Mr Justice Hart:
1. The first and second claimants ("the administrators") in this action are
the administrators of the estate of the late Christo M. ("Christo") under an
English grant of letters of administration dated 8 February 2001. The third
claimant ("Despina") is Christo's sister.
2. The first defendant ("Mr S.") is a connoisseur and dealer in works of
art and antiquities, and the owner of 99% of the share capital, and sole
director, of the second defendant ("RSL") which is an English registered
company incorporated in 1977.
3. From the late 1960's onwards Christo and Mr S. enjoyed an extremely
close relationship, living together in London at …, London, a property
originally consisting of two separate houses (No 3 purchased in 1972 and
No 1 in 1980). Christo died unexpectedly in an accident in Italy on 5 July
1999. It is common ground that his domicile at death was Greek. It is
also common ground that his heirs under Greek law are Despina and his
mother Eirene. It was on their application that the grant of letters was
made to the administrators who are both partners in Price Waterhouse
Coopers domiciled in England.
4. RSL has at all material times carried on a business of dealing in
valuable antiquities and other works of art. As already noted RSL has at
all material times been ostensibly in the ownership and under the control
of Mr S.. A similar business has also been conducted by, or through the
medium of, other companies registered overseas, in particular companies
incorporated in Panama (K.r Trader Inc, X. Trader Inc, and S. S. d'E. et de
S. SA). The properties at Seymour Walk were also registered in the names
of Panamanian companies, the shares in those companies being held by
trustees resident in the Isle of Man.
5. In addition to being a dealer, Mr S. is also a collector. During Christo's
lifetime, the property at Seymour Walk was home to, inter alia, collections
of three different descriptions: a collection of Hellenistic antiquities ("the
Hellenistic Collection"); a collection of art deco furniture by Eileen Gray
("the Eileen Gray Collection") and a collection of Egyptian antiquities ("the
Egyptian Collection").
6. The claims made in this action are of two different kinds. First, it is
alleged that all the business carried on during the period of Christo's
relationship with Mr S. was the business of a "partnership, alternatively
joint enterprise" between Christo and Mr S., in which they shared equally.
This is then defined and thereafter referred to in the pleading as "the
Enterprise". In so far as assets were purchased with profits from the
business it is alleged that those assets were held in equal shares. It is
also alleged that the shares in RSL were similarly held. Secondly, it is
alleged that three collections which I have mentioned were acquired by
Christo for himself and/or Despina, and that they were so acquired with
funds provided by Despina. Mr S. denies these claims.
7. During the period following Christo's death various discussions took
place between members or representatives of Christo's family and Mr
S. or those representing him in connection, in broad terms, with the
future of the business and the division between the family on the one
hand and Mr S. on the other of assets which had been acquired during
the course of the relationship. During the course of these discussions it
is alleged that admissions were made by or on behalf of Mr S. that some
such partnership as is now alleged had existed. It is also said that Mr
S. recognised Despina's claims to ownership of a valuable collection of
antiquities. As to this claim, it is not disputed that Despina was, and still
is, a co-guarantor of a facility enjoyed by RSL with C.bank. That facility
(originally for US$5m and £1m) stood at US$14m at Christo's death and
was increased temporarily (and with Despina's agreement) to $17m in
March 2000. Part of the security for that facility consisted of a collection of
antiquities which were represented to belong to Despina. There also exist
a number of valuations by Mr S. of what are described as being Despina's
collections, the most recent of which (in a letter dated 22 October 1997)
"conservatively valued" Despina's ancient art holdings at US$50m, and
included a schedule detailing certain works with an aggregate value of US
$16.255m.
[…]9. By February 2001 it had become clear to Christo's family that legal
proceedings would probably be necessary. By that time they had come to
appreciate that the Eileen Gray Collection (thought by them to be worth
US$20m) had been removed from the Seymour Walk property, along with
other items. By letters dated 12 February 2001 the administrators (who
had been appointed four days previously) and solicitors acting for Despina
wrote to the defendants setting out their respective claims and seeking
information and undertakings from them. Shortly thereafter they were
informed by Mr S.' Geneva lawyer (Maitre Tavernier) that Mr S. had taken
up permanent residence in Switzerland.
10. On 23 February 2001 the claim form in these proceedings was issued.
The claimants thereafter applied (on 27 February 2001) without notice to
Lloyd J for the appointment of a receiver and ancillary injunctive relief,
which was granted. It is accepted that these proceedings were served
on the defendants for all purposes as to the application in England of the
provisions of the Civil Jurisdiction and Judgments Act 1982 ("the 1982
Act") on 28 February 2001.
11. In the meantime Mr S. had himself, without any warning to the
claimants, on 23 February 2001 issued proceedings in Greece in
the multi-membered court of first instance in Athens, joining the
administrators, Despina and Eirene as defendants. In essence these
proceedings claim negative declaratory relief in respect of the matters
which are the subject of the English proceedings. There is an issue as
to when these proceedings were served on the administrators for the
purposes of the 1982 Act
12. By an application notice dated 21 March 2001 the defendant
applied for an order that the Court decline jurisdiction in this action,
alternatively stay all proceedings herein in accordance with Article 21,
alternatively Article 22 of the Brussels Convention on Jurisdiction and
the Enforcement of Judgments in Civil and Commercial Disputes ("the
Brussels Convention"), which of course has the force of law in England
by virtue of the 1982 Act. It is accepted that, even if that application
is successful, this court has jurisdiction to grant or continue interim
injunctive relief by way of "protective measures" under Article 24 of the
Brussels Convention: see section 25 of the 1982 Act. It is also accepted
by the defendants that, in the light of the allegations which have been
made and the state of the evidence before the court, some such interim
relief is appropriate. The exact form which it should take has been in issue
before me.
Jurisdiction
13. Articles 21 and 22 of the Brussels Convention provide as follows:
"Article 21:
Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court.
Article 22:
Where related actions are brought in the courts of different Contracting
States, any court other than the court first seised may, while the actions
are pending at first instance, stay its proceedings.
A court other than the court first seised may also, on the application of
one of the parties, decline jurisdiction if the law of that court permits the
consolidation of related actions and the court first seised has jurisdiction
over both actions.
For the purposes of this Article, actions are deemed to be related where
they are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings."
14. Article 16(2) of the Convention provides for the exclusive jurisdiction
of
"In proceedings which have as their object the validity of the constitution,
the nullity or the dissolution of companies or other legal persons or
associations of natural or legal persons, or the decisions of their organs,
the courts of the Contracting State in which the company, legal person or
association has its seat." (emphasis supplied)
The Article 21 point
[…]
16. It is now settled law that "seised" in Article 21 means "definitively
pending"; and that English proceedings are not definitively pending
until they have been served on the relevant defendants: see Neste
Chemicals SA v DK Lines SA [1994] 2 Lloyds Rep, 6 11-13 and Grupo
Torras SA v Sheikh Fahad Mohammed al Sabah [1996] 1 Lloyds LR 7,
20. It is common ground that a similar rule applies in Greece to Greek
proceedings. It is also clear that the question of seisin vel non has to be
determined in relation to each party, on a party by party basis: see the
Grupo Torras case, ibid at 21, Fox v Taher [1997] IL Pr 441; Glencore
International AG v Metro Trading International Inc [1999] 2 LL Rep 632,
639-640.
17. The principal question to be determined is therefore when, as
between each relevant party, the Greek proceedings were served. This
involves a consideration of what is meant by service for this purpose. The
facts in relation to the service of the Greek proceedings are as follows:
(1) Service on Despina. This took place by personal service on Despina in
Greece on 23 February 2001. No issue arises in relation to this.
(2) Service on the administrators. On 23 February 2001 the proceedings
were delivered to the Greek Public Prosecutor's office, that being the
recognised method in Greek domestic law for the service of foreign
domiciled defendants. On 26 February solicitors instructed on behalf of
Mr S. took steps to serve the administrators personally in England. This
was done by an employee of those solicitors attending at the officers
PwC at Plumtree Court London EC4A 4HT (the address given for the
administrators in the grant of letters of administration and the address
from which they had written the letter of 8 February 2001). The employee
was told by the doorman that he could not attend on the administrators
personally but that, if the documents were left at the offices, they would
be seen by the administrators. The documents were accordingly then
left at the "deliveries" department of that office. It is accepted that the
administrators had them in their hands by the end of the following day
(27 February 2001).
(3) Service on Eirene. Eirene was not served with the proceedings until 11
April 2001.
18. In the context of whether a court is seised of proceedings for the
purposes of Article 21, the question whether those proceedings have been
served is not determined by the foreign domestic rules of procedure.
This was settled in Molins plc v GD SpA [2000] 1 WLR 1741 (CA): see
per ibid at 1754. Where reliance is sought to be placed on service of
proceedings from the courts of one Contracting State on persons in
another Contracting State, service must be in accordance with Article IV
of the Protocol to the Convention. That provides:
"Judicial and extrajudicial documents drawn up in one Contracting State
which have to be served in another Contracting State shall be transmitted
in accordance with the procedures laid down in the conventions and
agreements concluded between the Contracting States."
19. Two such conventions are potentially applicable here, namely
the Convention on the Service Abroad of Judicial and Extrajudicial
Documents in Civil and Commercial Matters, The Hague, 1965 ("the
Hague Convention") and a convention between the United Kingdom and
Greece signed on 27 February 1936 and ratified on 16 November 1937
(Treaty Series number 5 of 1938) – ("the 1937 Convention").
20. Article 2(a) of the 1937 Convention provides as follows:
"Article 2
(a) When judicial or extra-judicial documents drawn up in the territory
of one of the High Contracting Parties are required by a judicial authority
situated therein to be served on persons in the territory of the other
High Contracting Party, such documents may be served on the recipient,
whatever his nationality, by any of the methods provided in Articles 3 and
4 in all cases where such method of service is recognised by the law of
the country of origin."
Article 4 provides, so far as material, as follows:
"(a) Service may be effected, without any request to or intervention
of the authorities of the country of execution, by any of the following
methods:
.......
(2) By an agent appointed for the purpose either by the judicial authority
of the country of origin or by the party on whose application the
document was issued;
(3) Through the post; or
(4) By any other method of service which is not illegal, under the law
existing at the time of service, in the country of execution
...........
(d) It is understood that the question of the validity of any service
effected by the use of any of the methods referred to in paragraph (a)
of this Article will remain a matter for the free determination of the
respective courts of the High Contracting Parties in accordance with their
laws." […]
22. As to that, I am satisfied that the Greek court would recognise as
good service any mode of service treated as good service by the English
court. That seems to me clear from a statement of Mr George J. Moratis,
a Greek Attorney-at-law instructed on behalf of the S. defendants and not
challenged as to Greek law by the claimants' expert Professor Kerameus.
[…]
23. The question therefore resolves into whether service on the
administrators by leaving the documents at their office on 26 February
2001 was good service for the purposes of the CPR. CPR Part 6.2(1),
under the heading "Methods of Service – General" provides that:
"(1) A document may be served by any of the following methods -
....................
(c) leaving the document at a place specified in rule 6.5;
............."
Rule 6.5 provides (so far as material) as follows:
….. (6) Where – (a) no solicitor is acting for the party to be served; and
(b) the party has not given an address for service,
the document must be sent or transmitted to, or left at, the place shown
in the following table.
(Rule 6.2(2) sets out the statutory methods of service on a company)"
[The Table, not apparently reproducible within the template on which this
judgment is produced, is appended] […]
25. […]At first sight the categories in the table do appear to be exclusive.
That is certainly the case in relation to the last three categories of
artificial person. It is, however, less clear in relation to the first three
categories. Each of these deals with service on a natural, as opposed to
artificial, person. It can be argued that, because in each case separate
and specific allowance is made for service at the individual's residence,
the categories are intended to be read as mutually exclusive. To put
it another way, if the "place of business" alternative in the case of a
proprietor of a business is available wherever an individual being sued
happens to be the proprietor of a business, why provide specifically
in that category that he may also be served at his place of residence?
The table has already told us that he may be. That in turn supports the
argument that the table is contemplating the particular capacity in which
the individual is being served with the document in question.
26. …I favour the view that the table is not directing attention to the
capacity in which a particular party is being sued or the nature of the
proceedings in which he (or it) is being sued. It is simply setting out a
variety of methods of service, more than one of which (in the case of an
individual being sued) may be used. […]
27. Accordingly, subject to one remaining point, I conclude that the Greek
court was seised of the proceedings against the administrators on 27
February 2001.
28. The remaining point, if it is a good one, is good in relation not only to
the Greek proceedings against the administrators but also to the Greek
proceedings against Despina. It is common ground that for convention
purposes these have to be looked at separately (save, arguably, for Article
22 purposes). There is no doubt that Despina was validly served in Greece
with the Greek proceedings before her English proceedings were served
on the S. defendants. […]
29. […]The weight of the expert evidence before me is quite simply
against the proposition that the Greek court was not seised of the suit
against Despina following personal service of those proceedings on
her. Mr Moratis' initial evidence was clearly to that effect and Professor
Kerameus did not in any way dissent from that evidence of Greek law.
It is, moreover, clear from the provisions set out by Mr Papadimitriou (in
particular Article 214A 9) that non-compliance with the provision does not
operate as an absolute bar on the Court's ability to proceed to a hearing.
The point has to be taken. The provisions appear to assume that the court
is already seised, for otherwise there would be no "first hearing" at which
the point might be taken.
Abuse of the Convention
30. This argument ran as follows. The fundamental principle of the
Convention is that "persons domiciled in a Contracting State shall...... be
sued in the courts of that State". Prima facie, therefore the administrators
should have been sued in England. The only reason that they can be sued
in Greece is the provision in Article 6(1) which provides that "A person
domiciled in a Contracting State may also be sued – (1) where he is one
of a number of defendants, in the courts for the place where any one of
them is domiciled". Article 6(1) should not, however, be interpreted so
as to permit a claimant to issue sham proceedings against one defendant
in order to obtain jurisdiction over another. The European Court has
held that Article 6(1) only applies if it is necessary to hear the claims
against both defendants together in order to prevent the possibility of
irreconcilable verdicts if they were not heard together: see Kalfelis v
Schroder [1988] ECR, 5565 para 8-13, and see also Reunion Europeenne
SA v Spliethoff's Bevrachtingskantoor BV [2000] QB 690. Consistently
with that principle the English court has held that for a foreign domiciliary
to be properly joined as a defendant to proceedings against an English
domiciliary, there must be a real issue to be tried as against the latter:
see The Rewia [1991] 2 LL Rep 325 at 329, and The Xing Su Hai [1995] 2
LL Rep 15 at 22. […]
32. Mr Steinfeld's submissions adverted to what he described as a "sleight
of hand" in the Greek proceedings. Their premise was that in Greek law
the only proper claimants to assets forming part of Christo's estate are
the Greek heirs, and that the administrators have no status whatsoever in
the Greek court. […9
33. There is a good deal to be said for this argument. Certainly the way
in which the Greek proceedings has been conceived appears to me to
conflate and confuse the distinct questions of what law applies to the
question of title to the assets in question and what law applies to the
question of who is entitled to succeed to those assets. I should, I confess,
be surprised to be told that Greek law does not recognise the title of
English administrators in relation to movables situate in England at the
date of death of a Greek domiciled Greek national, or indeed that its
private international law rules characterise questions of administration of
estates and questions of succession in some manner significantly different
from that adopted by English law. […]
35. In any event, the submissions have also to face the difficulty that
under Articles 21 and 22 the court which is seised second cannot, in
general, determine that the court first seised has no jurisdiction: see
Overseas Union Insurance v New Hampshire Insurance [1991] ECR
1-3317, 3350-3351, paras 25-26. Mr Steinfeld sought to deal with
this problem by submitting (quite correctly) that the Overseas Union
proposition admitted of exceptions. As the Court itself recognised in that
case, its ruling did not cover cases where "the main proceedings fall
within an exclusive head of jurisdiction laid down in the convention, in
particular in article 16 thereof" (see ibid at para 20). He argued that a
case where proceedings have been commenced abroad against persons
domiciled in the foreign country for the sole purpose, not of suing them,
but of suing a non-domiciliary who has been added under Article 6(1)
forms another such exception. The English court (ex hypothesi seised
second) should be permitted to take the point because all Convention
courts should be astute to prevent abuse of the convention itself.
36. While deriving some support for this approach from the recent
decision of the Court of Appeal in Turner v Grovit [2000] 1 QB 345, Mr
Steinfeld acknowledged that no direct authority existed for it. Turner v
Grovit was concerned with the questions whether the English court, which
was first seised of a lis between the parties, had jurisdiction to issue an
anti-suit injunction restraining a non-party to the English proceedings
from continuing proceedings subsequently commenced in a Convention
State (Spain) with the purpose (as found) of harassing and oppressing
the claimant in the English proceedings. The court below (Mr David
Donaldson QC sitting as a deputy judge of this division) had held that
it was for the Spanish court to determine the question of its jurisdiction
and, on that ground, refused to continue an anti-suit injunction which
had been granted on an interim basis by Pumfrey J. The Court of Appeal
disagreed, holding inter alia that this Convention principle did not oust the
jurisdiction of the English court to prevent abuse of its own process by the
issue in an appropriate case of anti-suit relief in respect of subsequently
commenced foreign proceedings.
37. By contrast, the position here seems to me to fall squarely within the
spirit of the general proposition for which Overseas Union Insurance is
authority. If any abuse of the Convention has taken place, it lies in the
invocation of the jurisdiction of the Greek court. It is for the Greek court
to determine whether its own processes are being abused, and (as is
apparent) the basis on which Mr Steinfeld contends that such abuse has
occurred will involve the Greek court determining questions of Greek law.
A rule which would allow the court second seised to determine whether
the court first seised was only so seised as a result of an abuse of the
convention itself would permit the possibility of the two courts reaching
different conclusions on that question. That would produce precisely the
dissonance which the convention seeks, where possible, to avoid.
38. In any event, while there are certainly strong grounds for supposing
that the Greek proceedings have been conceived and constructed as a
means not only of depriving the English court of its jurisdiction but also
of delaying and impeding effective judicial resolution of the underlying
dispute, it is difficult to say that the joinder of causes of action and parties
in the Greek proceedings is ex facie abusive. In so far as they are brought
against Despina in relation to her personal claims they are plainly brought
properly in Greece where she is domiciled. The claim against Christo's
estate (however represented for the purposes of the Greek proceedings)
is closely connected, so far as its facts are concerned, with the claim
against Despina. The underlying dispute is, in reality, between Mr S. on
the one hand and Despina and Eirene on the other. There is no obvious
abuse of the Convention in seeking to bring these disputes to trial in the
country of the latter's domicile. The fact that this is achieved by the route
of negative declaratory relief is neutral: cf per Saville LJ in Boss Group Ltd
v Boss France SA [1997] 1 WLR 351 at 358 E-H and per Lord Woolf MR in
Messier-Dowty v Sabena SA (No 2) [2001] 1 AER 275 at 284, paragraph
36. […]
Article 16(2)
40. Article 16 constitutes an exception to the general rule in the
Convention that proceedings should be brought in the courts of the
defendant's domicile. As such it has been held that it should be construed
restrictively or, in the words of the ECJ in Sanders v Van der Putte [1977]
ECR 2383 at 2391, "must not be given a wider interpretation than is
required by [its] objective". The proposition is also illustrated by the ECJ's
approach in Webb v Webb [1994] ECR 1-1717. Apart, however, from
directing attention to the need to explore what the objective of Article 16
is, the proposition is of no great assistance in deciding whether Article 16
applies in this case. It was common ground between the parties that it
was for this court to decide whether or not Article 16 does apply.
41. There was also agreement between the parties that the phrase
"proceedings which have as their object...." means proceedings which
have as "their principal subject" the relevant matters. That formulation
derives from the judgment of Knox J in Newtherapeutics v Katz [1991] Ch
226 at 245. Mr Steinfeld submitted that this was a reference to what was
raised as the principal issue in the proceedings. Mr Rosen disagreed. He
submitted that a distinction had to be drawn between the issues raised
by a particular case and its principal subject matter: it was the latter
which had to be identified for the purposes of the Article. For myself, I
think there are dangers in seeking to gloss the words of the Convention
itself. What has to be kept in mind is the underlying objective of Article
16, namely to reserve to the relevant court questions which are peculiarly
within its province.
42. A preliminary question is whether Article 16(2) applies to an English
partnership at all. Mr Rosen conceded that the words "associations
of natural.... persons" were wide enough in principle to encompass a
partnership, and took no point on the "seat" of the partnership alleged
being otherwise than in England (a question which falls to be determined,
under Section 43 of the 1982 Act, by reference to the place where its
central management and control is exercised). He also accepted that the
report by Professor Peter Schlosser, referred to in Section 3(3)(b) of the
1982 Act, expressly stated as follows: "Finally, it should be pointed out
that Article 16(2) also applies to partnerships established under United
Kingdom and Irish law (see paragraph 55)."
The reference to paragraph 55 takes the matter no further. Doubt has,
however, been expressed by certain commentators as to whether this is
correct. Professor Collins (as he then was) in The Civil Jurisdiction and
Judgments Act 1982, Butterworths, London 1983, expressed doubt as
to whether an association of natural or legal persons was apt to include
an English partnership having regard to the definition of "association"
in Section 50 of the 1982 Act. He pointed out, however, that other
language versions of the Article used expressions which were apt to
include partnerships. The same author's edition of Dicey & Morris on The
Conflict of Laws, 13th (2000) edition, continues to maintain that there is
room for doubt (see para 11-331). O'Malley and Layton's European Civil
Practice (1989) opines of the Schlosser view that:
"this should present no difficulty in the case of formally constituted
partnerships. The question is perhaps more difficult where the partnership
arises incidentally as a matter of law, where there is no formal
partnership agreement. This may be beyond the intended scope of Article
16(2)."
43. On this preliminary question I prefer the submissions of Mr Steinfeld.
In particular I can see no basis in English law for distinguishing a
partnership which is "formally" constituted from one which is not. Subject
to the qualifications made by statute and established by the case law,
partnership is in English law simply "the relation which subsists between
persons carrying on a business in common with a view to profit": see
Section 1(1) Partnership Act 1890. The existence of that relation is
founded on an agreement between the parties which may be express or
inferred from that conduct. No formality is necessary to constitute it. Once
constituted certain consequences follow. In particular the English court
has a jurisdiction quoad the relationship which is independent of the will
of the parties (e.g. to decree a dissolution: see Section 35). This seems to
me to be enough to demonstrate sufficient peculiarity to explain why the
English court should be given exclusive jurisdiction by Article 16(2).
44. A more difficult question seems to me to be whether the "object" of
these proceedings is "the validity of the constitution, the nullity or the
dissolution" of a partnership. […]
45. […]In particular, in relation to RSL, I have doubts whether the
pleading of partnership is sustainable at all in the light of the known facts.
Those are that RSL was owned by Mr S. and employed Christo. A case can
be made (having regard to the amount of Christo's salary and expenses
and the amount taken out by Mr S. in director's fees) that there was an
agreement that each would benefit equally from RSL's business, and it
may in due course be established that the understanding was that the
shares in RSL were held by Mr S. on trust for himself and Christo in equal
shares. All this could be claimed without any assertion of partnership.
If the claim were put in this way (invoking a mixture of contract and
trust law) no question of "partnership" as understood by the Partnership
Act 1890 would arise. Indeed such a claim would, as it seems to me, be
inconsistent with a partnership. It is of the essence of a partnership that
the business is carried on by the partners. It seems incontrovertible that
the business which went through RSL's books was a business carried on,
not by Mr S. and Christo, but by RSL itself. I do not see, on the basis
of the evidence before the court, how it can be asserted that RSL was
conducting that business as a mere nominee for the "partners". It was
plainly conducting that business as the beneficial owner of it. True it may
be that there was an underlying agreement between Christo and Mr S.
as to how the profits of that business would be extracted from RSL and
shared between them, and as to how the share capital in RSL should be
beneficially owned. Such an agreement would not, however, make Mr S.
and Christo "partners" in the eye of English law.
46. The same analysis may apply to business alleged to have been carried
on by the various Panamanian entities referred to in paragraph 6 of the
Particulars of Claim. Here, however, matters are still shrouded in a good
deal of mystery. The evidence currently before the court is consistent with
such entities having been no more than mere nominees for the underlying
owners or owner of the business transacted in their names.
47. As to the allegation that the business was carried on in part directly
by Christo and Mr S. ("partly on their own account, partly through [RSL],
and partly through other corporate entities" – see paragraph 6 of the
Particulars of Claim) there is no contemporary evidence whatsoever of
such a business having been carried on. The allegation appears to be
mere assertion based on an alleged admission (which is denied) made in
the course of the post death negotiations.
48. The allegations of a partnership, vulnerable as they are for
these reasons, are, moreover, only part of the picture painted by the
proceedings. The other claims made in the proceedings are that "[a]s well
as conducting the business of the Enterprise" Christo acquired for himself
and/or Despina collections which included the Hellenistic Collection, the
Eileen Gray Collection and the Egyptian Collection, now wrongly retained
by Mr S. and/or converted to his own use. These claims have nothing to
do with any partnership claim.
49. Can it therefore be said that these proceedings have as their principal
object the validity of the constitution, the nullity or the dissolution of a
partnership? Neither of the two English authorities which have examined
this question under Article 16(2) provide a direct answer to the question.
In Newtherapeutics v Katz [1991] Ch 226 an English company sued two of
its directors claiming that they had acted without authority and in breach
of duty in signing certain contracts. The jurisdiction question therefore
turned on the question whether the principal object was "the decisions
of [the company's] organs" for the purposes of Article 16(2). It was held
that the claim that the directors had acted without authority did fall within
these words, but that the claim that the directors were in breach of duty
because of the detrimental nature of the transactions did not. In Grupo
Torras SA v Sheikh Fahad Mohammed Al-Sabah [1996] 1 Lloyds Rep 7
(C.A) directors of a Spanish company were alleged to have engaged in
a fraudulent conspiracy to misappropriate its funds. The Court of Appeal
held that this claim was not caught by Article 16(2). As Stuart-Smith LJ
put it, at p.16 of the report:
"it is impossible to accept the proposition that in misappropriating [the
company's] money the alleged conspirators were acting as it agents or
organs, let alone that "decisions" of its organs were involved."
The court left open the question whether Knox J had been right in Katz in
his second holding.
50. I have not found this an easy question to decide. On further reflection
I adhere to the provisional view which I expressed to the parties
during the course of the hearing, namely that the principal object of
these proceedings (or at least that part of them concerned with "the
Enterprise") is the establishment of the validity, or existence, of the
partnership and the working out of the consequence of its dissolution.
It seems to me that "dissolution" in Article 16(2) should be construed
as including not only dissolution in the sense in which it is used in the
Partnership Act (as to which the partnership, if it existed, was dissolved
on Christo's death) but also the winding up of its affairs. Viewed in
this light, the claims which are made in these proceedings based on
the allegation of a partnership fall within Article 16(2). Had there been
an express ("formal") agreement for partnership, there would I think
have been much less room for doubt on the matter. Having rejected a
distinction between "formal" and "informal" partnerships, the doubts
which I have expressed on the point can be seen to arise from misgivings
as to the sustainability, as opposed to the underlying nature, of the claim.
The claimants have chosen to base their claim on a partnership analysis.
The allegation of a joint enterprise appears to me to add nothing. The
extent to which, in the future, they may be permitted to amend their
pleadings to put their case in relation to the business in some other way
will have to be dealt with as and when it arises. I say no more at present
than that there may be a strong argument for holding them to the current
basis of their pleading.
51. The consequence is that Mr Rosen's application succeeds in relation to
Despina's claims, and (in so far as such a claim is maintained) in relation
to the administrators' claims that certain assets belonged to Christo
independently of the partnership business, but fails in relation to the
administrators' claims based on partnership. The result is undeniably
and regrettably messy. To the extent that the application succeeds, the
appropriate order appears to me to be to stay the proceedings rather than
to decline jurisdiction in favour of the Greek Court, since proceedings may
yet be taken in Greece to challenge the Greek Court's jurisdiction.
52. I should add one matter by way of postscript. I have referred
throughout to the Brussels Convention. However, Mr Steinfeld's written
submissions were expressly premised on the applicable Convention being
not the Brussels Convention but the Lugano Convention. I did not explore
with him in argument his reasons for adopting this stance, or why, in
his oral argument, he referred me instead to the text of the Brussels
Convention (the texts are identical so far as Article 16(2) is concerned
but the interpretative tools are potentially different: see sections 3(3) and
3B(2) of the 1982 Act). As I understand the matter the United Kingdom
and Greece are both "Brussels Contracting States" for the purposes of the
1982 Act (see section 1(3)). It is therefore to the Brussels Convention
that this judgment refers throughout.
Protective Measures
53. The parties are agreed that, irrespective of the outcome of the
jurisdiction application, some form of interim regime is appropriate
pending trial. The one reservation made by Mr Rosen to this was by
reference to Despina's claim and the provision in section 25(1)(a) of
the 1982 Act that, for this court to apply protective measures, it was,
arguably, necessary that Despina should herself make positive claims in
the Greek proceedings. His submission to interim relief was expressly
made subject to this reservation. Subject to that point, the outcome of
the jurisdiction issue is only relevant in as much as, on the evidence
before me, a final hearing in Greece may not take place for some seven
years. It is suggested that a trial in England in this division could be
achieved within two years. I would agree with that.
54. The existing interlocutory regime has been arrived at as a result
principally of the following orders:
(1) Order of Lloyd J dated 27 February 2001. This order, made on a
without notice application, appointed a receiver (Mr Wallace of KPMG)
to collect in Relevant Chattels and Relevant Documents (as respectively
defined) found on certain identified premises. This order was made
without limit of time, and required Mr S. and RSL to co-operate with
the receiver and also to deliver up to the receiver Relevant Chattels
and Relevant Documents in their control at premises other than those
identified. At the same time, an injunction was granted against them in
"freezing" form in relation to the assets ordered to be delivered up to the
receiver, and also in relation to Relevant Chattels which were at any of
the identified premises at Christo's death and the proceeds of sale of any
such Relevant Chattels, as well as Christo's "Personal Effects". They were
required to swear an affidavit within 7 days detailing the "frozen" assets.
(2) Order of Hart J dated 7 March 2001 made, save in one respect, by
consent. […]
(3) Order of Rimer J dated 30 March 2001. This order (made on a without
notice application) "froze" all the Relevant Chattels on a world-wide basis
and their proceeds of sale, as well as all proceeds of sale of any chattel
comprised in the collection valued at $50m referred to in Mr S.' letter of
22 October 1997 and granted other ancillary relief of a policing nature.
The order contained an exception which permitted sales of chattels to
take place in circumstances envisaged by the existing undertakings. The
claimants were prompted to seek this relief by their discovery that a large
number of Relevant Chattels were under Mr S.' control in Geneva despite
apparent assertions to the contrary in his affidavits, and as a result of
inconsistencies which appeared to exist in his evidence concerning sales
which had taken place in New York in December 2000. The order required
further affidavit evidence from the defendants.
(4) Order of Etherton J dated 4 April 2001. This consent order varied
Rimer J's order in a number of respects to which it is unnecessary to refer
in detail.
(5) Order of Etherton J dated 11 April 2001 and of Neuberger J dated
1 May 2001 making limited provision for enabling Mr S. to discharge
his legal expenses out of the proceeds of sale of assets which would
otherwise be frozen.
55. The parties can be congratulated on having reach a large measure of
agreement on the general shape which the protective regime should take
pending trial. There remain, however, certain issues on which they have
been unable to agree. To put these in context, it is helpful to set out the
text of those undertakings contained in the Second Schedule to my Order
dated 7 March which are said to give rise to difficulty for one side or the
other:
"(3) Not to remove any Relevant Chattel from the Premises where it is
situate save for the purposes of completing a sale thereof permitted under
the terms of this Order or (upon notice being given) from one of the
Premises to another
(4) Not to carry out a sale of any Relevant Chattel save for full
consideration at arms length and in the ordinary course of business.
(5) To give notice of any sale of any Relevant Chattel as soon as is
reasonably practicable after the said sale has been arranged and in the
case of a sale of any Relevant Chattel for a price of or more that US
$50,000 to give such notice not less than two clear business days prior to
the removal of the said Relevant Chattel from any of the Premises.
(6) To pay or cause to be paid the proceeds of any sale of any Relevant
Chattel into the account of the 2nd Defendant (account number …) with
The C.bank Private Bank London (sort code …).
(7) Not to cause or permit any expenditure by the 2nd Defendant, save
for payments in respect of the following:
Staff salaries (including the salary of the 1st Defendant limited each
month to the annual equivalent of £125,000 per annum);
rent;
other outgoings incurred in the ordinary course of business (but excluding
any payment in or towards the acquisition of any antiquity, furniture or
furnishing, painting, drawing, statuary, jewellery or work of art generally).
(8) To permit access to the Claimants for the purposes of moving into
and storing within the Chinese Room at … such further Relevant Chattels
presently at the said premises as may be nominated by the Claimants
and of which notice will be given to the Defendants, and on the Claimants
setting the alarm to the said room, the Defendants thereafter to lock the
said room.
(9) To attend at the Business Premises and/or the Chinese Room at …
London for the purposes of facilitating the Claimants' access thereto at
all reasonable times between 9am and 10pm and upon reasonable notice
being given by the Claimants of their wish for such access (reasonable
notice being reasonable for a person to travel from the Defendants'
premises to the premises in question).
(10) To permit the Claimants (by their duly authorised representatives)
for the purpose of inspecting the Relevant Chattels therein access to:
a. … London SW1 at any time and without notice during the hours when
those premises are not locked;
b. … London at any time between 9am and 7pm during the time when the
1st Defendant is resident therein."
56. The first area of contention related to the modalities of any sale by
the defendants of Relevant Chattels. The existing provision was said
to have given rise to substantial difficulties in practice. The defendants
complained that the existing machinery had led to a proliferation of
inter-solicitor correspondence in connection with each proposed sale,
a phenomenon which was expensive, time-consuming and potentially
embarrassing to the successful conclusion of the sale in question. The
claimants countered that the difficulties had all been of the defendant's
own making: on each occasion on which a sale had been notified there
had been some circumstance which provoked a reasonable suspicion that
all was not what it appeared to be on the surface. Without attempting to
decide the merits of what has occurred to date, it seems to me that the
practical solution is to impose a regime which has the following elements.
First, the notification should be made not less than two clear business
days before there is delivery of the item in question to the purchaser.
Secondly, the notification should follow a pre-determined format. This
should, subject to the cross-undertaking mentioned below, identify
the purchaser. Mr Steinfeld produced a draft form which I reproduce at
the end of this judgment and which appears to me largely satisfactory
for this purpose. It should however be expanded so as to give details
of the item's original date of acquisition and acquisition price (with
accompanying invoice). Thirdly, the proceeds should be paid into a
designated bank account which, if practicable, should be a new account to
be opened at C.bank in the name of RSL.
57. The final point on sales is whether the distinction in paragraph (5)
of the existing undertakings in relation to the timing of notices between
Relevant Chattels worth more, or less, than US$50,000 should be
extended also to the amount of detail to be included in the sale notice. As
to this I do not think that it should be: the same details of sales should
be given irrespective of the value of the Relevant Chattel. The existence
of the distinction in relation to timing of the notice can, however, be
maintained.
58. I do not pretend that this solution will necessarily obviate in the
future the difficulties which have arisen to date. It is, however, the best
method I can currently envisage of reconciling on the one hand the
defendants' wish to carry on dealing (and in the process realise what
may be partnership assets) with the wish of the claimants to be able to
monitor the ongoing conduct of the business and to prevent, if necessary,
the completion of any sale which is perceived to be mala fide. I deal below
with how the resulting monies in the designated account will be dealt
with.
59. A still more contentious area surrounds the question whether the
defendants, or either of them, should be permitted to make purchases.
The effect of the existing orders and undertakings is that neither
defendant can effect purchases, RSL because of the provisions of
undertaking (7) and Mr S. because (it is said) the effect of Rimer J's
order is to impose a world-wide freezing order on all his assets. Both are
thus prevented from continuing the business which is said to have been
carried on in partnership, and which Mr S. claims is now his sole means
of livelihood. As Mr Rosen put it in argument, there are really only two
possibilities in relation to the business. Either it is permitted to continue
(in which case purchases must be catered for by the interlocutory regime)
or it must cease altogether.
60. The difficulties and dangers in permitting purchases should not
be underestimated. The business of dealing in antiquities is, for a
variety of reasons, one that is conducted in large part in a highly
discreet international community of dealers and collectors. The value
to be placed on a particular item is not readily susceptible to objective
verification, and may be affected by highly subjective factors, such as
a particular collector's passion, as well as by an appreciation of the
risks involved (which may vary from jurisdiction to jurisdiction) in the
ability to verify authenticity provenance and title. These problems of
valuation are magnified where a particular deal involves (as I imagine
it frequently may) an element of part exchange. The claimants' attitude
is understandably influenced by a fear that continued dealing by the
defendants will not be conducted bona fide, but will be deployed as a
means of extracting money from the otherwise frozen pot. All these
problems potentially affect sales as well as purchasers, but there is a
better chance in relation to sales that the defendants' own self-interest
will deter sales at an undervalue. That self-interest will, paradoxically, be
increased if the defendants are permitted to trade with at least part of the
proceeds.
61. On balance I have been persuaded that the defendants should be
allowed to continue trading and therefore be able to make purchases.
That raises the question as to (1) what funds should be made available
for such trading, and (2) how much protection should be offered to the
claimants by way of advance notice in respect of such purchases.
…. In my judgment, if the interlocutory regime is to work satisfactorily it
is essential that the claimants have the largest possible ability to satisfy
themselves as to the bona fides of proposed transactions consistent
with the defendants' ability to deal on the accustomed confidential basis
with the market. This entails the claimants being given information as
to the identity of sellers and purchasers but being subject to a stringent
prohibition on the use to which they may put that information. I shall
therefore only require the identities of such persons to be disclosed on the
claimants' undertaking not to reveal that information to any person other
than their own experts (and then only on terms of total confidentiality) or
to communicate with any such person in any manner which might reveal
to him or her the claimants' knowledge of the existence of the transaction
without an order of the court. In an appropriate case such an order might
be made on a without notice application by the claimants. The regime in
relation to moving, selling, inspecting and inventorising Relevant Chattels
will have to be extended to items purchased under this regime. […]
66. A further issue between the parties related to whether the defendants
should be obliged to indemnify the claimants in respect of losses incurred
as a result of purchases permitted under this regime. The correct
approach to this seems to me to be to preserve for the claimants their
ability to elect either to claim a share of the net proceeds of realisations
of Relevant Chattels or to adopt the new transactions and claim a share
in the resultant profits. In other words imposition of the protective regime
is without prejudice to that potential right to elect. That may be little
different in practice from requiring the suggested indemnity, but enables
the question to be postponed until the working out of the final accounts
of the parties (which themselves may be affected by findings made by the
court as to the precise nature of the arrangements to which they were
parties during Christo's lifetime). […]
68. The final area of disagreement between the parties so far as concerns
the basic shape of the interim regime is the extent to which the claimants
should themselves give cross-undertakings as a condition of obtaining the
continued relief which they seek. I have already identified one area where
it seems to me a cross-undertaking is apparent. Other cross-undertakings
sought are directed, in broad terms, to reducing the amount of intrusion
suffered by the defendants into their ongoing business affairs and, in
the case of Mr S., the conduct of his private life. Complaints have been
made about the manner in which the claimants have, as it is alleged,
showered third parties with copies of the orders made to date, of the fact
that the administrators have sought to communicate directly with the
defendants' accountants (in their capacity as such), of the nature and
degree of surveillance to which defendants and their premises have been
subjected, and of the manner in which customers of the business have
been approached. I have considered carefully whether any or all of these
matters should be the subject of cross-undertakings and have concluded
that, with the exception already mentioned, none should be. What I will,
however, say is this. The interim regime which I envisage is one under
which it is intended that the defendants should be entitled to continue to
conduct a profitable and successful business. Acts in the future by or on
behalf of the claimants which risk damaging that business will prima facie
be seen as acts which are contrary to the spirit of the regime, and which
may justify some further modification of it in the defendants' favour. I
include within that stricture (without making any finding as to what has
already occurred) the raising of detailed questions in relation to sale
and purchase notices. The purpose of that machinery is not, primarily,
to enable the claimants to take steps to restrain such transactions or to
investigate their bona fides prior to their completion. It is to provide the
claimants with a clear record of the transactions. By not objecting to the
transactions the claimants are not to be taken as consenting in any way to
them.
69. I would only add this, which is common ground. Experience alone will
prove whether or not the regime will work fairly and satisfactorily. Both
sides should have permission to come back to court for a variation without
having to prove a Chanel v Woolworth change of circumstances.
70. I am hopeful that, with these decisions in principle, the parties will be
able to agree a form of draft order. I shall therefore allow at least seven
days from the circulation of this judgment in draft for that process to take
place. For that purpose the parties' advisors will (contrary to the usual
practice) be free to communicate this judgment to their clients (on terms
of confidentiality) as from the receipt by them of the draft. Until I have
actually made an order replacing those previously made, the latter will
continue to apply.
71. The final area which I have to consider is the extent to which Mr S.
should be entitled to resort to otherwise frozen assets in order to meet his
reasonable legal expenses. A preliminary question is whether, before any
such order is made, Mr S. should submit himself to cross-examination as
to his assets by the defendants. A secondary question relates to the form
which any such order might take.
72. The question of cross-examination has already been considered in
this context by Neuberger J., whose judgment dated 1st May 2001 also
helpfully considered the issues of principle involved where an order of this
kind is sought by a defendant in relation to assets to which a claimant
makes a proprietary claim. He was dealing with the limited question of
what amount Mr S. should be entitled to spend up to the conclusion of the
hearing before me, and on the premise that the monies concerned would
come out of a fund already identified by Mr S. in his affidavit evidence.
Neuberger J. listed and considered thirteen factors which he took into
account in coming to his final conclusion that, for the purposes of the
order which he was asked to make, an order for cross-examination would
not be appropriate. […]
73. …First, in a further affidavit Mr S. adverted to an account with
Credit A. which he had not previously mentioned and did so in terms
which suggested (at first reading) that it was his account rather than
RSL's. Further examination of the disclosure revealed, however, that the
apparent admission was the result of a draftsman's slip. The account
was an RSL account. Such information as the defendant was able to
put before the court in relation to the account did, however, provoke
further questions as to the current state of the account and the manner
in which it was secured. The second matter was the revelation, shortly
before the hearing before me but not in the evidence itself, of the
existence of a yet further entity ostensibly controlled from the same firm
of Swiss accountants (Mr Henri-Albert J.) as hold the bearer shares in
the offshore Panamanian companies already known to the claimants. The
existence of this entity was revealed in a letter dated May 1st 2001 to
M. Stephane J. from So. referring to the latter's intention to charge the
cost of considering the court orders pursuant to a consignment agreement
entered into on 18 April 2001 by B. de D. I. et C. S.A. ("BUDICO") and
guaranteed by Mr S.. This has not yet been the subject of any explanation
by Mr S.. […]
75. Notwithstanding these matters, and having carefully considered
Neuberger J's own reasoning on the point, I do not think that the decision
whether or not to allow legal expenses to be paid should depend upon Mr
S. first submitting himself to an order for cross-examination. Any such
cross-examination would, for all the reasons identified by Neuberger J.,
be likely to develop into a mini-trial which might be difficult to contain
and which (given the incidence of the burden of proof in the substantive
proceedings) might be unfair to Mr S..
76. Approaching the matter on that basis, I find that I come to the
same conclusion in relation to future reasonable legal expenses as
Neuberger J. did in relation to the application before him, and I do so
having considered afresh and for myself each of the thirteen general
considerations which he set out in his judgment and which I only refrain
from re-expressing in my own words in order not to lengthen an already
long judgment. I am fortified in that conclusion by the fact that (prior
at least to the revelations about Credit A. and Budico) the claimants
appeared to be agreeable in principle, albeit reluctantly and subject to
safeguards, to a continuation of the regime which he had temporarily
authorised.
77. In coming to that conclusion, I have well in mind the evidence and
information which is before me and which was not available to Neuberger
J. The most striking feature of that evidence is the sheer scale of the
activities of the offshore entities which has been revealed. Profits totalling
some US$40m appear to have been made from offshore trading in art
over the nine years or so prior to Christo's death. There is little reason
to suppose that this will have ceased on Christo's death, despite what
Mr S. has to say about Christo's central role in the orchestration of these
entities. The BUDICO revelation strongly suggests that this activity
may still be going on. None of this, however, affects Mr S.' central point
that the effect of the existing orders, having regard to the width of the
definition of Relevant Chattel, is to 'freeze' the whole of his and RSL's
business. If the claimants' suspicions are well grounded it may mean
that he has been conducting a business in a manner which is in breach of
the existing orders and undertakings. It does not alter the application of
the general principle, as explained in Sundt Wrigley & Co Ltd v. Wrigley
(unreported), 23 June 1993, CA Transcript No 685 of 1993, that it is only
in an exceptional case of a strong proprietary claim that a defendant
should not be free to draw on enjoined funds to meet the costs of his
defence (see also United Mizrahi Bank Ltd. v Doherty [1998] 1 WLR 435
at 437H-440F where the authorities were reviewed by Michael Burton QC
(as he then was sitting as a deputy judge of this Division). I can hardly
regard this case as one where there is a strong proprietary claim: there is
no direct evidence of a partnership; the collections identified as belonging
to Despina appear to have been freely dealt with by the defendants during
her lifetime and she herself appears to have had no means of identifying
their contents; moreover, the current state of the evidence in relation
to the Eileen Gray collection appears to favour the defendants' case.
78 Neuberger J's order in relation to legal expenses contained three
measures of protection for the claimants. First, it identified a maximum
sum expendable on legal expenses in respect of the relevant stage of
the proceedings and the particular fund from which they were to be
paid. Secondly, it provided that if it should turn out that the expenses
had been paid from a fund to which the claimants were wholly or partly
entitled (and were not recoverable from the claimants) the costs should
be deemed to have been drawn by Mr S. on account of the profits of the
partnership and/or on account of his share of the proceeds of any jointly
owned asset. Thirdly, as to any balance of costs not so accounted for, the
claimants were to have the right to have Mr S.' solicitors bills taxed under
section 70 Solicitors Act 1974 with an appropriate extension of the period
stipulated in section 70(1). The first two points are accepted in principle
on behalf of Mr S. as appropriate in relation to the order which I am asked
to make, but in relation to the third his solicitors (Lovells) have expressed
their extreme reluctance to act in circumstances where they may be liable
to have their bills taxed by the claimants. I find that reluctance entirely
understandable for the reasons eloquently put by Mr Huntley of Lovells in
his affidavit dated 15th May 2001. However, if Mr S. is to be permitted to
draw on assets which turn out to belong to the claimants for the purposes
of his legal expenses it seems to me necessary that the claimants should
have the protection of being able, at some point in the proceedings, to
challenge the quantum. The choice is between a regime under which
the court is invited to approve particular expenditure in advance (which
will thereafter be unchallengeable) and one in which the claimants are
permitted to challenge the costs after they have been incurred. Of the two
the latter appears to me to be the better mechanism. In his affidavit Mr
Huntley indicates that he and his partners will have to reconsider their
position in the event of my arriving at this conclusion. I think that they
should do so, and express the hope that, on such reconsideration, they
will conclude that they can continue to act for Mr S.. If not, a stringent
procedure for vetting proposed expenditure in advance will have to be
constructed.