Mr Justice Morgan:
Introduction
•1.                   On 26th June 2007, the Claimants issued the Claim Form
in this action. The Claim Form named four defendants. It contained a
statement, on behalf of the Claimants, that the High Court of England
and Wales had power under Council Regulation (EC) 44/2001 of 22nd
December 2000 to hear the claim. The proceedings were duly served
on the First Defendant. On 18th October 2007, the First Defendant
applied for an order whereby the court would declare that it did not have
jurisdiction, alternatively, would not exercise its jurisdiction, to try the
claim. The application continued by seeking an order that the Claim Form
be set aside or the proceedings be stayed. The ground put forward for
the application were that the court did not have jurisdiction over the First
Defendant under Council Regulation (EC) 44/2001, alternatively because
Liechtenstein was a more appropriate forum in which to hear this claim.
•2.                   The application involves the interpretation of Council
Regulation (EC) 44/2001 of 22nd December 2000 ("the Judgments
Regulation"). In particular, the application requires the court to consider
and to apply Article 5 (6) of the Judgments Regulation which, so far as
material, is in these terms:
"A person domiciled in a Member State may, in another Member State, be
sued:
...
(6) as settlor, trustee or beneficiary of a trust created by the operation
of a statute, or by a written instrument, or created orally and evidenced
in writing, in the courts of the Member State in which the trust is
domiciled; .... "
•3.                   In addition to the questions as to the interpretation and
application of Article 5(6), the First Defendant contends that even if the
court has jurisdiction to determine the Claimants' claim against the First
Defendant, the court has power to decline jurisdiction and should do so in
favour of the claim being tried in Liechtenstein, which is said by the First
Defendant to be a more appropriate forum.
The issues
•4.                   The issues which arise can be summarised as follows:
(1) What trust or trusts are identified by the Claimants in the present
case which come within the words of Article 5(6) which refer to: "... a
trust created by the operation of a statute, or by a written instrument, or
created orally and evidenced in writing ...?"
(2) Is the relevant trust domiciled in England?
(3) In relation to the first part of the Claimants' claim against the First
Defendant, is the First Defendant "sued......as beneficiary..."?
(4) In relation to the second part of the Claimants' claim against the First
Defendant, is the First Defendant "sued....as.....trustee...."?
(5) If the court has jurisdiction under Article 5(6) in relation to all or part
of the Claimants' claims, is it open to the court to decline jurisdiction on
the grounds of forum non conveniens?
(6) If the answer to (5) is "yes", should the court decline jurisdiction on
that ground?
The declaration of trust
•5.                   There was a written declaration of trust in this case on
11th June 1984. The effective settlor of that declaration of trust was
Alfredo Gonzalez Diez. The settlor died on the 16th September 1991,
intestate and domiciled in Spain. The First Defendant is the widow of the
settlor. The First Defendant is domiciled in Spain. The settlor and the First
Defendant had five children, all sons, and the Claimants are three of those
sons.
•6.                   The original trustee under the declaration of trust was
Fidei Trust Company Limited, a corporation incorporated under the law
of Jersey. The principal asset of the trust was certain shares in Gonzalez
Byass & Co Limited a corporation incorporated under the law of the
Cayman Islands. Gonzalez Byass is the well known producer of sherry.
It is believed that the original trustee, Fidei Trust Company Limited no
longer exists.
•7.                   On 16th September 1999, the party named as the
Second Defendant in these proceedings, GB Investment Holdings Limited,
a corporation incorporated under the law of the British Virgin Islands
and the party named as the Fourth Defendant in these proceedings,
Ansbacher Trustees (Jersey) Limited, a corporation incorporated under
the law of Jersey, were appointed trustees of the trusts declared by
the declaration of trust in place of Fidei Trust Company Limited. At that
time, Ansbacher Trustees (Jersey) Limited was called St Helier Trust
Company Limited. On 23rd December 2002, the party named as the Third
Defendant in these proceedings, WalPart Trust Registered, a corporation
incorporated under the law of Liechtenstein, was appointed trustee of the
trust declared by the declaration of trust in place of Ansbacher Trustees
(Jersey) Limited. Accordingly, from 23rd December 2002, the trustees of
the trust declared by the declaration of trust have been GB Investment
Holdings Limited and WalPart Trust Registered.
•8.                   I was told that these proceedings have not been served
on the Second, Third and Fourth Defendants and, indeed, the time
permitted for service of the Claim Form on those defendants has now
expired. Subject to an application to extend time for service which was
made before that expiry.
•9.                   The declaration of trust refers to Fidei Trust Company
Limited as "the Trustee" and to Mr Gonzalez Diez as "the Settlor". The
declaration of trust recites that at the direction of the Settlor certain
shares in Gonzalez Byass were transferred into the name of the Trustee to
hold the same on the trusts of the declaration of trust, which the Trustee
then proceeded to make.
•10.               The material terms of the declaration of trust are the
following:
Clause 1
"In this Deed the following words shall have the following meanings:-
1.1 "Beneficiaries": those persons resident outside the United Kingdom
who are permitted by Article 28(B) of the Articles of Association of
[Gonzalez Byass] to hold Ordinary Shares in [Gonzalez Byass].
1.2 Trust Fund: means the Shares, any further property added to these
trusts, all income and capital gains of such Shares and other property and
all property from time to time representing the same.
1.3 The Trust Period: the period from the date hereof until the death of
the survivor of the Settlor and his wife.
1.4 The Appointor: any person or persons who shall be appointed as the
Appointor revocably or irrevocably in writing by the Settlor (or his wife if
he is incapacitated) or by his widow ...."
Clause 2
"The proper law of this Declaration of Trust shall be the law of England."
Clause 3
"3.1 The Trustee shall not sell dispose of grant any security over transfer
appropriate to a beneficiary or otherwise deal with the Shares otherwise
than in accordance with Clause 4 below.
..."
Clause 4
"4.1 The Trustee shall hold the Trust Fund upon trust to pay or apply the
same to or for the benefit of any one or more of the Beneficiaries in such
shares and proportions (if more than one) and upon such trusts (if any)
as the Settlor shall in his absolute discretion determine.
4.2 At the end of the Trust Period the Trustee shall hold any balance of
the Trust Fund remaining subject to these trusts upon trust for the benefit
of any one or more of the Beneficiaries in such shares and proportions (if
more than one) ... as the Appointor shall appoint within two years of the
end of the Trust Period.
4.3 Subject to any appointment under Clause 4.2 above the Trustee shall
at the end of the aforementioned two year period hold any balance of the
Trust Fund remaining subject to these trusts upon trust for such of the
sons of the Settlor as shall be living at the end of such two year period
and if more than one in equal shares absolutely.
4.4 In accordance with Settlor's instructions the Trustee may during the
period of twenty-one years from the date of this Deed accumulate any
income arising under the trusts hereof and invest the same ...."
Clause 6
"The Settlor ... or his widow after his death shall have the power to
remove any trustee hereof and to appoint new or additional trustees
hereof."
•11.               The definition, in clause 1.1 of the declaration of trust, of
the Beneficiaries refers to Article 28(B) of the Articles of Association of
Gonzalez Byass. The Particulars of Claim plead that this Article included
the following persons:
"Any lineal descendant (both male and female) of any male whose
surname is Gonzalez Gordon ...."
The claim
•12.               The Particulars of Claim pleads that the three Claimants
are lineal descendants of a male whose surname was Gonzalez Gordon.
The Claim Form also gives the addresses of the First, Second and Third
Claimants as being addresses in Spain, Portugal and the United States of
America, respectively. Accordingly, they plead that they are Beneficiaries
under the declaration of trust.
•13.               The Claim Form pleads that the First Defendant "is
beneficially interested" in the trusts pursuant to the declaration of trust
of 11th June 1984. However, at the hearing, the Claimants wished to
reserve their position on the question whether the First Defendant was a
Beneficiary within the definition in clause 1.1 of the declaration of trust.
Nonetheless, the Claimants wished the court to proceed on the basis
that the First Defendant was beneficially interested in the trusts under
the declaration of trust. These points were not explored in argument
before me. I am not wholly clear as to the extent of the reservation as
to whether the First Defendant is a Beneficiary within clause 1.1 of the
declaration of trust. Nor do I know what that issue will ultimately turn
on. Nor am I clear whether the pleading in the Claim Form that the First
Defendant is "beneficially interested" in the trusts of the declaration
of trust was intended to be a reference to the First Defendant being a
Beneficiary as defined in clause 1.1 of the declaration of trust or whether
her interest is as a beneficiary under a resulting trust arising out of
the declaration of trust and in relation to which the First Defendant is
beneficially interested under the Spanish law of succession. Nonetheless,
the Claimants wish to proceed on the basis that, as they plead, the First
Defendant is beneficially interested in the trusts of the declaration of
trust. Given that one of the issues I have to determine at this stage is
whether the First Defendant is "sued as beneficiary" within Article 5(6)
of the Judgments Regulation, it might have been relevant for the First
Defendant to require the Claimants to say one way or the other whether
they were contending or were not contending that the First Defendant
was a beneficiary under the trusts rather than the Claimants reserving
their position on that point. However, the First Defendant did not raise a
difficulty of that kind and accordingly, notwithstanding the present lack of
clarity as to the precise position, I will proceed on the basis, as currently
pleaded in the Particulars of Claim, that the First Defendant is indeed
beneficially interested in the trusts created by the declaration of trust.
•14.               The Particulars of Claim plead that on 27th May 1997,
the First Defendant purported to appoint herself as Appointor, as defined
in clause 1.4 of the declaration of trust. The Particulars of Claim then
proceed to set out the Claimants' contention that it was not open to the
First Defendant to appoint herself as Appointor.
•15.               It is convenient at this point to refer to two other
documents which are in evidence and which are referred to in the
Particulars of Claim.
•16.               The first such document is a deed of appointment dated
16th May 2001 between the then trustees of the 1984 declaration of trust
and the First Defendant referred to in the deed as "the Appointee". Recital
(D) of the deed of appointment stated that the Appointee was one of the
Beneficiaries of the settlement created by the declaration of trust. Recital
(E) stated that the trustees wished to exercise powers of appointment and
advancement of capital said to be conferred upon them by clause 4.1 of
the settlement created by the declaration of trust in order to appoint trust
assets amounting to 6,654,648 Spanish pesetas to the First Defendant.
By clause 1 of the deed of appointment, purportedly in exercise of powers
conferred on the trustees by clause 4.1 of the declaration of trust, and
of every and any other enabling power contained in that declaration of
trust, the trustees irrevocably appointed and declared that the fund of
Spanish pesetas referred to should with immediate effect be held upon
trust for the First Defendant absolutely and should be transferred to
the First Defendant, or as she should direct. Clause 3 of the deed of
appointment stated that the parties to it submitted to the non-exclusive
jurisdiction of the courts of the Island of Jersey in all matters arising out
of or in connection with the deed of appointment or the declaration of
trust. The Claimants were not a party to the deed of appointment and it
is not suggested that this non-exclusive jurisdiction clause is material for
present purposes.
•17.               On the 28th April 2003 the then trustee of the settlement
created by the declaration of trust resolved to distribute the sum of
€435, 000 to an account with Citibank Jersey, which account appears to
be connected to the First Defendant. The resolution referred to earlier
deeds of appointment (in the plural) and to the deed of 16th May 2001
in particular. The appointment made by the resolution of 28th April 2003
was expressed to be on the same conditions and with the benefit of the
same covenants from the First Defendant as appointee as set out in the
deed of 16th May 2001. The resolution contains a covenant by the First
Defendant which refers to her being the Appointor under the declaration
of trust.
•18.               In their Particulars of Claim, the Claimants set out their
contentions as to the operation of the trusts under the declaration of
trust in some detail. I will quote the contentions as they appear in
the Particulars of Claim. (Throughout the Particulars of Claim the First
Defendant is referred to as "EGM".)
10. The Settlor never made any determination under clause 4.1 of the
declaration of trust or alternatively none with effect after his death. Until
disclosure herein, the Claimants will rely upon the facts that:
(1) GB, WalPart and Ansbacher, though asked for information as to the
administration of the trusts of the declaration of trust, have not disclosed
any such determination; and
(2) Mr. Colin Horne, in advising WalPart by memorandum of 20th August
2004, recorded, "There is as far as is apparent no written direction signed
by the Settlor which deals with application of the trust fund after his
death".
11. Accordingly, the effect of the declaration of trust, in the events that
have happened, is that:
(1) The Trust Period will end on the death of EGM.
(2) Until the expiry of two years after the death of EGM or, alternatively,
until her death (here called in either case "the Distribution Date"):
•o                                            The trustee was obliged to accumulate
the income of the Trust Fund arising before 11th June 2005;
•o                                            Alternatively, the trustee was obliged to
accumulate the income of the Trust Fund arising before 11th June 2005
in so far as the Settlor so directed and the remainder became held on the
resulting trust hereinafter mentioned (in paragraph 13 hereof);
•o                                            In either case, the income of the Trust
Fund arising on or after 11th June 2005 became held on that resulting
trust; and
•o                                            The trustee was and is obliged to retain
the capital of the Trust Fund.
(3) Upon the Distribution Date:
•o                                            The Trust Fund will be held on trust as
the Appointor may appoint within two years after the termination of the
Trust Period or alternatively as the Appointor may have appointed within
two years beforehand;
•o                                            Except as so appointed the Trust
Fund will be held for such of the Settlor's sons as shall be living on the
Distribution Date (and if more than one in equal shares).
12. Under Spanish law, which applies to the devolution of the Settlor's
estate (other than immovables):
(1) EGM and the Settlor fell within a matrimonial property regime under
which assets (both capital and income) acquired during the marriage
otherwise than by inheritance, called "bienes gananciales", become jointly
owned and other assets, called "bienes privativos", remain separately
owned;
(2) The Settlor's estate comprised all of his bienes privativos and one-half
of his bienes gananciales, the other half of the bienes gananciales passing
to EGM;
(3) EGM is entitled to a usufruct (a life interest) in one-third of the estate;
(4) Subject to the usufruct, each of his five children is entitled to the
estate in equal shares.
13. All or alternatively most of the shares in Gonzalez Byass settled on
the trusts of the declaration of trust were the Settlor's bienes privativos
when so settled. Accordingly any income of the Trust Fund since the
Settlor's death becoming held on a resulting trust:
(a) Was payable, so far as those shares were bienes privativos, as to one-
third to EGM (but possibly one-half down to formal division of the estate)
and as to the balance in equal shares to his five children; and
(b) Was payable, so far (if at all) as those shares were bienes
gananciales, as to one-half and one-third of the other half to EGM and as
to the balance in equal shares to his five children.
The claim
•19.               The Claimants allege that the trustees have acted in breach
of trust. The relevant paragraphs of the Particulars of Claim are now set
out.
15. GB, WalPart, Ansbacher and Fidei have acted in breach of trust as
follows.
16. None of GB, WalPart, Ansbacher or Fidei during its trusteeship has
paid any income of the Trust Fund to any of the Settlor's children.
17. Each of them during its trusteeship has paid the whole income of
the Trust Fund (subject only to trustees' remuneration) to EGM or to
nominees of hers. Under the trusts of the declaration of trust EGM is
entitled to only one-third of that income, either from 11th June 2005
or alternatively from the Settlor's death. The best particulars which the
Claimants can give of those payments are as follows (bold type denoting
the currency of payment):
Year
Nature of payment
Amount in Ptas
Amount in Euros1997
Dividends
31,501,548
189,328.12
1998
Dividends
41,670,772
250,446.38
1999
Dividends
43,932,200
264,037.84
2000
Dividends
7,259,616
43,631.17
2000
Bonus
270,552,755
1,626,054.81
2001
Dividends
6,654,648
39,995.24
2002
Dividends
65,907,158
396,100.00
2003
Dividends
72,497,874
435,721.00
2004
Dividends
79,088,590
475,332.00
2005
Dividends
75,134,161
451,565.40
2006
Dividends
83,043,020
499,098.60Total
777,242,342
4,671,320.56
18. The payments mentioned in paragraph 17 hereof were made in breach
of trust.
19. Each of GB, WalPart and Ansbacher during its trusteeship has also
paid capital of the Trust Fund to EGM or to nominees of hers. Under the
trusts of the declaration of trust EGM is not entitled to any such capital.
The best particulars which the Claimants can give of those payments are
as follows:
(1) By deed of appointment dated 16th May 2001 and made between
Ansbacher and GB (1) and EGM (2), Ansbacher and GB purported to
appoint to EGM the sum of Ptas 6,654,648 (about £27,343.64) under
clause 4.1 of the declaration of trust, described as an appointment of
capital in the next-mentioned resolution.
(2) By resolution of 28th April 2003 made by WalPart and GB, WalPart and
GB purported to appoint to EGM the further sum of Eur 435,000.
(3) That resolution mentions previous purported appointments of capital
as having been made by Ansbacher and GB before that of 16th May 2001,
the particulars of which are unknown to the Claimants.
(4) It is to be inferred that all sums so appointed to EGM were then paid
to her or to nominees of hers.
20. The appointments and payments mentioned in paragraph 19 hereof
were made in breach of trust.
•20.               The Particulars of Claim continue by explaining the
Claimants' case against a defendant trustee where the Claimants allege
that, on taking up appointment as trustee, it was the duty of the newly
appointed trustee to consider the lawfulness of payments earlier made by
the trustees and to sue earlier trustees for orders that they restore the
trust fund.
•21.               The Particulars of Claim then proceed to identify two
separate claims against the First Defendant.
•22.               The first claim against the First Defendant is expressed in
the following terms.
24. EGM is liable for all those breaches of trust and is similarly bound to
reinstate the Trust Fund by reason that:
(1) She received the income and capital so paid to her as a volunteer;
(2) She did so with both notice and knowledge of the declaration of trust
(and in particular was a signatory to the deed of appointment of 16th May
2001 and the resolution of 28th April 2003);
(3) Any such breach of trust on the part of GB occurring between 1999
and 2002 (part of the period during which she controlled GB) was one
which she procured GB to commit.
25. EGM holds all the income and capital so paid to her as constructive
trustee and not for her own benefit. So far as necessary, the Claimants
will contend that in the premises it would be unconscionable for her to
retain that income and capital.
•23.               The claim in paragraph 24(3) of the Particulars of Claim is
no longer pursued.
•24.               The claims against the First Defendant are carried into the
prayer for relief where the Claimants claim against the First Defendant
an account of all property subject to the trusts of the declaration of trust
received by her and of her dealings therewith, an order for payment or
transfer to the trustees of the declaration of trust of all such property
received by her or the property now representing the same, compensation
for breach of trust and interest on such compensation.
•25.               The second part of the claim against the First Defendant
relates to her appointment or purported appointment of herself as
Appointor as defined in clause 1.4 of the declaration of trust. The claim is
expressed as follows.
27. On 27th May 1997 EGM purported to appoint herself as Appointor.
28. It was not open to EGM to appoint herself Appointor because:
(1) The power to appoint an Appointor conferred by clause 1.4 of the
declaration of trust is a fiduciary power; and
(2) Upon its true construction the power does not permit EGM to appoint
herself.
29. In any case, EGM is in the premises not a fit and proper person to be
Appointor and the court ought to appoint a new Appointor in her stead.
•26.               The prayer for relief only identifies one head of relief in
relation to the dispute as to whether the First Defendant was validly
appointed as Appointor and whether the court ought to appoint a new
Appointor in her stead. Paragraph (7) of the prayer for relief seeks an
order appointing some fit and proper person as Appointor in the stead
of the First Defendant. There is no claim for a declaration which picks up
the contention in paragraph 28 to the effect, for example, that the First
Defendant is not the Appointor and the purported appointment of herself
was a nullity.
•27.               The nature of the two claims made by the Claimants
against the First Defendant appear fairly clearly from the paragraphs of
the Particulars of Claim which I have set out. In addition, Counsel for the
Claimants explained in his submissions the legal basis for the various
claims and, in view of the questions which arise, or might arise, as to
the capacity in which the First Defendant is sued, I will refer to those
submissions. I will not set them out verbatim but I hope I can adequately
summarise the nature of the claims which the Claimants wish to pursue.
•28.               The first claim against the First Defendant focuses on the
fact that the First Defendant received sums of money from the trustees
and the Claimants assert that the First Defendant was not entitled to
receive those sums, or at any rate the greater part of those sums. The
Claimants say that the First Defendant was not entitled to be paid all of
the income of the trust but only some of it. They say that she was not
entitled to any capital. The Claimants contend that, because the First
Defendant gave no consideration for the money she received, she was
a volunteer. They point out that she had knowledge of the trust and its
terms. The Claimants contend they have both proprietary and personal
claims against her and are entitled to a personal Diplock remedy, a
proprietary Diplock remedy, a personal remedy for knowing receipt and
a proprietary remedy for knowing receipt. The reference to a Diplock
remedy is, of course, a reference to in Re Diplock [1948] Ch 465 (Court of
Appeal), affirmed sub nom. Ministry of Health v Simpson [1951] AC 251.
•29.               The Claimants further explain the Diplock claims in
these terms. The Claimants are beneficiaries of the trust. A beneficiary
prejudiced by an overpayment to another beneficiary has both personal
and proprietary claims against the overpaid beneficiary. The Claimants
point out that Re Diplock shows that it is irrelevant whether the overpaid
person is actually a co-beneficiary or someone who is not entitled under
the trust in question at all. The proprietary remedy under Re Diplock was
said to be well known. The personal remedy established in Re Diplock,
which concerned a deceased's estate, was available to an underpaid
creditor, legatee or next of kin against anyone who has been overpaid,
even someone who has no title at all and is a stranger to the estate. Such
a claim is equally available to an underpaid beneficiary of an inter vivos
trust such as the present trust against a person who has been overpaid,
whether that person is also a beneficiary or a stranger to the trust. The
Claimants referred to Re J Leslie Engineers Company [1976] 1 WLR 292
and Butler v Broadhead [1975] Ch 97.
•30.               In relation to the Claimants' claims against the First
Defendant based on knowing receipt, the Claimants referred to the
well known personal and proprietary remedies for knowing receipt. The
Claimants pointed out that the circumstances in which a recipient of trust
assets is liable for knowing receipt are usually described as giving rise to
a constructive trust, with its associated duties, for example, not to make a
profit from the trust.
•31.               The Claimants also made submissions at the hearing with
a view to explaining the second claim against the First Defendant which
related to her status or purported status as Appointor. The Claimant's
skeleton argument did not develop the claim which appeared in paragraph
28 of the Particulars of Claim to the effect that the First Defendant
was not able to appoint herself as Appointor. Perhaps consistently with
the fact that the prayer for relief did not claim a declaration that the
First Defendant's appointment of herself as Appointor was a nullity,
the Claimants' skeleton argument concentrated on the powers of the
court to act where the First Defendant had been validly appointed as the
Appointor, but it was said that she should be removed. On that topic, the
Claimants contended that the Appointor had one function only, though
an important one, and that was to exercise the power of appointment
which takes effect at the end of the Trust Period: see clause 4.2. The
Claimants contended that this power was a fiduciary power and not a
merely personal power, for two reasons. The first was that the power
could not be used to benefit the Appointor himself or herself. The second
reason was that the identity of the Appointor was not fixed in advance,
as would be normal with a personal power but, instead, the Settlor or
his widow could choose the Appointor and (seemingly) replace him or
her, at any rate if the Appointor were dead. From this it was submitted
that the Appointor filled an office like a trustee or protector, and the
Appointor filled that office for the benefit of the Beneficiaries. Having
contended that the Appointor filled an office akin to that of a trustee or
protector, the Claimants contended that the donee of such a fiduciary
power was a trustee of the power. The Claimants then drew attention to
cases where the court has considered the role of the court, and the extent
of the court's powers, in relation to the removal of a donee of a power
or the appointment of a substitute donee. I was referred in detail to the
lengthy discussion of these questions in Mettoy Pension Trustees Limited
v Evans [1990] 1 WLR 1587, Rawcliffe v Steele [1993-95] MLR426, Re
Papadimitriou [2004] WTLR 1141 and Re Freiburg Trust (2003-2004) 6
ITELR 1078.
Discussion
•32.               I have set out the relevant paragraphs from the Particulars
of Claim and the exposition by the Claimant's Counsel of the legal
basis for those claims in some detail. This is because it is necessary to
understand the basis of the claim in order to determine, for jurisdictional
purposes, the capacity in which the First Defendant is being sued in these
proceedings.
•33.               Whilst it is, or may be, important to understand the nature
of the claim and to identify the capacity in which the First Defendant
is being sued, it is not, in my judgment, necessary in this case to form
any view as to the strength or weakness of the claims made and, much
less, to decide whether they are well founded. The First Defendant
contends that the powers of the Appointor under the declaration of
trust are not fiduciary powers. In my judgment, it is neither necessary
nor appropriate for me to form any view on the rival submissions as
to whether the powers are, or are not, fiduciary powers. The question
which may be material at this jurisdiction stage relates to the capacity
in which the First Defendant is sued not whether the claim is likely to
succeed or will succeed. In the relevant respect, the claim against the
First Defendant is that she is the donee of a fiduciary power and the
Judgments Regulation must be applied to such a claim. Whichever court
ultimately has jurisdiction will then decide the issue raised by the First
Defendant as to whether the power is or is not a fiduciary power. If
that court holds that the power is a fiduciary power then on the present
pleading, the court will have to consider whether it has power to grant
the Claimants the remedy they seek of removing the First Defendant as
Appointor and, if so, whether that remedy should in all the circumstances
be granted to the Claimants.
•34.               Before addressing the specific issues raised on this present
application, I will say something of a more general character as to the
court's approach to the interpretation and application of the Judgments
Regulation.
•35.               Article 5(6) identifies a number of ingredients which must
exist in a particular case to enable it to be governed by Article 5(6). In
particular, Article 5(6) applies to a trust created by a written instrument.
Article 5(6) applies only where the trust is domiciled in the State in which
jurisdiction is being asserted. Article 5(6) only applies where the person
being sued is domiciled in a Member State. Article 5(6) only applies where
the person being sued is sued as settlor, trustee or beneficiary. On whom
does the burden of proof or the burden of persuasion lie when these
matters are in issue before a court at the stage when jurisdiction is in
question? What standard of proof or degree of persuasion is appropriate?
Fortunately, the parties are not in dispute as to these questions.
•36.               For present purposes, I can take the law as conveniently
summarised by Lawrence Collins J in Chellaram v Chellaram (No. 2)
[2002] 3 All ER 17, in particular at [133] to [136]. The Claimant must
establish a good arguable case that the court has jurisdiction. When
the question of jurisdiction depends on domicile, the Claimant must
establish what it asserts to the standard of a good arguable case. Where
the question of jurisdiction depends not on domicile but on other free-
standing questions under the relevant provisions, the Claimant must
again establish the requisite elements of jurisdiction to the standard of
a good arguable case. The test of good arguable case for the element
of domicile and other necessary elements was laid down by the House
of Lords in Canada Trust Co v Stolzenberg (No. 2) [2002] 1 AC 1 and
see Seaconsar Far East Limited v Bank Markazi Jomhouri Islami Iran
[1994] 1 AC 438. In Carnoustie v ITF [2002] 2 All ER (Comm) 657, the
court reviewed the authorities and referred, in particular, to the judgment
of Waller LJ in the Court of Appeal in the Stolzenberg case, where he
described the standard of "good arguable case" as involving one side
having a much better argument than the other on the material available.
In Carnoustie at [47], the deputy judge referred to the Claimant being
required to demonstrate that it had much the better argument on the
material available.
•37.               In Chellaram (No. 2) at [136], Lawrence Collins J referred
to cases where the question of jurisdiction depended on a question of
law or construction where the court would decide the question of law
or construction rather than apply the good arguable case test. In my
judgment, that passage does not mean, in the present case, that I should
determine whether the power of a Appointor under the declaration of trust
is a fiduciary power or not. The question of jurisdiction does not depend
on whether the power is a fiduciary power or not but turns on whether the
First Defendant is "sued as trustee". The claim against the First Defendant
is that she is a fiduciary. I have to decide whether a claim against the
First Defendant in the capacity of a fiduciary is a claim against her "as
trustee" but I do not have to decide whether she is or is not a fiduciary.
•38.               There is one other general point to which I need to refer.
This concerns the approach of the court to the interpretation of the
language of Article 5, and in particular Article 5(6), of the Judgments
Regulation. The approach, in relation to Article 5, has been the subject
of decisions in the European Court of Justice and was considered in detail
by the House of Lords in Kleinwort Benson Limited v Glasgow City Council
[1999] 1AC 153. The principal issue in that case was whether a claim
for restitution of monies paid under a purported contract, subsequently
accepted by both parties as being void ab initio, fell within Article 5(1) of
the
•39.               Brussels Convention
•40.               , which is in the same terms as Article 5(1) of the
Judgments Regulation. The point provoked a considerable difference of
judicial opinion. The Court of Appeal was split on the point and they were
reversed by the House of Lords, by a majority of three to two. At page
163G to 164B, Lord Goff of Chieveley said:
"The first point which is clearly established in the European jurisprudence
is that the basic principle is to be found in article 2. This is the principle
of domicile, viz., that a person domiciled in a part of the United Kingdom
shall be sued in the courts of that part. This principle is expressed
to be subject to the provisions of Title II, which includes the special
jurisdiction in Section 2. Article 5, which falls within Section 2, states
that a person domiciled in a part of the United Kingdom may be sued
in another part of the United Kingdom in the circumstances specified in
the paragraphs of the article, including of course article 5(1) with which
we are here concerned. But it is clearly recognised that article 5 is in
derogation from the basic principle of domicile in article 2 (see Martin
Peters Bauunternehmung G.m.b.H. v. Zuid Nederlandse Aannemers
Vereniging (Case 34/82) [1983] ECR 987, 1001), and that as a result
the provisions of article 5 are to be construed restrictively (see Kalfelis v.
Bankhaus Schröder, Münchmeyer, Hengst and Co. (Case 189/87) [1988]
ECR 5565, 5585, para. 19). In this connection, it is not to be forgotten
that the defendant can always be sued in the courts of his domicile."
At page 165D, Lord Goff commented that attempts to broaden the scope
of Article 5(1) had generally not succeeded. At page 166G, Lord Goff
referred again to the decision of the European Court of Justice in Kalfelis
v Bankhaus Shroder Munchmeyer Hengst & Co [1988] ECR 5565, at
paragraph 19, where the court had stressed that the "special jurisdictions"
in Articles 5 and 6 must be interpreted restrictively and pointed out that
a Claimant was always entitled to bring his action in its entirety before
the courts of the Defendant's domicile (i.e. under Article 2). At page
169F, when considering the contrary views of the majority in the Court of
Appeal, Lord Goff commented that the approach of the majority offended
against the fundamental principle that the special jurisdiction in Article
5 was in derogation from the general jurisdiction in Article 2 and so fell
to be construed restrictively. The view of the majority of the Court of
Appeal was rejected because it constituted "an expansion of the special
jurisdiction" in Article 5(1). At page 171D to F, Lord Goff again stated that
the view of the majority of the Court of Appeal depended upon the Article
being construed broadly and that was not permissible.
•39.               Lord Mustill and Lord Nicholls of Birkenhead dissented.
Lord Mustill did not deliver a speech of his own. Although Lord Nicholls
dissented, he fully acknowledged, at page 173B to D, that Article 5, as
a derogation from the basic provision in Article 2, should be construed
restrictively.
•40.               Lord Clyde stated at page 179F to H that the approach to
the interpretation of Article 5 should be narrow rather than generous.
At page 180B to D he held that the rules of jurisdiction should not be
construed so as to favour the wishes of the Claimant who could always
rely upon the basic jurisdiction provision in Article 2. At page 180H Lord
Clyde said:
"The language of the Article should provide the solution."
He then drew attention to the fact that there was no direct reference in
Article 5(1) to restitution or quasi contract.
•41.               At page 188, Lord Hutton drew attention to the Kalfelis
case and paragraph 19 of the judgment of the court in that case, which
referred to Article 5 being construed restrictively. At page 189 Lord
Hutton, referring to authority, stated that "a wide and multifarious
interpretation of the exceptions to the general rule of jurisdiction
contained in article 2 must be avoided". At page 195, Lord Hutton
referred to the fact that as a matter of legal analysis there might be
fine distinctions between a contract which is void and a contract which
is voidable or unenforceable but nonetheless Lord Hutton recognised
an all important distinction between a case where one party claims that
the contract is or was in existence and the other party claims that the
contract never existed or has ceased to exist and cases such as Kleinwort
Benson itself where both parties accepted before the commencement of
the action that the contract was void ab initio.
The Schlosser Report
•42.               Finally, before dealing with the issues which arise, I ought
to refer to the Schlosser Report, as some of the discussion in that Report
is material to more that one of the issues with which I am concerned.
The Schlosser Report is a report by Professor Peter Schlosser, a German
professor. The report is dated 9th October 1978. The Report was in
relation to the 1978 Accession Convention by which the United Kingdom
acceded to the 1968
•43.               Brussels Convention
•44.               . The Accession Convention introduced Article 5(6) into the
•45.               Brussels Convention
•46.               . Section 3(3) of the Civil Jurisdiction and Judgments Act
1982, dealing with the interpretation of the
•47.               Brussels Convention
•48.               , stated that the Schlosser Report could be considered in
ascertaining the meaning or effect of any provision of the
•49.               Brussels Convention
•50.               and should be given such weight as is appropriate in the
circumstances. There is no express statutory provision such as this which
links the Schlosser Report to the Judgments Regulation. However, both
parties addressed me on the basis that I could, and should, take into
account the
•51.               Brussels Convention
•52.               (and presumably the Lugano Convention) and the
Schlosser Report, when considering the Judgments Regulation.
•43.               The Schlosser Report dealt with trusts at paragraphs 109 to
120. Paragraph 109 was in these terms:
"A distinguishing feature of United Kingdom and Irish law is the trust.
In these two States it provides the solution to many problems which
continental legal systems overcome in an altogether different way. The
basic structure of a trust may be described as the relationship which
arises when a person or persons (the trustees) hold rights of any kind for
the benefit of one or more persons (the beneficiaries) or for some object
permitted by law, in such a way that the real benefit of the property
accrues, not to the trustees, but to the beneficiaries (who may, however,
include one or more of the trustees) or other object of the trust. Basically
two kinds of legal relationships can be distinguished in a trust; they may
be defined as the internal relationships and the external relationships."
•44.               Paragraph 110 of the Schlosser Report referred to external
relationships. An example would be a case where a trustee contracts to
sell to a third party. The relationship between the trustee and the third
party is external to the trust and no adjustment to the
•45.               Brussels Convention
•46.               was thought to be necessary for this external relationship.
•45.               Paragraph 111 of the Schlosser Report stated:
"Problems arise in connection with the internal relationships of a trust, i.e.
as between the trustees themselves, between persons claiming the status
of trustees and, above all, between trustees on the one hand and the
beneficiaries of a trust on the other. Disputes may occur among a number
of persons as to who has been properly appointed as a trustee; among a
number of trustees doubts may arise as to the extent of their respective
rights to one another; there may be disputes between the trustees and
the beneficiaries as to the rights of the latter to or in connection with the
trust property, as to whether, for example, the trustee is obliged to hand
over assets to a child beneficiary of the trust after the child has attained a
certain age. Disputes may also arise between the settlor and other parties
involved in the trust."
•46.               Paragraph 113 of the Schlosser Report stated that the
original provisions of the
•47.               Brussels Convention
•48.               were not always well adapted to the institution of a trust.
To base jurisdiction on the domicile of the defendant trustee would not
be appropriate in trust matters. It was pointed out that a trust had no
legal personality as such. There was then a reference to an action being
brought against a defendant "in his capacity as trustee". It was also
pointed out that legal relationships between trustees inter se and between
the trustees and the beneficiaries were not of a contractual nature.
•47.               Paragraphs 114 to 120 of the Schlosser Report came under
the heading "the solution proposed". Paragraph 114 addressed the issue
of how to identify the domicile of a trust. It was pointed out that at any
rate in Scottish law the concept of a trust having a domicile was not
unknown and reference was made to the matters which would be taken
into account under Scottish law in determining the domicile of a trust.
Professor Schlosser pointed out that these notions about the domicile of
a trust were developed mainly for the purpose of determining the legal
system to be applied, usually English law or Scottish law. However, it was
suggested that the principal characteristics which led to determining the
domicile of a trust for that purpose could also be used as the basis for
founding jurisdiction. It was stated in paragraph 114 that the proposed
Article 5(6) did not, strictly speaking, create a special jurisdiction as it
covered "only a very limited number of cases" and was therefore added to
Article 5 rather than to Article 2.
•48.               In paragraph 116 of the Report it was pointed out that the
concepts of "trust", "trustee" and "domicile" had not been translated into
the other community languages since they related to a distinctive feature
of United Kingdom and Irish law. It was stated that Member States could
give a more detailed definition of the concept of a trust in their national
language in the legislation implementing the Accession Convention. It will
be seen that, in England, the question of a domicile of a trust was dealt
with in a statutory instrument but no further guidance was given as to the
concept of a trust or a trustee.
•49.               Paragraph 117 of the Schlosser Report stated:
"The phrase created by the operation of a statute, or by a written
instrument, or created orally and evidenced in writing is intended to
indicate clearly that the new rules and jurisdiction apply only to cases
in which under United Kingdom or Irish law a trust has been expressly
constituted, or for which provision is made by Statute. This is important,
because these legal systems solve many problems with which continental
systems have to deal in a completely different way, by means of so called
constructive or implied trusts. Where the latter are involved, the new
Article 5(6) is not applicable, as for instance where, after conclusion of
a contract of sale, but prior to the transfer of title, the vendor is treated
as holding the property on trust for the purchaser..... Trusts resulting
from the operation of a statutory provision are unlikely to fall within
the scope of the 1968 Convention. Since in the United Kingdom, for
example, children cannot own real property, a trust in their favour arises
by operation of statute, if the circumstances are such that adult persons
would have acquired ownership."
•50.               Paragraph 119 of the Report discussed the rules which
might apply to determine the domicile of a trust. This paragraph
principally deals with continental Member States, rather than the
United Kingdom and Ireland. It was pointed out that the courts of
continental Member States would have to evolve appropriate rules but
two possibilities existed. One was that the domicile of a trust should be
determined by the legal system to which the trust is subject.
•51.               Paragraph 120 of the report discussed the relationship
between the new Article 5(6) and the exclusive jurisdiction provided for
by Article 16 of the
•52.               Brussels Convention
•53.               . Article 16 dealt with, amongst other things, proceedings
which had as their object rights in rem in immoveable property. Article
16 is not of particular relevance in the present case but in the Schlosser
Report there is a discussion of two cases which Professor Schlosser
seemed to think might raise a question as to the relationship between
Article 5(6) and Article 16. The second example is of a case where a
declaration is sought that a particular person is a trustee of a particular
trust which includes certain property. It was stated that Article 16
would not become applicable merely because the property included
immoveable property. That would clearly, in my view, be a case where
the defendant was being sued "as trustee". The first case envisaged
by Professor Schlosser concerned a dispute between two people as to
which of them was trustee of certain property. If one of them instituted
proceedings against the other in a German court claiming the cancellation
of the entry in the Land Register showing the defendant as the owner
of the property and the substitution of an entry showing the plaintiff as
the true owner, it was said that a German court would have exclusive
jurisdiction under Article 16(1) or (3). What is not wholly clear is whether
Professor Schlosser thought that such a claim would be a claim against
the defendant "as trustee". It might be objected that the claim was not
against the defendant "as trustee" when the claimant's assertion was that
the defendant was not a trustee.
•52.               Whilst dealing with the antecedents of the Judgments
Regulation, it is right to point out that Article 5(6) of the
•53.               Brussels Convention
•54.               is in the same terms as Article 5(6) of the Judgments
Regulation but Article 5(6) of the Lugano Convention includes the words
"in his capacity" in the phrase "sued in his capacity as settlor, trustee or
beneficiary".
The first issue
•53.               The first issue is:
"What trust or trusts are identified by the Claimants in the present case
which come within the words of Article 5(6) which refer to: ... a trust
created by the operation of a statute, or by a written instrument, or
created orally and evidenced in writing ...?"
•54.               It is, of course, obvious that the trust created by the
written declaration of trust dated 11th June 1984 was a trust created by
a written instrument. However, the questions arise: what is the position
in relation to the resulting trust pleaded in paragraphs 11 and 13 of the
Particulars of Claim and the constructive trust pleaded in paragraph 25 of
the Particulars of Claim?
•55.               The question in relation to the resulting trust was not
much explored in the course of the oral hearing. It may be that, for other
reasons to which I will later refer, the outcome of this application does
not depend on the answer to this question. Nonetheless, it may assist if I
briefly express my views on this point.
•56.               The resulting trust which is asserted to exist in the present
case is a resulting trust which came into existence automatically as a
matter of law because the Settlor had failed to dispose of the whole
beneficial interest, namely, the income from the trust assets, which
income was not permitted to be accumulated. A resulting trust of that
kind, coming into existence in that way, is described and analysed in
Lewin on Trusts, 18th Edition at paragraphs 7.05, 7.06 and 8.02.
•57.               Taking the language of Article 5(6) literally, it is difficult
to say that the resulting trust contended for in the Particulars of Claim
was created by the written instrument, i.e. the declaration of trust of
11th June 1984. The more accurate legal analysis would be to say that
the resulting trust is created by operation of law because the written
instrument did not provide for what was to happen in a certain event. It
is also right to draw attention to the fact that the words "the operation
of" do not govern "a written instrument". If Article 5(6) had referred to a
trust created by the operation of a written instrument then one could see
the argument that the resulting trust was created by the operation of a
written instrument in so far as the written instrument declared trusts but
did not exhaust all the possibilities.
•58.               In my judgment, the resulting trust contended for in
the Particulars of Claim is not a trust within Article 5(6). I reach this
conclusion by analysing the nature of the resulting trust contended
for and by applying Article 5(6) in a literal way. I am also somewhat
encouraged to reach that conclusion by reason of Professor Schlosser's
distinction between expressly declared trusts and implied trusts. Further,
and importantly, this conclusion appears consistent with the repeated
exhortation of the courts to construe the derogations in Article 5 in a
narrow or restrictive way.
•59.               The next point to address is whether Article 5(6) applies
to a constructive trust. Although the First Defendant developed a detailed
argument as to why Article 5(6) did not extend to constructive trusts,
that basic principle was not in dispute. In general, a constructive trust
is not created by a written instrument, nor created orally and evidenced
in writing. I also draw attention to what Professor Schlosser said on the
subject of constructive trusts in paragraph 117 of his Report. In Chellaram
(No. 2) [2002] 3 All ER 17, it was said, succinctly, at [138] that Article
5(6) did not apply to constructive trusts. However, the generality of those
statements should not be allowed to disguise the fact that there could be
a claim which was within Article 5(6) where a beneficiary sued a trustee,
in circumstances where the trustee had made a personal gain from
exploiting the trust's property and where the trustee held the gain on a
constructive trust for the beneficiary. In such a case, in my judgment, the
Defendant would be sued "as trustee".
•60.               In any event, the claim in paragraph 25 of the Particulars
of Claim that the First Defendant is a constructive trustee does not lead
the Claimants to say that this part of their claim is brought against the
First Defendant "as trustee" within Article 5(6). The Claimants' case
is that, in relation to that part of their claim, they are suing the First
Defendant "as beneficiary". I will deal with that claim in due course.
The second issue
•61.               The second issue is:
"Is the relevant trust domiciled in England?"
•62.               This court only has jurisdiction by reason of Article 5(6)
if the trust is domiciled in England. Article 60(3) of the Judgments
Regulation states:
"In order to determine whether a trust is domiciled in the Member State
whose courts are ceased of the matter, the court shall apply its rules of
private international law."
•63.               It is agreed that the relevant rule of private international
law, for present purposes, is contained in the Civil Jurisdiction and
Judgments Order 2001. Article 3 of that Order provides that Schedule 1
to the Order has effect. Paragraph 1(1) of Schedule 1 defines "part of the
United Kingdom" as meaning England and Wales, Scotland or Northern
Ireland. Paragraph 12(1) of schedule 1 to the 2001 Order provides the
rules required by Article 60(3) for determining where a trust is domiciled.
By paragraph 12(2) a trust is domiciled in the United Kingdom if and only
if it is by virtue of subparagraph (3) domiciled in a part of the United
Kingdom. Paragraph 12 (3) provides:
"A trust is domiciled in a part of the United Kingdom if and only if the
system of law of that part is the system of law with which the trust has its
closest and most real connection."
•64.               In view of the submissions addressed to me, I ought also
to refer to the Recognition of Trusts Act 1987. That Act enabled the United
Kingdom to ratify the Hague Convention on the Law Applicable to Trusts
and on their Recognition. By Section 1(1), the provisions of the Hague
Convention, set out in the schedule to the 1987 Act, were to have the
force of law in the United Kingdom. By section 1(2) the provisions of the
Convention were, so far as applicable, to have effect not only in relation
to the trusts described in Articles 2 and 3 of the Convention but also in
relation to any other trusts of property arising under the law of any part
of the United Kingdom, or by virtue of a judicial decision whether in the
United Kingdom or elsewhere.
•65.               By Article 1 of the Hague Convention, it was provided
that the Convention specified the law applicable to trusts and governed
their recognition. Article 2 defined the term "trust" for the purposes of
the Convention. The term was defined to refer to the legal relationship
created by the settlor when assets were placed under the control of a
trustee for the benefit of a beneficiary or for a specified purpose. Article 2
described certain characteristics of a trust. These characteristics referred
to the assets constituting a separate fund where title stood in the name of
the trustee or the name of another person, on behalf of the trustee, and
the trustee had the power and the duty to manage, employ or dispose
of the assets in accordance with the terms of the trust and the special
duties imposed upon him by law. The reservation by the settlor of certain
rights and powers and the fact that the trustee might himself have rights
as a beneficiary were not necessarily inconsistent with the existence of a
trust. By Article 3 of the Convention, the Convention applied only to trusts
created voluntarily and evidenced in writing.
•66.               Article 6 of the Hague Convention provided:
"A trust shall be governed by the law chosen by the settlor. The choice
must be express or be implied in the terms of the instrument creating or
the writing evidencing the trust, interpreted, if necessary in the light of
the circumstances of the case.
Where the law chosen under the previous paragraph does not provide for
trusts or the category of trust involved the choice shall not be effective
and the law specified in Article 7 shall apply."
•67.               Article 7 of the Hague Convention applies where no
applicable law has been chosen. In that case, the trust is governed by the
law with which it is most closely connected. In ascertaining the law with
which a trust is most closely connected, reference is made in particular
to four matters. In summary, these were the place of administration of
the trust designated by the settlor, the situs of the assets of the trust, the
place of residence or business of the trustee and the objects of the trust
and the places where they are to be fulfilled.
•68.               Article 8 of the Hague Convention stated that the law
specified by Article 6 or Article 7 should govern the validity of the trust, its
construction, its effects and the administration of the trust. Article 8 then
went on to provide for nine matters which, in particular, were stated to
be governed by that governing law. Article 9 recognised that a severable
aspect of the trust, such as matters of administration, might be governed
by a different law.
•69.               In the present case, the declaration of trust states in terms
that the proper law is English law.
•70.               The Claimants' case is simply stated. They submit that
because the trust is governed by English law it is English law which
is the system of law with which the trust has its closest and most
real connection. Accordingly, under paragraph 12(3) of schedule 1
to the 2001 Order, this trust is domiciled in England. Counsel for the
Claimants illustrated the importance of the governing law in relation to
the very many questions which can arise as to the validity of a trust, its
construction, its effects and its administration. It was stressed that a trust
gives rise to a bundle of rights and obligations, powers and duties and
the existence of these matters, and their extent and nature, were all the
subject of English legal principles.
•71.               The First Defendant submitted that the choice of governing
law was not conclusive for the purpose of determining the domicile of
the trust. It was said that paragraph 12 of schedule 1 to the 2001 Order
did not use language which equated the domicile of the trust with the
governing law. The First Defendant argued for a test which focused on
"whether there is a real and close connection between the trust and a
particular jurisdiction, not whether there is a nominal connection based
on governing law". I was asked to construe the phrase "closest and most
real connection" by reference to Article 7 of the Hague Convention. I was
referred to text books which described Article 7 of the Hague Convention.
Submissions were made as to the meaning of "domiciled" under the
Judgments Regulation. I was taken to other authentic language versions
of the Judgments Regulation and I was given translations of the words
in those versions which referred to matters such as, in English, domicile,
residence, home or seat. It was said that if one applied the matters which
were relevant for the purposes of Article 7 of the Hague Convention, the
conclusion would be, on the facts, that the jurisdiction with which this
trust had its closest and most real connection was Liechtenstein.
•72.               In my judgment, this trust is domiciled in England.
Paragraph 12 of schedule 1 to the 2001 Order requires one to identify
"the system of law" with which the trust has its closest and most real
connection, not the geographical location nor the jurisdiction with which
it has its closest and most real connection. Prima facie, the system of
law with which a trust has its closest and most real connection is the
governing system of law. That view is only fortified by considering that
a trust consists of rights and obligations and powers and duties which
in this case are governed by English legal principles. On the facts of
this case, there did not appear to be any other candidate for a system
of law which had a closer connection with the trust than English law.
In the course of argument, I raised the question whether the trust had
a connection with the Liechtenstein system of law given that the trust
appears to be administered from Liechtenstein and it may be there are
some controls under Liechtenstein law on acts of administration within
Liechtenstein. However, there was no material before the court to give
very much substance to this supposition, although I recognise there is a
possibility of some connection with Liechtenstein law in this way. Another
suggestion raised in argument stemmed from the fact that the principal
trust assets, the shares in Gonzalez Byass, were shares in a company
incorporated in the Cayman Islands. Accordingly, could it be said that
the trust had a close connection with the system of law of the Cayman
Islands because the company would have been governed by Cayman
Island company law? Again, there was no real material before the court
which would give much substance to this supposition. Accordingly,
without hesitation on the material before me, I adhere to the view that
the system of law with which the trust has its closest and most real
connection is English law.
•73.               Both parties made submissions on statements by Lawrence
Collins J in Chellaram (No. 2) [2002] 3 All ER 17, in particular, at [29],
[139], [141] and [162]. In my view, there is nothing in Chellaram (No.
2) which contradicts the approach I have adopted and, indeed, Chellaram
(No. 2) appears strongly to support that approach.
•74.               My conclusion in relation to the second issue is that the
trust is domiciled in England for the purposes of Article 5(6).
The third issue
•75.               The third issue is:
"In relation to the first part of the Claimants' claim against the First
Defendant, is the First Defendant sued......as beneficiary...?"
•76.               This issue arises in relation to the first claim made by the
Claimants against the First Defendant, rather than the second claim. I
have set out the relevant parts of the Particulars of Claim and the first
claim is essentially contained in paragraphs 24 and 25 of that pleading,
which I have quoted. I also bear in mind the submissions made by
Counsel for the Claimants as to the legal basis of the claim.
•77.               Article 5(6) only applies where a defendant is sued "as
settlor, trustee or beneficiary". The Claimants contend that this claim is
brought against the First Defendant "as beneficiary".
•78.               It is the Claimants' case that the First Defendant is a
beneficiary under the declaration of trust of 11th June 1984. I will
proceed on that basis although I have already referred to the Claimants'
reservation of position at least to some extent on this point.
•79.               Counsel for the Claimants submitted that the First
Defendant was being sued as a beneficiary under the 1984 trust. He
submitted that Article 5(6) is intended to deal with cases which are
concerned with "the internal relationships of a trust": see the Schlosser
Report at paragraph 111. He said that this case was about the internal
relationships of this trust and, in particular, it raised issues as to whether
the First Defendant, as a beneficiary under the trust, was, or was not,
entitled to take the benefits conferred upon her by the trustees of the
trust. The First Defendant was paid the sums in question, he submitted,
as a "purported beneficiary" so that she could defend her receipt and
retention of these sums only by asserting she was entitled to do so under
the terms of the trust.
•80.               These submissions were developed at the hearing by giving
examples of cases where a Defendant is sued "as settlor", "as trustee"
or "as beneficiary". Counsel for the Claimants accepted that there would
be cases, which were clearly within Article 5(6) where there was no
issue as whether a defendant was a settlor, or a trustee, or a beneficiary
and he gave examples of such claims. In the case of a settlor who had
covenanted with trustees to transfer assets to the trustees to be held on
trust, a claim by the trustees against the settlor, requiring him to perform
his covenant, would plainly be a claim against him "as settlor". A claim
against trustees for breach of trust would be a claim against them "as
trustees".
•81.               A claim by trustees against the beneficiaries for declaratory
relief to resolve differences between them as to the powers and duties
arising under the trust would be a claim brought against the defendants
"as beneficiaries". But it was further submitted on behalf of the Claimants
that the case would also be within Article 5(6) if the issue was whether
the defendant was a beneficiary. Thus, the Claimants said, a claim by
a trustee for a declaration that the defendant was not a beneficiary
would be within Article 5(6) in the same way as a claim by a trustee
for a declaration that a defendant was a beneficiary. Similarly, a claim
by a trustee which asked the court whether the Defendant was or was
not a beneficiary would be within Article 5(6). It was sufficient, it was
submitted, if there was an issue as to the capacity of the defendant and
whether the defendant was or was not a beneficiary. The Claimants drew
attention to the Schlosser Report at paragraph 111 where there was a
reference to disputes between "persons claiming the status of trustees"
and to a dispute "as to who has been properly appointed as a trustee".
I have also drawn attention to paragraph 120 of the Schlosser Report
which refers to a dispute where the relief claimed appeared to turn on an
allegation by a claimant that the defendant was not a trustee.
•82.               Thus the question arises whether the fact that the First
Defendant is a beneficiary under the declaration of trust, and the
circumstances in which payments have been made to her by the trustees,
ostensibly to her in her capacity as a beneficiary entitled to receive those
payments, makes the claim by the Claimants against the First Defendant
a claim against her "as beneficiary".
•83.               The principal difficultly I have with the Claimants'
submission on this issue is that the relief they seek against the First
Defendant depends upon the Claimants showing that the First Defendant
was not entitled to the monies now claimed. In short, the Claimants say
that the First Defendant was not a beneficiary in relation to those monies.
This is made all the more clear by the use of the words "as a volunteer"
and "as constructive trustee" in paragraphs 24 and 25 of the Particulars of
Claim. Further, the submissions made by Counsel for the Claimants, as to
the legal basis of this claim, correctly accepted that the legal basis of the
claim was available where a defendant was someone who was not entitled
under the trust in question at all, just as it was against someone who was
a beneficiary under the trust but who was not entitled to the receipt in
question. In my judgment, it is much easier to say that the claim against
the First Defendant is in her capacity as someone not entitled to the
monies received, or in her capacity as a stranger to the trust, rather than
in her capacity as a beneficiary under the trust.
•84.               I accept, certainly on the material at present available,
that the trustees paid monies to the First Defendant on the basis that
she was a permissible recipient of those monies as a beneficiary under
the trust. But that basis is denied by the claim made by the Claimants.
Accordingly, the basis on which the monies were paid to the First
Defendant (the Claimants say wrongly) does not seem to me to be much
help in determining the capacity in which the Claimants are suing the First
Defendant.
•85.               There was discussion at the hearing as to the approach
to be adopted where the Claimants were saying that a defendant was
not a beneficiary and the defendant was expected to defend on the basis
that he or she was a beneficiary. Counsel for the Claimants accepted that
Article 5(6) was to be applied to the claim made by a claimant and was
not to be governed by the nature of the defence run by a defendant.
That seems to me to be entirely right. In any event, when a jurisdiction
point arises in a case such as this, one may not know precisely what
defence will be run. Indeed in the present case, as I understand it, the
First Defendant has not yet identified the nature of her defence. It is
conceivable that a claim of the present kind would be met by a defendant
who does not challenge that he or she was not entitled to the money
initially, but who wishes to run a limitation defence. The whole question
of jurisdiction might be contested because the defendant's ability to run a
limitation defence may be greater in one Member State than in England:
see the relevance of limitation in Kleinwort Benson Limited v Glasgow City
Council [1999] AC 153.
•86.               The Claimants' argument, as set out above, nonetheless
has some force. I can see some sense in the Regulation being drafted
so that it spelt out what was meant by disputes as to "the internal
relationships of a trust" and providing that all such disputes were within
a special rule as to jurisdiction, based on the domicile of the trust. I can
also understand the criticism that it is not sensible to apply one rule as to
jurisdiction where the claimant seeks a declaration that the defendant is a
beneficiary but a different rule as to jurisdiction where the claimant seeks
a declaration that the defendant is not a beneficiary, or even where the
claimant asks the court to determine whether the defendant is or is not a
beneficiary.
•87.               Nonetheless, my conclusion is that the natural meaning
of the words used in Article 5(6) requires one to examine the claim
made against the defendant and to ask: is the claim brought against
the defendant in his or her capacity as a beneficiary? The answer to that
question is not affected by any prediction as to whether the defendant
will assert in his or her defence that he or she is a beneficiary and indeed
the assertions in any defence will not always be known when the question
of jurisdiction has to be addressed. Further, based on the very clear
authorities to which I have referred, I ought not to read the words used
in Article 5(6) in an expansive way in an attempt to produce a rule as to
jurisdiction which it might be said was a better rule, or one which drew
the line in a more sensible place.
•88.               In the end, I come to the conclusion that this claim against
the First Defendant is not a claim against her "as beneficiary". I reach
that conclusion essentially on the basis of the Claimants' own analysis
of the nature of the underlying claim coupled with my conclusion that
the words "as a beneficiary" require the Claimants to show that they are
suing the First Defendant in her capacity as a beneficiary rather than in
her capacity as someone not beneficially entitled to the monies which are
claimed. In my judgment, the words "as beneficiary" naturally mean: "in
the capacity of beneficiary". That conclusion is supported by the words
used in the Lugano Convention, apparently without intending to change
the meaning from the words used in the
•89.               Brussels Convention
•90.               . Like Lord Clyde in the Kleinwort Benson case, it seems to
me that I should find the solution to the problem in the language of the
Article. The construction urged upon me on behalf of the Claimant cuts
across what was described as a fundamental principle requiring me to
construe Article 5(6) narrowly or restrictively.
•89.               Accordingly, in relation to the third issue I hold that the
personal and proprietary claims against the First Defendant are not claims
against the First Defendant "as beneficiary" and are therefore not within
Article 5(6) of the Judgments Regulation.
The fourth issue
•90.               The fourth issue is:
"In relation to the second part of the Claimants' claim against the First
Defendant, is the First Defendant sued....as.....trustee....?"
•91.               This part of the Claimants' claim concerns the First
Defendant's status as Appointor and, more particularly, the claim for an
order removing the First Defendant as Appointor and replacing her with a
fit and proper person.
•92.               I have explained earlier in this judgment the basis on which
the Claimants put forward this claim. For the purposes of Article 5(6) of
the Judgments Regulation, the Claimants say that they are suing the First
Defendant in this respect "as trustee".
•93.               I have already drawn attention to the fact that paragraph
28 of the Particulars of Claim asserts that the First Defendant was not
able to appoint herself as Appointor but the pleading does not claim a
declaration that the purported appointment was a nullity. If the Claimants
intend in this claim to claim a declaration that the First Defendant is not
the duly appointed Appointor, then it seems to me to be difficult for them
to say that they are suing her as Appointor and that as an Appointor she
is in a position akin to that of a trustee so that they can say she is sued
"as trustee" for the purposes of Article 5(6).
•94.               However, in this judgment I will concentrate on the
claim,that is undoubtedly made by the Claimants, that if the First
Defendant is an Appointor then the court can remove her and appoint
another in her stead. This case is based upon the Appointor being the
donee of a power, which is said to be a fiduciary power with the result,
it is said, that the donee is in a position sufficiently analogous to that of
a trustee so that the words "as a trustee" in Article 5(6) can expand to
cover that type of case.
•95.               Although I have indicated that it is not necessary for
present purposes to rule on whether the Appointor's power under Clause
4.2 is fiduciary power, it is helpful to consider two of the authorities cited
to me for the purpose of considering whether the First Defendant is sued
"as trustee" within Article 5(6).
•96.               In Mettoy Pension Trustees Limited v Evans [1990] 1
WLR 1587 at 1613 to 1614, Warner J set out his summary of detailed
submissions made by Robert Walker QC (as he then was) which dealt
with the classification of certain powers. Mr Walker had identified four
categories. Category 1 comprised any power given to a person to
determine the destination of trust property without that person being
under any obligation to exercise the power or to preserve it. Typical of
powers in that category was a special power of appointment given to an
individual where there was a trust in default of appointment. In such a
case the donee of the power owed a duty to the beneficiaries under that
trust not to misuse the power, but he owed no duty to the object of the
power. He might therefore release the power but he might not enter into
any transaction that would amount to a fraud on the power; a fraud on
the power being a wrong committed against the beneficiaries under the
trust in default of appointment. The learned judge said that where the
donee of the power was the only person entitled under the trust in default
of appointment, the power was not a fiduciary power at all because the
donee owed no duty to anyone.
•97.               Category 2 comprised a power conferred on the trustees
of property, or on any other person, as a trustee of the power itself. This
was "a fiduciary power in the full sense". A power in that category could
not be released; the donee of it owed a duty to the objects of the power
to consider, as and when may be appropriate, whether and if so how he
ought to exercise it; and he was to some extent subject to the control of
the courts in relation to its exercise.
•98.               Category 3 comprised any discretion which was really a
duty to form a judgment as to the existence or otherwise of particular
circumstances giving rise to particular consequences.
•99.               Category 4 comprised discretionary trusts where someone,
usually but not necessarily the trustees, was under a duty to select
from among a class of beneficiaries those who are to receive, and the
proportions in which they are to receive, income or capital of the trust
property.
•100.            At page 1614F, Warner J referred to Mr Walker's submission
that he should eschew the phrases "trust power", "power coupled with
a duty", "power coupled with a trust" and "power in the nature of a
trust" which were said to have been used to cover different cases from
categories 2, 3 and 4. I infer that those phrases were regarded as lacking
the necessary precision for the purposes of clear categorisation of the
various types of power. In the Mettoy Pension Trustees case, Warner J's
ultimate conclusion was that the court could intervene and control the
exercise of a fiduciary power even where circumstances were not that of a
discretionary trust. Warner J relied upon a passage in the speech of Lord
Wilberforce in Re Baden's Deed Trusts [1971] AC 424 at 456 to 457.
•101.            Rawcliffe v Steele [1993-1995] MLR426 is a decision of
the Staff of Government Division, in the Isle of Man. At pages 495 to
499, Acting Deemster Hegarty identified a three fold classification of
powers. The first category he called "trust powers in the strict sense".
This category comprised, or was akin to, a discretionary trust. The second
category was that of fiduciary powers. The third category was a mere
power or a bare power, which was not a fiduciary power. The learned
judge discussed fiduciary powers, in particular, at pages 496 to 498 of the
judgment. There was a second judgment, from Acting Deemster Smith
who agreed with Acting Deemster Hegarty.
•102.            Based on the detailed analysis of the differences between
mere powers, fiduciary powers and trusts in the two cases I have cited,
I conclude that there are considerable differences between the office or
the capacity of a trustee and the position of a donee of a fiduciary power.
In some circumstances, it might conceivably be right to react to the word
"trustee" in an instrument, or even in a statutory provision, by holding
that the parties to the instrument or the enacting authority intended to
embrace not just trustees properly so called but also persons who had
fiduciary duties where those duties were, in the wide spectrum of fiduciary
duties, close enough to be regarded as analogous to or akin to the duties
of a trustee.
•103.            However, I have no doubt that that liberal or expansive
approach to the word "trustee", which might conceivably be possible in
some contexts, is not appropriate in the present context. I have already
referred to the restrictive approach which I am required to adopt to the
derogation provisions in Article 5(6). It seems to me it would be quite
inconsistent with that restrictive approach to read the words "as trustee"
in the present case in the expansive way, in which they would have to be
read, to produce a result in favour of the Claimants.
•104.            Accordingly, in relation to the fourth issue, I hold that the
second claim made against the First Defendant, in her role as Appointor,
is not a claim against her "as trustee" and is therefore not within Article
5(6) of the Judgments Regulation.
The fifth issue
•105.            The fifth issue is:
"If the court has jurisdiction under Article 5(6) in relation to all or part of
the Claimants' claims, is it open to the court to decline jurisdiction on the
grounds of forum non conveniens?"
•106.            Because of the answers I have given to the earlier issues,
the fifth issue does not arise. However, the fifth issue was fully argued
and I will deal with it, although more concisely than might have been
appropriate, if it had been a decisive issue.
•107.            The Claimants contend that this issue is to be determined in
their favour by reason of the decision of the European Court of Justice in
Owusu v Jackson [2005] QB 801, a case on the
•108.            Brussels Convention
•109.            . Both sides before me accepted that there was no relevant
distinction between the
•110.            Brussels Convention
•111.            and the Judgments Regulation for present purposes but the
First Defendant contends that this decision is distinguishable on other
grounds.
•108.            The particular Article of the
•109.            Brussels Convention
•110.            relied on in Owusu v Jackson was Article 2. It will be
remembered that Article 2 is the general provision as to jurisdiction
and Article 5 is a derogation from it. In substance, Article 2 directs that
persons domiciled in a Member State shall, whatever their nationality,
be sued in the courts of that Member State. Article 5(6) provides that a
person domiciled in a Member State may in another Member State be
sued as settlor, trustee or beneficiary etc.
•109.            In Owusu v Jackson, the Defendant was domiciled in the
United Kingdom so was the Claimant. The Claimants sued the Defendant
in the United Kingdom and joined a number of other Defendants who
were not so domiciled. The subject matter of the dispute related to events
which had happened in Jamaica. The Defendant, who was domiciled
in the United Kingdom, invited the court to decline jurisdiction on the
grounds that Jamaica was a more appropriate forum, in other words on
the grounds of forum non conveniens. The first issue considered by the
European Court of Justice was whether the
•110.            Brussels Convention
•111.            applied in a case where the suggested alternative forum
was not a Member State. The court held that the Convention applied even
though the suggested appropriate alternative forum was not a member
state, in that case Jamaica. At paragraphs 37 to 46 of the judgment of
the court, the court considered the general compatibility of the forum non
conveniens doctrine with the
•112.            Brussels Convention
•113.            . It was pointed out that Article 2 of the
•114.            Brussels Convention
•115.            was mandatory in nature and there could be no derogation
from the principle it laid down, except in the cases expressly provided for
by the Convention. No exception on the basis of forum non conveniens
was provided for by the authors of the Convention, though the question
had been discussed by them. Respect for the principle of legal certainty
would not be fully guaranteed if the court having jurisdiction under the
Convention (the United Kingdom in that case) was to be allowed to apply
the forum non conveniens doctrine. The preamble to the
•116.            Brussels Convention
•117.            indicated that the intention was to lay down common
rules on jurisdiction to guarantee certainty as to the allocation of
jurisdiction among the various national courts before which proceedings
in a particular case might be brought. Legal certainty required that the
jurisdictional rules which derogated from the general rule laid down in
Article 2 should be interpreted in such a way as to enable a normally well
informed defendant reasonably to foresee before which courts, other than
those of the state in which he is domiciled, he might be sued. Application
of the forum non conveniens doctrine which allowed the courts seised of a
matter a wide discretion was liable to undermine the predictability of the
rules of jurisdiction laid down by the
•118.            Brussels Convention
•119.            , in particular the rule in Article 2, and to undermine the
principle of legal certainty. A defendant would not be able reasonably to
foresee before which other courts he could be sued. Allowing for forum
non conveniens in the context of the
•120.            Brussels Convention
•121.            would be likely to affect the uniform application of the rules
of jurisdiction contained in it, in so far as that doctrine was recognised
only in a limited number of contracting states. Although there were
genuine difficulties in that case about the proceedings being dealt with in
the English courts, and those difficulties were precisely those which would
be taken into account when forum non conveniens was considered, those
difficulties were not such as to call into question the mandatory nature of
the fundamental rule of jurisdiction contained in Article 2 of the
•122.            Brussels Convention.
•110.            Article 2 of the Judgments Regulation was intended to
ensure, in the general run of cases, that the defendant would be sued
in the courts of the State in which he was domiciled. In Owusu, the
defendant was domiciled in the United Kingdom but it was the defendant
who wanted the court to decline jurisdiction. The effect of the ruling of the
European Court of Justice was that Article 2 was interpreted to mean that
the claimant was entitled to sue the defendant, against the defendant's
wishes, in the United Kingdom. In the present case, if Article 5(6) had
applied, the effect of Article 5 would be to entitle the Claimants to sue the
First Defendant against the First Defendant's wishes in the English courts.
•111.            The First Defendant submitted that the decision in Owusu
can be distinguished in the present case. It was pointed out that Owusu
concerned Article 2 whereas the present case potentially involved
the engagement of Article 5(6). It was pointed out that Article 2 is
"mandatory" and Article 5 is "permissive".
•112.            Article 2 is mandatory in that the defendant can insist on
being sued in the defendant's domiciled state (absent any derogation
from Article 2 in the Judgments Regulation itself). However, as explained
above, the way in which Article 2 applied in the Owusu case was that
it permitted the claimant to sue the defendant against the defendant's
wishes in the United Kingdom. Thus, in my judgment, there is no
difference between the claimant in Owusu exercising the permission
given by Article 2 to sue the defendant in the United Kingdom and the
Claimants in the present case exercising the permission in Article 5(6) (if
it applied) to sue the First Defendant in England. What was "mandatory"
in Owusu was that the rules laid down in the Judgments Regulation ruled
out the possibility that a court of a Member State had a discretion to
decline jurisdiction. That applies in a case under Article 5(6) just as much
as it applies to a case under Article 2.
•113.            My conclusion on this point is that, if the case had come
within Article 5(6), the court would not have the power to decline
jurisdiction on forum non conveniens grounds.
•114.            My conclusion is in accordance with the discussion in Dicey,
Morris & Collins, the Conflict of Laws 14th Edition at paragraph 12.020.
•115.            I have also considered the detailed discussion of Owusu v
Jackson in Civil Jurisdiction and Judgments, Briggs & Rees, 4th edition,
see at paras. 2.219 to 2.229. The authors find very great fault in the
reasoning, or they would say the lack of reasoning, in that case. They
discuss in detail cases in which the decision in Owusu v Jackson might
conceivably not apply. However, I did not see anywhere the suggestion
that a court which is given jurisdiction under Article 5 would be entitled to
decline jurisdiction on forum non conveniens grounds.
•116.            I was also shown a number of academic articles and other
judgments which explore the boundaries of the decision in Owusu v
Jackson but none of them makes a distinction between an Article 2 case
and an Article 5 case.
The sixth issue
•117.            The sixth issue is:
"If the answer to the fifth issue is yes, should the court decline jurisdiction
on that ground?"
•118.            The sixth issue only arises if the fifth issue had arisen and
if I had answered the fifth issue by holding that I had power to decline
jurisdiction. In fact, I have held that the fifth issue did not arise and even
if it had arisen I would not have had power to decline jurisdiction.
•119.            In these circumstances, I do not regard it as appropriate to
consider the sixth issue and I do not do so.
The overall result
•120.            The result of the foregoing is that I have held that the first
part of the Claimants' claim against the First Defendant is not a claim
against her "as beneficiary" and I have also held that the second part of
the Claimants' claim against the First Defendant is not a claim against her
"as trustee". It follows that the entirety of the Claimants' claim against
the First Defendant is outside Article 5(6) of the Judgments Regulation.
The only basis on which the Claimants contend that this court has
jurisdiction to hear this claim is Article 5(6). As I have held that the
Claimants' claim does not come within Article 5(6) it must follow that I
should declare that the court has no jurisdiction to hear this claim.