ON APPEAL FROM HIGH COURT OF JUSTICE (COMMERCIAL COURT)
2004 Folio 124 and 831
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE TOULSON
LORD JUSTICE RIMER
| (1) EDGARD ELIAS JOUJOU
(2) GEORGES ZAKHOUR
(3) JIHAD AL-HAJJAR
|- and -
Mr Simon Salzedo QC and Mr Colin West (instructed by Simmons & Simmons) for the Respondent
Hearing dates: 29-30 March 2011
Crown Copyright ©
Lord Justice Toulson:
"Shortly after the trial on liability, but before judgment was given, I received a call from … the group company secretary who told me that he and my brothers thought that it would be a good idea if I resigned as a director and the chairman of CCOG. He said that this was due to the Masri litigation. I cannot recall precisely what he said about this so I have asked [him] for his recollection. He recalls telling me that my brothers had decided that they no longer wanted the chairman of CCOG to be based in London."
1. CCOG changed the bank account into which revenues from oil sales was paid;
2. it changed the arrangements regarding the way in which the oil was sold;
3. it ceased to sell oil to the company to which it previously made sales.
"The receivership and freezing orders were granted for a legitimate purpose, namely to assist in the ultimate collection of the debt. Whether they would have that effect remains to be seen. But if the matter is looked at in the round, in the light of the careful and proportionate limitations on the scope of the receivership order and the freezing order, then it seems to me plain that the discretion was properly exercised in the unusual and perhaps unique circumstances of the present case."
"Whereas the documents evidence a vacancy in the management of the company exposing its interest to harm,
Whereas the shareholders do not oppose the judicial administration aiming primarily at electing a new Board of Directors,
Based on articles 589 /604 CCP
To appoint Mr George Zakhour and Dr Jihad Al-Hajjar and Mr Edgard Elias Joujou to administer the company provided that the tasks shall be distributed later and provided that the first two administrators shall convene a general assembly to elect a new Board of Directors for the company, and the three of them shall represent the company, both internally and externally, either jointly or severally."
"To entrust Mr Edgard Joujou with the management of the company with the assistance of Messers Jihad Al-Hajjar and George Zakhour on the understanding that the task will be defined later, provided that Mr Edgard Joujou shall conduct the ordinary business of the company with the obligation to seek the prior approval from the court for any matter that is important or not covered by the above."
1. the decision to pay the English judgment sum constituted an "important matter" which could only be decided by the Lebanese court in accordance with its order dated 14 January 2009;
2. payment of the English judgment sum should be made before the end of proceedings concerning exequatur before the courts; and
3. opposition to exequatur should be continued.
"Whereas the company had initially and on purpose taken the decision not to pay the amounts requested by Mr Munib Masri before the order instituting the judicial administration was given,
Whereas, pursuant to the obligation of the court supervising the judicial administration to preserve the interests of the company and to abide by the principle of caution in respect of the issue of payment of large debts, specifically those that have been the subject of opposition by the company before the court prior to the institution of judicial administration,
Noting the necessity to abide by the obligation not to pay until and after the rendering of a court decision obliging said payment and issued by the competent Lebanese judicial authority,
Whereas the foreign orders are not enforceable against the company and hence are not binding upon the company until they are granted exequatur by virtue of a decision given by the Lebanese courts,
Whereas it does not appear, as to date, that such decision has been rendered regarding any of the judgments issued by the English courts in spite of Mr Masri's application to the Lebanese courts to obtain orders granting exequatur,
Noting that Mr Masri has not made any opposition nor any request in the proceedings before this court,
To direct the Judicial Administrator not to take any step leading to the carrying out of the decisions issued by the foreign courts and request of Mr Munib Masri unless and until they are granted exequatur by the Lebanese courts, in particular in relation to any request for the disclosure of documents or the disclosure of confidential information relating to the company to Mr Masri, or the transfer of monies to the English receiver appointed by the English courts, or the cooperation with the latter through the provision of information and other steps."
The order under appeal
"…all oil and rights to oil to which CCOG is or may from time to time hereafter become entitled (including oil not yet allocated to CCOG) under the terms of the joint operating agreement (JOA) between the participants in the Masila Concession…"
"…to receive, take possession of, sell, deal with or otherwise dispose of all such oil, and to exercise all such rights to oil, in the name of and on behalf of CCOG…The receiver shall hold all such oil and any proceeds thereof to the credit of this action and to the order of the court."
"1. CCOG shall not receive or take for its own account, to the exclusion of the receiver, any Masila oil to which it is or has become entitled under the JOA and must not sell, encumber or otherwise deal with any such oil. In the event the CCOG obtains possession or control of any such oil, it shall immediately take steps to transfer the same to the receiver; and
2. CCOG shall not commence any proceedings, nor take any steps in the existing proceedings, in any jurisdiction in the world (other than in the European Union) the object or effect of which is to interfere with or obstruct the receivership, including by interfering with or obstructing the arbitration proceedings referred to at paragraph 4 below or any orders of this court in support of such proceedings including the order referred to at paragraph 5 below, and shall not procure that others do so
from the date hereof until such time as the receiver shall have confirmed that he has received oil (or the proceeds thereof) to the value [of the amount due to Mr Masri in respect of the judgment debt, interest and costs]."
"If [CCOG] disobeys this order, you, Edgard Elias Joujou, in your capacity as administrator of [CCOG] may be held to be in contempt of court and liable to imprisonment. This notice is given without prejudice to any representations you may make as to your capacity and position under Lebanese law and does not represent a determination of any such issues."
"The terms of this order will affect the following persons in a country or state outside the jurisdiction of this court:
the defendant or its officer or director or any other person acting (either alone or jointly with others) in the capacity of, or in place of, a decision making organ of the defendant. …"
Reasons for the order
1. The previous orders had not proved effective in enabling the receiver to collect CCOG's oil revenues because of CCOG's refusal to provide information identifying purchasers and its refusal to account to the receiver for revenues which it had received.
2. Mr Masri had not received any substantial sum in respect of the judgment debt. This was because of the judgment debtors' determined efforts to circumvent the various orders made by the court.
3. Part of the judgment debtors' strategy appeared to involve delaying execution long enough that they would have no significant assets left. Their business affairs were being deliberately run down. The Masila Concession is due to expire in December 2011.
4. An order of the court giving the receiver power to control the sales of oil in the name of CCOG (rather than merely collect the proceeds of sale) would have a reasonable prospect of enabling enforcement of the judgment debt, because COOG's rights in respect of the Masila Concession took the form of rights under a contract governed by English law, namely the JOA. That agreement contained an arbitration clause, and it would be for the arbitrators to decide whether CNPY was bound to recognise the right of the receiver to call for oil in the name of CCOG under the JOA and could give a valid receipt as against CCOG for oil delivered to the receiver on its behalf. However, the English court could authorise the receiver to bring the necessary arbitration proceedings and could in the meantime grant an asset preservation order preventing CNPY from lifting any oil to which CCOG was entitled under the terms of the JOA without the consent of the receiver. This mechanism (i.e. an order putting the receiver in control of the exercise of CCOG's contractual rights under the JOA, authorising the receivers to bring arbitration proceedings under the JOA in the name of CCOG and granting a freezing order against CNPY in the meantime) would be "an efficient and proportionate means of enforcing the judgment".
There has been no challenge on this appeal to the judge's conclusions in subparagraphs 1, 2 and 3 above. On the material before the court any such challenge would have been hopeless. Indeed, as noted in paragraph 25 above, the orders made by the Lebanese court on 4 October 2010 recited that the judgment debtors had deliberately decided not to pay the judgment debt prior to the orders placing them under judicial administration. The issue is whether in those circumstances it was right for the judge to make the order which she did.
1. The English court had no personal jurisdiction over the judicial administrators.
2. The judicial administrators were not properly to be regarded as officers or agents of the judgment debtors, but even if they were, the fact that the judgment debtors were subject to the English court's jurisdiction did not mean that its directors or officers were likewise so subject.
3. It was wrong for the court to seek to intervene in the operation of a contract between CCOG and a third party in relation to assets outside the jurisdiction by interposing the receiver to act as a manager in the name of CCOG.
4. It was wrong for the English court to direct orders at officers of the Lebanese court seeking to control their conduct outside the jurisdiction.
5. In particular, it was wrong for the English court to require the Lebanese judicial administrators to assist in the enforcement of judgments which the Lebanese court did not recognise as enforceable in the absence of an order of exequatur. This presented the judicial administrators with a choice whether to obey the orders of the English court or the Lebanese court which appointed them.
6. There was no possible gateway for service of contempt proceedings on the judicial administrators. It was therefore wrong to threaten them with contempt proceedings by a penal notice.
"In particular, this court is very mindful that it must not trespass on what are matters properly within the jurisdiction of the Lebanese court, or appear in any way to be dictating to, or interfering with, the powers of the Lebanese court in derogation from universal principles of comity."
"In making these comments, I am not suggesting either that the order appointing the judicial administrators by the Lebanese court was a sham, or that the order was one which the Lebanese court was not entitled to make, or should not have made. These are matters for the Lebanese court, with whose jurisdiction in relation to such matters I would not presume to interfere."
Discussion and conclusion
"Once the judicial administrator is in place, "the immediate consequence is that all the powers of the then-acting directors are removed so that all powers are transferred to the (judicial) administrator and therefore the original directors cannot engage the company, or initiate proceedings in its name or lodge any appeal".
Thus, it has been ruled that "the appointment of a judicial administrator with the task to manage the company…triggers the withdrawal/suspension [desseisissement] of the corporate organs that were in place until such a moment".
Such withdrawal/suspension of the existing corporate organs, and in particular of the directors of the company, is the "automatic consequence" of the appointment of the judicial administrators. Once a judicial administrator has been appointed, he is "the only one who has the power to represent the company in court and, more generally, to carry out any legal act on behalf of the company."
The judicial administrator "is a manager of the company who replaces the legal organs of direction of the company in the framework determined by the judge. In other words he is the legal representative of the company by virtue of a judicial decision"."
Lord Justice Rimer:
Lady Justice Arden:
In personam jurisdiction
"The Court does not, and cannot attempt by its order to put its own officer in possession of foreign property, but it treats as guilty of contempt any party to the action in which the order is made who prevents the necessary steps being taken to enable its officer to take possession according to the laws of the foreign country. See Keys v. Keys, where special directions were given to a receiver as to the best mode of getting in an Indian debt; and Smith v. Smith, where it was pointed out that a receiver of property in Jersey and in France would have to recover possession according to the laws of those countries; and in Houlditch v Marquis of Donegal the House of Lords held that the Court of Chancery in Ireland ought to appoint a receiver in a suit instituted to carry into effect a decree of the Court of Chancery in England by which a receiver had been appointed over estates in Ireland. In other words, the receiver is not put in possession of foreign property by the mere order of the Court. Something else has to be done, and until that has been done in accordance with the foreign law, any person, not a party to the suit, who takes proceedings in the foreign country is not guilty of a contempt either on the ground of interfering with the receiver's possession or otherwise."
"I will lay down the rule as broad as this: this Court will not permit him to avail himself of the law of any other country to do what would be gross injustice."
Status of the joint administrators appointed by the Lebanese court