Sabbagh v Khoury & Ors

For jurisdiction under Article 6(1) of the Brussels Regulation, the majority view, stated obiter, was that the claim against the anchor defendant must have a real prospect of success. A court should exclude hopeless claims but must not conduct a mini-trial at the jurisdiction stage. Unanimously, the court held that the share-deprivation claim was sufficiently arguable. A claim by an heir for damages for conspiracy to misappropriate property concerns ownership and intentional wrongdoing, not succession, merely because title derives from inheritance. The claims were not based on the company’s articles of association and were outside the relevant arbitration clauses. No mandatory stay was required.

The claimant, an heir of Hassib Sabbagh, brought claims alleging that members of the Khoury and Sabbagh families had misappropriated assets and deprived her of shares in a Lebanese company. Only one defendant was domiciled in England. Jurisdiction over the foreign defendants was asserted under Article 6(1) of the Brussels Regulation and the equivalent Lugano Convention provision, while jurisdiction over another defendant was based on service out as a necessary or proper party.

The High Court struck out the share-deprivation claim against the anchor defendant, although it rejected an estoppel argument and refused a mandatory arbitration stay. The claimant appealed. The central issues were whether the share claim was arguable, whether the claims concerned succession, and whether either claim was subject to arbitration.

Disposition. The appeal was allowed. The court was unanimous on the merits, succession and arbitration issues. Patten and Beatson LJJ expressed the majority view on the Article 6(1) merits question; that view was expressly obiter because the other issues determined the outcome. Gloster LJ dissented on that jurisdictional question.

1. Article 6(1). The majority would have required a real prospect of establishing the claim against the anchor defendant. A hopeless claim could fall within the sole-purpose exception because it would provide no legitimate basis for removing foreign defendants from their domiciliary courts. Gloster LJ considered that EU law excluded any merits test and permitted only a narrow inquiry into fraudulent abuse.
2. Arguability and mini-trial. The real-prospect test excludes fanciful or bound-to-fail claims. It does not authorise an abbreviated trial. Allegations that board approval, re-issue and registration formalities had not been completed, and that records had been falsified with the knowledge of the anchor defendant, required full disclosure, inspection and trial. The share-deprivation claim therefore had a real prospect of success.
3. Arbitration. The asset-misappropriation claim was, in substance, a non-contractual claim under general Lebanese law and was not based on the company’s articles of association. It was not an accounting claim or a claim to dividends as shareholder. The share-deprivation claim was likewise not a claim brought as Hassib’s heir or to enforce shareholder rights. Neither claim fell within Article 45 of the articles. Sana was not bound by the arbitration clauses in the 1993 Agreements, to which she was not party, and the claims were outside the scope permitted by Article 762 of the Lebanese Code of Commerce. No mandatory stay under section 9 of the Arbitration Act 1996 was granted.
4. Succession. Applying the subject-matter approach, the claims protected ownership and sought damages for alleged wrongdoing. The source of title in inheritance, and the need to decide what assets belonged to Hassib at death, did not make the claims matters of succession under the Brussels Regulation.
5. The unresolved question concerning the joinder of HH and any residual forum issues was left for determination in the Commercial Court.

• Court of Appeal (Civil Division) — allowed the appeal. The share-deprivation claim was sufficiently arguable; the claims were not excluded as succession matters; and no mandatory arbitration stay was required. Citation: [2017] EWCA Civ 1120.
• High Court of Justice, Queen’s Bench Division, Commercial Court — Carr J struck out the share-deprivation claim against the anchor defendant, rejected the defendants’ estoppel argument, and refused a mandatory stay. Citation: [2014] EWHC 3233 (Comm).