LORD JUSTICE CHADWICK: This is an appeal against an order made on
14th December 2000 by Mr Philip Mott QC, sitting as a Deputy Judge of
the High Court in the Queen's Bench Division, in proceedings brought
by X against his sister Y . The issue before the
judge was whether those proceedings should be struck out on the ground
that all matters in dispute in the proceedings were the subject of an
agreement falling within Article 17 of the Lugano Convention. The judge
struck out substantial parts of the particulars of claim as they then stood.
He gav
e permission to amend and, on the basis of the amendments,
allowed the proceedings to continue. It is against the judge's refusal to
disallow the amendments and to strike out the particulars of claim as a
whole that the defendant appeals. She does so with permission of this
Court granted on 23rd January 2001.
The underlying facts, so far as they appear from the particulars of claim,
are not in dispute and may be stated shortly. The appellant and her
brother are the children of the late Z  who died on 24th July
2000. In or about 1956 Z established a trust fund for his two
children. In 1970 the respondent emigrated to Australia where he now
lives. He was then aged 22 y
ears. On 15th July 1973 the children's trust
was wound up. The appellant's share was transferred to a new trust for
her children. It is not at all clear what, if any, distribution was made in
respect of the respondent's share. It seems to be common ground that
it was not then transferred to the respondent. In a witness statement
signed on 11th July 2000, very shortly before her father's death, the
appellant states her belief to be that the respondent's share remained
under the control of Z  for some years thereafter, but that it
was eventually transferred to the respondent in 1985. There is some
correspondence which tends to support this view; but the letters are
not unequivocal and it is impossible to say
, at this stage, whether the
appellant's view is correct. She does not, I think, claim to have any direct
knowledge of the matter. The respondent's contention is that his share
of the trust fund was transferred by his father into a numbered account
opened for that purpose with Bank S. in Switzerland.
The appellant agrees that there was a numbered account with Bank S.,
but does not accept that that was the destination of any
part of her brother's share of the trust fund. Her contention is that the
account was funded by savings made by her father over the years and
that it was regarded by him as an "insurance" or fund of last resort. Z
 had, it seems, arrived in England in or about 1939 from Austria
as a refugee. He prospered in this country and acquired consider able
wealth. But, as the appellant suggests, his early experiences had left him
with an understandable fear of future persecution; and this fear led him
to transfer so much of his wealth as he could to an nominate account
in Switzerland. It is difficult to avoid the suspicion that that course (if
that is what happened) was not unconnected with the obvious potential
for tax evasion which the ownership of undisclosed assets in a low tax
environment would offer; nor to avoid the suspicion that the transfer of
assets to Switzerland at that time is likely to have given rise to a breach
of exchange control.
Be that as it may, it seems to be common ground that the numbered
account in Switzerland  remained under the direct control of  Z until
July 1988. It is common ground also that on 22nd July 1988 Z,
his wife and the respondent visited the bank in Switzerland . By that date the
value of the money and securities in the numbered account was in excess
of £7 million. By arrangement with the manager of the bank (Mr W
. K.)
on that day the respondent became the bank's principal in relation to the
numbered account (identified in the particulars of claim as account no .
YYYY), and £2.5 million was transferred to an account in his own name
– either at B. Bank, U.K. or in Australia (the point is in dispute). Of
that sum, £1 million was tr
ansferred on to the respondent's parents to
enable them to buy a property in London and the remainder (£1.5 million)
was used by the respondent for his own benefit.
The appellant's explanation for the transactions which took place in Switzerland
on 22nd July 1998, as appears from the witness statement to
which I have referred, is that her father arranged for his numbered Swiss
bank account to be held in the respondent's name with an address in
Australia, "as he thought it would be safer". As she puts it, "he was very
concerned that the account would be detected by the UK authorities and
that this might expose him to prosecution". The respondent, of course,
asserts that the monies and securities in the numbered Swiss bank
account represented his share of the former trust fund; and that they had
belonged him beneficially since 1973. It is impossible, at this stage of the
proceedings, to say which explanation is correct.
In the course of the visit to Bank S. in Switzerland , the respondent
executed a power of attorney in favour of his father. The power
, which
appears to be on a Bank S. standard from and which is in the
English language, was expressed to be made "with power of substitution".
It authorised Z to represent the respondent "vis a vis" the
bank, and in particular to dispose of all or any assets deposited at any
time in the respondent's name with the bank. It contained an exclusive
jurisdiction clause in these terms:
"Applicable law and jurisdiction: All disputes will be decided in accordance
with Swiss law. The place of performance, the place for special
proceedings for the collection of debts owed by persons domiciled or
residing abroad and the place of jurisdiction shall be Switzerland  but the Bank
shall also be entitled to bring proceedings against the undersigned at his/
her domicile, in which event Swiss law shall remain applicable."
The power of attorney is dated 22nd July 1988. and appears to ha v
e
been signed by both principal and attorney in the presence of Mr K., the
manager of the Switzerland  branch of Bank S.
Some months thereafter, Z , acting under the authority of the
power of attorney gr
anted to him by his son, the respondent, appointed
his daughter, the appellant, to be sub-attorney "to represent the
principal with regard to Bank S. in the same manner as the
undersigned attorney is authorised to do himself". The substitute power
of attorney is also on a Bank S. standard form; but it is in the
German language. It is dated 10th November 1988 and it, too, appears
to have been signed by both attorney and sub-attorney in the presence of
Mr K.. The substitute power of attorney, itself, contains a provision which
incorporates the exclusive jurisdiction clause in the earlier power, to which
I have referred.
On or about 17th January 1989 the respondent transferred a further
£600,000 from the numbered account YYYY at Bank S. to
his account with B. Bank Plc, U.K. His belief is that following that
transfer the balance of funds in the numbered account w
as approximately
£4.5 million made up of a combination of cash and securities. The
appellant learned of this transfer. In early March 1989, acting under the
substitute power of attorney, she transferred the whole, or substantially
the whole, of the funds in the account to another numbered account,
XXXX , at Bank  S. of which she was principal. She says
that she did so "in order to protect my father's fund"; further, that she
informed her brother in writing that she had done so and that she gr anted
her mother power of attorney in relation to the new account. Whether or
not the respondent did inform her brother of what she had done at the
time, it seems reasonably clear that he w
as informed of the transfer by Mr
K. within a couple of years thereafter – that is to say not later than 1991.
The present proceedings were commenced by the issue of a claim form
on 26th May 2000. Particulars of claim were served on or about 29th
June 2000. At or about the same time the respondent, as claimant in the
proceedings, applied for an order restraining the appellant from dealing
with her assets up to a limit of £10 million, including, in particular , her
house in North London and any monies or assets in the two numbered
Swiss bank accounts. The application was made without notice to the
appellant, and an interim order was granted by Mr Justice Sullivan on
28th June 2000 for a period of 14 days. The application was renewed,
on notice, before Mr James Goudie QC, sitting as a Deputy Judge of the
High Court, on 12th July 2000. He discharged the order which had been
made on the 28th June. He did so in the light of evidence as to S wiss
law in relation to the scope and effect of the exclusive jurisdiction clause.
That evidence is contained in a letter dated 22nd May 2000 which is
exhibited to a witness statement which had been made by the respondent
in support of his application to Mr Justice Sullivan. The relevant passages
from that letter are these:
"2 The concept of beneficial ownership does not exist under Swiss law.
There is only one type of title and that is the legal title irrespective of
whether or not a third party has any beneficial interest in the property.
Should the holder of the legal title dispose of the property in breach of the
beneficial owner's instruction, the latter may claim damages for the loss
suffered.
As for monies held in a bank account, when these are transferred to
an account of someone else, the beneficial owner could not give any
instructions to the bank where the monies are held. Again, the beneficial
owner would have to bring a claim against the person transferring the
funds.
3 The jurisdiction clause contained in both Powers of Attorney means
that proceedings must be initiated in Z (except for the bank which
may start proceedings at the defendant's domicile). This is an ex
clusive
jurisdiction.
The jurisdiction clause only relates to (1) the parties to the contr act and
(2) the matters covered by the contract. The parties to the contract are X,
 his father and the bank (pursuant to the Power of Attorney).
By virtue of the Substitution Power of Attorney Y  became party
to the contract too. Hence, disputes between X and Y
arising out of or in connection with the Power of Attorney must be brought
before the courts of the canton of Z.
.....
5 As explained in point 3 abov
e the jurisdiction clause only relates to the
matters covered by the Power of Attorney itself, that is to its underlying
agreement (in casu the agreement would qualify as a mandate under
art. 394 following of the Code of Obligations). It is valid where the claim
is based on the very mandate. The jurisdiction clause does not extend
to an action in tort or any grounds other than contract (under Swiss law
conceivably an action could also be based on `unjust enrichment') and
hence an action based on any grounds other than the mandate would not
be limited by the jurisdiction clause."
Mr Goudie QC, after referring to those passages, expressed his conclusion
in these terms:
"So my conclusion is that the claimant's case that the English court has
jurisdiction is one that is likely to fail on the current state of the evidence
as to Swiss law and surrounding factual matters, and as things presently
stand certainly he does not have a good arguable case that the English
court does have jurisdiction. I am therefore minded to discharge the
injunction on that ground."
Encouraged, perhaps, by those observations the appellant pursued an
application to strike out the claim made against her on the ground that
the English court was bound to decline jurisdiction in the light of Article 17
of the Lugano Convention. The article, which is given the force of law in
the United Kingdom by section 3 of the Civil Jurisdiction and Judgments
Act 1982 is in these terms, so far as material:
"If the parties, one or more of whom is domiciled in a contracting state
have agreed that the court or the court's contracting state are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with, in particular, the legal relationship that court or those
courts shall have exclusive jurisdiction."
The application to strike out – together with a related application by the
respondent to amend his particulars of claim so as to rumour the defects
upon which the application to strike out was based – came before Mr
Mott QC on 14th December 2000. Mr Mott summarised the effect of the
evidence as to Swiss law in a passage at page 5 of his written judgment.
He said this:
"The advice of the Swiss attorney is as follows:
1. Both powers of attorney are valid under Swiss law.
2. The concept of beneficial ownership does not exist under Swiss law.
There is only one type of title, which is the legal title, but a `beneficial
owner' can claim damages from the holder of the legal title if the propert y
is disposed of in breach of instructions.
3. The exclusive jurisdiction clause relates only to the parties to the
contract and the matters covered by the contract. That would cover any
disputes between the Claimant and the Defendant arising out of or in
connection with the power of attorney.
4. The claimant is bound by the substitute power of attorney as he agreed
to it in advance.
5. The exclusive jurisdiction clause is valid where the claim is based
on the `mandate' (as defined by Article 394 of the Swiss Code of
Obligations). The clause does not extend to an action in tort or an y
grounds other than contract, such as unjust enrichment, which could
conceivably found a claim in Swiss law.
6. A power of attorney can be revoked at any time without reason."
It is important to keep in mind that the answers given by the Swiss
lawyers, to which the judge refers in that passage, must be read in
the light of the questions put to them. With that in mind, it is clear
that the second sentence under point 5 of the judge's summary, to
which I have just referred, must be understood in the sense that the
exclusive jurisdiction clause does extend to any action arising out of or
in connection with the use of the power of attorney or the substitute
power authorised thereunder; and that the claims to which the ex clusive
jurisdiction clause does not extend are limited to claims which do not
arise out of or in connection with the use of the powers of attorney .
The judge was satisfied that the exclusive jurisdiction clause clearly
covered the following claims and issues – which he listed at page 6 of the
judgment:
"1. The validity of the power of attorney and/or substitute power of
attorney
2. Misrepresentation and/or deceit inducive to contract
3. Breach of fiduciary duty in relation to the power of attorney
4. Breach of trust as originally pleaded
5. Trusteeship de son tort."
As he said:
"All these concern the relationship of principal and attorney, whether it
existed at all, whether it was induced by fraud, and the obligations arising
expressly or impliedly as a result of its existence."
He went on to say this:
"They are all aspects of the Roman law of obligations. On the other hand,
I conclude that it does not cover the following claims:
1. Conversion
2. Unjust enrichment.
These causes of action arose (if at all) after the original Swiss account
had been closed, and therefore after the power of attorney and substitute
power of attorney had been brought to an end. They are not covered by
the Roman law of obligations."
He took the same view in relation to claims in constructive trust. After
referring to a passage in the judgment of Lord Justice Millett in P aragon
Finance Plc v D B Thakerar & Co [1999] 1 All ER 401 at 409, he said:
"In my judgment, a claim of constructive trust of this sort, stemming
from the alleged misappropriation of the fund by [the defendant] as an
alternative to conversion and unjust enrichment, is not caught by the
exclusive jurisdiction clause. It cannot be said to arise from the law of
obligations, even in its widest sense."
In the light of those findings as to the effect of the exclusive jurisdiction
clause, the judge permitted the particulars of claim to be amended so
as to plead claims in conversion, unjust enrichment and constructive
trust. Those claims are now found in paragraphs 10, 11 and 12 of the
amended particulars of claim which were served after the judge had given
permission to amend. The paragraphs are in these terms:
"10. On a date or dates presently unknown to the Claimant (but on a date
the Claimant believes to be on or after the closure of the original Swiss
Bank account in March 1989) the Defendant unlawfully and dishonestly
converted to her own use the abovementioned securities and in further
breach of duty despite repeated requests by the Claimant during the
course of 1999 and 2000 has dishonestly and unlawfully refused to return
the same to the Claimant or to provide an account or to disclose any
information relevant to the securities or the said bank accounts.
11. In the circumstances the Claimant claims for the Defendant's unjust
enrichment of the aforementioned money and securities had and receiv ed
by her and/or for an order for an Account by the Defendant together
with all necessary enquiries to establish the amount of compensation
due to the Claimant. Alternatively the Claimant claims damages for the
Defendant's conversion of the said securities pleaded in paragraph 10
herein.
12. As a consequence of the 1st Defendant's denial that the Claimant w as
the beneficial owner of the contents of the original Swiss Bank account,
the Claimant seeks a declaration that the monies and securities in Swiss
Bank account number YYYY belonged beneficially to the Claimant prior
to and/or as at 22nd July 1988. Further, the Claimant seeks a declaration
that the Defendant holds the said monies and securities and/or an y assets
representing such monies and securities together with an
y proceeds
thereof and/or profits thereon on constructive trust for the benefit of the
Claimant."
It is, I think, reasonably clear that reference to "further breach of dut y"
in paragraph 10 of the amended particulars of claim, when read in
conjunction with the second sentence of paragraph 12, is an allegation
of breach of duty as trustee; the trust alleged being described as a
constructive trust.
In addressing the question whether the claims now relied upon in the
amended particulars of claim are within the scope of the exclusive
jurisdiction clause, it is necessary to keep in mind that the evidence
accepted by the judge was that the concept of beneficial ownership does
not exist under Swiss law. As he put it, at point 2 of his summary, there is
only one type of title recognised by Swiss law – legal title. Claims against
the holder of the legal title by a person who, in English law, would be
recognised as having a beneficial interest in equity in the property lie in
contract for breach of the mandate. There is no proprietary claim under
Swiss law by someone who is not a person recognised as having legal
title. The effect of that evidence, as it seems to me, is, first, that when
the respondent became the holder of account YYYY  in July 1988 he
became the only person recognised by Swiss la
w as having any title in
relation to the monies and securities held to that account. It is immaterial
– under Swiss law – whether the origin of those monies and securities
was, as the respondent alleges, his share of the trust fund established by
his father in 1956; or whether, as the appellant noted, those monies and
securities represented their father's savings. The effect of what Z
 did in July 1988 was that under Swiss law the respondent became the
owner in every sense recognised by that law.
The corollary is that upon the transfer of the monies and securities from
account YYYY to account XXXX  in March 1999 the appellant became
the owner of those monies and securities. The respondent might ha ve
said – although he does not do so – that the tr
ansfer was in breach of the
mandate conferred b
y the power of attorney and the substitute power
of attorney; and to have claimed damages in contract for breach of that
mandate. That would be a claim arising out of or in connection with the
mandate and would be subject to an exclusive jurisdiction clause.
The respondent is entitled to say – as he does say – that a subsequent
refusal to re-transfer the monies and securities in account XXXX  to him
or to his order, or an
y subsequent disposal of those monies and securities
to another account held by the appellant or to a third party, was also in
breach of the mandate; and to claim damages. But that, again, is a claim
arising out of or in connection with the mandate and so subject to the
exclusive jurisdiction clause.
The respondent has not appeared at the hearing of this appeal. He
has written from an address in Australia to explain that his financial
circumstances do not enable him either to instruct legal representativ es
or to travel to London. He asks the Court to take account of the skeleton
argument relied upon by his counsel at the hearing below and to read the
judgments both of Mr Goudie QC and Mr Mott QC. That, we have done.
His letter concludes with these paragraphs:
"In conclusion, I wish to reiterate that I do not understand some of the
legal arguments put forward on Y's behalf to suggest that this
case should not be pursued in England as a consequence of the Power of
Attorney. However, I wish to make very clear that it is not my case, and
never has been my case, that Y used the Power improperly.
It appears that Dad gave her the Power and I make no complaint as
regards the use of it when the monies were initially withdrawn from my
Swiss account. However, what I do complain of is that a number of years
after the transfer Y decided to steal my money. This act had nothing
to do with the Power of Attorney. Moreover, Y herself has never
claimed that she was acting for her own benefit at the time she exercised
her power under the Power of Attorney. The actual mechanical exercise of
that power is therefore not in issue."
It is from those paragraphs that I have felt able to say, with confidence,
that – although it might have appeared from the allegation in paragraph
10 of the amended particulars of claim that the words "on a date
which the claimant believes to be on the closure of the original Swiss
bank account in March 1999 the defendant unlawfully and dishonestly
converted to her own use the abovementioned securities" to be otherwise
– the respondent does not assert that the transfer from account YYYY to
account XXXX  was wrongful. His complaint is as to dealings with monies
and securities while or after they hav
e been held in account XXXX ;that is
to say
, after they have become, under Swiss law, the sole property of the
appellant.
In the eyes of an English lawyer there is no conceptual difficulty in a
claim that a person who has transferred to himself, in exercise of a power
authorising him to do so, monies and securities formerly in the legal and
beneficial ownership of another holds that money and those securities as
trustee for the former owner; that is to say, no difficulty in a claim that
the circumstances in which the transfer took place were such as to impose
upon the transferee the obligation of a trustee – see the observations
of Lord Browne-Wilkinson in West Deutsche Landesbank Girocentrale v
Islington London Borough Council [1996] AC 669 at 705. The question
in such a case is whether the circumstances in which the transfer took
place are such as to make it unconscionable for the transferee to refuse
to acknowledge he was to hold, or is required to hold, the property
transferred to him for the benefit or to the order of the former owner.
In the present case, the only matter relied upon in support of the claim
that the appellant holds as trustee is that she transferred the funds to
her account XXXX  by the use of the power of attorney and substitute
power of attorney. There is no subsequent ev
ent or acknowledgement
upon which a claim that she is a fiduciary or has acknowledged fiduciary
obligations can be founded. The whole claim stands or falls on her
obligations under the mandate. The respondent disclaims any contention
that the use of the mandate was wrongful. That, of itself, as it seems to
me, makes the trust claim impossible to sustain. There is no allegation
that the powers of attorney were used for an improper purpose or in
breach of fiduciary obligations. Even if such an allegation were to be
implied, the claim – if made in English proceedings – would founder on
the exclusive jurisdiction clause. A claim that the powers of attorney were
used for improper purposes or in breach of fiduciary obligations would, as
it seems to me, necessarily be a claim arising out of or in connection with
the mandate. If complaint about the use of the mandate is to be made, it
must be made in proceedings brought in Switzerland . That is the effect of the
Lugano Convention, which has been adopted in this country.
Nothing is added, as it seems to me, b
y the claims in conversion or unjust
enrichment. The claim in conversion, as understood by English law, is
the interference with chattels in the possession or ownership of another .
There are formidable difficulties in the argument that such a claim can
be brought in respect of monies or securities – other than, perhaps,
bearer shares. But even if those difficulties are overcome, the only person
entitled to ownership or possession of the monies and securities – other
than perhaps Bank S. – is the appellant. That is the effect of
the law of Switzerland – which is the lex situs – and the appellant cannot
be held to have converted property which, under the applicable law, is her
own property. Nor is there any independent claim in unjust enrichment.
If she has been enriched unjustly it is because she has made an improper
use of the mandate given to her; and that brings the claim back within
the exclusive jurisdiction clause.
In my view therefore the claims in conversion, unjust enrichment and
constructive trust cannot be entertained in the English courts. The
particulars of claim must be struck out in those respects.
That leaves the declaration sought in paragraph 12 – namely the
declaration that the monies and securities in account YYYY belonged
to the claimant before 22nd July 1988. The issue, of course, is whether
those monies and securities belonged to the respondent, as his share of
the original trust fund; or whether they were, as the appellant asserts,
funded by their father's savings.
I can see no reason why the English court should entertain a claim for
declaratory relief as to the position before 22nd July 1988. Whatever the
position may have been before 22nd July 1988 the position after 22nd
July 1998 was that under Swiss law those monies and securities belonged
– in every sense recognised by that law – to the respondent. He cannot
be in any better position, or in any worse position, as a result of anything
which had happened before that date. His claim against the appellant
in these proceedings is based on what happened after 22nd July 1988 –
indeed, on what happened some 10 years after that date. The claim is not
improved by establishing he was the beneficial owner before that date.
For those reasons I would allow this appeal.
LORD JUSTICE KENNEDY: I agree.