I Introduction
The C. family is a trading family, of which the claimants and all of the
non-corporate defendants are members. There has already been litigation
in Singapore, in London, in Bombay and in Bermuda which has some
relevance to the background to, or the issues in, this case. The litigation
in London resulted in the decision of Scott J in proceedings to which I
shall refer as C. v. C. (No.1).
These proceedings were brought by the claimants for relief in connection
with what they claimed were breaches of trust in relation to four
settlements, one made in 1943, one in 1946 and two in 1975. The
claimants were beneficiaries under each of these trusts. The trusts were
established by their great grandfather, and the assets of those trusts
are buildings in Bombay. The claimants have alleged that their father’s
cousins and their uncle, the trustees, have been in breach of trust by
letting the properties at a loss to persons connected with themselves and
have failed to provide proper accounts.
The 1975 trusts were established by their father and their uncle, and the
trust assets consisted of shares representing part of the businesses run by
their cousins outside India. The allegations relating to those trusts will be
set out in detail later, but (at the risk of oversimplification) they are that
their cousins, the trustees, diminished the value of the trust assets and
later, as part of the settlement of C. v. C. (No.1), procured their sale at an
undervalue to themselves or to companies controlled by them.
All of the defendants are, or are alleged to be, outside the jurisdiction. …
These are applications by the defendants (other than the first defendant,
who has not been served) to set aside the orders, or for declarations to
the effect that service has not been properly effected or that the court has
no jurisdiction (or for orders that if the court has jurisdiction, it should not
be exercised). The case raises a number of novel points on jurisdiction
and choice of law in relation to trusts, and an important point on postal
service under the CPR.
The claimants have discontinued the proceedings in so far as they relate
to the 1943 and 1946 settlements.
II Dramatis personae
The C. trading enterprise was originally based in Bombay, India and was
started by Kishinchand C. (“Kishinchand”), who died in 1951, leaving
three sons. There had been another son, Asandas, who effected a
partition of his share in the family property in 1932, and who does not
play a part in the story.
Kishinchand’s eldest son T. died in 1943, leaving three sons, all of whom
worked with him in the business: Ram, who died in 1987, and Murli, the
second defendant, and Pishu, the fifth defendant.
His second son, S., died in 1949, and he and his wife Lachmibai, who died
in 1997, had two sons, Mohan, the eighth defendant, and Harish, who
died in 1990. Harish was married to Radhika, who is still alive, and they
had two sons, Vishal and Ashwin, who are the claimants.
His third son was L., the first defendant, and he and his wife Kamlabai had
two sons, Lal and Sham, the third and fourth defendants.
After the death of Kishinchand, the family business traded as three
branches. The L. Group is the business run and owned by L., Lal and
Sham. The T. Group is the business run and owned by Murli and Pishu
(Ram having died in 1987). Murli is unable to manage his own affairs,
as a result of injuries sustained in an accident last year. The S. Group
comprised, following the death of S., the assets owned by or on behalf
of Lachmibai (who died in 1997), Mohan, Harish (who died in 1990),
Radhika, and the claimants.
The original business eventually traded as two branches, the L. Group
and T. Group, and not three. The S. Group had interests in both the other
two branches, and did not control any part of the original enterprise. Any
businesses in which the S. Group had an interest were controlled by either
the L. or T. Group. Nothing turns for present purposes on this difference of
emphasis.
Ch. Holdings Ltd. (“Ch.”), the sixth defendant, is a Gibraltar company
in the L. Group and is owned by Lal and Sham. In 1985 Ch. purchased
shares (representing interests in the L. Group businesses) which were
subject to the 1975 trusts.
Be. T. Co. Ltd. (“Be. T.”), the seventh defendant, is a Bermudan company
and the trustee arm of the Bank of Bermuda. It became a trustee of the
1975 trusts in 1985.
Mr H. G. Ad. (“Mr Ad.”) was an adviser of very long standing to
Kishinchand and to the family. He was a senior lawyer, and was described
in the C. v. C. (No.1) proceedings as the doyen of the Bombay bar. He
was a trustee of three of the four trusts which are the subject matter of
these proceedings, he advised on several of the important steps taken by
the family, and drafted many of the documents, and acted as an arbitrator
in valuing shares in the family businesses which the S. Group sold to the
other groups in 1985. He died in 1991.
III Jurisdiction
The principal questions on the existence of jurisdiction which arise in this
case are (a) whether Sham was properly served by post at an address
in London which the claimants say was his last known residence; (b)
whether any of the defendants is domiciled in England for jurisdictional
purposes; (c) whether any of the defendants is domiciled in a State
or territory to which the Brussels Convention on jurisdiction and the
enforcement of judgments in civil and commercial matters of 1968 (“the
1968 Convention”) applies, and, if so, whether the court may assume
jurisdiction under the provision in the 1968 Convention relating to trusts;
(d) which of the defendants are domiciled in countries or territories to
which the 1968 Convention does not apply, and whether the provisions
in CPR 6.20 authorising service on necessary and proper parties, and on
trustees, apply to them.
The following countries are relevant countries for the purposes of domicile
or residence: (a) England, where Lal and Sham, the third and fourth
defendants, are said to have residences to which the claim form and
particulars of claim were sent by post in June 2001, and from where the
claimants have suggested that Ch., the sixth defendant, is managed;
(b) Hong Kong, where L., the first defendant, is domiciled, and where
Sham, the fourth defendant, says he is resident; (c) India, where Murli
and Pishu, the second and fifth defendants, are domiciled, and where
Mohan, the eighth defendant, says he is domiciled; (d) Spain, where Lal
says he is domiciled; (e) Gibraltar, where Ch. is incorporated, and where
the claimants say that Mohan, the eighth defendant, is domiciled; and (f)
Bermuda, where Be. T., the seventh defendant, is incorporated.
The 1968 Convention is given effect by the Civil Jurisdiction and
Judgments Act 1982 (“the 1982 Act”). It applies to Spain as a Contracting
Party. It also applies to Gibraltar as a result of the Civil Jurisdiction
and Judgments Act 1982 (Gibraltar) Order 1997, S.I. 1997 No. 2602,
made under the power in section 39 of the 1982 Act to make provision
to regulate as between the United Kingdom and specified territories
(including any colony) jurisdiction and the enforcement of judgments.
Where the 1968 Convention applies, a defendant who is domiciled in
another State or territory to which it applies can only be sued in the
United Kingdom by virtue of the rules set out in the Convention: Articles
2 and 3. As from March 1, 2002, the 1968 Convention (and the parallel
Lugano Convention) will for most Contracting States be replaced, as
regards proceedings commenced from that date, by Council Regulation
44/2001, but the relevant provisions of the Council Regulation are not
materially different.
The English court can only have jurisdiction in relation to defendants
domiciled outside countries or territories to which the 1968 Convention
(or the Lugano Convention) applies if (a) they submit to the jurisdiction
(which none has); or (b) they have been validly served within the
jurisdiction (as the claimants allege Sham has been); or (c) they fall
within one of the heads of CPR 6.20 pursuant to which permission to
serve a defendant outside the jurisdiction may be obtained.
Domicile
The effect of Article 52(1) of the 1968 Convention is that whether a party
is domiciled in the United Kingdom depends on the law of the United
Kingdom. For the purpose of proceedings in England, an individual will
be domiciled in England if and only if (a) he is resident in England and
(b) the nature and circumstances of his residence indicate that he has a
substantial connection with England: 1982 Act, section 41(3). If a party is
not domiciled in the United Kingdom then, in order to determine whether
that party is domiciled in another Contracting State, the English court
applies the law of that State: Article 52(2). Residence is not defined but
means a settled or usual place of abode, which connotes some degree of
permanence or continuity: Bank of Dubai Limited v. Abbas [1997] ILPr
308, 311(CA).
The domicile of a company is its seat, and in order to determine the seat,
the court applies its rules of private international law: Article 53(2). The
relevant rules of private international law are enacted in the 1982 Act,
section 42. A foreign corporation will have its seat in England only if its
central management and control is exercised in the United Kingdom,
and that management and control is exercised in England or it has a
place of business in England: section 42 (3), (4)). It will have its seat in
another State or territory to which the 1968 Convention applies, if it is
incorporated under the law of that State or territory and has its registered
office there, or its central management and control is exercised there
(unless the courts of that State or that territory would not regard it as
having its seat there): section 42(6), (7).
The domicile of the defendants is only in part common ground. Where
it is not common ground, the onus is on the claimants to show a good
arguable case if they wish to establish that a defendant is domiciled in
a particular State or territory: Seaconsar Far East Ltd. v. Bank Markazi
Jomhouri Islami Iran [1994] 1 AC 438; Canada Trust Co. v. Stolzenberg
(No. 2) [2002] 1 AC 1, 13. The standard is therefore more stringent than
that of showing merely a serious issue to be tried, but less stringent than
proof on the balance of probabilities.
The position of the parties on domicile, and, where they differ, my findings
are these:
(a) It is accepted that L., the first defendant, is domiciled in Hong Kong.
(b) It is accepted that Murli and Pishu, the second and fifth defendants,
are domiciled in India.
(c) Lal, the third defendant, is domiciled in Spain,; Vishal, the first
claimant, said that until evidence was served he considered that Lal
was resident in London, and that the London address at which he was
purportedly served was his usual residence, but the claimants now accept
that he is domiciled in Spain.
(d) Sham, the fourth defendant, is resident in Hong Kong. The claimants
have asserted, that he is domiciled in England. He holds a United
Kingdom passport, and he occasionally stays at a flat in St John’s Wood
which is owned by a family trust. But he has been a permanent resident
of Hong Kong since 1984. …The evidence is clear in the sense that there
is neither the requisite residence in, nor substantial connection with,
England.
(e) Ch., the sixth defendant, has its seat (and therefore its domicile) in
Gibraltar,.
(f) It is accepted that Be. T., the seventh defendant, has its seat
(and therefore its domicile) in Bermuda, where it is incorporated and
registered.
(g) Mohan, the eighth defendant, says that he is domiciled in India. …
Jurisdiction under the 1968 Convention
So far as defendants who are domiciled in 1968 Convention countries are
concerned, Article 6(1) (jurisdiction over additional parties by virtue of
proceedings against defendant domiciled in the forum) has no application
because it is not now argued that any defendant is domiciled in England.
The only head of jurisdiction on which the claimants rely is Article 5(6)…
The effect of Article 53(2) of the 1968 Convention is that in proceedings
in England the domicile of a trust depends on the law of the United
Kingdom. By section 45(3) of the 1982 Act, a trust is domiciled in England
if and only if English law is the system of law with which the trust has its
closest and most real connection. …
IV The issues
The principal issues are these. The first is whether the Civil Procedure
Rules have effected a major change to the rules of jurisdiction, so that a
defendant who is not domiciled or present in England can now be sued
here by virtue of service on him at his last known residence. That in turn
depends on whether the effect of the decision of the House of Lords in
Barclays Bank of Swaziland Ltd v. Hahn [1989] 1 WLR 506 (that under
the RSC service by post within the jurisdiction was only permissible if the
defendant was in England at the time the writ was served or deemed to
be served) survives the introduction of the CPR.
The practical effect of this point is that Sham was not present in England
when the claim form was sent by post to the address at which he stays
when he is in London. If service is valid then the court would have
jurisdiction over Sham, and the court could give permission for service on
other non-Convention defendants as necessary or proper parties under
CPR 6.20(3). Since this point does not depend on an appreciation of the
facts of the case it will be dealt with in the next section.
The second set of issues also relates to the non-Convention defendants.
It includes the question of the applicability and interpretation of CPR
6.20(11) concerning claims in relation to trusts. It also raises the issues
(a) whether the claimants can satisfy the court that England is the forum
conveniens for the claims against those defendants; (b) whether the
permission granted by Master Bragge to serve these defendants outside
the jurisdiction should be set aside for non-disclosure; and (c) whether
the claimants have established a serious issue to be tried on the merits of
their claim.
The third set of issues relates to the question whether the 1968
Convention defendants (Lal and Ch.) can be sued under Article 5(6) of the
1968 Convention. …
V Service under CPR 6.5 and the decision in Barclays Bank of Swaziland
Ltd. v. Hahn
The effect of CPR Part 6 is that a claim form may be served by first-
class post, and for that purpose by CPR 6.5(6) the place of service of
an individual is the "usual or last known residence". By CPR 6.7(1)
a document served by first-class post is deemed to be served the
second day after it was posted (excluding Saturday, Sundays and public
holidays).
The claim form and particulars of claim were sent by first-class post
under cover of a letter from the claimants' solicitors dated June 7, 2001,
addressed to Sham at a flat in Imperial Court, … Road, St John’s Wood,
London. Sham is resident in Hong Kong. The flat belongs to a family trust,
and he and members of his family stay in the property if and when they
visit England. He was not at that address in June 2001.
The deemed date of service was June 11, 2001 (because June 9 and 10
were a Saturday and Sunday). Sham was in Hong Kong until June 9, 2001
and in Bombay from June 10 to 16, 2001. …
In my judgment there are two separate reasons why Sham has not
been validly served. First, the claimants have not adduced any evidence
which casts doubt on Sham’s evidence that the address in St John’s
Wood is used only occasionally by him on the rare occasions when
he visits London. In these circumstances there is no evidence that
it ever was a “residence” and it therefore cannot be his “last known
residence.” Secondly it has always been, and remains, a fundamental
rule of English procedure and jurisdiction that a defendant may be served
with originating process within the jurisdiction only if he is present in
the jurisdiction at the time of service, or deemed service. Barclays Bank
of Swaziland Ltd v. Hahn is simply an illustration of this principle (as is
another case, not cited in argument, Cadogan Properties Ltd v. Mount
Eden Land Ltd [2000] I.L. Pr 722, in which the Court of Appeal held that
if the defendant is outside England, an order for substituted service in
England could not be obtained unless permission to serve proceedings out
of the jurisdiction had been obtained). …
V The facts: the 1943 and 1946 Trusts
The 1943 Trust
The 1943 Trust was established by Kishinchand in April 1943 for the
benefit of the wives and male children of S. and L.. The funds were to
be divided equally into two separate trust funds: (1) the Lachmibai trust
fund, for the wife and male children of S.; and (2) the Kamlabai trust
fund, for the wife and male children of L.. …
The original trustees of the 1943 Trust were T., S. and L.. After T. and S.
died, Mr. Ad. and Murli were appointed trustees. After Mr. Ad. died, Lal
and Sham also became trustees, by deed of appointment dated January
5, 1993. The present trustees are L., Murli, Lal and Sham.
The present beneficiaries of the 1943 Trust assets are: as to the
Lachmibai trust fund (representing 50% of the whole): Mohan (25%
of the whole), and the claimants (12.5% each of the whole); as to the
Kamlabai trust fund: Kamlabai (50% of the whole) during her lifetime,
thereafter L. during his lifetime, and thereafter Sham and Lal (25% each
of the whole). …
The 1946 Trust
The 1946 Trust was established by Kishinchand in July 1946. The Trust
was established for the benefit of Lachmibai and the male children of S..
…Any male descendent had to attain the age of majority before receiving
his share. Until that time, the trustees were required to provide the net
income for the maintenance, upbringing, education and general welfare of
the sons of Lachmibai and S..
The original trustees were S., L. and Murli, and L. and Murli are the
surviving trustees. The present beneficiaries of the 1946 Trust are: Mohan
(50%) and the claimants (25% each).
The trust monies were invested in property, a 30% share of a building
in Bombay called Carmichael House. There is also a Bombay bank
account which is used for the administrative costs associated with the
administration of Carmichael House and its tenancies.
Complaints concerning 1943 and 1946 Trusts
In 1998 the trustees of the 1943 Trust requested the beneficiaries to
pay a contribution to the expenses of Central Building No. 2 to make up
a shortfall. After Indian lawyers for the trustees sought approval from
the beneficiaries to distribute the trust assets, the claimants’ London
solicitors in early 2001 sought (inter alia) full accounts for the 1943
and 1946 Trusts for the period “pre-1980” to the date of their letter.
In correspondence thereafter they took the position that information
supplied was not sufficient, and that their clients had no intention
of releasing the trustees from their obligations. The claimants then
commenced these proceedings, making the allegations which are set out
below.
Governing law of the 1943 and 1946 Trusts
There can be no doubt that the 1943 and 1946 Trusts, and their
administration, are governed by Indian law…
VI The 1975 Trusts
On February 14, 1975, two trusts were created by Harish (the father of
the claimants) and Mohan (the claimants’ uncle) (“the 1975 Trusts” and
separately “the Harish Trust” and “the Mohan Trust”). The 1975 Trusts
were drafted in Bombay by Mr Ad..
Background: Ka. (Bermuda) Ltd and Che. (Bermuda) Ltd
When S. died in 1949, his interest in the C. family trading enterprises
outside India was inherited by Lachmibai, his widow. Prior to the death
of S., the C. family businesses were already being conducted mainly by
L. and Murli. In about 1960, the C. businesses outside India became
subsidiaries of a Bermudan holding company, Ka. (Bermuda) Ltd ("Ka."),
with shareholdings of 36% for the L. Group, 34% for the T. Group and
30% for the S. Group.
In about 1973, the L. Group and T. Group decided to effect a separation
of their trading interests outside India from one another with Lachmibai
opting to retain her 30% interest in both groups. To implement this
separation the L. Group was to control Ka. as the holding company for the
L. Group businesses and the T. Group was to control another Bermudan
company, Che. (Bermuda) Ltd. ("Che.") as the holding company for the
T. Group businesses. Lachmibai was to have a 15/51 interest in Ka. and
a 15/49 interest in Che., i.e. 30% of the whole. The L. Group (L., Lal and
Sham) was to have 36/51 of Ka., and the T. Group (Murli, Pishu and Ram)
was to have 34/49 of Che.. The businesses to be allotted to each group
were settled by an arbitration award made by Mr Hobart Moore in 1974.
The Trusts
In about 1973 or 1974, Mr Ad. advised Lachmibai, for Indian fiscal and
exchange control reasons, to give one half of her 30% interest in Ka. and
Che. to each of her sons Mohan and Harish, and require them to settle
their shares in discretionary trusts with Lachmibai remaining as a named
beneficiary in both those settlements. It seems that because Mohan and
Harish were non-resident Indians (NRIs) the shares would not be subject
to Indian tax or exchange control. Vishal’s evidence is that the gift was an
absolute one and quite separate from the creation of discretionary trusts,
but nothing turns on this.
The assets of the 1975 Trusts established by Harish and Mohan were the
shareholdings in Ka. and Che.. Mohan and Harish were the respective
settlors. The original trustees were Ram, and Mr K Ru. and Mr G R Bh. .
The beneficiaries were in the case of the Harish Trust: Lachmibai, Mohan,
Radhika, the claimants, the wife and any children of Mohan, children and
remoter issue of the father and mother of the settlor (S. and Lachmibai),
and the spouses of the aforesaid and the spouses of any adopted child
of the settlor. In the case of the Mohan Trust the beneficiaries were:
Lachmibai, Harish, Radhika, the claimants, children and remoter issue of
the father and mother of the settlor (S. and Lachmibai), spouses of the
beneficiaries listed above and the spouses of any adopted children of the
settlor. …
VII Esk. (Bermuda) Ltd: reconstruction of trusts
Esk. 1 formed to hold Ka. and Che. shares
In October 1976, a Bermudan company, was formed to hold those shares
in Ka. and Che. which were subject to the 1975 Trusts. The shares in Esk.
1 were expressly held by Mohan, Harish and Conyers Dill & Pearman (the
well known Bermuda law firm) for the trustees of the 1975 Trusts.
Change in trustees and separation of L. Group and T. Group interests
In 1981 the following events occurred. First, Mr Ru. and Mr Bh. retired
as trustees of the 1975 Trusts, the continuation as trustee of Ram was
confirmed and Sham, Lal, Murli and Mr Ad. were appointed as new
trustees of each of the 1975 Trusts.
Secondly, there was a re-structuring of the interests of the 1975 Trusts in
the C. businesses. …
VIII The proceedings in Singapore and in England in 1983/1985
According to the claimants, in May or August 1983 the trustees of the
1975 Trusts ceased making payments to Harish and Radhika. In August
1983 they were removed as directors of K C. & Sons (Far East) P. Ltd, a C.
Singapore company, and allegations of fraud were made against them in
Singapore proceedings by Murli.
In December 1983, Harish and Radhika and their sons, the claimants
in these proceedings, brought proceedings in the High Court in London
against the then trustees of the 1975 Trusts (L., Murli, Lal, Sham, Pishu,
Ram, and Mr Ad.) in C. v. C. (No.1). They sought (inter alia) accounts
in respect of both trusts from the dates of their creation, and an order
removing the defendants as trustees and appointment of new trustees in
their place.
The complaints by the plaintiffs in C. v. C. (No.1) were that the trustees
had failed to prepare and provide proper accounts of the trusts; the effect
of the conversion of the shares into class “B” shares had diminished their
value, and the defendants had procured the conversion in breach of trust
for their own benefit;….
Each of the defendants entered appearances or instructed their solicitors
to accept service on their behalf. The defendants then sought a stay
of the proceedings on the ground that England was not the forum
conveniens.
Scott J refused a stay: …The beneficiaries were an Indian family, and the
trustees were all Indian in origin, and the settlements were drawn up in
Bombay, by an Indian practitioner. But the trust property was Bermudan,
and the underlying assets, in the form of the operating companies, were
all situated outside India, and the purpose of the settlements was in
part to escape Indian taxation and Indian exchange control. But, most
important, the identity of three original trustees, two of whom were
permanently resident in England, and the third being the member of the
family who in 1975 appeared to have the closest connection with England.
…Although India was a more convenient locality as far as the personal
circumstances of the parties and any witnesses were concerned, a stay
was refused principally on these grounds. …
IX Settlement of the proceedings and the sale of the S. trust interests in
Ka. and Che. to the L. and T. Groups
Background
In 1985 an agreement was reached whereby the Singapore and London
proceedings were discontinued, and which was intended to turn into
cash the interests of the beneficiaries of the 1975 Trusts in Ka. and Che..
According to the defendants in these proceedings, relations within the
family had reached the point where each side wanted a clean break. The
L. Group and the T. Group wished to have absolute control and ownership
of their businesses and the S. Group no longer wished to be tied into
those businesses but to be paid out their share. …
Heads of Agreement and Supplemental Agreement: change of trustees
and agreement to sell shares
…They agreed to appoint the Bank of Bermuda as trustee in place of the
family trustees, and Mohan, Harish and Radhika (both themselves and
on behalf of their children) (“the beneficiaries”) agreed not to challenge
or impugn the appointment. All rights against the family trustees that
the beneficiaries might have had were given up as well as any rights to
the Kay. and Esk. 2 shares once transferred to the relevant purchasers.
In addition it was agreed that a letter of wishes would be presented
to the new trustee which was scheduled to the Deed. The effect of the
letter of wishes was to indicate that the intention was to make an early
appointment to Harish and Radhika and their sons of 2/3rds of the Mohan
Trust fund, with a later appointment of 1/3rd of each of the Trust funds to
Lachmibai and 1/3rd of the Harish Trust fund to Mohan. The Supplemental
Agreement was signed by the parties in Jersey, Singapore and Bombay
in May 1985. Since the Supplemental Agreement was supplemental to
the Heads of Agreement it was no doubt impliedly governed by the same
choice of law and choice of jurisdiction provisions.
Third, on the same day Be. T. was appointed under the powers in the
1975 Trusts as a new trustee in place of the C. family trustees. Mr Ad.
remained as trustee.
Choice of law and jurisdiction for 1975 Trusts
Fourth, on May 31, 1985, purportedly pursuant to clause 15 of the 1975
trust deeds, the C. family trustees declared in relation to each of the 1975
Trusts:
“I. This settlement shall continue to take effect in accordance with the
Hindu Family Law being the proper law of the Settlement. 2. Without
prejudice to the provisions of paragraph (I) above the forum for the
administration of the Settlement shall henceforth be Bermuda.”…
Only the deed relating to the Harish Trust has been located, but I
am satisfied for the purposes of this application by the contemporary
correspondence that there were deeds for both Trusts. …
Arbitration
The “B” shares of Ka. were the principal assets of Kay.. In November 1984
Moore, Stephens had arrived at a valuation range of between $17 and
$21 as an approximate fair value (based on the accounts to June 30,
1983) for both the “A” and “B” shares of Ka., on the assumption that no
distinction was to be drawn between the two classes of shares.
Following a formal hearing in Jersey, the arbitrators on July 29, 1985
valued the Kay. shares at $45 per share, which represented a valuation of
the Ka. shares at $25. The amount due to Radhika and Harish and their
sons was therefore $2,250,000. The award recited that the arbitrators had
determined the value and that the parties had agreed to the valuation and
had requested the arbitrators to make the award by consent. The Kay.
award states: “This Award shall be enforced either in the Courts of Jersey
where it has been made or in Bermuda and in no other jurisdiction”. It
was signed by all parties, including Harish and Radhika on behalf of the
claimants.
The Esk. 2 arbitration resulted in a valuation of £180,000. The consent
award stated:
“The law of Bermuda shall apply to this award.”
The defendants have put in detailed evidence to support their contention
that the valuation of the Kay. and Esk. 2 shares was done on a proper
basis. The claimants have not contradicted this evidence.
The claimants say that the arbitrators based their valuation on the
financial advice provided by accountants employed by the companies
controlled by the defendants who bought the shares. The particulars
of claim do not put forward any positive case. It is simply said that the
claimants do not accept the valuations (paras 44 and 45).
X Completion of sale and treatment of proceeds of sale
Agreement by claimants’ parents: Kay. Award Supplemental Agreement
By an agreement dated August 7, 1985 and signed in Jersey, called the
Kay. Award Supplemental Agreement, Harish and Radhika agreed with
the purchasers of the Kay. shares (L., Lal, Sham and Ch.) that during the
minority of their sons, the claimants, or unless the Bermuda court should
otherwise order, they would invest the proceeds of sale of the claimants’
share of the sale of the Kay. shares (50%) in investments authorised
under the laws of Bermuda. …
Completion of sale and receipt of proceeds
Harish and Radhika instructed the new trustees of the 1975 Trusts (Mr
Ad. and Be. T.) to transfer the 50,000 shares in Kay. which Harish and
Radhika held for themselves and the claimants to Ch. as nominated
purchaser. Harish and Radhika were subsequently paid the money for
those shares by Ch. as set out below. …
Following execution of the deeds of appointment the Bank of Bermuda
Ltd. wrote to the Gibraltar lawyers who had dealt with the appointment
of Bank of Bermuda earlier, Triay & Triay, on December 2, 1985 to say:
“These Deeds have effectively terminated the Settlements, subject
to completion of the transfers of ownership of the Kashewak and Esk.
shares.”
Harish and Radhika were paid the sums due to them and their sons for
the Kay. shares. Vishal accepted in an affidavit in the Indian proceedings
that Harish and Radhika had been paid in full. ….There is no dispute about
these payments. …
Geneva Trust and execution of releases
There were proceedings in Bermuda by Lal and Sham against Harish
and Radhika in connection with the final payments due to them for the
benefit of the claimants in connection with the sale of the Kay. shares.
There was no evidence before me on the nature of the action, but it was
discontinued on condition that Radhika established a trust in Geneva
over the then unpaid proceeds of sale due to the claimants from Ch.
for the Kay. shares. The trust fund was $630,000. The trustees were
United Overseas Bank and Trust Co. (Bahamas) Ltd and Mr Justice P. N.
Bhagwati. Justice Bhagwati was a former Chief Justice of India (and is
now chairman of the United Nations Human Rights Committee), and he
was involved in settling the terms of the trust. Harish was not a party
to the Trust Deed, but on the date of its execution, June 30, 1988, he
approved its terms in the form of a separate confirmation. …
The deed provided that the trustees should not pay and distribute the
trust fund to either of the claimants until each of them had executed
a deed of release. If they did not execute a deed of release within 90
days of their attaining their majority, then the trust in their favour would
determine and the fund would be held for Radhika and Harish to be
applied solely to meet any liability under the indemnity in favour of L., Lal
and Sham in the Kay. Award Supplemental Agreement. The release was to
be in favour of L., Lal, Sham and Ch. in respect of any matter arising out
of C. v. C. (No.1), the Kay. consent award or the sale of shares pursuant
thereto or otherwise howsoever arising during the minority of the releasor
in any way touching or concerning any interest of the releasor in Kay.
or the operation thereof or of any subsidiary or associate or the trusts
affecting the same.
Each of the claimants signed releases and were paid out part of their
share of the Geneva Trust fund ($267,500 each) when they reached the
age of 21 on June 18, 1992, in the case of Vishal, and April 25, 1995, in
the case of Ashwin. The releases recited the C. v. C. (No.1) proceedings,
and also that the litigation had been settled by the submission to
arbitration and the Kay. Consent Award; that their interests in the
proceeds of sale of the shares in Kay. was $562,500 each; that Lal and
Sham had purchased the shares for Ch., and had paid $375,000 of that
sum to Radhika and Harish as trustees for the claimants, and the balance
had been paid to the trustees of the Geneva trust.
XI Indian proceedings
In 1991 the claimants in these proceedings commenced proceedings in
the High Court at Bombay against eighteen members of the C. family and
against seven C. companies or partnerships.
The proceedings were, according to Vishal, instituted on the claimants’
behalf by their mother Radhika, after her mother-in-law Lachmibai
had excluded the claimants from a family-owned property which they
regarded as an ancestral home. In those proceedings it is alleged that
the business of Kishinchand, and L., T., and S., was run as a joint H. U. F.
(“HUF”), and that the HUF had world-wide concerns and firms, situated all
over the world. …
…The claimants’ position is that although the subject matter of the Indian
proceedings includes properties in Bombay which are subject to the
trusts, the proceedings do not relate to the trusts or their assets; and that
the references to the worldwide assets of the HUF were purely historical,
and that the proceedings related only to Indian assets, and that was why
no foreign companies were joined as defendants.
XII The present proceedings
…With regard to the 1975 Trusts, the allegations are as follows:
(1) L., Murli, Lal, Sham and Pishu in breach of their duties as trustees
procured the conversion of the shares owned by the trusts in Che. and Ka.
into “B” shares, whose value immediately after their creation and since
was less than that of the unconverted shares which they represented.
(2) During August 1983 the trustees ceased to make payments from trust
income in favour of Harish or Radhika, and since that date had made no
payment to either claimant and provided no trust accounts.
(3) The 1985 Heads of Agreement and Supplemental Agreement,
purportedly settling all the litigation in Singapore and England, were
executed by the trustees and the claimants’ parents, who had no
authority to do so on behalf of the claimants who were then minors, and
their execution comprised a breach of trust by the defendants because the
intention and effect was to benefit the trustees and the claimants’ parents
at the expense of the claimants. …
(5) Accordingly the Heads of Agreement comprised an agreement which
was void or voidable, and the claimants (who, it is alleged, only became
aware of its terms during the year 2000) seek to avoid it.
(6) The purported appointment of Be. T. as a trustee to act jointly with
Mr Ad. as continuing trustee of the 1975 Trusts in May 1985 was for the
purpose of enabling the breaches of trust, and was consequently void or
voidable at the instance of the claimants, and in either event is ineffective
to release the existing trustees.
(7) The advance of the interests of Vishal and Ashwin to Harish and
Radhika “as bare trustees” by the deeds of appointment of July 29, 1985
was a breach of trust, and it caused the property appointed to pass out of
the control of the trustees.
(8) The claimants do not accept the valuation of the 50,000 shares in Kay.
….
(9) The releases are not binding because neither claimant had any
knowledge of the circumstances of the litigation, the arbitration or the
sale of the shares when they executed the releases, or had any sight of
the trust documents therein mentioned. …
The relief claimed with regard to the 1975 Trusts is that the first to fifth
defendants deliver accounts of capital and income; that the releases
signed in 1992 and 1995 be declared void or set aside; a declaration that
the claimants are entitled to the entire capital and income of the trust
fund of the Mohan Trust, and a declaration that they are each entitled to
25% of the assets of Harish Trust; …
XIII Jurisdiction
General
Since Sham and Lal were not validly served in England, the English court
will only have jurisdiction in these proceedings in one of the following
circumstances.
First, as regards the defendants who are domiciled outside the States or
territories to which the 1968 Convention applies (L., Sham, Murli, Pishu,
Be. T. and Mohan) the court may assume jurisdiction if either (a) the case
comes within the trust provision of CPR 6.20(11); or (b) the defendant
is a necessary or proper party under CPR 6.20(3) to proceedings against
another defendant who is amenable to the jurisdiction either under
CPR 6.20(11) or under the trust provision of Article 5(6) of the 1968
Convention.
Second, as regards the defendants who are domiciled in a State or
territory to which the 1968 Convention applies (Lal and Ch.), the court
has jurisdiction only if Article 5(6) is applicable. Since there is no
defendant who is domiciled in England, there is no basis for jurisdiction
over additional parties under Article 6(1).
It has been well established for more than 100 years that a claimant
cannot pursue causes of action against a foreign defendant under CPR
6.20 (and its predecessor Order 11) which are not within the provisions
for service out of the jurisdiction, even if the claimant has other claims
which are within it: see cases in Dicey and Morris, para 11-129. It is
therefore not permissible to join with claims covered by CPR 6.20 claims
which are not within any of the heads of jurisdiction. In my judgment the
same principle applies in the case of the 1968 Convention.
In cases to which CPR 6.20 applies, in addition the claimants must show,
because the burden is on them, that England is clearly the appropriate
forum (Spiliada Maritime Corp. v Cansulex Limited [1987] AC 460),
and the court will not give permission unless satisfied that England
is the proper place in which to bring the claim: CPR 6.21(2A). Unless
and until there is a decision of the European Court or of the House of
Lords to the contrary, where the English court has jurisdiction under
the 1968 Convention, the proceedings may be stayed in favour of the
courts of a non-Contracting State (Re Harrods (Buenos Aires) Ltd. [1992]
Ch 72, applied to defendants domiciled in other Contracting States in
Ace Insurance SA-NV v. Zurich Insurance Co [2001] EWCA Civ 173) if
the defendant can show that there is another available forum, having
competent jurisdiction, which is more suitable for the trial of the action,
i.e. in which the case may be tried more suitably for the interests of all
the parties and the ends of justice, unless the claimant can show that
there are circumstances by reason of which justice requires that a stay
should nevertheless not be granted: e.g. Lubbe v. Cape plc [2000] 1 WLR
1545, 1553-5 (H.L.).
In the section on domicile (paragraph 23) I referred to the rule, applicable
to both Convention and non-Convention cases, that the claimant must
establish a good arguable case that the court has jurisdiction. In non-
Convention cases, the claimant must also establish a serious issue to be
tried on the merits.
But where the question of jurisdiction depends, not on some free-standing
question such as domicile, but on elements which are linked to the
elements of the claim, the claimant must equally establish that the
requisite elements of jurisdiction exist. The question of the requisite
standard of proof was addressed fully in the context of jurisdiction in
contract cases under RSC Order 11, r. 1(1)(e) (now CPR 6.20(5)) by Lord
Goff of Chieveley in Seaconsar Far East Ltd. v. Bank Markazi Jomhouri
Islami Iran [1994] 1 AC 438, 453-455. The effect of the decision is that
where jurisdiction depends on several elements, for example that there
was a contract, that it was broken, and that it was broken within the
jurisdiction, then a good arguable case for each of those elements must
be established.
The good arguable case test was accepted as the appropriate test for
domicile in the context of the 1968 Convention in Canada Trust Co. v.
Stolzenberg(No. 2) [2002] 1 AC 1, 13, and there is no reason to doubt
that it applies also to the more complex jurisdictional provisions of the
1968 Convention (and has been so applied in several decisions in the
Court of Appeal: see Dicey and Morris, para 11-225, n. 69).
Where jurisdiction depends on a question of law or construction, the court
will decide it rather than apply the good arguable case test: see cases
at Dicey and Morris, para 11-127, n. 34. That approach has consistently
been applied to cases where jurisdiction has depended on the applicable
law of a contract for the purposes of what is now CPR 6.20(5)(c). In
such cases the court does not consider whether the claimant has a good
arguable case that the contract is governed by English law, but rather
whether the contract is governed by English law. Some of the most
important cases on the applicable law of a contract at common law were
decided under predecessors of this rule (e.g. Amin Rasheed Shipping
Corp. v. Kuwait Insurance Co. [1984] AC 50) and I do not consider
that anything in the Seaconsar case is intended to throw doubt on their
approach. Accordingly in a case such as this, if jurisdiction depends on the
identification of the applicable law, the claimant would have to satisfy the
court that the applicable law was English law, and the good arguable case
test would only have a role to play if there were a relevant factual issue
(for example, if an express choice of law were said to be ineffective on the
facts of the case).
Law applicable to trusts and jurisdiction
Both CPR 6.20(11) and Article 5(6) are in terms concerned with express
trusts. CPR 6.20(11) provides that a claim form may be served out of the
jurisdiction if “a claim is made for any remedy which might be obtained
in proceedings to execute the trusts of a written instrument where –(a)
the trusts ought to be executed according to English law; and (b) the
person on whom the claim form is to be served is a trustee of the trusts.”
Article 5(6) provides: “A person domiciled in a Contracting State may, in
another Contracting State, be sued….– 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 Contracting
State in which the trust is domiciled.”
Accordingly, neither CPR 6.20(11) nor Article 5(6) applies to constructive
trusts. CPR 6.20(14) makes special provision for constructive trusts, and
it is clear both from the text of Article 5(6) and from the Schlosser Report
on the 1978 Accession Convention (by which the United Kingdom acceded
to the 1968 Convention, and which introduced Article 5(6)), para 117,
that Article 5(6) does not apply to constructive trusts.
The effect of CPR 6.20(11) and Article 5(6), as implemented in the
United Kingdom, is that the relevant connecting factor for the purposes of
jurisdiction in the case of CPR 6.20(11) is the law “according to which the
trusts ought to be executed,” which must be English law, and in the case
of Article 5(6) (as implemented by 1982 Act, s. 45(3)) is “the system of
law with which the trust has its closest and most real connection,” which
must be English law.
CPR 6.20(11) applies only to claims against a person who “is” a trustee of
the trusts, and Article 5(6) applies only to an action against a defendant
“as settlor, trustee or beneficiary of a trust.”
Both CPR 6.20(11) (which had its origin in the nineteenth century) and
Article 5(6) (which originated in 1978) pre-date the Recognition of Trusts
Act 1987 (“the 1987 Act”), which implements the Hague Convention
of 1986 on the law applicable to trusts and on their recognition (“the
Hague Convention”). Although the formulations differ, each is referring
to the applicable law, and in each the starting point will be the Hague
Convention rules. I consider it likely that the wording of CPR 6.20(11) is
apt to encompass claims which may depend on English law either as the
law applicable to the trust itself or as the law governing its administration,
while Article 5(6) is probably limited to claims in relation to trusts
governed by English law.
The position prior to the 1987 Act, which is reflected in the judgment
of Scott J, in C. v. C. (No.1), was that in the absence of an express or
implied choice a trust was governed by the system of law with which
it had its closest and most real connection: [1985] Ch at 424-5; and
cf Duke of Marlborough v. Attorney General (No.1) [1945] Ch 78, 83
(“the law by reference to which the settlement was made and which was
intended by the parties to govern their rights and liabilities”); Iveagh v.
IRC [1954] Ch 364, 370. In C. v. C. (No.1) Scott J expressed the view
that the rights and duties of the trustees were governed by the proper
law of the settlement (and not by the law of the place of administration
if different); and that if the court had personal jurisdiction over the
trustees the inherent jurisdiction of the court to remove and appoint
trustees was a matter of machinery for English law as the lex fori, and
could be exercised regardless of the governing law of the trust or the law
governing the administration of the trust: see p. 432. …
The time for testing the applicable law for jurisdictional purposes
One of the questions canvassed in this case is the critical date for
determining the applicable law for the jurisdictional purposes of CPR
6.20(11) and Article 5(6). The claimants argue for the date when the
causes of action arose, which they say was before the change to Bermuda
law was made, with the consequence (they argue) that English law
applies as the law with the closest and most real connection with the 1975
Trusts, and accordingly gives the English court jurisdiction under both CPR
6.20(11) and Article 5(6).
The defendants say that the critical date for determining whether English
law is the applicable law and whether the defendant “is” a trustee (CPR
6.20(11)) or whether the defendant is sued as a trustee of a trust
which “is” domiciled in England (Article 5(6)), is the date when the
court is seised of the proceedings. At that date, the defendants say that
either there was no subsisting trust, or if there was, it was governed by
Bermuda law. …
In this case the question in relation to CPR 6.20(11) is whether the
condition that “the trusts ought to be executed according to English law”
must be fulfilled when permission to serve out is sought, or whether it is
sufficient that English law applied to the trusts at the time of the cause
of action. I consider that the first construction is the correct one, and is
supported by the other condition that the defendant “is” a trustee of the
trusts. So also in the case of Article 5(6) its application to a person sued
as a trustee of a trust which “is” domiciled in a Contracting State supports
the construction that the time of the proceedings is the critical time.
It is also supported not only by Winter v. Winter but also by part of
the reasoning which led the House of Lords to hold in Canada Trust
Co. v. Stolzenberg (No. 2) [2002] 1 AC 1 that for the purposes of the
Lugano Convention (and therefore also the 1968 Convention) the date for
determining whether a defendant was domiciled in the United Kingdom
or in another Contracting State was the date when the proceedings were
instituted, and not when they were served. One of the factors which led
Lord Steyn, in the leading speech, to that conclusion was the aim of the
Convention (citing Case C-125/92 Mulox IBC Ltd. v. Geels [1993] ECR
I-4075, 4103) to allow the plaintiff easily to foresee the court before
which he may bring an action and the defendant reasonably to foresee the
court before which he may be sued.
Finally it is supported by the strict approach to interpretation of both
CPR 6.20 and the 1968 Convention. In the context of what is now CPR
6.20 it has been said on many occasions, applying The Hagen [1908] P.
189, 201, that where there is doubt as to the construction of any of its
heads, the doubt should be resolved in favour of the foreigner (or, more
strictly, against the exercise of extra-territorial jurisdiction). In the case
of the 1968 Convention the European Court has emphasised on several
occasions that the exceptions to Article 2, which gives primacy to the
court of the domicile, are to be construed strictly (see cases cited at Dicey
and Morris, para 11-051).
I will, however, in case I am wrong on this point, also consider the
question of the applicable law at the time when the cause of action is said
to have arisen. …
1975 Trusts
It is central to the claimants’ case on the merits in relation at least to L.,
Lal and Sham that they can avoid the effect of the releases which they
signed when they attained majority in 1992 and 1995 respectively. That
is why the particulars of claim originally pleaded undue influence (and
why the claimants now seek to plead that they were obtained unfairly and
inequitably), and also sought an order that the releases be declared void
or be set aside. The defendants argued that the claimants’ case on the
releases was so weak that it did not raise a serious issue to be tried, but
in my judgment there is a more fundamental objection to the claim for a
declaration relating to the releases.
There is no basis for an argument that the claims relating to the
releases fall within CPR 6.20(11) or Article 5(6), and the court has no
jurisdiction to deal with them as independent claims for the reason given
in paragraph 131 above. But the claimants now say that they are really
matters for reply to a defence of release, and that it is not necessary for
the releases to be pleaded as a part of their positive case. I shall proceed
on the basis that that submission is correct.
So far as the 1975 Trusts are concerned, on the construction of CPR
6.20(11) which I have preferred, even if the trust subsists, the only
person who “is” a trustee is Be. T., and the other non-Convention
defendants could only be served under CPR 6.20(3) (which would make a
difference because of the even more special care which must be exercised
before service is authorised under that head). But the assets of the trusts
have been distributed, and Be. T., the sole trustee, acknowledged as long
ago as 1985 that the trusts were at an end. …
But, in any event, in the second choice of law in 1985 the trustees chose
Bermuda law and jurisdiction for the trusts, and therefore there is prima
facie no basis for a contention that the trusts ought to be executed
according to English law. The trustees had the power under clause 15(a)
to select the applicable law, and that choice is prima facie effective as a
combined result of the common law and Articles 6(1) and 10 of the Hague
Convention.
There is no good arguable case for impugning the validity of the choice of
applicable law. There is no reason to believe that there was any reason
for the change other than to distance the trusts from UK tax law. There
is clear and contemporary evidence produced by the defendants that the
change to a Bermuda-based trustee and the choice of Bermuda law and
jurisdiction in 1985 was tax-driven, to avoid an argument that UK tax law
might apply to the income from the Ka. and Che. shares. …I do not see
how the claimants can possibly establish a good arguable case that the
choice of Bermuda law is ineffective, and that therefore as at the date
of the proceedings the trusts ought to have been executed according to
English law.
In the case of the 1968 Convention defendants (Lal and Ch.), Article
5(6) applies only to a defendant who is sued “as settlor, trustee or
beneficiary.” Ch. is a defendant because it purchased the shares, but
it is not a settlor, trustee or beneficiary of the trusts. At most it might
be a constructive trustee, but (as I have mentioned) Article 5(6) does
not apply to constructive trusts. Nor is Lal any longer a trustee, and,
decisively (and for the same reasons as in relation to CPR 6.20(11)) the
trusts are not domiciled in England, because they would not (if they still
existed) have their closest and most real connection with English law. I do
not doubt that in deciding whether it is English law with which the trusts
have their closest connection, it is permissible to take into account the
express choice of Bermuda law to negate that connection.
Since there is no basis for jurisdiction under CPR 6.20(11) or Article 5(6),
there is no basis for service of additional necessary or proper parties
under CPR 6.20(3). …
XIV Discretion and forum conveniens
It is for the claimants to show that England is “the proper place in
which to bring the claim” against the non-Convention defendants: CPR
6.21(2A). ...
The following factors point to India as the forum conveniens. First, there
are already proceedings pending there which raise the issue of the
property rights in the C. family, and an Indian court is far better equipped
to understand the intricacies of these family relationships. If there were
proceedings in England, the same matters would be ventilated in two
jurisdictions. Second, several of the most important witnesses are in
India: Murli, Pishu and Mohan (although there may be doubts about the
ability of Murli and Mohan to give effective evidence); Radhika (who, as
I have said, would no doubt be joined as a party by L., Lal, Sham and
Ch. on the indemnities which she gave); Mr Chanrai and his assistant
(concerning the consent awards, Mr Ad. having died in 1991); and former
Chief Justice Bhagwati (concerning the Geneva Trust and the releases).
L. and Sham are in Hong Kong, and the claimants are in Singapore. Lal
has not, of course, suggested that it would be inconvenient for him to
attend. The only important witnesses who would not be compellable in
India are the lawyers involved in the 1985 settlement, Macfarlanes and
Norton Rose. But it is not realistic to suppose that they would not attend
if asked to by their clients, and privilege, unless waived, would prevent
them being compelled by any other party to give evidence. The partner
in Moore, Stephens who dealt with the matter has since died, and the
representatives of Be. T. and of United Overseas Bank would be only
marginally relevant witnesses. …
I have already dealt with the point on the jurisdiction of the Indian court.
This may not be a case of lis alibi pendens in the sense that the same
issues are before the Indian courts, but it is a case in which there are
proceedings in India to which all of the individual defendants are parties
and which will cover much of the same ground. …
On the hypothesis that the court would not exercise jurisdiction, not
only because the claimants had not shown that England was the clearly
appropriate forum, but also because India was the appropriate forum,
and that the proceedings would continue against the non-Convention
defendants in India, then there would be an overwhelming case for a stay
of proceedings against Lal if (contrary to my view) the English court had
jurisdiction over him under Article 5(6). …
XV Serious issue to be tried
On the view which I have taken on the jurisdiction and forum conveniens
issues, the question of the strength of the claim in relation to CPR 6.20
does not arise, and I will therefore deal with it shortly. There can be little
doubt that the claimants’ case is, on the evidence adduced so far, a very
weak one. .,..
In my judgment the weakness of the claim is such that I would have
held that for the purposes of service out of the jurisdiction under CPR
6.20 there would not have been a serious issue to be tried on the merits
for much of the claim, and if there had been jurisdiction under Article
5(6) the case would have been ripe for an application to strike much
of it out. Some qualification is necessary because I have not heard full
argument on the extent to which the claim in respect of the Esk. 2 shares,
where there was no release, and where the evidence on acquiescence and
concurrence is not so powerful, falls to be treated in the same way as the
claim in relation to the Kay. shares.
XVI Non-disclosure
…Finally, the witness statement referred to and relied on, in support
of the application, the particulars of claim. I have already set out the
evidence showing that the statement in the particulars of claim, para
38, that the claimants only became aware of the terms of the Heads of
Agreement in the year 2000 was demonstrably false and designed to give
the impression that the proceedings for equitable relief had been brought
promptly.
In my view these would have been sufficiently serious failures to justify
setting aside the orders.
XVII Conclusion
The orders of Master Bragge will be set aside, as will service on those
defendants who have been served, or purportedly served, and I will make
a declaration that the court has no jurisdiction to hear the claims.