Source: https://www.ucc.ie/academic/law/restitution/archive/englcases/dexter.htm
Timestamp: 2019-03-18 23:40:30
Document Index: 288509839

Matched Legal Cases: ['art 5', 'arts 2', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 6']

Dexter v Harley 8/3/2001
DEXTER LTD (IN ADMINISTRATIVE RECEIVERSHIP)
EDWINA AMETHYST HARLEY
A Sutcliffe for the Claimant
L Ife for the Defendant
1. Dexter Limited, the Claimant, claims to have suffered a substantial loss as a result of breaches of fiduciary duties on the part of a former director, and other persons. It asserts that part of the money which was wrongfully removed from its possession by those concerned found its way into an account in the name of the Defendant. It has brought this action against her to recover that money, alleging that her involvement makes her a constructive trustee of the money which passed through her account, either on the basis of knowing receipt or of dishonest assistance. However, the Defendant lives in Spain, and none of the things alleged as regards her in respect of the money happened within the jurisdiction of this court. She therefore applies to have the proceedings set aside on the basis that they cannot be brought against her in this court, having regard to the terms of the Brussels Convention.
2. The Claimant obtained a freezing order against the Defendant on 12 December 2000, the day before the Claim Form was issued. That order has been continued from time to time since then. It applies to me for that order to be continued now until trial or further order in the meantime. So far, however, only the question of jurisdiction has been argued. This judgment therefore is limited to that issue.
3. The Claim Form specifies the claim as being for £315,422.88 �as unjust enrichment and/or monies had and received�. In the Particulars of Claim, however, the claim is clearly put on the basis of constructive trust. It is accepted that I should look at the Particulars of Claim as well as the Claim Form, and that I can only consider them in their present form. I will first set out a summary of the allegations as they appear from the Particulars of Claim.
4. The Claimant was incorporated in May 1997 with, at that stage, a sole director, a Mr Haydon-Baillie (�HB�) and as company secretary Martin Vlieland-Boddy (�MVB�) who is the Defendant�s son. She has another son, Clive Vlieland-Boddy (�CVB�), who also features in the history. MVB became a director of the Claimant on 30 September 1997 and is alleged to have acted as a de facto director before that.
5. The Co-operative Bank made credit facilities available to the Claimant, for the purchase of aircraft parts, and £2 million was drawn down on 3 October 1997, supposedly for the purchase of an aircraft engine from an independent third party. In fact the items purchased already belonged to HB, and were worth nothing like £2 million, and the £2 million was not paid to the ostensible seller. Instead it was paid out for the benefit of HB, MVB and CVB. The alleged sequence of payments is of some importance, and I will deal with this in more detail.
6. The money was advanced to the Claimant on 3 October 1997. The allegation is that it was ultimately paid into a particular account called the Marshalls account at the Blandford Forum branch of National Westminster Bank. Marshalls seems to be a firm of insolvency practitioners, of which CVB was a partner, and MVB was a consultant to it. Out of that account, so far as relevant, £464,250 was paid to another account at the same branch, entitled M Vlieland-Boddy & Co. Clients Account (a firm of which MVB and his wife were then partners). £314,250 was paid from this last account into an account at Lloyds Bank in the Channel Islands, in the name of Portman Channel Islands Limited (�Portman�). There was then a series of transactions between accounts, all with Portman and remaining, therefore, within the Channel Islands. Portman held the money at first for the account of one Michael Hughes, with MVB as the contact address. On 8 October 1997 the money was credited to a fixed bond account for 12 months. On the expiry of the bond, the sum of £315,422.88 was paid from the bond account to an account in the name of the Defendant. That is the first involvement of the Defendant. Various withdrawals and credits were made from and to the Defendant�s account. On 12 July 1999 £291,870.55 was transferred from the Defendant�s account into another account, in the name of MVB. On 23 August 1999 that sum was transferred to a second account in the name of the Defendant.
7. In para 19 of the Particulars of Claim it is said to be the Claimant�s case that all the payments described above, starting with the payment out of the MVB & Co client account at National Westminster Bank Blandford Forum to the Portman account at Lloyds Channel Islands, were effected by or at the direction of either MVB or the Defendant, but in his submissions Mr Sutcliffe accepted that he could not assert that the Defendant�s involvement arose before the transfer of funds to the first of the accounts in her name mentioned above, on 8 October 1998.
8. MVB is alleged to have acted fraudulently and in breach of his duties to the Claimant in causing the sum of £315,422.88 to be applied in favour of the Defendant, rather than for the Claimant, in fraudulent breach of trust. The Defendant is alleged, in para 21 of the Particulars of Claim, to have known that the sum was transferred to her in breach of trust on the part of MVB, or to have been reckless as to whether that was the case, or to have failed to make such enquiries as a reasonable and prudent person would have made in the circumstances. It is further alleged that the circumstances in which she received the money made it unconscionable for her to retain it. That is a case of knowing receipt. In addition there is a case of dishonest assistance, which is based on the Defendant having allowed MVB to transfer money belonging to the Claimant into her account, and transferring, or allowing the transfer of, money to the MVB Portman account and then into the second account in her own name. The acts relied on in support of this do not include anything done prior to causing the transfer of money from the bond account into the first of her accounts. The Particulars of Claim also include a claim in conspiracy, at paras 24 and 25, but the overt acts do not include anything prior to the receipt of the money into the first of her accounts, and they are limited to that receipt and the dealings with the funds thereafter as described above. The Claimant�s claim is that the Defendant is a constructive trustee for it of the £315,422.88.
9. It is thus clear that the facts which gave rise to the Claimant�s claim against MVB and some others occurred, partly, within the jurisdiction, but that all the facts which are relied on to attach liability to the Defendant, as distinct from others, occurred outside the jurisdiction, in the Channel Islands (specifically, as I understand it, in Alderney). Given that the Defendant is domiciled in Spain, for the purposes of the Brussels Convention, the question is whether the Claimant can show that the case falls within one of the exceptions to the general rule in favour of the country of the Defendant�s domicile. That turns on whether it is enough to be able to rely on the acts done within the jurisdiction by MVB and others, not including the Defendant, which are at the start of the chain of events leading to the allegation against the Defendant, or whether the Claimant has to show some acts (or omissions) within the jurisdiction which involve the Defendant herself.
10. The Brussels Convention has effect in English law as a result of the Civil Jurisdiction and Judgments Act 1982. Article 2 lays down the general rule, that persons domiciled in a Contracting State shall be sued in the courts of that State, but this is subject to the other provisions of the Convention. The only one relied on is art 5(3), that
A person domiciled in a Contracting State may, in another Contracting State, be sued ...(3) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred.
11. In Handelskwekerij G J Bier BV v Mines de Potasse d�Alsace SA (Case 21/76) [1978] QB 708, the European Court of Justice had to consider what was meant by �the place where the harmful event occurred�. The alleged facts were that the Defendant, engaged in mining in France, discharged pollutants into the Rhine, which flowed down river and injured the Plaintiff carrying on a nursery gardening business in the Netherlands. The claim was brought in the Dutch courts, and the Defendant argued that the harmful event was the discharge in France, rather than the result in the Netherlands. The European Court of Justice held that both the place of the discharge and the place where the discharged materials caused injury to the Plaintiff were places where the harmful event occurred, so that the Defendant could be sued in either place. In its judgment the court said this, after referring to arts 2 and 5(3):
10. However, art 5 makes provision in a number of cases for a special jurisdiction, which the plaintiff may opt to choose.
11. This freedom of choice was introduced having regard to the existence, in certain clearly defined situations, of a particularly close connecting factor between a dispute and the court which may be called upon to hear it, with a view to the efficacious conduct of the proceedings.
12. Thus, in matters of tort, delict or quasi-delict art 5(3) allows the plaintiff to bring his case before the courts of the place where the harmful event occurred.
13. In the context of the Convention the meaning of that expression is unclear when the place of the event which is at the origin of the damage is situated in a state other than the one in which the place where the damage occurred is situated, as is the case, inter alia, with atmospheric or water pollution beyond the frontiers of a state.
14. The form of words �place where the harmful event occurred�, used in all the language versions of the Convention, leaves open the question whether, in the situation described, it is necessary, in determining jurisdiction, to choose as the connecting factor the place of the event giving rise to the damage or the place where the damage occurred, or to accept that the plaintiff has an option between the one and the other of those two connecting factors.
15. As regards this it is well to point out that the place of the event giving rise to the damage no less than the place where the damage occurred can, depending on the case, constitute a significant connecting factor from the point of view of jurisdiction.
16. Liability in tort, delict or quasi-delict can only arise provided that a causal connection can be established between the damage and the event in which that damage originates.
17. Taking into account the close connection between the component parts of every sort of liability, it does not appear appropriate to opt for one of the two connecting factors mentioned to the exclusion of the other, since each of them can, depending on the circumstances, be particularly helpful from the point of view of the evidence and of the conduct of the proceedings.
18. To exclude one option appears all the more undesirable in that, by its comprehensive form of words, art 5(3) covers a wide diversity of kinds of liability.
19. Thus the meaning of the expression �place where the harmful event occurred� in art 5(3) must be established in such a way as to acknowledge that the plaintiff has an option to commence proceedings either at the place where the damage occurred or the place of the event giving rise to it.
12. In order to show that the present claim may be brought against the Defendant in this court, the claim must be a matter of tort, delict or quasi-delict, and the (or a) harmful event, understood in accordance with the judgment just quoted, must have occurred in England or Wales. In Kleinwort Benson v Glasgow City Council [1999] 1 AC 153, one of the cases arising from local authority swap transactions, Lord Goff of Chieveley said, at p 172, that a claim for restitution such as was made in that case could not be brought within art 5(3),
if only because a claim based on unjust enrichment does not, apart from exceptional circumstances, presuppose either a harmful event or a threatened wrong.
He approved the dissenting judgment of Leggatt LJ in the Court of Appeal on the same point at [1996] QB 691-2. The submission that art 5(3) did apply was based on words of the European Court of Justice in Kalfelis v Bankhaus Schr�der M�nchmeyer Hengst & Co (Case 189/87) [1988] ECR 5565, that the article,
covers all actions which seek to establish the liability of a Defendant and which are not related to a contract within the meaning of article 5(1).
13. In Casio Computer Co Ltd v Sayo (20 December 2000 unreported) Mr Anthony Mann QC sitting as a deputy judge of this Division had to consider a similar question to that which is before me. Money had been diverted from the Claimant which was said to have found its way to various people including a Mr Kaiser. He was domiciled in Spain. The claim was based on constructive trust, with allegations of breach of fiduciary duty, knowing receipt and dishonest assistance, just as is alleged in the present case. Mr Kaiser sought to have the proceedings set aside on the basis that art 5(3) was not satisfied. Mr Mann held that the claim was of a kind which fell within the article, distinguishing what was said in Kleinwort Benson v Glasgow City Council on the basis that the kind of unjust enrichment or restitution claim involved there did not involve a harmful event, but that a constructive trust claim does. Miss Ife, for the Defendant before me, is prepared to accept for present purposes only that this is correct, while reserving her position in a higher court. I see considerable force in Mr Mann�s judgment on the point and I will proceed on the basis that the claim is of a kind which falls within art 5(3).
14. Then, however, comes the question whether any harmful event happened within England. Mr Mann had to consider that as well. On the facts of his case, as alleged, money belonging to Casio came under the control of Sayo, who was an employee of Casio and was supposed to invest it for the benefit of Casio. It came into an account in the name of Casio at a bank in London, over which both Sayo and one Tsuru were the signatories. Money was then transferred from there to another account at the same bank of which Tsuru was the sole signatory, and in turn from that account to another, known as the Alpha account, also in London, for the benefit of an Isle of Man company known as OVM, of which Mr Kaiser was a director. From there, it was transferred to an account of OVM in the Isle of Man, and thence further on. Mr Kaiser was sued on the basis that he procured the payments to and by OVM, so giving dishonest assistance. Mr Mann accepted that acts of assistance could constitute harmful events, and that they could be said to occur in the jurisdiction either if they were done here or if they had the result that something happened here. It was therefore not necessary to show that Mr Kaiser had been in the country when (as alleged) he caused money to be transferred into or out of the Alpha account for the benefit of OVM. The transfers did happen here, and on that basis he accepted that the case as pleaded fell within art 5(3).
15. He also considered whether the damage occurred within the jurisdiction. In this respect the European Court of Justice has also provided some assistance, in Marinari v Lloyds Bank (Case C-364/93) [1996] QB 217. Mr Marinari had lodged with a Manchester branch of the bank some promissory notes with an exchange value of many millions of dollars, but the bank staff refused to return them and advised the police of their possibly dubious origin. As a result Mr Marinari was arrested for a time and was deprived of the notes. On those facts it seems clear that the harmful event happened in Manchester. However Mr Marinari, having returned home to Italy, sued the bank there, claiming that he had suffered consequential and indirect financial loss in Italy. The European Court of Justice, on a reference from the Italian courts, held that the scope of the harmful events in art 5(3) could not be,
construed so extensively as to encompass any place where the adverse consequences of an event that has already caused actual damage elsewhere may be felt
consequently, that term cannot be construed as including the place where, as in the present case, the victim claims to have suffered financial damage consequential on initial damage arising and suffered by him in another contracting state.
16. On the basis of that ruling, it might be said that the Claimant suffered the initial damage when the money was abstracted from its account and remitted to the Marshalls account, and that all that happened thereafter was no more than consequential and therefore irrelevant. That argument commended itself to Mr Mann in the Casio case. At para 22 he said that he thought Casio suffered loss when its money was removed from the accounts where it should have been held, which did not happen in England (I suppose it may have been in Japan) and that it did not seem to him that the acts of OMV or Mr Kaiser made the situation any the worse, or added to the Claimant�s loss. He did, however, say that, in the alternative, the loss was suffered when the money started to be dissipated, which was after it had left the Alpha account, but that was also outside the jurisdiction. Accordingly the �place where the damage was suffered� was not a basis on which jurisdiction could be established against Mr Kaiser, but the place where the act leading to the damage was committed was sufficient. He therefore refused to strike out the proceedings.
17. It seems to me that it might be said that, for a constructive trust claim to fall within art 5(3) at all, there must be a harmful event, and the essence of a harmful event is that it causes harm, or in other words damage, to the Claimant: compare para 16 of the judgment in Mines de Potasse, cited in para 11 above. It might therefore be said to be illogical if the harmful event relevant to a particular claim occurs after the victim has already suffered all the damage that he can rely on for the purposes of the article. On that basis Mr Mann�s alternative view, that the damage was caused after the money left the Alpha account, is the better view. Which view is right does not affect his decision in itself.
18. In the present case, Mr Sutcliffe, for the Claimant, submits that he can rely on the harmful events done by MVB and others in the jurisdiction, and does not have to focus on what is alleged against the Defendant. He accepts that all of the Defendant�s allegedly wrongful acts and omissions occurred (so far as the pleading goes) outside the jurisdiction, but he points out that the harm to the Claimant was caused by the removal of money from its account, within this jurisdiction, and its transfer to accounts of MVB and others, also within the jurisdiction.
19. Although those matters are clearly part of the chain of events which has to be pleaded and proved in order to establish liability against the Defendant, I cannot accept that it is sufficient, for the purposes of art 5(3), to point to acts within the jurisdiction which have nothing to do with the Defendant, and the proof of which, by themselves, would not establish liability on the part of the Defendant. In principle it seems to me that, in applying the concept of the harmful event to a constructive trust claim based on knowing receipt or dishonest assistance, it is not relevant to show that the original breach of trust or fiduciary duty by someone other than the Defendant took place in the jurisdiction if nothing which involved the Defendant occurred within the jurisdiction. The harmful event must, in my judgment, be a harmful event on the part of the Defendant, whether it is the act or omission of the Defendant from which the harm results, or the direct result of such an act or omission through its impact on the Claimant.
20. It can certainly be said that, in one sense, the Claimant had already suffered the whole of the loss which it did suffer before the money reached the Defendant�s account. However, on the footing that a constructive trust claim is within art 5(3) because (unlike some restitution claims) it does involve a harmful event, it seems to me that the harmful event must be that which the Defendant is responsible for, and must be one which causes damage which the Defendant is responsible for. I do not consider that the fact that the Claimant has a separate cause of action against MVB or others in respect of amounts which would or might include the sums the subject of the claim against the Defendant means that the Claimant had not suffered harm from the Defendant�s act or omission as alleged. This is not like a claim based on indirect consequences of the same act by the same person on the Claimant, and is therefore not open to the same objection as Mr Marinari�s contention, which would have given every victim an additional forum in which to sue, which in almost every case would be his or its own domicile. If the facts alleged by the Claimant are correct it did suffer harm from the Defendant�s acts or omissions in not returning the money once it got into her account and she became aware of it. In my judgment this interpretation of the article, as applying to such a claim as this in these circumstances, is consonant with the text and the scheme of the Convention.
21. The only relevant acts or omissions of the Defendant, as pleaded, took place in Alderney. Accordingly, I conclude that there is no basis for saying that art 5(3) permits the Claimant to sue the Defendant in this court.
22. In many cases there might be another basis for joining someone such as the Defendant in English proceedings, namely as an additional Defendant to proceedings brought here against, for example, MVB, under art 6(1). However, the Claimant has sued MVB to judgment (though not to execution) and had done so before bringing proceedings against the Defendant. There are other persons against whom the Claimant might bring proceedings, but so far as I am aware there are no other current proceedings, and therefore the Claimant cannot now proceed against the Defendant in that way.
23. For these reasons I accept Miss Ife�s arguments on behalf of the Defendant, and I will hear submissions as to the order I should make as a result.