Dar Al Arkan Real Estate Development Co v Refai

The Court of Appeal dismissed the appeal against Andrew Smith J's order permitting committal proceedings under CPR 81.4(1) and (3) to be brought against a foreign director of foreign companies which had sued in England and were held to have breached a preservation undertaking and a drives delivery order. The court held that Part 81 can reach directors or officers of a company outside the jurisdiction where the company is properly before the English court because the rule of attribution and the public interest in enforcing court orders support such an interpretation. The court also held that the committal application was a "claim form" for the purposes of CPR Part 6 and that gateway (3) of PD6B could be satisfied (real issue and necessary or proper party), so that permission to serve out under CPR 6.36 was properly granted below. The court declined to disturb the judge's balancing of impracticability of enforcement against the public interest in upholding orders.

Background and procedural posture:

• DAAR and Bank Alkhair obtained a without-notice injunction and gave an undertaking to preserve two hard drives. After disclosure and forensic material, Andrew Smith J discharged the injunction and found breaches of the preservation undertaking and the drives delivery order (the "discharge judgment").
• Kroll applied for committal proceedings against the companies and against Sheikh Abdullatif (a foreign director) under CPR Part 81 for contempt by reason of those breaches. The judge authorised service out under CPR 6.36 and PD6B gateway (3) and held that CPR 81.4(1) and (3) could apply to foreign directors outside the jurisdiction. This decision was appealed to the Court of Appeal.

Nature of the claim and relief sought: Kroll sought declarations of contempt, fines and orders for imprisonment for contempt against DAAR and BA and committal (imprisonment) of Sheikh Abdullatif as the director responsible for the companies' breaches. Kroll relied alternatively on Article 22(5) Brussels I and on permission to serve out under CPR 6.36 (PD6B gateway (3)).

Issues framed:

• whether CPR 81.4(1) and (3) have extraterritorial effect to permit committal orders against directors who are foreign and reside outside the jurisdiction;
• whether a committal application is a "claim form" for CPR Part 6 and whether gateway (3) of PD6B (real issue and necessary/proper party) was made out so as to permit service out under CPR 6.36; and
• whether Article 22(5) of the Brussels I Regulation gave exclusive jurisdiction to the courts of the Member State in which enforcement is sought so as to preclude English jurisdiction over a non-EU domiciled director (cross-appeal point considered but not necessary to decide the appeal on CPR grounds).

Court's reasoning (concise): The court upheld the judge below. It emphasised the public interest in enforcement of court orders and the disciplinary character of civil contempt, distinguishing the situation from the Part 71 information-gathering power considered in Masri (No. 4). The court accepted that the rule of attribution means that a company acts through its officers and that Parliament and the Rules Committee must have contemplated means to discipline officers who cause corporate non-compliance where the company is before the English court. Practical difficulties in enforcing orders abroad are relevant but do not negate the rule's extra-territorial reach where the company is subject to the jurisdiction and the director has a sufficient connection to the proceedings. On service out, the court accepted that a committal application constitutes proceedings commenced by a claim form for the purposes of CPR Part 6, that there was a real issue between Kroll and the companies and that Sheikh Abdullatif was a necessary and proper party, so that gateway (3) was satisfied. The court therefore dismissed the appeal. The cross-appeal on Article 22(5) was not essential to the outcome and the court expressed views obiter.

Appeal dismissed. The Court of Appeal held that CPR 81.4(1) and (3) can apply to directors and officers of a company who are outside the jurisdiction where the company is properly before the English court, because the rule of attribution together with the public interest in enforcement of court orders supports such an interpretation; and a committal application counts as proceedings for the purposes of CPR Part 6 so that gateway (3) of PD6B can authorise service out under CPR 6.36. The judge below did not err in exercising his discretion to permit service out.

Appeal to the Court of Appeal from Andrew Smith J's order in the High Court, Queen's Bench Division [2013] EWHC 4112 (QB). The underlying without-notice injunction had been discharged by Popplewell J and Andrew Smith J in the "discharge judgment" [2012] EWHC 3539 (Comm). The Court of Appeal gave judgment on 23 May 2014 ([2014] EWCA Civ 715).