Masri v Consolidated Contractors International Co Sal & Ors

A receiver by way of equitable execution may be appointed where special circumstances make ordinary enforcement methods ineffective. The court may adapt the remedy to assets on a substantially wider scale where the underlying principles remain the same. The scope and practical operation of the order are matters for the judge’s discretion.

When disclosure ordered by an English court may expose a party or its officers to liability under foreign secrecy laws or blocking orders, the court takes a flexible discretionary approach. Foreign law is relevant but does not automatically prevent disclosure. The court may consider the likelihood of prosecution, the circumstances in which the foreign restriction arose and the interests of justice.

The judgment debtors owed more than US$60 million following judgments concerning an agreement to share costs and profits from a Yemeni oil concession. They had substantial assets but had stated that they would not pay. An earlier receivership over concession income had been upheld in [2008] EWCA Civ 303, but the debtors subsequently deferred their entitlement to revenue.

Tomlinson J appointed a receiver by way of equitable execution over receivables from 25 construction projects and confirmed three freezing orders. The debtors sought permission to appeal and stays. They argued that ordinary overseas enforcement remained available, that the receivership was excessively wide and disruptive, and that its disclosure requirements conflicted with Lebanese law and comity.

The central issues were whether the receivership disclosed an arguable error of principle or discretion, and whether alleged foreign-law restrictions made the information requirements arguably impermissible.

1. The applications for permission to appeal and for stays were refused. The persistent refusal to satisfy the judgment, the steps taken to frustrate the earlier receivership and the practical obstacles to overseas attachment constituted special circumstances. It was unrealistic to suggest that ordinary enforcement in each relevant foreign jurisdiction provided an adequate answer.

2. The new receivership was broader than the earlier order, but the governing principles were the same. Tomlinson J had confined it to receivables under the 25 projects for which the debtor was sole contractor. The difference in scale was not a difference in the nature of the remedy. Its extent and operation fell within the judge’s discretion.

3. The risk that removing receivables might impair the projects did not establish an arguable error. The receiver had an interest in preserving the projects’ working capital so that they continued generating revenue. Any contractual difficulty caused by the debtor withholding voluntary payment would be attributable to its own conduct.

4. The court adopted the flexible discretionary approach described in Brannigan v Davison [1997] AC 238. An English court may consider foreign criminal, secrecy or blocking laws when framing disclosure orders, but those laws do not automatically prevent an order. It was therefore unnecessary to determine the disputed construction of article 579 of the Lebanese criminal code or article 197 of the Lebanese Code of Commerce. The criticisms of Tomlinson J’s interpretation of Lebanese law were not decisive.

5. No question of a stay arose once permission was refused. Lawrence Collins LJ added that, had an appeal been arguable, he would have required payment into court of the entire judgment debt as a condition of a stay. Goldring LJ agreed.

• Court of Appeal (Civil Division): Refused permission to appeal from Tomlinson J’s orders of 21 October 2008 and refused the requested stays: [2008] EWCA Civ 1367.
• Commercial Court: Tomlinson J appointed a receiver by way of equitable execution over receivables from 25 construction projects and confirmed three freezing orders. He refused permission to appeal.
• Earlier enforcement proceedings: A receivership over income from the Yemeni oil concession was upheld by the Court of Appeal in [2008] EWCA Civ 303. A subsequent application to the House of Lords was struck out after conditions requiring payment into court were not met.