Trust - forum for the determination of the issues in the proceedings.
[2018]JRC188
Royal Court
(Samedi)
8 October 2018
|
Before :
|
T. J. Le Cocq, Esq., Deputy Bailiff, and
Jurats Ramsden and Christensen
|
|
Between
|
G.B. Trustees Limited
|
Representor
|
|
And
|
Tanya Marya Dick Stock
|
First Respondent
|
|
|
John William Dick II
|
Second Respondent
|
|
|
Advocate Howard Sharp (acting for minor and
unborn beneficiaries)
|
Third Respondent
|
|
|
Lilianfeld Holdings Limited
|
Fourth Respondent
|
|
|
John William Dick
|
Fifth Respondent
|
IN THE MATTER OF THE RUSSIAN TRUST
AND IN THE MATTER OF ARTICLE 51 OF THE
TRUSTS (JERSEY) LAW 1984 (AS AMENDED)
Advocate M L Preston for the Representor.
Advocate M C Goulborn for the First
Respondent.
Advocate D Evans for the Second Respondent
Advocate H Sharp for the Third Respondent
Advocate D P Le Maistre for the Fifth
Respondent
judgment
the deputy bailiff:
1.
On 5th
June, 2018, the Court heard an application brought by Tanya Marya Dick Stock
(“the First Respondent”) to set aside the representation of G.B.
Trustees Limited (“the Representor”) of 15th March, 2018
(“the Representation”) and of the order of the Court ordering
service and service out of the jurisdiction of the Representation on the First
Respondent. The First Respondent
also sought orders or declarations to the effect that the Royal Court had no
jurisdiction concerning the subject matter of the Representation and/or a
declaration that the proper forum for the subject matter of the representation
is wholly or in part the courts of Cyprus.
2.
On the
same date the Court rejected the First Respondent’s application and said
that it would give more elaborate reasons for doing so later. These are those reasons.
3.
The
application by the First Respondent was part of a number of disputes,
applications before the Court and judgments relating to two Jersey trusts. One of the trusts, that which is the
subject matter of the Representation, is called “The Russian Trust”
(“the Trust”). It is
not necessary to set out at any great length the background to the Representation. This is well set out in a number of
judgments of the Court. In short
the Representation itself seeks a determination as to whether the shares in
Lilianfeld Holdings Limited (“the Fourth Respondent”) should be
considered as an asset of the Trust or as held on trust for the First
Respondent or others.
4.
Since the
Representation was commenced a number of orders have been made by this Court
relating to the filing of evidence and, having dismissed the First
Respondent’s application on jurisdiction, evidence in the matters raised
by the Representation is at the present date part heard.
5.
The Trust
is a discretionary settlement created on 20th April, 1974, stating
that the proper law of the settlement was that of Jersey. John William Dick (“the Fifth
Respondent”) was the economic settlor of the Trust. In 1989, the Fifth Respondent was
excluded from benefit and the First Respondent and John William Dick II
(“the Second Respondent”) and their respective children and remoter
issue were appointed, in effect, as primary beneficiaries. The First Respondent has no children. The Second Respondent has three
sons. The minor and unborn
beneficiaries are represented by Advocate Sharp as Third Respondent.
6.
On 6th
November, 2015, this Court appointed the Representor as trustee of the Trust
further to a representation brought before that Court by the First
Respondent. On 6th
September, 2016, this Court determined that the proper law of the Trust is, and
has always been, the law of Jersey.
7.
The asset
of the Trust in question is the Fourth Respondent, Lilianfeld Holdings
Limited. The Fourth Respondent is a
company registered in Cyprus and its directors are entities connected with the
Representor. Both are companies
registered in Jersey. The only
shareholders in the Fifth Respondent are two companies registered in Cyprus
which hold the shares in the Fourth Respondent as nominees of the
Representor.
8.
The only
asset of the Fourth Respondent is a flat in St Petersburg, Russia (“the
flat”). There are, at
present, proceedings taking place in Russia relating to the ownership of the
flat which, it is understood, has been the subject of fraudulent activity and
the transfer into a name of an individual unknown to the Representor or indeed
to the First Respondent.
9.
On the
basis of information that it holds, the Representor was of the view that the
shares in the Fourth Respondent were purchased as and remain an asset of the
Trust. That is no longer a view
shared by the First Respondent, if indeed it ever was, and she asserts that she
is the beneficial owner of the shares and the Representor holds the shares in
the Fourth Respondent for her and not as trustee of the Trust. It is this issue that is currently
before the Court.
10. In February 2018 the First Respondent commenced
proceedings in the courts of Cyprus for interim relief and orders on the basis
that she is the beneficial owner of the shares in the Fourth Respondent. In that same month, the courts of Cyprus
ordered that her writ and application must be served on the Fourth Respondent
and she must make an application to serve three other defendants outside of the
jurisdiction. Service was effected
in March 2018. In April 2018 the
Fourth Respondent applied to the courts in Cyprus to set aside those
proceedings on the grounds that they were either an abuse of process or
alternatively should be stayed on the basis that Jersey was the appropriate
jurisdiction for determining the beneficial ownership of the shares in the
Fourth Defendant.
The Law
11. The matter of service out of proceedings in
Jersey is governed by the Service of Process Rules 1994 which states, at
Rule 9:-
“Every application for leave
to serve such summons on a defendant out of the jurisdiction shall be supported
by affidavit or other evidence, stating that in the belief of the deponent the
plaintiff has a good course of action, showing in what place or country such
defendant is or probably may be found, and the grounds upon which the
application is made; and no leave shall be granted unless it shall be made
sufficiently to appear to the Court that the case is a proper one for service
out of the jurisdiction in this Part.”
12. The Court has issued a Practice Direction RC
15/01 which sets out a number of requirements for an affidavit filed in
support of such an application. It
is the First Respondent’s case that the affidavit filed in support of the
Representation fails to comply with Rule 9 of the Service of Process Rules and
with the Practice Direction and accordingly no valid service had been affected
on the First Respondent. Service
had been ordered on her by this Court on 16th March, 2018. The Act of Court reflecting that order
provides:-
“…
2. Order to the extent
necessary that orders for service out of the jurisdiction are made in respect
of convened parties and in respect of each convened party the following orders
are made:
(a) order that Tanya Marya Dick
Stock shall be served with a copy of the said representation and any evidence
in support, such service to be affected by substitute to service on Messrs
Carey Olsen…”.
13. A review of the transcript of the convening
hearing before the Learned Bailiff makes it clear that the Bailiff considered
the question of service out of the jurisdiction and so ordered service on those
parties in respect of which service was necessary.
14. There does not appear to be any dispute that
this Court has jurisdiction in this matter by virtue of Article 5 of the Trusts
(Jersey) Law 1984 which provides:-
“The court has jurisdiction
where-
(a) the trust is a Jersey trust;
(b) a trustee of a foreign trust is
resident in Jersey;
(c) any trust property of a foreign
trust is situated in Jersey; or
(d) administration of any trust
property of a foreign trust is carried out in Jersey.”
15. It is apparent, therefore, that if the
Representor holds the shares in the Fourth Respondent for the purposes of the
Trust then jurisdiction arises under Article 5(a) or, if the Representor holds
the shares in the Fourth Respondent for the benefit of the First Respondent
then jurisdiction arises under Article 5(b).
16. The jurisdiction of the Court in connection
with Jersey trusts and the matter of service out are dealt with by the Service
of Process Rules 1994 at Rule 7(j) which provides:
“Service out of the
jurisdiction of a summons may be allowed by the court whenever - … (j)
the claim or application is brought within the terms of Article 5 of the Trusts
(Jersey) Law 1984.”
17. It is not, accordingly, argued before us that
had the affidavit in support of the Representation met the requirements of Rule
9 of the Service of Process Rules and the Practice Direction that this Court
could not have made an order for service out of the jurisdiction. We would go further and say that the
Court would, in the circumstances, inevitably have done so.
18. The First Respondent raises the issue of forum
conveniens and in effect says that it is not in the interests of justice to
have parallel proceedings in both Cyprus and Jersey in respect of the same
subject matter. The proceedings in
Cyprus having been commenced first and relevant witnesses are located in Cyprus
with regard to Cypriot accountancy and company law then the courts of Cyprus
are best placed to deal with the dispute and the courts of Jersey should in the
circumstances decline jurisdiction.
In essence, therefore, the First Respondent is arguing that there is a
technical but important failure on the part of the Representors in their
application to seek leave to serve out of the jurisdiction but, even if there
had not been, in the light of the proceedings in Cyprus, the Royal Court should
have declined jurisdiction in the exercise of its discretion.
19. In the case of Virani –v- Virani and
another [2000] JLR 203 the Royal Court had to consider an application
challenging the court’s jurisdiction on the basis that no leave to serve
the order of justice outside the jurisdiction had been obtained and that the
purported service on was accordingly invalid. The court characterised the
defendant’s case, at page 212, in the following way:-
“The defendants’ case
is simple. Service out of the
jurisdiction is not permitted without leave of the court. Not only was no leave granted in this
case, but no application for leave to serve the second Order of Justice out of
the jurisdiction was ever made. The
affidavit presented to the Deputy Bailiff at the time of signature of the
second Order of Justice did not comply with the requirements of r.9 of the
Service of Process (Jersey) Rules 1994.
The order in the second Order of Justice was merely one for substituted
service. It follows, say the
defendants, that there has been no valid service of the second Order of Justice
on the defendants.
Mr Sinel responds that this is a
wholly technical point which is devoid of merit in relation to the justice of
the case and is also wrong in law….”
20. The Court went on to agree with the
defendant’s argument saying:-
“The court is in no doubt
that the defendants’ arguments are correct. Article 2 of the Service of Process and
Taking of Evidence (Jersey) Law 1960 provides that any process summoning a
person outside the Island to appear before the courts of the Island may be
served on that person in such cases and in such manner as may be prescribed by
the Rules of Court. The relevant
Rules are the Service of Process (Jersey) Rules 1994. Rule 5 is in very clear terms: “No summons shall be served
outside the island without the leave of the court.”
Rule 7 specifies those
circumstances in which service out of the jurisdiction may be allowed. They are set out in paras (a) to (s) of
r.7. Rule 8 makes it clear that the
parties to a contract may agree to confer jurisdiction even in circumstances
which do not fall within r.7. Rule
9 sets out what must be produced in support of an application to serve out of
the jurisdiction and is in the following terms:
“9. Every application for
leave to serve such summons on a defendant out of the jurisdiction shall be
supported by affidavit or other evidence, stating that in the belief of the
deponent, the plaintiff has a good cause of action, and showing in what place
or country such defendant is, or probably may be found, and the grounds upon
which the application is made; and no such leave shall be granted unless it be
made sufficiently to appear to the court that the case is a proper one for
service out of the jurisdiction under this Part of these Rules.”
Rule 10 goes on to provide that any
order giving leave to serve out of the jurisdiction shall specify the day upon
which the defendant is to appear before the Royal Court. Rule 16 confers power to make such
orders for substituted service as may be necessary to give effect to the Rules.
In general, courts assume
jurisdiction on a territorial basis, i.e. over those persons physically in the
territory in which the court is situated.
It is a strong thing to purport to exercise jurisdiction over persons
who do not reside in the territory.
In Jersey, as in England, the grounds upon which the court is able to
assume jurisdiction over non-resident persons are clearly defined and
limited. Furthermore, it is made
clear that the Rules that the applicant must specify the ground upon which he relies
and that the court should not grant leave unless it is sufficiently persuaded
that the case is a proper one for service out of the jurisdiction. The whole tenor of the 1994 rules is
that any application for leave to serve out of the jurisdiction must be
adequately Rules presented by the applicant and carefully considered by the
court. “
21. The Court then, however, went on to determine
the effect of a failure in the affidavit in support of an application to serve
out of the jurisdiction. At page
213 (line 25 et seq) of the judgment,
the Court said:
“The fact that an affidavit
in support of an application for leave to serve out of the jurisdiction is
defective (in that it does not comply with r.9) does not of itself necessarily
invalidate any order for leave to serve out. It is primarily for the judge
considering the application to serve out of the jurisdiction to consider
whether the affidavit is in sufficient form and whether it gives him sufficient
information to make a decision. The
success of an application to set aside leave on grounds of failure to comply
with the requirements of r.9 will depend upon the facts of the case, including
any prejudice to the defendant, the extent and effect of any non-disclosure by
the plaintiff and whether the court is satisfied that, notwithstanding the
failure, there are clearly valid grounds for leave to serve out.
However, this case goes
further. It is not simply a case of
a defective affidavit in support of an application to serve out of the
jurisdiction. There was no such
application. Nowhere in any of the
documents produced to the Deputy Bailiff is there a paragraph which states that
application is sought for leave to serve out of the jurisdiction. Given that there is no application, it
is hardly surprising to find that neither is there any order granting leave to
serve out of the jurisdiction as required by r.5. Because there is no order granting
leave, there is no specific return date, as required by r.10. The court cannot accept the contention
that, because the defendants must have been known to the Deputy Bailiff to be
resident in the United States (because it says so in para.2 of the draft Order
of Justice) and he made an order for substituted service, his decision is to be
taken as granting leave to serve out of the jurisdiction. The exercise by the court of the
exorbitant jurisdiction to convene a non-resident person to its process is not
to be implied from some different order (in this case an order for substituted
service) interpreted against a detailed knowledge of the relevant facts. An order granting leave to serve out of
the jurisdiction must be stated in clear terms, pursuant to r.5. An application for leave must not only
be made clearly and unambiguously, but it must also be supported by an
affidavit complying with r.9, so that the court’s attention is directed
towards the issue and towards the relevant facts and principles necessary to
decide that issue.”
The test for service out of the jurisdiction
22. The test applicable for the giving of leave to
serve process out of the jurisdiction was set out by the Court of Appeal in Maywal
Limited –v- Nautech Limited [2014] JLR (2) 527 in which, at paragraph
23, the Court said:
“On an application for leave
to serve out there are three hurdles for a plaintiff to surmount.
(i)
First, the
Royal Court needs to be satisfied that there is a good arguable case that the
claim meets the requirements of at least one of the various permissible
gateways set out in Rule 7 [of the Service of Process Rules 1994].
(ii) Secondly, the Royal Court needs to be satisfied
that on the merits of the claim there is a serious issue to be tried.
(iii) Thirdly, the Royal Court needs to be satisfied
that Jersey is the suitable forum for the trial of the claim.”
The affidavit in support of the of the Representation
23. The Representation was supported by an
affidavit of Oliver Paul Egerton-Vernon, a director of the Representor, of 15th
March, 2018.
24. The position with regard to the location of the
First Respondent was made clear in the affidavit. For example, at paragraph 16, Mr
Egerton-Vernon states:-
“The First Respondent was
born in Colorado in 4th March 1966.
She is married to Darrin Stock.
There are no children of the marriage. The First Respondent is represented in
Jersey by Carey Olsen and when seeking an order convening the First Respondent
to these proceedings, the Representor seeks an order that service of the
representation be effected upon Carey Olsen. This can be seen from the letter
exhibited at page 472, Carey Olsen is actively engaged in representing the
First Respondent. It is not known
where service may be affected upon the First Respondent as she, to my
knowledge, travels widely. Given
the animosity that the First Respondent has expressed towards the Representor,
I anticipate that the First Respondent may seek to avoid service. The possibility that the only asset of
Lilianfeld may have been sold or that an attempt may have been made to sell it
imports an urgency to the resolution of these matters and I consider that it will
be appropriate, in all the circumstances, including consideration of the
overriding objective, for an order for substituted service to be made pursuant
to Royal Court Rule 5/10.”
25. The affidavit goes on to explain the fact that
proceedings had started by the First Respondent in Cyprus and what criticisms
may be made of it. It is not
necessary for our purposes to set out what is contained in the affidavit in
that regard.
26. In the concluding paragraphs of Mr
Egerton-Vernon’s affidavit, specifically at paragraph 81, he says:-
“The Representor is
therefore seeking the relief set out in the prayer of the representation. In the first instance, being convening
orders so that the interested parties may participate in these proceedings. No date has yet been identified as
available for the hearing of this representation but that parties will no doubt
liaise in order to fix a hearing date at which directions can be given leading
to a final hearing date. Insofar as
possible it is hoped that there can be agreement reached in respect of such
matters.”
27. There is nothing in the affidavit which meets
the procedural requirements of Practice Direction RC 15/01. Those are procedural requirements and it
is clear that they should have been complied with.
28. Representations relating to Jersey trust
matters that are to be served on parties outside of the jurisdiction should be
supported by an affidavit that accords with the Practice Direction. It may be thought of as obvious that beneficiaries
should be joined to any such representation. It may well be the case that in the vast
majority of cases where a Jersey trust is concerned, the Court will have little
difficulty in recognising its jurisdiction and requiring interested parties to
come before it. However, in our
view, the Service of Process Rules and the Practice Direction should be
complied with.
29. That being said, it is equally clear from a
consideration of the Representation, the accompanying affidavit and the
submissions of counsel and indeed the Court’s own observations from the
transcript, that the Court was fully aware that it needed to make an order for
service out of the jurisdiction and did so. It was aware that the proceedings
related to a Jersey trust (and would accordingly have been aware that they fell
within Rule 7(j) of the Service of Process Rules) and that some of the parties
to be convened were resident outside of the Island and accordingly an order for
service out of the jurisdiction was necessary. The Court raised no technical point with
the Representor through counsel concerning the deficit in the affidavit and
whether or not the Court had in mind the Practice Direction or overlooked it,
it is not possible now to say. What
is clear, however, and it would have been clear to the Court in the plainest
terms that this matter related to a Jersey trust, the Court obviously had
jurisdiction, the parties to be convened were beneficiaries of the trust and
some of them were resident outside of the jurisdiction. The Court accordingly made the
order in the terms set out above.
Conclusion
30. In our judgment, this is not a case in which it
is appropriate to dismiss the Representation or to stay it.
31. Firstly, notwithstanding the failings in the
affidavit to which we have made reference, these failings which are relied upon
in part by the First Respondent in the circumstances of this case, which is
somewhat unusual, are technical. It
is very different to Virani where no consideration to serve out of the
jurisdiction took place at all. As
we have said it seems to us that it must have been obvious to the Court
granting orders for service on the various parties to the Representation,
including the First Respondent, that the Court must have had jurisdiction
pursuant to Rule 7(j) of the Service of Process Rules 1994 and Article 5
of the Trusts (Jersey) Law 1984.
The Representation concerned the Jersey trust, and the assets held by a
Jersey trustee, and quite clearly it was appropriate for the Royal Court to
assume jurisdiction.
32. The Court was aware of the existence of
proceedings in Cyprus but clearly took the view that the forum with the most
real connection to the dispute in the proceedings was Jersey.
33. In any event the Court now has before it the
relevant information relating to the proceedings in Cyprus and it is clear to
the Court that the connection with Jersey is more real than the connection with
Cyprus. The owner of the shares is
the Representor through entities connected with it. There is a dispute as to whether or not
the shares are held on the trusts of a Jersey trust. The Representor and its directors are in
Jersey. No parties have any
substantial connection with Cyprus other than the nominee companies mentioned
above and any matters of Cypriot law, which seem to us to be unlikely to be
either disputed or ultimately determinative of the issue contained in the
Representation, can be, if necessary, proved as a fact in any hearing before
this Court.
34. As we have said the matter has no connection
whatever with Cyprus except for the fact that the Fourth Respondent and its
registered shareholders are registered there and, technically, as a result the
shares are there. Neither parties
who assert rival beneficial ownership has any connection and, as we have said,
the Representor is resident in Jersey.
It is difficult to find what, if any, disputes may exist as to Cypriot
law nor does the First Respondent explain what issues of Cypriot law must
arise.
35. The proper law of the Trust is that of Jersey.
36. Furthermore, Article 9(1)(g) of the Trusts
(Jersey) Law 1984 as amended provides:-
“(1) Subject to paragraph (3) any
question concerning –
…
(g) the nature and extent of any
beneficial rights or interests in the property,
shall be determined in accordance
with the law of Jersey and no rule of foreign law shall effect such
question.”
37. It would appear to us that were any orders to
be made by the courts in Cyprus they may well not be enforceable in Jersey.
38. Furthermore, it is not clear that the courts of
Cyprus could in any event make a determination in relation to the ownership of
the shares in the Fourth Respondent.
Whereas, as we have said above, our understanding is that the First
Respondent has commenced proceedings in Cyprus on the basis that she is the
owner, that is a simple assertion and is not yet in issue before the courts of
Cyprus. The Representor has not
been made a party to the proceedings nor indeed has the Second Respondent or
any representative of the children.
There appears to be no party before the courts in Cyprus who is in a
position to assert that the First Respondent is not as she simply claims, the
owner of the shares in the Fourth Respondent.
39. In any event we were advised that the evidence
of Jersey had been assembled and the issue of the ownership of the shares was
ready to proceed before this Court.
40. It is worthwhile noting that this Court has
dealt with questions relating to the ownership of the shares in the Fourth
Respondent previously. On 22nd
January 2016 in the case of Stock –v- Pan trust International SA and
others [2016] JRC 021 the Court said this, of a case in which the first
respondent was the representor, at paragraph 2(iii):-
“Lilianfeld Holdings Limited
(“Lilianfeld”). This is
a company incorporated in Cyprus which owns a property in St Petersburg. The new trustee contends that Lilianfeld
is an asset of The Russian Trust, whilst the former trustees contend it is an
asset beneficially owned by the Representor to whom it is offered to transfer
the same. As the Representor
supports the transfer to the new trustees rather than to her, it was agreed
that it would be a waste of time and cost to further debate the issue. With the consent of the Representor,
therefore, the former trustees would procure the transfer of the shares in
Lilianfeld to the new trustee.”
41. We hold that the Royal Court is the appropriate
forum for the determination of the issues in the proceedings.
Authorities
Service of Process Rules 1994.
Practice Direction RC 15/01
Trusts (Jersey) Law 1984
Virani
–v- Virani and another [2000] JLR 203
Maywal
Limited –v- Nautech Limited [2014] JLR
(2) 527
Stock
–v- Pantrust International SA and others [2016] JRC 021