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11 November 2014
In Sabbagh v Khoury(1) the High Court dismissed a tortious claim for conspiracy to deprive the claimant of inheriting her late father's shares on the basis that it had no real prospect of success. However, the court found that there was an arguable related claim that many of the same defendants had unlawfully misappropriated assets and conspired to deprive the claimant of her inheritance. Further, the English court was seized of jurisdiction in respect of all the relevant defendants. Succession was regarded as the basis of her entitlement, rather than the principal subject matter of the claim, so Article 1(2) of the EU Brussels I Regulation(2) did not operate to require a stay of the English proceedings.
Claimant Sana Hassib Sabbagh was the eldest of three children of the late Hassib Sabbagh, billionaire and co-founder of Consolidated Contractors Co International (CCC), a Middle East-based global building company.
Sabbagh alleged financial wrongdoing against multiple family members – in particular:
The two claims in this case, first brought on July 9 2013, were as follows:
In October 2014 the case came before Justice Carr for an interlocutory hearing in which the defendants disputed the English court's jurisdiction to hear these claims.
Sabbagh relied predominantly on Article 6(1) of Brussels I and almost identical provisions in the Lugano Convention to argue that these claims as against the non-EU domiciled defendants were "so closely connected" to her claims against her cousin – the English domiciled 'anchor' – that it was expedient for the claims to be heard together.
The defendants disputed jurisdiction, arguing that:
The court had to decide two issues.
Could the other defendants be joined as co-defendants to the English claim?
A claimant wishing to found jurisdiction to try foreign defendants under Article 6(1) of Brussels I must demonstrate that the claims are so closely connected with the claim against the anchor defendant that it is expedient to hear and determine them together. The court must also be satisfied that the claim meets the threshold test of being a good arguable case.
Asset misappropriation claim
In assessing whether Sabbagh had a good arguable case, the court considered whether there was a real prospect of her showing that:
The court found, in relation to the first issue, that there was an arguable case that it was not common practice to invest in the way that the defendants had; the defendants were unable to explain why and how specific investments were necessary, whether for local regulatory reasons or otherwise.
In respect of the second issue, the court held that the father's capacity following his stroke was clearly in question in light of his doctor's evidence that he "did not have sufficient capacity to understand investment decisions". The uncle would have been aware of this, given how closely connected the two brothers were in business.
As to whether the uncle was authorised to carry out the transactions, the court considered the scope of the 1992 power of attorney to be unclear and was not satisfied that the 2004 power of attorney had been properly executed (it was created following the father's stroke).
Finally, given the cousin's close involvement in the transactions, the likelihood of his knowledge of the father's material impairment and broader questions of propriety surrounding the investments, the court found that there was a real issue to be tried in relation to intentional wrongdoing on the cousin's part.
In the circumstances, the court considered that there were real issues to try in the asset misappropriation claim. Further, the court accepted that these issues arose in relation to each relevant defendant to the claim, and questions of knowledge and intention were likely to raise interlinked factual issues. The court was accordingly satisfied that the English court could take jurisdiction over the claims against the cousin's co-defendants in respect of the asset misappropriation claim and refused the defendants' application to stay the claim.
Share deprivation claim
In assessing the merits of whether there was a good arguable case for the share deprivation claim, the court considered:
In relation to the first issue, the court decided on the evidence that the father had successfully disposed of his shares in CCG capital before his death; therefore, there was no real prospect of Sabbagh demonstrating ownership at the time of his death.
In relation to the second issue, the court decided that the agreements stood as sales, rather than gifts, under Lebanese law.
Finally, the court decided that even if the father had owned the shares on his death, there was insufficient evidence to establish even a prima facie case that the cousin knew that the father had parted with the shares so as to justify an allegation as serious as intentional wrongdoing. Sabbagh's allegation was entirely inconsistent with the parties' understanding of the agreements, including her own.
The court was therefore not satisfied that the share deprivation claim had a real prospect of success and stayed the claim pursuant to the defendants' application.
Did the claims fall outside Brussels I under Article 1(2) or within the Article 22(2) exception?
The court was mindful that Article 1(1) of Brussels I is broad in scope and that exclusions should be construed strictly. The claims were subject to the regulation and jurisdiction was available in England, unless the principal subject matter of the claims was excluded under Article 1(2) or by the exception in Article 22(2). The court emphasised that when identifying the principal subject matter of the claim, it must look at the substance of the complaint, not the form. In terms of approach, the court stated that it is necessary to look at each claim separately, as well as any defence to it, and then to characterise the proceedings as a whole.
The court was satisfied that the asset misappropriation claim was not excluded by Article 1(2) of Brussels I, as the legal and factual issues involved did not concern succession. There was no dispute between the parties that Sabbagh and her two brothers were each entitled to inherit one-third of their father's estate under his intestacy. Succession was merely the root of Sabbagh's entitlement; the claims before the court were based on allegations of tortious wrongdoing, rather than whether Sabbagh was properly entitled to inherit from her father.
Taking a similar approach, the court found that the claim was not founded on challenges to ultra vires corporate decisions such that Article 22(2) of Brussels I precluded the English court from hearing it. The claim related to an alleged tortious conspiracy to deprive Sabbagh of valuable assets; the validity of the investments was not principally at issue.
Therefore, the court could accept jurisdiction over the asset misappropriation claim and rejected the defendants' application for a stay in favour of proceedings in Lebanon.
The judgment provides helpful clarification of the application of the wills and succession exclusion under Article 1(2) of Brussels I. It confirms that a dispute arising in the context of a succession or inheritance situation will not necessarily fall within the Article 1(2) exclusion; rather, the court will consider the principal legal and factual issues of the claim to determine whether its jurisdiction is excluded.
On a separate point, the court indicated in its assessment of the merits of the respective heads of claim that, contrary to the usual rule in Hollington v Hewthorn(3) (ie, previous litigation should not ordinarily be admissible), it would be willing in principle to consider findings in previous litigation when deciding at an interlocutory stage whether there was a serious issue to be tried, but only as a means to consider what material evidence there might be at trial. The court found little in the findings in another case involving the family (Munib Masri v Consolidated Contractors International Company SAL(4)) that had any bearing on the claims in this case. However, this could be a useful tool for other litigants seeking to demonstrate the merits of their claim in the early stages of litigation.
For further information on this topic please contact Sarah Trimmings or Geraldine Elliott at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
(1)  EWHC 3233.
(2) EU Regulation 44/2001 (December 22 2000) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
(3)  KB 587.
(4)  EWCA Civ 21.
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