Hussain v Vaswami & Ors (2020) EWCA Civ 1216 (not on Bailii yet. Judgment on Lawtel).

This is a somewhat unusual appeal in the context of possession proceedings, being an appeal against a 12 month committal of the tenant to prison on two counts of contempt of court.

Mr Rizwan Hussain was a banker and investment manager. He had a tenancy of a property owned by the Vaswamis (various) at a rent of £1950 per week. Mr H stopped paying rent in January 2019. In March 2019, notice was served and then in May possession proceedings brought. IN October 2019 a possession order was made, with payment of £61,150 in arrears and occupation rent of £277.80 per day from 23 September 2019.

Mr H was refused permission to appeal the money judgment, but a hearing was listed for his application for permission to appeal in February 2020, and a listing for for his application to stay eviction was in December 2019. The landlords obtained a warrant, due to be executed in January 2020. Mr H failed to attend the hearing of his stay application and it was dismissed.

Mr H applied to set aside the dismissal of his stay application, helpfully giving entirely different reasons for his non attendance than he had given to the court when seeking an adjournment of that hearing. The application was dismissed on 2 January 2020. However, Mr H had, in written and oral evidence told the court that he was able to pay rent arrears – now in the region of £92,500 – in three working days after being given the account to pay it to.  The Circuit Judge had warned Mr H about perjury before he gave this evidence. Undaunted, Mr H gave an undertaking to the court to pay the sum of £92,500 within 4 working days of notification regardless of the outcome of the stay application or the appeal. On that, the application was adjourned to 6 January 2020.

On 3 January 2020, the landlord’s solicitors sent the details of the bank account for payment to Mr H. On 6 January, Mr H attended court and told the Judge that the money had been paid, producing a letter from Kilimanjaro Capital Management Ltd stating that it had paid the sum. On that basis the warrant was suspended, but a further undertaking from Mr H was required to pay the occupation rent of £1950 per week until determination of the appeal, regardless of any claim for disrepair. Mr H might have. Mr H gave that undertaking.

Next, Mr H issued a claim against the landlords for £265,000, and applied to the High Court to appeal the order of 2 January to replace his undertaking with an undertaking to use ‘his best endeavours’ to get Kilimanjaro to make the payment. That permission to appeal was refused by Zacaroli J on 23 January.

By this point, you will not be entirely surprised to be told that no payment was made, either of the £92,500 or the ongoing occupation rent. On 21 January, the landlord applied for committal of Mr H for breach of both undertakings (and a third undertaking, and for giving the undertakings dishonestly). In evidence Mr H claimed that he was the beneficiary of a trust of which Kilimajro was the trustee but the money hadn’t been paid because the landlord’s bank account had tax status issues.

At about this time, it also came to light that Mr H was an undischarged bankrupt whose discharge from bankruptcy had been suspended, which he had omitted to mention at the hearings of 2 and 6 January.

At the hearing of 20 February, the stay of eviction was lifted. On 6 April 2020, Mr H’s appeal of the possession order was dismissed.

Mr H sought to strike out the committal application at the hearing of 15 June. He argued that only the High Court had jurisdiction to hear the ‘dishonestly giving an undertaking’ ground. The Circuit Judge accepted that. Mr H then submitted that section 4 Debtors Act 1869 precluded the other three grounds of the committal application. This was dismissed on the basis that the Debtors Act did not preclude a finding of contempt of court.

After a further few hearings, that Mr H did not attend, on unsupported claims of ill health, Mr H was found in contempt of court on the two grounds. It was also found that Mr H hd no intention of honouring his undertakings when they were given, and that it was a deliberate ploy to stay eviction without paying anything. At a further hearing, which Mr H did not attend, the sentence of 12 months was given (8 months punitive, 4 months coercive – so not served if contempt purged), reduced from 18 months on mitigation and the impact of Covi-19.

Mr H appealed, arguing that

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

Section 4 Debtors Act

CPR 81.4 provides:

“(1) If a person –

1. 1. (a)  required by a judgment or order to do an act does not do it within the time fixed by the judgment or order; or
   2. (b)  disobeys a judgment or order not to do an act,

then, subject to the Debtors Acts 1869 and 1878 and to the provisions of these Rules, the judgment or order may be enforced by an order for committal….

(4) So far as applicable, and with the necessary modifications, this Section applies to undertakings given by a party as it applies to judgments or orders.

Then section 4 Debtors Act 1869 provides:

“With the exceptions herein-after mentioned, no person shall be arrested or imprisoned for making default in payment of a sum of money.

There shall be excepted from the operation of the above enactment:
…
(3) Default by a trustee or person acting in a fiduciary capacity and ordered to pay by a court of equity any sum in his possession or under his control:
…
Provided, first, that no person shall be imprisoned in any case excepted from the operation of this section for a longer period than one year; and, secondly, that nothing in this section shall alter the effect of any judgment or order of any court for payment of money except as regards the arrest and imprisonment making default in paying such money.”

The Court of Appeal held that the contempts did not consist of “making default in payment of a sum of money”.

Mr Hussain gave the undertakings in order first to establish a change of circumstances which would open the door to a reconsideration of the refusal of a stay and secondly to persuade the court to exercise its discretion in his favour by granting a stay. Thus the undertakings were the price Mr Hussain paid in order to obtain court orders in his favour and adverse to the Vaswanis.

The failure to pay the money was not a failure to pay an ordinary debt, it was a failure to honour extra obligations to the court which Mr H had assumed over and above the debt, for an advantage in proceedings.

It there also made no difference whether part of the term was coercive rather than punitive.

Term of imprisonment

It wasn’t manifestly excessive. 18 months was not an excessive starting point for two counts of contempt. There were considerable aggravating circumstances. But it was the final sentence that mattered, and a substantial discount was given. If Mr H purged his contempt the 4 month coercive element would not be served.

Comment

Giving undertakings to the court is a serious business. It is not, as Mr H appears to have thought, just another debt to rack up, but can, as here, result in imprisonment.

The purpose of the undertaking being key to the operation of Debtors Act 1869 seems right to me. The undertakings weren’t given to resolve proceedings, but in order to obtain a particular order (here, a stay) within proceedings. Thus the contempt, as, unlike a failure to comply with a judgment debt, it is an attempted manipulation of the court. It might well have been different had the possession claim itself settled on an undertaking to pay arrears and rent.