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Session 2008 - 09 Publications on the Internet Judgments PDF Print Version 
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| Judgments - Masri (Respondent) v Consolidated Contractors International Company SAL and others and another (Appellant) and another
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HOUSE OF LORDS SESSION 2008-09 [2009] UKHL 43 on appeal from:[2008] EWCA Civ 876
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Masri (Respondent) v Consolidated Contractors International Company SAL and others and another (Appellant) and another Appellate Committee Lord Scott of Foscote Lord Rodger of Earlsferry Lord Walker of Gestingthorpe Lord Brown of Eaton-under-Heywood Lord Mance Counsel Appellants: Alexander Layton QC Thomas Raphael (Instructed by Olswang ) Respondents: Laurence Rabinowitz QC Simon Salzedo Colin West (Instructed by Simmons & Simmons) Hearing dates: 18, 19, 20 and 21 MAY 2009 ON THURSDAY 30 JULY 2009 HOUSE OF LORDS OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Masri (Respondent) v Consolidated Contractors International Company SAL and others and another (Appellant) and another [2009] UKHL 43 LORD SCOTT OF FOSCOTE My Lords, 1. I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Mance. I agree with it, and for the reasons given by Lord Mance I would allow this appeal and restore the order of Master Miller. LORD RODGER OF EARLSFERRY My Lords, 2. I have had the advantage of reading in draft the speech which is to be delivered by my noble and learned friend, Lord Mance. I agree with it and, for the reasons which he gives, I too would allow the appeal and make the order which he proposes. LORD WALKER OF GESTINGTHORPE My Lords, 3. I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Mance. I agree with it, and for the reasons given by Lord Mance I would allow this appeal and restore the order of Master Miller. LORD BROWN OF EATON-UNDER-HEYWOOD My Lords, 4. I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Mance. I agree with it, and for the reasons given by Lord Mance I would allow this appeal and restore the order of Master Miller. LORD MANCE My Lords, Introduction 5. Mr Masri, the respondent, is owed a judgment debt of US$ 64m by Consolidated Contractors International Company SAL (“CCIC”) and Consolidated Contractors (Oil and Gas) Company SAL (“CCOG”), both Lebanese companies. The debt arises from judgments on liability and quantum of Gloster J in the Commercial Court on 28 July 2006 and 4 May 2007. CCIC and CCOG have manifested their intention to avoid payment of this judgment debt at all costs. Permissions to appeal to the House of Lords on jurisdictional and other issues in the proceedings were discharged for failure to comply with conditions requiring payment of all or most of the judgment debt. Lord Bingham of Cornhill observed too truly in Société Eram Shipping Co. Ltd. v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, para. 10: “As many a claimant has learned to his cost, it is one thing to recover a favourable judgment; it may prove quite another to enforce it against an unscrupulous defendant. But an unenforceable judgment is at best valueless, at worst a source of additional loss.” He added that this was a problem that our Victorian forebears had addressed with characteristic energy and pragmatism. That applies in this case. CPR 71 on which the appeal turns reflects the provisions of s.60 of the Common Law Procedure Act 1854, as extended by the Rules of the Supreme Court 1883 to redress the effect of the decision in Dickson v Neath and Brecon Railway Co (1869) LR 4 Ex 87. 6. The issues now before your Lordships arise not between Mr Masri and CCIC or CCOG, but between Mr Masri and Mr Toufic Khoury. Mr Khoury was the chairman, general manager and a director of CCIC. He has at all times been habitually resident in Greece. On 6 July 2007, Mr Masri obtained without notice an order for his examination as an officer of CCIC in respect of CCIC’s means under CPR 71. The order, granted without notice and on paper by Master Miller, provided for service on the London solicitors then acting for CCIC. It is common ground that this was not appropriate. Subsequent steps were taken to serve Mr Khoury personally in Greece. 7. On an application by Mr Khoury on 20 December 2007, Master Miller set aside the order, primarily on the grounds of lack of jurisdiction under both European Community and domestic law, and without finding it necessary to determine whether valid personal service had been effected in Greece. He gave permission for a “leap-frog” appeal to the Court of Appeal on all but one presently immaterial issue. On 28 July 2008 the Court of Appeal allowed Mr Masri’s appeal, and remitted the matter for further consideration of the issue relating to the validity of the service effected in Greece. The House gave leave to appeal on 14 January 2009, indicating that it would hear first the issues of English law, and that, if the appeal failed on those points, it would refer the points of European law concerning in particular the application of the Evidence Regulation (EC) No 1206/2001 of 28 May 2001 and the Brussels Regulation (EC) No 44/2001 to the Court of Justice. In the meanwhile in January 2008 Mr Khoury resigned from his offices with CCIC, while continuing to enjoy the benefit of the same legal team as represents CCIC. In December 2008 CCIC entered into judicial administration in Lebanon, but the appeal proceeds on the basis of the facts before Master Miller in December 2007. The Court of Appeal ordered on 19 February 2009 that no examination of Mr Khoury should take place until after the House’s determination of the English law issues. 8. CPR 71 provides: “71.2 Order to attend court (1) A judgment creditor may apply for an order requiring - (a) a judgment debtor; or (b) if a judgment debtor is a company or other corporation, an officer of that body, to attend court to provide information about - (i) the judgment debtor’s means; or (ii) any other matter about which information is needed to enforce a judgment or order. (2) An application under paragraph (1) - (a) may be made without notice; and (b) (i) must be issued in the court which made the judgment or order which it is sought to enforce, except that (ii) if the proceedings have since been transferred to a different court, it must be issued in that court. (3) The application notice must - (a) be in the form; and (b) contain the information required by the relevant practice direction. (4) An application under paragraph (1) may be dealt with by a court officer without a hearing. (5) If the application notice complies with paragraph (3), an order to attend court will be issued in the terms of paragraph (6). (6) A person served with an order issued under this rule must - (a) attend court at the time and place specified in the order; (b) when he does so, produce at court documents in his control which are described in the order; and (c) answer on oath such questions as the court may require. (7) An order under this rule will contain a notice in the following terms - ‘You must obey this order. If you do not, you may be sent to prison for contempt of court.’” The issues 9. The issues now before the House are short, although the argument was long. They are (1) whether the language of CPR 71.2 purports to confer power to order examination of a foreign director of a foreign company, (2) whether it purports to confer power to order such examination in respect of foreign assets, (3) whether, if it does, it is ultra vires the rule-making power, (4) whether, if it does, there is any basis under CPR 6 for service upon Mr Khoury out of the jurisdiction in Greece, and (5) whether, if there is, the English courts should nonetheless give “primacy” or priority to use of the Evidence Regulation (EC) No 1206/2001, before contemplating such domestic means. Mr Khoury submits that the last contention, were it thought to have any force at all and to be potentially decisive, should be referred along with the other European issues to the Court of Justice. Scope of rule-making power 10. It is convenient to start with the third issue. This depends upon the width of the rule-making power contained in s.1 of the Civil Procedure Act 1997. The first and second issues arise only if the first issue is answered in Mr Masri’s favour and they depend upon the proper construction of CPR 71 and CPR 6. A conclusion about what would be within or outside the rule-maker’s power may itself affect the construction to be put on the rules. At the heart of Mr Alexander Layton QC’s submissions on behalf of Mr Khoury on all three issues is however a single theme, that the court lacks extra-territorial power - over Mr Khoury because he is abroad, and over CCIC’s assets (about which Mr Masri wishes to question Mr Khoury) because they are also abroad. The principle relied upon is one of construction, under-pinned by considerations of international comity and law. It is that “Unless the contrary intention appears ….. an enactment applies to all persons and matters within the territory to which it extends, but not to any other persons and matters": Bennion, Statutory Interpretation, 4th ed. (2002), p 282, s.106, cited with approval, along with the considerable case-law, by Lord Bingham of Cornhill in R (Al-Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26, [2008] AC 153, para.11. The principle may not apply, at any rate with the same force, to English subjects (see e.g. The Zollverein (1856) Swab. 96, 98, per Dr Lushington and Ex p. Blain, Ex p Sawers (1879) 12 Ch D 522, 526, per James LJ, cited with approval by Lord Scarman in Clark v Oceanic Contractors Inc. [1983] 2 AC 130, 144E-H), but that is presently irrelevant. Whether and to what extent it applies in relation to foreigners outside the jurisdiction depends ultimately as Lord Wilberforce said in Clark v Oceanic Contractors Inc. (p 152C) upon who is “within the legislative grasp, or intendment” of the relevant provision. To this a nuanced answer may be given, as in that case where United Kingdom PAYE legislation was held to apply to a foreign company employing workers to work in North Sea operations and as in Holmes v Bangladesh Biman Corp. [1989] AC 1112 where apparently general wording of a United Kingdom carriage by air Order was not taken to apply to carriage by air wholly to be performed in the territory of a foreign state. 11. The rule-making power in s.1 of the Civil Procedure Act 1997 reads: "1 Civil Procedure Rules (1) There are to be rules of court (to be called ‘Civil Procedure Rules’) governing the practice and procedure to be followed in- ……(b) the High Court ..…. (2) Schedule 1 (which makes further provision about the extent of the power to make Civil Procedure Rules) is to have effect.” Schedule 1 includes these provisions: “1. Among the matters which Civil Procedure Rules may be made about are any matters which were governed by the former Rules of the Supreme Court …. ….. 4. Civil Procedure Rules may modify the rules of evidence as they apply to proceedings in any court within the scope of the rules.” This language raises the questions: what is the scope of “practice and procedure” within s.1(1), and what is the scope of the matters “governed by the former Rules of the Supreme Court” to which paragraph 1 of Schedule 1 refers? Mr Layton took the House through legislative and rule-making history from the reign of Queen Elizabeth I onwards. His primary submission was that any exercise of jurisdiction in respect of foreigners abroad fell outside the concept of “practice and procedure” and required express statutory legitimation before it could become one of the matters governed by rules of court. He cited Lord Halsbury’s statement in British South Africa Company v. Companhia de Moçambique [1893] AC 602, 630 that “Rules of procedure and practice in England would not, I think, in the contemplation of any one, touch questions of territorial or international jurisdiction". That was however said in relation to a claim brought for trespass to land situate abroad, long recognised as a context in which jurisdiction is strictly territorial. He also cited In re Grosvenor Hotel, London (No 2) [1965] Ch 1210 and General Mediterranean Holdings SA v Patel [2000] 1 WLR 272 for the proposition that rules of practice and procedure cannot alter substantive law (in those cases, the rules relating to privileged documents). In the former case, it was also said that they cannot alter rules of evidence, a matter now expressly catered for by Schedule 1, para. 4 to the Civil Procedure Act 1997. 12. In the present case, Mr Layton also relies upon the limitation of the court’s power to enforce the attendance of witnesses or fine defaulting witnesses. From the Statute of Elizabeth (1562) onwards, this had been regulated by statute and had never extended beyond the United Kingdom. The procedure enacted in relation to other jurisdictions involves the taking of evidence, on commission or otherwise, with the assistance of the foreign court. The service of a writ of subpoena is still only possible under s.36 of the Supreme Court Act 1981 in respect of persons in one of the parts of the United Kingdom. The limitation of the court’s power in this respect corresponds with the principle of international law, summarised robustly by Dr Mann in his Hague lecture “The Doctrine of Jurisdiction in International Law” (Recueil des Cours, 1964-I, The Definition of Jurisdiction, p.137): “Nor is a State entitled to enforce the attendance of a foreign witness before its own tribunals by threatening him with penalties in case of non-compliance. There is, it is true, no objection to a State, by lawful means, inviting or perhaps requiring a foreign witness to appear for the purpose of giving evidence. But the foreign witness is under no duty to comply, and to impose penalties upon him and to enforce them against his property or against him personally on the occasion of a future visit constitutes an excess of criminal jurisdiction and runs contrary to the practice of States in regard to the taking of evidence as it has developed over a long period of time.” 13. With regard to the heads of extra-territorial jurisdiction involved in what used to be RSC O.11 and is now CPR 6, Mr Layton was able to trace many of them to express statutory provisions. But he accepted that there are a number which cannot be so derived. Thus, for example, the Rules of the Supreme Court 1883 were made under s.17 of the Supreme Court of Judicature Act 1875, which authorised the making of rules for regulating practice and procedure. But they included for the first time as grounds for service out of the jurisdiction that relief was “sought against any person domiciled or ordinarily resident within the jurisdiction” (para. (c)) and that “any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction” (para. (g)). Much later, of course, the latter provision was itself amended to apply whether the action was brought against another person served within or out of the jurisdiction: SI 1983/1181. A reading of the Supreme Court Practice 1997 (applicable immediately prior to the CPR) makes it clear that there was a regular process of amendment and minor extension of the powers under O.11 in order to address some new need or “small but irritating loophole": see 11/1 (history of rule, including SI 1983/1181 and its amendment by SI 1990/1689 and 2599, SI 1992/1907 and SI 1993/ 2760) and notes 11/1/18 (breach within preceded by breach out of the jurisdiction), 11/1/19 (tort), 11/1/23 (trusts) and 11/1/25 (foreign judgment or award sufficient ground for grant of leave without presence of assets here). Most recently, following the expression by the Court of Appeal in National Justice Compania Naviera SA v Prudential Assurance Co. Ltd. (The Ikarian Reefer)(No 2) [2000] 1 WLR 603, 615D-F of anxiety about the existence of a possible lacuna in the rules, the rule-making committee added CPR 6.20(17) expressly to enable service out of the jurisdiction of a claim against a non-party for costs under Supreme Court Act 1981 s. 51 (now s. 4 of the Courts and Legal Services Act 1990) as interpreted by the House in Aiden Shipping Co. Ltd. v Interbulk Ltd. [1986] AC 965. 14. In these circumstances I find both unpromising and unattractive Mr Layton’s submission that the rule-making power in respect of extra-territorial jurisdiction is limited to matters covered by specific statutory authority. Parliament must be taken to have understood and endorsed the manner in which the power has been understood and exercised over the years; and it permits the extension of the jurisdiction of the English courts over persons abroad to cover new causes of action and situations. This being so, I would also reject, indeed regard as paradoxical, Mr Layton’s further submission that the rule-making power in respect of persons outside the jurisdiction must exclude “purely procedural powers against non-parties". The exercise of the power to make CPR 6.20(17) was in my view legitimate. The statutory constraint contained in s. 36 of the Supreme Court Act precludes the possibility of a rule requiring an ordinary witness outside the jurisdiction to attend for examination within the jurisdiction. But it seems to me that the statutory rule-making power is wide enough, in principle, to permit the rule-making authority to enact rules relating to the examination of an officer abroad of a company against which a judgment has been given within the jurisdiction. While the two situations are not precisely comparable (see below), it is of some interest in this connection to note the origin of the rule-making power which was held by the Court of Appeal in In re Seagull Manufacturing Co. Ltd. [1993] Ch 345 to enable service out of the jurisdiction of an order for the public examination of an officer of a company being wound up by the court. S. 411 of the Insolvency Act 1986 authorises rules “for the purpose of giving effect” to, inter alia, Part IV of that Act, which includes the provisions in s.133 for public examination of such an officer. Rule 12.12 of the Insolvency Rules 1986 (SI 1986/1925), which was held to permit service out, was made under that general power. 15. I would also reject Mr Layton’s submission that s.1 of the Civil Procedure Act 1997, should be read as limited to assets within the jurisdiction. Rules of practice and procedure could clearly be made to enable the examination of an officer within the jurisdiction about assets anywhere worldwide. If and so far as it would be legitimate to make a rule for the examination of such an officer who is abroad, I see no basis for limiting the scope of the power to authorise such examination to assets within the jurisdiction. Scope of CPR 71 16. I turn to the scope of the rule actually made. I accept Mr Layton’s submission that, even though the rule-making power is wide enough to enable rules to be made relating to the examination of an officer who is outside the jurisdiction, the presumption against extra-territoriality still applies when considering the scope of CPR 71. Mr Laurence Rabinowitz QC for Mr Masri points out that CPR 71 covers first and foremost judgment debtors who may be anywhere in the world. It must be possible to obtain an order for examination of an individual when he or she is the judgment debtor. Service out of the jurisdiction on such an individual will be possible with leave under, or without leave by implication from, the terms of CPR 6.30(2), stating: “…. where the permission of the court is required for a claim form to be served out of the jurisdiction the permission of the court must also be obtained for service out of the jurisdiction of any other document to be served in the proceedings". O 11, r 9(4) (the differently worded predecessor to CPR 6.30(2)) was, rightly, held to authorise service out with leave in such a situation in Union Bank of Finland Ltd. v Lelakis [1997] 1 WLR 590. Further, I would accept Mr Rabinowitz’s submission that there is nothing in CPR 71 to limit its scope to domestic assets. The Court of Appeal was right to reject a contrary submission in Interpool Ltd. v Galani [1988] 1 QB 738. 17. That being so, Mr Rabinowitz submits that, where the judgment debtor is a company, there is no reason to limit the concept of “an officer of that body” to an officer within the jurisdiction; the situations of an individual and corporate debtor ought to be given parallel effect. Mr Layton counters by submitting, correctly in my view, that the two situations are not truly parallel. The judgment debtor is already subject to the court’s jurisdiction. In relation to him or her, the adjudicative and enforcement stages are for this purpose part of a single whole: see Union Bank of Finland Ltd. v Lelakis, above, 593F, per Henry LJ. But there is nothing in CPR 71 to enable the court to summon a third party witness who might have information about the personal judgment debtor’s assets. A corporate judgment debtor has a separate legal personality, and is not to be equated with its officers. They may have information about its affairs, but they have not submitted to the jurisdiction. Some, but certainly not all, officers of a company may for some purposes be regarded as its alter ego. That was a central element in the reasoning by which the Court of Appeal concluded that it had jurisdiction to order Mr Comninos, a non-party, to pay the costs of the false claim by his shipowning company which he had instituted, controlled and financed in The Ikarian Reefer, above. But CPR 71 is not limited to officers constituting a company’s alter ego, and the present order was not obtained and is not defended on the basis of any suggestion that Mr Khoury was CCIC’s alter ego. In these circumstances, the conjunction in CPR 71 of provision for oral examination of a personal judgment debtor (against whom an order may be obtained although he or she is out of the jurisdiction) with provision for oral examination of officers of a corporate judgment debtor is not persuasive support for a proposition that an order may be made against the latter when he or she is out of the jurisdiction. There are basic differences between the two situations, and the presumption against extra-territoriality has a potential application to the latter which it does not have to the former. 18. In Mr Rabinowitz’s submission the key to the scope of CPR 71 lies in a recognition of the English court’s jurisdiction over the subject matter of the action (including the judgment) against CCIC and the close connection between that subject matter and Mr Khoury, who was CCIC’s chairman, general manager and director. In The Ikarian Reefer it was the existence of substantive proceedings over which the court had jurisdiction and of “a substantial connection with those proceedings by a non-party” that Waller LJ stressed in his judgment as the key to understanding the circumstances in which orders for costs would be made against such a non-party (pp.611B-612B). Mr Rabinowitz took this as a useful analogy and found direct support for his submission in Professor Brownlie’s identification in Principles of Public International Law (7th ed, 2008) p.311 of one criterion of jurisdiction as “a substantial and bona fide connection between the subject-matter and the source of the jurisdiction” (to which however Professor Brownlie added that “the principle of non-intervention in the domestic or territorial jurisdiction of other states should be observed”). Mr Rabinowitz also relied on the statement by Sir Robert Jennings and Sir Arthur Watts in Oppenheim, Public International Law (9th ed.), vol 1, pp. 457- 458 that there must be “a sufficiently close connection to justify th[e] state in regulating the matter and perhaps also to override any competing rights of other states". |
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