[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Joujou & Ors v Masri [2011] EWCA Civ 746 (28 June 2011) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2011/746.html Cite as: [2011] EWCA Civ 746, [2011] 2 CLC 566

[New search] [Printable RTF version] [Help]

COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE (COMMERCIAL COURT)
Gloster J
2004 Folio 124 and 831

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/06/2011

Lord Justice Toulson:

Introduction

1. This appeal is against a receivership order made by Gloster J in a case brought by Mr Munib Masri against two companies. The case has become a cause célèbre in the English courts for the worst of reasons. For several years an inordinate amount of time of the Commercial Court and appellate courts has been taken up in procedural hearings as a result of the determination of the defendants not to comply with orders of the court, although they have submitted to its jurisdiction. The defendants' tactics for avoiding compliance have so far been successful. They owe a judgment debt to the claimant which now stands at a figure close to US $100 million. No attempt has been made to provide any reasons for the non-payment. This is not a case where a judgment debtor is unable to pay a judgment debt. On the judge's finding, the companies are well able to pay the debt but are determined not to do so. Unsurprisingly the English courts have done their utmost to try to see that justice is done. The question on this appeal is whether the court has overstepped the mark by its latest order.
2. English courts are not the only courts involved in the matter. The Lebanese court has now become involved. The critical question on this appeal is whether the latest order of the English court is compatible with proper respect for the jurisdiction of the Lebanese court.

Facts

3. Although the long and tortuous history of this case has been set out in many judgments, I will summarise it because it is necessary for a proper understanding of the circumstances which led the judge to make the order under appeal. It may also help to inform any Lebanese court which has to deal with the matter.
4. Consolidated Contractors International Company SAL (CCIC) and Consolidated Contractors (Oil and Gas) Company SAL (CCOG) are members of a group of companies known as the Consolidated Contractors Companies Group (CCC). The group is beneficially owned and controlled by members of two families, the Khoury and Sabbagh families. The heads of the two families were Mr Said Khoury and Mr Hasib Sabbagh. They and Mr Masri were all leading Palestinian businessman who were once friends and business associates. (Mr Hasib Sabbagh suffered a disabling stroke in 2004 and has died).
5. CCIC and CCOG were both incorporated in Lebanon but are registered as offshore companies. CCIC had at all relevant times its central administration and managing offices in Greece and until recently it relied on Greece as its country of domicile. CCOG has given contradictory evidence in the case about where it is managed. Mr Masri's case is that at all relevant times it was managed from London.
6. On 6 November 1992 Mr Said Khoury and Mr Masri signed an agreement in London relating to CCC's interest in an oil concession in Yemen known as the Masila Concession. The agreement provided that Mr Masri would pay to CCC 10% of certain amounts paid by CCC in connection with the costs incurred in respect of the Masila Concession and would receive 10% of certain amounts received by CCC in connection with the Masila Concession.
7. The agreement led to a dispute which was tried by Gloster J in 2006. Judgment was delivered on 28 July 2006. The judge found (1) that the 1992 agreement remained in existence, (2) that Mr Masri, CCIC and CCOG were parties to the agreement, and (3) that CCIC and CCOG were liable to Mr Masri for amounts due to him under the 1992 agreement until the end of the Masila Concession. Later judgments quantified the amount due to Mr Masri under the 1992 agreement. I will refer to CCIC and CCOG as the judgment debtors. The judgment debtors had initially opposed the jurisdiction of the English court, but later (and before the trial) they expressly submitted to the jurisdiction. They took a full part in the trial which resulted in the judgment given on 28 July 2006 and in the subsequent hearings about the amount which was owed by Mr Masri. In short, the judgment debtors' liability, and the amount of the debt, were established after a trial process (in which the judgment debtors took a full part and were represented by lawyers) by a court whose jurisdiction the parties had expressly accepted.
8. CCOG's principal asset is its right to lift and sell oil produced from the Masila Concession. CCOG has a 10% interest in the concession. This is derived from two contracts, a Production Sharing Agreement (PSA) and Joint Operating Agreement (JOA). The PSA is made between the Yemen Ministry for Oil and various companies including Canadian Nexen Petroleum Yemen (CNPY). CNPY is a partnership registered in Alberta, Canada. The JOA was signed by a company whose interests are now held by CNPY and by CCIC, which subsequently assigned its interest under the agreement to CCOG.
9. The JOA is governed by English law and contains an English arbitration clause. Under it CCOG has a 10% interest in oil lifted under the PSA.
10. CCOG began to take steps before judgment was delivered on 28 July 2006 to avoid enforcement of any judgment which might be made against it. At the time of the trial the chairman of CCOG was Mr Wael Khoury, who lived in London. He resigned as chairman and as a director of CCOG in June 2006. He explained his reason in an affidavit sworn on 22 November 2010:

"Shortly after the trial on liability, but before judgment was given, I received a call from … the group company secretary who told me that he and my brothers thought that it would be a good idea if I resigned as a director and the chairman of CCOG. He said that this was due to the Masri litigation. I cannot recall precisely what he said about this so I have asked [him] for his recollection. He recalls telling me that my brothers had decided that they no longer wanted the chairman of CCOG to be based in London."

11. The steps which the judgment debtors took to prevent Mr Masri from enforcing the judgment against oil revenues received by CCOG from the Masila Concession included the following:

1. CCOG changed the bank account into which revenues from oil sales was paid;

2. it changed the arrangements regarding the way in which the oil was sold;

3. it ceased to sell oil to the company to which it previously made sales.

12. On 20 December 2007 Gloster J took the unusual step of appointing a receiver in relation to CCOG's interest in revenues from the concession and made a freezing order restraining CCOG from disposing of its interest in the concession or selling oil from the concession otherwise than in the ordinary course of business. CCOG appealed against the order, but it was upheld by the Court of Appeal in Masri (2) [2008] EWCA Civ 303, [2009] QB 450. CCOG objected to the order on the ground, among others, that it amounted to seizure by order of the English court of an asset of the judgment debtor in another state, since the judgment debtor was required on pain of punishment for contempt to transfer the assets to the receiver, who would pass it on the order of the English court to the judgment creditor. This would offend against the principle recognised by the House of Lords in Société Eram Shipping Co Ltd v CIE Internationale de Navigation [2004] 1 AC 260 that it is wrong for a court of one country to reach out and affect title to property in another country. This court held that the receivership order did not contravene that principle because it was not a proprietary remedy. It did not change the title to the debts, but merely placed a personal obligation on CCOG, which was subject to the court's jurisdiction, to perform certain acts which had a genuine connection with England, i.e. compliance with an English judgment. The order had no direct effect on any other party. Other parties were specifically protected by a form of proviso known as a Babanaft proviso (after Babanaft International Co SA v Bassatne [1990] Ch 13), the broad effect of which was that foreign customers of CCOG were not to be affected by the order except to the extent that the order was declared enforceable by a court in the customer's state. The court summarised its reason for upholding the order in paragraph 135 of the judgment of Laurence Collins LJ:

"The receivership and freezing orders were granted for a legitimate purpose, namely to assist in the ultimate collection of the debt. Whether they would have that effect remains to be seen. But if the matter is looked at in the round, in the light of the careful and proportionate limitations on the scope of the receivership order and the freezing order, then it seems to me plain that the discretion was properly exercised in the unusual and perhaps unique circumstances of the present case."

13. In order to prevent the original receivership order from being effective, within about a month all the directors of CCOG and CCIC resigned and were replaced by directors resident in Lebanon. On the application of two former directors, on 14 April 2008 the Lebanese court made an order prohibiting the judgment debtors or their directors from giving any information pursuant to the orders of the English court unless and until Mr Masri was granted exequatur in respect of the English judgment.
14. On 12 June 2008 Mr Masri applied to the Lebanese court for exequatur in respect of orders of the English court, including the orders quantifying the amount of the judgment debt (the quantum orders). On 22 December 2008 the Court of Appeal of Beirut granted exequatur in respect of the three quantum orders.
15. Since the first receivership came into effect the judgment debtors have refused to provide any information to the receiver on the ground that this would contravene the order of the Lebanese court made on 14 April 2008. On 21 October 2008 Tomlinson J made a second receivership order appointing the receiver as receiver over CCIC's contractual receivables under 25 major international construction projects. On 30 November 2008 the Court of Appeal dismissed an application for permission to appeal against his order. However, the appointment of the receiver by the English court has proved in practical terms to be abortive and he has not obtained any money pursuant to either receivership order.
16. Mr Masri appealed unsuccessfully against the order of the Lebanese court made on 14 April 2008. Before his appeal was determined, the directors of the judgment debtors all resigned and applied to the Lebanese court for the appointment of judicial administrators. The application was made on 20 December 2008 (i.e. two days before the grant of exequatur in respect of the English court's quantum orders) and was granted. In English translation the order stated:

"Whereas the documents evidence a vacancy in the management of the company exposing its interest to harm,

Whereas the shareholders do not oppose the judicial administration aiming primarily at electing a new Board of Directors,

Therefore:

Based on articles 589 /604 CCP

We decide:

To appoint Mr George Zakhour and Dr Jihad Al-Hajjar and Mr Edgard Elias Joujou to administer the company provided that the tasks shall be distributed later and provided that the first two administrators shall convene a general assembly to elect a new Board of Directors for the company, and the three of them shall represent the company, both internally and externally, either jointly or severally."

17. On 14 January 2009 the Lebanese court made a further order:

"To entrust Mr Edgard Joujou with the management of the company with the assistance of Messers Jihad Al-Hajjar and George Zakhour on the understanding that the task will be defined later, provided that Mr Edgard Joujou shall conduct the ordinary business of the company with the obligation to seek the prior approval from the court for any matter that is important or not covered by the above."

18. On 23 January 2009 the judicial administrators made an application on behalf of the judgment debtors to set aside the three exequatur orders.
19. Meetings of the shareholders of the judgment debtors were convened for 27 April 2009 and 26 May 2009 but on each occasion they were inquorate because the shareholders did not attend, although the express purpose of the appointment of the judicial administrators had been primarily to elect a new board of directors. So the administration of the judgment debtors remained in the hands of the judicial administrators.
20. On 29 May 2009 Mr Joujou applied to the Lebanese court for directions as to whether:

1. the decision to pay the English judgment sum constituted an "important matter" which could only be decided by the Lebanese court in accordance with its order dated 14 January 2009;

2. payment of the English judgment sum should be made before the end of proceedings concerning exequatur before the courts; and

3. opposition to exequatur should be continued.

21. In response to his application the Lebanese court declared that the decision on payment of the English judgment sum was not a matter which could be decided upon by the judicial administrator without the consent of the court, and the judicial administrator was instructed to take all necessary actions and measures to the defend the interests of the judgment debtors by all legal and judicial means which he deemed appropriate, including the continuation of the legal actions referred to in the application. This order thus prohibited the judicial administrators from doing anything to bring about payment of the judgment debts without the approval of the Lebanese court.
22. On 30 July 2009 the House of Lords decided Masri (4) [2009] UKHL 43 [2010] 1 AC 90. On 4 July 2007 Mr Masri had obtained orders under CPR Part 71 against Mr Toufic Khoury and Mr Samer Khoury, both of whom were resident and domiciled in Greece, requiring them as officers of the judgment debtors to attend court and provide information about the judgment debtors' means. On the same day that Gloster J made the original receivership order (20 December 2007), the judge who had made the order for the examination of Mr Toufic Khoury and Mr Samer Khoury set it aside after hearing argument from both parties. On 28 July 2008 the order was reinstated by the Court of Appeal, but on 30 July 2009 it was set aside by the House of Lords. The House of Lords held that CPR 71 was not intended to apply to an officer or former officer of a corporate debtor who was himself out of the jurisdiction and had not personally submitted to the jurisdiction of the English court.
23. On 8 April 2010 the Lebanese court set aside the previous exequatur orders. Mr Masri is in the course of appealing against that decision to the Lebanese Court of Cassation.
24. On 4 October 2010 the Lebanese court made orders in relation to each of the judgment debtors in the following terms:

"Whereas the company had initially and on purpose taken the decision not to pay the amounts requested by Mr Munib Masri before the order instituting the judicial administration was given,

Whereas, pursuant to the obligation of the court supervising the judicial administration to preserve the interests of the company and to abide by the principle of caution in respect of the issue of payment of large debts, specifically those that have been the subject of opposition by the company before the court prior to the institution of judicial administration,

Noting the necessity to abide by the obligation not to pay until and after the rendering of a court decision obliging said payment and issued by the competent Lebanese judicial authority,

Whereas the foreign orders are not enforceable against the company and hence are not binding upon the company until they are granted exequatur by virtue of a decision given by the Lebanese courts,

Whereas it does not appear, as to date, that such decision has been rendered regarding any of the judgments issued by the English courts in spite of Mr Masri's application to the Lebanese courts to obtain orders granting exequatur,

Noting that Mr Masri has not made any opposition nor any request in the proceedings before this court,

Therefore,

We decide:

To direct the Judicial Administrator not to take any step leading to the carrying out of the decisions issued by the foreign courts and request of Mr Munib Masri unless and until they are granted exequatur by the Lebanese courts, in particular in relation to any request for the disclosure of documents or the disclosure of confidential information relating to the company to Mr Masri, or the transfer of monies to the English receiver appointed by the English courts, or the cooperation with the latter through the provision of information and other steps."

25. This order plainly forbade the judicial administrators to observe the English court's receivership order in any way.

The order under appeal

26. On 1 December 2010, on a without notice application by Mr Masri, Gloster J made an order extending the scope of the existing receivership orders against CCOG to include

"…all oil and rights to oil to which CCOG is or may from time to time hereafter become entitled (including oil not yet allocated to CCOG) under the terms of the joint operating agreement (JOA) between the participants in the Masila Concession…"

27. The order authorised and directed the receiver:

"…to receive, take possession of, sell, deal with or otherwise dispose of all such oil, and to exercise all such rights to oil, in the name of and on behalf of CCOG…The receiver shall hold all such oil and any proceeds thereof to the credit of this action and to the order of the court."

28. The order imposed the following restraints on CCOG:

"1. CCOG shall not receive or take for its own account, to the exclusion of the receiver, any Masila oil to which it is or has become entitled under the JOA and must not sell, encumber or otherwise deal with any such oil. In the event the CCOG obtains possession or control of any such oil, it shall immediately take steps to transfer the same to the receiver; and

2. CCOG shall not commence any proceedings, nor take any steps in the existing proceedings, in any jurisdiction in the world (other than in the European Union) the object or effect of which is to interfere with or obstruct the receivership, including by interfering with or obstructing the arbitration proceedings referred to at paragraph 4 below or any orders of this court in support of such proceedings including the order referred to at paragraph 5 below, and shall not procure that others do so

from the date hereof until such time as the receiver shall have confirmed that he has received oil (or the proceeds thereof) to the value [of the amount due to Mr Masri in respect of the judgment debt, interest and costs]."

29. The receiver was directed to commence arbitration proceedings in the name of CCOG against the operator under article 17 of the JOA for the purpose of establishing the receiver's right in law as against the operator to the receipt of the oil on behalf of CCOG; and he was directed to seek a freezing order against the operator in support of the prospective arbitration proceedings, which Gloster J simultaneously granted.
30. The order contained a penal notice including the following terms:

"If [CCOG] disobeys this order, you, Edgard Elias Joujou, in your capacity as administrator of [CCOG] may be held to be in contempt of court and liable to imprisonment. This notice is given without prejudice to any representations you may make as to your capacity and position under Lebanese law and does not represent a determination of any such issues."

31. As subsequently amended, paragraph 18A of the order stated that:

"The terms of this order will affect the following persons in a country or state outside the jurisdiction of this court:

the defendant or its officer or director or any other person acting (either alone or jointly with others) in the capacity of, or in place of, a decision making organ of the defendant. …"

32. On 14 December 2010, after a hearing at which the parties were represented, Gloster J directed that the order should continue (subject to various amendments). On the same day Mr Joujou, as a person named in the penal notice, applied for the discharge of the order in so far as it related to him personally. The court heard further argument on that application on the following day. On 21 December 2010 the judge announced her decision that she proposed to continue the order with the inclusion of Mr Joujou's name in the penal notice and that she would deliver her reasons later. Her reasons for making the order and for including Mr Joujou in the penal notice were set out in a judgment handed down on 3 March 2011.
33. Mr Joujou and the other judicial administrators appealed against the receivership order. On 15 March 2011 the Lebanese court accepted the resignation of Mr Joujou as a judicial administrator and in his place appointed the other two judicial administrators to act jointly as lead administrators until further order of the court. On 23 March 2011 Gloster J amended the order to remove Mr Joujou's name from the penal notice and replace it by the names of Mr Zakhour and Dr Al-Hajjar.

Reasons for the order

34. The judge set out her reasons for making the order in paragraphs 61 and 62 of her judgment. In summary they were these:

1. The previous orders had not proved effective in enabling the receiver to collect CCOG's oil revenues because of CCOG's refusal to provide information identifying purchasers and its refusal to account to the receiver for revenues which it had received.

2. Mr Masri had not received any substantial sum in respect of the judgment debt. This was because of the judgment debtors' determined efforts to circumvent the various orders made by the court.

3. Part of the judgment debtors' strategy appeared to involve delaying execution long enough that they would have no significant assets left. Their business affairs were being deliberately run down. The Masila Concession is due to expire in December 2011.

4. An order of the court giving the receiver power to control the sales of oil in the name of CCOG (rather than merely collect the proceeds of sale) would have a reasonable prospect of enabling enforcement of the judgment debt, because COOG's rights in respect of the Masila Concession took the form of rights under a contract governed by English law, namely the JOA. That agreement contained an arbitration clause, and it would be for the arbitrators to decide whether CNPY was bound to recognise the right of the receiver to call for oil in the name of CCOG under the JOA and could give a valid receipt as against CCOG for oil delivered to the receiver on its behalf. However, the English court could authorise the receiver to bring the necessary arbitration proceedings and could in the meantime grant an asset preservation order preventing CNPY from lifting any oil to which CCOG was entitled under the terms of the JOA without the consent of the receiver. This mechanism (i.e. an order putting the receiver in control of the exercise of CCOG's contractual rights under the JOA, authorising the receivers to bring arbitration proceedings under the JOA in the name of CCOG and granting a freezing order against CNPY in the meantime) would be "an efficient and proportionate means of enforcing the judgment".

There has been no challenge on this appeal to the judge's conclusions in subparagraphs 1, 2 and 3 above. On the material before the court any such challenge would have been hopeless. Indeed, as noted in paragraph 25 above, the orders made by the Lebanese court on 4 October 2010 recited that the judgment debtors had deliberately decided not to pay the judgment debt prior to the orders placing them under judicial administration. The issue is whether in those circumstances it was right for the judge to make the order which she did.

35. The judge summarised the judicial administrators' arguments against the making of the order or the inclusion of the judicial administrators in the penal notice at paragraph 64 of her judgment. The objections included the following:

1. The English court had no personal jurisdiction over the judicial administrators.

2. The judicial administrators were not properly to be regarded as officers or agents of the judgment debtors, but even if they were, the fact that the judgment debtors were subject to the English court's jurisdiction did not mean that its directors or officers were likewise so subject.

3. It was wrong for the court to seek to intervene in the operation of a contract between CCOG and a third party in relation to assets outside the jurisdiction by interposing the receiver to act as a manager in the name of CCOG.

4. It was wrong for the English court to direct orders at officers of the Lebanese court seeking to control their conduct outside the jurisdiction.

5. In particular, it was wrong for the English court to require the Lebanese judicial administrators to assist in the enforcement of judgments which the Lebanese court did not recognise as enforceable in the absence of an order of exequatur. This presented the judicial administrators with a choice whether to obey the orders of the English court or the Lebanese court which appointed them.

6. There was no possible gateway for service of contempt proceedings on the judicial administrators. It was therefore wrong to threaten them with contempt proceedings by a penal notice.

36. The judge rejected the judicial administrators' objections. She started from the proposition that the demands of justice must always be the overriding consideration in considering the scope of the jurisdiction to grant an injunction under section 37(1) of the Senior Courts Act 1981. She also bore in mind that in the exercise of that power the court must have regard to its international obligations and take care not to arrogate to itself powers which properly belong elsewhere. She properly observed at paragraph 68 that:

"In particular, this court is very mindful that it must not trespass on what are matters properly within the jurisdiction of the Lebanese court, or appear in any way to be dictating to, or interfering with, the powers of the Lebanese court in derogation from universal principles of comity."

37. The judge stated that the history of the behaviour of the judgment debtors and their shareholders showed plainly that the resignation of the directors, the procurement of the appointment of judicial administrators and the refusal of the shareholders to participate in shareholders' meetings so as to re-elect directors (which was the ostensible purpose of the appointment of the judicial administrators) were all part of a deliberate strategy on the part of the judgment debtors and their shareholders designed to frustrate any attempt by Mr Masri to enforce the judgment debt.
38. The judge said at paragraph 74:

"In making these comments, I am not suggesting either that the order appointing the judicial administrators by the Lebanese court was a sham, or that the order was one which the Lebanese court was not entitled to make, or should not have made. These are matters for the Lebanese court, with whose jurisdiction in relation to such matters I would not presume to interfere."

39. The judge observed, however, that the constraints to which the judgment debtors and the judicial administrators were currently subject had been brought about entirely as a result of actions deliberately taken on behalf of the judgment debtors and their controlling shareholders as part of a sophisticated strategy to render the judgment debtors judgment-proof. The judge considered it just in all the circumstances that the order should be made against the judgment debtors and that, since the judicial administrators were acting in the capacity of the decision-making organ of the companies, it was right that they should be named in the penal notice. The judicial administrators could avoid any risk of double jeopardy by requesting the judgment debtors to appoint new directors or, if the shareholders refused to do so, by resigning from their office. It was unnecessary and premature to consider questions which might arise regarding service of any contempt proceedings on the judicial administrators.
40. On the appeal the judicial administrators' objections to the order were developed, and responded to, in wide ranging arguments but the essential points were the same.

Discussion and conclusion

41. On the facts of the case there is no reason to doubt the judge's conclusion that the judgment debtors' controlling shareholders have procured the resignation of the companies' directors and the appointment by the Lebanese court of judicial administrators in their stead for no other reason than to obstruct the orders of the English court.
42. Although that was the motivation for the application for the appointment of judicial administrators, the order appointing them was a judicial act of the Lebanese court. The judicial administrators derive their powers in relation to the judgment debtors from the orders of the Lebanese court and they are subject to the control of that court.
43. As to the role and powers of a judicial administrator appointed under Lebanese law to manage the affairs of a company, the judge quoted the following passages from the evidence of an expert witness which were undisputed:

"Once the judicial administrator is in place, "the immediate consequence is that all the powers of the then-acting directors are removed so that all powers are transferred to the (judicial) administrator and therefore the original directors cannot engage the company, or initiate proceedings in its name or lodge any appeal".

Thus, it has been ruled that "the appointment of a judicial administrator with the task to manage the company…triggers the withdrawal/suspension [desseisissement] of the corporate organs that were in place until such a moment".

Such withdrawal/suspension of the existing corporate organs, and in particular of the directors of the company, is the "automatic consequence" of the appointment of the judicial administrators. Once a judicial administrator has been appointed, he is "the only one who has the power to represent the company in court and, more generally, to carry out any legal act on behalf of the company."

The judicial administrator "is a manager of the company who replaces the legal organs of direction of the company in the framework determined by the judge. In other words he is the legal representative of the company by virtue of a judicial decision"."

44. Although the judge's order is made against the judgment debtors, it is clear from these passages that as a matter of Lebanese law the only persons who have power to act in the name of the companies are the judicial administrators.
45. The consequence of the judge's order is that the judgment debtors are now under conflicting management regimes. The judge's order has placed the companies under the management of the receiver, who is required to act in accordance with the directions of the English court. The Lebanese court orders have placed the companies in the management of the judicial administrators, who are required to act in accordance with the orders of the Lebanese court.
46. The English court order recognises that the judicial administrators are now the sole organ of government of the judgment debtors both by the form of penal notice and in paragraph 18(A), which refers to any person acting "in the capacity of, or in place of, a decision making organ of the defendant", meaning the judicial administrators. In effect, the judicial administrators are required by the English court order to yield to the authority and powers given to the receiver appointed by the English court, but they are required by the Lebanese court orders not to pay the judgment sum without the consent of the Lebanese court.
47. The English court undoubtedly has a legitimate interest in trying to enforce payment of a judgment debt owed by parties which accepted its jurisdiction. However, the judicial administrators have not accepted the English court's jurisdiction. Moreover, although technically the judgment debtors' rights under the JOA are a thing in action governed by English law, and that thing in action may therefore be said to be located in England, that is a somewhat technical analysis. The physical asset to which the order relates is located outside the jurisdiction. The order under appeal is therefore an exercise of power over judicial administrators of Lebanese companies appointed by the Lebanese court in relation to physical assets outside the jurisdiction.
48. It has been rightly said that comity is a term of elastic content: Dicey, Morris and Collins' The Conflict of Laws (2006) 14^th Ed, para 1-008. Comity by its nature is a bilateral concept. In considering whether an order of the English court contains matters which more properly appertain to the jurisdiction of a foreign court, it is a useful test to consider how the English court would regard the matter if the tables were reversed.
49. For an English court to appoint a manager to enter into contracts of sale of oil outside the jurisdiction in the name of a foreign company whose sole organ of government is a judicial administrator appointed by, and acting under the direction of, a court of the company's place of incorporation is, on the face of things, to exercise an exorbitant jurisdiction and is contrary to the principle of comity. If the roles were reversed, an English court would regard it as contrary to the principle of comity if a foreign court were to grant management powers to a third party in respect of an English company under the administration of the English court with a view to those powers being exercised in a manner inconsistent with the orders of the English court.
50. The question then arises whether the circumstances of this case are so exceptional that justice demands that the English court should forego ordinary constraints on the exercise of its jurisdiction. The controlling shareholders of the judgment debtors have undeniably shown an extraordinary degree of determination and cunning in their attempts, so far successfully, to thwart the orders of the English court. Mr Salzedo QC argued that in these extraordinary circumstances it was right for the judge to make an order which impacts on the judicial administrators, since the situation has been induced by the controlling shareholders and they could alter it by the simple expedient of appointing a new board of directors.
51. The judge was impressed by that argument. She considered that the solution to any problem faced by the judicial administrators as a result of the combination of orders of the Lebanese and English courts was for the judicial administrators to ask the shareholders to appoint new directors and, if they refused or failed to do so, to resign from their appointments. That comes close to saying that it is right for the English court to apply pressure on the judicial administrators to take steps to secure the termination of their appointment in order to avoid any peril of double jeopardy. The judge rightly accepted that the question whether the Lebanese court ought to have appointed the judicial administrators was a matter for the Lebanese court, with whose jurisdiction she would not presume to interfere. However, to attempt to coerce the judicial administrators into resigning their appointment by holding out the threat of contempt proceedings is in reality a form of interference.
52. In a case in which the English court has sufficient interest, it might exceptionally judge that the interests of justice require it to forego the self-restraint ordinarily required by the principle of comity, if it were satisfied that justice according to internationally acceptable standards could not be obtained in the courts to whose jurisdiction a matter more naturally appertains (cf AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [93]-[112]). But I emphasise that there is no such suggestion at this stage in the present case.
53. For those reasons, although I sympathise with Gloster J's wish to try to prevent the judgment debtors' machinations from succeeding, I conclude that the order of the judge is an unjustified interference with the process of the Lebanese courts in relation to the administration of the Lebanese companies and offends against the principle of comity. I would therefore allow the appeal and set aside the receivership order made by the judge.
54. Having reached that conclusion on the central point in the case, it is unnecessary for me to lengthen this judgment by dealing with the various other arguments advanced by the parties and the many authorities cited.
55. While comity involves self restraint in refraining from making an order on a matter which more properly appertains to the jurisdiction of a foreign state, the courts of one country may legitimately wish to state plainly how they see the issues in a case in which they have a legitimate interest, in the hope that their perspective may assist the foreign court in its judgment of the matter. That is not the same as trying to dictate to a foreign court how it should decide a matter within its own jurisdiction. Conversely, part of the concept of comity is an expectation that the courts of different countries will, where appropriate, lend their assistance to one another. In some circumstances this can only be achieved by the cooperation of the courts in different jurisdictions. There are inevitably some situations where the policies of different countries are in conflict (for example, because of security considerations or because of matters of vital economic interest), but happily they are the exception rather than the rule. The general principle that contracts should be honoured (pacta sunt servanda) is common throughout developed legal systems, and countries have a mutual interest in not allowing a party which is properly subject to the jurisdiction of a particular court to try to undermine the effect of that court's orders by a recourse to an alternative jurisdiction.
56. The effect of this judgment is to leave the question of the administration of the judgment debtors in the control of the Lebanese courts. I have commented that in some circumstances justice can only be achieved by the cooperation of the courts in different jurisdictions. In the circumstances of this case it is right to place on record the English court's concerns about two matters. One is that it is a particularly bad example of wealthy debtors using their resources to go to elaborate lengths to avoid payment of a judgment after a full trial of the merits of the dispute before a court whose jurisdiction the debtors had accepted. This not only causes injustice in the individual case but brings the process of justice into disrepute. The second cause for concern is that these attempts at avoidance have taken up an extraordinary amount of the time and resources of the courts to the detriment of other and more deserving litigants.

Lord Justice Rimer:

57. I have had the advantage of reading in draft the judgments of Toulson and Arden LJJ. I gratefully adopt Toulson LJ's account of the background facts.
58. We had able and elaborate arguments from counsel on a number of issues but in my view the disposition of this appeal does not require a consideration of most of them. For short reasons that I shall give, I respectfully disagree with Toulson LJ that Gloster J's receivership order should be set aside in its entirety. I would allow the appeal of the judicial administrators to the extent that I would remove from the order all reference to them but I would otherwise uphold it. I therefore agree with the outcome favoured by Arden LJ. The relevant order is that which Gloster J made on 23 March 2011 in substitution for her earlier orders of 1 and 21 December 2010. The March order was made in the wake of the resignation in the meantime of Mr Joujou, hitherto the lead judicial administrator. It purports to affect only the two remaining judicial administrators, Mr Zakour and Dr Al-Hajjar. Both are resident out of the jurisdiction and neither has submitted to the jurisdiction of the English court.
59. The extreme circumstances of this litigation, in which the judgment debtors have tirelessly devoted themselves to a strategy directed at evading satisfaction of their liability under a judgment of the English court to whose jurisdiction they have submitted, have rightly caused the court to make unusual ancillary orders by way of equitable execution, in particular the first receivership order made by Gloster J on 20 December 2007 and the second receivership order made by Tomlinson J (as he then was) on 14 April 2008. Given the intransigent determination of the judgment debtors, those orders have, however, still not achieved any substantial satisfaction of the judgment. I consider that Gloster J had jurisdiction to make the third receivership order in respect of CCOG and, in the circumstances, I consider that its making was also a proper exercise of her discretion.
60. Where, however, I respectfully consider that her order went too far was to purport to make it binding not just upon CCOG but also upon its judicial administrators appointed by the Lebanese court. She did not find them to be officers of CCOG. Mr Edey QC advanced an argument that even if she had, such officers outside the jurisdiction of the English court would have been strangers to the proceedings and so, without more, not properly identified as purportedly bound by the order. I express no view on that because I do not regard it as this case. The true nature of the judicial administrators is that of officers of the Lebanese court, whose function is to manage CCOG in relation to 'important' matters in accordance with the directions of the Lebanese court (see its order of 14 January 2009). The ultimate organ of government of CCOG is that court.
61. In those circumstances it appears to me to have been an exorbitant exercise of jurisdiction, reflecting an insufficient regard to the principles of comity, for Gloster J's order to have been expressed to purport to bind the judicial administrators, going as it does to the extent of warning them that they 'may' be held to be in contempt if CCOG disobeys the order. Whilst the penal notice also says that it is 'without prejudice' to their right to argue the contrary – apparently in answer to any contempt proceedings brought against them – that is cold comfort. On the face of the notice, the threat to them in the meantime appears to be that disobedience of the order by CCOG will or may put them automatically in contempt by the mere fact of their status as judicial administrators. In particular, the order does not tell them what they were supposed to do, or not to do, in order to avoid the risk of being held in contempt. On one view it simply presented them with an uncomfortable choice between ensuring that unimpeded effect is given to the receivership order or else obeying any contrary directions of the Lebanese court. That was to put them in an impossible position of uncertainty and potential double jeopardy. They ought not to have been put in that position.
62. Gloster J's receivership order in that respect therefore went too far. But I can see no reason in principle why her order, if confined to and directed at CCOG, was not properly made, albeit that it may have fallen at the more intrusive end of the court's jurisdiction. This court's decision in Masri v. Consolidated Contractors International (UK) Ltd and others (No 2) [2008] EWCA Civ 303; [2009] QB 450 illustrated the court's jurisdiction to make such an order. The order, no more than the receivership order under consideration in that appeal, does not purport to change the ownership of the oil or have any like proprietary effect. It merely entitles the receiver to act in CCOG's name in respect of it. It was made for the purpose of enforcing a judgment of the English court – to the jurisdiction of which CCOG had submitted in its defence of Mr Masri's claim on the merits – by way of equitable execution in respect of CCOG's main asset, its interest in the Masila oil concession in Yemen. The receiver's entitlement to enforce the receivership order extra-territorially will no doubt depend upon the recognition of the order by any relevant foreign law, including if necessary in Lebanon. As regards Lebanon, that will presumably require the obtaining of an exequatur in relation to it, for which it is open to Mr Masri to apply. The orders made by the Lebanese 'Urgent Matters' court in relation to the administration of CCOG – made in the absence of an exequatur in respect of the previous receivership orders – do not purport to prevent such an application. If an exequatur were to be sought and granted in respect of the order, the Lebanese courts would, I presume, give full recognition to it.
63. I would allow the judicial administrators' appeal to the extent of varying Gloster J's order by removing from it all references to the judicial administrators of CCOG.

Lady Justice Arden:

64. I am grateful to Toulson LJ for setting out the facts and background in this matter. He has concluded that the receivership order of Gloster J dated 1 December 2010, as varied on 14 and 21 December 2010 (respectively the first second and third receivership orders), should be set aside. The special characteristics of these orders for present purposes are, first, that they extended the receivership orders against CCOG to include all oil and rights to oil to which CCOG should become entitled under the joint operating agreement relating to the Masila Concession, and, secondly, that they are expressed to bind the judicial administrators of the judgment debtors appointed by the Lebanese court on the ground that they now constitute the decision-making organ of the judgment debtors.
65. I, for my part, would not discharge the orders made by Gloster J in their entirety, but I would remove the second special characteristic. Accordingly, there is a narrow but crucial point of difference between the conclusion that I have reached and that of Toulson LJ, but there is much in his judgment with which I do agree.
66. I propose to deal with the issues I need to decide under four headings: in personam jurisdiction, lex situs, the status of the judicial administrators and comity. These four concepts in my judgment in combination hold the key to answering this appeal.

In personam jurisdiction

67. When the court appoints a receiver over the property of one of the parties to proceedings within the jurisdiction, it does so in exercise of its jurisdiction in personam over the parties to the proceedings: see the decision of this court in Masri v Consolidated Contractors International (UK) Ltd and others (No 2) [2009] QB 450 at [58].

Lex situs

68. The right of a receiver appointed by the court to take possession of foreign movable or immovable property is governed by the lex situs, unless the court can exercise its jurisdiction in personam. This does not prevent the court from appointing a receiver over foreign property, but it does mean that a third party will not be in breach of the order if he attempts to take possession of such property, by taking proceedings in the jurisdiction in which the property is situate, before the title of the receiver has been established there: see Re Maudslay [1900] 1 Ch 602, where Cozens Hardy J held:

"The Court does not, and cannot attempt by its order to put its own officer in possession of foreign property, but it treats as guilty of contempt any party to the action in which the order is made who prevents the necessary steps being taken to enable its officer to take possession according to the laws of the foreign country. See Keys v. Keys, where special directions were given to a receiver as to the best mode of getting in an Indian debt; and Smith v. Smith, where it was pointed out that a receiver of property in Jersey and in France would have to recover possession according to the laws of those countries; and in Houlditch v Marquis of Donegal the House of Lords held that the Court of Chancery in Ireland ought to appoint a receiver in a suit instituted to carry into effect a decree of the Court of Chancery in England by which a receiver had been appointed over estates in Ireland. In other words, the receiver is not put in possession of foreign property by the mere order of the Court. Something else has to be done, and until that has been done in accordance with the foreign law, any person, not a party to the suit, who takes proceedings in the foreign country is not guilty of a contempt either on the ground of interfering with the receiver's possession or otherwise."

69. Accordingly, it is an inherent limitation in an English receivership order applying to foreign property that the receiver may not be able to collect those assets because his title is not recognised in the jurisdiction in which he seeks to collect that property: see, generally, Liverpool Marine Credit Co v Hunter (1868) 3 Ch App 479.
70. Accordingly, the judge would not have been justified in making the extended receivership orders solely on the ground that the controlling shareholders had procured the resignation of the directors of the judgment debtors, and the appointment by the Lebanese court of the judicial administrators, for no reason other than to obstruct the orders of this court. There may, nonetheless, in some circumstances be a remedy in the English court to redress action taken by a party abroad. However, there will only be such a remedy where the court has jurisdiction over the parties in personam: see the leading case of Cranstown v Johnston (1796) 3 Ves Jun 170. In that case, the positions were reversed: it was the judgment creditor in English proceedings who sought to steal a march on the judgment debtor by reprehensible means. He sought to do this by seizing the assets of the judgment debtor abroad in foreign proceedings of which the judgment debtor was not given notice. The principle established in that case (at 180) applies by analogy where it is the judgment debtor who seeks to steal the march. Arden MR held:

"I will lay down the rule as broad as this: this Court will not permit him to avail himself of the law of any other country to do what would be gross injustice."

71. It is not enough to say that the judgment debtors' rights under the joint operating agreement are subject to English law. The reality is that the assets that the receivers wish to recover include (at least) physical oil that is not situate in this jurisdiction. (I leave to one side whether, and if so when, the oil constitutes movable property). The receivers may also need to establish their title against the judicial administrators in the country in which the latter were appointed. That is also the law of the domicile of the judgment debtors.
72. The Lebanese court should likewise be unable to exercise its jurisdiction extraterritorially in relation to property of the judgment debtors situate in another jurisdiction and, accordingly, it too should not expect its judicial administrators to be able to act in a third jurisdiction without an order of the local court.
73. The judgment creditor seeks to overcome the inherent limitation in a receivership order made in personam over foreign property by arguing that the judicial administrators are in fact to be treated as representing the judgment debtors. The judge should not have been persuaded by this argument, as I explain below.

Status of the joint administrators appointed by the Lebanese court

74. The judge proceeded on the basis that the judicial administrators are the decision making organ of the judgment debtors. That no doubt is so. The matter, however, does not stop there. The order of the Lebanese court of 14 January 2009 set out by Touslon LJ at paragraph 17 of his judgment makes it clear that, while the judicial administrators were indeed bound to manage the business of the judgment debtors, they are to do so, on any important matter, under the directions of the Lebanese court. They are not, therefore, in an analogous position to that of directors or agents (whether appointed by power of attorney or otherwise) of the judgment debtors, who were bound to act solely in what they consider to be in the best interests of the judgment debtors. In those circumstances, the judicial administrators are not to be treated as in the same position, for the purpose of the English receivership order, as such officers or agents. They are officers of the Lebanese court.
75. The judge indeed made no finding that the judicial administrators were officers or agents of the judgment debtors. In any event, that question does not fall to be answered in the abstract but in the context of the receivership orders. In my judgment, it is clear that, in the context of an order made in exercise of the court's in personam jurisdiction over the judgment debtors, the judicial administrators are not bound by it by virtue of their status in relation to the judgment debtors. They should be excluded from both the extended paragraph 18(A) of the third order (see the judgment of Toulson LJ at paragraph 31 above) and from the penal notice.
76. Contrary to the conclusion reached by the judge in paragraph [89] of her judgment, the issue here is not one whose resolution is dependent on the facts constituting an alleged breach of the order. This issue should accordingly not be left to be determined at a future date.

Comity

77. Toulson LJ concludes that it was contrary to comity for the English court to make the receivership orders made by the judge for the reasons which he gives in his careful and clear judgment. I wish to associate myself with the clear statements of principle in paragraph 55 of his judgment. I agree with him in relation to what I have called the second characteristic. In particular, I share the view of Toulson LJ that it is contrary to comity for the courts of England and Wales to make an order which is expressed to apply, without more, to acts done outside the jurisdiction by officers of the court of another jurisdiction. It is not possible to circumvent this difficulty by treating the judicial administrators as if they were within the court's in personam jurisdiction.
78. I agree with Toulson LJ that the courts of England and Wales undoubtedly have a legitimate interest in trying to enforce the payment of the judgment debt by parties who accepted the court's jurisdiction. However, when that interest conflicts with comity, the latter must prevail.

Concluding matters

79. In the light of the above conclusions, I do not need to consider whether proceedings for contempt of court could be served out of the jurisdiction. Likewise, I do not need to consider some of the other questions that have been argued on this appeal, including the question whether the receivership orders needed to be served personally on the judicial administrators, or questions of state immunity, act of state, double jeopardy or the legal basis on which officers or agents of a company may be personally liable in contempt in respect of a breach of an order made against the company.
80. I wish to associate myself with paragraph 56 of the judgment of Toulson LJ (leaving aside the first sentence). Judgment debtors should heed the broad principle laid down in Cranstown v Johnston. The judge in this case was clearly motivated in effect by this broad principle. This principle, however, is not to be read as unqualified, and can only be applied in proper circumstances. While it is not possible to give effect to it in this case in the way the judge held, there may be other ways in which the principle can be pressed into use in cases where steps are taken in other jurisdictions to undermine judgments made by the English courts.
81. For the reasons given above, the orders of Gloster J should be varied in the manner indicated above.