Challenge to jurisdiction - Claimant judgment creditor bringing proceedings in Greece - Defendant judgment debtors seek to stay UK proceedings

Masri v Consolidated Contractors International Company SAL and other companies: Queen’s Bench Division, Commercial Court (Mr Justice Burton): 13 July 2011

The claimant was the judgment ­creditor of a judgment debt amounting to about $75m following a ­judgment on liability given in 2006 (see [2006] All ER (D) 444 (Jul)) against the first and second defendant companies, CCOG and CCIC, the ­judgment debtors. Liability was not established as against the third to seventh defendants who were either companies or individuals connected with CCOG and CCIC.

The third defendant (SK) was the head of the Khoury family, which, together with another family, the Sabbagh family, owned and controlled the parent company of the group, Consolidated Contractors Company Group (CCC), of which SK was president. The fourth, fifth and sixth defendants, (TK, SSK and WK) were SK’s sons.

The seventh defendant (CC Holdings), owned more than 99.9% of CCIC and CCOG, and was again owned by the Khoury and Sabbagh families. CCIC and CCOG failed to make voluntary payments, while, seeking on advice, to take every legitimate point that was open to them to resist enforcement (the anti-enforcement strategy).

The anti-enforcement strategy was characterised as an unlawful conspiracy between CCOG and CCIC and the rest of the defendants to ensure that no monies were paid on foot of the judgment debt.

Against that background it was not surprising that, in addition to numerous attempts by and on behalf of the claimant to enforce the judgment in Lebanon, Greece, Bermuda, the Cayman Islands, Switzerland, Nigeria, Palestine and Qatar, the claimant conceived the ‘anti-anti-enforcement strategy’. The claimant brought proceedings in Greece in March 2010 against CC Holdings, SK, TK, SSK WK and two others (the Greek action).

The case in the Greek action was that all those defendants were personally liable for CCIC and CCOG’s judgment debt, on the basis allegedly that CCIC had in fact its seat in Greece and had failed to comply with the registration requirements thereof. If the Greek action was successful, the effect would be to make those seven defendants personally liable for the unpaid debt of CCIC and CCOG.

On 23 April 2010, a conspiracy action was issued against the judgment debtors in the High Court (the conspiracy action). On 11 May 2010, the claimant launched a contempt application, based on 14 alleged breaches of court orders by CCIC and CCOG, and alleging that WK was also guilty of contempt by virtue of his responsibility for those breaches.

In a judgment of 5 May 2011, (see [2011] All ER (D) 78 (May)) CCIC and CCOG were found to be in contempt in respect of 10 out of the 14 allegations. The case against WK was adjourned on case management grounds, prior to the commencement of the hearing, on the basis that he would agree to be bound by the findings made by the judge as against CCIC and CCOG. In the present proceedings, all seven defendants sought to challenge the jurisdiction of the court and/or to set aside service in the proceedings, brought against them for damages for conspiracy by the claimant pursuant to articles 27 and/or 28 of Council Regulation (EC) 44/2001 (the Judgments Regulation).

The jurisdiction, in whose favour the English court was said to be required to decline or stay its jurisdiction, was that of the Greek courts, in respect of the Greek action. Articles 27 and 28 of the Judgments Regulation replaced arts 21 and 22 of the Brussels Convention, and it was common ground that the jurisprudence with regard to the latter continued to apply to the former. If article 27 applied, a stay by the court second seized in favour of the court first seized, was mandatory, and if the jurisdiction of the court first seized was established (which in the present case it would be), then the court second seized had to decline jurisdiction.

If article 28 applied, then a stay, consolidation or a dismissal was discretionary.

The main issues were: (i) whether article 27 of the Judgments Regulation applied as between the Greek action and the conspiracy action; (ii) whether pursuant to article 28, if jurisdiction in the conspiracy action was declined by the court second seized (England), the proceedings could be recommenced in the court first seized (Greece) and consolidated with the prior action. There was no doubt in the present case that such consolidation could be available in Greece.

Another related issue arose relating to non-disclosure by the claimant of the Greek action when permission to serve the present proceedings out of the jurisdiction one CCOG, CCIC and CC Holdings was obtained without notice.

The court ruled: (1) By reference to the European authorities, the principles emerged that before the mandatory operation of article 27 of the Judgments Regulation as between ‘proceedings involving the same cause of action and between the same parties… brought in the courts of different member states’, there had to be consideration of the following: (i) identity, but not precise coincidence, of the parties; (ii) close similarity between the causes of action, that was, as construed by reference to an interpretation ‘independent of the specific features of the law in force in each contracting state’ by reference to the facts and rule of law on which they were based; (iii) the identity of the object of the two actions, including, in the case of claims other than in a single claimant scenario, where the objects of the parties, one to establish and the other to avoid, liability, were the reverse of each other.

Although each of those three aspects had to be separately considered, there were statements, that ‘in the interests of the proper administration of justice within the community, to prevent parallel proceedings before the courts of different contracting states and to avoid conflicts between decisions which might result there from’, article 27 had to be interpreted broadly: however, there was no need to ‘strain to fit a case’ into article 27 given the availability of article 28 with its ‘more flexible discretionary power to stay in the case of related proceedings’ (see [22]-[24] of the judgment).

In the present case, the rule of law relied on, was materially different in the two actions. In the Greek action, it had been sought to make the defendants personally liable for the debts of CCIC (in particular for the judgment debt). In the conspiracy action, it had been sought to establish that the defendants were parties to a conspiracy whose purpose was to cause loss to the claimant, including taking every possible step to deprive the claimant of the opportunity to recover any part of the judgment debt. A claim to render defendants personally liable for the debts of a company because it had failed to comply with its registration requirements had not constituted reliance on the same rule of law as one which asserted that they had become parties to an international conspiracy (see [29] of the judgment).

Article 27 of the Judgments Regulation did not apply (see [31] of the judgment). (2) Where a decision was discretionary, the circumstances of each individual case were particularly important. The national courts had to bear in mind that the aim of the provision was to ‘prevent parallel proceedings before the courts of different contracting states and to avoid conflicts between decisions which might arise therefrom’.

It would therefore be appropriate, in case of doubt, for a national court to decide to stay its proceedings under article 22 of the Brussels Convention. Furthermore, there were three factors which might be relevant to the exercise of the discretion vested in national courts by virtue of article 22, but that did not mean that other considerations might not also be important: first, the extent of the relatedness and the risk of mutually irreconcilable decisions; second, the stage reached in each set of proceedings; and third, the proximity of the courts to the subject matter of the case (Englishness).

The factors listed were non-exclusive. With regard to the first question, it was clear that what was required to be considered was whether ‘separate trial and judgment would involve the risk of conflicting decisions, without necessarily involving the risk of giving rise to mutually exclusive legal consequences’ (see [38]-[41] of the judgment).

In the present case, considering the overlap between the Greek action and the conspiracy action, there had been an assertion in the Greek action of the relevance, existence and continuation of the anti-enforcement strategy and on that basis there was a material risk of conflicting decisions on issues and facts in play in both proceedings and therefore of irreconcilable judgments. When the other various aspects of the discretion was considered the court was unconvinced by the expediency of the importation into the Greek action of the additional factual and, certainly, legal complexities of the conspiracy action.

If the claimant succeeded in Greece in establishing personal liability on the part of those defendants, then it would not be necessary to ­proceed with the conspiracy action in any event (see [44] and [49] of the judgment).

The proper course was to prevent those two proceedings continuing in tandem, and to stay the English conspiracy action, which was a related action in the court second seized. The English proceedings would be stayed on the defendants’ applications (see [57] of the judgment)

(3) The ‘golden rule’ of disclosure was that, on a without notice application particularly where that was made on paper where the judge was left to consider on his own in his or her room what might often be a pile of undigested exhibits – the party making the application had to identify any material facts, and in particular any which might constitute a defence or some ground for not granting the order sought.

The most significant consequence was where an ex parte injunction, such as a drastic freezing order with immediate effect and possibly long-lasting consequences, was made which might not have been made if material facts had been disclosed. The duty arose on any ex parte application, and certainly so on one for service out of the jurisdiction, where what was being sought was the exercise of an exorbitant jurisdiction, bringing a foreign defendant within the jurisdiction even if only to incur the cost and inconvenience of fighting a jurisdiction application successfully.

One of the matters that might well be material on an ex parte application was the existence of foreign proceedings. The non-disclosure of such pre-existing foreign proceedings was considered particularly material. In a service out case, not only might the existence of foreign proceedings go to the issue as to whether it was an appropriate case to be tried in England, but, in particular, where there might be questions of the applicability of articles 27 and/or 28 of the Judgments Regulation, the existence of potentially relevant or related actions in other jurisdictions was obviously material. Much depended on the seriousness of the non-disclosure, and whether or not it was accompanied by other non-disclosures (see [58], [59], [61] of the judgment).

In the present case, there plainly could and should have been some reference to the Greek action. The fact that the claimant had already been suing CC Holdings in the Greek action so as to render it personally liable for the judgment debt was plainly material in relation to the application to serve the CC Holdings out of the jurisdiction with the new conspiracy action.

Accordingly the non-disclosure had been very material, in the exercise of the court’s discretion it was not appropriate or necessary to discharge the order (see [67], [68] of the judgment).

The right course was to disallow all the claimant’s costs of making and obtaining the ex parte order, so that they would not in any event be recoverable against the defendants (see [68] of the judgment).

Gavin Kealey QC and Colin West (instructed by Simmons & Simmons) for the claimant; Richard Walford and Jonathan Harris (instructed by S C Andrew) for the first and second defendants; Alistair Schaff QC, David Mumford and Oliver Phillips (instructed by Gide, Loyrette Nouel) for the third fourth and fifth defendants; Andrew Hunter (instructed by Jones Day) for the sixth defendant; Andrew Popplewell QC and Simon Birt (instructed by Baker & McKenzie) for the seventh defendant.