Overseas Director Cannot Be Summoned To England For Questioning On Company's Assets.

Masri v Consolidated Contractors International Company SAL and another [2009] UKHL 431

Amongst the judgments handed down on the last day of sitting of the House of Lords, the Law Lords delivered a significant judgment concerning the extent of the territorial jurisdiction of the English courts. Unanimously, their Lordships granted an appeal by a former director of a corporate judgment debtor located overseas against an order granted under Part 71 of the CPR to the judgment creditor that the former director attend court in England for an examination as to the judgment debtors assets (which were also all located overseas).

The case arose out of long-running litigation between the claimant, Mr Munib Masri, and two companies in the multinational construction and energy group Consolidated Contractors Group. In 2006 Mr Masri obtained judgment from the High Court awarding a 10% share of the defendant's revenues from a valuable oil field in Yemen. The defendants, who had no assets or personnel within the jurisdiction of the English courts, had not paid the judgment sum and Mr Masri accordingly sought to enforce against their worldwide assets.

To assist that enforcement, the claimant sought and obtained ex parte in July 2007 an order under Part 71 obliging Mr Toufic Khoury (who was then a director of one of the defendants) to travel to England from his home in Greece and attend an examination as to the whereabouts and amounts of the judgment debtor's worldwide assets. The order contained a penal notice threatening imprisonment for non-compliance. Mr Khoury applied to have the order set aside for want of jurisdiction; he succeeded at first instance before Master Miller, who held that as a foreign resident who was not a party to the proceedings in England, the English courts had no jurisdiction over him for such purposes.

The Court of Appeal reversed that decision and restored the order against Mr Khoury, holding that Part 71 should be read as having an extra-territorial effect. This was on the basis that since the English courts had jurisdiction to hear the underlying trial, they also had jurisdiction to make enforcement orders notwithstanding the fact that the subjects were located outside England & Wales. It would "defeat the object of [Part] 71" if it were confined to persons within the jurisdiction. Mr Khoury appealed to the House of Lords.

The key questions for their Lordships were these: does Part 71 extend the power of the English courts to order the examination of a foreign director of a foreign company in respect of foreign assets and, if so, does Part 6 of the CPR provide a basis for such an order to be served out of the jurisdiction? Judgment was given by Lord Mance, with whom the other four panel members all agreed. Lord Mance concluded that:

there was a presumption against legislation applying extra-territorially;

the English courts had never had the power to compel a witness from overseas to attend court in England to give evidence;

a corporate judgment debtor should riot be equated with its officers, who had separate legal personality;

the Rules Committee, when drafting Part 71, did not appear to have contemplated that it might apply overseas;

accordingly Part 71 should not be taken as having effect against an officer outside the jurisdiction; and

in any event Part 6 provided no basis for service out.

The Court of Appeal's order was reversed and Master Millers order setting aside the Part 71 order against Mr Khoury was restored.

The judgment goes some way towards restoring the previously accepted status quo in the law of enforcement, to the effect that orders concerning enforcement can only be made by the courts where the underlying asset is located. Their Lordships took a view, based on underlying principles of international comity, against extending the court's extra-territorial jurisdiction. In so doing, they send a reminder to commercial parties and in particular potential claimants that the choice of law and litigation forum will only go so far and enforcement may be necessary where the counterparty's assets and officers are located.

Footnote 1 Olswang LLP (Jeremy Mash and Oliver Gayner) acted for Mr Khoury

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Jeremy Mash

Olswang

90 High Holborn

London

WC1V 6XX

UNITED KINGDOM

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