Kroll (the Second Defendant in the substantive proceedings) issued contempt proceedings against both Claimants (a listed Saudi Arabian property development company and a Bahraini based investment bank) and one of their senior executives (Sheikh Abdullatif). Kroll applied for a declaration that the Claimants are in contempt of court by reason of their breach of an order of the Court and undertaking given to the Court in June 2012, an order for committal against Sheikh Abdullatif for the Claimants’ contempt and a fine against the Claimants.
Sheikh Abdullatif challenged the jurisdiction of the English Court to order his imprisonment arguing (among other things) that CPR 81.4(3) (which provides for the imprisonment of a director or officer for the company’s contempt) did not have extra-territorial effect and so could not apply to an officer who was outside the jurisdiction. At first instance, Andrew Smith J dismissed Sheikh Abdullatif’s jurisdiction challenge holding that CPR 81.4(3) did have extra-territorial effect, and accordingly the Court gave permission for Kroll to serve Sheikh Abdullatif out of the jurisdiction with the committal proceedings. The Judge’s decision can be found at [2013] EWHC 4112 (QB)
Sheikh Abdullatif appealed against that decision, with the permission of the Judge, and the appeal was heard in March 2014 by a Court comprising Richards, Beatson and Briggs LJJ. On 23 May 2014, the Court dismissed Sheikh Abdullatif’s appeal, upholding Andrew Smith J’s decision. Beatson LJ (with whom Richards and Briggs LJJ agreed) held that CPR 81.4(3) did have extra-territorial effect, because (in essence)
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CPR 81.4 provided a mechanism for the exercise of the Court’s disciplinary powers against companies which were subject to its jurisdiction and had breached undertakings or Court orders. The purpose of the CPR 81.4(3) mechanism was to ensure that the Court could exert the necessary pressure on the responsible officers or directors of such companies. If the power to commit such an officer or director was limited to officers or directors within the jurisdiction, then the Court’s powers to ensure that foreign companies (or English companies with foreign directors) complied with orders against them would be significantly weakened. This was a strong factor pointing towards the displacement of the presumption against extra-territorial effect
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CPR 81.4(3) was a power closer in nature to the power under consideration in Re Seagull Manufacturing Co Ltd [1993] Ch 345 (the power to order the public examination of an officer of a company placed into compulsory liquidation) than the power under consideration in Masri v Consolidated Contractors (No. 4) [2009] UKHL 43 (the power to order the examination of an officer of a judgment debtor). In Re Seagull, the Court of Appeal had held the relevant power had extra-territorial effect. In Masri, the House of Lords had held it did not. The Court held that the same public interest Peter Gibson J had based his decision on in Re Seagull supported giving CPR 81.4(3) extra-territorial effect.
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The Court did not accept that any practical difficulties with enforcement of such orders against foreign directors were such as to lead to the conclusion that the Rules Committee did not intend CPR 81.4(3) to have extra-territorial effect.
Kroll’s potential cross-appeal (on the scope of Article 22 of the Judgments Regulation) did not, therefore, fall to be considered but given the importance of the point the Court of Appeal did express the view (accepting Kroll’s submissions) that Choudhary v Bhattar [2009] EWCA Civ 1176 was decided per incuriam because the relevant ECJ jurisprudence had been overlooked in that case and that Andrew Smith J’s reasons for concluding that Article 22 did extend to defendants not domiciled within a Member State were compelling. Andrew Smith J had also held that Choudhary was decided per incuriam but, as a matter of precedent, had concluded that a first instance judge was bound to follow it.
The case is significant for considering the jurisdictional basis for contempt proceedings against directors and officers of companies where the director or officer in question is outside the jurisdiction.
The Court of Appeal’s Judgment can be found here.
Charlie Graham QC, Nicholas Sloboda and Sophie Weber appeared for Kroll (instructed by Slaughter and May).