Integral Petroleum SA v Petrogat FZE & Anor

This is the hearing of the Claimant’s (“Integral’s”) application to commit the Second Third Party, and the Third Third Party, to prison for contempt of court.

Integral was represented before me by Mr Blackwood QC and the Third Parties by Mr Smith QC. I am very grateful to them for their submissions, in a hearing which I suspect involved significant logistical challenges for both of them.

At the start of the hearing, applications for committal were also pursued against the First and Fourth Third Parties. However, after the evidence had been completed, Mr Blackwood QC for Integral confirmed that the application would not be pursued against those parties.

Integral, the First Defendant (“Petrogat”) and the Second Defendant (“San Trade”) are oil trading companies based in Geneva, the UAE and Germany respectively.

The Second Third Party (“Ms Sanchouli”) is an Iranian national. It is her evidence that she oversaw the day-to-day business of both Defendants, together with her father (“Mr Sanchouli”) who is the Third Third Party.

The First Third Party (“Mr Sonnenberg”) was at all relevant times the sole director of San Trade. The Fourth Third Party (“Mr Beisenov”) was the sole director and owner of Petrogat.

The committal application arises out of a contract for the sale of oil concluded between Integral as buyer and Petrogat as seller on 16 September 2017 (“the Contract”). The Contract was for the purchase of 20,000 MT (+/- 10%) of Medium

San Trade guaranteed Petrogat’s obligations under the Contract by a guarantee letter dated 30 September 2017, a guarantee agreement dated 8 November 2017 and a guarantee agreement dated 22 December 2017 (collectively “the Guarantees”).

The Contract provided for delivery FOB Turkmenbashi Ferry (Western

Difficulties arose in relation to loading the LSFO cargo, for reasons which it is not necessary to determine. The parties agreed in the course of a series of telephone conversations between 1 and 3 November 2017 that $1m would be paid by Integral to the Refinery for MSFO, until deliveries of MSFO to that value had been made by the Refinery to Integral, at which point another $1m would be paid for MSFO, with this process continuing until the full 18,000 mt of MSFO had been delivered.

There was a dispute between the parties as to whether, in assessing what amount of the prepayment had been utilised, regard was to be had to the price under Petrogat’s contract with the Refinery (as Integral contended) or the price under the Contract (as the Defendants contended). That dispute was ultimately determined in Integral’s favour by the award of an LCIA arbitration tribunal (“the LCIA Award”).

The first payment of $1m was made to the Refinery on 14 November 2017, and the second $1m on 27 December 2017. By 31 December 2017, some 8,999 mt of MSFO had been loaded (approximately half of the quantity of MSFO provided for in the Contract). Railway bills of lading were issued for the loaded cargo by the Railways

By 31 December 2017, the parties were in dispute as to whether the pre-payments were sufficient to cover all of the 138 RTCs which had been loaded by that point. It is the Defendants’ case that, against this background, they decided to hold back some of the 138 RTCs to cover the amounts for which Integral had yet to make payment. It was Integral’s case, on which it ultimately prevailed in the LCIA Award, that it had acquired title to the MSFO in all the RTCs.

It is common ground that the Defendants gave the Railways Ministry instructions to amend the bills of lading for 72 RTCs, to provide for the delivery of those RTCs to San Trade and to change the destination of the cargo from Georgia to Bandar Abbas, Iran. It was Integral’s case that this change was effected by San Trade providing a forged letter to the Railways Authority which purported to record Integral’s consent to the amendments, when in fact Integral had approved no such letter and had not consented to the changes. The Defendants say that no such forged letter was produced, and that San Trade made it clear that it was requesting the change because it was in dispute with Integral.

Integral says it learned through its representatives in Turkmenistan that a substantial part of its cargo was being diverted to Iran. It wrote to San Trade and Petrogat urging them to confirm that the cargo would be shipped to Integral and would in no circumstances be shipped to Iran. There was no response to this correspondence and no such confirmation was given.

Accordingly, Integral applied ex parte on notice for injunctive relief (serving the papers on Petrogat and San Trade over the weekend). Following a hearing on the evening of Saturday 13 January 2018, Morgan J granted an injunction which was sealed the following day, and which provided as follows:

“(1)

The First and Second Defendants shall take no steps whatsoever to direct delivery of the cargo to Iran or elsewhere and shall take no steps whatever in relation to the Cargo save for those identified in paragraph (2).

(2)

Both of the Defendants shall by 12.00 hours local time in Turkmenistan on

The letter in question required San Trade and Petrogat to state that:

“It has come to our knowledge that someone purporting to be a representative of San Trade GmbH wrote to Turkmen Railways on or before 12 January 2018 seeking to give instructions on behalf of Integral Petroleum SA to the effect that the cargo be sent to Iran.

The cargo must not be sent to Iran in any circumstances and must either be delivered to Parto Tskali / Khobi Kulveli via Azerbaijan in accordance with the terms of the unamended bills of lading or alternatively should be preserved pending a further order from Integral Petroleum SA or an order of the Court or Arbitration Tribunal in the competent jurisdiction (England and Wales)”.

The Morgan Injunction, which contained the appropriate form of penal notice, was served on Petrogat, San Trade, Ms and Mr Sanchouli and Mr Sonnenberg, together with accompanying correspondence informing them of what they needed to do to comply with its terms. However, it is common ground that no letter in the required form was signed within the deadline imposed by Morgan J or at any time prior to 29 January 2018. On 18 January 2018, in the absence of compliance, Integral served a copy of the injunction on two further individuals, Ms Lobis and Mr Beisenov, who were asked to sign the Schedule C letter. There was still no response.

On 24 January 2016, two days before the return date, Stephenson Harwood Middle East LLP came on the record for both Defendants and served evidence in support of an application to discharge the injunction on various grounds. Integral served reply evidence on the day of the hearing. When the matter came on before His Honour Judge Waksman QC, he adjourned the hearing in view of the late flurry of evidence. At the hearing, Mr Stephen Cogley QC, counsel for the Defendants, informed the Court that the cargo was “almost certainly going to Iran in any event …. over the weekend” and that “the [Schedule C letter] would not make any difference”.

His Honour Judge Waksman QC continued the injunction pending the adjourned return date, but paragraph (2) was varied as follows:

“Both of the Defendants shall forthwith sign by a duly authorised representative a letter in the form of the draft attached hereto as Schedule C (as amended by the order of His Honour Judge Waksman QC dated 26 January 2018) and provide such signed letters to the Claimant’s solicitors as soon as signed”.

The terms of the draft letter in Schedule C were also amended to provide:

“The cargo must not be sent to Iran in any circumstances and should be preserved in its present location pending a further order from the Court or Arbitral Tribunal in the competent jurisdiction (England and Wales)”.

The Defendants did not provide a letter in the revised form of Schedule C until 29

The Defendants served a substantial volume of further evidence for the resumed return date. At that hearing, Popplewell J found that there was a good arguable case that the Defendants were in breach of the injunction in multiple respects, but that it made no sense to continue the injunction in circumstances in which all or most of the cargo was now in Iran.

The application notice to commit the Third Parties for contempt was issued on 30 April 2018. On 1 May 2018, Popplewell J gave the Claimants permission to serve that application by alternative means. He also dispensed with the requirement for personal service under CPR 81.10(5).

That order required the Defendants and the Respondents to file evidence in answer to the application notice within 22 days of service. Notwithstanding that provision, no evidence was filed until 3 February 2020. The explanation offered for that late service was that Integral, the Defendants and the Third Parties were in negotiations to settle the underlying commercial dispute, as a result of which it was anticipated that the committal proceedings might be disposed of or adjourned. That is obviously not a satisfactory explanation. For so long as the committal proceedings remained live and they wished to serve witness evidence, the Third Parties were required to serve that witness evidence in accordance with the Court’s direction, or seek an extension of time for doing so.

Integral served reply evidence during the afternoon of the last working day before the hearing, together with a further skeleton argument addressing the Third Parties’ case which had been set out for the first time in their evidence. The late service of evidence significantly impeded the orderly preparation for the hearing. In addition, it has led to a number of issues emerging at a late stage in the case, and not receiving the focus they would have received if the evidence had been served in good time for the hearing. However, in view of the serious allegations which the Third Parties face, I have allowed that evidence to be placed before the Court in the usual way.

Applications for committal for contempt of court have become an increasingly common feature of High Court litigation, particularly in the Business and Property Courts. One of the few beneficial consequences of that otherwise unfortunate trend is that there are a number of authorities setting out the applicable legal principles.

In JSC Mezhdunarodniy Promyshelnniy Bank v Pugachev [2016] EWHC 192 (Ch) at [41], Mrs Justice Rose summarised the applicable principles as follows:

In this judgment, where I make findings of fact or state that I have concluded that an allegation has been proved, I make such findings and arrive at such conclusions on the basis of the criminal standard of proof.

While it is necessary for me to be satisfied to the criminal standard that a particular ground of contempt has been made out, it is not necessary for the court to be satisfied to that standard in respect of its conclusion on each disputed piece of evidence before it can be taken into account: see JSC BTA Bank v Ablyazov (No 8) [2018] 1WLR 1331, where Rix LJ cited with approval the following passage in the judgment of Dawson J in Shepherd v The Queen (1990) 170 CLR 573 , 579-580:

The mental element of the criminal offence of contempt of court is that set out by Briggs J in Sectorguard Plc v Dienne Plc [2009] EWHC 2693 (Ch) at [32]-[33]:

“The mental element required of a contemnor is not that he either intends to breach or knows that he is breaching the court order or undertaking, but only that he intended the act or omission in question, and knew the facts which made it a breach of the order: see Adam Phones v Goldschmidt [1999] 4 All ER 486 at 492j to 494j”.

Where the contempt alleged is the breach of a court order, the principles summarised by Marcus Smith J in Absolute Living Developments Ltd v DS7 Limited [2018] EWHC 1717 (Ch) at [30] are also relevant:

It is clear in this context that the terms of the order should be clear and unequivocal and should be strictly construed. This was emphasised by Lord Clarke in the Supreme Court in JSC BTA Bank v Ablyazov (No 10) [2015] UKSC 64 at [10].

There is one further issue of law which merits consideration. The directors or officers of a company can be committed for the breach of a court order made against that company. As to the principles applicable here:

The Third Parties have contended before me that the committal application should be struck out on two grounds:

Argument on these applications took up the greater part of the first day of the hearing.

Steven Gee QC in Commercial Injunctions (6^th) at [20-024] states that:

“The threat of contempt proceedings or of continuing contempt proceedings should not be made for any purpose other than securing compliance with the relevant order of the court. To use such a threat to secure a settlement is a gross abuse of process of the court and itself constitutes a contempt of court”.

The authority cited for this proposition isKnox v D’Arcy Ltd Court of Appeal Transcript No. 1759 of 1995 (19 December 1995). In that case, a motion to commit was issued on the basis that the plaintiffs had deliberately concealed evidence when obtaining freezing order relief from the court. Millett LJ found on the facts as alleged that “by no conceivable process of reasoning could the respondents’ failure to measure up to the high standards required of them be described as a contempt of court”. However, he went on to refer to the fact that, on the day before the motion was due to be heard, the applicant’s solicitors had written to the senior partner of the respondent’s solicitors stating:

“I enclose a copy of a Without Prejudice letter which had been sent to your firm today. I hope that in all these circumstances there will be a positive response. I make this point particularly as I do not believe that in all the circumstances that by leaving himself in a position where such allegations have to be made, Mr Campion has best served the interests of the good name of Eversheds.

….

It is my hope that as a result of this letter that appropriate resolution can be achieved between your firm and your clients and our clients”.

The accompanying letter contained an offer to settle the entire litigation, stating:

“In the light of the documents served last Friday [viz the contempt application], we believe that your clients, and in particular Mr Steel [will] wish to reconsider their position. We believe that the same will apply to Mr Campion in view of the serious situation in which he now finds himself. In the circumstances our Clients are prepared to consider to enter a compromise which will have the effect of terminating all the proceedings”.

Against the background of both letters read together, Millett LJ concluded:

“It is obvious to me that the threat of committal proceedings against Mr Steel and Mr Campion was being used as a lever in order to obtain a favourable settlement of the litigation. That, to my mind, is a gross abuse of the process of the court. Indeed, I observe that in 1903, in R v Newton 67 JP 453, the obtaining of money in consideration of an agreement to discontinue contempt proceedings was held itself to be a contempt. What was attempted in the present case was not far short of that. It was a plain attempt to obtain a favourable settlement of litigation by threats to bring committal proceedings against the guiding mind behind the plaintiff and their English solicitor”.

In Ferster v Ferster [2016] EWCA Civ 77, the Court of Appeal upheld the decision of Rose J ([2015] EWHC 3895 (Ch)) that a communication made in the context of a mediation which contains a threat of committal fell within the “unambiguous impropriety” exception to “without prejudice” privilege. The communication in question, sent via the mediator to the respondent (“Jonathan”), involved the withdrawal of an existing offer to settle the dispute, and the making of a less favourable offer, on the basis that the applicant “had become aware of further wrongdoing by Jonathan ... which will also have very serious implications for Jonathan’s partner”. The wrongdoing in question was said to be the swearing of false evidence as a result of which “Jonathan will face charges of perjury, perverting the course of justice and contempt of court and is likely to be imprisoned”. Rose J held that “this was an attempt at blackmail”. She stated at [17]:

“The impropriety consists, in my judgment, in threatening to pursue contempt proceedings, including a committal to prison, unless Jonathan pays his brothers a much higher price for the two thirds share, an extra 25%.... It is quite clear that the increase in price is nothing to do with any increase in the value of the shares or of the company’s business, but rather is the price being exacted for the brokers

… not causing the company to take action to deal with the supposed wrongdoing they claim to have uncovered”.

In rejecting the appeal against Rose J’s judgment Floyd LJ at [20] agreed that there was a distinction between an offer “which unambiguously exceeds the claim, and one which merely makes an upward adjustment within that value”, noting that “in the former case one might infer more readily that improper factors are being deployed”.

In the course of his judgment, Floyd LJ referred to the judgment of Flaux J in Boreh vRepublic of Djibouti [2015] EWHC 769 (Comm) at [132], in which he held that certain communications in that case fell within the “unambiguous impropriety” exception because they went beyond “the permissible in settlement of hard fought commercial litigation”. Flaux J’s reference to what was permissible “in settlement of hard fought commercial litigation” is apposite. There is no doubt that committal proceedings are a far more frequent feature of commercial litigation now than previously, and than they were at the time that Knox was decided. Once a committal application has been issued, any settlement of the overall commercial dispute is necessarily going to have to address the position of the committal application, with most respondents being understandably concerned to ensure that the settlement ties up all matters including the contempt, and most claimants themselves wanting to draw a line under the litigation in terms of further costs and management time (in circumstances in which the continuation of the committal application will inevitably involve the claimants in the further expenditure of both). It can never be proper to seek to use a committal application as a lever to bully a respondent into a settlement. However, the practical consideration that resolving an outstanding committal application will in most cases be necessary to achieve a settlement of the commercial dispute means that the court should not jump too readily to the conclusion that references in the settlement communications to the disposal of the committal proceedings or the timing of the committal proceedings evidence an improper purpose on the claimant’s part, or involve the use of the committal proceedings as some form of improper threat.

Finally, in considering the Third Parties’ submission that the committal proceedings were an abuse of process because they were commenced for an improper purpose, I note that the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor GeneralInsurance (Cayman) Ltd [2013] UKPC 17 held that the tort of abuse of civil process would only be established if the proceedings were conducted for a predominant purpose other than those for which they were designed, so as to obtain a benefit other than that for which they were designed. While it is arguable whether the same mental element should be required to strike out civil process as that required to render the civil process an actionable wrong, an enhanced mental element is generally required to make ostensibly lawful steps unlawful because of the purpose for which they are taken. This explains the requirement for a predominant purpose to injure in lawful means conspiracy (Kuwait Oil Tanker v Al-Bader [2000] 2 All ER (Comm 271, [108]) and the requirement that the statutory purpose under s.423 of the Insolvency

In determining whether the committal was commenced or pursued for the improper purpose of forcing a settlement, I will proceed on the basis that the pursuit of an application to commit will not be such an abuse unless the applicant had as a “real and substantial purpose” the use of the threat of committal to force the respondents to settle the claim. While I can see a strong argument in favour of the view that before striking out such an application on the basis that it is abuse of process, it should be necessary to establish a predominant purpose of the Crawford kind, it is not necessary for me to resolve that issue on this application.

In order to make his abuse of process argument good, Mr Smith QC referred me to some of the “without prejudice” communications between the parties, arguing that the “without prejudice” principle is not engaged by the purpose for which the Third Parties seek to rely on the communications, or that one of the exceptions to this head of privilege (that of unambiguous impropriety) applies. Mr Blackwood QC has not sought to debate the admissibility of that material, but very fairly makes the point that if reference is to be made to it, the Court needs to view it in context.

In this section, I set out the relevant chronology as it emerges in incontrovertible form from the documents.

Integral notified the Defendants and the Third Parties of their intention to seek committal as early as 27 January 2018, in letters from Mr Kozachenko to Mr Sonnenberg, Mr Beisenov, Ms Lobis and Mr and Ms Sanchouli. Those letters provided:

“I hereby put you on notice that should the relevant cargo be shipped to Iran – as Mr Cogley says it will – or should San Trade fail to remedy its contempt and/or continue to be in breach of injunction, my client will seek your committal to prison for contempt of Court for a term of up to 2 years”.

The reference to committal proceedings in this letter was clearly intended to incentivise the Defendants to comply with the Waksman Injunction, and as such, was entirely legitimate.

On 2 February 2018 Popplewell J discharged the injunction but held that there was a good arguable case that the Morgan and Waksman Injunctions had been breached. He stated:

“I am also satisfied that there is a good arguable case that there have been breaches of the orders; first, in relation to not providing the letter in the form of letter C as required by Mr Justice Morgan; secondly, in relation to what Mr Lakin describes as having happened in paras 6, 4 and 8 of his second witness statement in relation to cooperating with the Turkmen Authorities to enable the cargo to go to Iran; and thirdly, in failing forthwith to sign the letter C in its revised form as ordered by His Honour Judge Waksman”.

The application for committal was issued on 30 April 2018. At the hearing before me, it became apparent that Mr Smith QC was seeking to take the point that the committal application had not only been used for an improper purpose, but had been issued for an improper purpose as well. This ground of challenge was not sufficiently taken (or, as Mr Smith QC fairly accepted, “clearly articulate[d]”) in his skeleton argument, nor had it been flagged in any other way in advance of the hearing on 10 February 2020. As a result, the point was not specifically addressed in the eleventh affidavit of Mr Kozachenko, itself sworn under very heavy pressure of time on 5 February 2020.

Given the prior history of the litigation - the fact that the issue of contempt had been raised by Integral initially for the purpose of procuring compliance with the Waksman Injunction, and given Popplewell J’s findings at the return date - I reject any suggestion that it is to be inferred that Integral had as a real and substantial purpose in commencing and conducting the committal application pressurising the respondents to settle (and certainly no predominant purpose of this kind). Against the background of the events which had led Popplewell J to conclude that there was a good arguable case of breach, Integral’s decision to commence the contempt proceedings against the Defendants and the Third Parties represented an understandable attempt to followthrough on Integral’s earlier statements as to what the consequences of noncompliance would be, and to ensure that there was some sanction for those apparent breaches. The facts of this case are very different to those in Knox, where the attempt to pursue a complaint of non-disclosure in a without notice freezing application through the committal process was a highly unusual course. For these reasons, I have concluded that it would not be appropriate to draw the inference that the contempt application was issued or pursued other than for a proper motive.

On 1 May 2018, Integral served its claim in the LCIA Arbitration which it had commenced against the Defendants on 13 January 2018. The amounts claimed included £135,351.20 for costs, another $439,000 for damages for non-delivery, and a further $164,000 for breach of the warranty of quality in respect of delivered cargo (a total of $603,000).

On 2 May 2018, Integral’s solicitors made a “without prejudice save as to costs” (“WPSATC”) offer, proposing:

“an amicable settlement of all disputes between the parties, including the Claimants’ application to commit Mr Sonnenberg, Ms Sanchouli, Mr Sanchouli, Mr Beisenov and Ms Lobis to prison and the LCIA Arbitration”.

The settlement proposal sought payment of the full costs of the injunction proceedings (£135,551,20) together with a further £300,000 in return for the settlement of all disputes (both the LCIA Arbitration and the contempt application). The offer was made on the basis that both Defendants and the Third Parties (then including Ms Lobis, against whom the order for service of the committal application was subsequently set aside) would be jointly liable for the payment.

Paragraph 3 stated:

“We would respectfully submit that this is a very reasonable settlement for all parties. The Claimant proposes a discount of at least US$195,000 compared to its claims in the arbitration. Petrogat’s and San Trade’s claims in the arbitration are virtually certain to fail. Petrogat’s and San Trade’s legal fees to run the arbitration until the end are likely to exceed the proposed settlement sum. The most reasonable solution is therefore to settle the matter and do so as soon as possible, before any arrest warrants are issued and further legal costs are incurred”.

Paragraph 4 stated:

“This offer is open until 11 May 2018”.

This email provides the high point of Mr Smith QC’s submission that Integral maintained and/or used the committal application for the purposes of impermissibly leveraging a settlement, in gross abuse of process. Mr Smith QC asked for this issue to be decided on the documents alone in advance of the evidence (and it was therefore decided without the benefit of oral evidence from Integral as to what its purposes were).

First, Mr Smith QC relied on the timing of the letter, which came five days after the witness statement in support of the committal application had been served, and two days after Popplewell J had given permission for the committal application to be served. However, it also came the day after Integral had served its claims submissions in the LCIA Arbitration. In short, it came at a point when various steps had recently been taken to initiate courses of conduct which would involve all parties in substantial further expenditure as they progressed. In these circumstances, the obvious inference to draw from the timing of the letter (and the inference which I do draw) is that it was motived by a desire to settle the parties’ entire commercial dispute at a stage when the various strands of litigation were sufficiently identified, but before the further significant costs which those steps would inevitably entail had been incurred. The short deadline for acceptance of the offer – until 11 May 2018 – before any responsive evidence on the committal application was due, and long before the committal application would be heard, supports that view. I note that the first settlement offer made by the Defendants and Third Parties of 7 May 2018, seeking a payment of $1,750,000 “in full an[d] final settlement of all disputes between the parties”, was similarly reflective of a desire to wrap up all disputes in a single settlement at that early stage.

Second, Mr Smith QC relies upon the fact that the offer was made on the basis that the Third Parties would be jointly and severally liable for the settlement sum. Mr Smith QC submitted that as the Third Parties could have no liability to Integral, the request that they have joint and several liability could only be interpreted as the price of foregoing the committal application.

I do not accept this conclusion.

Finally, Mr Smith QC pointed to the reference to “before any arrest warrants are issued” in the third paragraph of the letter. I am unhappy about this language, which was unwise. However, viewed in the overall context of the communication, it does not

The second communication which Mr Smith QC relied upon in support of the abuse of process argument was sent on 31 December 2019, some 20 months after the first communication. The lengthy period between the two mails itself weighs very heavily against Mr Smith QC’s submission that I should conclude that Integral brought and maintained the committal application for the purpose of improperly pressurising the Defendants and the Third Parties to settle the claim. However, before turning to the terms of the email, it is necessary to provide a little context for it:

The second email on which Mr Smith QC’s abuse of process submission depended was sent in direct response to that request from Stephenson Harwood ME LLP. It provided:

“In relation to the committal hearing our proposal is this. Our clients have discussed that Mr Sanchouli would procure for them certain transactions as a result of which they will make extra profit and will off-set the losses suffered as a result of your clients’ actions and the arbitration. The first such transaction, according to Mr Sanchouli, is to take place shortly. If there is such a transaction, and at least part of our client’s losses are covered in January, our clients will be prepared to adjourn the committal hearings as to allow Mr Sanchouli to arrange further such transactions so that our clients’ entire loss may be off-set. Once our clients’ entire loss is covered, our clients will be prepared to discontinue the committal proceedings”.

I see no basis for the suggestion that in proposing the adjournment of the committal application until there had been at least part performance of the settlement, Integral or its solicitor were doing anything improper. It was Stephenson Harwood ME LLP who had specifically said that the settlement should address the contempt application and who had asked Integral to explain their proposal in this regard. In circumstances in which the financial terms of the proposal had been agreed in principle in advance of the exchanges, there was nothing objectionable in Integral seeking some demonstration of the Defendants’ and Third Parties’ seriousness before acting on the Defendants’ and Third Parties’ request to discontinue the committal proceedings as one of the settlement terms.

Finally, I should note that the parties came very close to resolving the entirety of their dispute on the basis outlined in Integral’s 31 December 2019 email, without any suggestion from Stephenson Harwood ME LLP that the proposal Mr Kozachenko had put forward was professionally improper or involved an abuse of the Court’s process (something I would have expected an experienced commercial solicitor to raise had it been a genuine concern). Further, on 8 January 2020, Stephenson Harwood ME LLP effectively told Integral that it would suffer an adverse financial consequence from pursuing the committal, namely:

“If no settlement is reached they will deal with that hearing in February, but it will only result in the cash offer we are making now being withdrawn as our clients will be required to spend roughly the commensurate amount of money on those proceedings”.

Mr Smith QC, rightly, did not suggest that this involved the offer by his clients of a financial inducement to abandon the committal application or a threat of an adverse financial consequence if they were pursued. The communication reflected the fact that the committal application was an element of the parties’ overall dispute, and that any settlement discussion and settlement strategy had to address it. This is what the solicitors for both parties did.

In the event, after Stephenson Harwood ME LLP had signed a copy of the consent order which would have adjourned this hearing to allow settlement discussions to continue, the Defendants and Third Parties changed their minds, it would appear largely as a result of alighting on the Knox argument now advanced before me. On 27 January 2020, Stephenson Harwood ME LLP wrote to Integral stating:

“As we have made repeatedly clear, it is not acceptable for your clients to hold the committal proceedings over our clients’ heads in order to force them to reach a settlement. It is a significant abuse of process and our clients find it unfair and unacceptable to meet under those conditions”.

However, for the reasons I have set out above, the suggestions that Integral was holding the committal proceedings over the Defendants’ and Third Parties’ heads and had engaged in “a significant abuse of process” are without merit. Mr Kozachenko’s conduct did not go beyond that which was permissible in attempting to settle hardfought commercial litigation. Accordingly, as I informed the parties shortly after the conclusion of the argument, Mr Smith QC’s application to strike out the committal application as an abuse of process failed.

Mr Smith QC’s second threshold objection concerned the particularisation of the acts or omissions said to constitute contempt. I gave a summary of my reasons for refusing that application before the evidence began. For the convenience of the parties, I set them out again here.

The objections arose at a late stage, being taken in evidence served by the Third Parties on 3 and 4 February 2020 for a three-day hearing beginning on 10 February 2020.

The basis of the objection was CPR 81.10(3). This provides:

“The applicant must:

(a)

Set out in full the grounds on which the committal application is made and must identify, separately and numerically, each alleged act of contempt including, if known, the date of each of the alleged acts; and

(b)

be supported by one or more affidavits containing all the evidence relied upon”.

Mr Smith QC referred me to a number of authorities emphasising the importance of the requirement that the allegations of contempt be properly particularised in the application notice. These included:

In this case, the application notice provides:

“The Defendants have breached the injunction of Mr Justice Morgan dated 14 January 2018 and the order of His Honour Judge Waksman QC extending and modifying the injunction dated 26 January 2018. The Third Parties, as the Defendants’ owners and/or principals and/or directors caused and/or enabled and/or permitted the Defendants to breach the orders as set out in the attached affidavit”.

The application referred to an attached draft order. I have concluded that the attached draft order falls on the right side of the line identified by Nicholls LJ in Harmsworth as a document to which regard can properly be had when determining if the allegations of contempt have been properly particularised, although I accept that best practice involves the matters said to place the respondent in contempt appearing in the application notice itself.

The draft order:

I will address the failure to provide the letter first. In my view this is directly analogous to the example given by Sir John Donaldson MR in Chiltern DistrictCouncil of an order requiring something to be done by a particular time on a particular day, of which Sir John observed “it would be sufficient to say that he had failed to comply with that order, because it only permits of one breach”.

However, the same is not true of the plea that the Third Parties caused or enabled and/or permitted the cargo to be shipped to Iran. That was simply too general a formulation of the alleged contempt. In those circumstances, I accept Mr Smith QC’s submission that Integral failed to comply with CPR 81.10(3) in this respect.

I am satisfied that this defect in the application notice has not caused any prejudice to the Third Parties who were fully prepared at the hearing to meet the case of contempt on which the application was based:

On that basis, I was willing to exercise my discretion under paragraph 16.2 of the Practice Direction 81 (Applications and Proceedings in Relation to Contempt of Court) to “waive any procedural defect in the commencement or conduct of a committal application, if satisfied that no injustice has been caused to the respondent by the defect”, subject to the following conditions:

In this regard, I note the observations of the Court of Appeal in Attorney-General forTuvalu v Philatelic Distribution Corporation Ltd (at p.935) that:

“It would not, however, be reasonable and would stultify this branch of the law if the same degree of particularity were required in a case where the complainant has not personally witnessed the acts complained of and must rely on inference to establish that non-compliance with a court order was caused by the act or omission of the alleged contemnor. In such a case the complainant must make clear the thrust of the case he will present to the court. The alleged contemnor can then prepare to meet that case.

…

As the judge rejected this submission on behalf of the second defendant it was not necessary for him to consider the powers which he had to deal with as to any defect in the notice of motion, nor has it been necessary for this court to consider what his powers would have been. However, we would regard it as regrettable if it were the law that, if this could be achieved without causing injustice, the lack of particulars in a notice of motion was not capable of being cured. Such a situation would encourage the incurring of the substantial costs which were incurred in this case to no useful purpose”.

Mr Blackwood QC produced a draft amended version of the Application Notice, which I was satisfied in its final form complied with the CPR 81.10(3) requirements. I gave Integral permission to amend its application notice in terms of the final version of the draft. My reasons for doing so were given in an ex tempore judgment in the afternoon of the first day of the hearing, supplemented by a further ex tempore judgment on the morning of the second day of the hearing.

On this basis, I reject Mr Smith QC’s second basis for applying to strike out the committal application notice.

Integral’s evidence comprised affidavits from its solicitor, Mr Kozachenko, from Mr Saeid Mohseni, a senior trader at Integral, and from Mr Altayev, who was the representative of Integral (and of various other international companies) in

Mr Mohseni principally gave evidence about the progress of the settlement negotiations with Ms and Mr Sanchouli, and also as to the steps he had taken to inform Mr Sanchouli of the injunction via WhatsApp, Mr Mohseni also offered evidence of what he said was the practice for the amendment of railway bills in Turkmenistan based on his “experience in trading in Turkmenistan”.

Mr Mohseni was based in Geneva during the period with which this application is concerned and had no direct exchanges with the Railways Ministry himself. The timing and content of his communications with Mr Sanchouli are apparent from the documents.

Mr Altayev also gave evidence about the practice of the Railways Ministry in Turkmenistan. His cross-examination was conducted under less than ideal circumstances. There was a significant delay on the video link which, when coupled with the need for questions and answers to be translated into Russian, led to a degree of miscommunication and over-speaking. Time was lost because Mr Altayev did not have access to the hearing bundles and had to find the documents which Mr Smith QC wanted to take him to on his laptop computer. Further, the video link froze, and then cut out, before Mr Smith QC’s cross-examination had been completed.

There is one matter which was the focus of Mr Smith QC’s cross-examination which does give me cause to approach Mr Altayev’s evidence with a degree of caution.

I accept that the explanation in Mr Altayev’s second affidavit is a possible explanation for his failure to mention this important part of his conversation with Mr Gurbanov, albeit perhaps a surprising one. It is also surprising that there was no mention of this issue in his contemporaneous email to Integral. Mr Altayev clearly did report a conversation to this effect to Integral on 12 January 2018 because it features in Mr Kozachenko’s letter of that date. However, the differing accounts may well reflect the fact that the communications which Mr Altayev had had with the Railways Ministry may have involved more than one conversation or may have been inconsistent in their content.

I turn to the evidence adduced by the Third Parties. This comprised affidavits from:

Ms Sanchouli is a Farsi speaker who, she accepted, had a “reasonably good command of spoken English”. To her credit, she gave evidence in English. Her (lengthy) affidavit was also produced in English. I am satisfied that Ms Sanchouli has a good command of English, but I have made allowances in my assessment of her evidence for the fact that she was not giving evidence in her first language.

Ms Sanchouli clearly had a close involvement in and good understanding of the underlying commercial dispute, and of the issues in the contempt application. She had a tendency in the course of questioning to fall back on and repeat a number of “prepared lines” rather than answering the question: for example the fact that it was not possible to sign the Schedule C Letter because the first paragraph was not true, or her repeated references to the advice that her UAE lawyers had given her. She was clearly alive in her evidence to a legal argument open to the Third Parties that there had been no contempt because the shipment of the cargo to Iran took place as a result of the Defendants’ diversion of the cargo before the Morgan Injunction, rather than any positive steps taken by the Defendants after the Morgan Injunction, and she sought to frame a number of her answers accordingly. In particular, Ms Sanchouli sought to walk this difficult line when asked repeatedly what her understanding was, when giving an instruction on 18 January 2018 that 36 of the RTCs which the Defendants had previously re-routed to Iran should be routed back to Integral, as to what would happen to other RTCs which the Defendants had rerouted to Iran. It was clear to me that Ms Sanchouli fully understood the potential significance of this question, and that she sought to avoid answering it.

For these reasons, I have found it necessary to treat Ms Sanchouli’s evidence with caution. I have been guided in my assessment of her evidence by the considerations identified by Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at [15]-[24], but taking account of the fact that this is a committal application in which the subjective state of mind of the respondents has a prominence which it does not ordinarily have in a commercial case, and of the heightened burden of proof which applies in the present context.

Mr Sonnenberg is a German speaker but with a very good command of English. I found him to be an honest witness, but someone who had adopted an unduly sceptical attitude to an order of the English court by reference to his own understanding of German law, in circumstances in which the parties had chosen English law and London arbitration in their contracts. It was clear from his evidence that he had very little involvement in this transaction before becoming aware of the Morgan Injunction, that Ms Sanchouli had told him that she was handling the matter and essentially instructed him on behalf of San Trade not to sign the Schedule C Letter, and that he himself took steps to try and ensure the RTCs remained within Turkmenistan in an effort to “hold the ring” in response to the Morgan Injunction.

In relation to Mr Sanchouli, I asked Mr Smith QC to confirm whether he had been warned that by choosing not to make himself available for cross-examination, there was a risk of adverse inferences being drawn against him (cf Whipple J’s judgment in VIS Trading v Nazarov [2015] EWHC 3327 (QB) at [57]). Mr Smith QC confirmed that Mr Sanchouli had been so advised.

The committal application against the Third Parties was advanced on the basis that they were either de jure or de facto directors of one or other of the Defendants. This issue was first aired before the Court when the Third Parties challenged the order giving Integral permission to serve the application for committal on Ms and Mr Sanchouli and Ms Lobis. The challenge in respect of Ms Lobis succeeded and I need say no more about it.

In a reserved judgment reported at [2018] EWHC 2686 (Comm), Moulder J rejected the argument that the reference to a director in CPR 81.4(3) was limited to de jure directors ([67]). She also concluded that Integral had the better of the argument that Ms and Mr Sanchouli were de facto directors of both Defendants ([80]). An application for permission to appeal against the judgment was rejected by Flaux LJ on 23 January 2019.

Before me, while there was no formal concession of the point, Ms Sanchouli and Mr Sanchouli did not seek to challenge the argument that they were de facto directors of both Defendants. On the basis of their own evidence, I am satisfied to the relevant standard that Ms and Mr Sanchouli were de facto directors of both the First and Second Defendants.

The approach which a judge hearing an application for committal should adopt has been the subject of guidance from the Court of Appeal in Inplayer Limited vThorogood [2014] EWCA Civ 1511, as commended in Hewlett Packard EnterpriseCo v Sage [2017] EWCA Civ 973. In short, the judge should confine himself or herself to the contempts which are alleged in the application notice, and set out each relevant ground of contempt before proceeding to consider whether it is made out on the evidence to the criminal standard of proof.

It is also necessary to consider the Third Parties separately. I have decided that the issues in this case are best approached by considering the position of Ms Sanchouli first, by reference to each ground of contempt alleged against her, and then the position of Mr Sanchouli. I do so by reference to the “Particulars of breaches of Third Parties” document which I gave Mr Blackwood QC permission to amend into the Application Notice on the second day of the hearing.

I find that by late Saturday night on 13 January 2018 or in the very early hours of the following morning UAE time, Ms Sanchouli was aware that Integral was applying to

Ms Sanchouli confirmed in her evidence that she had read the draft order sent to her, but stated that she could not rely on a draft of a document because there was no stamp on it.

The Morgan Injunction was served on Ms Sanchouli’s email address at 00.54 UK time on 14 January 2018 (03.54 UAE time). Ms Sanchouli’s evidence was that she

“cannot recall exactly when I first saw the email however it will have been at some point on the morning of 14 January 2018”.

In these circumstances Mr Smith QC contends that no breach of the order can be made out. His argument proceeded as follows:

Before considering this argument further, I should say something more about the decision of Sir James Munby in In re Jones. That was a case in which a mother had been ordered to “deliver up the children into the care of the father or cause the children to be so delivered up, at Cardiff Railway Station at no later than 4pm on 12 October 2012”. This not having happened, the Solicitor General moved to commit Ms Jones for contempt on two bases: in failing to deliver up the children by 4pm on 12 October 2012 and “that she continued to breach the order by failing to deliver up the children after 4pm on 12 October 2012”. Sir James Munby (P) said of this argument:

“[20] There is, in my judgment, simply no basis in law upon which the Solicitor General can found an allegation of contempt for anything done or omitted to be done by the mother at any time after 4pm on 12 October 2012. Paragraph

2(b) of the order was quite specific. It required the mother to do something by 4pm on 12 October 2012. It did not, as a matter of express language, require her to do anything at any time thereafter, nor did it spell out what was to be done if, for any reason, there had not been compliance by the specified time. In these circumstances there can be no question of any further breach, as alleged in the Solicitor General's notice of application, by the mother's failure to deliver up the children after 4pm on 12 October 2012 or, as alleged in the application, any continuing breach thereafter until 17 October 2012 when she and the children were found.

In this case, there can be no serious dispute that the Defendants, to whom the orders were addressed, were in breach of them by 11am UAE time on 14 January (some 7 hours after service of the orders on a number of directors of the Defendants). Contempt in failing to comply with a court order is a strict liability offence (Arlidge,

However, as a director of the Defendants, Ms Sanchouli can only be liable for the Defendants’ contempt if she was aware of the order and wilfully failed to take reasonable steps to ensure that the order was obeyed (AG for Tuvalu v PhilatelicDistribution Corpn [1990] 1 WLR 926, 936).

On the facts of this case, I am sure that the Morgan Injunction came to Ms

Given that the terms of paragraph 2 of the Morgan Injunction required Ms Sanchouli to do no more than sign and produce the Schedule C Letter, I am satisfied that Ms Sanchouli had more than sufficient time after becoming aware of the contents of the Morgan Injunction to sign and produce the Schedule C Letter before 11am UAE time, even allowing for some time for reflection. In any event, when an order of the Court is made which requires action to be taken urgently, a corporate defendant and its directors are expected to comply with that order. If a decision is taken deliberately and consciously not to comply by the deadline because of a desire to carry out further investigations, that might be a relevant matter when deciding whether committal was appropriate or what sanction to impose (particularly if compliance followed soon after the deadline). It does not, however, have the effect that no contempt in the form of a deliberate breach of the injunction has occurred.

In these circumstances, it is not necessary for me (so far as Ms Sanchouli is concerned) to consider the position of a director who only becomes aware of an order after the company is already in breach of the order, or only becomes aware after that date that no other director is handling the issue. However, I return to that issue when considering the position of Mr Sanchouli below.

For these reasons I am sure that the Defendants were in breach of paragraph 1 of the Morgan Injunction, and that Ms Sanchouli, as the de facto director who, on her own evidence, had responsibility for dealing with this matter and familiarity with the underlying transaction, is responsible for that breach, having taken a deliberate and conscious decision not to sign the Schedule C Letter.

However, in order to determine the character of the breach, it is necessary to consider the reasons which Ms Sanchouli has given for not signing the Schedule C Letter (and

The first reason she gave is that signing a letter which contained the statement in the first paragraph would have involved the Defendants acknowledging:

I am willing to accept that the Defendants may have believed the statement in the first paragraph of the Schedule C Letter was untrue (and that it may well have been untrue):

However, I do not find that to be a sufficient reason for the refusal to make any effort to comply with the Morgan Injunction. An important and operative part of the Schedule C Letter was the second paragraph. The issues raised by the Defendants and Ms Sanchouli concerning the first paragraph provided no reason not to provide a letter in the form of the second paragraph. However, it was the second paragraph which was the principal reason why the Defendants refused to engage with the Morgan Injunction. It is striking that when Stephenson Harwood ME LLP came on the record for the Defendants, they wrote on 24 January 2018 explaining why the Defendants

Mr Smith QC points to Ms Sanchouli’s evidence that she told Stephenson Harwood ME LLP about her concerns about the first paragraph, and submits that in those circumstances the fact that this point did not feature in their letter was the result of a decision of Stephenson Harwood ME LLP, and not Ms Sanchouli. I am willing to accept that Ms Sanchouli mentioned her concern about the first paragraph of the Schedule C Letter to Stephenson Harwood ME LLP. But I have no doubt that their letter, the first substantive step taken by Stephenson Harwood ME LLP in the dispute, reflected the Defendants’ and Ms Sanchouli’s principal concern as communicated to them, and that this was the driving consideration behind Ms Sanchouli’s refusal to sign the Schedule C Letter.

I am sure that Ms Sanchouli was determined to ship the RTCs which the Defendants maintained Integral had not paid for to the UAE via Iran, and to do so notwithstanding the Morgan Injunction. I find that the failure to sign a letter containing at least the second paragraph of the Schedule C Letter involved a deliberate breach of the Morgan Injunction, and did not result from the concern which I accept may have applied to the first paragraph.

The second reason put forward for not producing any letter was that Ms Sanchouli had been advised by UAE lawyers that Mr Kozachenko had no authority to represent Integral because he had not produced a power of attorney (“POA”), and that the Morgan Injunction was invalid as a result.

As to this:

It is important to note that paragraph 1 of the Morgan Order takes the form of a negative (and not a mandatory) injunction. The paragraph placed no obligation on the Defendants to undertake any positive act but did require the Defendants to refrain from taking any steps to direct the cargo to Iran.

In the “Particulars of breaches” document, Mr Blackwood QC referred to three specific paragraphs of Mr Kozachenko’s sixth affidavit setting out the matters said to constitute this contempt which I consider in turn.

I agree with Mr Smith QC that this conduct, even if established, would not constitute a breach of paragraph 1 of the Morgan Injunction. It does not specify an act which the Defendants took which they were injuncted from taking, but (at best) a failure to take positive steps which the Morgan Injunction did not order the Defendants to take. Accordingly, no contempt to this effect is made out.

In relation to the first part of this paragraph, no evidence was adduced before me that the Defendants took active steps to convince the Turkmen Railways that the order of Mr Justice Morgan was invalid and no such case was put to Ms Sanchouli in crossexamination. Accordingly, this alleged ground of contempt is not established.

The second part of this paragraph – that the Defendants took active steps to ship the cargo – is considered below in the context of Mr Blackwood QC’s final particular under this head of contempt.

It is not in dispute that the Defendants took active steps before the Morgan Injunction to divert the cargo to Iran. In particular, acting on Ms Sanchouli’s instructions, on 9 and 10 January 2018 Ms Lobis sent letters to the Railways Ministry requesting the reconsignment of 73 RTCs, leading the Railways Ministry to issue orders to that effect on 10 and 11 January 2018 (Orders Nos. 15 and 16). A further request was sent on 12 January 2018 stating:

“The company San Trade … asks you to help and re-consign the tankers in quantity of 73 pcs … Payment in accordance with instruction No. 33 d/d 10.01.2018 has been completed. In the AIGTR … consignment note please indicate”

(and then various information was set out). Orders Nos 15 and 16 provided that the consent of the Customs Department was required.

The issue is whether any such steps took place after the Morgan Injunction, or whether the position may be that no further steps were taken by the Defendants, but the Railways and Customs Ministries acted after that point on their own initiative in taking the steps by which part of the Cargo was diverted to Iran.

There are essentially two issues to consider.

First, Mr Blackwood QC submitted that the Defendants took identifiable active steps after the Morgan Injunction to divert part of the cargo to Iran. The following matters are clear from Ms Sanchouli’s evidence:

The terms of the letter sent by Ms Lobis to the Railways Ministry on 18 January 2018 provided as follows:

Ms Lobis also sent a letter to the Customs Authority on 18 January 2018 which made the following request:

“The company San Trade asks you to help and reconsign tankers in quantity of 38 ps which are going with fuel oil M-100 according to the Contract No B-016579 dd 17.072015, Annex 1 d.d. 24.12.2016, EKC 361171 (10.08.15) to dd 26.01.2017 to the Parto Tskali station to the address of “Intergral Petroleum” by order from “SAN Trade GmH”. Reconsignment should be carried out by old documents to the station Banderabas Iran via Akyayla to the address of company “San Trade”.

As well as repeating the request for reconsignment of these 38 RTCs from Integral to San Trade via Iran, the letter asked the Customs Authority to make a series of amendments to the Customs’ Declaration which were clearly intended to facilitate the delivery of the 38 RTCs to Iran. The letter also confirmed that payment in accordance with instruction No 38 dated 11 January 2018 had been completed.

Mr Smith QC suggested that the letter did no more than partially countermand the document previously sent to the Customs Department on 12 January 2018. That letter had concerned the re-routing of 79 RTCs from Integral to the Defendants, whereas the 18 January 2018 letter was limited to 37 of those RTCs. On this basis, Mr Smith QC submitted that there had been no positive act in breach of the Morgan Injunction, merely a failure to re-route all (as opposed to some) of the RTCs. However, it is clear that the 18 January 2018 letter went beyond this:

I have concluded that the 18 January letter was sent to the Lebap Customs to facilitate the transfer of 38 RTCs to Iran. The 38 RTCs comprised:

As I have mentioned, Ms Sanchouli exhibited a statement signed by senior employees in the Customs Department (and others) on 25 January 2018 entitled “on making amendments in relevant cells of Cargo Customs Declaration”. It stated:

“For the reasons stated in the letter No 36 dated January 18, 2018 from company “San Trade” under the contract number B-016579 … which was concluded on 17^th July 2018 between the Turkmenbashi Complex of Oil Refineries and the company ‘San Trade’ … in the cargo customs declaration [numbers given] which was formalized at the customs post “Seydi” of the Lebap Region Customs, according to the terms of the contract, in cell 8 replace the entry … “Integral Petroleum …. on behalf of San Trade GMBH in Shore Tanks of Black Sea

Terminal Georgia … with the entry “San Trade GMBH (Germany), UAE Dubai ……. Via Bander Abbas-Iran and the entry 07226 in the cell 29 replace with the entry 07324”.

It is clear from this evidence that it was only on 25 January that the Customs Declaration for the 37 RTCs was amended to remove Integral and the reference to

There can be no doubt, therefore, that the communications sent by Ms Lobis on 18 January 2018 involved a breach of paragraph 1 of the Morgan Injunction. The issue which then arises is whether I can be sure Ms Sanchouli instigated or failed to take reasonable steps to prevent Ms Lobis sending a letter in such terms.

I have no doubt that this is the case:

Second, Mr Blackwood QC submitted that, although prohibitory in form, the injunction required the Defendants to take steps to stop the cargo being shipped to Iran because, for so long as the Railways Ministry were carrying it pursuant to the

Mr Smith QC challenged this submission, both as a matter of principle, and having regard to the way in which Integral’s case has initially been put. I am persuaded by both of those submissions, and I am not prepared to find that Ms Sanchouli was in contempt of court on this ground. There is a clear difference both legally and practically between a prohibitory and a mandatory injunction. The former does not generally require the respondent to incur any expenditure, and ordinarily creates no difficulty in supervision of performance. A mandatory injunction requires a respondent to take positive steps, and is much less readily granted. Paragraph 1 of the Morgan Injunction was prohibitory in form and could legitimately have been read and understood by the recipient as only requiring the Defendants to refrain from taking further positive acts.

Construing the Morgan Injunction with the strictness appropriate in this context, I have concluded that paragraph 1 should not be read as requiring the Defendants to take positive steps such as interrupting a shipment which had already been consigned to a particular destination or requesting the Railways Ministry to change that destination. Either this would involve making an order which was prohibitory in form but mandatory in substance (cf Dowty Boulton Paul Ltd v Wolverhampton

There can be no dispute that Ms Sanchouli did not sign the Schedule C Letter forthwith as required by the Waksman Injunction. Ms Sanchouli was made aware of the Waksman Injunction in the early hours of 27 January 2018. The draft letter was not signed until the morning of 29 January 2018. On no view can this be described as “forthwith”.

Ms Sanchouli’s evidence was that she was at her sister’s wedding in Iran when she received notice of the Waksman Injunction, that she had poor telephone and internet connectivity, and that in signing the Schedule C Letter when she got back to the UAE on 29 January 2018, she acted reasonably and as soon as she reasonably could.

I accept that Ms Sanchouli was at a wedding in Iran at the relevant time. However, I do not accept that she procured the signing of the amended Schedule C Letter as soon as she reasonably could. I am sure that it suited Ms Sanchouli and the Defendants that the Schedule C Letter be signed as late as possible, and that in taking no steps to ensure that the Schedule C Letter was signed before 29 January 2018, Ms Sanchouli was deliberately flouting the Waksman Injunction.

I have reached this conclusion for the following reasons:

I turn to Mr Sanchouli. He produced an affidavit but did not make himself available for cross-examination. There was no evidence before me which explained his failure to attend for cross-examination, even if only by video link. As I have explained above, Mr Sanchouli was aware that it would be open to the Court to draw an adverse inference against him by reason of his non-attendance.

The legal principles for drawing an adverse inference from the absence of a witness are set out in an oft-quoted passage from Brooke LJ’s judgment in Wisniewski vCentral Manchester HA [1998] PIQR 324, 340:

When addressing the evidence relating to Mr Sanchouli, I have considered whether there are grounds for drawing such an adverse inference on each issue.

It was Mr Sanchouli’s evidence that he was not aware of the terms of the Morgan Injunction until after the deadline for compliance had expired. While Mr Sanchouli has not made himself available for cross-examination on that evidence, I am

I have reached this conclusion for the following reasons:

By contrast, I am sure that at a very early stage in the period between the expiry of the deadline for compliance, and the hearing before His Honour Judge Waksman QC, Mr Sanchouli was made aware of the terms of the Morgan Injunction, that the injunction was not being complied with, and that he knew of and supported Ms Sanchouli’s decision not to provide a letter in any form. On the evidence of both Mr and Ms Sanchouli:

In these circumstances, the issue arises as to whether Mr Sanchouli can be liable in contempt for failing to take reasonable steps to ensure compliance with paragraph 1 of the Morgan Injunction after the time for compliance had expired.

I am not satisfied that Mr Sanchouli can be found to be in contempt of the Morgan Injunction on this basis:

The law of contempt rightly places a significant premium on certainty and precision, and points which might be regarded as unattractive in the conventional cut-and-thrust of commercial litigation must be approached with particular care in the committal context.

In any event, the suggestion that Mr Sanchouli was guilty of contempt for failing to take steps to cure a breach which had already occurred was one which only emerged clearly in closing submissions (for example the draft order served on the Defendants contains no such suggestion). In these circumstances, I am not satisfied that this ground of contempt is one of which Mr Sanchouli can fairly be said to have had notice when preparing his affidavit and taking his decision not to make himself available for cross-examination. This provides a further reason for my decision not to find that Mr Sanchouli had committed this head of contempt.

I am satisfied that Mr Sanchouli committed this act of contempt, essentially for the reasons why I am similarly so satisfied in relation to Ms Sanchouli.

There can be no dispute that Mr Sanchouli was aware of the terms of the Morgan Injunction prior to 16 January 2018. As I have stated, I am sure that over the period 16 to 18 January 2018 Ms Sanchouli took the decision that cargo which, on the Defendants’ case, had not been paid for by Integral, should continue to be shipped to Iran. I am also sure that the instruction which Ms Sanchouli gave to Ms Lobis were that it was, in effect, “business as usual” so far as that part of the cargo was concerned, and that Ms Lobis was to take such steps as might be necessary for that part of the cargo to continue its journey to the UAE via Iran.

It is inconceivable that Mr Sanchouli was not involved in formulating this strategy, and that he did not approve of it. I have already set out the evidence as to his involvement in and approval of all key decisions taken by Ms Sanchouli in relation to the Cargo and the dispute with Integral. On Mr Sanchouli’s own evidence, on 16 January 2019 he discussed the decision to re-direct some of the cargo back to Integral, including sending “the necessary communications to the Railways Ministry and the Customs Department”, with his daughter. The belief that Integral’s entitlement to cargo was to be measured using the Contract rather than refinery price, and that, English court-orders notwithstanding, that was all they were to get, was one which I find to have been strongly held by Mr Sanchouli and Ms Sanchouli. While I have reached this conclusion without needing to draw an adverse inference from Mr

I am also satisfied that Mr Sanchouli committed this ground of contempt. It is clear on his own evidence that he was aware of the hearing before His Honour Judge Waksman QC on 26 January 2018 because he gave instructions to the Defendants’ lawyers to tell the judge that “to [show] respect to his order we still kept some of the rail cars in Turkmenistan”. On his own evidence, he was with his daughter in Iran when Stephenson Harwood ME LLP relayed the outcome of the hearing. He would, therefore, clearly have been aware at around the same time as Ms Sanchouli about the Waksman Injunction, as he appeared to acknowledge.

He was also aware of how urgent matters were. On his own evidence, he knew that several rail cars were still in transit from Turkmenbashi and had yet to cross the border at that point.

I am sure that the decision that the letter would not be signed until 29 January 2018, notwithstanding the requirement to produce the amended Schedule C Letter forthwith and the obvious urgency of the situation, was a joint decision of Mr and Ms Sanchouli taken together, and that the reason for adopting this course was to play for time while more RTCs passed the point of no return.

I accept that committal orders are exceptional orders, only to be used in exceptional cases (Arlidge, Eady & Smith para. 12-20). However, I am satisfied in respect of the three grounds of contempt which I have found to be established against Ms Sanchouli, and the two grounds of contempt I have found to be established against Mr Sanchouli, that these represented deliberate breaches of the Morgan and Waksman Injunctions for which committal is appropriate.

I accept that Ms and Mr Sanchouli were acting at all times on the basis of what they genuinely believed to be their rights in their commercial dispute with Integral (albeit the effect of the LCIA Award is that their belief was mistaken). Further, the contempt occurred within a relatively narrow time period (14 to 29 January 2018) against a background of fast-moving events, with developments occurring in a number of different countries at or around the same time. Finally, both Ms Sanchouli and Mr Sanchouli have offered their apologies to the Court. These matters are likely to be material at the sentencing stage. However, they do not remove the essential seriousness of Ms and Mr Sanchouli’s contempt, which involved seeking to pre-judge the commercial dispute in the Defendants’ favour, in breach of orders of this Court intended to hold the ring while those issues were determined.

I will ask counsel for further submissions on the issue of sentence, and any consequential matters.