the Claimants is limited to costs. It seems to me that there has been a real impact on the ability of the Issuers to get on with their proper business. But, second, I do not think that the fact that the Issuers have had to incur these costs should be belittled. None of the costs of the proceedings have yet been recovered and there can be no assurance that the Defendant will pay them. The irrecoverable costs of dealing with the Defendant’s breaches will ultimately fall on the innocent bondholders. That is the only place from which they can be met.

It also seems to me that the Issuers were entirely justified in seeking to protect themselves by bringing the committal proceedings. If they had allowed the Defendant’s conduct to carry on unchecked, that would inevitably affect bondholders and lead to still greater confusion for holders of bonds and the various service providers. The committal application had to be made.

Turning to item (b) in the checklist, there is no evidence that the Defendant acted under pressure. On the contrary, I have found that he orchestrated a series of calculated and premeditated breaches.

As to (c), the breaches were deliberate and indeed contumacious. I am satisfied that the Defendant knew exactly what he was doing and that what he was doing was in breach of the order of the court.

As to (d), there is an extremely high degree of culpability for the reasons I have already given. This was a repeated, clandestine and carefully planned series of steps deliberately designed to flout the Injunction.

As to (e), the Defendant was not placed in breach of the order by reason of the conduct of others. On the contrary, he caused others to take the steps complained of as a cloak for his own activities and deliberately remained in the shadows.

As to (f), the Defendant appreciated that there was a risk of imprisonment. He thought he could hide behind others by remaining in the shadows and for the reasons I have given, he was and is determined to defy the orders of the court.

As to (g), the Defendant has not cooperated. It is in fact hard to think of a case involving less cooperation. He has not engaged in the proceedings but has given assurances that he would attend at the trial which he then has broken. He told the court in December 2021 that he intended to appear and defend himself. He repeated this at the procedural hearing on 26 January 2022. He then failed to attend without any proper reason or evidence. He knew that the court had issued a bench warrant and he defied that. He ignored the advice of his own solicitors to attend. I set out the relevant history in the Judgment at [11] to [29]. Those events seriously disrupted the trial and made it much longer than it would otherwise have been.

I also explained in [31] to [33] of the Judgment that purported notices of discontinuance of the committal proceedings were filed at court on the eve of the trial in an attempt to derail the trial. Those notices were signed by people having no authority to act for the Issuers.

Even since 2 March 2022 the Defendant has chosen to breach the court’s orders by failing to attend.

As to item (h) of the checklist, there has been no acceptance of responsibility, apology, remorse or reasonable excuse. The Defendant has defied the orders of the court and continues to do so. He appears to think that he is above the law and that compliance with the court’s orders is optional. There is a complete absence of any insight by him into the need to accept and comply with the court’s orders. He needs to understand that, like everyone else, he is not above the law. There is nothing to suggest that he has learned any lessons from this process.

As to other possible mitigation, the Defendant has relied on no personal or family or other circumstances other than some very general information about his health condition. His counsel relied on a passage from the decision of HHJ Lethem in the 2020 committal proceedings which suggested that that judge had been provided with information about the Defendant suffering from diabetes, high blood pressure and high cholesterol levels. But before me there was no medical evidence or even an update about his medical condition. As I have already said, I gave directions on 2 March for any evidence that was to be relied on for this hearing and none was served.

The information that was before HHJ Lethem in 2020 is stale and out of date. In earlier interlocutory hearings in this matter, the Defendant provided some pictures of medicine he said he was taking for diabetes and high blood pressure, but the pictures he provided showed that the medicine had been prescribed and obtained in 2020 and there is no more recent evidence of his medical condition. I am unable to conclude that his medical condition has, or should have, any real impact on sanction. Moreover, as I have already said, the severe Covid-19 pandemic has passed and its consequences on such matters as prison visits are far less marked than they were a year or so ago. I do not consider that any lingering consequences of the pandemic carry any real weight on the current facts.

Taking all these features into account, I come to my conclusions about the right sanction.

The authorities show that the court should only impose a prison sentence as a last resort and if no other lesser sanction would properly meet the justice and circumstances of the case.

I should therefore first consider whether a fine would be appropriate. I am entirely satisfied it would not. This is a case of extremely serious, repeated and contumacious breaches of the orders of the court. The Defendant appears to believe he is beyond the reach of the law or even that it does not apply to him. Only a custodial sentence will meet the circumstances of this case.

The court must impose the shortest sentence properly required to meet the circumstances of the case. I have considered all of the factors, including any mitigation, very carefully. I have decided to impose a sentence of twenty-four months in respect of all of the contempts.

I need next to consider whether the sentence should be suspended. I have concluded in all of the circumstances already set out that a suspended sentence would not do justice. Only an immediate custodial sentence would properly mark the seriousness of the contempts established in this case. The Defendant carried out a carefully pre-ordained series of breaches of the court’s orders and has thereby continued his unlawful corporate campaign against the Issuers. The purpose of the court’s order was to prevent that happening. The Defendant knew what he was doing. He has interfered with the administration of justice in a cynical, calculated and persistent way. He has shown no remorse or recognition that he is required to comply with the orders of the court.

The overwhelming likelihood is that he will continue to breach the court’s orders unless restrained by a sentence of imprisonment. There is no cogent or significant mitigation and there is no proper purpose that would be served by a suspension. There is nothing to suggest that a suspended sentence would alter his behaviour. He knew of the risk of imprisonment for breach of the court’s orders and decided to carry on with the course of conduct set out in the Judgment.

Moreover, as I have explained, he did so by remaining in the shadows. It has been a substantial task for the Claimants to prove the contempts and it was by a careful assessment of essentially circumstantial evidence that they were able to do so. It seems to me that it would be very difficult for them to show in a simple or straightforward way that the acts of the Defendant (who is again likely to remain in the shadows and use others to do his bidding) had breached any condition of a suspended sentence. It seems to me likely that it would be necessary in practice to have another substantial trial to establish that. I would have decided, independently of this point, not to suspend the sentence, but this feature further supports the same conclusion.

For all these reasons I do not think that this is a case where a suspended sentence would meet the justice of the case.

Accordingly, I shall sentence the Defendant to an immediate term of twenty four months in prison for all the contempts. The Defendant will be entitled to be released from prison on serving half his sentence.

The Defendant is entitled to appeal this sentence without permission. The appellate court is the Court of Appeal. Any appeal must be commenced within 21 days of the order reflecting this judgment.

The court has a power under CPR 81.9(3) to direct that service of the warrant of committal or the order of committal need not be personally served on the Defendant. The default position is that it must be served personally. The Claimants invite me to exercise this power. They say that they are unable to serve the Defendant because they do not know where he is and it would be straightforward for him to make himself available for personal service but he is choosing not to do so. Moreover, he is communicating with his own lawyers but is not prepared to tell them where he is.

The Claimants say there would be no prejudice to the Defendant if he were served by an alternative means where the court can be properly satisfied that the order and warrant will be brought to his attention by those means.

It would be unsatisfactory were service not to be effected as soon as possible given the seriousness of the order of contempt and the committal warrant. I am satisfied that that is the right course in principle. The Defendant has the choice to make himself available for personal service and the only reason the Claimants cannot do so is because he is refusing to tell them or the court’s officers, of his whereabouts. It seems to me that he is doing everything he can to avoid the consequences of the committal proceedings.

I am fully satisfied that if the order is sent by email to his solicitors who are on the record for him and who will be required to report to him after this hearing and to all of the known email addresses through which the Defendant has been known to communicate (including an email address which he has recently made a series of applications to the Court of Appeal recently) that the order and the warrant will come to his attention. I shall make that order.

The Defendant has applied for the order of committal and the warrant of committal to be suspended pending appeals. As a fallback position, counsel for the Defendant asks for there to be a short suspension of perhaps a week to allow the Defendant to apply to the Court of Appeal itself for a further stay. I will come in a moment to an order which was made yesterday, 10 March 2022, by Phillips LJ in the Court of Appeal and the impact of that order on what I should do.

Leaving aside that order, I would not think it right to suspend execution of the order or warrant. It seems to me that the approach I should follow is that taken by Nugee LJ in Kea Investments v Watson [2020] EWHC 2796 (Ch). In that case he asked himself whether he thought there were realistic prospects of an appeal succeeding and concluded that there were none. I do not consider there is any realistic prospect of an appeal against my decision of 2 March succeeding. Nugee LJ pointed out that the Defendant in that case could apply to the Court of Appeal for stay and temporary release pending appeal if he could persuade the Court of Appeal that there was sufficient merit in the appeal. That was not a case like the present where the Defendant was evading arrest and refusing to attend for the committal hearing.

I turn to the order of Phillips LJ. He decided to stay a bench warrant I granted permitting forcible entry on 4 February. Although the wrong date is given in the order, liberty was given to the Claimants to apply to Phillips LJ to lift that stay in advance of the hearing on 11 March 2022 on written notice to the applicant. Phillips LJ refused to stay the order of 3 March 2022 where I gave directions for this sanctions hearing to take place.

Phillips LJ explained in his order that it was not presently possible to determine the application for permission to appeal multiple orders I had made as the judgments had not yet been provided, save for one judgment, and no skeleton arguments had been lodged, save in relation to the issue of a bench warrant. Phillips LJ went on to say that he currently saw no merits in relation to the refusal to adjourn the trial but said that it had to be considered in the light of various other grounds and he expressed no opinion on the merits of those other grounds. He then said this:

“I see no reason to stay any part of the order of 3 March 2022 as nothing in that order has irreversible consequences to the applicant. In particular there is no reason why the sanction hearing cannot proceed on 11 March 2022 on the safe assumption that Miles J will ensure that any penalty imposed does not take effect until after all relevant applications for permission to appeal have been determined by the Court of Appeal. As I understand that the bench warrant permitting forcible entry remains active, I consider that this should be stayed pending determination of the application for permission to appeal it. If it was intended to attempt to execute this warrant in advance of the hearing on 11 March 2022 the respondent may apply to me to lift the stay on written notice to the applicant.”

That passage shows that Phillips LJ had in mind, when imposing a stay of the bench warrant, the part of the order which concerned the forcible entry into premises.

However, a bench or committal warrant has other practical consequences and it is to my mind unlikely (indeed unthinkable) that Phillips LJ intended that those should be stayed. They were not brought to his attention by the Defendant. These consequences include notification by the Tipstaff to ports and airports to ensure that the Defendant should not leave the country. That is not spelt out in the bench or committal warrant but it is one of the ways that such warrants are given effect.

The Claimants point out that if the court does not now issue a warrant of committal, the Defendant may use the gap to seek to leave the country and thereby avoid the consequences of these committal proceedings. There is hence a danger of the committal proceedings being rendered entirely nugatory.

The Claimants also point out that it is entirely in the Defendant’s own hands to address this. He could explain where he is and could hand his passport(s) into the custody of the court. He has chosen to do neither of these things despite that the court previously inviting him to do so. Even now he has not informed the court of his whereabouts.

When issuing the bench warrant, I reached the conclusion that the Defendant was a flight risk and that remains the case.

If anything, the risk has heightened since he has now been found in contempt of court and sentenced to imprisonment.

I agree with the Claimants’ concerns and submissions. I have decided that I shall not stay the warrant. It does not appear to me that Phillips LJ could possibly have had in mind the full potential consequences of my staying the committal warrant. When staying the bench warrant, it seems to me plain that he had in mind only that part of the warrant which concerned the forcible entry of premises. In this regard, I have not included a power of forced entry in the committal warrant (although it will be open to the Claimants to apply for this power to be included on appropriate evidence). In short I do not think that Phillips LJ intended by his order to allow the Defendant a chance to be at liberty to flee the country.

It seems to me that the right approach is to allow the committal warrant and order to be issued immediately and for the Tipstaff to notify ports and airports to reduce the flight risk. If the Defendant wishes to seek a stay or suspension of that warrant and order, it is for him to apply to the Court of Appeal to do so. That Court will have to decide whether to do so while he is refusing to submit to custody or provide adequate assurances that he will not flee the jurisdiction. It is in the Defendant’s own hands to deal with these issues by presenting himself and submitting himself to the Tipstaff. The court should not afford him the chance of leaving. So I will not suspend the order or warrant of committal.

I will make an order for costs on the indemnity basis. Given the contents of the Judgment and the procedural history there is an ample basis for indemnity costs and it is not opposed.

There is a possible qualification to the costs order which arises from the fact that the Defendant was granted a legal aid certificate on 7 February 2022, some days after the trial was first called on. Counsel for the Defendant relies on a decision of HHJ Lewis in the case of The Chief Constable of Essex Police v Roland Douherty, given on 6 July 2020 in the County Court at Chelmsford. In that case the Defendant who had been found to be in contempt of court was on benefits and was unable, or arguably unable, to meet any order for costs. It was pointed out that there was a possible anomaly or lacuna which arises from the fact that legal aid in committal proceedings is criminal legal aid, whereas the protection for legally aided parties in civil proceedings under section 26 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 only applies in respect of parties in receipt of civil legal aid. In criminal cases there is no equivalent provision but criminal courts take into account the financial position of parties when making decisions on costs.

The judge pointed out that criminal legal aid for civil proceedings in civil venues is not means-tested. He observed that there may therefore be a lacuna in the legislation in the sense that there are mechanisms in place to protect impecunious parties facing costs orders in criminal courts, and legally aided parties in the civil courts, where the exception appears to be civil committal proceedings. He said that there was nothing to suggest that this omission was intentional. Rather, it has come about because legal aid in civil committal applications is treated as criminal legal aid. He said that it seems unfair to those Defendants who are impecunious that in certain respects they are put in a worse position by the decision that they should receive criminal rather than civil legal aid.

The judge rightly referred to authorities which showed that in civil committal proceedings the court must apply CPR Part 44 when determining questions of costs. There is nothing in Part 44 itself that suggests that the financial position of the parties is properly to be taken into account when making costs orders, albeit the broad discretion which is contained in CPR 44 might possibly enable a court to take into account the financial position of parties in certain cases. I have not heard any submissions on that point and will say no more about it.

In the case before him, the judge decided to stay the costs order for three months. That appears to have been unopposed by the claimant. It was then to be open to the defendant to make an application to continue the stay and should, if he did so, provide all the evidence about his financial position that would be required under section 26 of the 2012 Act and should provide details of any legal authorities relied upon. So the approach taken by the judge in that case was a pragmatic one which was based, it seems, on a concession. The judge said at [21]: “Ordinarily, if a party raises these sorts of points I would expect them to be able to provide the required evidence at the hearing itself, and be able to address the detail of the law, so that all aspects of the application can be considered at the same time, without the need for any subsequent… exercise.”

Counsel for the Defendant says that a stay on enforcement of the costs order should be granted here. I am unable to agree.

The first point is that the legal aid certificate was granted late on in the proceedings and it is accepted by the Defendant that if any stay is to be imposed it can only apply in respect of a period after the grant of the legal aid certificate. So this point is unlikely to be material. But, second, there is no evidence before the court as to the ability of the Defendant to meet any order for costs. I granted liberty for him to put in evidence for the purposes of this application and one of the points to be dealt with was costs. He has not provided any evidence as to his financial position. As the judge said in the Douherty case, one would normally expect that kind of evidence to be put forward.

In any event, I am not persuaded that the court in acting under Part 44 of the CPR should make any special order in relation to any part of the costs. It seems to me that the right order is simply to order the Defendant to pay the costs.

I was taken to orders at first instance and in the Court of Appeal in the Khan case where the respondent to a committal application had been given legal aid and the order for costs in that case was stayed on terms that the claimant could apply to lift the stay in the way that normally happens in cases where one of the parties has civil legal aid. But there is nothing to suggest that there was any argument on the point and it may well have gone by concession so I do not think those orders provide any real assistance.

In the circumstances, I shall simply order that the Defendant shall pay the costs on the indemnity basis.

I am asked to give a direction that the Claimants’ solicitors should pass a copy of the evidence and orders made in the proceedings and of the judgments to the Attorney-General for the purpose of enabling the Attorney-General to consider whether proceedings should be taken against the Defendant for the purpose of making him a vexatious litigant. This follows the approach taken by HHJ Pelling in a separate set of proceedings called Hurricane Energy PLC v Chaffe [2021] EWHC 2258 (Comm). That case also involved Mr Hussain. Counsel for the Defendant says that if the Claimants themselves wish to make contact with the Attorney-General’s office, that is a matter for them and the court should not become involved.

I am satisfied that it is appropriate to do this. It will be entirely for the Attorney-General to consider whether to take proceedings and, if the Attorney-General does take proceedings, it will be entirely for the court hearing the application to decide its merits. I do not think that by giving this direction the court is entering into the arena. The court has its own interest in proceedings of this kind in the administration of justice. I have already explained in the Judgment how Mr Hussain has breached the order of the court by procuring proceedings to be wrongly issued in the names of the Issuers and has done so using the names of others or by associating himself with various accomplices rather than in his own name. This is not covered by the GCRO against him, as it is framed in terms of proceedings brought by him. So it does seem to me that it is proper for the Attorney-General at least to consider the Judgment and supporting evidence and I will make that direction.

I sentence the Defendant to prison for twenty-four months for the various proved contempts of court taken together. An order of committal and a warrant of committal will be issued immediately. The Defendant is entitled to appeal the findings of contempt and the sentence, without needing permission to appeal. The appellate court is the Court of Appeal. Any appeal must be commenced within 21 days of the order reflecting this judgment.