Sabbagh v Khoury & Ors, Court of Appeal - Civil Division, July 28, 2017, [2017] EWCA Civ 1120

Resolution Date:July 28, 2017
Issuing Organization:Civil Division
Actores:Sabbagh v Khoury & Ors
 
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Neutral Citation Number: [2017] EWCA Civ 1120

Case No: A3/2015/0188 and 0184

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

THE HON MRS JUSTICE CARR

[2014] EWHC 3233 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 28/07/2017

Before :

LADY JUSTICE GLOSTER

Vice President of the Court of Appeal, Civil Division

LORD JUSTICE PATTEN

and

LORD JUSTICE BEATSON

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Between :

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Mr Laurence Rabinowitz QC, Mr John Wardell QC, Mr Anthony Peto QC, Mr Simon Colton, Mr James Walmsley and Mr Peter Head (instructed by Mishcon de Reya LLP) for the Claimant

Mr Andrew Hunter QC and Mr Andrew Scott (instructed by Jones Day) for the 1st Defendant

Mr Philip Edey QC and Mr Andrew Fulton (instructed by Baker and McKenzie LLP) appeared for the 2nd, 3rd, 4th, 8th and 9th Defendants

Mr Alexander Layton QC and Ms Jessica Hughes (instructed by Olswang LLP) appeared for the 5th, 6th, 7th and 10th Defendants

Hearing dates : 6-10 February 2017

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Lady Justice Gloster, Lord Justice Patten and Lord Justice Beatson:

1. Subject to one point, this is the judgment of the Court to which we have all contributed. As will be seen below, we disagree about the jurisdictional test under Article 6 (1) of the Brussels Regulation, which, in the event, given our agreed determination of the other issues, does not affect the outcome of the appeal. While conscious of the disadvantages of adding to the obiter statements on the topic, as we heard full argument on it, we set out our conclusions. Accordingly, the majority views of Patten and Beatson LJJ on this point are set out at paragraphs 32 to 72 below, and the minority view of Gloster LJ is set out at paragraphs 166 to 22 below.

Introduction

2. These appeals raise a number of jurisdictional and other issues which will determine whether these proceedings are properly justiciable in England. The claimant, Ms Sana Hassib Sabbagh (``Sana'' or ``the claimant''), is the only daughter of the late Mr Hassib Sabbagh (``Hassib'') who died intestate on 12 January 2010. It is common ground that along with her two younger brothers, Mr Samir Hassib Sabbagh (``Samir'') and Mr Suheil Hassib Sabbagh (``Suheil''), she is one of her father's heirs under Lebanese law and is entitled to one-third of his estate at the time of his death. On 21 April 2010 the Lebanese Court made a declaration to that effect. Samir and Suheil are the fifth and sixth defendants.

3. Along with the late Mr Said Toufic Khoury (``Said''), Hassib, a Palestinian, founded what became the Consolidated Contractors Company group of companies (``the CCC group'') in 1950. The CCC group was subsequently re-established in Lebanon. The CCC group is referred to in its literature and in a number of documents relevant to the appeals as ``CCC'' but it has no corporate identity in its own right. Since its incorporation in 1984 the holding and ultimate parent company in the CCC group has been Consolidated Contractors Group SAL (``CCG''), the eighth defendant. Another company in the CCC group, Consolidated Contractors International Company (SAL) Offshore (``CCIC''), is the ninth defendant.

4. The CCC group is the largest group of engineering and construction companies in the Middle East and the evidence is that it is valued in the sum of at least US$5 billion. All of the companies in the CCC group were incorporated in Lebanon.

5. The first defendant, Mr Wael Said Khoury (``Wael''), is the non-executive chairman of CCG. His two brothers, Mr Samer Said Khoury (``Samer'') and Mr Toufic Said Khoury (``Toufic''), the third and fourth defendants, are directors of CCG together with all the other individual defendants except Samir. Wael, Samer and Toufic are the three sons of Said and are cousins of Sana. The seventh defendant, Mr Wahbe Abdallah Tamari (``Wahbe''), is another cousin.

6. The tenth defendant, Hassib Holding SAL (``HH''), is a Lebanese company owned and controlled by Samir and Suheil of which they, together with Samer and Wahbe, are the directors.

7. On 29 June 2002 Hassib suffered a severe stroke which incapacitated him for the rest of his life and, it is alleged, rendered him unable to make any business decisions or to manage his own affairs. In proceedings issued in the High Court on 9 July 2013 Sana alleged that the principal defendants conspired from a date shortly after Hassib's stroke to misappropriate assets belonging to Hassib and that since his death in 2010 they have also conspired to deprive her of her entitlement to the shares in CCG which she claims belonged to Hassib at the date of his death. These two claims have been labelled the asset misappropriation claim and the share deprivation claim and, for convenience, we shall adopt the same terminology.

8. The asset misappropriation claim relates for the most part to dividends from Hassib's shares in CCG which were used either to make investments in other companies and property or to meet expenses such as the running costs of an aircraft. It is not in dispute that before his stroke Hassib used and authorised CCIC to pay family expenses and charitable donations out of his income from dividends and other investments. But the allegation is that, following Hassib's stroke, accumulated dividends and other income were used knowingly by the defendants (other than Wahbe and HH) to make improper or unauthorised investments in their own names and that, when sold, the proceeds of sale from these investments were not accounted for or applied for the benefit of Hassib. To the extent that they would otherwise have formed part of Hassib's estate on death, Sana seeks damages for conspiracy based on the value of the misappropriated assets.

9. The share deprivation claim depends upon Hassib having retained ownership of shares in CCG at the date of his death. Sana relies on a confirmation by the Commercial Registry in Beirut (``the Commercial Registry'') dated 16 January 2010 that its register contained an entry which records that, as at 10 May 2009, Hassib continued to hold 399,915 shares in CCG. She alleges that following her father's death, the defendants conspired to deprive her of her entitlement under Lebanese law to a third of this shareholding by unlawfully procuring the transfer of the shares to HH.

10. The defendants accept that HH is now the registered holder of 399,915 shares in CCG following general meetings of the members of CCG held in July 2010 which confirmed HH as the holder of the shares. But their case is that there was no unlawful conspiracy and that the shares now held by HH are derived from transfers of shares in CCG which Hassib made prior to his death (and prior to his stroke) in favour of Sana, Samir and Suheil. We will come to the detail of this later in the judgment but it is now common ground that by three share transfer agreements made in 1993 (``the 1993 Agreements'') Hassib agreed to transfer to his children 199,960 of his then holding of 199,970 shares in CCG subject to the retention by him of a usufruct in the shares for his life. Sana became entitled to receive 20,000 shares (for a stated consideration of US$1,333,333) and Samir and Suheil each became entitled to receive 89,980 shares at a price of US$6m. In September 1993 Hassib agreed to transfer 2 more of his remaining shares in CCG to each of his sons leaving him with only 6 shares.

11. Further agreements were entered into in 1995 between Hassib and his children and between Sana and her two brothers, the cumulative result of which (after taking into account increases in the share capital of CCG) was that Sana became entitled to 100,000 shares and Samir and Suheil to 199,960 and 199,961 shares respectively. Then in 1998 Sana transferred her entire holding of 100,000 shares back to Hassib who in turn transferred them to CCIC. His remaining 3 shares in CCG were transferred to Suheil. If this sequence of agreements was effective to pass ownership of the shares and any necessary corporate formalities were complied with, the net result of the agreements and transfers executed between 1993 and 1998 was that Hassib had ceased to own any shares in CCG but had retained his usufruct rights over 399,915 shares. By an agreement dated 16 July 2006 (but whose date is in issue) Samir and Suheil transferred 399,915 shares to HH subject to Hassib's usufruct. CCIC retained the shares it had acquired in April 1998.

12. Sana's original position was that the family agreements made between 1993 and 1998 were artificial or sham transactions with no legal effect. But she no longer disputes the existence, validity or effectiveness of the agreements as such. Her case now is that, as a matter of Lebanese law, the agreements fall to be treated as gifts rather than agreements to sell which would continue to bind Hassib (and his heirs) even after his death. As gifts they would lapse on death unless completed as transfers before then. She says that the agreements were ineffective to divest Hassib of ownership of the shares which were later transferred to HH because the formalities of board approval, registration and reissuing of the shares required under Lebanese law and the articles of association in relation to the earlier agreements were not complied with. It is not disputed that Sana received US$50m at the time she agreed in 1998 to give up her shareholding in CCG. But she disputes that the money (or at least all of it) was paid as consideration for her shares.

13. Of the various defendants to the claim only Wael is domiciled within the jurisdiction. He resides in London. The other individual defendants are or, in the case of Said, were before death all domiciled abroad: Said, Samer, Toufic, Samir and Suheil in Greece; and Wahbe in Switzerland. The corporate defendants are all incorporated in Lebanon...

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