Gomez & Ors v Encarnacion Gomez-Monche Vives & Ors [2008] EWHC 259 (Ch)

[2008] EWHC 259 (Ch)Case No HC07C01676
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/02/2008
Before
MR JUSTICE MORGAN
Between
(1)Jose Gonzalez GomezClaimants(2) Pablo Gonzalez GomezClaimant(3) Alvaro Gonzalez GomezClaimantEncarnacion Gomez-Monche VivesDefendantsGB Investment Holdings LimitedDefendantWalPart Trust RegisteredDefendantAnsbacher Trustees (Jersey) LimitedDefendant
Mr Nicholas Le Poidevin and Mr Tony Oakley (instructed by Farrer & Co) for ClaimantsMr Peter Rees (of Debevoise & Plimpton LLP) for 1 st DefendantHearing Hearing dates: 25 th& 28 th January 2008
Judgment

Introduction

[1]On 26th June 2007, the Claimants issued the Claim Form in this action. The Claim Form named four defendants. It contained a statement, on behalf of the Claimants, that the High Court of England and Wales had power under Council Regulation (EC) 44/2001 of 22nd December 2000 to hear the claim. The proceedings were duly served on the First Defendant. On 18th October 2007, the First Defendant applied for an order whereby the court would declare that it did not have jurisdiction, alternatively, would not exercise its jurisdiction, to try the claim. The application continued by seeking an order that the Claim Form be set aside or the proceedings be stayed. The ground put forward for the application were that the court did not have jurisdiction over the First Defendant under Council Regulation (EC) 44/2001, alternatively because Liechtenstein was a more appropriate forum in which to hear this claim.[2]The application involves the interpretation of Council Regulation (EC) 44/2001 of 22nd December 2000 (“the Judgments Regulation”). In particular, the application requires the court to consider and to apply Article 5 (6) of the Judgments Regulation which, so far as material, is in these terms:
“A person domiciled in a Member State may, in another Member State, be sued: … (6) as settlor, trustee or beneficiary of a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, in the courts of the Member State in which the trust is domiciled; …. ”
[3]In addition to the questions as to the interpretation and application of Article 5(6), the First Defendant contends that even if the court has jurisdiction to determine the Claimants’ claim against the First Defendant, the court has power to decline jurisdiction and should do so in favour of the claim being tried in Liechtenstein, which is said by the First Defendant to be a more appropriate forum.

The issues

[4]The issues which arise can be summarised as follows:(1) What trust or trusts are identified by the Claimants in the present case which come within the words of Article 5(6) which refer to: “… a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing …?”(2) Is the relevant trust domiciled in England?(3) In relation to the first part of the Claimants’ claim against the First Defendant, is the First Defendant “sued……as beneficiary…”?(4) In relation to the second part of the Claimants’ claim against the First Defendant, is the First Defendant “sued….as…..trustee….”?(5) If the court has jurisdiction under Article 5(6) in relation to all or part of the Claimants’ claims, is it open to the court to decline jurisdiction on the grounds of forum non conveniens?(6) If the answer to (5) is “yes”, should the court decline jurisdiction on that ground?

The declaration of trust

[5]There was a written declaration of trust in this case on 11th June 1984. The effective settlor of that declaration of trust was Alfredo Gonzalez Diez. The settlor died on the 16th September 1991, intestate and domiciled in Spain. The First Defendant is the widow of the settlor. The First Defendant is domiciled in Spain. The settlor and the First Defendant had five children, all sons, and the Claimants are three of those sons.[6]The original trustee under the declaration of trust was Fidei Trust Company Limited, a corporation incorporated under the law of Jersey. The principal asset of the trust was certain shares in Gonzalez Byass & Co Limited a corporation incorporated under the law of the Cayman Islands. Gonzalez Byass is the well known producer of sherry. It is believed that the original trustee, Fidei Trust Company Limited no longer exists.[7]On 16th September 1999, the party named as the Second Defendant in these proceedings, GB Investment Holdings Limited, a corporation incorporated under the law of the British Virgin Islands and the party named as the Fourth Defendant in these proceedings, Ansbacher Trustees (Jersey) Limited, a corporation incorporated under the law of Jersey, were appointed trustees of the trusts declared by the declaration of trust in place of Fidei Trust Company Limited. At that time, Ansbacher Trustees (Jersey) Limited was called St Helier Trust Company Limited. On 23rd December 2002, the party named as the Third Defendant in these proceedings, WalPart Trust Registered, a corporation incorporated under the law of Liechtenstein, was appointed trustee of the trust declared by the declaration of trust in place of Ansbacher Trustees (Jersey) Limited. Accordingly, from 23rd December 2002, the trustees of the trust declared by the declaration of trust have been GB Investment Holdings Limited and WalPart Trust Registered.[8]I was told that these proceedings have not been served on the Second, Third and Fourth Defendants and, indeed, the time permitted for service of the Claim Form on those defendants has now expired. Subject to an application to extend time for service which was made before that expiry.[9]The declaration of trust refers to Fidei Trust Company Limited as “the Trustee” and to Mr Gonzalez Diez as “the Settlor”. The declaration of trust recites that at the direction of the Settlor certain shares in Gonzalez Byass were transferred into the name of the Trustee to hold the same on the trusts of the declaration of trust, which the Trustee then proceeded to make.[10]The material terms of the declaration of trust are the following: Clause 1 “In this Deed the following words shall have the following meanings:–1.1 “Beneficiaries”: those persons resident outside the United Kingdom who are permitted by Article 28(B) of the Articles of Association of [Gonzalez Byass] to hold Ordinary Shares in [Gonzalez Byass].1.2 Trust Fund: means the Shares, any further property added to these trusts, all income and capital gains of such Shares and other property and all property from time to time representing the same.1.3 The Trust Period: the period from the date hereof until the death of the survivor of the Settlor and his wife.1.4 The Appointor: any person or persons who shall be appointed as the Appointor revocably or irrevocably in writing by the Settlor (or his wife if he is incapacitated) or by his widow ….” Clause 2 “The proper law of this Declaration of Trust shall be the law of England.” Clause 3 “3.1 The Trustee shall not sell dispose of grant any security over transfer appropriate to a beneficiary or otherwise deal with the Shares otherwise than in accordance with Clause 4 below. …” Clause 4 “4.1 The Trustee shall hold the Trust Fund upon trust to pay or apply the same to or for the benefit of any one or more of the Beneficiaries in such shares and proportions (if more than one) and upon such trusts (if any) as the Settlor shall in his absolute discretion determine. 4.2 At the end of the Trust Period the Trustee shall hold any balance of the Trust Fund remaining subject to these trusts upon trust for the benefit of any one or more of the Beneficiaries in such shares and proportions (if more than one) … as the Appointor shall appoint within two years of the end of the Trust Period. 4.3 Subject to any appointment under Clause 4.2 above the Trustee shall at the end of the aforementioned two year period hold any balance of the Trust Fund remaining subject to these trusts upon trust for such of the sons of the Settlor as shall be living at the end of such two year period and if more than one in equal shares absolutely. 4.4 In accordance with Settlor’s instructions the Trustee may during the period of twenty-one years from the date of this Deed accumulate any income arising under the trusts hereof and invest the same ….” Clause 6 “The Settlor … or his widow after his death shall have the power to remove any trustee hereof and to appoint new or additional trustees hereof.”[11]The definition, in clause 1.1 of the declaration of trust, of the Beneficiaries refers to Article 28(B) of the Articles of Association of Gonzalez Byass. The Particulars of Claim plead that this Article included the following persons:
“Any lineal descendant (both male and female) of any male whose surname is Gonzalez Gordon ….”

The claim

[12]The Particulars of Claim pleads that the three Claimants are lineal descendants of a male whose surname was Gonzalez Gordon. The Claim Form also gives the addresses of the First, Second and Third Claimants as being addresses in Spain, Portugal and the United States of America, respectively. Accordingly, they plead that they are Beneficiaries under the declaration of trust.[13]The Claim Form pleads that the First Defendant “is beneficially interested” in the trusts pursuant to the declaration of trust of 11th June 1984. However, at the hearing, the Claimants wished to reserve their position on the question whether the First Defendant was a Beneficiary within the definition in clause 1.1 of the declaration of trust. Nonetheless, the Claimants wished the court to proceed on the basis that the First Defendant was beneficially interested in the trusts under the declaration of trust. These points were not explored in argument before me. I am not wholly clear as to the extent of the reservation as to whether the First Defendant is a Beneficiary within clause 1.1 of the declaration of trust. Nor do I know what that issue will ultimately turn on. Nor am I clear whether the pleading in the Claim Form that the First Defendant is “beneficially interested” in the trusts of the declaration of trust was intended to be a reference to the First Defendant being a Beneficiary as defined in clause 1.1 of the declaration of trust or whether her interest is as a beneficiary under a resulting trust arising out of the declaration of trust and in relation to which the First Defendant is beneficially interested under the Spanish law of succession. Nonetheless, the Claimants wish to proceed on the basis that, as they plead, the First Defendant is beneficially interested in the trusts of the declaration of trust. Given that one of the issues I have to determine at this stage is whether the First Defendant is “sued as beneficiary” within Article 5(6) of the Judgments Regulation, it might have been relevant for the First Defendant to require the Claimants to say one way or the other whether they were contending or were not contending that the First Defendant was a beneficiary under the trusts rather than the Claimants reserving their position on that point. However, the First Defendant did not raise a difficulty of that kind and accordingly, notwithstanding the present lack of clarity as to the precise position, I will proceed on the basis, as currently pleaded in the Particulars of Claim, that the First Defendant is indeed beneficially interested in the trusts created by the declaration of trust.[14]The Particulars of Claim plead that on 27th May 1997, the First Defendant purported to appoint herself as Appointor, as defined in clause 1.4 of the declaration of trust. The Particulars of Claim then proceed to set out the Claimants’ contention that it was not open to the First Defendant to appoint herself as Appointor.[15]It is convenient at this point to refer to two other documents which are in evidence and which are referred to in the Particulars of Claim.[16]The first such document is a deed of appointment dated 16th May 2001 between the then trustees of the 1984 declaration of trust and the First Defendant referred to in the deed as “the Appointee”. Recital (D) of the deed of appointment stated that the Appointee was one of the Beneficiaries of the settlement created by the declaration of trust. Recital (E) stated that the trustees wished to exercise powers of appointment and advancement of capital said to be conferred upon them by clause 4.1 of the settlement created by the declaration of trust in order to appoint trust assets amounting to 6,654,648 Spanish pesetas to the First Defendant. By clause 1 of the deed of appointment, purportedly in exercise of powers conferred on the trustees by clause 4.1 of the declaration of trust, and of every and any other enabling power contained in that declaration of trust, the trustees irrevocably appointed and declared that the fund of Spanish pesetas referred to should with immediate effect be held upon trust for the First Defendant absolutely and should be transferred to the First Defendant, or as she should direct. Clause 3 of the deed of appointment stated that the parties to it submitted to the non-exclusive jurisdiction of the courts of the Island of Jersey in all matters arising out of or in connection with the deed of appointment or the declaration of trust. The Claimants were not a party to the deed of appointment and it is not suggested that this non-exclusive jurisdiction clause is material for present purposes.[17]On the 28th April 2003 the then trustee of the settlement created by the declaration of trust resolved to distribute the sum of €435, 000 to an account with Citibank Jersey, which account appears to be connected to the First Defendant. The resolution referred to earlier deeds of appointment (in the plural) and to the deed of 16th May 2001 in particular. The appointment made by the resolution of 28th April 2003 was expressed to be on the same conditions and with the benefit of the same covenants from the First Defendant as appointee as set out in the deed of 16th May 2001. The resolution contains a covenant by the First Defendant which refers to her being the Appointor under the declaration of trust.[18]In their Particulars of Claim, the Claimants set out their contentions as to the operation of the trusts under the declaration of trust in some detail. I will quote the contentions as they appear in the Particulars of Claim. (Throughout the Particulars of Claim the First Defendant is referred to as “EGM”.) 10. The Settlor never made any determination under clause 4.1 of the declaration of trust or alternatively none with effect after his death. Until disclosure herein, the Claimants will rely upon the facts that:(1) GB, WalPart and Ansbacher, though asked for information as to the administration of the trusts of the declaration of trust, have not disclosed any such determination; and(2) Mr. Colin Horne, in advising WalPart by memorandum of 20th August 2004, recorded, “There is as far as is apparent no written direction signed by the Settlor which deals with application of the trust fund after his death”. 11. Accordingly, the effect of the declaration of trust, in the events that have happened, is that: (1) The Trust Period will end on the death of EGM. (2) Until the expiry of two years after the death of EGM or, alternatively, until her death (here called in either case “the Distribution Date”):• The trustee was obliged to accumulate the income of the Trust Fund arising before 11th June 2005;• Alternatively, the trustee was obliged to accumulate the income of the Trust Fund arising before 11th June 2005 in so far as the Settlor so directed and the remainder became held on the resulting trust hereinafter mentioned (in paragraph 13 hereof);• In either case, the income of the Trust Fund arising on or after 11th June 2005 became held on that resulting trust; and• The trustee was and is obliged to retain the capital of the Trust Fund.(3) Upon the Distribution Date:• The Trust Fund will be held on trust as the Appointor may appoint within two years after the termination of the Trust Period or alternatively as the Appointor may have appointed within two years beforehand;• Except as so appointed the Trust Fund will be held for such of the Settlor’s sons as shall be living on the Distribution Date (and if more than one in equal shares). 12. Under Spanish law, which applies to the devolution of the Settlor’s estate (other than immovables): (1) EGM and the Settlor fell within a matrimonial property regime under which assets (both capital and income) acquired during the marriage otherwise than by inheritance, called “bienes gananciales”, become jointly owned and other assets, called “bienes privativos”, remain separately owned; (2) The Settlor’s estate comprised all of his bienes privativos and one-half of his bienes gananciales, the other half of the bienes gananciales passing to EGM; (3) EGM is entitled to a usufruct (a life interest) in one-third of the estate;(4) Subject to the usufruct, each of his five children is entitled to the estate in equal shares. 13. All or alternatively most of the shares in Gonzalez Byass settled on the trusts of the declaration of trust were the Settlor’s bienes privativos when so settled. Accordingly any income of the Trust Fund since the Settlor’s death becoming held on a resulting trust: (a) Was payable, so far as those shares were bienes privativos, as to one-third to EGM (but possibly one-half down to formal division of the estate) and as to the balance in equal shares to his five children; and (b) Was payable, so far (if at all) as those shares were bienes gananciales, as to one-half and one-third of the other half to EGM and as to the balance in equal shares to his five children.

The claim

[19]The Claimants allege that the trustees have acted in breach of trust. The relevant paragraphs of the Particulars of Claim are now set out. 15. GB, WalPart, Ansbacher and Fidei have acted in breach of trust as follows. 16. None of GB, WalPart, Ansbacher or Fidei during its trusteeship has paid any income of the Trust Fund to any of the Settlor’s children. 17. Each of them during its trusteeship has paid the whole income of the Trust Fund (subject only to trustees’ remuneration) to EGM or to nominees of hers. Under the trusts of the declaration of trust EGM is entitled to only one-third of that income, either from 11th June 2005 or alternatively from the Settlor’s death. The best particulars which the Claimants can give of those payments are as follows (bold type denoting the currency of payment): Year Nature of payment Amount in Ptas Amount in Euros 1997 Dividends 31,501,548 189,328.12 1998 Dividends 41,670,772 250,446.38 1999 Dividends 43,932,200 264,037.84 2000 Dividends 7,259,616 43,631.17 2000 Bonus 270,552,755 1,626,054.81 2001 Dividends 6,654,648 39,995.24 2002 Dividends 65,907,158 396,100.00 2003 Dividends 72,497,874 435,721.00 2004 Dividends 79,088,590 475,332.00 2005 Dividends 75,134,161 451,565.40 2006 Dividends 83,043,020 499,098.60 Total 777,242,342 4,671,320.56 18. The payments mentioned in paragraph 17 hereof were made in breach of trust. 19. Each of GB, WalPart and Ansbacher during its trusteeship has also paid capital of the Trust Fund to EGM or to nominees of hers. Under the trusts of the declaration of trust EGM is not entitled to any such capital. The best particulars which the Claimants can give of those payments are as follows:(1) By deed of appointment dated 16th May 2001 and made between Ansbacher and GB (1) and EGM (2), Ansbacher and GB purported to appoint to EGM the sum of Ptas 6,654,648 (about £27,343.64) under clause 4.1 of the declaration of trust, described as an appointment of capital in the next-mentioned resolution.(2) By resolution of 28th April 2003 made by WalPart and GB, WalPart and GB purported to appoint to EGM the further sum of Eur 435,000.(3) That resolution mentions previous purported appointments of capital as having been made by Ansbacher and GB before that of 16th May 2001, the particulars of which are unknown to the Claimants.(4) It is to be inferred that all sums so appointed to EGM were then paid to her or to nominees of hers. 20. The appointments and payments mentioned in paragraph 19 hereof were made in breach of trust.[20]The Particulars of Claim continue by explaining the Claimants’ case against a defendant trustee where the Claimants allege that, on taking up appointment as trustee, it was the duty of the newly appointed trustee to consider the lawfulness of payments earlier made by the trustees and to sue earlier trustees for orders that they restore the trust fund.[21]The Particulars of Claim then proceed to identify two separate claims against the First Defendant.[22]The first claim against the First Defendant is expressed in the following terms. 24. EGM is liable for all those breaches of trust and is similarly bound to reinstate the Trust Fund by reason that:(1) She received the income and capital so paid to her as a volunteer;(2) She did so with both notice and knowledge of the declaration of trust (and in particular was a signatory to the deed of appointment of 16th May 2001 and the resolution of 28th April 2003);(3) Any such breach of trust on the part of GB occurring between 1999 and 2002 (part of the period during which she controlled GB) was one which she procured GB to commit. 25. EGM holds all the income and capital so paid to her as constructive trustee and not for her own benefit. So far as necessary, the Claimants will contend that in the premises it would be unconscionable for her to retain that income and capital.[23]The claim in paragraph 24(3) of the Particulars of Claim is no longer pursued.[24]The claims against the First Defendant are carried into the prayer for relief where the Claimants claim against the First Defendant an account of all property subject to the trusts of the declaration of trust received by her and of her dealings therewith, an order for payment or transfer to the trustees of the declaration of trust of all such property received by her or the property now representing the same, compensation for breach of trust and interest on such compensation.[25]The second part of the claim against the First Defendant relates to her appointment or purported appointment of herself as Appointor as defined in clause 1.4 of the declaration of trust. The claim is expressed as follows. 27. On 27th May 1997 EGM purported to appoint herself as Appointor. 28. It was not open to EGM to appoint herself Appointor because:(1) The power to appoint an Appointor conferred by clause 1.4 of the declaration of trust is a fiduciary power; and(2) Upon its true construction the power does not permit EGM to appoint herself. 29. In any case, EGM is in the premises not a fit and proper person to be Appointor and the court ought to appoint a new Appointor in her stead.[26]The prayer for relief only identifies one head of relief in relation to the dispute as to whether the First Defendant was validly appointed as Appointor and whether the court ought to appoint a new Appointor in her stead. Paragraph (7) of the prayer for relief seeks an order appointing some fit and proper person as Appointor in the stead of the First Defendant. There is no claim for a declaration which picks up the contention in paragraph 28 to the effect, for example, that the First Defendant is not the Appointor and the purported appointment of herself was a nullity.[27]The nature of the two claims made by the Claimants against the First Defendant appear fairly clearly from the paragraphs of the Particulars of Claim which I have set out. In addition, Counsel for the Claimants explained in his submissions the legal basis for the various claims and, in view of the questions which arise, or might arise, as to the capacity in which the First Defendant is sued, I will refer to those submissions. I will not set them out verbatim but I hope I can adequately summarise the nature of the claims which the Claimants wish to pursue.[28]The first claim against the First Defendant focuses on the fact that the First Defendant received sums of money from the trustees and the Claimants assert that the First Defendant was not entitled to receive those sums, or at any rate the greater part of those sums. The Claimants say that the First Defendant was not entitled to be paid all of the income of the trust but only some of it. They say that she was not entitled to any capital. The Claimants contend that, because the First Defendant gave no consideration for the money she received, she was a volunteer. They point out that she had knowledge of the trust and its terms. The Claimants contend they have both proprietary and personal claims against her and are entitled to a personal Diplock remedy, a proprietary Diplock remedy, a personal remedy for knowing receipt and a proprietary remedy for knowing receipt. The reference to a Diplock remedy is, of course, a reference to in Re Diplock [1948] Ch 465 (Court of Appeal), affirmed sub nom. Ministry of Health v Simpson[1951] AC 251.[29]The Claimants further explain the Diplock claims in these terms. The Claimants are beneficiaries of the trust. A beneficiary prejudiced by an overpayment to another beneficiary has both personal and proprietary claims against the overpaid beneficiary. The Claimants point out that Re Diplock shows that it is irrelevant whether the overpaid person is actually a co-beneficiary or someone who is not entitled under the trust in question at all. The proprietary remedy under Re Diplock was said to be well known. The personal remedy established in Re Diplock, which concerned a deceased’s estate, was available to an underpaid creditor, legatee or next of kin against anyone who has been overpaid, even someone who has no title at all and is a stranger to the estate. Such a claim is equally available to an underpaid beneficiary of an inter vivos trust such as the present trust against a person who has been overpaid, whether that person is also a beneficiary or a stranger to the trust. The Claimants referred to Re J Leslie Engineers Company [1976] 1 WLR 292 and Butler v Broadhead[1975] Ch 97.[30]In relation to the Claimants’ claims against the First Defendant based on knowing receipt, the Claimants referred to the well known personal and proprietary remedies for knowing receipt. The Claimants pointed out that the circumstances in which a recipient of trust assets is liable for knowing receipt are usually described as giving rise to a constructive trust, with its associated duties, for example, not to make a profit from the trust.[31]The Claimants also made submissions at the hearing with a view to explaining the second claim against the First Defendant which related to her status or purported status as Appointor. The Claimant’s skeleton argument did not develop the claim which appeared in paragraph 28 of the Particulars of Claim to the effect that the First Defendant was not able to appoint herself as Appointor. Perhaps consistently with the fact that the prayer for relief did not claim a declaration that the First Defendant’s appointment of herself as Appointor was a nullity, the Claimants’ skeleton argument concentrated on the powers of the court to act where the First Defendant had been validly appointed as the Appointor, but it was said that she should be removed. On that topic, the Claimants contended that the Appointor had one function only, though an important one, and that was to exercise the power of appointment which takes effect at the end of the Trust Period: see clause 4.2. The Claimants contended that this power was a fiduciary power and not a merely personal power, for two reasons. The first was that the power could not be used to benefit the Appointor himself or herself. The second reason was that the identity of the Appointor was not fixed in advance, as would be normal with a personal power but, instead, the Settlor or his widow could choose the Appointor and (seemingly) replace him or her, at any rate if the Appointor were dead. From this it was submitted that the Appointor filled an office like a trustee or protector, and the Appointor filled that office for the benefit of the Beneficiaries. Having contended that the Appointor filled an office akin to that of a trustee or protector, the Claimants contended that the donee of such a fiduciary power was a trustee of the power. The Claimants then drew attention to cases where the court has considered the role of the court, and the extent of the court’s powers, in relation to the removal of a donee of a power or the appointment of a substitute donee. I was referred in detail to the lengthy discussion of these questions in Mettoy Pension Trustees Limited v Evans [1990] 1 WLR 1587, Rawcliffe v Steele[1993-95] MLR426, Re Papadimitriou [2004] WTLR 1141 and Re Freiburg Trust (2003-2004) 6 ITELR 1078.

Discussion

[32]I have set out the relevant paragraphs from the Particulars of Claim and the exposition by the Claimant’s Counsel of the legal basis for those claims in some detail. This is because it is necessary to understand the basis of the claim in order to determine, for jurisdictional purposes, the capacity in which the First Defendant is being sued in these proceedings.[33]Whilst it is, or may be, important to understand the nature of the claim and to identify the capacity in which the First Defendant is being sued, it is not, in my judgment, necessary in this case to form any view as to the strength or weakness of the claims made and, much less, to decide whether they are well founded. The First Defendant contends that the powers of the Appointor under the declaration of trust are not fiduciary powers. In my judgment, it is neither necessary nor appropriate for me to form any view on the rival submissions as to whether the powers are, or are not, fiduciary powers. The question which may be material at this jurisdiction stage relates to the capacity in which the First Defendant is sued not whether the claim is likely to succeed or will succeed. In the relevant respect, the claim against the First Defendant is that she is the donee of a fiduciary power and the Judgments Regulation must be applied to such a claim. Whichever court ultimately has jurisdiction will then decide the issue raised by the First Defendant as to whether the power is or is not a fiduciary power. If that court holds that the power is a fiduciary power then on the present pleading, the court will have to consider whether it has power to grant the Claimants the remedy they seek of removing the First Defendant as Appointor and, if so, whether that remedy should in all the circumstances be granted to the Claimants.[34]Before addressing the specific issues raised on this present application, I will say something of a more general character as to the court’s approach to the interpretation and application of the Judgments Regulation.[35]Article 5(6) identifies a number of ingredients which must exist in a particular case to enable it to be governed by Article 5(6). In particular, Article 5(6) applies to a trust created by a written instrument. Article 5(6) applies only where the trust is domiciled in the State in which jurisdiction is being asserted. Article 5(6) only applies where the person being sued is domiciled in a Member State. Article 5(6) only applies where the person being sued is sued as settlor, trustee or beneficiary. On whom does the burden of proof or the burden of persuasion lie when these matters are in issue before a court at the stage when jurisdiction is in question? What standard of proof or degree of persuasion is appropriate? Fortunately, the parties are not in dispute as to these questions.[36]For present purposes, I can take the law as conveniently summarised by Lawrence Collins J in Chellaram v Chellaram (No. 2) [2002] 3 All ER 17, in particular at [133] to [136]. The Claimant must establish a good arguable case that the court has jurisdiction. When the question of jurisdiction depends on domicile, the Claimant must establish what it asserts to the standard of a good arguable case. Where the question of jurisdiction depends not on domicile but on other free-standing questions under the relevant provisions, the Claimant must again establish the requisite elements of jurisdiction to the standard of a good arguable case. The test of good arguable case for the element of domicile and other necessary elements was laid down by the House of Lords in Canada Trust Co v Stolzenberg (No. 2) [2002] 1 AC 1 and see Seaconsar Far East Limited v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438. In Carnoustie v ITF [2002] 2 All ER (Comm) 657, the court reviewed the authorities and referred, in particular, to the judgment of Waller LJ in the Court of Appeal in the Stolzenberg case, where he described the standard of “good arguable case” as involving one side having a much better argument than the other on the material available. In Carnoustie at [47], the deputy judge referred to the Claimant being required to demonstrate that it had much the better argument on the material available.[37]In Chellaram (No. 2) at [136], Lawrence Collins J referred to cases where the question of jurisdiction depended on a question of law or construction where the court would decide the question of law or construction rather than apply the good arguable case test. In my judgment, that passage does not mean, in the present case, that I should determine whether the power of a Appointor under the declaration of trust is a fiduciary power or not. The question of jurisdiction does not depend on whether the power is a fiduciary power or not but turns on whether the First Defendant is “sued as trustee”. The claim against the First Defendant is that she is a fiduciary. I have to decide whether a claim against the First Defendant in the capacity of a fiduciary is a claim against her “as trustee” but I do not have to decide whether she is or is not a fiduciary.[38]There is one other general point to which I need to refer. This concerns the approach of the court to the interpretation of the language of Article 5, and in particular Article 5(6), of the Judgments Regulation. The approach, in relation to Article 5, has been the subject of decisions in the European Court of Justice and was considered in detail by the House of Lords in Kleinwort Benson Limited v Glasgow City Council [1999] 1AC 153. The principal issue in that case was whether a claim for restitution of monies paid under a purported contract, subsequently accepted by both parties as being void ab initio, fell within Article 5(1) of the Brussels Convention, which is in the same terms as Article 5(1) of the Judgments Regulation. The point provoked a considerable difference of judicial opinion. The Court of Appeal was split on the point and they were reversed by the House of Lords, by a majority of three to two. At page 163G to 164B, Lord Goff of Chieveley said:
“The first point which is clearly established in the European jurisprudence is that the basic principle is to be found in article 2. This is the principle of domicile, viz., that a person domiciled in a part of the United Kingdom shall be sued in the courts of that part. This principle is expressed to be subject to the provisions of Title II, which includes the special jurisdiction in Section 2. Article 5, which falls within Section 2, states that a person domiciled in a part of the United Kingdom may be sued in another part of the United Kingdom in the circumstances specified in the paragraphs of the article, including of course article 5(1) with which we are here concerned. But it is clearly recognised that article 5 is in derogation from the basic principle of domicile in article 2 (see Martin Peters Bauunternehmung G.m.b.H. v. Zuid Nederlandse Aannemers Vereniging (Case 34/82) [1983] E.C.R. 987, 1001), and that as a result the provisions of article 5 are to be construed restrictively (see Kalfelis v. Bankhaus Schröder, Münchmeyer, Hengst and Co. (Case 189/87 ) [1988] E.C.R. 5565, 5585, para. 19). In this connection, it is not to be forgotten that the defendant can always be sued in the courts of his domicile.”
At page 165D, Lord Goff commented that attempts to broaden the scope of Article 5(1) had generally not succeeded. At page 166G, Lord Goff referred again to the decision of the European Court of Justice in Kalfelis v Bankhaus Shroder Munchmeyer Hengst & Co [1988] ECR 5565, at paragraph 19, where the court had stressed that the “special jurisdictions” in Articles 5 and 6 must be interpreted restrictively and pointed out that a Claimant was always entitled to bring his action in its entirety before the courts of the Defendant’s domicile (i.e. under Article 2). At page 169F, when considering the contrary views of the majority in the Court of Appeal, Lord Goff commented that the approach of the majority offended against the fundamental principle that the special jurisdiction in Article 5 was in derogation from the general jurisdiction in Article 2 and so fell to be construed restrictively. The view of the majority of the Court of Appeal was rejected because it constituted “an expansion of the special jurisdiction” in Article 5(1). At page 171D to F, Lord Goff again stated that the view of the majority of the Court of Appeal depended upon the Article being construed broadly and that was not permissible.[39]Lord Mustill and Lord Nicholls of Birkenhead dissented. Lord Mustill did not deliver a speech of his own. Although Lord Nicholls dissented, he fully acknowledged, at page 173B to D, that Article 5, as a derogation from the basic provision in Article 2, should be construed restrictively.[40]Lord Clyde stated at page 179F to H that the approach to the interpretation of Article 5 should be narrow rather than generous. At page 180B to D he held that the rules of jurisdiction should not be construed so as to favour the wishes of the Claimant who could always rely upon the basic jurisdiction provision in Article 2. At page 180H Lord Clyde said:
“The language of the Article should provide the solution.”
He then drew attention to the fact that there was no direct reference in Article 5(1) to restitution or quasi contract.[41]At page 188, Lord Hutton drew attention to the Kalfelis case and paragraph 19 of the judgment of the court in that case, which referred to Article 5 being construed restrictively. At page 189 Lord Hutton, referring to authority, stated that “a wide and multifarious interpretation of the exceptions to the general rule of jurisdiction contained in article 2 must be avoided”. At page 195, Lord Hutton referred to the fact that as a matter of legal analysis there might be fine distinctions between a contract which is void and a contract which is voidable or unenforceable but nonetheless Lord Hutton recognised an all important distinction between a case where one party claims that the contract is or was in existence and the other party claims that the contract never existed or has ceased to exist and cases such as Kleinwort Benson itself where both parties accepted before the commencement of the action that the contract was void ab initio.

The Schlosser Report

[42]Finally, before dealing with the issues which arise, I ought to refer to the Schlosser Report, as some of the discussion in that Report is material to more that one of the issues with which I am concerned. The Schlosser Report is a report by Professor Peter Schlosser, a German professor. The report is dated 9th October 1978. The Report was in relation to the 1978 Accession Convention by which the United Kingdom acceded to the 1968 Brussels Convention. The Accession Convention introduced Article 5(6) into the Brussels Convention. Section 3(3) of the Civil Jurisdiction and Judgments Act 1982, dealing with the interpretation of the Brussels Convention, stated that the Schlosser Report could be considered in ascertaining the meaning or effect of any provision of the Brussels Convention and should be given such weight as is appropriate in the circumstances. There is no express statutory provision such as this which links the Schlosser Report to the Judgments Regulation. However, both parties addressed me on the basis that I could, and should, take into account the Brussels Convention (and presumably the Lugano Convention) and the Schlosser Report, when considering the Judgments Regulation.[43]The Schlosser Report dealt with trusts at paragraphs 109 to 120. Paragraph 109 was in these terms:
“A distinguishing feature of United Kingdom and Irish law is the trust. In these two States it provides the solution to many problems which continental legal systems overcome in an altogether different way. The basic structure of a trust may be described as the relationship which arises when a person or persons (the trustees) hold rights of any kind for the benefit of one or more persons (the beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries (who may, however, include one or more of the trustees) or other object of the trust. Basically two kinds of legal relationships can be distinguished in a trust; they may be defined as the internal relationships and the external relationships.”
[44]Paragraph 110 of the Schlosser Report referred to external relationships. An example would be a case where a trustee contracts to sell to a third party. The relationship between the trustee and the third party is external to the trust and no adjustment to the Brussels Convention was thought to be necessary for this external relationship.[45]Paragraph 111 of the Schlosser Report stated:
“Problems arise in connection with the internal relationships of a trust, i.e. as between the trustees themselves, between persons claiming the status of trustees and, above all, between trustees on the one hand and the beneficiaries of a trust on the other. Disputes may occur among a number of persons as to who has been properly appointed as a trustee; among a number of trustees doubts may arise as to the extent of their respective rights to one another; there may be disputes between the trustees and the beneficiaries as to the rights of the latter to or in connection with the trust property, as to whether, for example, the trustee is obliged to hand over assets to a child beneficiary of the trust after the child has attained a certain age. Disputes may also arise between the settlor and other parties involved in the trust.”
[46]Paragraph 113 of the Schlosser Report stated that the original provisions of the Brussels Convention were not always well adapted to the institution of a trust. To base jurisdiction on the domicile of the defendant trustee would not be appropriate in trust matters. It was pointed out that a trust had no legal personality as such. There was then a reference to an action being brought against a defendant “in his capacity as trustee”. It was also pointed out that legal relationships between trustees inter se and between the trustees and the beneficiaries were not of a contractual nature.[47]Paragraphs 114 to 120 of the Schlosser Report came under the heading “the solution proposed”. Paragraph 114 addressed the issue of how to identify the domicile of a trust. It was pointed out that at any rate in Scottish law the concept of a trust having a domicile was not unknown and reference was made to the matters which would be taken into account under Scottish law in determining the domicile of a trust. Professor Schlosser pointed out that these notions about the domicile of a trust were developed mainly for the purpose of determining the legal system to be applied, usually English law or Scottish law. However, it was suggested that the principal characteristics which led to determining the domicile of a trust for that purpose could also be used as the basis for founding jurisdiction. It was stated in paragraph 114 that the proposed Article 5(6) did not, strictly speaking, create a special jurisdiction as it covered “only a very limited number of cases” and was therefore added to Article 5 rather than to Article 2.[48]In paragraph 116 of the Report it was pointed out that the concepts of “trust”, “trustee” and “domicile” had not been translated into the other community languages since they related to a distinctive feature of United Kingdom and Irish law. It was stated that Member States could give a more detailed definition of the concept of a trust in their national language in the legislation implementing the Accession Convention. It will be seen that, in England, the question of a domicile of a trust was dealt with in a statutory instrument but no further guidance was given as to the concept of a trust or a trustee.[49]Paragraph 117 of the Schlosser Report stated:
“The phrase created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing is intended to indicate clearly that the new rules and jurisdiction apply only to cases in which under United Kingdom or Irish law a trust has been expressly constituted, or for which provision is made by Statute. This is important, because these legal systems solve many problems with which continental systems have to deal in a completely different way, by means of so called constructive or implied trusts. Where the latter are involved, the new Article 5(6) is not applicable, as for instance where, after conclusion of a contract of sale, but prior to the transfer of title, the vendor is treated as holding the property on trust for the purchaser….. Trusts resulting from the operation of a statutory provision are unlikely to fall within the scope of the 1968 Convention. Since in the United Kingdom, for example, children cannot own real property, a trust in their favour arises by operation of statute, if the circumstances are such that adult persons would have acquired ownership.”
[50]Paragraph 119 of the Report discussed the rules which might apply to determine the domicile of a trust. This paragraph principally deals with continental Member States, rather than the United Kingdom and Ireland. It was pointed out that the courts of continental Member States would have to evolve appropriate rules but two possibilities existed. One was that the domicile of a trust should be determined by the legal system to which the trust is subject.[51]Paragraph 120 of the report discussed the relationship between the new Article 5(6) and the exclusive jurisdiction provided for by Article 16 of the Brussels Convention. Article 16 dealt with, amongst other things, proceedings which had as their object rights in rem in immoveable property. Article 16 is not of particular relevance in the present case but in the Schlosser Report there is a discussion of two cases which Professor Schlosser seemed to think might raise a question as to the relationship between Article 5(6) and Article 16. The second example is of a case where a declaration is sought that a particular person is a trustee of a particular trust which includes certain property. It was stated that Article 16 would not become applicable merely because the property included immoveable property. That would clearly, in my view, be a case where the defendant was being sued “as trustee”. The first case envisaged by Professor Schlosser concerned a dispute between two people as to which of them was trustee of certain property. If one of them instituted proceedings against the other in a German court claiming the cancellation of the entry in the Land Register showing the defendant as the owner of the property and the substitution of an entry showing the plaintiff as the true owner, it was said that a German court would have exclusive jurisdiction under Article 16(1) or (3). What is not wholly clear is whether Professor Schlosser thought that such a claim would be a claim against the defendant “as trustee”. It might be objected that the claim was not against the defendant “as trustee” when the claimant’s assertion was that the defendant was not a trustee.[52]Whilst dealing with the antecedents of the Judgments Regulation, it is right to point out that Article 5(6) of the Brussels Convention is in the same terms as Article 5(6) of the Judgments Regulation but Article 5(6) of the Lugano Convention includes the words “in his capacity” in the phrase “sued in his capacity as settlor, trustee or beneficiary”.

The first issue

[53]The first issue is:
“What trust or trusts are identified by the Claimants in the present case which come within the words of Article 5(6) which refer to: … a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing …?”
[54]It is, of course, obvious that the trust created by the written declaration of trust dated 11th June 1984 was a trust created by a written instrument. However, the questions arise: what is the position in relation to the resulting trust pleaded in paragraphs 11 and 13 of the Particulars of Claim and the constructive trust pleaded in paragraph 25 of the Particulars of Claim?[55]The question in relation to the resulting trust was not much explored in the course of the oral hearing. It may be that, for other reasons to which I will later refer, the outcome of this application does not depend on the answer to this question. Nonetheless, it may assist if I briefly express my views on this point.[56]The resulting trust which is asserted to exist in the present case is a resulting trust which came into existence automatically as a matter of law because the Settlor had failed to dispose of the whole beneficial interest, namely, the income from the trust assets, which income was not permitted to be accumulated. A resulting trust of that kind, coming into existence in that way, is described and analysed in Lewin on Trusts, 18th Edition at paragraphs 7.05, 7.06 and 8.02.[57]Taking the language of Article 5(6) literally, it is difficult to say that the resulting trust contended for in the Particulars of Claim was created by the written instrument, i.e. the declaration of trust of 11th June 1984. The more accurate legal analysis would be to say that the resulting trust is created by operation of law because the written instrument did not provide for what was to happen in a certain event. It is also right to draw attention to the fact that the words “the operation of” do not govern “a written instrument”. If Article 5(6) had referred to a trust created by the operation of a written instrument then one could see the argument that the resulting trust was created by the operation of a written instrument in so far as the written instrument declared trusts but did not exhaust all the possibilities.[58]In my judgment, the resulting trust contended for in the Particulars of Claim is not a trust within Article 5(6). I reach this conclusion by analysing the nature of the resulting trust contended for and by applying Article 5(6) in a literal way. I am also somewhat encouraged to reach that conclusion by reason of Professor Schlosser’s distinction between expressly declared trusts and implied trusts. Further, and importantly, this conclusion appears consistent with the repeated exhortation of the courts to construe the derogations in Article 5 in a narrow or restrictive way.[59]The next point to address is whether Article 5(6) applies to a constructive trust. Although the First Defendant developed a detailed argument as to why Article 5(6) did not extend to constructive trusts, that basic principle was not in dispute. In general, a constructive trust is not created by a written instrument, nor created orally and evidenced in writing. I also draw attention to what Professor Schlosser said on the subject of constructive trusts in paragraph 117 of his Report. In Chellaram (No. 2) [2002] 3 All ER 17, it was said, succinctly, at [138] that Article 5(6) did not apply to constructive trusts. However, the generality of those statements should not be allowed to disguise the fact that there could be a claim which was within Article 5(6) where a beneficiary sued a trustee, in circumstances where the trustee had made a personal gain from exploiting the trust’s property and where the trustee held the gain on a constructive trust for the beneficiary. In such a case, in my judgment, the Defendant would be sued “as trustee”.[60]In any event, the claim in paragraph 25 of the Particulars of Claim that the First Defendant is a constructive trustee does not lead the Claimants to say that this part of their claim is brought against the First Defendant “as trustee” within Article 5(6). The Claimants’ case is that, in relation to that part of their claim, they are suing the First Defendant “as beneficiary”. I will deal with that claim in due course.

The second issue

[61]The second issue is:
“Is the relevant trust domiciled in England?”
[62]This court only has jurisdiction by reason of Article 5(6) if the trust is domiciled in England. Article 60(3) of the Judgments Regulation states:
“In order to determine whether a trust is domiciled in the Member State whose courts are ceased of the matter, the court shall apply its rules of private international law.”
[63]It is agreed that the relevant rule of private international law, for present purposes, is contained in the Civil Jurisdiction and Judgments Order 2001. Article 3 of that Order provides that Schedule 1 to the Order has effect. Paragraph 1(1) of Schedule 1 defines “part of the United Kingdom” as meaning England and Wales, Scotland or Northern Ireland. Paragraph 12(1) of schedule 1 to the 2001 Order provides the rules required by Article 60(3) for determining where a trust is domiciled. By paragraph 12(2) a trust is domiciled in the United Kingdom if and only if it is by virtue of subparagraph (3) domiciled in a part of the United Kingdom. Paragraph 12 (3) provides:
“A trust is domiciled in a part of the United Kingdom if and only if the system of law of that part is the system of law with which the trust has its closest and most real connection.”
[64]In view of the submissions addressed to me, I ought also to refer to the Recognition of Trusts Act 1987. That Act enabled the United Kingdom to ratify the Hague Convention on the Law Applicable to Trusts and on their Recognition. By Section 1(1), the provisions of the Hague Convention, set out in the schedule to the 1987 Act, were to have the force of law in the United Kingdom. By section 1(2) the provisions of the Convention were, so far as applicable, to have effect not only in relation to the trusts described in Articles 2 and 3 of the Convention but also in relation to any other trusts of property arising under the law of any part of the United Kingdom, or by virtue of a judicial decision whether in the United Kingdom or elsewhere.[65]By Article 1 of the Hague Convention, it was provided that the Convention specified the law applicable to trusts and governed their recognition. Article 2 defined the term “trust” for the purposes of the Convention. The term was defined to refer to the legal relationship created by the settlor when assets were placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose. Article 2 described certain characteristics of a trust. These characteristics referred to the assets constituting a separate fund where title stood in the name of the trustee or the name of another person, on behalf of the trustee, and the trustee had the power and the duty to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law. The reservation by the settlor of certain rights and powers and the fact that the trustee might himself have rights as a beneficiary were not necessarily inconsistent with the existence of a trust. By Article 3 of the Convention, the Convention applied only to trusts created voluntarily and evidenced in writing.[66]Article 6 of the Hague Convention provided:
“A trust shall be governed by the law chosen by the settlor. The choice must be express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary in the light of the circumstances of the case. Where the law chosen under the previous paragraph does not provide for trusts or the category of trust involved the choice shall not be effective and the law specified in Article 7 shall apply.”
[67]Article 7 of the Hague Convention applies where no applicable law has been chosen. In that case, the trust is governed by the law with which it is most closely connected. In ascertaining the law with which a trust is most closely connected, reference is made in particular to four matters. In summary, these were the place of administration of the trust designated by the settlor, the situs of the assets of the trust, the place of residence or business of the trustee and the objects of the trust and the places where they are to be fulfilled.[68]Article 8 of the Hague Convention stated that the law specified by Article 6 or Article 7 should govern the validity of the trust, its construction, its effects and the administration of the trust. Article 8 then went on to provide for nine matters which, in particular, were stated to be governed by that governing law. Article 9 recognised that a severable aspect of the trust, such as matters of administration, might be governed by a different law.[69]In the present case, the declaration of trust states in terms that the proper law is English law.[70]The Claimants’ case is simply stated. They submit that because the trust is governed by English law it is English law which is the system of law with which the trust has its closest and most real connection. Accordingly, under paragraph 12(3) of schedule 1 to the 2001 Order, this trust is domiciled in England. Counsel for the Claimants illustrated the importance of the governing law in relation to the very many questions which can arise as to the validity of a trust, its construction, its effects and its administration. It was stressed that a trust gives rise to a bundle of rights and obligations, powers and duties and the existence of these matters, and their extent and nature, were all the subject of English legal principles.[71]The First Defendant submitted that the choice of governing law was not conclusive for the purpose of determining the domicile of the trust. It was said that paragraph 12 of schedule 1 to the 2001 Order did not use language which equated the domicile of the trust with the governing law. The First Defendant argued for a test which focused on “whether there is a real and close connection between the trust and a particular jurisdiction, not whether there is a nominal connection based on governing law”. I was asked to construe the phrase “closest and most real connection” by reference to Article 7 of the Hague Convention. I was referred to text books which described Article 7 of the Hague Convention. Submissions were made as to the meaning of “domiciled” under the Judgments Regulation. I was taken to other authentic language versions of the Judgments Regulation and I was given translations of the words in those versions which referred to matters such as, in English, domicile, residence, home or seat. It was said that if one applied the matters which were relevant for the purposes of Article 7 of the Hague Convention, the conclusion would be, on the facts, that the jurisdiction with which this trust had its closest and most real connection was Liechtenstein.[72]In my judgment, this trust is domiciled in England. Paragraph 12 of schedule 1 to the 2001 Order requires one to identify “the system of law” with which the trust has its closest and most real connection, not the geographical location nor the jurisdiction with which it has its closest and most real connection. Prima facie, the system of law with which a trust has its closest and most real connection is the governing system of law. That view is only fortified by considering that a trust consists of rights and obligations and powers and duties which in this case are governed by English legal principles. On the facts of this case, there did not appear to be any other candidate for a system of law which had a closer connection with the trust than English law. In the course of argument, I raised the question whether the trust had a connection with the Liechtenstein system of law given that the trust appears to be administered from Liechtenstein and it may be there are some controls under Liechtenstein law on acts of administration within Liechtenstein. However, there was no material before the court to give very much substance to this supposition, although I recognise there is a possibility of some connection with Liechtenstein law in this way. Another suggestion raised in argument stemmed from the fact that the principal trust assets, the shares in Gonzalez Byass, were shares in a company incorporated in the Cayman Islands. Accordingly, could it be said that the trust had a close connection with the system of law of the Cayman Islands because the company would have been governed by Cayman Island company law? Again, there was no real material before the court which would give much substance to this supposition. Accordingly, without hesitation on the material before me, I adhere to the view that the system of law with which the trust has its closest and most real connection is English law.[73]Both parties made submissions on statements by Lawrence Collins J in Chellaram (No. 2) [2002] 3 All ER 17, in particular, at [29], [139], [141] and [162]. In my view, there is nothing in Chellaram (No. 2) which contradicts the approach I have adopted and, indeed, Chellaram (No. 2) appears strongly to support that approach.[74]My conclusion in relation to the second issue is that the trust is domiciled in England for the purposes of Article 5(6).

The third issue

[75]The third issue is:
“In relation to the first part of the Claimants’ claim against the First Defendant, is the First Defendant sued……as beneficiary…?”
[76]This issue arises in relation to the first claim made by the Claimants against the First Defendant, rather than the second claim. I have set out the relevant parts of the Particulars of Claim and the first claim is essentially contained in paragraphs 24 and 25 of that pleading, which I have quoted. I also bear in mind the submissions made by Counsel for the Claimants as to the legal basis of the claim.[77]Article 5(6) only applies where a defendant is sued “as settlor, trustee or beneficiary”. The Claimants contend that this claim is brought against the First Defendant “as beneficiary”.[78]It is the Claimants’ case that the First Defendant is a beneficiary under the declaration of trust of 11th June 1984. I will proceed on that basis although I have already referred to the Claimants’ reservation of position at least to some extent on this point.[79]Counsel for the Claimants submitted that the First Defendant was being sued as a beneficiary under the 1984 trust. He submitted that Article 5(6) is intended to deal with cases which are concerned with “the internal relationships of a trust”: see the Schlosser Report at paragraph 111. He said that this case was about the internal relationships of this trust and, in particular, it raised issues as to whether the First Defendant, as a beneficiary under the trust, was, or was not, entitled to take the benefits conferred upon her by the trustees of the trust. The First Defendant was paid the sums in question, he submitted, as a “purported beneficiary” so that she could defend her receipt and retention of these sums only by asserting she was entitled to do so under the terms of the trust.[80]These submissions were developed at the hearing by giving examples of cases where a Defendant is sued “as settlor”, “as trustee” or “as beneficiary”. Counsel for the Claimants accepted that there would be cases, which were clearly within Article 5(6) where there was no issue as whether a defendant was a settlor, or a trustee, or a beneficiary and he gave examples of such claims. In the case of a settlor who had covenanted with trustees to transfer assets to the trustees to be held on trust, a claim by the trustees against the settlor, requiring him to perform his covenant, would plainly be a claim against him “as settlor”. A claim against trustees for breach of trust would be a claim against them “as trustees”.[81]A claim by trustees against the beneficiaries for declaratory relief to resolve differences between them as to the powers and duties arising under the trust would be a claim brought against the defendants “as beneficiaries”. But it was further submitted on behalf of the Claimants that the case would also be within Article 5(6) if the issue was whether the defendant was a beneficiary. Thus, the Claimants said, a claim by a trustee for a declaration that the defendant was not a beneficiary would be within Article 5(6) in the same way as a claim by a trustee for a declaration that a defendant was a beneficiary. Similarly, a claim by a trustee which asked the court whether the Defendant was or was not a beneficiary would be within Article 5(6). It was sufficient, it was submitted, if there was an issue as to the capacity of the defendant and whether the defendant was or was not a beneficiary. The Claimants drew attention to the Schlosser Report at paragraph 111 where there was a reference to disputes between “persons claiming the status of trustees” and to a dispute “as to who has been properly appointed as a trustee”. I have also drawn attention to paragraph 120 of the Schlosser Report which refers to a dispute where the relief claimed appeared to turn on an allegation by a claimant that the defendant was not a trustee.[82]Thus the question arises whether the fact that the First Defendant is a beneficiary under the declaration of trust, and the circumstances in which payments have been made to her by the trustees, ostensibly to her in her capacity as a beneficiary entitled to receive those payments, makes the claim by the Claimants against the First Defendant a claim against her “as beneficiary”.[83]The principal difficultly I have with the Claimants’ submission on this issue is that the relief they seek against the First Defendant depends upon the Claimants showing that the First Defendant was not entitled to the monies now claimed. In short, the Claimants say that the First Defendant was not a beneficiary in relation to those monies. This is made all the more clear by the use of the words “as a volunteer” and “as constructive trustee” in paragraphs 24 and 25 of the Particulars of Claim. Further, the submissions made by Counsel for the Claimants, as to the legal basis of this claim, correctly accepted that the legal basis of the claim was available where a defendant was someone who was not entitled under the trust in question at all, just as it was against someone who was a beneficiary under the trust but who was not entitled to the receipt in question. In my judgment, it is much easier to say that the claim against the First Defendant is in her capacity as someone not entitled to the monies received, or in her capacity as a stranger to the trust, rather than in her capacity as a beneficiary under the trust.[84]I accept, certainly on the material at present available, that the trustees paid monies to the First Defendant on the basis that she was a permissible recipient of those monies as a beneficiary under the trust. But that basis is denied by the claim made by the Claimants. Accordingly, the basis on which the monies were paid to the First Defendant (the Claimants say wrongly) does not seem to me to be much help in determining the capacity in which the Claimants are suing the First Defendant.[85]There was discussion at the hearing as to the approach to be adopted where the Claimants were saying that a defendant was not a beneficiary and the defendant was expected to defend on the basis that he or she was a beneficiary. Counsel for the Claimants accepted that Article 5(6) was to be applied to the claim made by a claimant and was not to be governed by the nature of the defence run by a defendant. That seems to me to be entirely right. In any event, when a jurisdiction point arises in a case such as this, one may not know precisely what defence will be run. Indeed in the present case, as I understand it, the First Defendant has not yet identified the nature of her defence. It is conceivable that a claim of the present kind would be met by a defendant who does not challenge that he or she was not entitled to the money initially, but who wishes to run a limitation defence. The whole question of jurisdiction might be contested because the defendant’s ability to run a limitation defence may be greater in one Member State than in England: see the relevance of limitation in Kleinwort Benson Limited v Glasgow City Council[1999] AC 153.[86]The Claimants’ argument, as set out above, nonetheless has some force. I can see some sense in the Regulation being drafted so that it spelt out what was meant by disputes as to “the internal relationships of a trust” and providing that all such disputes were within a special rule as to jurisdiction, based on the domicile of the trust. I can also understand the criticism that it is not sensible to apply one rule as to jurisdiction where the claimant seeks a declaration that the defendant is a beneficiary but a different rule as to jurisdiction where the claimant seeks a declaration that the defendant is not a beneficiary, or even where the claimant asks the court to determine whether the defendant is or is not a beneficiary.[87]Nonetheless, my conclusion is that the natural meaning of the words used in Article 5(6) requires one to examine the claim made against the defendant and to ask: is the claim brought against the defendant in his or her capacity as a beneficiary? The answer to that question is not affected by any prediction as to whether the defendant will assert in his or her defence that he or she is a beneficiary and indeed the assertions in any defence will not always be known when the question of jurisdiction has to be addressed. Further, based on the very clear authorities to which I have referred, I ought not to read the words used in Article 5(6) in an expansive way in an attempt to produce a rule as to jurisdiction which it might be said was a better rule, or one which drew the line in a more sensible place.[88]In the end, I come to the conclusion that this claim against the First Defendant is not a claim against her “as beneficiary”. I reach that conclusion essentially on the basis of the Claimants’ own analysis of the nature of the underlying claim coupled with my conclusion that the words “as a beneficiary” require the Claimants to show that they are suing the First Defendant in her capacity as a beneficiary rather than in her capacity as someone not beneficially entitled to the monies which are claimed. In my judgment, the words “as beneficiary” naturally mean:
“in the capacity of beneficiary”
. That conclusion is supported by the words used in the Lugano Convention, apparently without intending to change the meaning from the words used in the Brussels Convention. Like Lord Clyde in the Kleinwort Benson case, it seems to me that I should find the solution to the problem in the language of the Article. The construction urged upon me on behalf of the Claimant cuts across what was described as a fundamental principle requiring me to construe Article 5(6) narrowly or restrictively.[89]Accordingly, in relation to the third issue I hold that the personal and proprietary claims against the First Defendant are not claims against the First Defendant “as beneficiary” and are therefore not within Article 5(6) of the Judgments Regulation.

The fourth issue

[90]The fourth issue is:
“In relation to the second part of the Claimants’ claim against the First Defendant, is the First Defendant sued….as…..trustee….?”
[91]This part of the Claimants’ claim concerns the First Defendant’s status as Appointor and, more particularly, the claim for an order removing the First Defendant as Appointor and replacing her with a fit and proper person.[92]I have explained earlier in this judgment the basis on which the Claimants put forward this claim. For the purposes of Article 5(6) of the Judgments Regulation, the Claimants say that they are suing the First Defendant in this respect “as trustee”.[93]I have already drawn attention to the fact that paragraph 28 of the Particulars of Claim asserts that the First Defendant was not able to appoint herself as Appointor but the pleading does not claim a declaration that the purported appointment was a nullity. If the Claimants intend in this claim to claim a declaration that the First Defendant is not the duly appointed Appointor, then it seems to me to be difficult for them to say that they are suing her as Appointor and that as an Appointor she is in a position akin to that of a trustee so that they can say she is sued “as trustee” for the purposes of Article 5(6).[94]However, in this judgment I will concentrate on the claim,that is undoubtedly made by the Claimants, that if the First Defendant is an Appointor then the court can remove her and appoint another in her stead. This case is based upon the Appointor being the donee of a power, which is said to be a fiduciary power with the result, it is said, that the donee is in a position sufficiently analogous to that of a trustee so that the words “as a trustee” in Article 5(6) can expand to cover that type of case.[95]Although I have indicated that it is not necessary for present purposes to rule on whether the Appointor’s power under Clause 4.2 is fiduciary power, it is helpful to consider two of the authorities cited to me for the purpose of considering whether the First Defendant is sued “as trustee” within Article 5(6).[96]In Mettoy Pension Trustees Limited v Evans [1990] 1 WLR 1587 at 1613 to 1614, Warner J set out his summary of detailed submissions made by Robert Walker QC (as he then was) which dealt with the classification of certain powers. Mr Walker had identified four categories. Category 1 comprised any power given to a person to determine the destination of trust property without that person being under any obligation to exercise the power or to preserve it. Typical of powers in that category was a special power of appointment given to an individual where there was a trust in default of appointment. In such a case the donee of the power owed a duty to the beneficiaries under that trust not to misuse the power, but he owed no duty to the object of the power. He might therefore release the power but he might not enter into any transaction that would amount to a fraud on the power; a fraud on the power being a wrong committed against the beneficiaries under the trust in default of appointment. The learned judge said that where the donee of the power was the only person entitled under the trust in default of appointment, the power was not a fiduciary power at all because the donee owed no duty to anyone.[97]Category 2 comprised a power conferred on the trustees of property, or on any other person, as a trustee of the power itself. This was “a fiduciary power in the full sense”. A power in that category could not be released; the donee of it owed a duty to the objects of the power to consider, as and when may be appropriate, whether and if so how he ought to exercise it; and he was to some extent subject to the control of the courts in relation to its exercise.[98]Category 3 comprised any discretion which was really a duty to form a judgment as to the existence or otherwise of particular circumstances giving rise to particular consequences.[99]Category 4 comprised discretionary trusts where someone, usually but not necessarily the trustees, was under a duty to select from among a class of beneficiaries those who are to receive, and the proportions in which they are to receive, income or capital of the trust property.[100]At page 1614F, Warner J referred to Mr Walker’s submission that he should eschew the phrases “trust power”, “power coupled with a duty”, “power coupled with a trust” and “power in the nature of a trust” which were said to have been used to cover different cases from categories 2, 3 and 4. I infer that those phrases were regarded as lacking the necessary precision for the purposes of clear categorisation of the various types of power. In the Mettoy Pension Trustees case, Warner J’s ultimate conclusion was that the court could intervene and control the exercise of a fiduciary power even where circumstances were not that of a discretionary trust. Warner J relied upon a passage in the speech of Lord Wilberforce in Re Baden’s Deed Trusts[1971] AC 424 at 456 to 457.[101]Rawcliffe v Steele [1993-1995] MLR426 is a decision of the Staff of Government Division, in the Isle of Man. At pages 495 to 499, Acting Deemster Hegarty identified a three fold classification of powers. The first category he called “trust powers in the strict sense”. This category comprised, or was akin to, a discretionary trust. The second category was that of fiduciary powers. The third category was a mere power or a bare power, which was not a fiduciary power. The learned judge discussed fiduciary powers, in particular, at pages 496 to 498 of the judgment. There was a second judgment, from Acting Deemster Smith who agreed with Acting Deemster Hegarty.[102]Based on the detailed analysis of the differences between mere powers, fiduciary powers and trusts in the two cases I have cited, I conclude that there are considerable differences between the office or the capacity of a trustee and the position of a donee of a fiduciary power. In some circumstances, it might conceivably be right to react to the word “trustee” in an instrument, or even in a statutory provision, by holding that the parties to the instrument or the enacting authority intended to embrace not just trustees properly so called but also persons who had fiduciary duties where those duties were, in the wide spectrum of fiduciary duties, close enough to be regarded as analogous to or akin to the duties of a trustee.[103]However, I have no doubt that that liberal or expansive approach to the word “trustee”, which might conceivably be possible in some contexts, is not appropriate in the present context. I have already referred to the restrictive approach which I am required to adopt to the derogation provisions in Article 5(6). It seems to me it would be quite inconsistent with that restrictive approach to read the words “as trustee” in the present case in the expansive way, in which they would have to be read, to produce a result in favour of the Claimants.[104]Accordingly, in relation to the fourth issue, I hold that the second claim made against the First Defendant, in her role as Appointor, is not a claim against her “as trustee” and is therefore not within Article 5(6) of the Judgments Regulation.

The fifth issue

[105]The fifth issue is:
“If the court has jurisdiction under Article 5(6) in relation to all or part of the Claimants’ claims, is it open to the court to decline jurisdiction on the grounds of forum non conveniens?”
[106]Because of the answers I have given to the earlier issues, the fifth issue does not arise. However, the fifth issue was fully argued and I will deal with it, although more concisely than might have been appropriate, if it had been a decisive issue.[107]The Claimants contend that this issue is to be determined in their favour by reason of the decision of the European Court of Justice in Owusu v Jackson [2005] QB 801, a case on the Brussels Convention. Both sides before me accepted that there was no relevant distinction between the Brussels Convention and the Judgments Regulation for present purposes but the First Defendant contends that this decision is distinguishable on other grounds.[108]The particular Article of the Brussels Convention relied on in Owusu v Jackson was Article 2. It will be remembered that Article 2 is the general provision as to jurisdiction and Article 5 is a derogation from it. In substance, Article 2 directs that persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State. Article 5(6) provides that a person domiciled in a Member State may in another Member State be sued as settlor, trustee or beneficiary etc.[109]In Owusu v Jackson, the Defendant was domiciled in the United Kingdom so was the Claimant. The Claimants sued the Defendant in the United Kingdom and joined a number of other Defendants who were not so domiciled. The subject matter of the dispute related to events which had happened in Jamaica. The Defendant, who was domiciled in the United Kingdom, invited the court to decline jurisdiction on the grounds that Jamaica was a more appropriate forum, in other words on the grounds of forum non conveniens. The first issue considered by the European Court of Justice was whether the Brussels Convention applied in a case where the suggested alternative forum was not a Member State. The court held that the Convention applied even though the suggested appropriate alternative forum was not a member state, in that case Jamaica. At paragraphs 37 to 46 of the judgment of the court, the court considered the general compatibility of the forum non conveniens doctrine with the Brussels Convention. It was pointed out that Article 2 of the Brussels Convention was mandatory in nature and there could be no derogation from the principle it laid down, except in the cases expressly provided for by the Convention. No exception on the basis of forum non conveniens was provided for by the authors of the Convention, though the question had been discussed by them. Respect for the principle of legal certainty would not be fully guaranteed if the court having jurisdiction under the Convention (the United Kingdom in that case) was to be allowed to apply the forum non conveniens doctrine. The preamble to the Brussels Convention indicated that the intention was to lay down common rules on jurisdiction to guarantee certainty as to the allocation of jurisdiction among the various national courts before which proceedings in a particular case might be brought. Legal certainty required that the jurisdictional rules which derogated from the general rule laid down in Article 2 should be interpreted in such a way as to enable a normally well informed defendant reasonably to foresee before which courts, other than those of the state in which he is domiciled, he might be sued. Application of the forum non conveniens doctrine which allowed the courts seised of a matter a wide discretion was liable to undermine the predictability of the rules of jurisdiction laid down by the Brussels Convention, in particular the rule in Article 2, and to undermine the principle of legal certainty. A defendant would not be able reasonably to foresee before which other courts he could be sued. Allowing for forum non conveniens in the context of the Brussels Convention would be likely to affect the uniform application of the rules of jurisdiction contained in it, in so far as that doctrine was recognised only in a limited number of contracting states. Although there were genuine difficulties in that case about the proceedings being dealt with in the English courts, and those difficulties were precisely those which would be taken into account when forum non conveniens was considered, those difficulties were not such as to call into question the mandatory nature of the fundamental rule of jurisdiction contained in Article 2 of the Brussels Convention.[110]Article 2 of the Judgments Regulation was intended to ensure, in the general run of cases, that the defendant would be sued in the courts of the State in which he was domiciled. In Owusu, the defendant was domiciled in the United Kingdom but it was the defendant who wanted the court to decline jurisdiction. The effect of the ruling of the European Court of Justice was that Article 2 was interpreted to mean that the claimant was entitled to sue the defendant, against the defendant’s wishes, in the United Kingdom. In the present case, if Article 5(6) had applied, the effect of Article 5 would be to entitle the Claimants to sue the First Defendant against the First Defendant’s wishes in the English courts.[111]The First Defendant submitted that the decision in Owusu can be distinguished in the present case. It was pointed out that Owusu concerned Article 2 whereas the present case potentially involved the engagement of Article 5(6). It was pointed out that Article 2 is “mandatory” and Article 5 is “permissive”.[112]Article 2 is mandatory in that the defendant can insist on being sued in the defendant’s domiciled state (absent any derogation from Article 2 in the Judgments Regulation itself). However, as explained above, the way in which Article 2 applied in the Owusu case was that it permitted the claimant to sue the defendant against the defendant’s wishes in the United Kingdom. Thus, in my judgment, there is no difference between the claimant in Owusu exercising the permission given by Article 2 to sue the defendant in the United Kingdom and the Claimants in the present case exercising the permission in Article 5(6) (if it applied) to sue the First Defendant in England. What was “mandatory” in Owusu was that the rules laid down in the Judgments Regulation ruled out the possibility that a court of a Member State had a discretion to decline jurisdiction. That applies in a case under Article 5(6) just as much as it applies to a case under Article 2.[113]My conclusion on this point is that, if the case had come within Article 5(6), the court would not have the power to decline jurisdiction on forum non conveniens grounds.[114]My conclusion is in accordance with the discussion in Dicey, Morris & Collins, the Conflict of Laws 14th Edition at paragraph 12.020.[115]I have also considered the detailed discussion of Owusu v Jackson in Civil Jurisdiction and Judgments, Briggs & Rees, 4th edition, see at paras. 2.219 to 2.229. The authors find very great fault in the reasoning, or they would say the lack of reasoning, in that case. They discuss in detail cases in which the decision in Owusu v Jackson might conceivably not apply. However, I did not see anywhere the suggestion that a court which is given jurisdiction under Article 5 would be entitled to decline jurisdiction on forum non conveniens grounds.[116]I was also shown a number of academic articles and other judgments which explore the boundaries of the decision in Owusu v Jackson but none of them makes a distinction between an Article 2 case and an Article 5 case.

The sixth issue

[117]The sixth issue is:
“If the answer to the fifth issue is yes, should the court decline jurisdiction on that ground?”
[118]The sixth issue only arises if the fifth issue had arisen and if I had answered the fifth issue by holding that I had power to decline jurisdiction. In fact, I have held that the fifth issue did not arise and even if it had arisen I would not have had power to decline jurisdiction.[119]In these circumstances, I do not regard it as appropriate to consider the sixth issue and I do not do so.

The overall result

[120]The result of the foregoing is that I have held that the first part of the Claimants’ claim against the First Defendant is not a claim against her “as beneficiary” and I have also held that the second part of the Claimants’ claim against the First Defendant is not a claim against her “as trustee”. It follows that the entirety of the Claimants’ claim against the First Defendant is outside Article 5(6) of the Judgments Regulation.[121]The only basis on which the Claimants contend that this court has jurisdiction to hear this claim is Article 5(6). As I have held that the Claimants’ claim does not come within Article 5(6) it must follow that I should declare that the court has no jurisdiction to hear this claim.

Cited in 8 later judgments