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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sabbagh v Khoury & Ors  EWCA Civ 1219 (12 July 2019)
Cite as:  EWCA Civ 1219
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
THE BUSINESS AND PROPERTY COURT OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
THE HON MR JUSTICE ROBIN KNOWLES
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE HADDON-CAVE
SIR TIMOTHY LLOYD
| SANA HASSIB SABBAGH
|- and -
|(1) WAEL SAID KHOURY
(2) SAID TOUFIC KHOURY (deceased)
(3) SAMER SAID KHOURY
(4) TOUFIC SAID KHOURY
(5) SAMIR HASSIB SABBAGH
(6) SUHEIL HASSIB SABBAGH
(7) WAHBE ABDULLAH TAMARI
(8) CONSOLIDATED CONTRACTORS GROUP SAL (HOLDING COMPANY)
(a company incorporated in the Lebanon)
(9) CONSOLIDATED CONTRACTORS INTERNATIONAL COMPANY SAL (OFFSHORE)
(a company incorporated in the Lebanon)
(10) HASSIB HOLDING SAL
(a company incorporated in the Lebanon)
John Wardell QC, Simon Colton QC and James Walmsley (instructed by Mishcon de Reya LLP) for the Respondent
The remaining Defendants (none of whom was an Appellant) did not appear and were not represented
Hearing dates: 20 and 21 March 2019
Crown Copyright ©
Lord Justice David Richards:
The proceedings and the parties
"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."
The judgment under appeal
"28. Mr Edey QC argued that the injunction sought would leave unresolved "the question of who are the rightful shareholders in CCG". However that is not an issue between the Arbitration Claimants and Sana because Sana is not claiming a right to be a shareholder, and this was made clear to the Court of Appeal. The question identified by Mr Edey QC cannot therefore be a reason for the Lebanese Arbitration.
29. Thus the parties did not agree to arbitration in respect of the two claims. The reasoning of the Court of Appeal shows why a conclusion of the tribunal in the Lebanese Arbitration that it has jurisdiction is wrong. The Arbitration Claimants do not accept that, but they should. They have deployed their argument about Article 45 and it has been shown to fail."
The grounds of appeal
"1. The Learned Judge erred in law in that the grant of an injunction restraining the Appellants' pursuit of its claims in a Lebanese-seated arbitration was not an Order which the Court had power to make, having regard to the scheme of the Arbitration Act 1996 and the UK's treaty obligations under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (a fortiori where, as here, one of those claims was a claim which indisputably fell to be arbitrated); alternatively which it could ever in principle be a proper exercise of the Court's discretion to make.
2. Further, or alternatively, the learned Judge erred in law in that after (apparently) accepting (as he was right, as a matter of clear authority, to accept) that it was a precondition to the injunctive relief sought that England be the "natural forum" for the litigation, he then misinterpreted and/or misapplied the concept of natural forum, wrongly regarding it as sufficient merely that the English Court had jurisdiction over the claim and the Appellants. Had the Learned Judge correctly applied the test, he would have had to conclude that England was not the "natural forum" for the litigation and as a result the Court either could or should not grant the anti-arbitration injunction."
The arbitration claims
"Similarly, we are inclined to accept that Sana is not claiming an entitlement to be recognised as a shareholder, but rather is claiming that the defendants have deprived her of this entitlement. The relationship is tripartite: whilst Hassib would have been bound to arbitrate an assertion that he was entitled to be recognised as shareholder, as against the defendants, this cannot bind Sana to arbitrate her claim even if her claim depends in part on the question of Hassib's ownership, since she does not claim on Hassib's behalf."
Jurisdiction to grant an injunction restraining a foreign arbitration
"97. Where there is an application to stay proceedings under section 9 of the 1996 Act, both in international and domestic cases, the court will determine the issue of whether there ever was an agreement to arbitrate: see…Albon (trading as NA Carriage Co) v Naza Motor trading Sdn Bhd (No 4)  1 Lloyd's Rep 1 (Malaysian arbitration). So also where an injunction was refused restraining an arbitrator from ruling on his own jurisdiction in a Geneva arbitration, the Court of Appeal recognised that the arbitrator could consider the question of his own jurisdiction, but that would only be a first step in determining that question, whether the subsequent steps took place in Switzerland or in England: see Weissfisch v Julius  1 Lloyd's Rep 716, para 32.
98. Consequently, in an international commercial arbitration a party which objects to the jurisdiction of the tribunal has two options. It can challenge the tribunal's jurisdiction in the courts of the arbitral seat: and it can resist enforcement in the court before which the award is brought for recognition and enforcement."
"The provisions of this Part are founded on the following principles, and shall be construed accordingly –
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part."
"We have formed the view that there are cogent reasons why we should not at this stage restrain Mr Julius by injunction from holding a hearing to consider his own jurisdiction. These essentially mirror the conclusions of Steel J. They are:
(i) Amir and Rami, each of whom was receiving independent legal advice, expressly agreed that their disputes should be resolved by Mr Julius under arbitration which would be governed by Swiss law and have its seat in Switzerland.
(ii) The natural consequence of this agreement was that any issues as to the validity of the unusual provisions of the arbitration clauses would fall to be resolved in Switzerland according to Swiss law.
(iii) This consequence accords with principles of the law of international arbitration agreed under the New York Convention recognised by this country by the 1966 Act.
(iv) For the English court to restrain an arbitrator under an agreement providing for arbitration with its seat in a foreign jurisdiction to which the parties unquestionably agreed would infringe those principles.
(v) Exceptional circumstances may, nonetheless, justify the English court in taking such action. Whether such circumstances exist will be a matter to be resolved by Colman J and nothing in those reasons is intended to influence his decision in that regard.
(vi) No special circumstances have been shown which justify taking such action on an interim basis, pending the hearing before Colman J." (emphasis added)
"In many of the cases which concern whether an anti-arbitration injunction should be granted there is an issue as to whether there is any or any valid arbitration agreement. One can well understand why it would generally be appropriate for that issue to be left in the first instance to be determined by the arbitration tribunal. Here, however, not only has it already been decided by this court that there is no such agreement, but this court has also held there is a governing English exclusive jurisdiction clause."
Will the court grant an anti-arbitration injunction where the dispute falls within the arbitration agreement?
Is it a pre-condition for the grant of an anti-arbitration injunction that England is the natural forum?
"I approach the matter as follows. As a general rule, before an anti-suit injunction can properly be granted by an English court to restrain a person from pursuing proceedings in a foreign jurisdiction in cases of the kind under consideration in the present case, comity requires that the English forum should have a sufficient interest in, or connection with, the matter in question to justify the indirect interference with the foreign court which an anti-suit injunction entails.
In an alternative forum case, this will involve consideration of the question whether the English court is the natural forum for the resolution of the dispute."
Lord Justice Haddon-Cave:
Sir Timothy Lloyd: