Cimc Raffles Offshore (Singapore) PTE Ltd and Another (Claimants/Respondents) Schahin Holding SA (Defendant) Salim Taufic Schahin and Another (Applicants)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 09 May 2014 |
| Neutral Citation | [2014] EWHC 1742 (Comm) |
| Docket Number | No: 2011 Folio 1600 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 May 2014 |
[2014] EWHC 1742 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Mr Justice Field
No: 2011 Folio 1600
Andrew Fletcher QC (instructed by Curtis Davis Garrard LLP) appeared on behalf of the Claimants/Respondents
Charles Holroyd (instructed by Humphries Kerstetter LLP) appeared on behalf of the Applicants
Approved Judgment
Friday, 9 May 2014
This is the hearing of applications by Mr Salim Schahin and Mr Fernando Schahin for the setting aside of orders made against them under CPR Part 71 on 4 March 2014. The court has had the benefit of two very clearly presented and thorough skeleton arguments upon which this judgment will draw without further attribution.
The applicants are Brazilian citizens resident in Brazil. They are officers of Schahin Holding SA ("SHSA"), a Brazilian company. Fernando is the Chief Financial Officer of SHSA; Salim, who is older, has been an officer of the company for a longer period. The orders challenged require the applicants to attend at this court on 20 May 2014 to be examined before a Master and to disclose 14 days prior to that attendance all documents in their control evidencing SHSA's assets worldwide above £5,000 and full details of a bond refinancing referred to in letters from SHSA's solicitors.
The principal ground upon which both applications are made is that the court had no jurisdiction to make the orders because the applicants were not within the territorial jurisdiction at the time when the orders were applied for, and in the case of Salim, also when the order against him was made.
The applicants contend in the alternative that, in the exercise of its discretion, the court should set aside the orders or direct that their implementation should await developments in other steps being taken by the Claimants to enforce a judgment against SHSA.
The background is this. The Claimants operate a shipyard in China. In 2006 they agreed with Baerfield Drilling LLC ("BD") and Soratu Drilling LLC ("SD") to construct two semi-submersible drilling rigs. BD and SD, which are incorporated in Delaware, USA, agreed to purchase the rigs for the purpose of hiring them to Petrobras SA, the Brazilian state oil and gas company under long-term charters. The rigs were delivered late, which gave rise to various disputes between BD/SD on the one hand and the Claimants on the other. The disputes are subject to a London arbitration which is currently in progress.
SD and BD are ultimately owned and controlled by members of the Schahin family, who, like the applicants, are citizens of and resident in Brazil. SHSA is the holding company of other interests of the Schahin family, known as Grupo Schahin. SHSA issued a guarantee to the Claimants in respect of certain of SD and BD's obligations under the shipbuilding contracts. The guarantee is subject to English law and English jurisdiction. A claim was made by the Claimants under the guarantee, which led to a compromise incorporated into a Consent Order dated 11 December 2013, under which SHSA agreed to pay the Claimants approximately $67 million within 14 days, ie, by 25 December 2013.
SHSA did not pay any part of that sum by 25 December 2013 and the whole remains outstanding. SHSA's solicitors, Linklaters, informed the Claimants' solicitors on 23 January 2014 that they were instructed that SHSA intended to pay as soon as it was able to do so, but it did not currently have sufficient liquid assets. Linklaters stated that the Schahin Group was currently arranging a refinancing via a bond issue, which was expected to improve SHSA's financial position very significantly and SHSA would pay promptly thereafter.
The Claimants were dissatisfied with this response and issued applications under CPR Part 71 in respect of the applicants. Those applications were made on 25 February 2014. In the usual way they were made on paper ex parte. They were dealt with by Eder J who granted the orders sought on 4 March 2014. The order against Salim was served on Salim on 12 March 2014 and Fernando was served with order made against him on 13 March 2014. Both Salim and Fernanda were in this country to give evidence at the arbitration between the Claimants and SD/BD.
Mr Holroyd on behalf of the applicants submits that the decision of the House of Lords in Masri v Consolidated Contractors International (UK) Ltd (No. 4) [2010] 1 AC 90 establishes that there is no power to make an order under CPR Part 71 unless the individuals intended to be made subject to the order are present in the jurisdiction.
Mr Holroyd analysed the leading judgment of Lord Mance in Masri in the following way. The issue before their Lordships was one of interpretation and construction of CPR Pt 71 and the principal argument of the appellant was whether the word "officer" in CPR r 71.2 (1) (b) meant an officer present within the jurisdiction. Lord Mance decided that the presumption against extraterritoriality applied in construing Part 71 and so the question was whether the wording of the rule was such as to rebut that presumption.
In paragraph 23 of his judgment, Lord Mance said that the present case stood between In re Tucker [1990] Ch 148 and In re Seagull [1993] Ch 345. In the former case, which involved an examination under s. 25 of the Bankruptcy 1914, the Court of Appeal held that the relevant provision had no extraterritorial effect, whereas in the latter case, which was concerned with provisions under the Insolvency Act 1986, it was held that those provisions did operate extraterritorially. In paragraph 24, having analysed those two decisions, and noted that CPR Pt 71 sprang from an amendment of the Rules in 1883, Lord Mance said:
"The Rules Committee in 1883 is likely to have been focusing on domestic judgments and domestically based officers. If it thought at all about foreign judgments, which might be enforced in England, it is unlikely to have contemplated that a judgment creditor, having come here for that purpose, would then need assistance abroad to make the enforcement effective. The extreme informality of the process by which the rules enable an order for examination to be obtained continues to point towards a purely domestic focus. An application for an order may under CPR Pt 71 be made without notice, may be dealt with ministerially by a court officer and will lead to the automatic issue of an order (albeit with the general safeguard of the right to apply to set aside which exists under CPR r 23.10 in the case of any order made without service of the relevant application notice). These considerations all tend to point against the application of CPR 71 to company officers outside the jurisdiction."
In paragraph 25 Lord Mance expressed the view that Sir Anthony Clarke MR, who gave the lead judgment in the court below, had put matters substantially too high when he said that it would defeat its object if CPR r 71.2 were restricted to persons within the jurisdiction.
In paragraph 26 Lord Mance said:
"In my view CPR Pt 71 was not conceived with officers abroad in mind, and, although it contains no express exclusion in respect of them, there are lacking critical considerations which enabled the Court of Appeal in In re Seagull to hold that the...
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