Khaled Salam Racy v Salah Jacques Hawila

JurisdictionEngland & Wales
Judgment Date18 February 2004
Neutral Citation[2004] EWCA Civ 209
CourtCourt of Appeal (Civil Division)
Docket NumberA3/2003/1681
Date18 February 2004
Khaled Salam Racy
Salah Jacques Hawila

[2004] EWCA Civ 209


Lord Justice Thorpe

Lord Justice May

Lord Justice Jonathan Parker







Royal Courts of Justice


London, WC2

MR COLIN NASIR (a solicitor advocate) (instructed by Colin Nasir & Co) appeared on behalf of the Appellant

MR EWAN MCQUATER QC (instructed by Lovells) appeared on behalf of the Respondent


This is an appeal by Mr Khaled Racy against an order made by Blackburne J on 11 July 2003 in an action ("the English action") brought by Mr Racy against Mr Salah Hawila. The judge's order begins by recording an election by Mr Racy to pursue the English action before he pursues proceedings commenced by him in Lebanon ("the Lebanese action") against Mr Hawila and a company called Midmac SARL ("SARL") . The order then recites undertakings by Mr Racy to use his best endeavours to procure that no further steps are taken in the Lebanese action pending final determination of the English action or further order of the English court, and that he will not take any steps to reactivate the Lebanese action within that time period. The order goes on to give procedural directions relating to the further conduct of the English action.


As to costs, the order provides that Mr Racy is to pay Mr Hawila's costs of the application in any event, and that Mr Racy is to make an interim payment of £75,000 on account of such costs, the balance to be the subject of a detailed assessment on the standard basis.


Finally, the order records the judge's refusal to grant permission to Mr Racy to appeal.


Before the judge was an Application Notice by Mr Hawila in which Mr Hawila sought an order that the English action be stayed or dismissed, on the ground that Mr Hawila is a defendant in both the English action and the Lebanese action, and that the two actions concern the same or very similar subject-matter. However, at the hearing Mr Hawila sought relief of a more limited nature. The relief which he sought is set out by the judge in paragraph 41 of his judgment:

"41. … The precise relief that he seeks is that Mr Racy should be given a short further period within which to elect which action he wishes to pursue; if he fails within that period to make an election the court is invited to order a stay of the English action pending a determination of the Lebanese action whereupon the English action, if it continues to raise issues which have not been determined in the Lebanese action or which, even if determined, are not binding on the parties in the English action, may revive; if Mr Racy elects to continue with the English action, then provided the Lebanese action is stayed in the meantime, Mr Hawila would no longer pursue this application.


At the hearing before the judge, Mr Racy was represented by Mr Simon Browne-Wilkinson QC and Mr Andrew de la Rosa, instructed by Colin Nasir & Co. Mr Hawila was represented by Mr Ewan McQuater QC, instructed by Lovells.


It appears that the English action is on course for trial in June of this year.


The judge handed down a written judgment on 11 July 2003, having previously circulated a draft of the judgment to the parties' legal advisers. In the draft judgment, and in the judgment in its final form, as subsequently handed down, the judge decided, in the exercise of his discretion, to grant the more limited relief sought by Mr Hawila, and to give Mr Racy a period of 21 days in which to elect which of the two actions to pursue first. At the adjourned hearing when the judgment was handed down, Mr Racy appeared by Mr Colin Nasir (solicitor-advocate), who also appears for Mr Racy on this appeal. At the commencement of the hearing, Mr Nasir informed the judge that Mr Racy would elect to pursue the English action first, and the hearing proceeded on that basis. This explains the form which the judge's order took. However, in the course of the same hearing (as also appears from the order) Mr Nasir also sought permission to appeal, which the judge refused.


An Appellant's Notice was duly issued by Mr Racy, seeking permission to appeal. That application came before me on the papers, and I refused it. The application was renewed at an oral hearing, without notice, which took place before the Vice-Chancellor. The Vice-Chancellor granted permission to appeal. The Vice-Chancellor's judgment was expressed to be on the basis, which Mr Nasir had confirmed in the course of his oral submissions to the Vice-Chancellor, that Mr Racy's election to pursue the English action first had been conditional on Mr Racy having first exhausted his rights of appeal.


An application was then made by Mr Hawila to set aside the Vice-Chancellor's order granting permission to appeal, on the basis that on the renewed application Mr Nasir had misled the court when he stated that Mr Racy's election had been conditional; that the election had been unconditional; and that in the circumstances it was not open to Mr Racy to seek permission to appeal. That application came before me on 3 November 2003, when I dismissed it.


This is the hearing of the substantive appeal.


Since the hearing before the judge, steps have been taken by Mr Racy to — and I use what I hope is a neutral expression — bring the Lebanese action to a halt.


The judge summarises the background to the two actions in paragraph 3 of his judgment:

"3. … At the heart of Mr Racy's claim is a business relationship between himself and Mr Hawila which, he claims, went back many years and extended to many countries and many differing business and other interests. A part of that relationship was conducted, he says, through the medium of a group of companies called the Midmac Group. The holding company of that group is a Luxembourg company called Midmac Holding Corporation SA ('MHC') of which all but six shares out of its issued 40,000 shares are divided in the ratio of 2:1 between a Jersey company called Midmac Inc (holding 26,662 shares) in which, through various off-shore arrangements, Mr Hawila is interested and Ochil Holdings Limited (holding 13,332 shares) in which, through other off-shore arrangements, Mr Racy is interested. ['SARL']—the subject matter of the Lebanese action—is virtually a wholly owned subsidiary of MHC in that MHC holds 9,560 of its shares out of 9,600 in issue (ie over 99%) . SARL does not itself carry on any business but acts as a holding company for, principally if not exclusively, a Qatari entity which carries on business as a construction company in Qatar and elsewhere in the Middle East. Mr Racy holds 20 shares in SARL and one share in MHC out of the 40,000 in issue in that company."

In paragraphs 4 to 13 of the judgment the judge summarises the issues in the Lebanese action as follows:

"4. With that preface I come straight to the Lebanese action. It was initiated by a summons dated 21 February 2002. Mr Racy is the claimant, Mr Hawila the first defendant and SARL the second defendant. Mr Racy's claim is for the liquidation of SARL and the appointment of a liquidator. A less than perfect translation into English of the summons was in evidence.

5. Mr Racy appears to sue as a shareholder of SARL in right of his holding of 20 shares in that company, ie less than 0.25% of its issued share capital. He pleads that Mr Hawila holds another 20 shares, a Mr Malek another 20 and that the remainder, ie over 99% of the share capital, is held by MHC. He pleads that MHC is owned by himself and Mr Hawila in the ratio of one-third by himself and two-thirds by Mr Hawila.

6. Mr Racy goes on to plead that he, Mr Hawila and Mr Malek were SARL's only directors but that at the end of 1984 Mr Malek retired and sold to Mr Hawila the shares that he owned in the various companies of what he refers to simply as 'the group'. That is obviously intended to refer to the Midmac Group. He says that as between himself and Mr Hawila the ratio of ownership since the beginning of 1985 had been 2:1 in favour of Mr Hawila.

7. Then, after noting that SARL was incorporated to operate as a construction and engineering contractor and that it has not carried out any work in the Lebanon but instead has restricted its activity to other Middle Eastern countries operating through a subsidiary, Mr Racy pleads that he was in charge of engineering matters and resided most of his time in Qatar, Iraq and Saudi Arabia while Mr Hawila became the effective chairman of the group and resided in London. He pleads that he and Mr Hawila incorporated a services company called Mid Orient Technical Services ('MOTS') which became the principal and effective head office of the whole word-wide group of companies owned by himself and Mr Hawila.

8. In paragraph 9 he pleads that 'the persons in charge of accounting matters in the British service company'—which I take to be a reference to MOTS—prepared annual balance sheets for all of the companies in the group including SARL for which two kinds of balance sheet were prepared: (a) annual so-called 'local non-consolidated balance sheets' which were restricted to SARL's activities inside the Lebanon and made no mention of work carried out abroad through its subsidiaries and (b) consolidated annual balance sheets covering all of SARL's activities, both inside and outside the Lebanon, including 'partners' drawings' as well as accounts covering its subsidiaries in Qatar and Iraq. Mr Racy then pleads that the non-consolidated balance sheets did not disclose SARL's true financial position although the...

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