Macmillan Inc. v Bishopsgate Investment Trust Plc (No. 3)

JurisdictionEngland & Wales
JudgeLORD JUSTICE STAUGHTON,LORD JUSTICE AULD,LORD JUSTICE ALDOUS
Judgment Date02 November 1995
Judgment citation (vLex)[1995] EWCA Civ J1102-15
Docket NumberCH 1991 M No.12739
CourtCourt of Appeal (Civil Division)
Date02 November 1995
Macmillan, Inc
Appellants
and
Bishopgate Investment Trust Plc & Ors
Respondents

[1995] EWCA Civ J1102-15

(Mr. Justice Millett))

Before: Lord Justice Staughton Lord Justice Auld Lord Justice Aldous

CH 1991 M No.12739

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE (CHANCERY DIVISION)

MR. D. OLIVER Q.C and MR. M. ROSEN Q.C. (Instructed by Messrs Herbert Smith) appeared on behalf of the (Plaintiff) Appellant, Macmillan Inc.)

MR. C. ALDOUS Q.C. and MR. R. HILDYARD Q.C. (instructed by Messrs. Freshfields) appeared on behalf of the Second Defendant (Respondent) Shearson Lehman Brothers Holdings plc.

MR. W. BLAIR Q.C. (instructed by Messrs. Watson, Farley & Williams) appeared on behalf of the Third Defendant (Respondent) Swiss-Volksbank.

MR. S. MORTIMORE Q.C. and MR. W. TROWER (instructed by Messrs. Clifford Chance) appeared on behalf of the Fifth Defendant (Respondent), Credit Suisse).

LORD JUSTICE STAUGHTON
1

In any case which involves a foreign

2

element it may prove necessary to decide what system of law is to be applied, either to the case as a whole or to a particular issue or issues. Mr Oliver, for Macmillan Inc., has referred to that as the proper law; but I would reserve that expression for other purposes, such as the proper law of a contract, or of an obligation. Conflict lawyers speak of the lex causae when referring to the system of law to be applied. For those who spurn Latin in favour of English, one could call it the law applicable to the suit (or issue) or, simply the applicable law.

3

In finding the lex causae there are three stages. First, it is necessary to characterize the issue that is before the court. Is it for example about the formal validity of a marriage? Or intestate succession to movable property? Or interpretation of a contract?

4

The second stage is to select the rule of Conflict of Laws which lays down a connecting factor for the issue in question. Thus the formal validity of a marriage is to be determined, for the most part, by the law of the place where it is celebrated; intestate succession to movables, by the law of the place where the deceased was domiciled when he died; and the interpretation of a contract, by what is described as its proper law.

5

Thirdly, it is necessary to identify the system of law which is tied by the connecting factor found in stage 2 to the issue characterised in stage 1. Sometimes this will present little difficulty, though I suppose that even a marriage may now be celebrated on an international video link. The choice of the proper law of a contract, on the other hand, may be controversial.

6

In an ideal world the answers obtained in these three stages would be the same, in whatever country they were determined. But unfortunately the Conflict rules are by no means the same in all systems of law. In those circumstances a choice of Conflict rule may have to be made. It is clear that, in general, the second and third stages are to be determined by the law of the place where the trial takes place (lex fori). That law must tell one what the connecting factor is for the issue before the court, and what system of law it points to. But the first stage, characterisation of the issue, presents more of a problem. In Dicey and Morris on The Conflict of Laws (12th edn) p.35 there is this passage:

7

"The problem of characterisation has given rise to a voluminous literature, much of it highly theoretical. The consequence is that there are almost as many theories as writers and the theories are for the most part so abstract that, when applied to a given case, they can produce almost any result."

8

Fortunately the next sentence reads:

9

"They appear to have had almost no influence on the practice of the courts in England."

10

The authors conclude (p.44):

11

"The way the court should proceed is to consider the rationale of the English conflict rule and the purpose of the rule of substantive law to be characterised. On this basis, it can decide whether the conflict rule should be regarded as covering the rule of substantive law. In some cases the court might conclude that the rule of substantive law should not be regarded as falling within either of the two potentially applicable conflict rules. In this situation a new conflict rule should be created."

12

Later (p.47):

13

"… the way lies open for the courts to seek commonsense solutions based on practical considerations."

14

Before leaving these preliminary matters, I would add that if at all possible the rules of Conflict should be simple and easy to apply. One might say that all rules of law should be of that character; but we have less control over rules of domestic law. The litigant who is told by his advisers that his case may or may not involve the application of a foreign system of law, and that he must be armed with expensive expert evidence which may, in the event, prove unnecessary, deserves our sympathy. For many years even cases of tort/delict involved uncertainty and the analysis of five different speeches in the House of Lords. Academic writers of distinction concern themselves with Conflict, not surprisingly since it is a subject of great intellectual interest. We must do our best to arrive at a sensible and practical result.

15

These proceedings

16

Macmillan Inc., a Delaware corporation, started an action against eight defendants claiming the return of 10.6 million shares in Berlitz International Inc., a New York Corporation of renown in the language teaching field, or compensation for the loss of the shares. The action continued against the second defendants (Shearson Lehman Brothers Holding Ltd), the third defendants (Swiss Volksbank) and the fifth defendants (Credit Suisse). The trial lasted for the best part of a year, from October 1992 to July 1993, before Millett J. He gave judgment in favour of the defendants, dismissing the claims of Macmillan. One of the problems which he had to resolve on the route to that conclusion —one might say the first —was whether the dispute should be resolved by English law or the law of and prevailing in the state of New York. In other words, which was the lex causae? The judge held that it was New York law.

17

Macmillan have appealed. All parties agreed that we should first determine that same question as a preliminary issue in the appeal; and an order has been made to that effect. The order reads as follows:

18

"(2) that the said hearing of these appeals commence with and be limited in the first instance to the following issues ('the Proper Law Appeal Issues') on which argument is estimated to occupy the court for 10 days namely:-

19

a. paragraph 2 of the Notice of Appeal as against the Second Defendant and paragraph 1 of the Second Defendant's Respondent's Notice;

20

b. paragraph 2 of the Notice of Appeal as against the Third Defendant;

21

c. paragraph 2 of the Notice of Appeal as against the Fifth Defendant, and paragraph 1 of the Fifth Defendant's Respondent's Notice."

22

The paragraphs in the three notices of appeal are all the same in substance. One of them read as follows:

23

"2.1The Learned Judge was wrong to hold that the Plaintiff's claim against Shearson was governed by New York law rather than English law. That claim is to be governed by the law which has the closest and most real connection with Shearson's alleged obligation to make restitution of the relevant Berlitz shares to the Plaintiff and not by the lex loci actus."

24

The Respondents' notices of the second and fifth defendants introduce alternative reasons for choosing New York law.

25

I am not entirely happy with the way that the preliminary issue is drafted, although I have to confess that I certainly approved it, and may have had a hand in its drafting. However, the right course would seem to be first to arrive at an answer to the problem, and then to see if the question needs re-drafting.

26

There are in essence three issues before us, corresponding to the three stages in a Conflict case which I have mentioned. They are:

27

(A)How does one characterize the question in this action?

28

(B)What connecting factor does our Conflict rule provide for questions of that character?

29

(C)What system of law does that connecting factor require to be applied?

30

The facts

31

There are differences in the material facts relating to each of the second, third and fifth defendants. But some are common to all. Macmillan were a wholly owned subsidiary of Maxwell Communications Corporation plc, a company owned partly by the public and partly by Mr Robert Maxwell and his family. Macmillan in turn had a majority holding of 10.6 million shares in Berlitz, registered in Macmillan's name in New York. (In point of fact it would seem that the transfer sheets of the company's transfer agent, Manufacturers Hanover Trust Company, constituted the register.)

32

On 5th November 1990 the shares were transferred out of Macmillan's name to a company called Bishopsgate Investment Trust plc, which was in a part of the Maxwell group that was owned and controlled by Mr Robert Maxwell and his family. This was done on the instructions of Mr Maxwell, and (as the judge found) with the authority of a resolution of the executive committee of the board. Macmillan's share certificates were cancelled, and replaced by 21 certificates in the name of Bishopsgate. They were brought to London from the United States by Miss Ghislaine Maxwell on the following day. But not long afterwards Mr Maxwell signed a nominee agreement in which Bishopsgate acknowledged that it held the shares as nominee for the account and benefit of Macmillan, and had "no power or right to take any action with...

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