Source: http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Fam/2015/907.html&query=(Dellal)+AND+(v)+AND+(Dellal)+AND+(others)+AND+(%5B2015%5D)+AND+(EWHC)+AND+(907)
Timestamp: 2020-07-02 19:54:53
Document Index: 25656515

Matched Legal Cases: ['UKSC ', 'UKHL ', 'EWCA ', 'Art 400', 'Art 400', 'Art 4']

You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> Dellal v Dellal & Ors [2015] EWHC 907 (Fam) (01 April 2015)
URL: http://www.bailii.org/ew/cases/EWHC/Fam/2015/907.html
Cite as: [2015] EWHC 907 (Fam)
Neutral Citation Number: [ 2015] EWHC 907 (Fam)
01/04/ 2015
LORRAINE KIRKE (NÉE DELLAL)
DIANE SOKOLOWSKI (NÉE DELLAL)
Tracey Angus QC & Jordan Holland (instructed by Mishcon de Reya)
for the 1st to 6th & 8th defendants
Eason Rajah QC & Leon Pickering (instructed by Charles Russell Speechlys) for the 7th defendant
This case concerns a claim under the Inheritance (Provision for Family and Dependants) Act 1975 in respect of the estate of the legendary property dealer Jack Dellal who died on 28 October 2012 aged 89. I shall refer to the deceased as Jack in this judgment. The claimant is his widow, now aged 61. She married Jack on 1 February 1997 following 10 years' cohabitation. It was his second marriage, her first. They had two children now aged 15 and 12. The first to fourth defendants are the children of Jack's first marriage to Zehava, who are all now middle aged. The fifth and sixth defendants are Jack's children of a non-marital relationship. They too are middle aged. The seventh defendant is Jack's sister, Violet. She lives in Switzerland and is aged 96, having been born on 18 August 1918. The eighth defendant is the son of the first defendant and is one of a number of grandchildren of Jack. He is aged 31.
In all Jack had 9 children. His daughter Suzanne tragically died aged 25 in 1983.
Jack's obituaries make interesting reading. He was born in the Chorlton area of south Manchester to parents who had emigrated here from Baghdad and who joined the Sephardic community which made its living on the edges of the city's textile industry. According to the obituary in the Daily Telegraph:
On any view Jack was phenomenally successful. The Sunday Times Rich List stated that he was worth £580m in 2008, £480m in 2009, £500m in 2011 and £445m in 2012. Based on these, and other, rich lists, as well as on other evidence (to which I will refer), the claimant says that at the time of his death Jack personally held, or ought to have held, a vast fortune.
Jack's will dated 15 November 2006 to all intents and purposes left his entire estate to the claimant[1]. However the disclosed assets which comprise his estate amount only to £15.4m comprising overwhelmingly realty and personalty. There was only minimal cash and no income generating assets. The claimant says that this is an absurd presentation of the true scale of his personal wealth at his death. If it had shrunk to £15.4m then in the period before his death he must have given most of it away to the defendants without her knowledge.
Therefore she commenced this claim on 10 March 2014. Her principal claim is for reasonable provision to be made for her from Jack's estate pursuant to section 2 of the 1975 Act. Obviously she does not seek an order under section 2 against the actual death estate as identified and declared to HMRC as that was, effectively, left to her alone. She seeks an order under section 2 against the deemed "net estate" as defined by the 1975 Act. This is not the same as the actual death estate. Sections 8 and 9 treat certain property as forming part of the "net estate" which would not in fact form part of the actual death estate. And section 25 defines the "net estate" as not only including property captured by sections 8 and 9 but also to include any sum of money or property which is ordered under section 10 to be provided for the purpose of making provision under the 1975 Act. In this case the claimant's real substantive claim is her application made under section 10 of the 1975 Act, as supplemented by section 13.
The decision of Campbell J in Morrow v Morrow [1995] NIJB 46 shows that, while uncommon, the fact that a claimant stands to inherit whatever may fall into the actual death estate does not preclude an order being made under sections 10 and 2 in her favour.
So far as is material to this case sections 10 and 13 of the 1975 Act provide:
(b) an order under section 11 of this Act in respect of any payment made or property transferred, in accordance with a contract made by the deceased, to any person as a trustee,
Section 10 is similar in its language to section 37 of the Matrimonial Causes Act 1973 although there are real conceptual and structural distinctions between the two provisions. I endeavoured to explain these differences in my decision of AC v DC & Ors (Financial Remedy: Effect of s37 Avoidance Order) (No 1) [2012] EWHC 2032 (Fam), [2013] 2 FLR 1483. The effect of an order under section 37 is to annul or "avoid" the transaction under attack. Moreover, the bad intention to defeat the principal ancillary relief claim is presumed for transactions done within the three year period before the avoidance claim. There is no time limit on attackable transactions. A transaction done 20 years earlier is, at any rate in theory, capable of being annulled. By contrast, a claim under section 10 of the 1975 Act does not affect the validity of the disposition under attack. If relief is granted then it takes the form of a money judgment against the disponee to pay a specified sum to the estate. There is no presumption as to the necessary bad intention and there is a six year time limit on attackable transactions. If the disponee is a trustee then by section 13 the money judgment cannot exceed the value of the disposition left in the hands of the trustee.
In this case the six year period began on 28 October 2006.
Accordingly if the claimant is to succeed in her application under section 10 she will have to show at trial the following as against each separate defendant:
i)	At least one disposition was made by Jack in favour of the defendant in question after 28 October 2006.
ii)	For these purposes a disposition is an outright transfer of the beneficial ownership of the transferred thing done otherwise than for full valuable consideration. A transfer to a person to hold the thing as agent or nominee or bare trustee is not within the section. A transfer to a person as trustee presupposes that the trust is more than just a bare trust.
iii)	Where it is said that the disposition was to a trustee that the trustee actually holds some money or property deriving from the disposition.
iv)	The disposition was done by Jack with the intention of defeating the claimant's claim for financial provision under section 2 of the 1975 Act. The motive does not have to be the dominant motive in the transaction; if it is a subsidiary (but material) motive then that will suffice: see Kemmis v Kemmis Welland and Others Intervening); Lazard Brothers and Co (Jersey) Ltd v Norah Holdings Ltd and Others [1988] 1 WLR 1307, CA.
The defendants have applied to this court for an order summarily terminating the claimant's section 10 application without a trial. This is my judgment on that application.
There are two routes whereby summary termination may be sought. They are, first, for an order for strike out under CPR 3.4(2) and, second, for summary judgment under CPR 24.2. Both routes are travelled by the defendants. In addition they say that the ex parte orders granting leave to serve the claim out of the jurisdiction on the second and seventh defendants are flawed by a breach of the duty of candour and the grant of leave should therefore be set aside. Frankly this additional argument struck me as a makeweight.
CPR 3.4(2) has three heads or grounds whereby a strike-out may be sought. The first is that "the statement of case discloses no reasonable grounds for bringing or defending the claim". This is explicated and exemplified by CPR PD3A paras 1.4 and 1.6 as follows:
claims which are incoherent and make no sense;
claims which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant;
a defence which consists of a bare denial or otherwise sets out no coherent statement of facts; or
the facts set out in a defence, while coherent, would not even if true amount in law to a defence to the claim.
The second head or ground is that "the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings". This is explicated by CPR PD3A para 1.5, which says that "a claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded".
The third head or ground is where "there has been a failure to comply with a rule, practice direction or court order", which is not relevant here.
CPR PD3A para 1.7 provides:
This language appears to suggest that a strike-out application under CPR 3.4 may be made where a party believes that his opponent's case has no real prospect of success on the facts. This is, to put it mildly, very odd as a dismissal of a case in such circumstances is precisely what CPR 24.2 is for, as will be seen. The Family Procedure Rules contain similar provisions (but no provision for summary judgment). FPR 4.4(1) contains very similar strike out provisions to those in CPR 3.4(2). FPR PD4A paras 2.1 – 2.3 are near replications of CPR PD3A paras 1.4 – 1.6. Para 2.4 is very similar to CPR PD3A para 1.7, and provides:
These family rules and practice directions were very recently considered by the Supreme Court in Wyatt v Vince [ 2015] UKSC 14. At para 27 Lord Wilson JSC described FPR PD4A para 2.4 as "an unhelpful curiosity". He stated:
By parity of reasoning I reach the same conclusion concerning CPR PD3A para 1.7 inasmuch as it suggests that CPR 3.4(2)(a) can be construed to encompass serious arguments about real prospect of success. Such arguments should be reserved for applications under CPR 24.2. Under CPR 3.4(2)(a) arguments about real prospect of success can only arise in a literal sense, as described by Lord Wilson i.e. a claim which is legally unrecognisable has no prospects of success.
I similarly conclude that the reference in CPR PD3A para 1.5 to an abusive claim being one which is "obviously ill-founded" is another unhelpful curiosity. What that adds to a claim which is "incoherent" or "makes no sense" or which does "not disclose any legally recognisable claim" in para 1.4 is hard to imagine.
So I turn to CPR 24.2. This provides:
The central question is whether or not a party has real prospects of success. It is the mirror image of the test for permission to appeal in CPR 52.3(6) and FPR 30.3(7). Under those provisions I had suggested that the test should be whether the appellant had shown that there was a better than evens chance of the appeal succeeding. I reasoned, I believe with logic, that if that were not so there would be a real prospect of failure not success (see NLW v ARC [2012] EWHC 55 (Fam) [2012] 2 FLR 129). But that has been roundly condemned as heretical from all quarters and I have repented of my error.
The test for summary judgment and for permission to appeal is the same (see Tanfern Ltd v Cameron-MacDonald (Practice Note) [2000] 1 WLR 1311 at para 21). It is as pronounced by Lord Woolf MR in Swain v Hillman [2001] 1 All ER 91:
The bar is set low to weed out the hopeless case or appeal. As Lord Hobhouse put it in Three Rivers DC v. Bank of England [2001] UKHL 16, [2003] 2 AC 1 at paragraph 158:
In Easy Air Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) Lewison J, as he then was, at para 15 helpfully set out a list of principles in play on an application for summary judgment:
Principles ( v), ( vi) and ( vii) address the possibility that evidence may yet emerge which may turn a fanciful prospect of success into a real one. In Three Rivers DC v. Bank of England at para 160 Lord Hobhouse stated:
These statements recall the Ampthill Peerage Case [1977] AC 547, where the claimant John Russell sought to persuade the Committee of Privileges to order a blood test on him and his cousin Geoffrey Russell. John suggested that this evidence would prove that Geoffrey was illegitimate (contrary to a judicial declaration of legitimacy 50 years earlier by Swift J on 28 July 1926). The Committee refused to allow such evidence to come into being. Lord Simon of Glaisdale stated at 594 "if admitted, there is no reason why there should be any end to litigation. The bitter waters would never ebb". It was not a case, as Lord Wilberforce stated at 574, "where a certain and conclusive answer is waiting the moment it is asked for".
In the course of the hearing before me two cases were discussed where a summary judgment application was adjourned in order that disclosure might happen. They were Emerald Supplies Ltd & Ors v British Airways Plc & Ors [2014] EWHC 3514 (Ch), which is under appeal, and Arsenal Football Club Plc v Elite Sports Distribution Limited [2002] EWHC 3057 (Ch). In the latter case Mr Vos QC, as he then was, drew an analogy with the power to grant pre-action disclosure pursuant to the (renamed) Senior Courts Act 1981, section 33, and CPR 31.16, where it may be said that Parliament has equipped Mr Micawber to go angling. Mr Vos QC stated at para 35:
When considering the question of incomplete evidentiary materials I do regard the analogy with the rules governing pre-action disclosure as helpful and relevant. It would be bizarre if a claimant was in a worse position vis-à-vis disclosure after starting an action than before. The test for pre-action disclosure is by no means stringent. It has recently been confirmed by the Court of Appeal in Jet Airways (India) Ltd & Ors v Barloworld Handling Ltd [2014] EWCA Civ 1311 at para 4 by Moore-Bick LJ as being no more than:
Having completed this somewhat lengthy legal tour d'horizon I turn to the applications before me.
On behalf of the defendants (apart from the seventh defendant) Miss Angus QC argues that the claim should be struck out or summarily dismissed for the following reasons:
i)	The claimant has not identified one single disposition that took place in favour of a defendant between October 2006 and October 2012.
ii)	The claimant has not identified any matters which could conceivably prove the necessary bad motive. The reliance on a letter written by Jack in 1952 just before his first marriage is hopeless.
iii)	The claimant has no prospect of success at trial in persuading the court to exercise the discretion under section 10 in her favour having regard to the scale of her assets as stated in her first witness statement at para 133. The fact that she may have lost some of that value since then by mismanagement cannot avail her.
In addition, as I have stated above, as regards the second defendant, who lives in New York, the order for service out was flawed by a want of full and frank disclosure. Further, a payment order under section 10 may not be enforceable in New York.
For the seventh defendant Mr Rajah QC adopts Miss Angus QC's arguments (i) to (iii) and advances equivalent arguments in relation to service on his client in Switzerland. He also argues that the claim against his client is additionally abusive because the claimant has commenced two actions against his client in Switzerland which are inconsistent with the claim brought against her here.
I propose to address the argument about a breach of full and frank disclosure at the end of this judgment when I have disposed of all the other arguments. In order to address those arguments it is necessary to fill in some more of the factual background.
One piece of evidence which is relied on by the claimant is a letter written by Jack to his business partner Len Brown on 13 January 1952 just before his first marriage to Zehava on 20 January 1952. In it he stated "Please see to it that all my possessions in banks, etc and shares in [Allied Commercial] etc [go] to my sisters and their children and mother (Charlotte Dellal) and the most Zehava receives is £1,000. … This may sound a strange request. But DO IT." (emphasis in original).
This is relied on by the claimant as showing that an abiding concern of Jack's was to favour his own blood relations over those he happened to marry.
I move forward 45 years to 1997. Shortly after his marriage to the claimant Jack transferred all his remaining shares in Allied Commercial Holdings (ACH) to his then living children. Company accounts show that ACH's net assets as at 31 March 2008 were £56.4 million.
The existing evidence, such as it is, shows that ACH was by no means the sole vehicle through which Jack conducted his business. A witness for the claimant is Mr James Woolf, who was a friend and business partner of Jack. On 13 July 2009 Jonathan Raymond, Jack's godson and assistant, sent an email to Mr Woolf, explaining that ACH was merely a trading vehicle and that the larger investments were held in other entities. He wrote in his witness statement:
This suggests that substantial transactions were undertaken through single purpose vehicles which may well have been trusts.
In his witness statement Mr Woolf further explains that a Panamanian company called Tatich Financing Inc was "the entity which provided all the money" in respect of the deals that he and Jack did. Tatich is a company established in Panama in 1978. There is evidence deriving from a SEC filing for a US company, Brilliant, in which Tatich was a shareholder, which suggests that the seventh defendant had the authority to vote and dispose of the shares held by Tatich. Further, Jack's sister Violet, the seventh defendant, was stated by an accountant employed by ACH to be the beneficial owner of Tatich in a letter written to Artemis Trustees Ltd in Guernsey on 1 August 2006. In his witness statement at para 23 Mr. Woolf explained that "during Jack's lifetime Jack was Tatich and Tatich was Jack." He referred at paras 20 - 22 to a number of emails which showed, he suggested, that Tatich was Jack's alter ego.
In 2007 difficulties arose in the marriage of Jack and the claimant. The claimant consulted Mr Raymond Tooth. A document from Mr Tooth's file has been produced which shows that the claimant believed that Jack was "probably worth £750m although he will deny this". In her witness statement at para 61 she refers to Jack having told her that he has a "secret stash" of money, if he needed it. She believed that that "stash" was £50m.
In reaction to the claimant consulting Mr Tooth, Jack consulted Sandra Davis of Mishcon de Reya. Miss Davis's assistant was Melissa Lesson. Jack attended along with his son Guy, the first defendant, two meetings with Miss Davis and her helpers on 18 April and 7 June 2007, and there was a telephone discussion between Jack and Miss Lesson on 3 May 2007. Following Jack's death the claimant secured the file of Mishcon de Reya (but not certain internal emails which were disclosed later). In her witness statement the claimant summarised the meetings in the following terms at para 113:
( v) It is suggested that Guy was holding monies on trust for Jack.
( vi) Jack confirms that Violet is the settlor of some of the family trusts and Sandra advises that it looks "fishy".
( vii) Guy referred to me seeing Jack lose a million pounds in a casino as though it were a regular occurrence (which it was).
( viii) He said he might leave me another £20million in his Will.
That was not a complete or correct summary. The claimant is wrong to suggest that the shares in ACH were transferred three years after her marriage to Jack. They were transferred less than five months after her marriage to him. Perhaps more significant is that there was a clear understanding between Jack and Guy on the one hand and the lawyers at Mishcon de Reya that there were in existence a number of trusts with the inference that they held large sums. This is hardly surprising. The letter to Artemis Trustees Ltd in Guernsey to which I have referred above speaks volumes.
The account by the claimant in her witness statement omits reference to the telephone conversation with Miss Lesson on 3 May 2007. In it Jack stated that he had no property, which was obviously incorrect as he owned a country house in Hampshire the value of which the claimant has estimated at £5m. He further stated he had £10m in banks; £5m in investments; no policies; £400,000 owed to him; £5m in chattels; tax liabilities of £500,000; no borrowings, trusts or pensions; and income of £1.5m net annually. The claimant should not have omitted reference to this. On the other hand the later email disclosure from Mishcon de Reya shows that the lawyers there did not believe this statement of means by Jack to be true. I agree with their scepticism.
I have referred above to the statements of Jack's wealth in Rich Lists. The claimant relies on these. It is very dangerous to rely on these lists as an accurate or even approximate statement of an individual's wealth. Anyone who has practised in the field of big money ancillary relief knows how wildly inaccurate they can be, both in terms of overall quantum and also as to the division between wealth held by the individual and wealth held by members of his or her family or by family trusts or similar structures.
By the time the six year period began to run in October 2006 Jack was very old and there is evidence from the claimant that he was preoccupied with things eschatological. However, it is the evidence of Mr Woolf that right up to his death Jack remained commercially active in property deals. Mr Miles QC makes the fair point that the defendants have never denied this. In his skeleton argument at para 40 Mr Miles QC lists a number of transactions in the six year period as follows:
(5) A €15 million Hotel Jalta/ Verdi deal in Prague.
In July 2008, within the six year period, Jack and the claimant came close to concluding a post-nuptial settlement. This would have provided:
i)	A lump sum of £11.5m
ii)	Transfer of the country property, now estimated to be worth £5m
iii)	Transfer of all paintings and contents to the claimant, now estimated to be worth £4m
iv)	Transfer of the shares of the company which owned the hotel in Prague, then estimated to be worth £8m.
On any view the lifestyle of Jack and the claimant was very high. In para 42 of his skeleton Mr Miles QC wrote:
In her oral submissions Miss Angus QC described the claimant's case as "extraordinarily weak". Mr Rajah QC described the claim against the seventh defendant as "non-existent". Mr Miles QC described the applications for summary termination as "completely misconceived". These are submissions of which Marshall Hall KC would have been proud.
In my judgment the claimant has put up a strong prima facie case that at his death Jack had access to very considerable resources. The evidence is however thin as to how those resources were held. It is a reasonable inference that most were held in trusts. It may be that some trusts were established long ago. On the other hand there is the hearsay evidence of Mr Raymond that individual trusts were set up for specific deals.
The evidence is thin indeed that outright dispositions were made to the defendants during the six year period. The case for the claimant in this regard is almost entirely inferential. It goes like this. If Jack was very rich, and if his estate appears to have mysteriously shrunk then the money can only have gone to his blood family. There are no other candidates.
In his will made on 15 November 2006 Jack did not make any provision for his children other than the children of him and the claimant. In clause 8 he expressly stated that he left his adult children nothing as "provision has been made for them during their life times". Yet the claimant's case is that from that point onwards vast sums were funnelled by Jack directly to those very children. I suppose this is possible, but it does seem unlikely. It seems much more likely that if dispositions were made that they were to trusts, probably settled by his sister who he always seemed to use for such purposes.
It is noteworthy that in the inheritance tax return signed by the claimant as personal representative on 19 August 2013 she declared to HMRC that Jack had not made any lifetime gifts or transfers of value after 18 March 1986. However she hedged that declaration by stating that Jack had involvement in a number of offshore structures, either as beneficiary or settlor, and that there may be significant assets within such structures. These statements do not sit well with a case of outright dispositions since 26 October 2006 in favour of the defendants.
Miss Angus's case on the strike out route is that the claimant has failed to comply with the elementary requirements of CPR 8.2(b) in that the claim form does not specify with sufficient particularity what the claimant is seeking or the legal basis for it. She argues that it is a requirement of adversarial proceedings that those who make charges must state at the beginning what they are and the facts upon which they seek to base them and it is an abuse of process for a claimant to issue a claim against a party at a time when she is not able to plead a factual basis for a claim against him in the hope that facts that will enable her to properly plead her case will emerge on disclosure. She relies on Hytrac Conveyors Ltd v Conveyors International Limited [1983] 1 WLR 44 at 47G-48.
As I have shown, we have moved on a long way since 1983, particularly with the extension of section 33 of the Senior Courts Act 1981 to all forms of proceedings by section 8 of the Civil Procedure Act 1997 and the Civil Procedure (Modification of Enactments) Order 1998 (S.I. 1998 No. 2940). Before that the power had been confined to personal injury cases. These wider powers are procedurally regulated by CPR 31.16 and came into force with the rest of the CPR on 26 April 1999. It seems to me that we now operate in a different legal world to that which pertained when Hytrac was decided in 1983. This brave new world allows full pre-action disclosure to be made where the applicant can put up a prima facie case which is more than a speculative punt. Mr Vos QC was undoubtedly right in my judgment in the Arsenal case to say that a claimant can plead a case in a laconic or protean way in anticipation of particularisation following disclosure. That is what the claimant has done here. I reject Miss Angus's contention.
As regards the seventh defendant Mr Rajah QC asserts that it is abusive for the claimant to issue proceedings against her in circumstances where she (the claimant) has issued two sets of proceedings against the seventh defendant in Switzerland. Mr Rajah QC says that these Swiss proceedings are inconsistent with the claim made here. He says that the claimant is approbating and reprobating, having her cake and eating it and running with the hare while hunting with the hounds. In effect he says that the claimant must elect which proceedings to pursue.
The Swiss proceedings are described by the claimant's Swiss lawyers, Froriep, in a letter dated 27 February 2015. The claimant has commenced separate proceedings in Nyon and Geneva. The Nyon proceedings sought an "account" and a freezing injunction. The proceeding seeking an "account" is made under Art 400 of the Swiss Code of Obligations. This is within Title 13 of the Code which is about agency contracts. Art 400(1) provides that:
According to the letter from Froriep an "account" here does not mean an "account" in the term-of-art sense used by equity lawyers here. It means only "a detailed report of the activities carried out by the agent". It can be seen therefore that the claimant is not seeking anything more than information, although it is true, as Mr Rajah QC says, that to obtain this relief the seventh defendant has to be acting as an agent, whereas under section 10, as I have explained the bedrock premise is that the seventh defendant has either received dispositions outright or as a full (i.e. not bare) trustee.
Interestingly, in those proceedings the seventh defendant is arguing that it was purely a succession dispute and that the only place of jurisdiction is the UK.
The application for a freezing injunction was to preserve documents held by the seventh defendant. That was initially granted but was later discharged. The claimant is not appealing as she has been advised that by the time the appeal would be heard the documents would likely have disappeared.
The Geneva proceedings concern monies held by Tatich with Leumi Private Bank SA. An ex parte freezing order has been made in respect of a bank account at the Bank. That is still in force. The claimant has applied for witnesses to be summoned before the court in Geneva. That has been denied, and an appeal has been mounted which is pending.
Mr Miles QC argues that it is perfectly legitimate to run alternative cases within a single English suit. A fortiori, alternative cases in different suits in different jurisdictions. To say "if, which is denied" has been the mainstay of pleaders for centuries. He relies on Clarke v Marlborough Fine Art (London) Ltd [2002] 1 WLR 1731, Ch D. There at para 30 Patten J (as he then was) stated:
In my judgment it is not abusive, at least at this early stage, for the claimant to proceed against the seventh defendant on different bases in different places.
I have concluded that the defendants' applications to strike out the claimant's section 10 application does not in any respect meet the standards specified in CPR 3.4(2)(a) or (b) and accordingly that limb of the termination application is dismissed.
However, I am by no means so satisfied in relation to the defendants' applications for summary judgment. I have already adverted to the present poverty of the claimant's case as to actual dispositions and the existence of the statutory motive. On the other hand, I do not go so far as to say that the claimant's case is merely a speculative punt. In my judgment I should follow the course mapped out by Mr Vos QC in the Arsenal case. The application for summary judgment should be adjourned with liberty to restore and there should be specific disclosure pursuant to CPR 31.12. The disclosure should be limited to all documents in the custody possession or power of each defendant which evidence any individual transfer of money or any other thing of (or worth) £10,000 or more to or for them from 28 October 2006 until Jack's death and which derived directly from him, or from any entity over which he had de jure or de facto control. The scope of the disclosure proposed by the claimant is too wide; that proposed by the defendants is too narrow.
For the purposes of determining if an entity, such as a trust, was under Jack's de facto control the test to be applied should be as set out by me in para 5 of BJ v MJ (Financial Remedy: Overseas Trusts) [2011] EWHC 2708 (Fam), [2012] 1 FLR 667.
These documents will enable everyone to determine if the claimant has a real prospect of successfully proving her section 10 claim, or whether it is hopeless. It may well be hopeless, but the judgment whether it is, or is not, should be made on an informed basis.
My overarching conclusion is that it would be fundamentally unjust to terminate the application at this stage before there has been a scrutiny of the underlying documents which would prove conclusively whether or not the averrals by each of the defendants that there have been no relevant dispositions in their favour are true or false.
For the avoidance of any doubt I do not order that any defendant should file a witness statement at this stage. I am merely ordering disclosure of those key documents which will allow an informed decision to be reached at to whether this claim is hopeless or realistic.
The second and seventh defendants are resident overseas in New York and Switzerland respectively. Mr Rajah QC submitted that an order for disclosure cannot be made against them unless and until they have submitted to the jurisdiction. I think that what he meant was that until and unless the challenged orders authorising service out have been affirmed disclosure cannot be ordered against them. I did not understand him to say that disclosure cannot be ordered against a non-resident defendant who has been properly served out unless that defendant has made an elective submission to the jurisdiction. That would be a very surprising position. As will be seen, I will dismiss the challenge by the second and seventh defendants to the order granting leave to serve out. Therefore the disclosure order is properly made against them. If I am wrong about this then, if these defendants have not submitted to the jurisdiction by 1 May 2015, I authorise, in lieu of the order for disclosure, letters of request pursuant to CPR 34.13. The request will be for those defendants to attend their local court and to produce the documents I have specified above.
At para 32.iii) above I have set out a further argument of Miss Angus QC. She says that having regard to the scale of the claimant's wealth there is no prospect of the court awarding her more in these proceedings. In her first witness statement the claimant set out assets and liabilities as follows:
25 York Terrace West 8,500,000
New Cavendish Street 3,275,000
22 Nottingham Terrace 600,000
Hampshire home 5,000,000
Cape Town 1,100,000
less mortgage (10,000,000)
Middle East development 26,500,000
Art 4,000,000
Jewellery (insurance) 1,000,000
Cars 83,000
Cash and investments 1,700,000
less liabilities (268,000)
In her second witness statement the claimant asserted that her overall fortune had somewhat diminished. I agree that she cannot rely on her mismanagement or unwise speculations in a rising market. However, although it seems improbable that she would be awarded more having regard to what she has (or had), I cannot say that her claim is hopeless.
It is true that as regards the second and seventh defendants the claimant has adduced no positive evidence that a payment order would be enforceable against them in, respectively, New York and Switzerland. Mr Rajah QC concedes that a substantive section 10 order would be enforceable against the seventh defendant in Switzerland. Miss Angus QC suggests that a section 10 order would not be enforceable under the New York Recognition Act (as expressed in section 5301 of the New York Civil Practice Law and Rules) but may be under principles of international comity. In my judgment these doubts are not a reason for concluding now that the claimant's claim is hopeless against the second defendant. That is for another day.
In his written submissions Mr Rajah QC also suggested, somewhat faintly, that the claimant may struggle to show that the section 10 application against the seventh defendant is governed by English law. I can give this argument short shrift. In my judgment it just cannot be said that the claimant has no prospect of success in showing that English law applies. On the contrary it seems to me that it is overwhelmingly likely that it does.
I now turn, finally, to the argument that the orders granting leave to serve the second and seventh defendants out of the jurisdiction should be set aside for want of full and frank disclosure.
CPR PD6B para 3.1(20)(a) stipulates that leave to serve out of the jurisdiction is required where "a claim is made under an enactment which allows proceedings to be brought and those proceedings are not covered by any of the other grounds referred to in this paragraph". Proceedings under the 1975 Act were expressly named under the old version of this subparagraph. They are not covered in subparagraphs 1-19. Therefore leave to serve out is required. The test for the grant of leave is that there must be shown a serious issue to be tried. That test must be interpreted conformably with the test for pre-action disclosure otherwise strange inconsistencies would arise.
Service out of the jurisdiction has been described in cases as "the exercise of an exorbitant jurisdiction" and therefore requiring much caution, but again, as in so many other areas, we have moved on. Leave to serve out is not required where the defendant is resident in one of the other 27 countries of the EU. Or in another part of the United Kingdom. It is not required in any family proceedings (see FPR 6.41). So it is only occasionally the exercise of an exorbitant jurisdiction.
Putting aside the question of non-disclosure, I am satisfied that the claimant demonstrated "a serious issue to be tried" and that the orders for service out were properly made by District Judge Hess.
In my decision of L v K (Freezing Orders: Principles and Safeguards) [2014] Fam 35 I sought to analyse all the relevant principles governing the grant of and challenge to an ex parte freezing order. An ex parte freezing order is one of the law's nuclear weapons. If improperly obtained it can cause untold and potentially irremediable damage both economically and reputationally. Therefore a very strict and unyielding approach is adopted by the courts. The same cannot be said of an improperly obtained order for service out. If it has been improperly obtained then any harm caused can easily be remedied by orders for costs or damages. In truth it is hard to see what actual harm would be caused, other than costs and some inconvenience, if the defendant improperly served moves quickly to set aside the order.
In the Hida Maru [1981] 2 Lloyd's Rep 510 the Court of Appeal upheld a decision by Neill J not to set aside service, because he took the view that, if the full facts had been before the judge, he would still have given leave. This was also the case in Network Telecom (Europe) Ltd v Telephone Systems International Inc [2003] EWHC 2890 (QB). In Masri v Consolidated Contractors International Co Sal & Ors [2011] EWHC 1780 (Comm) the non-disclosure was described as " very material", but service was not set aside. On the other hand in Ophthalmic Innovations International (UK) Ltd v Ophthalmic Innovations International Inc [2004] EWHC 2948 (Ch), [2005] I.L.Pr 10 service was set aside on this ground, as it was in Re Yugraneft [2008] EWHC 2614 (Ch). As in so many fields it all depends.
In Masri Burton J considered a failure to reveal foreign proceedings to be "particularly material" (para 59). At para 61 he stated, unsurprisingly, that "much depends upon the seriousness of the non-disclosure, and whether or not it is accompanied by other non-disclosures".
Apart from some nit-picking points, which I ignore, the big instances of non-disclosure which are relied on are the failure to disclose, when referring to the Mishcon de Reya file, the conversation between Jack and Melissa Lesson on 3 May 2007, and, as far as the seventh defendant was concerned, the existence of the Swiss proceedings.
I am of the view that those matters ought to have been disclosed but had they been leave to serve would definitely have been granted nonetheless. In my judgment the "but for" test in the Hida Maru is the one to be generally used rather than the strict, almost penal, approach which obtains where an ex parte freezing order has been improperly obtained.
I therefore reject this aspect of the application by the defendants.
Note 1 It also created an IHT nil-rate trust which is irrelevant for my purposes. [Back]