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Court of Appeal overturns decision in Sabbagh v Khoury

The Court of Appeal on Friday 28th July overturned the decision of Mrs Justice Carr to strike out the majority of the claim in the Sabbagh v Khoury proceedings, a significant piece of commercial litigation concerning the ownership of shares in a Lebanese construction group (namely, Consolidated Contractors Group SAL).

On the principal issue, Gloster, Beatson and Patten LJJ unanimously found that the judge at first instance had conducted a mini-trial at the strike out hearing. They held that it was inappropriate to strike out the claim without the taking of further evidence. The Court also found, in favour of the appellant, that she was not bound by any arbitration clauses and that, in any event, those arbitration clauses did not extend to the subject matter of the claims.

The judgment also addresses two important points of principle. First, the Court addressed the proper scope of the ‘succession’ exclusion from the Brussels Regulation. It was held that, although there was an issue as to the property owned by the appellant’s father on his death, that was not enough to bring the claim within the succession exception. Fundamentally, this was a claim in tort to recover damages, and there no “technical issue of succession”.

Second, the Court addressed the proper construction of Article 6(1) of the Brussels Regulation. Article 6(1) creates an exception to the general rule that defendants must be sued in their place of domicile. Article 6(1) applies where the claim against the non-domiciled defendant is sufficiently closely connected to the claim against the domiciled ‘anchor’ defendant. The appellant argued that Article 6(1) did not require the claimant to demonstrate an arguable case against the anchor defendant; the appellant submitted that the only test is one of a sufficiently close connection between the claims. Although the issue was obiter, the Court set out extensive reasoning. Gloster LJ, dissenting, agreed with the appellant’s submissions that Article 6(1) did not allow the courts to apply a merits threshold to the claim against the anchor defendant. However, the majority held that a claimant must still establish a serious question to be tried against the anchor defendant in order to rely on Article 6(1).

Laurence Rabinowitz QC and Simon Colton QC represented the successful appellant.

A full text of the Judgment is available here.