Masri v Consolidated Contractors International Company Sal & Anor [2008] EWHC 2492 (Comm)

[2008] EWHC 2492 (Comm)

Case No 2004 Folios 124 & 831

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 21 October 2008

Before

THE HON. MR JUSTICE TOMLINSON

Between

MUNIB MASRIClaimant

Consolidated Contractors International Company Sal & AnorDefendant

MUNIB MASRI Claimant/Judgment Creditor- and -(1) CONSOLIDATED CONTRACTORS INTERNATIONAL COMPANY SAL (2) CONSOLIDATED CONTRACTORS (OIL AND GAS) COMPANY SAL Defendants/ Judgment Debtors

Simon Salzedo, Harry Matovu and Colin West

(instructed by Messrs Simmons & Simmons) for Claimant/Judgment Creditor

Alexander Layton QC and Tom Raphael

(instructed by Messrs Olswang) for Defendants/Judgment Debtors

Hearing Hearing dates: 16 & 18 July; 27, 28 & 29 August 2008

Judgment

[1]The Claimant, Mr Munib Masri, is a judgment creditor. The Defendants are his judgment debtors, jointly and severally liable to him in an amount now in excess of US$63,000,000. The judgment debtors are both companies in the Consolidated Contractors Company group of companies. Ownership and control of the Consolidated Contractors Company group is vested in two families, of which Mr Said Khoury and Mr Hasib Sabbagh are the respective heads. They were also the founders of the group. Mr Masri, Mr Sabbagh and Mr Khoury are all leading Palestinian businessmen who were once friends and business associates, although Mr Sabbagh has been inactive since suffering a major stroke in 2004.

[2]On 19 May 2008 and 12 June 2008 respectively David Steel J granted to the Claimant three freezing orders affecting various assets of the Defendants. They have become known in these proceedings as Freezing Order No. 2, Bank Accounts; Freezing Order No. 3, Receivables and Freezing Order No. 4, Shares. 16 July 2008 was the return date for the three freezing orders which had initially been granted formally without notice, albeit the hearing at which the freezing order in respect of receivables and some but not all of the shares was granted took place on short notice to the Defendants. 16 July 2008 was also fixed as the date upon which there would be heard the Claimant’s application by Notice dated 5 June 2008 for the appointment of a receiver in respect of the receivables the subject of Freezing Order No. 3.

[3]One day proved an inadequate estimate of the time required to deal with these matters. On 16 July 2008 after hearing the Claimant’s applications for continuation of the existing relief and the grant of the additional, receivership, order and the Defendants’ application for an adjournment, I continued the freezing orders, with some amendments, and at a further hearing on 18 July I varied the freezing order in respect of the receivables so as to permit in certain circumstances variations to the contracts under which the receivables fall due to the Defendants. Further evidence was then exchanged, in addition to the very substantial evidence already before the court on 16 July, and I heard further argument on 27, 28 and 29 August 2008, at the conclusion of which I reserved judgment. On this latter occasion neither of the Claimant’s counsel who appeared before me on 16 July, Mr Simon Salzedo and Mr Colin West, was available. The Claimant was represented by Mr Harry Matovu to whom I am indebted for his assistance. The Defendants were on each occasion represented by Mr Alexander Layton QC and Mr Tom Raphael for whose assistance on these difficult applications I am equally grateful. I now give my decision and reasons.

[4]It is unnecessary for present purposes that I should rehearse the facts underlying or the history of this long-running litigation. For present purposes the starting point is the judgment of Gloster J on liability,

[2006] EWHC 1931 (Comm)

followed by her judgment on quantum,

[2007] EWHC 468 (Comm)

in which she found the Defendants jointly and severally liable to the Claimant in the sum of about US$38,000,000, an amount subsequently increased to about US$52,000,000 following a successful appeal by Mr Masri on an aspect of quantum. Mr Masri has succeeded in establishing that he has a 10% interest in the judgment debtors’ own 10% interest in an oil concession for the exploitation of an oil field in the Yemen. The concession is known as the “Masila Concession”. Because the concession continues and no doubt because of interest, costs and other matters the judgment debt is now in excess of US$63,000,000. After initially and unsuccessfully objecting to the jurisdiction of this court the Defendants expressly submitted to it and participated fully in the proceedings before Gloster J.

[5]As I have already pointed out the Defendant judgment debtors are part of a larger group of companies. This is a very substantial group based in the Lebanon. There is no doubt that the group and indeed these two Defendant companies have available to them substantial funds out of which they could easily pay the judgment debt without in any way imperilling their ability to carry on their diverse and successful businesses. The Defendants have made it abundantly clear that they have no intention of paying the judgment debt. They have commenced proceedings in the Yemen for a declaration that they are not liable to the judgment creditor, albeit subsequently discontinued pursuant to an anti-suit injunction issued by this court and upheld by the Court of Appeal. They have commenced proceedings both in Lebanon and in Greece, from where to a large extent they are run, for declarations that the judgment of the English court is not enforceable. The Defendants have shown both determination and ruthlessness in taking advantage of any opportunity open to them to resist enforcement of the judgment. They will put every obstacle in the way of Mr Masri in his efforts to enforce the judgment in whatever jurisdiction those efforts may be made. These are my own conclusions in the light of the evidence before me, but they do no more than reflect similar conclusions reached earlier both by Gloster J and by different constitutions of the Court of Appeal. I suspect that Lord Bingham had similar considerations in mind when on 26 June 2008, speaking for the Appeal Committee of the House of Lords, he said that “the circumstances and history of this case call for an unusual order”.

[6]The immediately relevant background to the current applications is that on 20 December 2007 after a yet further hearing Gloster J appointed a receiver in relation to the interest of Consolidated Contractors (Oil and Gas) Company SAL, to which I shall refer hereafter as “CCOG”, in revenues from the Masila Concession. In her first judgment, that on liability, Gloster J found that by an agreement made in 1992 Consolidated Contractors International Company SAL, to which I shall refer hereafter as “CCIC”, and CCOG had granted to Mr Masri a 10% interest in their own 10% interest in the Masila Concession. However subsequent to the making of that agreement there took effect an assignment by CCIC to CCOG of the former’s interest in the Masila Concession. Gloster J’s reasons for making the receivership and allied orders are contained in her judgment of 20 December 2007,

[2007] EWHC 3010 (Comm)

. Paragraphs 4-34 of this latter judgment contain a résumé of the procedural history which in part informs the conclusion which I have expressed in paragraph 5 above.

[7]Gloster J refused permission to appeal against her decision to appoint a receiver but stayed the receivership order until 2359hrs (GMT) on 15 January 2008 in order to permit the Defendants or at any rate CCOG a reasonable opportunity to make an application to the Court of Appeal for permission to appeal, and for a longer stay were such application for permission to appeal to succeed.

[8]On 15 January 2008 the Court of Appeal (Rix and Jacob LJJ) heard the Defendants’ application, which was supported by the 14th Witness Statement dated 10 January 2008 of Mr Yasser Burgan, a “Senior Manager for Oil and Gas” employed by CCIC in their offices in Athens who spends the majority of his time working on behalf of CCOG. This 14th Witness Statement referred back to Mr Burgan’s 13th Witness Statement dated 19 December 2007 which was also before the Court of Appeal on 15 January 2008, as was a skeleton argument prepared by Mr Layton and Mr Raphael on the basis of their instructions. The Court of Appeal granted (limited) permission to appeal and extended the stay on terms. One condition was that CCOG should notify Mr Masri’s solicitors of any sale of oil or any agreement for the sale of oil or any transfer of oil to a purchaser and direct its counterparties in respect of sales or transfers of Masila oil to make payment into a designated bank account in London in the name of the Defendants’ solicitors who undertook to the court that payment would not be made out of the account save with the express written consent of Mr Masri or his solicitors or pursuant to order of the court.

[9]The evidence on the basis of which the Court of Appeal was induced to make this order was seriously misleading, as subsequently found by Lawrence Collins LJ sitting as a single judge of the Court of Appeal and as set out in his judgment of 2 April 2008,

[2008] EWCA Civ 288

. As Lawrence Collins LJ records:

“39. Taken together the material supplied to the Court of Appeal by or on behalf of CCOG communicated the information that as at January 15, 2008, sales of oil were agreed two to three months before extraction, usually for a whole month’s production and sometimes for more; sales of oil had to be agreed this far in advance for the operational reasons given by Mr Burgan in his evidence; liftings took place at least once a month and sometimes more often, and were expected to continue during the course of any receivership; payments were received at most 35 days from the bill of lading date, but sometimes slightly sooner, as CCOG gave a discount for early payment; it would be commercially damaging for CCOG if there was any interference in the course of regular sales to existing buyers; CCOG was able to store up oil entitlements for a matter of days within each month, but could not do so for longer periods. A failure by CCOG to take its ongoing entitlement to oil on a regular basis would constitute a breach of the terms of the JOA. 40. These witness statements and the skeleton argument would have led any reasonable reader in the position of this court, or Mr Masri, to believe that the Defendants would have had no opportunity to avoid monies being received within a month or so of January 15, 2008 (and thereafter), because sales would already have been arranged, they could not be postponed for commercial reasons and oil could not be stockpiled for long periods, and that this position would continue.”

In fact the position was, as Mr Burgan knew, that since early November 2007 there had been concluded by CCOG no contracts of sale in respect of the oil to which they were entitled and there were no sales arranged for January, February and March, whether arranged two or three months in advance of extraction or at all. Furthermore in late January 2008, completely contrary to what Mr Burgan had said was commercially, physically and contractually possible, it was agreed between the operator of the concession and CCOG that the operator would not allocate any oil to CCOG for the time being, on the express understanding that there would be no forfeiture of CCOG’s entitlement to oil. Thus no payments were made into the designated London account.

[10]The upshot is that although the Court of Appeal (Ward LJ, Lord Neuberger of Abbotsbury and Lawrence Collins LJ) by their judgments of 4 April 2008,

[2008] EWCA (Civ) 303

, upheld the receivership order made by Gloster J, lifting the stay on its efficacy with effect from 2359hrs on that day, the Defendants have potentially rendered the entire exercise nugatory by deferring apparently indefinitely their entitlement to revenue. As Lawrence Collins LJ observed at paragraph 61 of his judgment on the substantive appeal, it would not have taken many customers or many shipments to clear the judgment debt. Protestations by the Defendants that they fear that the receivership order now sought will imperil their relationship with multiple third parties, including sovereign governments, have to be considered in that light. Lawrence Collins LJ also observed, at paragraph 60 of his judgment, that if CCOG was concerned that its customers might think that a receiver had been appointed because it was bankrupt, it had only itself to blame for that and, if it wished to avoid that impression, it had only to pay the judgment debt which the group could well afford to do.

[11]In fact it is unknown whether CCOG has resumed trading in oil from the Masila Concession following the coming into effect of the receivership order. On 5 April 2008 the receiver, Mr Lee Manning of Deloitte, wrote to CCOG asking for details of oil sales and requiring CCOG to send a letter to purchasers of its oil requiring that the purchase price be paid to the receiver. CCOG has not complied with either request. On 11 April 2008 an ex parte application was made to the Lebanese court in Beirut seeking an order preventing CCOG from giving any information about CCOG pursuant to the various orders made by Gloster J on 20 December 2007, including the receivership order. The order was granted on 14 April. The application was made by Ms Salwa Khoury, who the evidence suggests owns two out of the 100,000 shares in CCOG. Until May 2007 she was a Director of CCOG. She is the daughter of Mr Said Khoury to whom I have referred above. For reasons to which I shall return I have no doubt whatever that this application by Ms Khoury was made with the knowledge and consent of CCOG – indeed it is likely to have been made at the instance of CCOG and at its expense and with its active co-operation. CCOG now shelters behind this order, the making of which it did not oppose and the setting aside of which it has not sought, as purportedly justifying it in refusing to divulge to the receiver or to this court any information concerning sales of oil from the concession. It is of course possible that having by the deferring of its entitlement coupled with an undertaking to ring-fence the oil revenues achieved the stay of the receivership order until after prosecution of its unsuccessful appeal, CCOG has now simply resumed acceptance of its allocation. On any showing, whether shipments have been resumed or not, the receivership order over the revenues has been frustrated and no sums have been collected in aid of execution of the judgment.

[12]It is against this background that the Claimant now seeks a further receivership order. On 20 December 2007 Gloster J also ordered the disclosure of assets other than the Masila Concession. Amongst the assets subsequently disclosed are the receivables due to CCIC pursuant to 38 construction projects where CCIC is the contractor either alone, in the case of 25 projects, or as a participant in a joint venture, or pursuant to some other arrangement the precise nature of which is unclear, so far as concerns the other 13 projects. The receivables under those contracts where CCIC is the sole contractor are said to be US$111,000,000, and under those in the second category a further US$53,000,000. Beyond a bald description of each project by name, the name of the client, i.e. the employer, and its address, the location of the project and the amount of the receivables due under each project, the Defendants have provided no information about the contracts pursuant to which these receivables arise. They say that they are prevented from so doing either by reason of the provisions of Lebanese law or by reason of the order of the Lebanese court to which I have already referred. It is over the interests of CCIC in these receivables that the Claimant now seeks the appointment of Mr Manning as receiver in aid of enforcement of the judgment.

[13]CCIC resists the making of a receivership order on at least five broad grounds of principle, some of which inevitably overlap. As an over-arching point CCIC points out that appointment of a receiver in aid of enforcement of a judgment over 38 international construction projects, involving six sovereign states as employer, either directly or through government entities such as, for example, Qatar Petroleum or Abu Dhabi Company for Onshore Oil Operations, is almost certainly unprecedented. Apart from the breadth and scope of the order sought, it was not until the judgment of Colman J in Soinco S.A.C.I v Novokuznetsk Aluminium Plant,

[1998] QB 406

that it was established that the court has jurisdiction to appoint a receiver by way of equitable execution to receive not only payments due at the time of the making of the order but also payments which might in the future become due. That case was concerned only with payments which would become due in England. It was not until the judgment of Gloster J in this case, now affirmed by the Court of Appeal, that it was established that the court may make a receivership order by way of equitable execution in relation to foreign debts. Mr Layton was right to submit that in such circumstances the court should pause for reflection before making the order here sought. He suggested that the order would cause completely unacceptable interference with the interests of several sovereign states. However the order sought will only cause inconvenience to third parties if CCIC is determined not to co-operate with the receiver. The court will not assume that there will be such non-compliance with its order – see per Lawrence Collins LJ at paragraph 28 of his judgment of 4 April 2008. The court is asked to assist in the execution of a judgment against those who have submitted to its jurisdiction but are determined to set at nought its conclusions which they find unpalatable. Whilst in so doing the court must as always have regard to its international obligations and take care not to arrogate to itself powers which properly belong elsewhere, the court should not in my view be deterred by the prospect of interference with the interests of third parties which the judgment debtors have it in their power to prevent occurring.

[14]Mr Layton’s first point of principle goes to the basis upon which the court should exercise its jurisdiction. Section 37(1) of the Supreme Court Act 1981 gives to the court power to appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. Mr Layton however suggests that the court has never regarded justice and convenience as the touchstones for relief. He contends that on established authority an applicant for such relief must show either that it is necessary, because legal, as opposed to equitable, enforcement is impossible, or there must be some special circumstances justifying appointment such as practically render it very difficult, if not impossible, for the judgment creditor to obtain the fruits of his judgment by other means. In support of this submission Mr Layton cited S. Payne, Commercial Enforcement, (2005) paragraphs 6.29 to 6.35; Manchester and Liverpool District Banking Co. v. Parkinson

[1888] 22 QBD 173

(CA) at pages 175-177; Harris v. Beauchamp

[1894] 1 QB 801

(CA) at pages 806-811; CPR Part 69, PD, paragraph 4.1(3). Mr Layton suggested that this is a point of particular importance in the present case because the judgment creditor has not adduced evidence to the effect that enforcement of the judgment will, without the appointment of a receiver, be impossible. What is more, the Defendants have for their part placed evidence before the court to the effect that enforcement proceedings could be brought against assets disclosed in Egypt, United Arab Emirates, Qatar and Namibia. Lack of evidence of impossibility of execution by other means did not deter the Court of Appeal from making the receivership order to which I have already referred. However, Mr Layton points out that the argument which he now wishes to put in the forefront was not put forward before Gloster J by the Defendants’ then counsel and it was not ventilated before the Court of Appeal because Rix and Jacob LJJ refused to grant permission to appeal on that ground. Finally, Mr Layton points out that the judgment of the Court of Appeal was, at any rate on this issue, rendered against CCOG alone. CCIC is not therefore formally bound by it.

[15]Lawrence Collins LJ, with whom the other members of the court agreed, said, at paragraph 135 of his judgment of 4 April 2008 upholding the appointment of a receiver:

“The receivership and freezing orders were granted for a legitimate purpose, namely to assist in the ultimate collection of the debt. Whether they will have that effect remains to be seen. But if the matter is looked at in the round, in the light of the careful and proportionate limitations on the scope of the receivership order and the freezing order, then it seems to me plain that the discretion was properly exercised in the unusual and perhaps unique circumstances of the present case.”

Lawrence Collins LJ also pointed out, at paragraph 183 of his judgment, that “The demands of justice must always be the overriding consideration in considering the scope of the jurisdiction under section 37(1)”, echoing what the Court of Appeal had said in Maclaine Watson v. International Tin Council (No. 2)

[1987] 1 WLR 1711

, affirmed

[1989] Ch 286

. The order now sought is of course much broader than the receivership order affecting just the Masila oil concession, but it is the inevitable consequence of Mr Layton’s submission that he invites me to hold that the Court of Appeal fell into error even in making that more limited order.

[16]I find these submissions unrealistic and for a number of reasons. In the first place, enforcement against the assets disclosed by the Defendants even if possible will be neither straightforward nor quick. Indeed, if the Defendants knew that their assets were at risk of straightforward execution in the various jurisdictions mentioned, I suspect that they would by now have met the judgment. If execution in any jurisdiction where substantial assets are to be found were straightforward, I have equally no doubt that Mr Masri would by now have set in train the steps required. I was told that lawyers have been instructed to advise on enforcement proceedings in at least ten jurisdictions. This is not litigation in which stones are left unturned. Furthermore the evidence deployed by the Defendants stops short of asserting that the English judgment will be recognised in the various jurisdictions. I can understand that an unqualified assertion of that sort might be difficult to make, but so too it is difficult for Mr Masri to prove a negative. Moreover it is wholly unrealistic in circumstances such as the present to expect a judgment creditor publicly to discuss the possible difficulties he might encounter in enforcement proceedings in various contemplated jurisdictions. Identification of the difficulties can in such circumstances be relied upon to ensure that those difficulties ensue.

[17]The cases cited by Mr Layton were not concerned with execution overseas. Execution of an English judgment overseas, particularly in countries outside the European Community, is always relatively speaking a difficult exercise. In the present case I am satisfied that it will indeed be practically very difficult for Mr Masri to enforce his judgment by conventional means of attachment against the Defendants’ assets abroad. However I am far from satisfied that the jurisdiction has ever been regarded as rigidly circumscribed. Fry LJ in the Manchester & Liverpool District Banking case spoke of a receivership order as appropriate where under particular circumstances it was a more convenient mode of procuring satisfaction of the judgment than the usual process of attachment. He also spoke of it being appropriate to appoint a receiver to hold property liable to execution in order to prevent someone making away with it. In a later case, Goldschmidt v. Oberrheinische Metallwerke,

[1906] 1 KB 373

, there was reason to believe that the judgment debtor, a German company, was taking steps to collect all debts payable to it in this country in order to avoid garnishee proceedings. The Plaintiff had no means of ascertaining the particulars of such debts as from time to time fell due to the Defendant company from its customers. The Court of Appeal regarded the making of a receivership order as justified under both limbs of the approach of Fry LJ in the earlier case. In Bourne v. Colodense

[1985] ICR 291

receivership was said by the Court of Appeal to be available where recovery of the judgment debt by the more usual processes of execution or attachment of debts is not practicable. That case was applied in Maclaine Watson, above, where however Millett J and the Court of Appeal spoke of there being required some hindrance arising from the nature of the property which prevented the judgment creditor from obtaining execution at law, but which the appointment of a receiver could overcome. Maclaine Watson was extensively discussed in the judgment of Lawrence Collins LJ who evidently saw nothing in it to prevent the making of a receivership order in the present case. Indeed the Liverpool & Manchester District Banking case is also discussed by Lawrence Collins LJ and Harris v. Beauchamp is referred to in his judgment. Since the source of the jurisdiction is section 37(1) of the Supreme Court Act 1981, it is to my mind clear that the Court of Appeal in this case regarded the modern jurisdiction as unconstrained by rigid expressions of principle and responsive to the demands of justice in the contemporary context. In these circumstances it is unrealistic to expect this court to reach a conclusion as to the availability of the remedy different from that reached by the Court of Appeal. However in case it be said that I have failed to exercise my own discretion, I record my own finding that the practical difficulty which Mr Masri will encounter in pursing conventional means of attachment overseas, and the difficulties which the Defendants will seek to put in his way, amply justify the making of a receivership order. Lawrence Collins LJ regarded the circumstances justifying the making of the order here as unusual and perhaps unique. I respectfully agree.

[18]I have of course borne in mind that endorsement by the Court of Appeal of Gloster J’s receivership order over a single revenue stream, the revenue from the concession which was itself the subject matter of the litigation, does not amount to approval of a much more wide-ranging order. Indeed Lawrence Collins LJ referred to the careful and proportionate limitations on the scope of the receivership order which Mr Layton invites me to regard as an indication that any order more broadly drawn would not have found favour.

[19]The total receivables under the 38 contracts are in excess of the judgment debt – I have set them out at paragraph 12 above. Of course, not all of the amount receivable will be profit and there may well be contractual obligations upon CCIC to permit the use of some of the funds for the payment of designated expenses, a point to which I shall revert. I am satisfied that in the first instance it is appropriate to restrict any receivership order which may be made at this stage to one in respect of the 25 projects where CCIC is the sole contractor. I do not rule out that the court might in the light of experience regard the interests of justice as requiring its extension, but the task for the receiver will be sufficiently large to render it sensible to proceed by an incremental approach. If the receiver is to have to grapple with the complexities of joint venture or consortium agreements, he will be better equipped to do so in an economical and expeditious manner in the light of experience with the more straightforward contracts.

[20]So far as concerns the balance of Mr Layton’s objections of principle to the making of an order, even in the more limited form indicated above, there is at the outset a fundamental difficulty in that CCIC declines to provide details of the contractual arrangements pursuant to which it is undertaking the various construction projects, still less to disclose the contracts themselves. Mr Edgard Marina, a Lebanese qualified lawyer and CCIC’s in-house legal counsel, has provided evidence, in the shape of an as yet untested witness statement and an untested affidavit, to the effect that the construction projects are financed by banks who have rights of set off against the construction contractor’s receivables under so-called “direct agreements”. Direct agreements are apparently tripartite agreements between a bank, the project company employer which it is financing and the counterparty to the project contract, the contractor such as CCIC. It is said that in the jurisdictions in which CCIC’s construction projects take place, CCIC’s staff, suppliers and sub-contractors will usually have preferred creditor status in respect of the receivables due or received from CCIC’s client employers, the project companies. It is said that CCIC’s obligation to pay employees and third parties out of receivables paid into nominated bank accounts is or may be enforced and controlled directly by the financing bank. It is suggested that CCIC could not consistently with its obligations under the tripartite agreements procure that payment would not be made to the designated accounts but rather directly to the receiver and that in any event were CCIC to attempt to do so the banks would be able to prevent it from succeeding. The effect it is said of requiring payment to be made to the receiver would be to cause serious interference with these major construction projects in which many third parties have interests.

[21]However literature upon which Mr Marina relies in order to illustrate the nature of the arrangements is demonstrative simply that agreements of this type are typically heavily negotiated, for the very reason that contractors are unwilling to see an unacceptable variation of the terms of their underlying contract with the project company. They wish “to limit the amount of times or the circumstances in which step-in rights can be exercised by banks, rights pursuant to which the bank can step into the shoes of the project company and assume its rights and obligations” – see Construction Law, UAE, March 2008, published by Messrs Denton Wilde Sapte.

[22]Indeed, in a subsequent affidavit of 25 August 2008 Mr Marina has been at pains to point out that there is “a wide variety in the policies, procedures and working practices adopted for each project and those in turn reflect local laws and customs. Bespoke internal accounting policies have been developed and adopted on each project.” Exhibited to this latter affidavit are copies of some heavily redacted historical documents which are said to be “equivalent in their terms and effect to the documents which govern CCIC’s current financing arrangements with the relevant banks as described” in Mr Marina’s previous evidence. I am afraid that I find it difficult to accept that those arrangements are, in the light of the literature and of Mr Marina’s own evidence, likely to be uniform in their effect. The redacted documents pose rather more questions than they answer. On the face of it, they seem to evidence provision of finance to CCIC as contractor to enable it to bid for new projects or to finance working capital requirements. Quite how this ties in with the provision of finance to the project company is difficult to understand without seeing a coherent set of un-redacted documentation relating to a specific project.

[23]In these circumstances I am not satisfied that the grant of the receivership order sought will necessarily require CCIC to commit breaches of its existing contractual obligations or that it will involve unwarranted interference with the rights of third parties. On the contrary, the receiver is bound in my view to ensure that the work on the projects continues in a seamless and uninterrupted manner, since unless it does the projects will not generate revenue which will be available to be collected in. It would be self-defeating for the receiver to deprive the projects of working capital. The court will not assume that the collection of receivables by the receiver will involve CCIC in a breach of its existing contractual obligations because that has not been demonstrated. The Claimant has, in the draft receivership order placed before the court, done his best to anticipate the possibility that the contracts may on examination exhibit one or more of the characteristics suggested by Mr Marina, but there is a limit to the extent to which the Claimant, and I might add the Court, should be expected to operate in a darkness created by the Defendants. The scheme of the receivership order sought is in fact simple and straightforward. The receiver will need to be made aware of the contractual arrangements and will deal with them on a case by case basis. He will have no interest in riding roughshod over the contractual rights of others, although I would emphasise that it is plain to me that CCIC in any event has available to it free resources to ensure that no project is jeopardised. In his 14th witness statement Mr Burgan stated that CCOG had always, since 1993, paid its monthly and special cash calls in respect of the Masila concession out of revenue therefrom. He stated that CCOG had no other source of income out of which to pay these very substantial amounts – about US$30 million in 2007 by way of example. It is plain that despite what was said there neither the Masila concession nor CCOG’s interest in it has been imperilled by CCOG voluntarily denying to itself the revenue stream out of which hitherto it paid cash calls. Furthermore in his 8th affidavit Mr Suheil Nasser, Chairman of both CCIC and CCOG, explains how finance for CCIC’s construction projects is provided by way of advances which count as overdrafts against the project bank accounts. This has enabled CCIC to continue operating its projects despite the freezing orders so far made, and I can see no reason why the receivership order should have any further inhibiting effect, given the co-operation with the receiver which its terms will inevitably require. The proposed receiver is a highly experienced insolvency practitioner and court appointed receiver with all the resources of the international Deloitte operation at his disposal. I see no reason to anticipate that he will encounter problems which it is impossible to resolve consistently with the smooth continuation of the project work.

[24]In the absence of proper information concerning the contracts, which are for the most part for projects in Qatar, the UAE and Egypt, it is quite impossible for me to evaluate the suggestion that the receiver will effectively be imposed as a manager of the contracts. His role is essentially a simple one, to collect receivables. To the extent that it is correct that receivables are utilised for the defraying of costs, as seems likely to be the case to some extent whether done pursuant to contractual obligation or otherwise, he will be monitoring the receipt of money and its use. There is nothing very startling about this. In any event in modern conditions I do not consider that it is or should be an impediment to the appointment of a receiver that his function can in some respects be characterised as management. No receiver given proper co-operation will wish to micro-manage another’s business. The question is therefore one of degree. In Soinco, above, having first found that the receiver proposed in that case would not have to act as manager of the relevant supply contract, Colman J dealt next with the suggestion of the judgment debtors that appointment of a receiver would bring its business to a standstill. Colman J observed:

“Impact on the judgment debtor’s business is not a consideration material to the availability of legal process of execution and there is no reason in principle why it should be introduced as material to the availability of equitable execution.”

Mr Layton suggested that this decision is out of line with other authority. Evidently Sarah Payne, writing in Commercial Enforcement, does not agree. At paragraph 6.14 she observes:

“In any event, as a practical matter, the fact that the distinction between mere receipt and management may sometimes be blurred should not necessarily preclude the appointment of a receiver by way of equitable execution.”

[25]I would add that I am in any event wholly unconvinced by the suggestion of the Defendants that they are constrained in what they can disclose to the court or to the receiver about their contractual arrangements by the provisions of the Lebanese criminal law, by the Lebanese civil law and/or by a specific order of the Lebanese court made on 14 April 2008.

I. The Criminal Law

[26]Article 579 of the Lebanese Criminal Code provides:

“Any individual who is, according to his position, his employment his job or his art, aware of a secret and divulges it without a legal reason or uses it for his own benefit or for the benefit of a third person, shall be punished by imprisonment for a maximum of one year plus a penalty not over 400,000 Lebanese Pounds, in case the said action causes a damage even if it is a moral one.”

There is a dispute, which I cannot on this application resolve, whether this provision applies to company directors. There is also as it seems to me a serious question whether the Lebanese court would regard a director of CCIC as acting without a legal reason in circumstances where CCIC did no more than comply with the order of a court to whose jurisdiction it had expressly submitted. However these questions do not in my judgment need to be resolved. The judgment of the Privy Council delivered by Lord Nicholls in Brannigan v. Davison

[1997] AC 238

points to the court adopting a flexible discretionary approach when faced with a suggestion that compliance with its requirements will involve incrimination under another system of law. Thus in Morris v. Banque Arab et Internationale d’Investissement [2000] C.P. Rep 65 Neuberger J thought it appropriate to assess what was the real risk of a prosecution ensuing as a result of compliance with the order sought from the English court. He assessed it as very small and made the order accordingly. There is no evidence to suggest that a criminal prosecution would be likely in Lebanon were the directors to comply with the order of this court requiring disclosure of the contractual arrangements. Indeed it seems to me that the prospects of such a prosecution taking place, save at the request of the directors or those acting on their behalf, are fanciful. On 14 April 2008 the Lebanese (civil) court issued an order forbidding CCOG, the holding company and various directors including Mr Nasser from giving any information about CCOG pursuant to the orders of Gloster J made on 20 December 2007. Notwithstanding this, on 16 April 2008 CCIC and CCOG provided a further affidavit of assets as ordered by Flaux J on 19 March 2008. Flaux J had held that the existing compliance with Gloster J’s orders of 20 December 2007 was inadequate and ordered the service of further and better affidavits. In his affidavit sworn on 16 April 2008 Mr Nasser said that faced with the dilemma whether to comply with the orders of the English court or with what they understood to be their obligations under Lebanese law, as established by the order made by the Lebanese court, CCIC and CCOG had decided to comply with the order of the English court, albeit he said that they did so under protest and under compulsion. There was no suggestion that in so acting the directors of CCIC and CCOG were rendering themselves at risk of prosecution in Lebanon, indeed the suggestion that the directors might be acting in a manner which was contrary to the Lebanese criminal code was not even mentioned. This reinforces my belief that the risk of such prosecution is fanciful.

II. Lebanese company law

[27]Article 197 of the Lebanese Code of Commerce provides:

“All shareholders and debenture holders have the right to review at the head office of the company the stock schedule, the balance sheet, the profits and losses accounts, the list of shareholders, the board of directors’ report, the auditors’ report, the consolidated profits and losses account, the consolidated balance sheet if any exists, and the auditors’ report regarding the two latter within fifteen days preceding the annual meeting. In case they were denied that right, the deliberations of the annual meeting are void. …”

The natural meaning and effect of this provision is clear. Shareholders and debenture holders must be allowed access to certain company information in the run up to the annual general meeting failing which decisions taken thereat are of no effect. It might well be arguable that in the light of this provision shareholders have no right to inspect the relevant documents at other times and third parties have no right to the information at all. What the provision on the face of it plainly does not do is to impose a restriction upon the directors of a company in their disclosing information concerning the company to a third party in the event that in the ordinary course of the company’s affairs they deem it in the interests of the company so to do. It would seem obvious that the directors of a company must have such a power. It would be surprising if this article of the Lebanese code of commerce has the effect that the directors of a Lebanese company are precluded from showing the company’s balance sheet to a bank from whom they seek financial assistance. Yet that is as I understand it the position which the Defendants’ expert evidence invites me to accept. Article 197 is referred to by the Lebanese court in the judgment of 14 April 2008 to which I have referred above but I am not absolutely certain that it espoused the construction urged upon me. I should mention first a familiar problem sometimes encountered when reading a judgment which adopts the “recital” style of introduction often used by courts in the civilian tradition. I cannot be confident from the translation of the judgment, without assistance from a person versed in Lebanese practice, what constitutes recital by the court of the facts and arguments presented to it and what constitutes the considered judgment of the court. Putting that on one side, it seems to me that what the court may first have decided is that in the light of Article 197 the company’s creditors had no right to inspection of the documents enumerated therein, citing in support thereof an academic work, Fabia and Safa, Explanation of the Code of Commerce, Article 197, paragraph 9, where that point is made. It is true that the court went on to say that “the other aspect of the absence of rights for the third persons to view the mentioned documents is the obligation of the Chairman and the Board of Directors and the Directors not to brief the others on these documents or on the information they contain”, but that is, with great respect, unless justified by some provision or principle of Lebanese law which is not apparent, a non-sequitur. I have already pointed out that if it were correct the company could not carry on business. It has to be remembered that the judgment of the Lebanese court followed an ex parte hearing at which it heard no argument in opposition to the making of the order. The essential reasoning of the court upon which its decision is based seems to me to lie in the failure of the Claimant to have first obtained the order of exequatur which is apparently the necessary precursor to enforcement of an English judgment in Lebanon. The Claimant has now applied for an order of exequatur in Lebanon but it will be recalled that the Defendants have for their part already issued pre-emptive proceedings in Lebanon seeking a declaration that the English judgment is not enforceable. In any event it is not shown that provision of information about the project contracts by CCIC to this court and to the receiver would involve the Defendants in doing anything in Lebanon. It seems to me quite likely that the task would be co-ordinated from Athens where CCIC’s in-house counsel is to be found, together with other senior management such as Mr Burgan. In all the circumstances I am not persuaded that I should regard the Lebanese judgment of 14 April 2008 as necessarily containing a considered conclusion that Article 197 of itself and without more precludes the Defendants from complying with orders of the English court as to provision of information concerning their activities. However, even if I am wrong about that, there is nothing in the judgment which suggests that the inhibition on the Directors extends beyond the information contained in the formal documents enumerated in Article 197. Those documents deal with the overall financial position of the company – they are not concerned with the minutiae of the individual contractual arrangements into which the company has entered. Information concerning the terms of the individual construction contracts and any associated financing arrangements is not such as would be contained within the company documents listed in Article 197.

III. The Lebanese judgment

[28]The Lebanese judgment does not prohibit compliance with any judgment of the English court – it prohibits compliance only with the orders of Gloster J dated 20 December 2007. I do not consider that it should inhibit the court from making the receivership order now sought. In any event, I have already expressed my conclusion that the application for the order was made at the instance or at the very least with the active co-operation of the Defendant companies. They did not oppose its making and they have not sought its setting aside. Furthermore as I have pointed out at paragraph 26 above, the Defendant companies have already themselves on one occasion felt able to proceed in a manner which they regarded as contrary to their obligations as established by the order of the Lebanese court. In such circumstances it would not be appropriate to regard the Lebanese order as inhibiting this court from making the order which the interests of justice require. In expressing this conclusion I intend no disrespect to the Lebanese court. For the reasons I have given I do not consider that compliance with the order which I propose to make would in fact be prohibited by the order of the Lebanese court. However if I am wrong about that, it is plain to me that the Defendants have deliberately set out to obtain from the Lebanese court an order preventing compliance with the orders of a court to whose jurisdiction they have relevantly submitted, viz, the orders of Gloster J, and that they could procure the setting aside of that order if they perceived it as in their interests to do so. I referred briefly at paragraph 11 above to the making of the application to the Lebanese court on 11 April 2008. The preceding relevant history of similar applications to the Lebanese court is set out by the Claimant’s solicitor, Mr Simon Richard Morgan, at paragraphs 99 and 100 of his affidavit of 11 July 2008. It is to be noted that this material, or most of it, was not before David Steel J when he was asked in May 2008 to consider whether the Lebanese order entitled the Defendants to decline to supply information pursuant to the orders of Gloster J in the light of a term in her order which provided that nothing in that order should, 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. I should also note in passing that so far as concerns the receivables which are now sought to be made the subject of a receivership order, I doubt if any of them are payable in Lebanon. I propose to include in the order of the court a saving provision which will point out that, in relation to any particular asset, the Defendants and/or their directors are not required to disobey any order of any court in the jurisdiction in which that asset is located.

[29]I have already referred to Ms Salwa Khoury. Also involved in applications to the Lebanese court has been Mr Samir Sabbagh, the son of Mr Hasib Sabbagh, to whom I referred in paragraph 1 above. Mr Samir Sabbagh is a shareholder in CCIC, although I do not know if his shareholding is as insignificant as is that of Ms Khoury in CCOG. I reproduce below, with two small omissions, what Mr Morgan says about the various applications to the Lebanese court:

“99. … I believe that the Judgment Debtors have been involved in procuring the Lebanese Orders prohibiting compliance with the English orders for the following principal reasons: (A) The Judgment Debtors commenced the first proceedings in Lebanon on 10 July 2007 seeking a declaration that the English judgments could not be recognised and enforced in Lebanon (action 216). (B) On 12 November 2007, Salwa Khoury lodged an application in action 216 seeking an order prohibiting Samer Khoury from complying with an English order made under CPR Part 71 and seeking a declaration that the Part 71 order was not enforceable in Lebanon. On the same date, Samir Sabbagh lodged an application in almost identical form seeking an order prohibiting Toufic Khoury from complying with an order made under CPR Part 71. … (3) Both applicants instructed Caroline Moarbess, a lawyer listed on letter heading as being part of the same law firm that the Judgment Debtors had instructed. However, we have since been informed by Mr Chedid (the Judgment Debtors’ lawyer) that Ms Moarbess had set up practice in a separate firm earlier in 2007. (4) The fact that both applicants instructed the same lawyer (who had until recently worked with the Judgment Debtors’ lawyers) and lodged almost identical applications at the same time suggests that there must have been a central point of co-ordination. (5) The fact that the applicants were aware of the CPR Part 71 Orders suggests that they must have been brought to their attention by the Judgment Debtors or Samer Khoury and Toufic Khoury. (6) The applicants must have been provided with copies of the claim documents in action 216 by the Judgment Debtors since they were not party to the proceedings but they made applications in the proceedings and referred to the arguments set out in the claim documents. (7) The arguments set out in the application documents reveal a detailed knowledge of the English proceedings and the Yemen proceedings which, realistically, could only have been obtained from the Judgment Debtors. (8) The lengthy detailed jurisdictional arguments regarding the gathering of evidence in foreign proceedings reflect the positions taken by the Judgment Debtors in the English proceedings and it is highly unlikely that the applicants and Ms Moarbess would have produced these arguments without reference to the Judgment Debtors and/or their legal team. In particular, Ms Moarbess, displays a detailed knowledge of Belgian case law which I believe must have been as a result of liaison with the Judgment Debtors who instruct as part of their legal team, Professor Arnaud Nuyts, a professor at the University of Brussels in Belgium (see pages 9 and 10 of the application document dated 12 November 2007). (9) Although the applicants asserted that compliance with the Part 71 Orders would result in damage, they do not specify what that damage would be and they do not identify any unfair prejudice that would ensue (other than the companies complying with their legal obligations). This again suggests that the interests that are sought to be protected by the application are those of the company and not any third party. (10) There is no evidence that the Judgment Debtors contested these applications in any way although they were not subsequently pursued. (C) Any interests that are sought to be protected by the Order are in any event only interests that reflect those of the company; there is therefore no risk of prejudice to an independent third party. The only potential harm to a shareholder is the devaluation of the company by virtue of it complying with the Orders of the English court. In such circumstances it would be wholly inappropriate for the English court to refrain from granting an order that it would otherwise make. (D) The fact that Salwa Khoury and Samer Sabbagh have been provided with documents (outside the scope of Article 197 of the Lebanese Civil Code) relating to the case highlights the artificial nature of the arguments raised by the Judgment Debtors and the applicants that it would be a criminal offence for the companies to provide any information to third parties or the Receiver. (E) On 15 November 2007, further applications were brought by Salwa Khoury and Samir Sabbagh in a separate Lebanese court seeking orders prohibiting compliance with the CPR Part 71 orders. One of the principal arguments in support of the applications related to Article 197 of the Lebanese Civil Code (relating to shareholders and debenture holders’ rights to company information). (F) At around the same time that the above applications were being prepared, Mr Melkane was being instructed first on behalf of Wael Khoury (a former director of CCOG) and then on behalf of the Judgment Debtors to give expert evidence as to points of Lebanese law for the purposes of the English proceedings. (1) His first report was dated 21 November 2007 and contained the same arguments about the restrictions on the provision of information under article 197 of the Civil Code (as well as further arguments based on articles 167 Civil Code and 579 Criminal Code). The similarity of the arguments would be striking if the documents had been prepared entirely independently because it appears that there has never been any case involving a director being found to have breached article 197 by providing information pursuant to a foreign court order (I say this on the basis of the evidence of Mr Abirached) and, on its face, the provision does not appear to limit the provision of information by companies to third parties. (2) Mr Melkane’s second report, also dated 21 November 2007, was prepared for the purposes of post hearing submissions in the English proceedings in response to the Judgment Creditor’s applications for a freezing injunction, receivership order and affidavit of assets order. The opinion was addressed to the issue of whether individual directors should be named in the penal notice in the English freezing order. (G) On 25 November 2007, CCOG apparently executed an assignment agreement (under Lebanese law) purporting to assign various shares in CCOGNL in breach of a pledge to Centrica. (H) (Dewey & LeBoeuf ceased to act for the Judgment Debtors on 26 November 2007. They were replaced by Olswang who had previously acted only for the Directors). (I) On 20 December 2007, Mrs Justice Gloster DBE granted a freezing order over CCOG’s interest in the Concession, a receivership order over CCOG’s revenues from the Concession and an order for the provision of affidavits of assets by the Judgment Debtors. (J) On or around 9 January 2008, the directors of CCOG were all replaced by individuals (and non-family members) based in Lebanon rather than Greece. Similarly, on or around 21 January 2008, all the directors of CCIC (members of the Sabbagh and Khoury families and the holding company), the principal operating company in the CCC group said to be domiciled in Greece, were replaced by non-family members located in Lebanon. (K) On 10 January 2008, Salwa Khoury and Samir Sabbagh obtained orders from the Lebanese court prohibiting the directors from complying with the CPR Part 71 Orders (although such orders had in fact already been discharged by Master Miller). (L) On 11 January 2008, CCOG received early payment in relation to an oil sale in respect of which payment was due on 23 January 2008. This was in the context of the Receivership Order having been stayed temporarily until 15 January 2008. (M) On 18 January 2008, Salwa Khoury and Samir Sabbagh lodged further ex parte applications in Lebanon seeking Orders prohibiting the companies and their directors from complying with both the information provision requirements in the 20 December orders and the payment obligations in the Receivership Order. The following points should be noted in respect of these applications: (1) Again, these applications only seek to protect the interests of the Judgment Debtors and the reflective interests of their shareholders. (2) The applicants would appear to have been provided with copies of the 20 December Orders by the Judgment Debtors or their directors, otherwise they would have had no knowledge of their existence or terms. (3) The applications refer to the fact that the judgment debtor companies were ‘about to present a petition before the European courts in Strasbourg’. This is a reference to the application to the European Court of Human Rights that was subsequently lodged by the Judgment Debtors on 23 January 2008. The applicants could only have known this confidential information if they were in close contact with the Judgment Debtors and/or their legal team when preparing the application. (4) The Judgment Debtors have not challenged the applications dated 18 January 2008 in any way and they have not disputed any statements of fact or law made by the applicants; they left it to the judge to determine them, as explained in Mr Marina’s Fourth Witness Statement at paragraph 14. (N) On 21 January 2008, the Judgment Debtors served affidavits of assets pursuant to the Affidavits Order dated 20 December 2007. However, these were wholly insufficient; for example they failed to provide account numbers in respect of bank accounts and they identified CCIC’s construction projects by reference to objectively meaningless acronyms. (O) On 22 January 2008, Simmons & Simmons wrote to Olswang in relation to the Judgment Debtors’ involvement in the Lebanese proceedings (Exhibit SRM1, page 1). This letter stated, inter alia: ‘Please confirm without delay: (1) whether any of the directors of your clients had any involvement with the commencement of these [Lebanese] proceedings and/or any communication with the parties commencing the proceedings in relation to the enforcement of the English court orders; (2) whether your firm has advised in relation to the commencement or legitimacy of these proceedings; (3) the precise nature of all proceedings commenced in Lebanon against CCIC and/or CCOG and/or their directors in relation to the issue of compliance with the orders of the English court in these proceedings; and (4) please also provide copies of all related documentation and certified translations of such documents.’ Olswang replied in their third letter of 31 January 2008 (Exhibit SRM1, page 3) refusing to respond to the questions raised. (P) Although Mr Masri was informally notified of some of the Lebanese applications through the English proceedings, he was not served with the Lebanese proceedings or joined in to them despite the fact that he was clearly an interested party. (Q) Despite the fact that the Judgment Debtors now refuse to comply with the disclosure obligations in the Order dated 11 February 2008, they did not raise any arguments as to the obligations infringing Lebanese law at the hearing on that date. (R) The Judgment Creditor lodged an application seeking further and better affidavits. The Judgment Debtors sought to delay the listing of this matter but it was in any event listed for 19 March 2008. On 19 March 2008 Mr Justice Flaux found the Judgment Debtors to have breached the Affidavits Order and ordered them to provide further affidavits by 16 April 2008. (S) On 04 April 2008, the Judgment Debtors’ appeals against the 20 December Orders were dismissed and the appointment of the receiver took effect. (T) On 14 April 2008, the Lebanese court, acting without notice to Mr Masri, granted a temporary Order pursuant to the applications dated 18 January 2008 prohibiting the Judgment Debtors from complying with the information provision requirements in the Receivership Order and the Affidavits Order. However, the Order did not prohibit the payment of monies pursuant to the Receivership Order as had been sought in the 18 January applications. (U) On 16 April 2008, the Judgment Debtors served further affidavits of assets in accordance with the Order of Flaux J. There is no evidence that any of the directors have since been subject to criminal proceedings in Lebanon for having disclosed information pursuant to an Order of the English court. (V) On 15 May 2008, the Judgment Debtors’ Lebanese lawyer, Mr Chedid, served his third witness statement as part of the English proceedings. He gave no evidence as to his clients’ involvement in the intervention applications despite questions having been raised by Simmons & Simmons. (W) On 5 June 2008, the Judgment Debtors’ Lebanese lawyers lodged documents in the Lebanese proceedings which in effect seek a ruling that the Judgment Debtors be prohibited from paying any monies to the Receiver. This is articulated as a request for clarification as to the meaning of the 14 April Order; however, given that the original application had specifically sought an order prohibiting the payment of monies and such an order was not granted it appears in reality to be a request for the order to be broadened. The document lodged by the Judgment Debtors states (according to an informal translation): ‘6. The Defendant requests: [clarification of the] Legal position towards the Lebanese order from one side and the obligations tacitly derived from the Receivership order dated 20.12.2007 especially whether the transfer of the proceeds of oil return to the Receiver represents a breach or not to the Lebanese order as the transfer of proceeds in compliance to the Receivership order would providehim information about the first defendant especially regarding the details of the transaction (i.e. price, income and other).’ (emphasis added) 100. In the circumstances of this case, the applications lodged by Salwa Khoury and Samir Sabbagh should not be considered as applications made by independent third parties to protect their legitimate interests. I believe that they were applications made at the behest of, and with the co-operation of, the Judgment Debtors themselves. The Judgment Debtors are the only parties who stand to gain from these applications and they have conspicuously avoided replying to questions about this issue in correspondence or evidence.”

I should also mention that the Mr Samer Khoury referred to in paragraph 99(B) above is as I understand it Ms Salwa Khoury’s brother and that Mr Morgan omits from his chronology the ex parte application made by Ms Salwa Khoury on 11 April 2008 which followed hard upon the upholding by the Court of Appeal of the receivership order made by Gloster J. Given that these are family owned companies I regard the inference derived by Mr Morgan at paragraph 100 of his affidavit as wholly irresistible. It would in all the circumstances be irresistible even if they were not family owned companies. … (3) Both applicants instructed Caroline Moarbess, a lawyer listed on letter heading as being part of the same law firm that the Judgment Debtors had instructed. However, we have since been informed by Mr Chedid (the Judgment Debtors’ lawyer) that Ms Moarbess had set up practice in a separate firm earlier in 2007. (4) The fact that both applicants instructed the same lawyer (who had until recently worked with the Judgment Debtors’ lawyers) and lodged almost identical applications at the same time suggests that there must have been a central point of co-ordination. (5) The fact that the applicants were aware of the CPR Part 71 Orders suggests that they must have been brought to their attention by the Judgment Debtors or Samer Khoury and Toufic Khoury. (6) The applicants must have been provided with copies of the claim documents in action 216 by the Judgment Debtors since they were not party to the proceedings but they made applications in the proceedings and referred to the arguments set out in the claim documents. (7) The arguments set out in the application documents reveal a detailed knowledge of the English proceedings and the Yemen proceedings which, realistically, could only have been obtained from the Judgment Debtors. (8) The lengthy detailed jurisdictional arguments regarding the gathering of evidence in foreign proceedings reflect the positions taken by the Judgment Debtors in the English proceedings and it is highly unlikely that the applicants and Ms Moarbess would have produced these arguments without reference to the Judgment Debtors and/or their legal team. In particular, Ms Moarbess, displays a detailed knowledge of Belgian case law which I believe must have been as a result of liaison with the Judgment Debtors who instruct as part of their legal team, Professor Arnaud Nuyts, a professor at the University of Brussels in Belgium (see pages 9 and 10 of the application document dated 12 November 2007). (9) Although the applicants asserted that compliance with the Part 71 Orders would result in damage, they do not specify what that damage would be and they do not identify any unfair prejudice that would ensue (other than the companies complying with their legal obligations). This again suggests that the interests that are sought to be protected by the application are those of the company and not any third party. (10) There is no evidence that the Judgment Debtors contested these applications in any way although they were not subsequently pursued. (1) His first report was dated 21 November 2007 and contained the same arguments about the restrictions on the provision of information under article 197 of the Civil Code (as well as further arguments based on articles 167 Civil Code and 579 Criminal Code). The similarity of the arguments would be striking if the documents had been prepared entirely independently because it appears that there has never been any case involving a director being found to have breached article 197 by providing information pursuant to a foreign court order (I say this on the basis of the evidence of Mr Abirached) and, on its face, the provision does not appear to limit the provision of information by companies to third parties. (2) Mr Melkane’s second report, also dated 21 November 2007, was prepared for the purposes of post hearing submissions in the English proceedings in response to the Judgment Creditor’s applications for a freezing injunction, receivership order and affidavit of assets order. The opinion was addressed to the issue of whether individual directors should be named in the penal notice in the English freezing order. (1) Again, these applications only seek to protect the interests of the Judgment Debtors and the reflective interests of their shareholders. (2) The applicants would appear to have been provided with copies of the 20 December Orders by the Judgment Debtors or their directors, otherwise they would have had no knowledge of their existence or terms. (3) The applications refer to the fact that the judgment debtor companies were ‘about to present a petition before the European courts in Strasbourg’. This is a reference to the application to the European Court of Human Rights that was subsequently lodged by the Judgment Debtors on 23 January 2008. The applicants could only have known this confidential information if they were in close contact with the Judgment Debtors and/or their legal team when preparing the application. (4) The Judgment Debtors have not challenged the applications dated 18 January 2008 in any way and they have not disputed any statements of fact or law made by the applicants; they left it to the judge to determine them, as explained in Mr Marina’s Fourth Witness Statement at paragraph 14. ‘Please confirm without delay: (1) whether any of the directors of your clients had any involvement with the commencement of these [Lebanese] proceedings and/or any communication with the parties commencing the proceedings in relation to the enforcement of the English court orders; (2) whether your firm has advised in relation to the commencement or legitimacy of these proceedings; (3) the precise nature of all proceedings commenced in Lebanon against CCIC and/or CCOG and/or their directors in relation to the issue of compliance with the orders of the English court in these proceedings; and (4) please also provide copies of all related documentation and certified translations of such documents.’ Olswang replied in their third letter of 31 January 2008 (Exhibit SRM1, page 3) refusing to respond to the questions raised. ‘6. The Defendant requests: [clarification of the] Legal position towards the Lebanese order from one side and the obligations tacitly derived from the Receivership order dated 20.12.2007 especially whether the transfer of the proceeds of oil return to the Receiver represents a breach or not to the Lebanese order as the transfer of proceeds in compliance to the Receivership order would providehim information about the first defendant especially regarding the details of the transaction (i.e. price, income and other).’ (emphasis added)

[30]On the resumed hearing before me there was put in an affidavit of Mr Samir Sabbagh in an attempt to persuade me that the latter had acted independently of the Defendants. Somewhat unpromisingly that affidavit begins with a recital that Mr Sabbagh is authorised to make it on behalf of CCIC and CCOG. In so far as the affidavit attempts to explain that Mr Sabbagh has done nothing improper, I entirely accept it. I do not however regard the contents of the affidavit as necessarily inconsistent with my overall conclusion that these applications were made with the active co-operation of the Defendants and very probably at their instance. It is notable that Mr Sabbagh does not suggest that he and Ms Khoury have paid the legal expenses associated with their applications to the Lebanese court. My conclusion is reinforced by consideration of the seventh affidavit, dated 25 August 2008, of Mr Suheil Nasser, Chairman of both Defendants. Whilst explaining why both companies regard it as not in their best interests to honour the judgment of this court, he conspicuously fails to deny that the applications to the Lebanese court have been made with their knowledge and consent and, as I think likely, at their instance.

[31]Mr Layton submitted that: 1) It would require a truly exceptional case to justify the court in granting a receivership order over the foreign assets of a foreign judgment debtor; 2) A receivership order by way of equitable execution should not invite or require the judgment debtor to break pre-existing contractual commitments; 3) A receivership by way of equitable execution should not be granted if its effect would be seriously to interfere with the interests of third parties, and 4) The dictates of comity must be observed. Point (1) may be overstated but it is certainly not a jurisdiction lightly to be exercised. Although not amounting to execution the order has extra-territorial effect. However the decision of the Court of Appeal has already established that the jurisdiction can appropriately be exercised in this case. The case has if anything become still more exceptional since it was last before the Court of Appeal – the Court of Appeal’s order has been rendered nugatory. Points 2, 3, and 4 are unexceptional. I hope I have sufficiently explained why in my judgment they provide here no impediment to the appointment of a receiver.

[32]I propose therefore to make a receivership order broadly in the form of the working draft submitted to the court by the Claimant on 27 August 2008 in respect of the CCIC projects enumerated in Part 1 of the Schedule attached to the receivables Freezing Order, which for the avoidance of doubt will not for the time being include the Qatar Shell project which is already the subject of an interim receivership order made ex parte in proceedings in Bermuda.

[33]The precise wording of the order, if not agreed, can be dealt with on the handing down of this judgment. I shall deal briefly here with the main points which were raised before me: 1) I see nothing inappropriate in deeming reasonable letters in the form annexed as Schedules C and D to the draft order. Whether required to or not, David Steel J has already regarded as reasonable a letter substantially in the form of Schedule C. It should be made clear in Schedule C (it is already implicit) that the statement that no agent or employee of CCIC has authority to override the instructions contained in the letter is a statement of CCIC’s position so far as it is concerned. In Schedule D there should be deleted the words “and correspondence between the Company and your bank regarding the operation of the Account”. 2) The order itself should contain a provision, anyway implicit, that either CCIC or the Receiver shall have the right to apply to the court for directions. I believe that in practice this, combined with the provisions about persons outside England and Wales, is likely to be adequate to deal with any concern raised by third parties. In any event it is unrealistic to expect third parties to apply to the English court for clarification. Of course they will be able to do so if they so wish. 3) Clause 7(D) of the Order should be qualified by the words “save in so far as inconsistent with any presently existing contractual obligation”. 4) I agree that seven days in the proviso to Clause 7(A) is likely to be too short, although in the absence of any proper information concerning the nature of the documentation the point is difficult to evaluate. I shall allow 21 days, followed by seven days in respect of subsequent requests by the receiver. 5) It is clear what is intended by the final paragraph of Clause 7(C) but as drafted it does not actually make sense. I would also here substitute “as soon as possible” for “within seven days”. 6) The Order should include the following term:

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

Freezing Orders

[34]At paragraph 134 of his judgment of 4 April 2008 Lawrence Collins LJ said:

“I am satisfied that there is no error of principle in Gloster J’s exercise of discretion in relation to the three orders. In particular, a freezing order will be granted more readily after judgment than before: Babanaft International Co. S.A. v. Bassatne [1990] Ch 13 at 37; Republic of Haiti v. Duvalier [1990] 1 QB 202, at 214; Dicey, paragraph 8-014. It is sufficient for the grant of relief that there is a real risk that the judgment will remain unsatisfied if injunctive relief is refused: Ketchum International Plc v. Group Public Relations Holdings Limited [1997] 1 WLR 4, CA.”

Mr Layton submits that properly read Ketchum is no authority for the proposition there stated. It is true that the point did not need to be decided. However Stuart-Smith LJ stated the proposition exactly as Lawrence Collins LJ records it and Peter Gibson and Ward LJJ agreed with him. It is the basis upon which the jurisdiction is routinely exercised – see Gee, Commercial Injunctions, 5th Edition, at paragraph 12.033. Developments since the Court of Appeal gave judgment on 4 April 2008 demonstrate that the grant of relief in aid of execution is no less appropriate now than it was then. Mr Layton suggested that the orders were being used as an instrument of oppression in order to pressurise the Defendants into paying the judgment debt, and in that regard he relied upon what was said by Sir Thomas Bingham MR and Phillips LJ in Camdex International Limited v. Bank of Zambia (2)

[1997] 1 WLR 632

. However that was a case in which the assets seized were of no value on the open market and against which therefore execution could not be levied. The use of the freezing order jurisdiction was therefore illegitimate since it would not assist in the ultimate collection of the debt. Here, the freezing orders have been granted for the entirely legitimate purpose of assisting in the process of ultimate collection of the debt. As Lawrence Collins LJ observed at paragraph 135 of his judgment, in relation to the orders there under consideration, whether they will have that effect remains to be seen, but it is certainly in my judgment premature to consider setting them aside. I agree that it would be inappropriate to leave them in place until the crack of doom – c.f. per Staughton LJ in Republic of Haiti at page 214. The Defendants can apply at any time for their discharge upon provision of credible evidence that the Claimant is maintaining them for an illegitimate purpose. There may well come a time beyond which the absence of any attempt at execution in a given jurisdiction may militate in favour of such an application, but that point has not yet been reached. One very good reason why that is so is because the Claimant has no up-to-date information as to what is contained in the various bank accounts which have been frozen. Information was supplied as at 16 April 2008 but it was only on 19 May 2008 that a freezing order was made. I shall include in the continued freezing order in respect of the bank accounts a requirement for the provision of up-to-date information as per paragraph 7(1) of the draft Order at Bundle 1 Tab 2. I shall allow fourteen days in respect of the provision of CCOG’s estimate of the value of its shares in CCC Energy Nigeria Limited.

[35]The “ordinary course of business” proviso as directed at the hearing on 18 July 2008 will continue in the receivables freezing order. It is obviously necessary in order to allow the contracts to continue to be performed in the usual manner. The freezing order in respect of the bank accounts have contained no such proviso since it was granted on 19 May 2008 and there is no evidence that that absence has caused any actual disruption to the Defendants’ business. For the avoidance of doubt I do not read paragraph 27 of Mr Marina’s sixth witness statement as providing such evidence and I read paragraph 11 of Mr Nasser’s eighth affidavit as positively indicating that there has been no such disruption. In any event I am satisfied that in relation to assets such as balances in bank accounts an “ordinary course of business” exception is inappropriate in the post-judgment environment. I respectfully adopt the reasoning of Colman J at page 412 of the Soinco case which I have set out above. That was of course a case concerned with a receivership order rather than a freezing order, but it seems to me that those considerations apply a fortiori to a post-judgment freezing injunction.

[36]I turn finally to Mr Layton’s submission that the freezing order over bank accounts and certain shares granted by David Steel J on 19 May 2008 on the ex parte application of the Claimant should in any event be set aside as having been obtained in an irregular and inappropriate fashion. In the alternative, Mr Layton seeks such costs order as will reflect the court’s disapproval of the procedure adopted. I shall deal with this point shortly. On 19 May 2008 David Steel J heard CCOG’s inter partes application raising two points:(i) whether CCOG was obliged to provide information pursuant to Gloster J’s receivership order in the light of (a) paragraph 15 of that order, a saving in respect of the Defendants’ ability to obey orders of a court of competent jurisdiction outside England and Wales and (b) the order of the Lebanese court of 14 April 2008, and

(ii) whether the receiver’s requirement that CCOG write a particular form of letter to a third party purchaser was within the scope of the receivership order and reasonable. Immediately after that contested application, and unbeknown to the Defendants, the Claimant made an ex parte application to David Steel J for a freezing order over certain bank accounts and shares. The ex parte application was supported by an affidavit of Mr Morgan dated 15 May 2008 which was supplied to the judge in advance of the inter partes hearing. Paragraph 17 of that affidavit stated Mr Morgan’s belief that the Defendants would attempt to frustrate enforcement proceedings in any way possible. Paragraphs 75 to 78 suggested that the Defendants might have failed to disclose an interest in CCC Energy Nigeria Limited. It is said that it was inappropriate that this prejudicial material should without the knowledge of the Defendants have been placed before the judge before he heard the inter partes hearing. Mr Layton relies upon some trenchant observations of Dillon and Leggatt LJJ in Lunn v. All Starr Video Limited, The Times 25 March 1993, 137 SJ LB 108. In that case a Deputy Judge in the course of a High Court trial entertained an ex parte application for the grant of a world-wide freezing order against a personal Defendant whilst that Defendant was in the course of giving his evidence and before he had been re-examined. In the course of so doing the judge heard a prejudicial speech about the Defendant in his absence and, in determining to grant the relief, formed an adverse view about him in respect of the likelihood of his seeking to take steps to frustrate the enforcement of any judgment which might ultimately be given against him. Whilst the Court of Appeal unsurprisingly deprecated this procedure in strong terms, it is to be noted that the court in any event regarded it as a wholly inappropriate case in which to have granted freezing order relief and set it aside on that ground alone. It is also to be noted that the real vice in the procedure adopted lay in its prejudicial effect upon the inter partes hearing, not upon the integrity of the ex parte hearing. The present case is very different. David Steel J was not hearing a trial or application in which issues of credibility or reliability were at stake. He was hearing an argument as to the true construction of the saving provision in Gloster J’s order, and its effect, if any, in the light of the Lebanese order, and argument as to the ambit of the receivership order and the reasonableness of a request made by the receiver pursuant thereto. By the time this matter was before David Steel J it had already been found both by Gloster J and by the Court of Appeal, on several occasions, that the Defendants were determined to do everything possible to frustrate enforcement of the Claimant’s judgment against them. Furthermore, what was said in Mr Morgan’s affidavit was of no relevance to the issues raised by and debated in the inter partes application. As it happens on the first and principal issue argued inter partes the Defendants were in any event successful. In my judgment if there were here anything in the suggestion of irregularity it could only have an impact on the integrity of the inter partes proceedings. There is no basis upon which the integrity of the ex parte application can be impugned. David Steel J reserved the costs of the ex parte application to the judge hearing the application on the return date. Since the integrity of the ex parte hearing is not in issue, there can be no basis for the making of any special costs order in relation thereto.

[37]I hope that I have dealt with the main points of contention on the wording of the continued freezing orders. If they are not agreed they too can be the subject of discussion on the handing down of this judgment.

Cited in 13 later judgments

and 4 more of the most senior