Tag: Article 7(6)

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Dooley v Castle: Court of Appeal overturns jurisdictional objections, claims over alleged offshore pension scam can continue.

Dooley & Ors v Castle Trust & Management Services Ltd [2022] EWCA Civ 1569  is the successful appeal against Russen HHJ’s first instance judgment which I discussed here – readers best consult that post for context, before reading on. For reasons I explain in that post, judicial relations between the UK and Gibraltar pre-Brexit engaged the Brussels 1968  Convention.

Carr LJ wrote the reasons for overruling the judgment, and the Court of Appeal does find there is jurisdiction in E&W. [35] she reminds us of the evidentiary burden at the jurisdictional stage

For the purpose of the evidential analysis, the standard lies between proof on the balance of probabilities and the mere raising of an issue. On contentious factual issues, the court takes a view on the material available if it can reliably do so; if a reliable assessment is not possible, there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it. The test is context-specific and flexible, and if there is an issue of fact the court must use judicial common sense and pragmatism, making due allowance for the limitations of the material available at an early point in the proceedings.

[41] ff the judge is held to have wrongly treated the relationship between Article 5 (mostly known for forum contractus and forum delicti reasons but also including a trust forum: A5(6) concerning trust-related claims in the courts of the trust’s domicile) and Article 13 (the forum consumptoris). [43] Articles 13 to 15 make up an entirely separate and self-contained section and there is no need or indeed allowance to first check whether Article 5’s conditions apply (including on the conditions for a ‘contract’ to exist), subsequently to check whether A13 ff (including the conditions for a ‘consumer contract’ to exist) apply with a consequence of disapplying A5. Both Opinion AG and judgment in CJEU C-96/00 Gabriel are called upon in solid support.

[48] Jurisdiction under Article 13 is thus a self-standing lex specialis and derogation from the general rule in Article 2. If jurisdiction is not established under Article 13, it may nevertheless arise under Article 5(1). But it is not necessary to establish jurisdiction under Article 5(1) in order to make it out under Article 13.

[49] The Judge’s error on this issue was material, in the light of his conclusion that any claim against Castle would fall within Article 5(6) (and so could not fall within Article 5(1)).

Continuing then on A13, the contentious issue is whether the Judge was wrong to conclude that the pensioners did not have the better of the argument for the purpose of A13:  i) that the proceedings were “proceedings concerning” contracts between the pensioners and Castle for the supply of services; and, if so, ii) that in England and Wales the conclusion of the contracts was preceded by specific invitations addressed to the pensioners.

Re i), [55] the Judge appears to have concluded that there was no contract, by reference to the lack of clarity as to the services to be provided by Castle beyond the contents of the Welcome Letter. On appeal Castle concede that a contract for services did exist between each pensioner and Castle, however that the services to be provided by Castle under each contract were limited to the technical execution of the relevant Deed of Adherence in each case and that therefore the proceedings, which made no complaint about the technical execution of the Deeds, were not “proceedings concerning a contract”.

Carr LJ [57ff] insists that the existence of a trustee-beneficiary relationship does not preclude the co-existence of a contract between the same parties, and, referring to language with strong ‘contract’ echo in the marketing, holds that there was indeed a contract between each of the pensioners and Castle, a relationship that went beyond mere technical execution of the deeds.

[61] ff then deals with ii), with the Court holding there is a good arguable case that each pensioner received (in the State of their domicile) a specific invitation addressed to them, such invitation crystallising at the moment that Management Services sent or handed them an application form. Carr LJ suggest that such an invitation might be sufficient for A13(3) purposes without more: A13 does not contain any express requirement for a connection between the invitation and the trader; the focus is on the existence of a sufficiently strong connection between the contract and the country of domicile of the consumer. However the claimants concede that there was a further requirement, namely that the invitation had to be made on behalf of the trader, here Castle. Arguendo, [66] Carr LJ holds 

there is a plausible evidential basis for the proposition that there was some sufficient connection between MS and Castle, including the possibility that MS was acting for Castle as a “middleman” of the type envisaged in the Schlosser Report (by cross-reference to the Giuliano/Lagarde Report). It is, for example, not in dispute that MS obtained Castle’s application forms and provided them to the pensioners. It appears that MS procured or facilitated production of all the complex documentation and declarations as required by Castle from the pensioners in the build-up to the application forms and transfers themselves.

[68] ff are the proceedings then “proceedings concerning” the contracts in question? The Court holds they are, at a general level for the proceedings are not about mismanagement of the trusts once established, but rather that the pensioners should never have entered the Schemes in the first place, and at a more specific level for the claims to relate to specific issues in the services agreement.

The claims can now proceed to trial where, as I noted before, applicable law will be one of the contested issues.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 2.2.9.2.1 and 2.2.9.2.2.

 

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Dooley v Castle. On Gibraltar, the Brussels Convention and trust management as consumer contracts.

After Eastern Pacific Chartering Inc v Pola Maritime Ltd, judgment in Dooley & Ors v Castle Trust & Management Services Ltd [2021] EWHC 2682 (Comm) is the second recent case to apply the 1968 Brussels Convention in relations between the UK and Gibraltar. This time it is the consumer section of the Convention which is at the core of the jurisdictional discussion.

Defendant is a company registered in Gibraltar which operates as a professional trustee company. The litigation concerns overseas pension schemes, promoted principally by Montegue Smythe, a Cypriot firm which operated from an English address. The court did not have before it any contractual terms evidencing the relationship between Castle and Montegue Smythe [66].

Common law negligence or breach of regulatory or statutory rules are the claim. Applicable law [15-16] is announced to be a contested issue at trial but not one that featured in the current jurisdictional challenge.

Readers may be aware that prior to the Brussels I Regulation (2001) amendments to the consumer section, requirements to trigger it were quite different. Defendants argue that the consumer section is not engaged for claimants have not shown that the conclusion of the contract was preceded in the consumer’s domicile by a specific invitation addressed to them or by advertising. In support of their case that the requirement of A13.3(b) Brussels Convention was satisfied, claimants plea an extract from Castle’s website which was said to be an act of advertising in the UK.

CJEU Kalfelis, Engler, Gabriel and Pammer (the latter mutatis mutandis and with focus on the CJEU’s view as to its own previous authority under the Convention; for Pammer Alpenhof is a Brussels I case) were the core cases discussed. At [64] Russen J rejects ia Petruchova and Reliantco as relevant authority given their Brussels I(a) context.

The judge emphasises the restrictive interpretation of the consumer section and holds that Castle’s obligations to claimants rested fundamentally upon its trusteeship of the QROPS rather than any separate contract for the provision of financial administration services. There is no plausible evidential basis for saying a contract was concluded for the supply of services outside those which were identified by the Deeds and the Rules which were incorporated by Castle [68].

Any claim against Castle based upon non-performance of services would have to be based upon the Trust Deeds and the Rules incorporated by them. Any such claim would fall within Article 5.6 (equivalent to A7(6) BIa) which would lead to the same court – the Gibraltar court – having jurisdiction as it would under the general rule of A2 Brussels Convention [70].

The judge also held that even on the assumption that a particular claimant read the extract on the website before investing in the QROPS, the fact is that there is no evidence to suggest that the territorial requirement identified in  CJEU Gabriel was satisfied.

The tort gateway under A5(3) Brussels Convention was not much entertained for claimants did not put much weight on it. At [73] the judge located locus delicti commissi in Gibraltar and did not hold on locus damni possibly being in England or the UK (the signing away of the transfer of the funds in the UK potentially qualifying as locus damni. With interesting potential discussion of course of the EU v the E&W approach on same per UKSC Brownlie I and II.

The jurisdictional challenge succeeds.

Geert.

EU Private International Law, 3rd ed. 2021, Heading 2.2.9.2.1 and 2.2.9.2.2.

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Ashley v Jimenez: Jurisdiction upheld despite choice of court ex-EU. No locus damni, locus delicti commissi or trust jurisdiction viz EU defendant.

In [2019] EWHC 17 (Ch) Ashley et anon v Jimenez et anon service out of jurisdiction was granted against a Dubai-based defendant, despite choice of court pro the UEA. That clause was found by Marsh CM not to apply to the agreement at issue. Jurisdiction was found on residual English PIL, which are of less relevance to this post. Forum non conveniens was rejected.

Service out of jurisdiction was however denied against the Cyprus-based (corporate) defendant in the case. Claimants had argued jurisdiction on the basis of Brussels I Recast Articles 7(2) (tort) or (6) (trust). Note Marsh CM  using the acronym BRR: Brussels Recast Regulation. As I noted earlier in the week  Brussels Ia is now more likely to win the day.

Claimants (“Mr Ashley” and “St James”) allege that £3 million has been misappropriated by the defendants (“Mr Jimenez” and “South Horizon”). In summary the claimants say that: (1) Mr Ashley and Mr Jimenez orally agreed in early 2008 that upon payment of the euro equivalent of £3 million, Mr Ashley would acquire, via a shareholding in Les Bordes (Cyprus) Limited, a holding of approximately 5% in the ownership of a golf course in France called Les Bordes and that the shares would be registered in the name of St James. (2) On 13 May 2008, Mr Ashley instructed his bank to transfer the requisite sum to the bank account specified by Mr Jimenez and the transfer was made. In breach of the agreement, the shares were never registered in the name of St James. (3) The agreement and/or the payment were induced by fraudulent misrepresentations made by Mr Jimenez. The claimants say that Mr Jimenez knew South Horizon did not hold the shares and was not in a position to transfer, or procure transfer, upon payment of the agreed sum and that, in representing that South Horizon held the shares, or could procure transfer, Mr Jimenez acted dishonestly. (4) In the alternative, the payment of £3 million gave rise to a Quistclose trust (on that notion, see below) because the payment was made for an agreed purpose that only permitted use of the money for securing transfer of the shares.

(At 82) qualifying strands relevant to the jurisdictional issues, are (1) representations were made by Mr Jimenez to Mr Ashley to induce him to invest in Les Bordes which he relied on; (2) an oral contract was made between Mr Jimenez and Mr Ashley in early 2008 under which Mr Ashley invested £3 million in Les Bordes; and (3) the creation of a Quistclose trust relating to the investment. Note a Quistclose trust goes back to Barclays Bank Ltd v Quistclose Investments Ltd [1968] UKHL 4, and is a trust created where a creditor has lent money to a debtor for a particular purpose. Should the debtor use the money for any other purpose, it is held on trust for the creditor.

On Article 7(2), the High Court held that a breach of trust is properly seen as a tortious claim for the purposes of Brussels Ia. As for locus delicti commissi, the Court notes the question of where the harmful event occurred is less straightforward. Claimants rely on the Cypriot defendant, South Horizon, having paid away the investment money it received in breach of the relevant trust. That event took place in Cyprus where the bank account is based. There might be an obligation to restore the money in England, yet that does not make England the locus delicti commissi: at 128: ‘It seems to me, however, that the claimants in this case are seeking to conflate the remedy they seek with the tortious act which was paying away the investment. The obligation to make good the loss is the result of the wrong, not a separate wrong.‘

The High Court does not properly consider the locus damni strand of the claim against South Horizon. Given the test following from Universal Music, England’s qualification as locus damni given the location of the bank accounts is not straightforward yet not entirely mad, either. The Court did consider England to be the locus damni in its application of English residual rules for the claim between Ashley and Jimenez (who is domiciled in Dubai): at 101: ‘the dealings between Mr Ashley and Mr Jimenez concerning an investment of £3 million in Les Bordes took place in England in the early part of 2008. Loss was sustained in England because the payment was made by Mr Ashley from an account held in England’ (reference made to VTB capital).

On (a rare application of) Article 7(6): are any of the claims relating to the Quistclose trust claims brought against “… the trustee … of a trust … created orally and evidenced in writing” and which is domiciled in England and Wales?: Marsh CM at 129-130:

‘Article 7(6) does not assist the claimants. They need to show that there is (a) a dispute brought against a trustee of a trust (b) the trust was created orally and was evidenced in writing and (c) the claim is made in the place where the trust is domiciled. The difficulty for the claimants concerns the manner in which the trust came into being. As I have indicated previously, although the oral agreement between Mr Ashley and Mr Jimenez gives rise to the circumstances in which the Quistclose trust could come into being, there was (i) no express agreement that the investment would be held on trust and (ii) South Horizon was not a party to the agreement. The trust came into being only upon the payment being made by Mr Ashley to South Horizon at which point, and assuming South Horizon was fixed with knowledge of the agreement, the investment was held upon a restricted basis.

I also have real difficulty with the notion of the Quistclose trust having a domicile in England. It seems to me more likely that the domicile is the place of receipt of the money, because that is where the trust came into being, rather than the place from which the funds were despatched.’

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.2.

 

 

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