Sana Hassib Sabbagh v Wael Said Khoury

Hearing dates: 20 and 21 March 2019

Approved Judgment

Introduction

This is an appeal against the grant of an injunction to restrain the appellants from pursuing an arbitration in Lebanon. The judge held that the claims made in the arbitration were not within the arbitration agreement relied upon by the appellants and duplicated claims made in proceedings properly brought by the respondent in England. The injunction was granted on the basis that continuation of the arbitration would thus be vexatious and oppressive. The issues raised on the appeal include whether the court has jurisdiction on these grounds to grant an injunction to restrain an arbitration with a foreign seat and, if so, whether the jurisdiction is limited to cases where England is the natural forum for the underlying dispute.

The proceedings and the parties

The claimant in these proceedings, and the respondent to the appeal, Sana Hassib Sabbagh (Sana) is the sister of the fifth and sixth defendants Samir and Suheil Hassib Sabbagh (respectively Samir and Suheil). They are the daughter and two sons of the late Hassib Sabbagh (Hassib) who died on 12 January 2010. They are his heirs under Lebanese law, each entitled to one third of his estate.

Hassib, with the late Said Toufic Khoury, founded in 1950 what has become the Consolidated Contractors Company group (the CCC group), the largest engineering and construction business in the Middle East. The evidence is that its value is at least US$5 billion. The ultimate holding company is the eighth defendant, Consolidated Contractors Group SAL (CCG), which is owned by Hassib's family and by the Khoury family. CCG and its subsidiaries are incorporated in Lebanon.

Relations have broken down between Sana and her brothers over disputes concerning the management of, and dealings with, their father's assets both after he suffered a severe stroke in June 2002 and following his death in 2010.

The present proceedings were commenced in the Commercial Court in July 2013. The first to fourth defendants are members of the Khoury family. The late Said Khoury is named as the second defendant and his three sons, Wael, Samer and Toufic are the first, third and fourth defendants. They are all directors of CCG and Wael is the non-executive chairman. Samir, Suheil and the seventh defendant, Wahbe Abdallah Tamari (Wahbe), are also directors of CCG. The ninth defendant is a company in the CCC group. The tenth defendant, Hassib Holdings SAL (HH), is a Lebanese company, owned and controlled by Samir and Suheil. They, together with Samer and Wahbe, are the directors of HH.

The only connection with England is that Wael is resident here. Sana lives in New York, Wahbe lives in Switzerland and the other individual defendants are resident in Greece. CCG and CCIC accepted service of the claim form in Greece, where each has an office, and they are treated in these proceedings as domiciled in Greece for jurisdiction purposes. HH is domiciled in Lebanon.

Wael is the anchor defendant for the purposes of establishing jurisdiction against the other individual defendants, CCG and CCIC under art. 2(1) of Regulation 44/2001 and against Wahbe under art. 6(1) of the Lugano Convention. Leave to serve HH out of the jurisdiction as a “necessary or proper party” was given under the CPR. The defendants other than Wael challenged the jurisdiction of the court. Those challenges were upheld in part by Carr J at first instance ( [2014] EWHC 3233 (Comm)) but, on appeal, rejected in whole by this court (Gloster V-P, Patten LJ and Beatson LJ) in a judgment given on 28 July 2017 ([EWCA Civ 1120]) (the 2017 judgment).

The claims made in these proceedings are summarised in the 2017 judgment:

“7. On 29 June 2002 Hassib suffered a severe stroke which incapacitated him for the rest of his life and, it is alleged, rendered him unable to make any business decisions or to manage his own affairs. In proceedings issued in the High Court on 9 July 2013 Sana alleged that the principal defendants conspired from a date shortly after Hassib's stroke to misappropriate assets belonging to Hassib and that since his death in 2010 they have also conspired to deprive her of her entitlement to the shares in CCG which she claims belonged to Hassib at the date of his death. These two claims have been labelled the asset misappropriation claim and the share deprivation claim and, for convenience, we shall adopt the same terminology.

8. The asset misappropriation claim relates for the most part to dividends from Hassib's shares in CCG which were used either to make investments in other companies and property or to meet expenses such as the running costs of an aircraft. It is not in dispute that before his stroke Hassib used and authorised CCIC to pay family expenses and charitable donations out of his income from dividends and other investments. But the allegation is that, following Hassib's stroke, accumulated dividends and other income were used knowingly by the defendants (other than Wahbe and HH) to make improper or unauthorised investments in their own names and that, when sold, the proceeds of sale from these investments were not accounted for or applied for the benefit of Hassib. To the extent that they would otherwise have formed part of Hassib's estate on death, Sana seeks damages for conspiracy based on the value of the misappropriated assets.

9. The share deprivation claim depends upon Hassib having retained ownership of shares in CCG at the date of his death. Sana relies on a confirmation by the Commercial Registry in Beirut (“the Commercial Registry”) dated 16 January 2010 that its register contained an entry which records that, as at 10 May 2009, Hassib continued to hold 399,915 shares in CCG. She alleges that following her father's death, the defendants conspired to deprive her of her entitlement under Lebanese law to a third of this shareholding by unlawfully procuring the transfer of the shares to HH.

10. The defendants accept that HH is now the registered holder of 399,915 shares in CCG following general meetings of the members of CCG held in July 2010 which confirmed HH as the holder of the shares. But their case is that there was no unlawful conspiracy and that the shares now held by HH are derived from transfers of shares in CCG which Hassib made prior to his death (and prior to his stroke) in favour of Sana, Samir and Suheil. We will come to the detail of this later in the judgment but it is now common ground that by three share transfer agreements made in 1993 (“the 1993 Agreements”) Hassib agreed to transfer to his children 199,960 of his then holding of 199,970 shares in CCG subject to the retention by him of a usufruct in the shares for his life. Sana became entitled to receive 20,000 shares (for a stated consideration of US$1,333,333) and Samir and Suheil each became entitled to receive 89,980 shares at a price of US$6m. In September 1993 Hassib agreed to transfer 2 more of his remaining shares in CCG to each of his sons leaving him with only 6 shares.

11. Further agreements were entered into in 1995 between Hassib and his children and between Sana and her two brothers, the cumulative result of which (after taking into account increases in the share capital of CCG) was that Sana became entitled to 100,000 shares and Samir and Suheil to 199,960 and 199,961 shares respectively. Then in 1998 Sana transferred her entire holding of 100,000 shares back to Hassib who in turn transferred them to CCIC. His remaining 3 shares in CCG were transferred to Suheil. If this sequence of agreements was effective to pass ownership of the shares and any necessary corporate formalities were complied with, the net result of the agreements and transfers executed between 1993 and 1998 was that Hassib had ceased to own any shares in CCG but had retained his usufruct rights over 399,915 shares. By an agreement dated 16 July 2006 (but whose date is in issue) Samir and Suheil transferred 399,915 shares to HH subject to Hassib's usufruct. CCIC retained the shares it had acquired in April 1998.

12. Sana's original position was that the family agreements made between 1993 and 1998 were artificial or sham transactions with no legal effect. But she no longer disputes the existence, validity or effectiveness of the agreements as such. Her case now is that, as a matter of Lebanese law, the agreements fall to be treated as gifts rather than agreements to sell which would continue to bind Hassib (and his heirs) even after his death. As gifts they would lapse on death unless completed as...