Masri v Consolidated Contractors (Oil and Gas) Company Sal

This is an appeal from an order dated 12^th June 2008 of David Steel J. in which he granted declaratory relief as to the proper construction of paragraph 15 of a Receivership Order (“the Order”) made by Gloster J on 20^th December 2007.

The procedural history of the dispute between the Appellant and the Respondent is lengthy and complex. Events prior to the Order are set out in detail in three judgments of Gloster J., the first dealing with liability [2006] EWCH 1931 (Comm), the second dealing with quantum [2007] EWHC 468 (Comm) and the third dealing with various post-judgments orders, including the Order [2007] EWHC 3010 (Comm). The Respondent’s appeal against the last of these judgments was dismissed by the Court of Appeal on 4^th April 2008 [2008] EWCA Civ. 303. Events after the judgment of David Steel J. are set out in detail in a judgment of Tomlinson J dated 21^st October 2008 [2008] EWHC 2492 (Comm) in which he decided to make a further Receivership Order against the Respondent’s co-Defendant. Permission to appeal against that, and other, orders made by Tomlinson J. was refused on 13^th November 2008 [2008] EWCA Civ.1367.

For present purposes, the background to the making of the Order is conveniently summarised in paragraphs 2 – 8 of the judgment of David Steel J:

“2.

……..CCOG and its co-Defendant Consolidated Contractors International Company SAL (“CCIC”) are judgment debtors in default of orders to pay a sum in excess of $63 million to the claimant, Mr. Masri.

3.

The trial on liability took place in March and April 2006 before Gloster J. Judgment was handed down on 28 July 2006. Thereafter the Defendants were ordered to make a part payment of $30 million by 16 May 2007 against the provision of a bank guarantee by Mr. Masri. No such payment was made.

4.

On 6 July 2007, Master Miller made orders under CPR 71 requiring Toufiq Said Khoury (then a director of CCIC) and Samer Said Khoury (then a director of Consolidated Contractors Group SAL (Holding Company), a corporate director of CCOG) to attend court in England for examination as to the assets of CCOG and CCIC. Toufiq and Samer Khoury applied to set aside the orders on 13 September 2007.

5.

On 1 October 2007 Mr. Masri issued applications for appointment of a receiver and for an affidavit of means. These orders (together with a freezing order) were duly made on 20 December 2007. The same day Master Miller set aside the CPR 71 orders for want of jurisdiction.

6.

In the meantime, on 15 November Ms. Salwa Khoury, the daughter of Said Khoury made an application to the Court of First Instance in Beirut Case No. 1168/2007. She did so in her capacity as a shareholder of CCOG. The application was for an order restraining her brother from complying with the CPR 71 order. An order to this effect was made on 10 January 2008.

7.

The background to the present application was an expert report on Lebanese law furnished to CCOG and deployed before Gloster J in regard to the application for a receivership. The thrust of this evidence was to the effect that a UK judgment or order would only receive recognition in Lebanon pursuant to an “exequatur” procedure. Further, absent an exequatur, a director’s liability would be engaged if any response to a foreign court’s order for information is made.

8.

Gloster J commented as follows in her judgment [2008] 1 All ER 305:

“136.

Nothing in the expert evidence as to Lebanese law, produced by the Defendants after the hearing, suggests that (absent insolvency or impending insolvency) a director of a judgment debtor would be in breach of his duty to that company in procuring it to comply with its obligations under the judgment or other orders of a foreign court that satisfied the requirements necessary for a Lebanese court to recognise the judgment, namely: (i) the judgment must have been rendered by a competent court according to the laws of the issuing state and not the result of jurisdiction fraud, ie forum shopping; (ii) the right of the Defendant to defend the claim must have been respected; (iii) the judge must have been issued by a country that give reciprocal recognition to Lebanese judgments without revising them; and (iv) the judgment must not be contrary to public order.

137.

Necessarily, in the circumstances where all avenues of appeal have been exhausted, this court proceeds on the assumption that those conditions are satisfied.

138.

It is difficult, therefore, to see what possible double jeopardy could arise so far as the individual directors are concerned, by naming them in the orders to provide documents or information to the receiver, or by confirming to third parties the receiver's entitlement to receive the oil revenues. As I have said previously, the orders are made against CCOG, and only against the individual directors insofar as CCOG acts through or by them as its officers. Thus, they are not being asked in their individual capacities to provide documents or information or confirmation to third parties; thus whether they, as directors or shareholders, for example, have personal rights to have access to the company's documents or information (which is the issue addressed in the expert evidence) is simply not in point; the company clearly has access to its own documents and information, and, as a judgment debtor in substantive proceedings where the English court has jurisdiction, it is obliged to provide relevant information if the court so directs.”

The Order appointed a receiver to receive the “Oil Revenues” to be paid to the Respondent for the sale of oil from a concession known as Block 14 in the Yemen. Paragraph 7 of the Order imposed the following obligation on the Respondent:

“7.

That from the date hereof until further order, CC (Oil & Gas) and its directors or officers including Fouad Asfour and Samir Nayef Khoury, shall co-operate with the receiver in the following ways:

(a)

Providing within a reasonable time such information and documents falling within the following categories as the receiver may reasonably require:

(i)

the whereabouts at any time of the Oil Revenues or any assets representing the proceeds of the same;

(ii)

the arrangements, whether contractual or based on instructions given from time to time, in place at any time for the sale of the oil referred to in paragraph 1 above and realisation of the proceeds of the same;

(iii)

the identities of (and any other details concerning) all entities involved in the sale of the said oil and realisation of the proceeds of the same;

(iv)

the amounts due to CC (Oil & Gas) in respect of Oil Revenues from time to time.

(b)

Providing within a reasonable time such written confirmation to third parties anywhere in the world as the receiver may reasonably require of the receiver's rights under this order to act on behalf of CC (Oil & Gas) for the purpose of carrying out his functions as set out above, and of his rights under this order to receive the Oil Revenues in that capacity, and providing to the receiver copies of such confirmations.

(c)

Within three days of making any agreement for the sale of oil, or any sale of oil, providing to the receiver the following information in relation to such an agreement or sale, namely:

i.

If it is in writing, a copy of such agreement, if it is not in writing, a written description of its terms and conditions.

ii.

The identity of the purchaser under such agreement or sale including the purchaser's name, registered office address and contact details of the office of the purchaser involved in the purchase.

iii.

If an agent acted for CC(Oil & Gas) in making such agreement or sale, the agent's name, registered office address and the address and telephone and fax numbers (if any) of the office of the agent involved in making such agreement or sale.

iv.

The details of the bank account to which any monies due to CC (Oil & Gas) SAL have been or are to be remitted in connection with such agreement or sale, including the name of the bank, the address of the branch involved, the name of the account and the number of the account.

Paragraphs 14 and 15 of the Order are in these terms:

“14.

Nothing in this order shall, in respect of assets located
outside England and Wales, prevent any third party
from complying with -

(A) what it reasonably believes to be its obligations,
contractual or otherwise, under the laws and
obligations of the country or state in which those
assets are situated or under the proper law of any
contract between itself and the Defendants; and

(B) any orders of the courts of that country or state,
provided that reasonable notice of any
application for such an order is given to the
Claimant’s solicitors.

15. Nothing in this order shall, in respect of assets located
outside England and Wales, require the Defendants
and/or their directors to disobey the order of any court
of competent jurisdiction in relation to such assets.”

At the beginning of the Order there is a Penal Notice warning the Respondent and a number of named directors or officers that if the Respondent disobeys the Order they “may be held in contempt of court and liable to imprisonment”. The Penal Notice further states that:

“ Any other person who knows of this Order and does anything which helps or permits the Respondent to breach the terms of this Order may also be held to be in contempt of court and may be imprisoned, fined or have their assets seized.”

In paragraphs 12 – 16 of his judgment David Steel J, summarised what happened after the Order was made by Gloster J.:

“12.

On 15 January 2008, leave to appeal against the
Receivership Order was granted. A few days later, on
18 January 2008, Ms. Khoury made an application in
the Lebanese proceedings to join CCOG (and others).
The thrust of the application was that the new parties
were not entitled to comply with the information
disclosure requirements of the orders of Gloster J
absent an exequatur. The response of CCOG and
others to this application was to file declarations "se
référerà justice", the effect of which is to adopt a
neutral stance leaving it to the court to decide the
issue.

13.

On 4 April, the appeal against the orders of Gloster J
was dismissed ([2008] EWCA Civ 303) whereupon the
receivership order came into effect. This led to an ex
parte application in the Lebanese proceedings on 11
April for interim orders to the effect that CCOG (and
CCIC) should not provide any information sought by
the receivers under the Order.

14.

In the meantime the receivers had written to CCOG for
information relating to a sale of oil made on 12 March
attaching a standard form letter for despatch to the
purchasers:

"…We are obliged by order of the High Court of England & Wales to inform you that a receiver has been appointed by the court to collect any oil revenue owed to CC (Oil & Gas). The term 'oil revenues' includes any revenues derived from the sale of CC (Oil & Gas)'s share of oil produced from the oil concession in Yemen known as Block 14 or the Masila Block; in particular, it includes the purchase price to be paid under the Oil Sale Agreement referred to above….

We hereby instruct you to pay any amounts due to CC (Oil & Gas) or its nominee under the Oil Sale Agreement to Mr Manning as receiver on our behalf. Please pay these amounts into the bank account of the receiver: we will confirm the details of this account as soon as possible. We hereby unconditionally and irrevocably confirm that we will consider payment of amounts due under this agreement to Mr Manning to constitute satisfaction of your company's obligations to pay such amounts under the Oil Sale Agreement. In the event that any director, employee or agent of CC (Oil & Gas) informs you of anything contrary to what is stated in this letter, please inform the receiver without delay. No person has the authority of CC (Oil & Gas) to override the instructions in this letter."

15.

On 14 April, the Lebanese Court handed down a
reasoned judgment. It found that the claimants had the
appropriate status as a shareholder to institute the
proceedings and that CCOG was a Lebanese company
governed by Lebanese laws and accordingly the court
was one of competent jurisdiction. The ruling went on
as follows:

"And as it appears from the mentioned Article that third persons are not entitled to obtain directly the information contained in the documents enumerated in the Article 197 of the Code of Commerce. However, that in case there was any litigation between the third persons and the company, the court examining the litigation can ask the company to produce any documents it finds necessary to settle the conflict and it can require the company to produce it during the trial, and the court can also assign an expert to obtain the required information. And if the legal decision were issued form a non-Lebanese court, it shall be necessary that it be coupled with the exequatur from the competent Lebanese judicial authority in case the decision included any compulsory measure to guarantee its execution.

And as both decisions issued by the British magistrate are practically investigation decision that aim at obtaining evidence present in the seat of the Lebanese company in Lebanon, meaning that both mentioned decisions shall be executed practically in Lebanon without passing through the Lebanese legal authorities. And that the party benefiting from them replaced the exequatur by the compulsory measure that guarantees the practical execution, which constitutes a fraudulent circumvention of the Lebanese law and a breach of the principle of judicial sovereignty of the Lebanese government on its territories.

16.

The court accordingly made the orders sought which
prohibited CCOG "from giving any information about
[CCOG]…in execution of the three British
decisions…." [“the Lebanese Court Order”]. In the
wake of the dispute that then arose as to the potentially
inconsistent and competing obligations imposed on
CCOG as to furnishing information, CCOG issued this
application on 28 April 2008. On 6 May 2008, Mr.
Masri applied to set aside the orders of the Lebanese
court. Mr. Masri's application was due to be heard on
22 May but as yet however no application for
exequatur has been made.”

There is to be a hearing on 29^th January 2009 in the Court of First Instance, Beirut in respect of both Mr Masri’s set aside application dated 6^th May 2008 and an application made by the Respondent and CCIC on 5^th June 2008 to the Lebanese Court for orders stating whether Lebanese Law precludes them from requiring the buyers of the oil to pay the receiver, and the extent to which it impacts on their compliance with orders other than Gloster J’s orders of 20^th December 2007.

David Steel J summarised the oral submissions before him, as follows:

“17.

The principal issue on this application relates to the impact of the Lebanese court order given the provisions of paragraph 15 of the receivership order. It was the claimant's submission that it had no impact on CCOG's obligation to furnish information as otherwise required under paragraph 7. The basis of this submission was three-fold:

i)

Paragraph 15 is concerned with assets located outside England and Wales and ensures that the courts of the relevant jurisdiction (i.e. the courts of the jurisdiction where the asset is located) have priority in relation to any issues of title to, or any seizure of, that asset.

ii)

Such a construction is supported by the fact that (i) there is no equivalent to paragraph 15 in the order requiring the judgment debtors to make affidavits of assets and (ii) the second sentence of paragraph 15 as proposed by CCOG was excluded as being unnecessary.

iii)

The order made by the Lebanese court was not a ruling on the status or disposition of any asset.

18.

CCOG's submission can be summarised as follows:

i)

The Lebanese court has competent jurisdiction over CCOG (this is common ground).

ii)

CCOG are the owners of various assets including the concession in the Yemen and relevant oil revenues.

iii)

The order of the court was to the effect that CCOG was forbidden from giving any information about CCOG "in execution of three British decisions".

iv)

The receivership order required the provision of information relating to assets located outside England and Wales in the form of oil revenues.

v)

It follows that provision of the information would involve disobedience to the order of the Lebanese Court.”

In paragraph 19 of his judgment he explained why he preferred the Respondent’s submission:

“i)

It is more in accord with the ordinary and natural
meaning of paragraph 15.

ii) In contrast, under paragraph 14 which also concerns
assets outside England and Wales, it is made expressly
clear that a third party is entitled to comply with any
obligation under the laws of the country “in which
those assets are situated” (together with the orders of a
court of such country subject to notice of any
application).

iii) The background to the inclusion of paragraph 15, as
explained above, was the content of advice obtained by
CCOG regarding the limitations on access to company
information under Lebanese law.”

He concluded in paragraphs 20 and 21:

“20.

If this is right, it is legitimate for CCOG to refuse to
provide the information requested under paragraph
7(a) and (c) unless and until the Lebanese Court order
is set aside or an exequatur is acquired. Less clear is
the position as regards any written confirmation under
subparagraph (b). It may well be that no breach of the
order would be involved in requiring such
confirmation since it would not on the face of it
involve the "giving of any information" within the
meaning of the Lebanese order. But since the scope of
the Lebanese Court order is a matter for that court and
since the provision of copies of such confirmation
might be regarded as providing "information", I
conclude that CCOG is entitled to refuse to provide
such confirmation, subject both to the provisos above
and to any review of the scope of the restrictions by
the Lebanese court.

21.

This conclusion makes it strictly unnecessary to consider the express terms of the letter that the receiver proposes by way of confirmation to third parties. Suffice to say that I am not persuaded that CCOG's objections as spelt out in paragraph 28 of its skeleton argument are made out.”

Mr Salzedo submitted on behalf of the Appellant that paragraph 15 did not, by reason of the Lebanese Court Order, excuse the Respondent from its obligations to provide information to the receiver and to provide information to its purchasers as to the existence and effect of the Order, because paragraph 15 applies only to the orders of foreign courts in relation to dealings with particular assets which are situated in the jurisdiction of the court making the order.

He submitted, firstly that the Appellant’s construction of paragraph 15 was “more in line with the ordinary meaning” of the words used in the paragraph; and in this context he placed particular reliance on the two references to “assets” in paragraph 15. Compliance with the requirements of the Order is excused only “in respect of assets”, and then only in the case of an order of a court of competent jurisdiction “in relation to such assets”.

Secondly, he submitted that the Appellant’s construction was consistent with the other provisions of the Order which dealt with its extra territorial effect so as to avoid infringing upon the jurisdiction of foreign courts in relations to assets in those jurisdictions. The Lebanese Court Order did not purport to be concerned with assets in Lebanon.

Thirdly, he submitted that the Appellant’s construction of paragraph 15 was consistent with other orders made against the Respondent by Gloster J. following her judgment on 20^th December 2007. At the same time as she granted the Order, Gloster J. made an order requiring the Respondent and CCIC to provide affidavits as to their assets worldwide. That order did not contain any provision which excused the Respondent from providing such information if ordered not to do so by a foreign court.

Fourthly, it was submitted that the Respondent’s construction of paragraph 15 would have the unintended consequence that the English Court having exercised its in personan jurisdiction over the Respondent, and having made the Order in the exercise of that jurisdiction, would have permitted its Order to be “trumped” by a contrary order of any foreign court with in personam jurisdiction over the Respondent. That would be an unwarranted subjection of the jurisdiction of the English Court to the jurisdiction of foreign courts.

In paragraph 9 of his judgment David Steel J. referred to a draft order which had been provided by the Respondent for the hearing before Gloster J. on 20^th December 2007. The draft contained provisions dealing with “persons outside England and Wales”. He said in paragraph 10 of the judgment that “the thinking behind the draft order was spelt out in the Respondent’s skeleton argument for the hearing”. Whatever may have been the thinking of the parties, or either of them, at the hearing on 20^th December 2007, the Order is not a commercial agreement between them, it is an order of the Court. Moreover, the Order contains a Penal Notice which makes it clear to the Respondent that if it disobeys the Order, its directors or officers may be held to be in contempt of court and liable to imprisonment, and warns third parties that if they know of the Order and do anything to help the Respondent to breach its terms they may also be held to be in contempt of court and may be imprisoned, fined or have their assets seized.

In my judgment the Order must “speak for itself”, and references to extrinsic material, such as earlier drafts prepared by the parties for the assistance of the Court, are not admissible as an aid to its proper construction. The Order must, on its face, make it clear to third parties, who may know little or nothing of the background to the making of the Order, what it is that they must not do in order to avoid being in contempt of Court. The words in paragraph 15 of the Order must be given their ordinary and natural meaning, in the context of the Order when read as a whole. If there is any ambiguity in the words used then that ambiguity must be resolved in favour of those persons, including the Respondent, who are liable to be imprisoned if they disobey the Order.

It would therefore be inappropriate to construe paragraph 15 as though it is subject to an implied limitation that it relates only to assets within the jurisdiction of the foreign court making the Order. As David Steel J. observed in paragraph 19(ii) of his judgment, paragraph 14(A) of the Order contains an express limitation to that effect. The contrast between the words used in paragraphs 14 and 15 in this respect is plain. Individuals should not be exposed to potential liability for imprisonment on the basis of an implied limitation upon an express exception to the Order’s requirements. Whether paragraph 15 of Gloster J’s Order is consistent with other orders made by her on the 20^th December 2007, including the order requiring the Respondent and CCIC to provide affidavits of assets is beside the point. There may, or may not, have been good reasons for the differences between the Orders, but the Orders impose different obligations, each is subject to a penal notice and each must be separately construed.

If the ordinary and natural meaning of paragraph 15 results in unintended consequences the appropriate remedy is not to argue for a strained and artificial meaning of the Order, but to apply to the Court for a variation of the Order.

While the Court when making a Receivership Order will do its best to anticipate all likely eventualities, and make provision for them in the precise form of the Order, it will not infrequently be the case that when the receiver embarks on his task he will encounter some unexpected obstacle to the discharge of his responsibilities to the Court. In these circumstances the receiver is able to apply to the Court for a variation of the Order so that it is, to the best of the Court’s ability, “tailor made” to overcome the particular, unforeseen, obstacle.

The Receivership Order made by Tomlinson J. on 21^st October 2008 illustrates how easily this could be achieved in the present case. Paragraph 15 of Tomlinson J’s Order includes the following provision:

“Nothing in this order shall, in respect of assets located outside England Wales, require the Defendants and/or their directors or officers to disobey the orders of any court of competent jurisdiction in the jurisdiction in which those assets are located.” (emphasis added).

It is true that the word “assets” appears twice in paragraph 15 of the Order. However, the words “in respect of assets located outside England Wales” and “in relation to such assets” must be construed in the context of an Order which does not, for reasons of international comity, affect title to any assets located outside England and Wales: see paragraphs 47 and 72 of the judgment of Lawrence Collins L.J. (with whom Ward L.J. and Lord Neuberger of Abbotsbury agreed) dismissing the Respondent’s appeal against the orders made by Gloster J. [2008] EWCA Civ. 303.

The Respondent’s assets, which the receiver is appointed to receive, are the “Oil Revenues” as defined in paragraph 2 of the Order. While the Respondent is restrained from receiving the Oil Revenues, the only positive obligations imposed by the Order upon the Respondent “in relation to” those assets are to provide the Receiver with information about them (paragraph 7(a)) and to give third parties written confirmation of the receiver’s rights to receive them on behalf of the Respondent (paragraph 7(b)). Paragraph 15 qualifies this, limited, obligation. It is common ground that the Lebanese Court is a court of competent jurisdiction for the purpose of paragraph 15 of the Order. The words “in relation to such assets” are very broad, and are certainly broad enough to include the Lebanese Court Order prohibiting the Respondent from giving information about the Oil Revenues as required by paragraph 7(a) of the Order. In ordinary language, in the context of an order requiring the provision of information about assets, the Lebanese Court Order prohibiting the provision of that information is an order “in relation to such assets”.

For these reasons I agree with David Steel J. that the Respondent’s submission in respect of the information required by paragraph 7(a) of the Order is to be preferred. I further agree with David Steel J. that the position in respect of the confirmation required by paragraph 7(b) of the Order is less clear. However, in his oral submissions Mr Salzedo accepted that the final requirement in paragraph 7(b), to provide the receiver with copies of the written confirmations sent to third parties may well, unless the names and addresses of the addressees were to be redacted, disclose the kind of information which the Respondent is required to provide under paragraph 7(a) (iii) of the Order. Even with some details redacted the copies of the confirmatory letters to purchasers might disclose other information “in relation to” the Oil Revenues.

We have no expert evidence as to the meaning and effect of the Lebanese Court Order. As David Steel J. observed in paragraph 20 of his judgment, its scope is a matter for the Lebanese Court. Since that Court is shortly to rule upon both the Appellants’ set aside application and the Respondent’s application dated 5^th June 2008 (see above), it would not, in my view, be appropriate at this stage for an English court to attempt to, in effect, “second guess” the likely outcome of the proceedings in Beirut on 29^th January.

For these reasons I would dismiss the Appellant’s appeal against paragraph 1 of the Order made by David Steel J. on 12^th June 2008.

There is also an application by the Respondent for permission to cross-appeal against paragraph 2 of the Order, in which David Steel J. granted the following declaration:

“It is further declared that, subject to the aforesaid order of the First Instance Court of Beirut dated 14 April 2008, the terms of the receiver’s proposed letter attached as Schedule 1 to the receiver’s letter to CCOG dated 4 April 2008 are reasonable within the terms of paragraph 7(b) of the Receivership Order.”

On behalf of the Respondent, Mr Layton QC submitted that, having concluded in paragraph 21 of his judgment that a decision as to the reasonableness of the receiver’s proposed letter was “strictly unnecessary”, it was inappropriate to grant declaratory relief as to the reasonableness of its terms; that David Steel J. had given no reasons for rejecting the Respondent’s arguments as to the respects in which the proposed letter was unreasonable; and that in any event the requirements in the proposed letter exceeded the receiver’s powers under paragraph 7(b) of the Order.

In his judgment of 21^st October 2008 Tomlinson J. considered a similar letter in draft form proposed by the receiver, and concluded that it was reasonable: see paragraph 33. The points which the Respondent now seeks permission to argue do not appear to have been raised in the Respondent’s application for permission to appeal against the orders made by Tomlinson J. The Court of Appeal refused permission to appeal [2008] EWCA Civ. 1367. Lawrence Collins L.J., (with whom Goldring L.J. agreed) said in paragraph 33 of his judgment that had he considered that there were arguable grounds of appeal:

“I would have taken the view that this court should impose a condition of payment in of the whole of the judgment debt on conditions similar to those imposed by the House of Lords when granting leave to appeal in the receivership appeal, conditions which were not complied with by the judgment debtors with the result that the appeal was struck out.”

The conditions imposed by the House of Lords on 30^th July 2008 included a requirement that the Respondent and CCIC should pay the outstanding judgment sum of U.S. $ 63, 365, 957.40 into Court by 15^th August 2008.

We did not hear submissions from Mr Salzedo as to the merits of the cross appeal. In these circumstances I will say only that Mr Layton has persuaded me that the grounds of the Respondent’s proposed cross appeal are properly arguable. However, in view of the particular characteristics of this long-running litigation, I am firmly of the view that permission to appeal should be granted only on the terms which Lawrence Collins L.J. would have imposed had he granted permission to appeal against the Orders made by Tomlinson J., although for my part I would extend the time for compliance with the conditions from 14 days to 28 days.

I would therefore grant permission to appeal if the outstanding judgment sum of US$63,365,957.40 is paid into Court within 28 days of the date of our order following the handing down of our judgment.
Lord Justice Rimer

I agree.
Lord Justice Mummery

I also agree.