Entitlement to inheritance claim fell short of “wills and succession” exclusion on jurisdiction and enforcement

Claims with a view to entitlement to inheritance did not fall within the “wills and succession” exclusion under Article 1(2) of the “Brussels I” Regulation on jurisdiction and enforcement of judgments in civil and commercial matters.

In Sana Hassib Sabbagh v Wael Said Khoury and others1 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) Brussels I did not operate to require a stay of the English proceedings.

Facts

The claimant, Sana Hassib Sabbagh (Sana) is the eldest of three children of the late Hassib Sabbagh (Hassib), billionaire and co-founder of Consolidated Contractors Co. International (CCC), a Middle East based global building company.

Sana alleges financial wrongdoing against multiple family members; in particular her uncle Said Toufic Khoury, co-founder of CCC with Hassib (Said), and her cousin (Said’s son), Wael Said Khoury (Wael), non-executive director of Consolidated Contractors Group SAL (CCG) a Lebanese company within the CCC group of companies and itself a defendant to the claim.

The two claims in this case, first brought by Sana on 9 July 2013, are:

  • First, that after Sana’s late father suffered a stroke and up until his death in early 2010, the defendants unlawfully conspired to misappropriate Hassib’s assets and to interfere with Sana’s lawful inheritance through a series of investments (asset misappropriation claim); valued at an estimated $75m
  • Secondly, that since Hassib’s death the Defendants had unlawfully conspired to deprive Sana of her entitlement to shares in CCG (share deprivation claim); valued at an estimated $520m. This allegation arises out of a disagreement between Sana and her relatives over whether Hassib held 39.915% of CCG’s share capital at the time of his death, pursuant to share transfer agreements entered into in 1993, 1995 and 1998.

In October this year, the case came before Mrs Justice Carr for an interlocutory hearing, in which the defendants disputed the English court’s jurisdiction to hear these claims.

Sana relied predominantly upon 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 are “so closely connected” to her claims against Wael, the English domiciled “anchor”, that it was expedient for the claims to be heard together.

The defendants disputed jurisdiction, arguing:

  • That Sana’s claims against Wael were so weak that there was no risk of irreconcilable judgments from separate proceedings and therefore no basis on which to join the other defendants under Article 6(1), and
  • That the claims fell outside Brussels I under the “wills and succession” exclusion in Article 1(2) or, alternatively, that the validity of corporate decisions (share and asset transfers) were in issue such that the natural forum for the dispute under Article 22(2) ought to be Lebanon.

Decision

The judge had to decide two issues.

Was there a triable claim against Wael and thus a basis on which to join the other defendants as co-defendants to the claim before the English court?

A claimant wishing to found jurisdiction to try foreign defendants under Article 6(1) 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 together2 . 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 Sana had a good arguable claim, the court considered whether there was a real prospect of her showing:

  1. That it was not a common practice within the CCC group to reinvest as the defendants alleged,
  2. That Hassib had had insufficient mental capacity to authorise the transfers following his stroke,
  3. That Said was not authorised under 1992 and 2004 powers of attorney to carry out the transactions on behalf of Hassib, and
  4. That Wael had conspiratorial knowledge or involvement in the alleged misappropriations.

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 Hassib’s capacity following his stroke was clearly in question in the light of his doctor’s evidence that he “did not have sufficient capacity to understand investment decisions” and Said would have been aware of this, given how closely connected the two brothers were in business.

As to whether Said 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 Hassib’s stroke). 

Finally, given Wael’s close involvement in the transactions, the likelihood of his knowledge of Hassib’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 part of Wael.

In the circumstances, the court consider hat there were real issues to try in the asset misappropriation claim. Further, the court accepted that those issues arose in relation to each relevant defendant to that 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 Wael’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 the following:

  1. Whether there was a real prospect of establishing that Hassib in fact owned 39.915% of CCG’s share capital at the time of his death,
  2. If yes, whether there was a real prospect of establishing that the shares fell within Hassib’s estate as lapsed gifts rather than sales and that Sana was therefore entitled to them, and
  3. Whether there was a real prospect of establishing intentional wrongdoing by Wael in relation to deprivation of those shares.

In relation to the first issue, the court decided on the evidence that Hassib had successfully disposed of his shares in CCG capital before his death and there was therefore no real prospect of Sana demonstrating ownership at the time of his death.

In relation to the second issue, the judge decided that the agreements stood as sales rather than gifts under Lebanese law.

Finally, the court decided that even if Hassib had owned the shares on his death, there was insufficient evidence to establish even a prima facie case that Wael knew that this uncle had parted with the shares so as to justify an allegation as serious as intentional wrongdoing. Sana’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 succession form part of the principal subject matter of the claim and did the claims therefore fall outside the Brussels Regulation under Article 1(2)? Alternatively did the claims fall within the exclusive jurisdiction for corporate decisions provision, Article 22 (2)?

The judge was mindful that Article 1(1) of Brussels I is broad in its 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 judge emphasised that when identifying the principal subject matter of the claim, the court 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 Sana and her two brothers were each entitled to inherit a third of Hassib’s estate under his intestacy. Succession was merely the root of Sana’s entitlement; the claims before the court were based on allegations of tortious wrongdoing rather than whether Sana 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) Brussels I precluded the English court from hearing it. The claim related to an alleged tortious conspiracy to deprive Sana of valuable assets; the validity of the investments was not principally in issue.

The court was therefore able to accept jurisdiction over the asset misappropriation claim and rejected the defendants’ application for a stay in favour of proceedings in Lebanon.

Comments

The judgment provides helpful clarification of the application of the “wills and succession” exclusion under Article 1 (2) Brussels 1. The decision confirms that the fact that a dispute arises in the context of a succession or inheritance situation does not necessarily mean that it will fall within 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.

Interestingly, on a separate point, the judge indicated, when assessing the merits of the respective heads of claim, that contrary to the usual rule in Hollington v Hewthorn3 (previous litigation ought not ordinarily to be admissible) the court 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 judge found there to be little in the findings in another case involving the family (Munib Masri v Consolidated Contractors International Company SAL and others4 ) 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.