Sabbagh v Khoury & Ors

Factual and Procedural Background

The Claimant, referred to as Sana, is the eldest daughter and heir of the late Hassib, who died intestate in January 2010 following a cerebral haemorrhage in 2002. Hassib was a co-founder and significant figure in Company A, a large global engineering and construction group originally founded in 1950. Sana brings claims against various family members and companies controlled by them, alleging financial wrongdoing occurring after her father's stroke and death. The defendants include family members domiciled in different countries and companies incorporated in Lebanon.

The claims are twofold: an asset misappropriation claim concerning alleged misappropriation of Hassib's assets post-stroke, and a share deprivation claim alleging conspiracy to deprive Sana of her entitlement to shares in Company A following Hassib's death. Proceedings commenced in July 2013, with the claim form amended in September 2013. Defendants acknowledged service but raised jurisdictional challenges, resulting in applications for stays and challenges to service. No defences have been filed and no disclosure has taken place. The jurisdictional applications are the focus of the current determination.

The litigation is complex, involving extensive documentary evidence, numerous witness statements, and expert reports on Lebanese and Greek law, as well as on the availability of Lebanon as a forum. The hearing lasted five days with multiple counsel involved. The court noted the volume and complexity of the material far exceeded expectations for forum determination hearings.

Legal Issues Presented

1. Whether there is a triable claim against the anchor defendant domiciled in England, justifying jurisdiction and joinder of co-defendants domiciled abroad under Article 6(1) of the Brussels Regulation.
2. Whether mandatory and/or discretionary stays of proceedings should be granted due to arbitration clauses in the company’s Articles of Association.
3. Whether the claims fall outside the Brussels Regulation by virtue of exclusions for succession matters or exclusive jurisdiction provisions concerning corporate decisions (Article 22), and whether the English court should decline jurisdiction on forum conveniens grounds.
4. Whether service out of the jurisdiction on a particular defendant (HH) is justified under CPR 6.37.

Arguments of the Parties

Appellant's Arguments (Sana)

• Sana contends the jurisdiction applications are a delaying tactic by the Defendants and that the Defendants have conducted themselves with disregard to the court and the Claimant.
• She asserts a real prospect of success on both claims, particularly relying on alleged failures to complete formal share transfer formalities and the possibility that share transfers were gifts rather than sales.
• Sana disputes that she is bound by arbitration agreements in the Articles of Association for the asset misappropriation claim.
• She argues the claims fall within the Brussels Regulation and that the exceptions for succession or corporate decisions do not apply.
• She asserts that the claims are properly brought in England, with Wael as an anchor defendant domiciled there.

Respondents' Arguments (Defendants)

• The Defendants argue the dispute is fundamentally Lebanese and Greek, with no material connection to England except for forum shopping by naming Wael as anchor defendant.
• They contend the share transfers in 1993, 1995, and 1998 were valid and effective, and thus Hassib did not own shares at death, defeating the share deprivation claim.
• They submit that Sana cannot establish Wael’s knowledge of any wrongdoing or conspiracy.
• The asset misappropriation claim is subject to mandatory stay under arbitration clauses in the company’s Articles of Association.
• The claims fall outside the Brussels Regulation as succession matters or matters concerning corporate organ decisions, triggering exclusive jurisdiction elsewhere.
• Service out of jurisdiction on HH is improper as there is no real issue to be tried against the anchor defendant on the share deprivation claim.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed and structured analysis of the jurisdictional challenges, applying established principles of English, Lebanese, and Greek law, and the Brussels Regulation.

Regarding the share deprivation claim, the court identified three essential elements: ownership of shares by the deceased at death, entitlement of the Claimant as heir, and intentional wrongdoing by the anchor defendant. The court found that Sana expressly accepted the validity of the key share transfer agreements of 1993, 1995, and 1998, which demonstrated that Hassib had divested his shares prior to death. The court found no real prospect of success in challenging the completion of formalities or the authenticity of the share register, which evidenced valid transfers. Contractual estoppel principles and waiver further undermined the claim. The court also rejected the suggestion that the transactions were gifts rather than sales on a summary basis, though it recognized this issue as arguable.

On the knowledge element, the court found no properly arguable basis to establish that Wael knew of any failure of share transfer or conspiracy. The timing and nature of registry requests and responses were explained as coincidental and unrelated to the claim. The court concluded the share deprivation claim lacked any real prospect of success and thus failed the jurisdictional threshold.

Conversely, the asset misappropriation claim was found to raise serious issues to be tried. The court identified triable issues concerning the management of Hassib's assets post-stroke, including capacity to authorize transactions, the existence and scope of powers of attorney, and the propriety of investments made by the Defendants. There was a real issue as to whether Wael had knowledge or involvement in any wrongdoing. The claim was substantive and distinct from the share deprivation claim.

The court rejected the Defendants’ submissions that the claims fall outside the Brussels Regulation due to succession or corporate decisions exceptions. It found the principal subject matter of the claims to be tortious conspiracy and misappropriation, not succession or challenges to corporate organ decisions. Accordingly, the Brussels Regulation applied, and jurisdiction was appropriate.

On the arbitration stay applications, the court found that Sana was not bound by the arbitration clause in the company’s Articles of Association in respect of the asset misappropriation claim, as the claim was not based on rights conferred by those Articles. Therefore, no mandatory or discretionary stay was appropriate for that claim.

Service out of jurisdiction on HH was rejected due to the failure of the share deprivation claim against Wael, the anchor defendant.

The court considered the relevance of prior litigation ("the Masri litigation") but found no findings against Wael and no material assistance in assessing the present claims.

Holding and Implications

The court’s final decision was as follows:

• The share deprivation claim against all Defendants is dismissed for want of a serious issue to be tried.
• The asset misappropriation claim against all Defendants except two (who are not parties to that claim) raises serious issues to be tried and is not stayed.
• The asset misappropriation claim is not subject to mandatory or discretionary stay under the Arbitration Act 1996.
• The claims fall within the scope of the Brussels Regulation, and jurisdiction is properly exercised by the English courts.
• Service out of jurisdiction on the Defendant HH is set aside due to failure of the share deprivation claim against the anchor defendant.

The implications are that the asset misappropriation claim will proceed in England against the relevant Defendants, while the share deprivation claim is effectively discontinued. No new precedent is established beyond the application of existing jurisdictional principles to the complex facts of this case.