Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION
	[2013] CSOH 33
P1217/12	OPINION OF LORD GLENNIE in the petition of MARTIN AND CO (UK) LIMITED Petitioners; for An order under section 1 of the Administration of Justice (Scotland) act 1972 ________________

Petitioners: A Smith QC; Simpson & Marwick

Respondent: Sandison QC; Brodies LLP

21 February 2014
Introduction

[1] This opinion is concerned with a minute by which the petitioners seek a finding of contempt of court against Mr Kenny Stenhouse and Mr Graham Main, arising out of their conduct in allegedly attempting to frustrate the execution of a commission for the recovery of documents and other property under s1 of the Administration of Justice (Scotland) Act 1972.

[2] Although the facts alleged by the petitioners in the minutes are not seriously in dispute, for present purposes at least, Mr Stenhouse and Mr Main argue that it would be disproportionate in the circumstances to invoke against them the court's jurisdiction to punish for contempt even if the facts alleged by the petitioners were proved. I was told that the full hearing of the Minute would take 2-3 days, whereas it would only take half a day or so to resolve the question of "proportionality". I appointed the matter to a hearing on proportionality. At that hearing I heard submissions based on the content of the minute and the report of the Commissioner, Ian Mackay QC.

The petition

[3] On 15 November 2012 the petitioners presented a petition seeking an order under s1 of the Act. The named respondents included Mr Stenhouse (fourth respondent). Mr Main was not a respondent. The allegations in the petition involved two franchise agreements. The first was entered into between the petitioners and the first and second respondents, the petitioners being the "Franchisor", the second respondents ("KCJ") being the "Franchisee" and the first respondent being a guarantor of the obligations of the Franchisee. The second was between the petitioners as "Franchisor", the third respondents ("Easter") as "Franchisee" and the first respondent, again, as guarantor of the obligations of the Franchisee.

[4] The following brief outline of the dispute is taken from the averments in the petition and does not involve any finding of fact by the court. The subject matter of the franchise agreements was a service provided by the petitioners (under the name "Martin & Co Service") of property management and letting, together with ancillary and complementary services using a "System" devised and developed by the petitioners for use in the provision of the service. On 13 November 2012 the petitioners terminated each franchise agreement with immediate effect by notice in writing. Thereupon if it became incumbent on the Franchisees and the first respondent as guarantor to deliver up to the petitioners documentation relating to the services provided by them pursuant to the franchise agreements and not to retain any details of persons, firms or companies which had entered into contracts with the Franchisee for the provision of the services. The Franchisees were also required to assign to the petitioners the benefit of any contracts entered into with any such persons, firms or companies and to pay to the petitioners any sums received from such persons, firms or companies on account of such contracts.

[5] The service of the notice terminating the franchise agreements had been preceded a few months earlier by proceedings raised as a commercial action in the Court of Session by which the petitioners, as pursuers, obtained orders against the first respondent for production of accounts and a number of other documents relating to the provision of the services. She did not produce those documents, and alleged that Mr Stenhouse, her domestic partner, controlled access to all of the records and premises and refused to give her the relevant records. That was why Mr Stenhouse was made a respondent to the petition. Further, it was alleged in the petition that, without the consent of the petitioners, the business of the Franchisees and the provision of the petitioners' services had been passed by the Franchisees on to two other companies, namely firster (the fifth respondents) and secter (the sixth respondents). The petitioners' concern was that Mr Stenhouse was carrying on the business of supplying the services under new branding without their consent and without accounting to them for the profits.

[6] The only other point worth noting at this stage is that messengers at arms had been sent to premises from which the business was being conducted on two occasions in September and October 2012 pursuant to the judgment obtained against the first respondent in the Court of Session. Mr Stenhouse was, apparently, present at some of those premises on such occasions but, it is alleged, refused to allow a search of the premises or to provide any database held inside.

The interlocutor appointing the commission

[7] On 15 November 2012, having heard counsel for the petitioners on a motion before calling, Lord Drummond Young granted an interlocutor appointing the petition to be intimated and served and allowing 21 days for answers. In terms of s1 of the Act, he appointed Ian Mackay QC to be Commissioner and granted commission and diligence for the recovery of the documents and other property called for in terms of the specification mentioned in the Second Schedule to the petition.

[8] The Second Schedule identified the documents sought to be recovered in the following terms:

"1. All records of any nature, whether on paper or in electronic form or howsoever formed, recorded or stored, in the hands of the respondents or anyone on their behalf which contain entries showing or tending to show:

(a) The details (including names and addresses) of the persons, firms or companies who entered into agreements or contracts with [KCJ] and [Easter] for the provision of the "Martin & Co Service", prior to the written terminations of the franchise agreements ... on 13 November 2012 by notices, howsoever entered into and whether KCJ and Easter were trading under the name of Martin & Co or otherwise and whether operating from the premises at 81 or 83 Cadzow Street, Hamilton, 69 Graham Street, Airdrie, 19a Queensferry Street, Edinburgh or 229 Morningside Road, Edinburgh or otherwise;

(b) the details of such agreements and contracts; and

(c) The amounts and timing of sums received from such persons, firms or companies on account of such agreements or contracts;

in each case, for the avoidance of any doubt and without prejudice to the foregoing generality, including any such records that (i) may not bear any reference to the names of KCJ, Easter or Martin & Co and (ii) may bear to be in the name of, or to refer to, [Firster], [Secter], [various other trading names] or any other name or names;

in order that excerpts may be taken therefrom at the sight of the Commissioner of all such entries.

2. Failing principals, drafts, copies or duplicates of the above or any of them."

The words in italics were added by amendment, but nothing turns on that.

[9] Having appointed Mr Mackay QC to be commissioner, and having granted commission and diligence for the recovery of those documents and other property, the interlocutor went on in the following terms:

"(5) orders the Commissioner to explain to the havers, their servants, agents or anyone acting on their behalf on executing the order:

a. the meaning and effect of the order;

b. that the havers may be entitled to claim that certain of the documents and other property are confidential or privileged;

c. that the havers have a right to seek legal or other professional advice of their choice and to apply to vary or discharge the order; and to give the havers a copy of the Notice in Form 64.9 of the Rules of Court;

(6) grants warrant to and authorises the said Commissioners, whether the havers have allowed entry or not;

a. To enter, between the hours of 9 a.m. and 5 p.m. on Monday to Friday,

i. the premises at 83 Cadzow Street, Hamilton;

ii. the premises and 69 Graham Street, Airdrie;

iii. the premises at 229 Morningside Road, Edinburgh;

iv. any other place in Scotland owned or occupied by the havers at which it appears to the Commissioner that any of the items set out in the Second Schedule of the Petition (the "listed items") may be defeated;

b. to search for and take all other steps which the Commissioners consider necessary to take possession of or preserve the listed items;

c. to take possession of land to preserve all or any of the listed items and to consign them with the Deputy Principal Clerk of Session to be held by him pending the further orders of the court;

and for that purpose,

(7) orders the havers or their servants or agents to allow the Commissioners, any person whom the Commissioner considers necessary to assist him ..., and the Petitioner's representatives, to enter into the premises named in the order and:

a. to allow them to search for the listed items and take such other steps as the Commissioner considers it reasonable to take to execute the order;

b. to provide access to information stored on any computer owned or used by them by supplying or providing the means to overcome any and all security mechanisms inhibiting access thereto;

c. to remain in the premises until such time as the search is complete, including allowing them to continue the search on subsequent days if necessary;

d. to inform the Commissioner(s) immediately of the whereabouts of the listed items;

e. to provide the Commissioner(s) with a list of the names and addresses of everyone to whom he has given any of the listed items; and

f. not to destroy, conceal or tamper with any of the listed items except in accordance with the terms of this order."

[10] I was told that the reference in the interlocutor to the "havers" in various places was a consequence of the way the interlocutor was prepared by the court, the order sought in the petition having in each case referred to the "respondents" rather than the "havers". It was suggested that this change had unwittingly had the result of extending the reach of the order well beyond that which was intended, in that it allowed the Commissioner to enter and search any place in Scotland owned or occupied by anyone who might be a haver, a category of person extending well beyond the named respondents. I can see that an order in these terms might well have that effect in some cases. Here, however, since the documents identified in the Second Schedule to the petition are documents "in the hands of the respondents or anyone on their behalf" I do not consider that the reference to "havers" in this case did have that effect. However, the point illustrates the care that requires to be taken in drafting the order to avoid the risk that the order goes further than intended.

The events of 15 November 2013 at 83 Cadzow Street, Hamilton

[11] For present purposes, parties were content to proceed upon the account given by the Commissioner in his report of his attendance at the premises. I shall attempt to summarise the material parts of the report briefly.

[12] The Commissioner attended the premises at 83 Cadzow Street, Hamilton, at 1019 on Friday, 15 November 2013. He was accompanied by two messengers at arms, a solicitor in the firm acting for the petitioners, a female (in case the premises were occupied by a single female - see Rule of Court 64.11(3)(b)), and a computer consultant. He identified Mr Stenhouse and served him with a copy of the petition, the interlocutor and the affidavit sworn in support of the before calling motion for the order. When he attempted to explain to Mr Stenhouse the nature, meaning and effect of the interlocutor and the affidavit, Mr Stenhouse repeatedly interrupted with complaints that "this canna be right" and other comments, and would not allow the Commissioner to complete going through the various parts of the documents. The Commissioner handed Mr Stenhouse the Form 64.9 and attempted to explain what was set out in it but Mr Stenhouse refused to let him go through it and indicated that he wished to exercise its legal right to representation. He told the Commissioner that the Commissioner was "wasting his time" attempting to explain his rights because he, Mr Stenhouse, was going to contact his lawyer.

[13] At 1024, the Commissioner managed to explain to Mr Stenhouse that he would not commence recovery until two hours had elapsed - as provided for in Rule of Court 64.12 - but that he would commence the recovery after that time unless prevented by court order. The two hours for Mr Stenhouse therefore expired at 1224.

[14] Mr Stenhouse said that he himself would prevent the Commissioner from executing the commission if he tried to do so after the two hours had elapsed. Mr Stenhouse said that he had "nothing to do with this business" and that Mr Main was "in charge". The Commissioner notes that this was something which he repeated at regular intervals throughout the day, though the Commissioner came to the view that that claim was false and was intended to stop him executing the commission.

[15] All of the above happened within the first five or six minutes. Everyone then sat down to afford Mr Stenhouse the opportunity of seeking legal representation. Mr Stenhouse left the premises at 1040, telling one of the female employees to phone him "if anything happens".

[16] At 1122 Mr Stenhouse returned not having been able to obtain legal advice because everyone at his lawyer's office who might have been able to advise him was in the sheriff court. Mr Stenhouse repeated that he had nothing to do with the business. At 1145 he said that "the owner is on his way". At 1146 he stated that he would contact the police.

[17] At 1152 Mr Main arrived. After talking privately to Mr Stenhouse, Mr Main said: "over my dead body you'll be searching for files in here". He then closed the internal doors to an office adjacent to the sales area so as to continue his conversation with Mr Stenhouse. Mr Main emerged from the office and said: "I'm getting fucking sick of you disrupting my business". This was probably a reference to the previous occasions messengers at arms had attempted to obtain documents from the various offices: see para [6] above.

[18] At 1153 the Commissioner introduced himself to Mr Main. Mr Main claimed to have no records relating to Martin and Co. At 1158 Mr Main interrupted the commissioner's attempt to explain the procedure to him by saying: "I have a van and nothing will be leaving here". It is not clear why it was relevant that he had a van.

[19] At 1200 a policeman entered the premises with Mr Stenhouse, at Mr Stenhouse's request. The Commissioner showed him the court's interlocutor and explained the nature of the commission. The police officer asked if the interlocutor contained a power of arrest and the Commissioner informed him that it did not. The police officer requested a police car to attend.

[20] At 1206 Mr Main again stated: "nothing will be leaving here apart from yourselves."

[21] At 1207 one of the female employees (later identified as LD) ran out of the front door of the premises carrying two boxes of files labelled Martin and Co. The Commissioner ran after her shouting to her to stop, but she ignored him, ran across the street and disappeared up a side street. The Commissioner explained that he was concerned that if he attempted to use physical force to stop her it might have been treated as an assault.

[22] At 1208 the petition, the interlocutor and the affidavit were served upon Mr Main by the messengers at arms. He accepted service and admitted that "this is my business". At 1209, the Commissioner again attempted to explain the meaning and effect of the order, this time to Mr Main, but was repeatedly interrupted. Mr Main said that he wished to exercise his right to seek legal advice. The Commissioner informed him that he would not commence recovery until two hours had elapsed but that he would commence recovery after that time unless the court pronounced an order halting the commission. The two hours for Mr Main ended at 1409.

[23] At 1215, the Commissioner asked Mr Main if he would allow him to execute the commission after the two hours had expired. Mr Main replied that he would physically stop him from removing items from the property.

[24] At 1220, the Commissioner asked Mr Main what was contained in the boxes removed by the female employee (at 1207), to which Mr Main replied: "it's boxes of sandwiches". This was a flippant remark and was not taken seriously. One of the messengers at arms was able to tell the Commissioner that the boxes in fact contained files labelled "Martin & Co.

[25] At 1223 Mr Main threatened to destroy all the computers rather than have the information on them searched. However, he was told that any action to prevent the commission from being carried out might constitute contempt of court, and, presumably chastened by this warning, Mr Main stopped that conversation.

[26] At 1227 the two hours allowed to Mr Stenhouse before the Commissioner commenced the execution of the commission expired. However, the two hours allowed to Mr Main did not expire until 1409, so the Commissioner could not in fact do anything until then.

[27] At 1245 Mr Main repeated that "nothing will be leaving here".

[28] Between 1325 and 1335 a man identified as Mr Smith entered the premises, spoke to Mr Stenhouse and then left.

[29] Although the two hours allowed to Mr Main expired at 1409, nothing is recorded by the Commissioner until 1450, at which time he asked Mr Main if he would physically stop him from undertaking the commission and Mr Main stated: "it depends how much you piss me off".

[30] At 1455 the commissioner notes that the two hours for Mr Main to obtain legal advice had expired but that in view of the comments made by Mr Main he would await further guidance from the court before proceeding.

[31] At 1509 the Commissioner asked Mr Main and Mr Stenhouse if they would reveal the name of the female employee who removed the boxes labelled Martin and Co. Mr Main said that he knew her only as "Lauren" and did not know her home address. The Commissioner asked Mr Main and Mr Stenhouse if they would assist him in recovering the boxes, to which "he" (it is not clear whether this means Mr Stenhouse or Mr Main) replied that the boxes were "out the door".

[32] At 1510 the Commissioner informed both Mr Stenhouse and Mr Main that they might be committing a contempt of court by denying knowledge of the boxes' whereabouts and refusing to disclose the name and address of the female employee who removed them. The commissioner notes that he did not believe their story that they did not have details of that person.

[33] At 1520 the Commissioner was emailed a copy of a (further) interlocutor which included a power of arrest. He read the terms of the order to Mr Main and Mr Stenhouse.

[34] At 1525 the Commissioner told Mr Main that he should remain on the premises whilst the execution of the commission was taking place. He advised Mr Main (and possibly Mr Stenhouse) that execution of the commission was now inevitable and that they should reconsider their previously stated intention of preventing the commission being executed.

[35] At 1540 Mr Main said that he would allow the Commissioner to execute the commission, but he wished it to be noted that his decision was under objection. The commission then began. Mr Main thereafter claimed confidentiality regarding all the recoveries and in consequence all the recoveries were then sealed and marked "confidential".

[36] The Commissioner notes that the commission then proceeded at 1550. It continued without further interruption and ended at 1810, the Commissioner in the meantime having recovered a number of documents and computer related items.

The events of 19 November 2013 at 69 Graham Street, Airdrie

[37] This commission started by the Commissioner entering the premises at 1535 on 19 October 2013. At 1634 Mr Stenhouse arrived having been summoned by the manageress. Mr Stenhouse indicated that he would not prevent the Commissioner from executing the commission but requested that the solicitor representing the petitioners should not be present. The solicitor then left. The commission then commenced at 1645 with no suggestion of any obstruction by either Mr Stenhouse or Mr Main.

The correct approach in law

[38] The correct legal approach to the question of proportionality in this context was not in dispute. I was referred to the opinion of the court given by Lord Reed in Sovereign Dimensional Survey Ltd v Cooper 2009 SC 382. Taking the summary from the headnote, the court identified (at paras [30]-[32]) the following principles as applicable: (i) the rationale of the court's jurisdiction in contempt was to uphold the rule of law by protecting or enforcing the authority of the court; (ii) since the jurisdiction was exercised in order to protect the administration of justice, it was for the court and not for individual litigants to determine the circumstances in which it would permit the jurisdiction to be invoked; (iii) where the alleged contempt had not caused any harm to the interests of the minuters, the only question was whether it was in the public interest that the court should permit its jurisdiction to be invoked; and (iv) in order to answer that question, there were many factors which the court would require to consider depending on the circumstances of the case, including the gravity of the offence, whether it was persisted in to the point where it was likely to interfere with the course of justice, the extent to which the proceedings would be likely to promote the authority of the court and the interests of justice, the relationship between the contempt proceedings and other proceedings, and whether the proceedings would be likely to justify the public resources that would have to be devoted to them, it being a feature of the proper administration of justice that cases should be dealt with expeditiously and without undue demands on the resources of the court.

Application of those principles to the present case

[39] The minute for the petitioners sets out in a number of paragraphs the conduct on the part of Mr Stenhouse and Mr Main which is alleged to amount to contempt of court. So far as Mr Stenhouse is concerned, it is said that without reasonable or lawful excuse he obstructed the Commissioner in the execution of the commission, or attempted to frustrate its execution, by falsely stating that he had nothing to do with the business, by refusing to divulge the name of the employee who had removed the box of files from the premises or the likely whereabouts of that box after its removal, and by failing to provide reasonable assistance to the Commissioner in revealing the whereabouts of the documents and property sought in the orders pronounced by the court. So far as Mr Main is concerned, it is said that he too without reasonable or lawful excuse obstructed the Commissioner by threatening to make it difficult for him to recover any documents ("over my dead body", "nothing will be leaving", that he would "physically" stop him, etc.), by threatening to destroy computers and/or computer records rather than have them searched, by refusing to divulge the name of the employee who had removed the boss of files or the whereabouts of those files (and by saying that the box contained sandwiches when in fact it contained files), and by generally behaving in an abusive and obstructive manner. Those allegations all relate to the narrative set out by the Commissioner in his report (summarised in paras [14]-[32] above).

[40] Having considered the matter carefully in light of the principles set out in Sovereign Dimensional Survey, I have come to the conclusion that it would be disproportionate to allow these proceedings for contempt of court to continue. I can express my reasons fairly briefly.

[41] There is no doubt that Mr Stenhouse and Mr Main were, to begin with, uncooperative and that Mr Main threatened to obstruct the execution of the commission. It must be remembered, however, that an order in terms of s1 of the Act is very draconian in its nature. On the say so of the petitioners, the other party to potential litigation, the court grants authority to a Commissioner to enter and search premises at which he is unknown. He arrives unannounced. In times past he could arrive at an unseemly hour, but now he is required to attend between 9am and 5pm unless the court orders otherwise: Rule of Court 64.11(1). The unheralded arrival of someone with authority to search the premises is liable to provoke outrage and anger. It is by no means surprising if those in the premises react in a bad tempered way and threaten to obstruct. It is now the case (though formerly it was not) that a person in occupation of such premises may take legal advice; and if he wishes to do so the Commissioner will allow him two hours (or possibly longer) to take such advice before beginning to execute the commission. This period provides an opportunity not only to take advice but for a general cooling off. Once the Commissioner has been able to explain his independence and what he is doing, and able to inform the occupiers of the premises of their rights, both their right to take legal advice and their right to claim privilege and/or confidentiality in any documents or other materials taken from the premises by the Commissioner, much of the initial shock and outrage will have dissipated. The passage of time will assist. The court will not normally punish by contempt proceedings outbursts of anger and threats of obstruction during this early period unless they do in fact result in the commission being materially impeded.

[42] In the present case, with one possible exception to which I shall return, the Commissioner was faced with anger and bluster but not, in my opinion, with actual obstruction. The threats and other outbursts uttered by Mr Stenhouse and Mr Main took place during the period when the Commissioner was prepared to wait before executing the commission. The two hours allowed for Mr Stenhouse to take legal advice ended at 1224. The two hours allowed for Mr Main to take legal advice ended at 1409. The complaints about Mr Stenhouse were all, subject to this one point, complaints about what he said and did during the period before 1224. The complaints about Mr Main were again, subject to this one point, largely about what he said and did during the period before 1409. In the case of Mr Main, it is true that at 1450 he replied to a question about whether he would physically stop the Commissioner from undertaking the commission by saying: "it depends how much you piss me off". But, apart from the one matter to which I shall return, that was all he said after 1409. At 1540 he made it clear that he would allow the Commissioner to execute the commission. The Commissioner then proceeded to do so and no attempt was made to stop him. Accordingly, nothing in the general threats, abuse or bluster by Mr Stenhouse and, more particularly, by Mr Main impeded the Commissioner in the execution of the commission. It may be that he started the commission an hour or two later than he might otherwise have done had Mr Stenhouse and Mr Main been entirely cooperative, but no prejudice was caused by that delay.

[43] The one possible exception to this concerns the removal by the female employee of two boxes containing files labelled "Martin & Co". There is no suggestion that either Mr Stenhouse or Mr Main instructed her to remove the boxes. The complaint is that they failed to cooperate by saying who she was or saying where she had taken the boxes (I disregard the joke about sandwiches for this purpose). In some cases that might be of importance. Had the petitioners sought in the Minute to set up a case that the documents removed were important to their making progress in the case against the respondents, then it might well be seen that the failure to assist in identifying who had taken the documents and where those documents were could amount to contempt of which the court would take a dim view. But nothing in the petition instructs such a case. It is not said, for example, that there is a missing category of documents without which the petitioners are unable to make good their case against the respondents. So while the removal of two boxes of files may have resulted in a number of documents not being recovered by the Commissioner, it is not shown nor even suggested that the removal of those files had any material effect on the success or otherwise of the commission. For aught known, they might have been documents of which the petitioners already had copies. At all events, the recovery of documents by the commission has not led to litigation being commenced by the petitioners against the respondents or any of them, and there is no suggestion that that is because of any obstruction to the execution of the commission.

[44] For those reasons I am satisfied that it would not be proportionate to allow this Minute to proceed any further. Assuming the actions of Mr Stenhouse and Mr Main to amount to contempt, it is not a contempt of which the court requires to take notice. On that basis I shall dismiss the Minute. I shall reserve all questions of expenses.