Gomez and Others v Gomez-Monche Vives

JurisdictionEngland & Wales
JudgeLord Justice Lawrence Collins,Mr Justice Lewison,Lord Justice Jacob
Judgment Date03 October 2008
Neutral Citation[2008] EWCA Civ 1065
Docket NumberCase No: A3/2008/0547
CourtCourt of Appeal (Civil Division)
Date03 October 2008

[2008] EWCA Civ 1065

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

MR JUSTICE MORGAN

Royal Courts of Justice

Strand,

London, WC2A 2LL

Before:

Lord Justice Jacob

Lord Justice Lawrence Collins and

Mr Justice Lewison

Case No: A3/2008/0547

HC07C01676

Between:
Jose Gonzalez Gomez & Ors
Appellants
and
Encarnacion Gomez-monche Vives
Respondent

Mr Nicholas Le Poidevin and Mr Tony Oakley (instructed by Farrer & Co . LLP) for the Appellant s

Lord Goldsmith QC and Mr Peter Rees (Debevoise & Plimpton) for the Respondent

Hearing dates : July 24 and 25, 2008

Lord Justice Lawrence Collins

I Introduction

1

This is an appeal from a judgment of Morgan J dated February 18, 2008, in which he declared that the court had no jurisdiction in a claim by the three claimants against their mother, the first defendant, arising out of a trust created by their father. The family is Spanish and the trust is expressed to be governed by English law. The application involved the interpretation and application of Article 5(6) of the Council Regulation (EC) 44/2001 (“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; ….”

2

The appeal raises an important question of principle on the ascertainment of the domicile of a trust for the purposes of Article 5(6), and also questions on the interpretation and the application of the expression “sued …as … trustee or beneficiary” in that Article.

3

The background to this appeal is that on June 11, 1984 a declaration of trust was made by Fidei Trust Co Ltd, a Jersey corporation. The principal asset of the trust was certain shares in Gonzalez Byass & Co Ltd, a corporation incorporated under the law of the Cayman Islands. Gonzalez Byass is the well known producer of sherry.

4

The effective settlor of the declaration of trust was Alfredo Gonzalez Diez (“the Settlor”), who died on September 16, 1991, intestate and domiciled in Spain.

5

Encarnación Gómez-Monche Vives, the first defendant and respondent on this appeal, is the widow of the Settlor. She is domiciled in Spain for the purposes of the Judgments Regulation. The Settlor and the first defendant had five children, all sons, and the claimants (the appellants on this appeal), José González Gómez, Pablo González Gómez, and Álvaro González Gómez, are three of those sons. The claimants live in Spain, Portugal and the United States of America, respectively

6

On September 16, 1999, GB Investment Holdings Ltd, a BVI corporation, the second defendant and Ansbacher Trustees (Jersey) Ltd (then called St Helier Trust Company Ltd), a Jersey corporation, the fourth defendant were appointed trustees in place of Fidei Trust Co Ltd (which no longer exists). On December 23, 2002, WalPart Trust Registered, a Liechtenstein corporation, the third defendant, was appointed trustee in place of Ansbacher Trustees (Jersey) Ltd. Consequently from December 23, 2002, the trustees have been GB Investment Holdings Ltd and WalPart Trust Registered.

7

The Trust is administered in Liechtenstein. All of the directors of the third defendant are resident in Liechtenstein, and it is the sole corporate director of the second defendant. All decisions relating to the Trust are taken in Liechtenstein, and all of the Trust's bank account and accounting books are located in Liechtenstein.

II The terms of the Trust

8

The declaration of trust recites that at the direction of the Settlor 6,000 ordinary shares in Gonzalez Byass & Co Ltd, a Cayman Islands corporation, the holding company of the well-known sherry producer, were transferred into the name of the Trustee (then, as I have said, Fidei Trust Co Ltd) to hold the same on the trusts of the declaration of trust.

9

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 & Co Ltd] to hold Ordinary Shares in [Gonzalez Byass & Co Ltd].

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.”

10

Article 28(B) of the then Articles of Association of Gonzalez Byass & Co Ltd identified the following persons: “Any lineal descendant (both male and female) of any male whose surname is Gonzalez Gordon ….” The effect is to prevent shares being transferred outside the descendants of the two founding families of the Gonzalez Byass business.

11

The broad effect of the trust is said by the claimants to be as follows: (1) during the Trust Period, the declaration of trust gave the Settlor (but not the trustees) a power of appointment, in the form of a discretion to determine to which (or for the benefit of which) of the Beneficiaries the trustees should pay or apply the trust fund, as to both capital and income; (2) the Settlor during his lifetime never exercised his power of appointment as regards capital and so the trustees were bound to retain the trust property during the Trust Period; (3) as to income, the Settlor during his lifetime never exercised his discretion, but the trustees could accumulate income for 21 years (Law of Property Act 1925, section 164 (as amended by Perpetuities and Accumulations Act 1964, section 13 would have prohibited a longer period), i.e. to June 11, 2005) “[i]n accordance with Settlor's instructions” under clause 4.4; (4) any income in respect of which the Settlor did not exercise his discretion during his lifetime is therefore held on resulting trust for the settlor or his estate at least from the end of the 21 years (i.e. from June 11, 2005) and – if the declaration of trust means that there could be no accumulation unless he gave an express instruction – beforehand also.

12

Consequently, the claimants say that income subject to the resulting trust which arose after the death of the Settlor (December 16, 1991) therefore fell into his estate. Since he died intestate and domiciled in Spain, it went according to the Spanish law of intestacy. Spanish law gives one-third of the income to the first defendant and the rest of the income to the settlor's children (the claimants and their two brothers). But if any of the shares settled were acquired during the marriage otherwise than by inheritance, they were assets within the matrimonial property regime applying to the Settlor and the first defendant; the first defendant would then, on the death of the Settlor, have become entitled to half of those shares and therefore to the income from that half, as well as to her one-third share of the income from the other half, making a total of two-thirds of the income of those shares. Consequently, the claimants concede that the first defendant has been entitled to one-third of the income, from June 11, 2005 and perhaps earlier.

13

According to the claimants, when clause 4.2 provides that the fund is to be distributed at the end of the Trust Period in accordance with any appointment made by the Appointor within two years of the end of the Trust Period, it is not clear whether it is two years before the end of the period or two years afterwards. In default of appointment, the trust property goes to the Settlor's sons living at the end of the Trust Period. The first defendant was not entitled to be...

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