Masri v Consolidated Contractors Group SAL & Ors

This is an appeal from part of an order made by Cresswell J on 17 May 2005. By paragraph 3 of that order, the judge dismissed applications by the defendants in claim no 2004 Folio 831 for declarations that the court had no jurisdiction to entertain the claimant's claim against them and in each case for an order setting aside service of the claim form. Permission to appeal was refused by the judge but subsequently granted by Waller LJ.

The applications arose in this way. The claimant, Mr Masri, claims damages against Mr Said Khoury and four companies in all of which Mr Khoury has a direct or indirect interest. They are Consolidated Contractors International UK Limited, ("CCUK"); Consolidated Contractors Group SAL ("CC Holding"); Consolidated Contractors International Company ("CCIC") and Consolidated Contractors (Oil and Gas) ("CC Oil and Gas").

The claim against Mr Khoury and the four companies is the same, namely damages for breach of a written contract which was dated 6 November 1992 and was made in London. I shall describe the claim as the claim for damages because that is how it is pleaded. However it may be that on analysis it is a claim in debt for sums due under a contract.

As at 6 November 1992 Mr Masri was resident in London where he had lived since 1982. He moved to Jordan in about 1993 or 1994 and has been resident there every since. Mr Khoury is President of CCIC and CC Holding and is domiciled in Greece. CC Holding is simply a holding company and is incorporated in Lebanon. CCIC is also incorporated in Lebanon and is a subsidiary of CC Holding. It has its principal place of business in Greece. CCUK is indirectly a subsidiary of CC Holding, and CC Oil and Gas is a direct subsidiary of CC Holding. They are incorporated in England and the Lebanon respectively.

As summarised by the judge, the position under the 1992 agreement is briefly as follows. The agreement relates to rights in an oil field in South Yemen known as the Masila block or Masila concession ("the concession"). The relevant oil interest, a 10% interest in the concession, was initially held by CCIC. It was agreed to be assigned to CC Oil and Gas by an assignment dated 25 October 1992. The defendants contend that CCIC still held the interest at the time of the 1992 agreement because the assignment had not then taken effect. Mr Masri contends that the assignment was effected on 25 October 1992 so that by the time of the November 1992 agreement the relevant interest had passed to CC Oil and Gas. The interest is currently held by CC Oil and Gas. I will return to the 1992 agreement in a moment.

In the first action (2004 Folio 124) Mr Masri claimed against CCUK, alternatively CC Holding. Mr Masri has discontinued the claim in the first action against CC Holding. In the second action (2004 Folio 831) Mr Masri claims in the alternative against Mr Khoury, CC Holding, CCIC and CC Oil and Gas.

The first action was commenced by claim form dated 18 February 2004 and the second action was commenced by claim form dated 8 October 2004. The claim form in the first action was served on CCUK in England and on CC Holding by serving it in England on CCUK as its agent, pursuant to CPR 6.16. The claim form in the second action was served on Mr Khoury and CCIC in Greece, where they were both domiciled. It was served without permission, pursuant to Council Regulation EC44/2001 ("the Regulation"). It contained this standard endorsement:

The claim form was also served on CC Holding and CC Oil and Gas in Lebanon, pursuant to permission to serve out of the jurisdiction which was granted on an application made without notice under CPR 6.20. CCUK sought summary judgment in the first action on the ground that there was no prospect of a finding that CCUK was a party to the 1992 agreement. The judge dismissed that application in paragraph 2 of his order of 17 May 2005. Permission to appeal was refused by Waller LJ on paper and by Moore-Bick LJ after oral argument. As a result, the claim against CCUK is proceeding in England.

In the second action Mr Khoury and CCIC submitted that Mr Masri must proceed against them in their place of domicile, namely Greece, under Article 2 of the Regulation. Mr Masri submitted that he was entitled to proceed against them by reason of Article 6.1 or 5.1 of the Regulation. The judge accepted Mr Masri's submissions and accordingly dismissed the applications made by Mr Khoury and CCIC.

The positions of CC Holding and CC Oil and Gas were somewhat different because they are not domiciled in a state to which the Regulation applies. In those cases, the issues were whether there was a serious issue to be tried as between Mr Masri and CC Holding and/or CC Oil and Gas, and whether Mr Masri was able to establish that England was clearly the appropriate forum for the trial of any claim against them.

In the light of his conclusions on CCUK's application for summary judgment and on the applications by Mr Khoury and CCIC based upon Article 2 of the Regulation, the judge refused the applications of CC Holding and CC Oil and Gas. Having dismissed all the applications, the judge ordered the consolidation of the actions with the result that, subject to the result of this appeal, Mr Masri's claims against all the defendants will proceed in one action which, unless settled, will, as I understand it, be tried next year.

The principal issues in this appeal are whether the judge was correct to hold that Mr Masri was entitled to proceed in England against Mr Khoury and CCIC under Article 6.1 or 5.1 of the Regulation. If the appeals succeed, so that any claims against Mr Khoury and CCIC should proceed in Greece, CC Holding and CC Oil and Gas say that, as a matter of forum conveniens so too should the claims against them.

The Regulation replaced the Brussels Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters 1968 (as amended) ("the Brussels Convention"). It reproduced many of the provisions of the Convention but for some reason gave them different numbers. So far as relevant for present purposes, the Regulation provides as follows:

Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of the member State.

Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter.

(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;

for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:

if subparagraph (b) does not apply then subparagraph (a) applies;

where he is one of a number of defendants, in the court for the place where any one of them is domiciled provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;

as a third party in an action on a warranty or guarantee or in any other third party proceedings, in the seised of the original proceedings, unless these were instituted solely with the object of removing him from the jurisdiction of the court which would be competent in his case;

on a counter-claim arising from the same contract or facts on which the original claim was based, in the court in which the original claim is pending;

in matters relating to a contract, if the action may be combined with an action against the same defendant in matters relating to rights in rem in immovable property, in the court of the Member State in which the property is situated.

Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.

Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and it law permits the consolidation thereof.

For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

Article 2 is the principal provision and applies unless the claimant can bring himself within one of the exceptions in section 2 of the Regulation. In Briggs, Civil Jurisdiction and Judgments, 4th edition (most recently published in 2005) the editors say at paragraph 2.05 that in recent years the European Court of Justice has stressed that those provisions which allow a defendant to be sued against his will in a Member State other than that of his domicile are to be construed narrowly. They point to a number of cases collated in note 44 which relate to Article 22 and to Article 5 of the Brussels Convention. In other words they say that the right of a defendant to defend himself at home is the fundamental principle of civil or commercial jurisdiction to which other jurisdictional rules are to be seen as exceptions to be given no wider an interpretation than is necessary to achieve the purposes of the Regulation. The party seeking to rely upon a particular exception (here Mr Masri) bears the burden of establishing a good arguable case that it applies.

As Waller LJ, with whom Nourse LJ agreed, observed in Canada Trust Company v Stolzenberg (No 2) [1998] 1 WLR 547 at 555, the concept "good arguable case" has a certain flexibility and in the context of Article 6 involves showing that the claimant has a much better argument on the material available. However, he made it clear at page 558E-F that that is a lower threshold or test than proof on a balance of probabilities. Those passages were expressly approved by Lord Steyn in the House of Lords in the same case (see [2002] 1 AC 1 at 13).

The judge held that Mr Masri was entitled to sue Mr Khoury and CCIC in England because he is one of a number of defendants in England where one of them, namely CCUK, is domiciled, and his claims against Mr Khoury and CCIC are so closely connected with his claim against CCUK that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

It is not, as I understand it, in dispute that the claims against CCUK and against Mr Khoury and CCIC are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments. Indeed, to my mind, that could scarcely be in dispute. The substantive claim in each case is the same. It is a claim for damages for an alleged breach of the November 1992 agreement. The only difference between the claims is the identity of the party or parties to the agreement other than Mr Masri.

The agreement contains some curiosities. It is written on CCUK notepaper and is signed only by Mr Khoury and Mr Masri. Neither signature is qualified. In particular, it is not stated on the document that Mr Khoury was signing it on behalf of any particular entity. The agreement is in the form of a memorandum from Mr Khoury to Mr Masri, and reads as follows:

Masri is to pay 10% of Masila Block Development costs which are paid by CCC.

Masri is to pay 10% of Masila operating costs assessed to CCC.

Masri to pay 10% of CCC's internal costs for Management and administration of Masila Block Exploration and Development.

Masri shall pay 10% of CCC's share of Bonus and Training payments required under the Production Sharing Agreement (PSA) under the PSA.

10% of CCC's share of Contractor oil entitlements under the PSA.

10% of Development Cost Recovery received by CCC.

operating Expenses.

Exploration Expenses.

Development Expenses."

The judge set out the background to the agreement in paragraphs 11-21 of his judgment. I need not, however, repeat that account here for the purposes of resolving the issues in this appeal. It is sufficient to note that Mr Masri's primary case is that the parties to the agreement were Mr Masri himself and CCUK. He says that the expression "CCC" in the agreement is not a reference to CCIC, but to the group; and that it should be inferred that Mr Khoury signed the agreement on behalf of CCUK, the agreement not being a transfer of an interest in the concession to Mr Masri but a promise to pay income derived from it. The appellants say that the reference to the CCC are references to CCIC and that Mr Khoury made the agreement on behalf of CCIC, which was the entity which owned a share in the concession. Mr Masri says that that is not so because CCIC had assigned its interest in the concession to CC Oil and Gas by an assignment dated 25 October 1992. As I indicated earlier, the appellants say that that assignment did not take effect until February 1993 at the earliest, which was of course after the November agreement.

As already indicated, the judge held that there was a serious issue to be tried as between Mr Masri and CCUK as to whether CCUK was the other party to the agreement. In case it is held that, as CCUK contends, CCUK was not the other party to the agreement, Mr Masri says in the alternative that it was one of the other companies in the group, viz CC Holding, CCIC or CC Oil and Gas, or indeed Mr Khoury himself, given he did not expressly sign the agreement on behalf of another entity.

It can thus be seen that there is a real issue between Mr Masri on the one hand and each of the appellants on the other as to who was the other party to the agreement. If Mr Masri's claims against CCUK on the one hand and the appellants on the other hand were to be tried in different courts, there would be a risk of irreconcilable judgments. He might fail against CCUK in England and against the other appellants in, say, Greece. It follows that it is expedient to hear the claims together in the same action.

I should note in passing that, as Mr Aldous explained, whoever the party to the 1992 agreement was, that party asserts a number of potential defences on the merits. They are, however, common to almost all Mr Masri's claims so that they are not relevant for present purposes.

The order of the judge has achieved the result that the claims will be heard together in the same action by holding that Mr Masri was entitled to sue the appellants in England under Article 6 of the Regulation and by ordering that the English actions be consolidated and tried together. The appellants submit that he was wrong to hold that Article 6 is applicable in the circumstances of this case for one simple reason. They say that on its proper construction Article 6.1 applies only where the relevant defendant is a defendant in the same set of proceedings as a defendant domiciled in England (my emphasis).

It will be recalled that Article 6.1 reads:

The appellants construe the reference to "one of a number of defendants" in the first part of Article 6.1 as meaning "where he is one of a number of defendants in one action". They also construe the reference to "claims" in the proviso as "claims in the action in which another defendant is domiciled in the Member State in which the proceedings were commenced", which here was of course England. They contrast the reference to "the claims" in Article 6.1 with the reference to the action in Article 6.4.

The respondent says on the other hand that there is no support in either the language of Article 6.1 or the policy or purpose of the article as identified in the case law for such a construction. In short, he says that the reference to "the defendants" is wide enough to include both defendants in one action and defendants in more than one action. He says the same of the reference to "the claims", namely that the reference to the claims is wide enough to encompass claims in more than one action.

The judge preferred the respondent's submissions. In my opinion he was right to do so when regard is had both to the language and to the underlying purpose of the Article. So far as I am aware the construction of Article 6.1 suggested by the appellants has not previously been suggested in the case law. The only case in which the European Court of Justice has considered Article 6 in this context is Kalfelis v Bankhaus Schröder Münchmeyer Hengst and Co [1988] ECR 5587, where the court considered Article 6 of the Brussels Convention, which was the predecessor to Article 6 of the Regulation. Article 6.1 of the Convention reads:

In considering Kalfelis v Schröder it is right to have regard to the fact that the question for decision arose in a case where there was only one action and not, as here, two actions. The European Court was not therefore specifically considering the question for decision here. It was, however, considering the policy underlying Article 6.1. As Advocate General Darmon observed at page 5573 of the report of Kalfelis v Schröder, the court was asked whether Article 6.1 applies whenever the claims are similar in fact and in law or only where that course is necessary to avoid irreconcilable judgments in separate proceedings. The Advocate General said this, in paragraph 12 of his opinion at page 5575:

The court agreed. It said this, in paragraphs 8-13 of its judgment:

It is true that the point now taken did not arise in that case. But it seems to me that if, as the Advocate General said, in my opinion correctly, the ratio legis is the prevention of irreconcilable judgments, the appellants' submissions, if correct, would be contrary to that ratio legis and should therefore be rejected. That is so, to my mind, however narrowly Article 6.1 is construed.

Thus, if the construction preferred by the judge is adopted there is, in the words of paragraph 8 of the European Court's judgment, no possibility of the very existence of the principles enshrined in Article 2 being called into question. As to paragraph 9, there is no suggestion here that the action against CCUK was brought with the sole object of ousting the jurisdiction of the courts in Greece. The judge's construction is consistent with the positive principles stated in paragraphs 9 and 11-13 of the judgment.

It should be noted that the Advocate General's conclusion is supported by recitals 12 and 15 of the Regulation, which are in these terms:

As to the language of Article 6.1, I prefer the submissions of the respondent to those of the appellants. It seems to me that the word "defendants" and the word "claims" are indeed wide enough to encompass defendants and claims in more than one action. The judge went a little further. In paragraph 91 of his judgment he quoted the bulk of paragraphs 11 and 12 of the judgment of the European Court of Justice and in his quotation of paragraph 12 he underlined part of his sentence as follows."

I cannot see anything in Article 6.1 to support the appellants' submissions. The appellants and CCUK are all defendants in the courts for the place where one of them is domiciled because CCUK is domiciled in England and all the appellants are defendants in English proceeding. The fact that those proceedings are not the same proceedings is, to my mind, irrelevant.

Whether Article 6.1 is construed literally, or whether, as it should be, it is construed in its context and having regard to its purpose, or, as the Advocate General put it, to its ratio legis, for my part I would accept the submission made in the respondent's skeleton argument that how actions are initiated, constituted and prosecuted is a matter for national procedure and does not bear upon the operation of the principles underlying the Regulation. In the instant case, although two actions were begun, once it became clear that the issues in the actions were closely related, as explained earlier, there was no doubt that they would be consolidated.

In the course of his submission Mr Carr has placed some reliance upon Article 28 but, for my part, I do not rest my conclusions on any analysis or comparison between this case and that Article.

It was submitted by Mr Aldous on behalf the appellants that the judge's decision is contrary to the principle of certainty which lies behind the Convention. In that regard, our attention was drawn to the speech of Lord Steyn in CanadaTrust Company, where he said at page 1362G-H:

Our attention was also drawn to the decision of the European Court of Justice in Owusu v Jackson [2005] 2 WLR 924, where the Court said this, at paragraph 40:

Mr Aldous submits that the position must be certain when the proceedings are served and that that will not be so unless Article 6.1 is construed as referring to only one set of proceedings.

For my part I would not accept that submission. In this case, for example, Mr Masri was entitled to bring proceedings against CCUK in respect of the claim which the court has held has a real prospect of success. A normally well-informed defendant in the position of any of the defendants could reasonably foresee that Mr Masri would, or might, do so; and that if he did and if, as in fact occurred, CCUK argued that it was not a party to the 1992 agreement, Mr Masri would have proceeded against one or more of the appellants in England in order to avoid the risk of irreconcilable judgments, as indeed he did.

Mr Aldous submits that that may be so on the facts of this case but may not be the case in other circumstances and that the Convention should be construed so that it is certain for all. However, it appears to me that in very nearly all of the circumstances which are likely to arise a defendant with all the relevant knowledge that he would be likely to have would be able reasonably to foresee the basis upon which he would be sued and where he would be sued. It seems to me that, save perhaps in an exceptional case, he would be likely to know precisely the basis upon which the jurisdiction of the particular court was invoked. If in any case he did not, he would of course have only to ask. I foresee no difficulty or uncertainty about that.

In all the circumstances, and principally because of the underlying purpose of Article 6 identified in Kalfelis vSchröder, I would hold that the judge was correct to hold that the court had jurisdiction to entertain Mr Masri's claim under Article 6.1 of the Regulation. It follows that I would dismiss the appeals of Mr Khoury and CCIC. As to CC Holding and CC Oil and Gas it is not, as I understand it, suggested that their appeals can succeed if those of Mr Khoury and CCIC do not. It follows that I would dismiss all the appeals.

This conclusion makes it unnecessary for this court to decide whether the judge was correct to hold that the court also had jurisdiction under Article 5.1. I can see that significant problems potentially arise under Article 5.1, but, having formed no final conclusion upon them, it would be wrong to say anything more about Article 5.1, especially in circumstances in which we did not hear oral argument on the point.

LORD JUSTICE RIX: I agree.

LORD JUSTICE RICHARDS: I also agree.