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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Racy v Hawila [2004] EWCA Civ 209 (18 February 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/209.html Cite as: [2004] EWCA Civ 209 |
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(BLACKBURNE J)
Strand London, WC2 |
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B e f o r e :
LORD JUSTICE MAY
LORD JUSTICE JONATHAN PARKER
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KHALED SALAM RACY | Appellant/Claimant | |
-v- | ||
SALAH JACQUES HAWILA | Respondent/Defendant |
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Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MR EWAN MCQUATER QC (instructed by Lovells) appeared on behalf of the Respondent
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Crown Copyright ©
"41. ... The precise relief that he seeks is that Mr Racy should be given a short further period within which to elect which action he wishes to pursue; if he fails within that period to make an election the court is invited to order a stay of the English action pending a determination of the Lebanese action whereupon the English action, if it continues to raise issues which have not been determined in the Lebanese action or which, even if determined, are not binding on the parties in the English action, may revive; if Mr Racy elects to continue with the English action, then provided the Lebanese action is stayed in the meantime, Mr Hawila would no longer pursue this application.
"3. ... At the heart of Mr Racy's claim is a business relationship between himself and Mr Hawila which, he claims, went back many years and extended to many countries and many differing business and other interests. A part of that relationship was conducted, he says, through the medium of a group of companies called the Midmac Group. The holding company of that group is a Luxembourg company called Midmac Holding Corporation SA ('MHC') of which all but six shares out of its issued 40,000 shares are divided in the ratio of 2:1 between a Jersey company called Midmac Inc (holding 26,662 shares) in which, through various off-shore arrangements, Mr Hawila is interested and Ochil Holdings Limited (holding 13,332 shares) in which, through other off-shore arrangements, Mr Racy is interested. ['SARL'] - the subject matter of the Lebanese action - is virtually a wholly owned subsidiary of MHC in that MHC holds 9,560 of its shares out of 9,600 in issue (ie over 99%). SARL does not itself carry on any business but acts as a holding company for, principally if not exclusively, a Qatari entity which carries on business as a construction company in Qatar and elsewhere in the Middle East. Mr Racy holds 20 shares in SARL and one share in MHC out of the 40,000 in issue in that company."
In paragraphs 4 to 13 of the judgment the judge summarises the issues in the Lebanese action as follows:
"4. With that preface I come straight to the Lebanese action. It was initiated by a summons dated 21 February 2002. Mr Racy is the claimant, Mr Hawila the first defendant and SARL the second defendant. Mr Racy's claim is for the liquidation of SARL and the appointment of a liquidator. A less than perfect translation into English of the summons was in evidence.
5. Mr Racy appears to sue as a shareholder of SARL in right of his holding of 20 shares in that company, ie less than 0.25% of its issued share capital. He pleads that Mr Hawila holds another 20 shares, a Mr Malek another 20 and that the remainder, ie over 99% of the share capital, is held by MHC. He pleads that MHC is owned by himself and Mr Hawila in the ratio of one-third by himself and two-thirds by Mr Hawila.
6. Mr Racy goes on to plead that he, Mr Hawila and Mr Malek were SARL's only directors but that at the end of 1984 Mr Malek retired and sold to Mr Hawila the shares that he owned in the various companies of what he refers to simply as 'the group'. That is obviously intended to refer to the Midmac Group. He says that as between himself and Mr Hawila the ratio of ownership since the beginning of 1985 had been 2:1 in favour of Mr Hawila.
7. Then, after noting that SARL was incorporated to operate as a construction and engineering contractor and that it has not carried out any work in the Lebanon but instead has restricted its activity to other Middle Eastern countries operating through a subsidiary, Mr Racy pleads that he was in charge of engineering matters and resided most of his time in Qatar, Iraq and Saudi Arabia while Mr Hawila became the effective chairman of the group and resided in London. He pleads that he and Mr Hawila incorporated a services company called Mid Orient Technical Services ('MOTS') which became the principal and effective head office of the whole word-wide group of companies owned by himself and Mr Hawila.
8. In paragraph 9 he pleads that 'the persons in charge of accounting matters in the British service company' - which I take to be a reference to MOTS - prepared annual balance sheets for all of the companies in the group including SARL for which two kinds of balance sheet were prepared: (a) annual so-called 'local non-consolidated balance sheets' which were restricted to SARL's activities inside the Lebanon and made no mention of work carried out abroad through its subsidiaries and (b) consolidated annual balance sheets covering all of SARL's activities, both inside and outside the Lebanon, including 'partners' drawings' as well as accounts covering its subsidiaries in Qatar and Iraq. Mr Racy then pleads that the non-consolidated balance sheets did not disclose SARL's true financial position although the consolidated balance sheet did.
9. In paragraph 11 Mr Racy pleads that SARL's Qatari subsidiary suffered a $23 million loss. In paragraph 12 he pleads that, in view of the exclusive control exercised by Mr Hawila and his employees in London over the accounts of SARL and of the remainder of the Midmac Group, he requested Mr Hawila and the financial director working for him, a Mr Nasr, to prepare a comprehensive report showing the 'partners' accounts' for the period between 1 January 1985 and 31 December 1998. He goes on to plead that on 19 December 1999 Mr Nasr reported that the total of Mr Hawila's drawings amounted to $18,685,000. He pleads that after 1985 he and Mr Hawila agreed to keep their drawings 'equitable and commensurable' with expected benefits and losses but that Mr Hawila broke the agreement by making withdrawals thereby rendering him liable to SARL for $12,299,000 with interest. He pleads that this caused SARL to incur huge losses and become insolvent.
10. In paragraph 15 Mr Racy claims that a dispute has arisen between himself and Mr Hawila (whom he jointly describes as 'the true and effective partners' in SARL) as a result of Mr Hawila's 'illegal behaviour and his appropriation' of SARL's assets. In paragraph 16 he refers to a dispute over 'consultative fees' amounting to approximately $21 million, says that it and other matters put an end to their relationship but does not otherwise explain how those fees fit into the scheme of things.
11. Mr Racy pleads four grounds for winding up SARL. First, there is what is described as 'the strong dispute' between himself and Mr Hawila as 'the only true and effective partners' in SARL resulting from Mr Hawila's control of that company (including its finances and accounts) and his action in making excessive withdrawals. The second ground is what he alleges to be SARL's loss of over three-quarters of its capital as a result of the $23 million loss sustained by the Qatari subsidiary and Mr Hawila's withdrawal of $12,299,000. The third ground refers to Mr Hawila's alleged control of SARL's accounts and what is said to be Mr Hawila's action in publishing SARL's incomplete balance sheet amounting, it is alleged, to 'an attempt to take over the company's assets and to falsify its accounts' and conceal its true value from persons intending to contract with it and its bankers. The fourth ground is said to be the failure after 1983 to appoint managers of SARL coupled with their present inability, as 'the only and effective partners' in SARL, to make fresh appointments.
12. He concludes by pleading that it is imperative to dissolve SARL and appoint a liquidator to recover the amounts due to it that Mr Hawila has misapplied.
13. In a response to that summons Mr Hawila has challenged the jurisdiction of the Beirut court to entertain the Lebanese action. His first basis of challenge is founded upon the fact that, as alleged, SARL is as to 477 parts out of 480 owned by MHC, the Luxembourg parent company. The challenge is that, insofar as Mr Racy's claim is based upon a dispute between the two of them, the dispute in question concerns MHC and not SARL, the resolution of which is a matter for the Luxembourg and not the Lebanese court. His second basis of challenge is that as he and Mr Racy only own one share each in MHC out of the 40,000 issued by that company and only one each out of 480 parts in SARL (equivalent to 20 out of 9,600), it does not fall to Mr Racy to speak on behalf of MHC and allege that SARL is deadlocked. On the contrary, he says, SARL held a shareholders' meeting on 14 December 2001 which approved its 1990 accounts and resolved upon an increase in its capital. Mr Hawila goes on to say that, even if the Beirut court has jurisdiction, it should reject the four grounds put forward by Mr Racy for putting SARL in liquidation. Mr Hawila then refers to a variety of matters going to the merits of those four grounds. SARL too has filed a response raising similar issues going to both jurisdiction and to the general merits. These responses (served on 29 April 2002 and 10 June 2002) were themselves the subject of counter-responses by Mr Racy filed on 8 October 2002 to which Mr Hawila and SARL have each filed yet further responses, Mr Hawila's dated 12 November 2002 and SARL's dated 7 January 2003. I was told that at the beginning of this month an order was made by the Beirut court directing the parties to attend on 16 October 2003."
"14. I now turn to Mr Racy's action in this jurisdiction in which Mr Hawila makes his application and which I will refer to as 'the English action'. It was started by a claim form issued on 6 December 2002 and was accompanied by very extensive particulars of claim running to over 50 pages.
15. There are three main elements to Mr Racy's claims in the English action: (1) an alleged partnership between himself and Mr Hawila entered into in early 1985 in succession to an earlier partnership formerly carried on by them and a Mr Malek (the same person of that name referred to in the Lebanese actions), (2) a contract between them said to have arisen out of a telephone conversation on 19 May 1986 and a deed between them entered into on 14 April 1986 and (3) breach of a fiduciary duty said to have been owed to him by Mr Hawila arising out of a fiduciary relationship between them.
16. Their business relationship is allegedly said to have started in the late 1960s when they were employed in the construction industry in Qatar. Mr Racy pleads that by 1975 he and Mr Hawila and Mr Malek were equal shareholders in a company called Orient Lebanon and that between 1975 and 1981 the three of them set up and thereafter operated through a structure of companies called the Midmac Group. He alleges that the most significant of the companies in the group were: (1) MHC, the Group's holding company the shares in which were, save for very small holdings held by outsiders, owned legally or beneficially in equal shares by himself, Mr Hawila and Mr Malek, (2) SARL, (3) Midmac Contracting (a Qatari company owned and controlled by SARL and operating in Qatar), (4) Midmac SA (a Saudi company owned as to 65% by MHC and as to the balance by Saudi nationals), and (5) MOTS. Mr Racy pleads that MOTS became a service company for the Midmac Group and its London offices in effect the Group's head office from which all joint activities were controlled. Much of this repeats what is already pleaded in the Lebanese action.
17. Mr Racy goes on to say that the Midmac Group increasingly engaged in activities outside the construction field, especially in the property and financial fields, for which purposes other Midmac companies were created. He alleges he, Mr Hawila and Mr Malek engaged together in business activities outside the Midmac Group operating through corporate and non-corporate vehicles or, in some cases, in the name of one or more individually of the three of them.
18. Paragraph 11 pleads that, after formation of the Midmac Group, money was frequently circulated among the various group companies, according to their needs and that an annual consolidated balance sheet was prepared for MHC (the holding company).
19. Paragraph 16 pleads that from late 1981 withdrawals by the three participants of funds for business and personal purposes, which up to then had been made from different accounts held by various Midmac Group companies, became consolidated into one account for each of them held nominally by SARL although each of them could continue to draw on different Midmac Group accounts. These accounts, it is pleaded, were referred to as 'the Partners' Accounts'. The underlying understanding, it is said, was that withdrawals should reflect their respective entitlements to no more than one third of the net assets of the Midmac Group and non-Midmac Group businesses and investments.
20. Mr Racy pleads in paragraph 22 that the business relationship between the three of them from 1975 to 1985 was that of partners sharing equally in the profits and losses of the Midmac Group and non-Midmac Group businesses and investments. He goes on to plead that in 1986 Mr Malek retired and that his one-third share in the overall business was acquired by Mr Hawila. He pleads his concern at the time that his existing right to one third of the net profits and assets of the Midmac Group and non-Midmac Group businesses and investments should not thereby be affected. He pleads that, with that concern in mind, he agreed with Mr Hawila in the course of a lengthy telephone conversation on 19 May 1986 that his right to make withdrawals in accordance with his one-third share would continue even after Mr Hawila became the majority shareholder of the Midmac Group. He pleads that as a consequence of that agreement he retained his interest in the various businesses and investments.
21. He pleads that with effect from 1 January 1985 or thereabouts he and Mr Hawila carried on in partnership - in succession to the business formerly carried on by them together with Mr Malek - sharing profits and losses in the ratio of 2:1 in favour of Mr Hawila and covering, as it is put, 'all Midmac Group business and activities and also all non-Midmac Group businesses and investments that they were then or subsequently became engaged in' and that the partnership was governed by English law. He pleads that, as had been the case before 1985, the businesses and investments which were the subject of their partnership were (with one exception) the sum total of all business activities and investments undertaken by the two of them between 1985 and (at the earliest) the end of 1998. He pleads that 'however much one partner received or withdrew from the partnership businesses and investments, the other partner would receive or could withdraw such corresponding amount as would ensure adherence to the two-to-one ratio' and that they would each contribute to operating losses in the same ratio.
22. In paragraph 33 Mr Racy pleads as an alternative to the partnership what he refers to as 'the General Agreement' derived from the oral agreement over the telephone on 19 May 1986 and the terms of a deed entered into on 14 April 1986. He pleads that under this agreement, which was also governed by English law, each would continue to have the right to make withdrawals from the profits and net assets of the Midmac Group and likewise contribute to Midmac Group losses in proportions corresponding to their respective shareholdings. He further pleads that under this agreement Mr Hawila agreed that he would not abuse his position as majority shareholder to deprive him of his one third entitlement and that neither would divert or conceal money or benefits relating to the Midmac Group.
23. In paragraph 38 Mr Racy pleads in the further alternative that, as a result of the various matters there set out, he and Mr Hawila were in a fiduciary relationship to one another, in the same 2:1 sharing in the ratio of 2:1, in respect of financial benefits derived from both Midmac Group and non-Midmac Group businesses and investments. He pleads that, as a consequence, Mr Hawila came under a fiduciary obligation to him not to prevent him from withdrawing funds from Midmac Group and non-Midmac Group assets proportionate to Mr Hawila's withdrawals by reference to that ratio and, in the alternative, that any money or other property coming into Mr Hawila's hands or under his control in excess of his two-thirds share was to be held by him on constructive trust for him.
24. Mr Racy goes on to plead that between 1985 and 1998 he and Mr Hawila acted on the terms of the Partnership and the General Agreement in a variety of ways among which was the continuous maintenance of the Partner's Accounts, (which were periodically updated by the production of six-monthly statements of account prepared by Midmac Group's internal accountants) and (by paragraph 42.4) the 'transfer of funds between different Midmac Group and non-Midmac Group business and investments ... in recognition of the Claimant's and Defendant's personal interests in and rights in relation to those assets, and frequently in disregard of corporate formalities and the contents of company accounts'.
25. He pleads that they engaged in various parts of the world in a number of business ventures outside construction, property and financial investments, of which particulars are supplied, and that the profits and losses from those activities were shared in the ratio of 2:1. He pleads that he and Mr Hawila continued to make personal cash withdrawals from accounts held by Midmac Group companies and from other sources, that they did so in the ratio of 2:1 and that he made his withdrawals as of right and without Mr Hawila's prior authorisation. He goes on to say that they transferred monies from non-Midmac Group assets into the Midmac Group to cover the latter's operating losses and, by paragraph 57, that they transferred monies 'between Midmac Group and non-Midmac Group businesses according to the needs of the underlying businesses and [their own] personal requirements'.
26. He pleads that he and Mr Hawila each acted in the management of the Midmac Group and non-Midmac Group business and investments, that at Mr Hawila's suggestion he moved with his family from England to Qatar in 1992 where he remained for 8 years managing the Midmac Group's core construction business in Qatar (through the medium of Midmac Contracting) while Mr Hawila remained in London. He pleads that all of his and Mr Hawila's time was spent on joint business activities, both Midmac Group and non-Midmac Group.
27. In Part VI of the particulars of claim Mr Racy refers to a series of consultancy and related arrangements entered into between the Midmac Group and multinational companies tendering for civil engineering projects in the Middle East, notably Qatar and Saudi Arabia. He pleads that the effect of those arrangements was that if the multinational's tender for the project was successful, it would pay a consultancy fee equal to a small percentage of the overall value to it of the project. Mr Racy pleads that these consultancy agreements were invariably entered into by bearer share companies and that 'the benefit of the said consultancy agreements and beneficial ownership of the bearer share companies belonged to the Partnership and/or the Midmac Group and/or [himself] and [Mr Hawila] jointly and in any such case fell to be dealt with as between [them] in the ratio of two-to-one'.
28. Mr Racy then goes on to refer to three such consultancy agreements, one of which yielded the consultancy company $21,442,792 of which, after certain payments, a balance of $20,647,471 was paid to personal trust companies of Mr Hawila, and two others of which are said to have yielded, after various payments to Midmac Group employees, a balance of $1,039,265 which, on Mr Hawila's instructions, was transferred to one of his personal trust companies. He pleads that any monies so paid fell within the scope of the partnership and/or the General Agreement, alternatively was subject to the fiduciary relationship or otherwise belonged to Mr Hawila and himself in the ratio of 2:1.
29. It seems reasonably clear that the matters pleaded in this part of the particulars of claim are the same as the 'consultative fees' and the allegation of a $21 million appropriation by Mr Hawila referred to in paragraph 16 of the Lebanese action.
30. In Parts VII and VIII of the particulars of claim, Mr Racy pleads that, between 1985 and 1998 and in breach of the terms of the partnership and/or the General Agreement and/or the fiduciary duty, Mr Hawila made what are referred to as 'disproportionate net withdrawals from Midmac Group accounts' and that he persistently failed and refused to permit Mr Racy to make any withdrawals or pay himself such sums as would achieve adherence to the agreed 2:1 ratio. He pleads that between 1 January 1985 and 31 December 1998 Mr Hawila made net withdrawals of $18,685,000 while those made by himself over the same period totalled only $3,193,000. He claims that his due share of the $18,685,000 is $6,149,500 plus interest. He makes a similar claim in relation to Mr Hawila's failure to account in respect of the consultancy agreement payments. He claims $7,228,912 plus interest as his due share of the sums received by Mr Hawila under those agreements. He also claims dissolution of the partnership and ancillary relief of one kind or another.
31. Mr Hawila has not yet served a defence in the English action. Before the time for doing so (including an agreed extension) had expired he launched the present application. He did so under CPR Part 11. In her witness statement served on his behalf by Ms Armstrong of Lovells, Mr Hawila's responses to Mr Racy's claims are summarised. First, it is denied that there was any partnership between Mr Hawila and Mr Racy over the relevant period, and certainly from 1986 onwards, and denied that Mr Hawila owed any fiduciary duties as alleged. Second, it is said that between 1984 and 1986 there was a fundamental restructuring of their business relationship with the result that when Mr Malek withdrew from the business his shares were purchased by Mr Hawila and the affairs of any pre-existing partnership, if there was one, were settled in accounts drawn up and agreed at the time. Third, it is said that between 1984 and 1986 there were lengthy negotiations for a shareholders' agreement in which both sides had independent legal advice but Mr Racy did not succeed in negotiating any rights and protections beyond those enjoyed by him as a minority shareholder in MHC with the result that any assurances or oral agreements that Mr Racy would be entitled to special rights in relation to the business are denied. Fourth, it is said that under the provisions of the deed dated 14 April 1986 Mr Hawila was entitled freely to enjoy the rights and benefits attaching to his majority shareholding and that the parties' future rights and obligations were to derive from the MHC corporate structure and not from any alleged partnership or other fiduciary relationship. Fifth, it is said that there were no rights of pre-emption over the shares in MHC or any restrictions on the parties' respective entitlements to dispose of them, that there was no new joint investment activity carried out by Mr Hawila and Mr Racy after 1986 and that the jointly owned assets, which were valued in the 1986 accounts, were largely distributed to the individual shareholders or were reinvested in the Midmac Group. Sixth, it is said that the restructuring of the business coincided with a serious and marked deterioration in the personal relationship between Mr Racy and Mr Hawila, that Mr Racy thereafter had no special role in the management of the Midmac Group, that there were no joint management decisions undertaken by the two of them alone after 1986, that Mr Hawila became the chairman and chief executive of the Midmac Group and that Mr Racy became merely one of several executives who participated in the management of the Group. Seventh, it is said that the consultancy agreements referred to in the English action were personal business projects of Mr Hawila and fell outside the proper scope of the Midmac Group business and that, even if there had been a partnership in existence, they would have fallen outside its proper scope. Eighth, it is said that the withdrawals made by Mr Hawila were not 'disproportionate' but were entirely proportionate to his role and function within the Midmac Group and were calculated in accordance with principles to which Mr Racy had himself agreed. Last, it is said that, given the considerable time which has elapsed since some of the events relied on by Mr Racy and his delay in seeking to enforce them, Mr Racy's claims face limitation and laches defences."
"... there is a very considerable degree of overlap between the two in that both are concerned with the business relations between Mr Racy and Mr Hawila stretching back to January 1985 conducted, according to Mr Racy in the English action, in part through the Midmac Group and in part outside it. Many of the allegations in both actions are the same."
"Both cases are part of an exercise in which Mr Racy is seeking to unravel a 30-year business relationship with Mr Hawila which, although conducted largely through the medium of corporate vehicles, was essentially one in which they agreed to share both the financial benefits of, and liabilities arising from, world-wide businesses, investments and assets in specific personal shares, latterly ... in the ratio 2:1."
The document continues in the same vein.
"37. An examination of their respective roles and attendant rights and duties towards one another as the only and effective partners in SARL will also lead to an examination of the nature of the dispute between them which Mr Racy pleads has led to a paralysis of SARL's activities. Mr Racy himself pleads in paragraph 15 of the Lebanese action that the dispute has arisen because of what he says was Mr Hawila's illegal appropriation of SARL's assets. That opens up the question, pleaded at length in the English action, over the legality of Mr Hawila's cash withdrawals."
"42. Mr Hawila does not seek on his application a discontinuance of either the English or Lebanese action. He recognises that there are triable issues which arise in the English action that do not arise and cannot be tried in the Lebanese action so that it is appropriate, if the Lebanese action is to proceed, that there is merely a stay of the English action leaving it open, once the Lebanese action has been determined, to lift the stay and enable the English action to proceed. Equally, he accepts that there may be issues which arise in the Lebanese action which could not be dealt with in the English action so that, if Mr Racy were to elect to proceed first with the English action, he would not insist that the Lebanese action be discontinued: he will be content that it is merely stayed.
43. It will be evident from this that Mr Hawila, although he resists the relief claimed in both proceedings and asserts that he has defences to all of the matters alleged against him, accepts that, to the extent that they may raise different issues, both proceedings should be allowed to go to trial. He merely wishes to ensure that both do not go forward for trial at the same time. It is, in short, merely a matter of priority: which should proceed first? He is content that Mr Racy should choose the order in which the two actions should go forward. He does not seek an anti-suit injunction to restrain Mr Racy from proceeding with his Lebanese action. He accepts that, given the relief sought in that action (the winding-up of SARL over which the English court has no jurisdiction), it is not open to him to obtain such an injunction. He merely asks the court in this jurisdiction to step in if Mr Racy declines to elect which action should go first.
44. When Mr McQuater first opened the matter to me, his client's stance struck me as entirely reasonable and one which it was quite open to the court to accommodate. Notwithstanding lengthy argument from Mr Browne-Wilkinson to the effect that there are all sorts of reasons why it would not be appropriate, I remain of precisely the same view."
"I for my part recognise fully the risks to which Mr Carr draws attention, but I have no doubt that judges (not least commercial judges) will be alive to these risks. It will very soon become clear that stays are only granted in cases of this kind in rare and compelling circumstances. Should the upholding of the judge's order lead to the making of unmeritorious applications, then I am confident that judges will know how to react.
It remains to consider the judge's exercise of his discretion here. I have endeavoured to summarise his judgment fully, without quoting all of it verbatim. It is in my judgment evident that he assessed and evaluated the factors which he was called upon to consider. Although it was suggested in Reichhold's skeleton argument that the judge misdirected himself in approaching the various factors which he had to consider, I for my part am persuaded that he left nothing out of account, took account of nothing of which he should not have taken account, and gave a fair and judicious summary of all the matters properly to be considered. I find no misdirection of the law. This was, therefore, a decision within the discretion of the judge, not vitiated by misdirection or manifest error. I would dismiss this appeal."
"In such circumstances the parties to the individual actions no longer enjoy the unfettered right (if indeed they ever did) to determine how the proceedings should be conducted; it is recognised that the court is entitled to impose on them procedures which it considers appropriate in the light of the nature and content of the litigation as a whole."
"58. It is evident from what I hope is a fair summary of that document that the points raised are intimately bound up with the wider dispute ventilated in the English action and merely go to emphasise the extent to which the Lebanese action overlaps, although is by no means co-extensive with, the English action. Point (4) makes clear that the remedy sought in the Lebanese action - SARL's winding-up and the appointment of a liquidator - is essentially 'in aid' of those wider claims. Mr Hawila challenges the suggestion in points (3) and (5) that he is manipulating SARL without regard to Mr Racy's position not least when the only matters relied upon by Mr Racy are matters which Mr Hawila has himself raised in defence of the Lebanese action and which on their face (I will not trouble to set them out) do not lend much if any support for the suggested manipulation of which Mr Racy complains. For example, one of them is the action purportedly resolved upon at a general meeting of SARL, to confirm Mr Racy (along with Mr Hawila) as one of SARL's managers.
59. I emphasise, as I have made clear more than once, that Mr Hawila does not suggest that Mr Racy should not be able to pursue both actions, merely that he should not have to defend both actions at the same time. I therefore look to see, in conformity with the approach outlined in McHenry and Peruvian Guano (and endorsed in Aerospatiale), what it is about the two actions which might provide good reasons for Mr Racy wishing to pursue both of them simultaneously."
"57. In a document produced in the course of the hearing Mr Browne-Wilkinson and Mr de la Rosa set out why it is reasonable and appropriate for Mr Racy to pursue the Lebanese action. The following reasons were advanced: (1) SARL and the other corporate vehicles through which Mr Racy alleges he and Mr Hawila conducted their business relationship 'cannot simply be left in abeyance while Mr Hawila has effective control over them and exercises that control in a manner inconsistent with the partnership agreement'; (2) the Lebanese action concerns one such corporate venture (SARL) over which the English court does not have jurisdiction but the Lebanese court does; (3) Mr Hawila is, it is alleged, continuing to exercise control over SARL 'without regard to Mr Racy's position as the partner ultimately entitled to one-third of the benefit or one-third of the loss attributable to its business';
(4) Mr Racy is entitled to pursue his Lebanese remedies 'which are effectively in aid of his personal claim against Mr Hawila'; (5) the liquidation of SARL would remove it from Mr Hawila's control and 'close off one means by which he [Mr Hawila] could continue to appropriate to himself monies which Mr Racy is entitled to share'; and (6) if a liquidator is appointed and takes proceedings against Mr Hawila, any sums recovered from him would become part of the assets to which Mr Racy has a claim 'based on his alleged entitlement to a one-third share of world-wide Group and non-Group assets'.
58. It is evident from what I hope is a fair summary of that document that the points raised are intimately bound up with the wider dispute ventilated in the English action and merely go to emphasise the extent to which the Lebanese action overlaps, although is by no means co-extensive with, the English action. Point (4) makes clear that the remedy sought in the Lebanese action - SARL's winding-up and the appointment of a liquidator - is essentially 'in aid' of those wider claims. Mr Hawila challenges the suggestion in points (3) and (5) that he is manipulating SARL without regard to Mr Racy's position not least when the only matters relied upon by Mr Racy are matters which Mr Hawila has himself raised in defence of the Lebanese action and which on their face (I will not trouble to set them out) do not lend much if any support for the suggested manipulation of which Mr Racy complains. For example, one of them is the action purportedly resolved upon at a general meeting of SARL, to confirm Mr Racy (along with Mr Hawila) as one of SARL's managers.
59. I emphasise, as I have made clear more than once, that Mr Hawila does not suggest that Mr Racy should not be able to pursue both actions, merely that he should not have to defend both actions at the same time. I therefore look to see, in conformity with the approach outlined in McHenry and Peruvian Guano (and endorsed in Aerospatiale), what it is about the two actions which might provide good reasons for Mr Racy wishing to pursue both of them simultaneously.
60. I am unable to see that there are good reasons. It might be different if, for example, Mr Racy could demonstrate a need to obtain interim relief in the Lebanese action to preserve SARL's assets while bringing the English action to trial but no such relief is sought. Apart from the exchange of responses to Mr Racy's originating summons and the court's decision to conduct some form of preliminary hearing this coming October, nothing much seems to have happened in that action since it started just over sixteen months ago apart from the exchange of 'responses'. It is not even clear when the Lebanese action will come on for an effective hearing. The only interim application in the English action, apart from Mr Hawila's application currently before me, appears to have been Mr Racy's attempt to obtain a world wide freezing order against Mr Hawila. He was initially successful in obtaining such an order when he made a without notice application to Patten J on 24 April last. But the order was subsequently set aside when the matter came on for hearing on notice before Lewison J on 6 May. It is not apparent from the judgment of Lewison J that Mr Racy was suggesting that Mr Hawila was continuing to deal with any of the assets of the alleged partnership inconsistently with Mr Racy's rights. Because if he had been and there were credible evidence to support such a suggestion I would have expected Mr Racy to have applied for appropriate injunctive relief to restrain Mr Hawila from continuing with such conduct. But that has not happened."
"65 . The short answer to this and to many of the other points raised on Mr Racy's behalf is that it is for Mr Racy to decide which action to pursue first. Common sense would suggest that he pursue the English action which, so far as I can see, covers the whole spectrum of their dispute and can be brought on for trial within a year or so (the parties having agreed what directions should be sought to ensure that this may happen) in contrast to the Lebanese action, which does not appear to give him any advantage beyond what he will obtain if he is successful in his English action and the date for the trial of which is in any event wholly at large. Indeed, Mr Racy's Lebanese lawyer states that 'Mr Racy stands to make no money at all in Lebanon even if a liquidator is appointed because he only has a negligible shareholding in the Company [ie SARI] (albeit that it allows him to initiate the liquidation proceedings).' But if Mr Racy elects to pursue his Lebanese action and issues are determined in it which are binding on the parties to the English action, that is all to the good: it will (or should) shorten the trial and therefore reduce the costs of the English action."
"Should the upholding of a judge's order lead to the making of unmeritorious applications, then I am confident that judges will know how to react."
ORDER: Appeal dismissed, with costs; interim payment of £25,000, balance to be assessed.