Labrouche v Frey and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE PETER SMITH,MR NEWMAN,Lord Justice Moses,Lord Justice Rimer |
| Judgment Date | 03 July 2012 |
| Neutral Citation | [2012] EWCA Civ 881 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2012/0121 & A3/2012/0104 |
| Date | 03 July 2012 |
[2012] EWCA Civ 881
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Peter Smith
[2011] EWHC 3854 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Neuberger, Master of the Rolls
Lord Justice Moses
and
Lord Justice Rimer
Case No: A3/2012/0121 & A3/2012/0104
Mr Paul Newman QC, Ms Emily Campbell (instructed by Collyer Bristow LLP), Mr Michael Furness QC, Miss Tiffany Scott (instructed by Boodle Hatfield LLP), for the Appellants
Mr Simon Taube QC, Mr Marcus Staff and Mr Justin Higgo (instructed by Carter Perry Bailey) for the Respondent
Hearing date: 18 June 2012
The Master of the Rolls:
This is an appeal against a decision of Peter Smith J refusing an application to strike out part of a claim.
The background facts
Olga Martin Montis ("Olga") died on 8 th February 1980, leaving a will dated 9 May 1974 ("the will"), which was written in English and was governed by English law. In the will, Olga appointed Hugo Frey ("Hugo") as her executor, and (i) her daughter, Soledad Cabeza de Vaca y Leighton ("Soledad"), (ii) her third husband, and (iii) Hugo, as the trustees of the will. Hugo (who died in 2005) and Soledad ceased to be trustees in 1998. On the death of Olga's third husband in 1991, Hugo's son, Markus ("Markus") became a trustee of the will in his place. Markus is also the executor of the estate of his father, Hugo.
Newin Foundation ("Newin") has been a Liechtenstein foundation since November 1995, but it was originally set up as a Liechtenstein Anstalt in about 1957. In addition to many other assets, the valuable founder's rights in Newin, as an Anstalt, had belonged to Olga, and, on her death, they formed part of her estate ("the estate") and were accordingly held by the trustees of her will.
The terms of the trust ("the trust") established under the will were not entirely straightforward, but, for present purposes, it is enough to say that Forester Labrouche ("Forester"), Soledad's son, was, contingently on attaining the age of 40 (which he did in 1991), entitled to: (i) an absolute interest in possession of 15% of the residue of the estate (which was distributed to him in about 1999), and (ii) an absolute interest in reversion in 45% of the residuary estate, the reversion being expectant on the death of the survivor of Olga's third husband (who, as mentioned, died in 1991) and Soledad (who is still alive).
The instant proceedings
The present proceedings were brought in the Chancery Division of the High Court on 5 March 2010, by Forester against (i) Markus, (ii) Hugo's estate, (iii) Soledad and (iv) Newin (together, "the defendants"). The main aspects of the claim are for an account, an inquiry, and an order for payment, against the first three defendants as former trustees (together, "the trustees"), an order that Markus be removed as a trustee, and a declaration as to the beneficial ownership of Newin and Newin's assets. The claim form and particulars of claim were served in April 2010.
The claims are based on contentions that:
(i) although there was a trustees' charging clause in the will, the trustees, or some of them, charged at a highly excessive rate;
(ii) Hugo and Markus, as trustees, received commissions, or retrocessions, through their ownership of a company called ZT Zurich Trust AG, through the medium of payments by two Swiss banks which held the trust's monies;
(iii) the trustees acted in breach of trust in permitting or causing Newin to be converted from an Anstalt to a Foundation, thereby losing the trust the valuable founder's rights; Forester also sought a declaration against Newin to the effect that all assets held by it or in its name were beneficially the property of the trust;
(iv) the trustees failed to hold the balance fairly between the capital and income beneficiaries of the trust, which included contentions that (a) the proceeds of sale of a property were distributed as if they were income, (b) the trustees decided to invest largely in US dollar denominated stocks, (so far, I think, not pleaded) and (c) the trustees had directed their agents to invest for income rather than for capital appreciation.
In July 2010 (in the case of the trustees) and October 2010 (in the case of Newin), the defendants applied to strike out the proceedings, or at least some of the allegations and claims in the proceedings, essentially based on the contention that Forester had brought claims in other jurisdictions, including in Lausanne and in Zurich, Switzerland and in Liechtenstein ("the other proceedings"). So far as the other proceedings are concerned, (i) the Lausanne court had declined jurisdiction in 1999, (ii) the Zurich proceedings had resulted in a judgment dismissing all Forester's claims in October 2006, and, although he issued an appeal, Forester abandoned it in November 2007, and (iii) the Liechtenstein proceedings were still running during 2011.
The defendants contended that, in those circumstances, at least some of the claims raised in these proceedings should be struck out on the grounds of issue estoppel or abuse of process, and in particular on the grounds that:
i) One or more of the claims had been raised and dismissed in the claims in the other proceedings, particularly in Zurich;
ii) Insofar as some of the claims had not been raised in the other proceedings, they could and should have been raised in the other proceedings;
iii) Insofar as it was said that England was the only proper forum for many of the claims, it was still an abuse of process to have brought the present proceedings in respect of those claims, given that Forester had brought and pursued the other proceedings.
In essence, the four defendants based their application to strike out on the principles and approach adopted in cases such as Henderson v Henderson (1843) 3 Hare 100, Johnson v. Gore Wood & Co (1) [2002] 2 AC 1, and Aldi Stores Limited v. WSP Group Plc [2008] 1 WLR 748, in which this court referred with approval to the approach adopted by Clarke LJ in Dexter v. Vlieand-Boddy [2003] EWCA Civ 14.
Together with one or two other matters, the defendants' application to strike out came before Peter Smith J on 9 November 2011, at a hearing where (i) he approved Markus's retirement as a trustee of the trust, and (ii) directed that the strike-out applications come on for hearing before him shortly. The strike out applications duly came on before him on 19 December 2011, with a time estimate of three days, most of which was presumably attributable to the applications to strike out. Apart from the applications to strike out, Peter Smith J was also being invited to consider an application to amend Forester's statement of case, and to give directions for the trial. By that time, the trial date had already been fixed for 13 January 2013, with a time estimate of four weeks.
The hearing of 19 and 20 December 2011
In order to understand properly the issues raised by the parties on this appeal, it is necessary to set out most of the contents of the first three pages of the transcript of the hearing on 19 December before Peter Smith J. Those pages record the initial exchanges between the Judge and Mr Newman QC (who appeared together with Ms Campbell for Markus and for Hugo's Estate, as he does before us).
The transcript reads as follows:
MR JUSTICE PETER SMITH'Mr Newman, I have attempted in the five hour [reading time] estimate to understand this case and in that period I was barely able to read let alone to digest all of the material. I am firmly of the view that an argument on these papers that the proceedings should be struck out as being an abuse is really beyond the reach of sustained argument. It can only be done if yet more material about the Zurich decision in particular is provided and in my view it is a waste of the parties' time and money and the court time. What these parties ought to have, after the decade of dispute, is a merits-based trial. I do not believe they have had one yet. What I am proposing to do is to allow the action to proceed, set the timetable for the trial date … and preserve, with proper evidence, the right of the defendants to argue that any of the previous proceedings have issue estopped the claimants as opposed to abuse. That is what I think should happen.
MR NEWMANThat is going to make the application I intend to make before your Lordship that these proceedings should be struck out for abuse of process somewhat problematical. There are perhaps two ways of proceeding. One is I could stand here for a day and seek to persuade your Lordship that your Lordship is wrong in your Lordship's initial view; the other is for your Lordship to go straight to case management, giving me the opportunity to appeal your Lordship's decision that this is an unsustainable application and see if I can persuade the Court of Appeal that your Lordship is wrong. I am in your Lordship's hands as to which way your Lordship wants to go.
MR JUSTICE PETER SMITHI do not intend to force you to try and persuade me to the contrary. It is a pointless exercise.
MR NEWMANI understand.
MR JUSTICE PETER SMITHIt is not sustainable in my view without yet more evidence. I cannot stop you going to the Court of Appeal, if your clients wish. In my view, it would waste more time on procedural issues as opposed to merits-based issues …. I propose, as I have said, to set in the CMC today a timetable for this trial ….
MR NEWMANI wonder if it would be possible if your Lordship could rise and we could have a few minutes to digest what your...
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