England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/10/2011

MR JUSTICE CHRISTOPHER CLARKE:

1. On 5^th May of this year I delivered a judgment in which I found the judgment debtors, Consolidated Contractors International Co SAL, ("CCIC"), and Consolidated Contractors (Oil and Gas) Co SAL, ("CCOG"), guilty of a number of contempts of court.
2. A contempt is a breach of an order of the court whose terms are known to the contemnor, who also knows the facts which make his conduct a breach. The long history of these extraordinary proceedings, so far as they relate to the contempts, is set out in my judgment.
3. In very briefest outline, as long ago as 28^th July 2006, Mrs Justice Gloster gave judgment against the judgment debtors, which are Lebanese offshore companies. In that judgment she held that Mr Masri, the claimant, had a 10 per cent interest in the 10 per cent interest in the Masila oilfield, which was originally owned by CCIC and later assigned to CCOG.
4. On 15^th June 2007 Mrs Justice Gloster gave judgment for over $28 million against the judgment debtors in respect of the amount due to the 31^st December 2006, and ordered an interim payment of over $1 million in respect of the first quarter of 2007. Further payments have been ordered thereafter. As a result, the sum due including interest had, by the time of my judgment, exceeded $75 million and was rising.
5. The court has made a number of orders, including (i) the CCOG Receivership Order, (ii) the Affidavits Order and (iii) Freezing Order No 1, all made on 20^th December 2007 by Mrs Justice Gloster, and (iv) the Affidavits No 2 order of 19^th March 2008, made by Mr Justice Flaux, and (v) the CCIC Receivership Order and (vi) Freezing Orders Nos 2 and 4, all made on 21^st October 2008 by Mr Justice Tomlinson.
6. Until very recently, nothing had been paid towards the judgment debt. This was not for want of funds. The judgment debtors made it plain that they did not intend to pay and would resist any attempt to compel them to do so.
7. Their refusal to honour the judgments of this court was described by Mr Justice Rix as "determined and deliberate contempt". They have carried out their plan of resistance in several ways. On 14^th April 2008, Mrs Salwa Khoury and Mr Samir Sabbagh, acting at the behest of and with the cooperation of the judgment debtors, secured from Judge Riskallah in Beirut, blocking orders forbidding the production of information by CCOG and CCIC and others, in compliance with the orders of 20^th December 2007.
8. Thereafter on 20^th December 2008, Mr Chedid, the judgment debtor's lawyer, prevailed upon the Judge of Urgent Matters in Beirut to appoint Mr Edgard Joujou and two others to administer the companies. On 14^th January 2009, the same judge made an order in respect of CCOG and CCIC:

"To entrust Mr Edgard Joujou with the management of the company, with the assistance of Messrs Jihad Al Hajjar and Georges Zakhour, on the understanding that the tasks will be defined later provided that Mr Edgar 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."

9. On 21^st February 2009, pursuant to an application made by Mr Joujou, the Lebanese court issued further directions to the judicial administrators. One of them was:

"To approve instructing the judicial administrator, Mr Joujou, to supervise the pleading and defences in England provided that no binding decisions are to be taken before seeking directions from this court."

10. On 1^st June 2009, following an application by Mr Joujou, the judge instructed the judicial administrators to take all necessary actions and measures to defend the interests of the companies. On 4^th October 2010, the judge ordered the judicial administrators:

"Not to take any step leading to the carrying out of the decisions issued by the foreign courts at the request of Mr Munib Masri, unless and until they are granted executor by the Lebanese courts, in particular in relation to any requests 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."

11. In May I adjourned the question of sanction until a date to be fixed at the end of July or the beginning of August because, as I was informed, an application was to be made to the court in Beirut by the remaining judicial administrators, Mr Joujou having resigned, for directions as to whether they should cause the judgment debtors to purge their contempt and whether they should take any other steps in the light of my judgment and in particular paragraphs 430 and 431, where I suggested that there should be put before the Lebanese court a full explanation of the steps that had been taken to avoid enforcement and the consequence of that on the companies. When it was apparent that no decision would be available at or around the end of July, I adjourned the matter until today.
12. On 21^st June Judge Zouein ordered the payment into courted in the Lebanon of all oil revenues and appointed Mr Mounir Honein, Honorary First President of the Lebanese Court of Cassation, to advise him on whether it would be in the best interests of the companies to pay the judgment debts and purge their contempts. He has now reported to the court.
13. On 22^nd September I was informed by Mr Masri's solicitors that the judgment debt had now been satisfied, pursuant to the terms of a global settlement agreement of all disputes between them in all jurisdictions, the terms of which were confidential, that in Mr Masri's view the judgment debtors had now purged the contempts which I had found established and that, as a consequence, Mr Masri did not seek to make any further submissions in support of any sanctions which I might think it appropriate to impose and had agreed not to pursue the committal application against Mr Wael S Khoury, the third respondent to the contempt application brought by Mr Masri, who had been alleged to have instigated or participated in the relevant contempts.
14. I propose to grant Mr Masri permission to discontinue his application against Mr Khoury with no order as to costs.
15. There remains the question of what course I should take in respect of the contempts that I have found proved. Those contempts varied in seriousness. The most serious was the receipt by CCOG of the proceeds of a sale of oil from the Masila Concession made on 12^th March 2008 in the sum of $23,932,423, which was a substantial proportion of the then outstanding debt under the judgments then in force, contrary to the CCOG Receivership Order.
16. The next was the institution of proceedings in the Yemen calculated to put pressure on Mr Masri to abandon the receivership or to recover by way of damages sums equivalent to what the receiver might obtain.
17. Other contempts consisted of failures on the part of CCIC and CCOG to reveal information which this court had ordered to be provided, in the form of audited accounts or bank balances, all as part of a plan to avoid enforcement.
18. Lastly, there was a failure on the part of CCIC to provide information in relation to Contract Revenues and the receipt by CCIC of those revenues.
19. Not without some hesitation, I am persuaded that the right course in the events which have happened is to make no further order. I say that for a number of reasons. First, the primary but not the exclusive purpose of the court's contempt powers is to ensure that its orders are fulfilled. Another is to punish conduct in defiance of its orders.
20. The judgment debtors embarked upon a prolonged course of conduct with a view to ensuring that the orders of the court were not complied with. But the satisfaction of the judgment under a settlement acceptable to the claimants has substantially purged the contempts which were the subject of my judgment of 5^th May and the underlying contempt constituted by the non-payment of the judgment debt.
21. The receipt of monies contrary to the CCOG Receivership Order and the institution of the Yemeni proceedings lose much of their significance when settlement has been made and the Yemeni proceedings discontinued. Similar considerations arise in relation to the failure to provide information relevant to enforcement.
22. Some of the matters of contempt, such as the failure by CCOG to disclose its interest in the Nigerian and Alfurt companies and CCOG's failure to disclose the debts owed to it by those companies in rulings to preliminary and pre-operational expenses and the failure to disclose the existence of a Greek bank account were of very limited significance. So was CCIC's inaccurate information in respect of its interest in the BTC pipeline.
23. Second, whether or not to make an order is a matter for the Court. But it is relevant to take account that the claimant seeks no order and regards the judgment debt as satisfied and the contempts as purged. Since the terms of the settlement are confidential, I do not know whether this means that the entirety of the debt has been paid, but whether or not that is so, the matter has been determined to the claimant's satisfaction.
24. Third, the contempts that I have found were in some respects acts done in what was believed to be compliance with the orders of the Lebanese court. That was so in the case of the receipt of the sale proceeds, where Mr Chedid, the company's usual counsel, was of the view that the April 2008 orders prevented payment to the receiver, although the contempt consisted of the receipt and not the non-payment of the receiver.
25. It was also so in the case of failure to provide details of balances by CCOG and CCIC, in breach of freezing order number 2, and CCIC's failure to provide the information required by paragraph 7A and the confirmation required by paragraph 7B of the CCIC receivership order. The Yemeni proceedings were authorised by the Court of First Instance in Beirut. The force of this point is, in my judgment, reduced by the fact that the invocation of Lebanese jurisdiction and the judicial administration were part of a scheme to avoid payment of that which this court had ordered.
26. Fourth, whatever might have been the position if no settlement had been reached, it seems to me legitimate to take into account the undesirability of making orders which impose a penal sanction for that which a foreign court has, or is thought to have, authorised, particularly when any sanction in the form of a fine will in practice require the direction of the foreign court if any such fine is to be recovered.
27. Fifth, I have before me an apology from Mr Marina, the companies' in-house counsel.
28. In all those circumstances, which are unusual, it does not seem to me necessary to impose some penal sanction on the judgment debtors. Accordingly, the orders that I propose to make are these: firstly, to declare that the judgment debtors were guilty of the contempts of court set out in my judgment of 5^th May 2011; secondly, to record that the court has been informed that the judgment debt owed to the claimant by the judgment debtors has been satisfied, pursuant to the terms of the settlement agreement; thirdly, to make no order by way of sanction; and, fourthly, to give the claimant permission to discontinue his application against the third respondent with no order as to costs.