Court of Appeal finds proceedings for contempt may be brought against foreign director of corporate party

The Court of Appeal has held that proceedings for civil contempt may be brought against a director of a foreign company which is party to proceedings in England and Wales but has not complied with a court order in those proceedings, regardless of whether the director is otherwise subject to the court's jurisdiction: Dar Al Arkan Real Estate Development Co & another v Majid Al-Sayed Bader Hashim Al Refai & others [2014] EWCA Civ 715.

This decision means that the court's power to make a committal order against a director or officer of a party to proceedings under CPR 81 has extra-territorial effect - in contrast to the court's power to order a corporate officer of a judgment debtor to provide information to aid enforcement under CPR 71, which it has been established does not have extra-territorial effect. In appropriate circumstances, therefore, commercial parties may seek to enforce a judgment or order by way of committal proceedings against an opponent's directors or officers, regardless of where those individuals are domiciled or resident.

The decision is also of interest for the Court of Appeal's view that article 22 of the Brussels Regulation (which provides for certain member states' courts to have exclusive jurisdiction over certain matters, including proceedings concerned with the enforcement of judgments) gives the court jurisdiction over persons who are not domiciled within the EU. That is contrary to the widely criticised Court of Appeal decision in Choudhary v Bhatter [2009] EWCA Civ 1176. The recast Brussels Regulation, which will apply to proceedings commenced from 10 January 2015 (see post), will in any event clarify that article 22 applies whether or not the defendant is EU domiciled.

Legal background

CPR 81.4(3) provides that, where a judgment or order against a company is to be enforced by an order for committal, the committal order may be made against any director or other officer of the company.

CPR Practice Direction 6B 3.1 provides for various "gateways" for seeking permission to serve proceedings out of the jurisdiction including, at paragraph (3), where the person to be served is "a necessary or proper party" to a claim brought against a defendant (or defendants) on whom the claim form has been served other than in reliance on that paragraph.

In Masri v Consolidated Contractors International (UK) Ltd and others (No 4) [2009] UKHL 43, the House of Lords held that the court's power under CPR 71 to order an officer of a corporate judgment debtor to attend court to provide information needed to enforce a judgment or order did not have extra-territorial effect and so did not apply to an officer of a corporate judgment debtor who habitually resided in Greece.

In In Re Seagull Manufacturing Co Ltd [1993] Ch 345 it was held that the power under section 133 of the Insolvency Act 1986 to order the public examination of any director or manager of a company which had been placed into compulsory liquidation could be exercised extra-territorially over a director outside the jurisdiction.

Facts

In the present case, Sheikh Abdullatif was the managing director / a director of the two claimant companies, which were incorporated in Saudi Arabia and Bahrain respectively. An application for committal was brought against the claimants and against Sheikh Abdullatif after a without notice injunction obtained by the claimants was discharged on the basis that the claimants had breached their duty to make full disclosure and failed to comply with an undertaking reflected in the order. Although the claimants were incorporated overseas, they had submitted to the English court's jurisdiction by suing the defendants here. The question was whether the court could take jurisdiction in respect of the claim against Sheikh Abdullatif.

The High Court (Andrew Smith J) ordered that committal proceedings against Sheikh Abdullatif were within the scope of CPR 81.4(3) and that the proceedings could be served on him out of the jurisdiction under the necessary or proper party gateway. Sheikh Abdullatif appealed, arguing that the judge did not have jurisdiction over him as he was domiciled and resident in Saudi Arabia.

Decision

The Court of Appeal (Richards, Beatson and Briggs LJJ) dismissed the appeal.

It was accepted that, although there is a presumption against extra-territoriality, the Civil Procedure Rule Committee has power to make rules with an extra-territorial effect (as established by the House of Lords decision in Masri). As a matter of principle, the Court found that CPR 81.4(3) should be read as having extra-territorial effect due to:

• the need to enforce compliance with rules, practice directions and orders as part of the court's "overriding objective" of dealing with cases justly;
• the need to ensure that the courts can control proceedings which are properly brought in this jurisdiction, particularly given the international character of commercial litigation and the extent to which foreign companies are involved;
• the anomalies that would otherwise result, including the fact that a foreign director would be subject to CPR 8.14(3) if that person happened to be a party to the underlying proceedings but not otherwise. 

The approach taken by the House of Lords in Masri in relation to CPR 71 did not affect that conclusion. The nature of, and rationale for, committal proceedings is very different from the court's power to obtain information from judgment debtors under CPR 71. The purpose of civil contempt proceedings is to vindicate the authority of the court as well as the rights of individual litigants. That meant that this case was closer to the decision in Re Seagull than that in Masri.

The Court of Appeal also considered article 22(5) of the Brussels Regulation which provides that in proceedings concerned with the enforcement of judgments, the courts of the member state of enforcement have exclusive jurisdiction "regardless of domicile". In Choudhary v Bhatter [2009] EWCA Civ 1176, the Court of Appeal found that the words "regardless of domicile" in article 22 should not be construed as having any application to a case where the person to be sued was not domiciled in a member state. In the present case, Andrew Smith J had found that, although he was bound by the decision in Choudhary, it was contrary to ECJ authority and therefore per incuriam in a way which would permit the Court of Appeal, as a court of co-ordinate jurisdiction, to depart from it.

Although it was not necessary to rule on the issue, since the appeal was dismissed on other grounds, the Court of Appeal expressed its view on the Choudhary point, saying that the judge's reasoning that the decision was per incuriam appeared to be compelling.