Masri v Consolidated Contractors International Company SAL & Ors

An English court order properly made against a person subject to its jurisdiction must be obeyed according to its terms. Conflicting foreign court orders do not themselves excuse disobedience. An express exception for foreign orders may, however, qualify the obligation. Foreign constraints inform the court’s discretion concerning sanctions, with little mitigating weight attaching to constraints deliberately procured to frustrate enforcement.

Appointment of a receiver to receive revenues necessarily restrains the judgment debtor from receiving them, including through an agent. Foreign proceedings designed to undermine that appointment may constitute contempt. Proceedings seeking to establish that an express exception to the receivership applies are distinguishable. Contempt requires knowledge of the order, intentional conduct breaching it and knowledge of the relevant facts. A specific intention to disobey is unnecessary. Every essential element must be proved to the criminal standard.

Munib Masri, the judgment creditor, had obtained judgments against Consolidated Contractors International Company SAL and Consolidated Contractors (Oil and Gas) Company SAL, two Lebanese companies controlled by the Khoury and Sabbagh families. The judgments concerned his contractual share of revenues from the Masila oil concession in Yemen. The companies had submitted to English jurisdiction, but had paid nothing despite having sufficient funds.

The English court subsequently appointed Lee Manning as receiver of specified revenues and made asset disclosure and freezing orders. Lebanese blocking orders prohibited disclosure of company information. After the companies’ directors resigned, Lebanese judicial administrators assumed their management and obtained further directions restricting compliance with the English orders.

Mr Masri sought declarations of contempt and fines for receipt of revenues, deficient disclosure, failure to co-operate with the receiver and foreign proceedings allegedly interfering with the receiverships. The central issues concerned the construction of the English orders, the effect of conflicting Lebanese orders and proof to the criminal standard. His separate application to commit Wael S Khoury, alleged to be a de facto or shadow director or officer involved in the breaches, was deferred.

1. The contempt application succeeded in part. Allegations 1A, concerning the March 2008 oil sale, 1C, 2A, 2B, 2C, 2E, 2G, 3, 4 and 5A were established. The remaining allegations were not established. Sanctions would be considered after further submissions. The application against the third respondent remained for a separate hearing ([425]; [432]).

2. The applicant bore the criminal burden of proof. Essential inferences had to be compelling, and every necessary intermediate fact had to be established beyond reasonable doubt. Foreign law was a question of fact, so material uncertainty about its effect prevented a contempt finding. Knowledge of the order, intentional conduct constituting a breach and knowledge of the relevant facts sufficed. A specific intention to disobey was unnecessary: DG of Fair Trading v Pioneer Concrete, [1995] 1 AC 456, followed ([144]–[157]).

3. The receivership appointment necessarily restrained CCOG from receiving the oil revenues, including through its broker. The April 2008 Lebanese information prohibition neither required receipt nor prevented refusal of payment. Receipt of the March sale proceeds therefore constituted contempt. The three later receipts were not proved contemptuous because the court was unsure whether refusal of payment would contravene subsequent Lebanese administration orders. Seeking a blocking order was permitted by the receivership’s express foreign court exception ([169]–[199]; [205]).

4. An unconditional English order remained binding despite conflicting foreign requirements. The debtor should seek appropriate variation. A judicial administrator’s involvement did not immunise the companies from contempt. The court rejected a hierarchy based on primary allegiance and adopted a flexible discretion concerning its response, taking account of the orders, their provenance and the consequences of foreign disobedience ([238]; [244]–[261]).

5. Beneficial interest in the disclosure order extended beyond English beneficial or equitable ownership to interests benefiting the debtor. Conditional share sales therefore did not remove the disclosure obligation. Debts were disclosable despite doubtful recoverability. Later disclosure orders neither erased earlier breaches nor imported exceptions from other orders. Inaccurate incorporation information breached the stipulated disclosure categories. The words concerning best ability addressed practical difficulties and provided no foreign law exception ([238]; [277]–[280]; [293]–[301]; [314]; [335]–[345]; [359]).

6. The Yemeni damages proceedings unlawfully undermined the court-appointed receivership. The Azerbaijani proceedings instead sought to establish that a contractual exception applied. They were distinguishable from authorities concerning assertion of paramount rights against property appointed to be received. Once evidence raised the contractual exception, the applicant had to negate it. Nevertheless, CCIC had received revenues outside that exception ([229]; [401]–[403]; [421]–[424]).

7. The stayed information obligation ran from the order’s operative date. The CCIC foreign court exception required a court physically situated where the relevant asset was located. Asset location was determined by English law. The service constraints in RSC Order 45 did not govern an application for fines; actual notice supported enforcement and dispensation with service. The hearing was not a trial attracting the hearsay cross-examination power in CPR 33.4 ([141]; [349]–[355]; [370]–[386]).

8. The deliberately procured foreign constraints carried very little mitigating weight. The controlling shareholders could restore management and procure payment, and foreign punishment for compliance was highly unlikely. No sanction was imposed in this judgment ([427]–[432]).

• House of Lords: Permission to appeal the Court of Appeal’s conditional payment order was refused on 7 November 2007. CCIC’s jurisdiction appeal was subsequently struck out following failure to comply with payment conditions.
• Court of Appeal: The jurisdiction ruling was upheld on 25 October 2005. The liability appeal was struck out for non-payment in June 2007, while the creditor’s quantum cross-appeal succeeded in July 2007. Appeals against the December 2007 enforcement orders were dismissed on 4 April 2008. The appeal concerning the CCOG receivership’s foreign court exception was dismissed on 6 February 2009. The Yemeni anti-suit injunction was upheld in [2008] EWCA Civ 625 .
• High Court: Gloster J gave liability judgment on 28 July 2006 and subsequent quantum and enforcement orders. Flaux J and Tomlinson J made further disclosure, freezing and receivership orders. This judgment determined allegations of contempt of those orders, with sanctions and the third respondent’s case remaining outstanding.