1. D. Limited, the Claimant, claims to have suffered a substantial loss as
a result of breaches of fiduciary duties on the part of a former director,
and other persons. It asserts that part of the money which was wrongfully
removed from its possession by those concerned found its way into
an account in the name of the Defendant. It has brought this action
against her to recover that money, alleging that her involvement makes
her a constructive trustee of the money which passed through her
account, either on the basis of knowing receipt or of dishonest assistance.
However, the Defendant lives in Spain, and none of the things alleged as
regards her in respect of the money happened within the jurisdiction of
this court. She therefore applies to have the proceedings set aside on the
basis that they cannot be brought against her in this court, having regard
to the terms of the Brussels Convention.
2. The Claimant obtained a freezing order against the Defendant on 12
December 2000, the day before the Claim Form was issued. That order
has been continued from time to time since then. It applies to me for that
order to be continued now until trial or further order in the meantime.
So far, however, only the question of jurisdiction has been argued. This
judgment therefore is limited to that issue.
3. The Claim Form specifies the claim as being for £315,422.88 "as unjust
enrichment and/or monies had and received". In the Particulars of Claim,
however, the claim is clearly put on the basis of constructive trust. It is
accepted that I should look at the Particulars of Claim as well as the Claim
Form, and that I can only consider them in their present form. I will first
set out a summary of the allegations as they appear from the Particulars
of Claim.
4. The Claimant was incorporated in May 1997 with, at that stage, a sole
director, a Mr H.-B. ("TB") and as company secretary M. V.-B. ("MVB")
who is the Defendant's son. She has another son, C. V.-B. ("CVB"), who
also features in the history. MVB became a director of the Claimant on 30
September 1997 and is alleged to have acted as a de facto director before
that.
5. The Co-operative Bank made credit facilities available to the Claimant,
for the purchase of aircraft parts, and £2 million was drawn down on 3
October 1997, supposedly for the purchase of an aircraft engine from an
independent third party. In fact the items purchased already belonged to
HB, and were worth nothing like £2 million, and the £2 million was not
paid to the ostensible seller. Instead it was paid out for the benefit of HB,
MVB and CVB. The alleged sequence of payments is of some importance,
and I will deal with this in more detail.
6. The money was advanced to the Claimant on 3 October 1997. The
allegation is that it was ultimately paid into a particular account called
the M. account at the B. Forum branch of National Westminster Bank.
M. seems to be a firm of insolvency practitioners, of which CVB was a
partner, and MVB was a consultant to it. Out of that account, so far as
relevant, £464,250 was paid to another account at the same branch,
entitled M V.-B. & Co. Clients Account (a firm of which MVB and his wife
were then partners). £314,250 was paid from this last account into an
account at L. Bank in the Channel Islands, in the name of P. Channel
Islands Limited ("P."). There was then a series of transactions between
accounts, all with P. and remaining, therefore, within the Channel Islands.
P. held the money at first for the account of one M. H., with MVB as the
contact address. On 8 October 1997 the money was credited to a fixed
bond account for 12 months. On the expiry of the bond, the sum of
£315,422.88 was paid from the bond account to an account in the name
of the Defendant. That is the first involvement of the Defendant. Various
withdrawals and credits were made from and to the Defendant's account.
On 12 July 1999 £291,870.55 was transferred from the Defendant's
account into another account, in the name of MVB. On 23 August
1999 that sum was transferred to a second account in the name of the
Defendant.
7. In paragraph 19 of the Particulars of Claim it is said to be the
Claimant's case that all the payments described above, starting with the
payment out of the MVB & Co client account at National Westminster Bank
B. Forum to the P. account at L. Channel Islands, were effected by or
at the direction of either MVB or the Defendant, but in his submissions
Mr Sutcliffe accepted that he could not assert that the Defendant's
involvement arose before the transfer of funds to the first of the accounts
in her name mentioned above, on 8 October 1998.
8. MVB is alleged to have acted fraudulently and in breach of his duties to
the Claimant in causing the sum of £315,422.88 to be applied in favour
of the Defendant, rather than for the Claimant, in fraudulent breach of
trust. The Defendant is alleged, in paragraph 21 of the Particulars of
Claim, to have known that the sum was transferred to her in breach of
trust on the part of MVB, or to have been reckless as to whether that
was the case, or to have failed to make such enquiries as a reasonable
and prudent person would have made in the circumstances. It is further
alleged that the circumstances in which she received the money made
it unconscionable for her to retain it. That is a case of knowing receipt.
In addition there is a case of dishonest assistance, which is based on
the Defendant having allowed MVB to transfer money belonging to the
Claimant into her account, and transferring, or allowing the transfer of,
money to the MVB P. account and then into the second account in her
own name. The acts relied on in support of this do not include anything
done prior to causing the transfer of money from the bond account into
the first of her accounts. The Particulars of Claim also include a claim in
conspiracy, at paragraphs 24 and 25, but the overt acts do not include
anything prior to the receipt of the money into the first of her accounts,
and they are limited to that receipt and the dealings with the funds
thereafter as described above. The Claimant's claim is that the Defendant
is a constructive trustee for it of the £315,422.88.
9. It is thus clear that the facts which gave rise to the Claimant's claim
against MVB and some others occurred, partly, within the jurisdiction, but
that all the facts which are relied on to attach liability to the Defendant,
as distinct from others, occurred outside the jurisdiction, in the Channel
Islands (specifically, as I understand it, in Alderney). Given that the
Defendant is domiciled in Spain, for the purposes of the Brussels
Convention, the question is whether the Claimant can show that the
case falls within one of the exceptions to the general rule in favour of the
country of the Defendant's domicile. That turns on whether it is enough to
be able to rely on the acts done within the jurisdiction by MVB and others,
not including the Defendant, which are at the start of the chain of events
leading to the allegation against the Defendant, or whether the Claimant
has to show some acts (or omissions) within the jurisdiction which involve
the Defendant herself.
10. The Brussels Conventionhas effect in English law as a result of the
Civil Jurisdiction and Judgments Act 1982. Article 2 lays down the general
rule, that persons domiciled in a Contracting State shall be sued in the
courts of that State, but this is subject to the other provisions of the
Convention. The only one relied on is Article 5(3), that
"A person domiciled in a Contracting State may, in another Contracting
State, be sued ... (3) in matters relating to tort, delict or quasi-delict, in
the courts for the place where the harmful event occurred"
11. In Handelskwekerij G J Bier BV v. Mines de Potasse d'Alsace SA (Case
21/76) [1978] QB 708, the European Court of Justice had to consider
what was meant by "the place where the harmful event occurred". The
alleged facts were that the Defendant, engaged in mining in France,
discharged pollutants into the Rhine, which flowed down river and injured
the Plaintiff carrying on a nursery gardening business in the Netherlands.
The claim was brought in the Dutch courts, and the Defendant argued
that the harmful event was the discharge in France, rather than the result
in the Netherlands. The European Court of Justice held that both the place
of the discharge and the place where the discharged materials caused
injury to the Plaintiff were places where the harmful event occurred, so
that the Defendant could be sued in either place. In its judgment the
court said this, after referring to articles 2 and 5(3):
"10. However, article 5 makes provision in a number of cases for a special
jurisdiction, which the plaintiff may opt to choose.
11. This freedom of choice was introduced having regard to the existence,
in certain clearly defined situations, of a particularly close connecting
factor between a dispute and the court which may be called upon to hear
it, with a view to the efficacious conduct of the proceedings. 12. Thus,
in matters of tort, delict or quasi-delict article 5(3) allows the plaintiff'
to bring his case before the courts of the place where the harmful event
occurred.
13. In the context of the Convention the meaning of that expression is
unclear when the place of the event which is at the origin of the damage
is situated in a state other than the one in which the place where the
damage occurred is situated, as is the case, inter alia, with atmospheric
or water pollution beyond the frontiers of a state.
14. The form of words 'place where the harmful event occurred' used in
all the language versions of the Convention, leaves open the question
whether, in the situation described, it is necessary, in determining
jurisdiction, to choose as the connecting factor the place of the event
giving rise to the damage or the place where the damage occurred, or to
accept that the plaintiff has an option between the one and the other of
those two connecting factors.
15. As regards this it is well to point out that the place of the event giving
rise to the damage no less than the place where the damage occurred
can, depending on the case, constitute a significant connecting factor
from the point of view of jurisdiction.
16. Liability in tort, delict or quasi-delict can only arise provided that a
causal connection can be established between the damage and the event
in which that damage originates.
17, , Taking into account the close connection between the component
parts of every sort of liability, it does not appear appropriate to opt for
one of the two connecting factors mentioned to the exclusion of the other,
since each of them can, depending on the circumstances, be particularly
helpful from the point of view of the evidence and of the conduct of the
proceedings.
18. To exclude one option appears all the more undesirable in that, by its
comprehensive form of words, article 5(3) covers a wide diversity of kinds
of liability.
19. Thus the meaning of the expression 'place where the harmful
event occurred' in article 5(3) must be established in such a way as to
acknowledge that the plaintiff has an option to commence proceedings
either at the place where the damage occurred or the place of the event
giving rise to it."
12. In order to show that the present claim may be brought against
the Defendant in this court, the claim must be a matter of tort, delict
or quasi-delict, and the (or a) harmful event, understood in accordance
with the judgment just quoted, must have occurred in England or Wales.
In Kleinwort Benson v. Glasgow City Council [1999] 1 AC 153, one of
the cases arising from local authority swap transactions, Lord Goff of
Chieveley said, at page 172, that a claim for restitution such as was made
in that case could not be brought within article 5(3) "if only because
a claim based on unjust enrichment does not, apart from exceptional
circumstances, presuppose either a harmful event or a threatened
wrong". He approved the dissenting judgment of Leggatt LJ in the Court
of Appealon the same point at [1996] QB 691-2. The submission that
article 5(3) did apply was based on words of the European Court of
Justice in Kalfelis v. Bankhaus Schroder Munchmeyer Hengst & Co (Case
189/87) [1988] ECR 5565, that the article "covers all actions which seek
to establish the liability of a Defendant and which are not related to a
contract within the meaning of article 5(1)".
13. In Casio Computer Co Ltd v. Sayo (20 December 2000 unreported)
Mr Anthony Mann Q.C. sitting as a deputy judge of this Division had to
consider a similar question to that which is before me. Money had been
diverted from the Claimant which was said to have found its way to
various people including a Mr Kaiser. He was domiciled in Spain. The claim
was based on constructive trust, with allegations of breach of fiduciary
duty, knowing receipt and dishonest assistance, just as is alleged in the
present case. Mr Kaiser sought to have the proceedings set aside on the
basis that article 5(3) was not satisfied. Mr Mann held that the claim
was of a kind which fell within the article, distinguishing what was said
in Kleinwort Benson v. Glasgow City Councilon the basis that the kind of
unjust enrichment or restitution claim involved there did not involve a
harmful event, but that a constructive trust claim does. Miss Ife, for the
Defendant before me, is prepared to accept for present purposes only
that this is correct, while reserving her position in a higher court. I see
considerable force in Mr Mann's judgment on the point and I will proceed
on the basis that the claim is of a kind which falls within article 5(3).
14. Then, however, comes the question whether any harmful event
happened within England. Mr Mann had to consider that as well. On the
facts of his case, as alleged, money belonging to Casio came under the
control of Sayo, who was an employee of Casio and was supposed to
invest it for the benefit of Casio. It came into an account in the name of
Casio at a bank in London, over which both Sayo and one Tsuru were the
signatories. Money was then transferred from there to another account
at the same bank of which Tsuru was the sole signatory, and in turn from
that account to another, known as the Alpha account, also in London, for
the benefit of an Isle of Man company known as OVM, of which Mr Kaiser
was a director. From there, it was transferred to an account of OVM in the
Isle of Man, and thence further on. Mr Kaiser was sued on the basis that
he procured the payments to and by OVM, so giving dishonest assistance.
Mr Mann accepted that acts of assistance could constitute harmful events,
and that they could be said to occur in the jurisdiction either if they were
done here or if they had the result that something happened here. It was
therefore not necessary to show that Mr Kaiser had been in the country
when (as alleged) he caused money to be transferred into or out of the
Alpha account for the benefit of OVM. The transfers did happen here, and
on that basis he accepted that the case as pleaded fell within article 5(3).
15. He also considered whether the damage occurred within the
jurisdiction. In this respect the European Court of Justice has also
provided some assistance, in Marinari v. Lloyds Bank (Case C-364/93)
[1996] QB 217. Mr Marinari had lodged with a Manchester branch of the
bank some promissory notes with an exchange value of many millions of
dollars, but the bank staff refused to return them and advised the police
of their possibly dubious origin. As a result Mr Marinari was arrested
for a time and was deprived of the notes. On those facts it seems clear
that the harmful event happened in Manchester. However Mr Marinari,
having returned home to Italy, sued the bank there, claiming that he had
suffered consequential and indirect financial loss in Italy. The European
Court of Justice, on a reference from the Italian courts, held that the
scope of the harmful events in article 5(3) could not be "construed so
extensively as to encompass any place where the adverse consequences
of an event that has already caused actual damage elsewhere may be
felt", and that "consequently, that term cannot be construed as including
the place where, as in the present case, the victim claims to have suffered
financial damage consequential on initial damage arising and suffered by
him in another contracting state".
16. On the basis of that ruling, it might be said that the Claimant suffered
the initial damage when the money was abstracted from its account and
remitted to the Marshalls account, and that all that happened thereafter
was no more than consequential and therefore irrelevant. That argument
commended itself to Mr Mann in the Casio case. At paragraph 22 he
said that he thought Casio suffered loss when its money was removed
from the accounts where it should have been held, which did not happen
in England (I suppose it may have been in Japan) and that it did not
seem to him that the acts of OMV or Mr Kaiser made the situation any
the worse, or added to the Claimant's loss. He did, however, say that,
in the alternative, the loss was suffered when the money started to be
dissipated, which was after it had left the Alpha account, but that was
also outside the jurisdiction. Accordingly the "place where the damage
was suffered" was not a basis on which jurisdiction could be established
against Mr Kaiser, but the place where the act leading to the damage
was committed was sufficient. He therefore refused to strike out the
proceedings.
17. It seems to me that it might be said that, for a constructive trust
claim to fall within article 5(3) at all, there must be a harmful event, and
the essence of a harmful event is that it causes harm, or in other words
damage, to the Claimant: compare paragraph 16 of the judgment in
Mines de Potasse , cited in paragraph 11 above. It might therefore be said
to be illogical if the harmful event relevant to a particular claim occurs
after the victim has already suffered all the damage that he can rely on
for the purposes of the article. On that basis Mr Mann's alternative view,
that the damage was caused after the money left the Alpha account, is
the better view. Which view is right does not affect his decision in itself.
18. In the present case, Mr Sutcliffe, for the Claimant, submits that he
can rely on the harmful events done by MVB and others in the jurisdiction,
and does not have to focus on what is alleged against the Defendant. He
accepts that all of the Defendant's allegedly wrongful acts and omissions
occurred (so far as the pleading goes) outside the jurisdiction, but he
points out that the harm to the Claimant was caused by the removal
of money from its account, within this jurisdiction, and its transfer to
accounts of MVB and others, also within the jurisdiction.
19. Although those matters are clearly part of the chain of events which
has to be pleaded and proved in order to establish liability against the
Defendant, I cannot accept that it is sufficient, for the purposes of article
5(3), to point to acts within the jurisdiction which have nothing to do with
the Defendant, and the proof of which, by themselves, would not establish
liability on the part of the Defendant. In principle it seems to me that, in
applying the concept of the harmful event to a constructive trust claim
based on knowing receipt or dishonest assistance, it is not relevant to
show that the original breach of trust or fiduciary duty by someone other
than the Defendant took place in the jurisdiction if nothing which involved
the Defendant occurred within the jurisdiction. The harmful event must, in
my judgment, be a harmful event on the part of the Defendant, whether
it is the act or omission of the Defendant from which the harm results,
or the direct result of such an act or omission through its impact on the
Claimant.
20. It can certainly be said that, in one sense, the Claimant had already
suffered the whole of the loss which it did suffer before the money
reached the Defendant's account. However, on the footing that a
constructive trust claim is within article 5(3) because (unlike some
restitution claims) it does involve a harmful event, it seems to me that the
harmful event must be that which the Defendant is responsible for, and
must be one which causes damage which the Defendant is responsible
for. I do not consider that the fact that the Claimant has a separate cause
of action against MVB or others in respect of amounts which would or
might include the sums the subject of the claim against the Defendant
means that the Claimant had not suffered harm from the Defendant's
act or omission as alleged. This is not like a claim based on indirect
consequences of the same act by the same person on the Claimant, and
is therefore not open to the same objection as Mr Marinari's contention,
which would have given every victim an additional forum in which to
sue, which in almost every case would be his or its own domicile. If
the facts alleged by the Claimant are correct it did suffer harm from
the Defendant's acts or omissions in not returning the money once
it got into her account and she became aware of it. In my judgment
this interpretation of the article, as applying to such a claim as this in
these circumstances, is consonant with the text and the scheme of the
Convention.
21. The only relevant acts or omissions of the Defendant, as pleaded,
took place in Alderney. Accordingly, I conclude that there is no basis for
saying that article 5(3) permits the Claimant to sue the Defendant in this
court.
22. In many cases there might be another basis for joining someone
such as the Defendant in English proceedings, namely as an additional
Defendant to proceedings brought here against, for example, MVB, under
article 6(1). However, the Claimant has sued MVB to judgment (though
not to execution) and had done so before bringing proceedings against
the Defendant. There are other persons against whom the Claimant might
bring proceedings, but so far as I am aware there are no other current
proceedings, and therefore the Claimant cannot now proceed against the
Defendant in that way.
23. For these reasons I accept Miss Ife's arguments on behalf of the
Defendant, and I will hear submissions as to the order I should make as a
result.