United Capital Corporation Ltd v Bender and Five Others

CourtCourt of Appeal
JudgeSmith, Jones and McNeill, JJ.A.
Judgment Date14 July 2006
Date14 July 2006
Smith, Jones and McNeill, JJ.A.

J. Speck for the first and second defendants/appellants;

S. Young for the plaintiff;

P.D. James for the fifth and sixth defendants;

The fourth defendant, Mr. Wijsmuller, appeared in person.

Cases cited:

(1) Canada Trust Co. v. Stolzenberg (No. 4), [1998] CLC 1171; [1998] EWCA Civ. 774, dicta of Waller, L.J. applied.

(2) Chellaram v. Chellaram (No. 2), [2002] 3 All E.R. 17; [2002] EWHC 632 (Ch.), distinguished.

(3) Dubai Aluminium Co. Ltd. v. Salaam, [2003] 2 A.C. 366; [2003] 1 All E.R. 97; [2002] UKHL 48, dicta of Lord Millett considered.

(4) Mayo Associates S.A. v. Cantrade Private Bank Switzerland (C.I.) Ltd., 1998 JLR 173, applied.

(5) Spiliada Maritime Corp. v. Cansulex Ltd., The Spiliada, [1987] A.C. 460; [1986] 3 All E.R. 843; [1987] 1 Lloyd's Rep. 1; (1986), 130 Sol. Jo. 925, dicta of Lord Goff of Chieveley considered.

(6) Tyne Improvement Commrs. v. Armement Anversois S.A., The Brabo, [1949] A.C. 326; [1949] 1 All E.R. 294; (1949), 93 Sol. Jo. 180, distinguished.

come into existence by oral declaration, or by an instrument in writing (including a will or codicil) or arise by conduct."

Legislation construed:

Court of Appeal (Civil) Rules 1964 (Revised Edition, ch.07.245.10), r.12(1):

"The Court shall have full discretionary power to receive further evidence on questions of fact, either by oral examination in court, by affidavit, or by deposition taken before the Viscount or on commission:

Provided that in the case of an appeal from a judgment after hearing of any cause or matter on the merits, no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds."

Royal Court Rules (Revised Edition, ch.07.770.72, 2006 ed.), r.10/6: The relevant terms of this rule are set out at para. 78.

Service of Process Rules 1994 (Revised Edition, ch.07.840.50), r.7: The relevant terms of this rule are set out at para. 30.

r.9: The relevant terms of this rule are set out at para. 45.

Trusts (Jersey) Law 1984 (Revised Edition, ch.13.875), art. 2: The relevant terms of this article are set out at para. 56.

art. 5: The relevant terms of this article are set out at para. 56.

art. 7: "(1) . . . [A] trust may come into existence in any manner.

(2) Without prejudice to the generality of paragraph (1), a trust may

art. 33: The relevant terms of this article are set out at para. 57.

Rules of the Supreme Court, O.11: The relevant terms of this order are set out at paras. 40-43.

Texts cited:

Dicey & Morris, The Conflict of Laws, 13th ed., vol. 1, para. 9-025, at 232 (2000).

Supreme Court Practice 1999, vol. 1, para. 11/1/22, at 97.

Civil Procedure—service out of jurisdiction—necessary or proper party—not requirement for service out of jurisdiction under Service of Process Rules 1994, r.7(c) that claim to which non-resident defendant is necessary or proper party was properly brought against Jersey defendant—if no real issue against Jersey defendant, leave to serve on non-resident defendant could be refused under r.9

Civil Procedure—service out of jurisdiction—constructive trusteeship—"constructive trustee" in Service of Process Rules 1994, r.7(q) has same meaning as in Trusts (Jersey) Law 1984, i.e. person who makes or receives any profit, gain or advantage from alleged breach of trust—claim for accessory liability also falls under r.7(q)—sufficient if acts alleged to create constructive trusteeship to material extent committed in Jersey

The plaintiff brought proceedings in the Royal Court to recover fees allegedly due under an oral agreement between the first defendant and S.

In 1996, the first defendant established hedge funds, known as the Amber funds. The first defendant was the investment manager and S was concerned with setting up the funds and obtaining investment. They allegedly agreed that S would receive 25% of the management and performance fees and the first defendant 75% ("the Amber agreement"). S did not, however, receive any fees after 1997.

The funds were set up in the Cayman Islands and were formally managed by a Cayman company, which was contractually entitled to the fees. In 1999, the second defendant joined the first defendant in managing the funds. Subsequently, a company was established in Anguilla which replaced the Cayman company as investment adviser and thereafter received the fees. A trust ("the AEB Trust") was then established in Anguilla, to which substantial sums were transferred by the companies. The fourth defendant, a Jersey resident, and the third defendant, a Jersey company of which he was the managing director, were centrally involved in procuring these transfers on behalf of the first defendant.

The Amber funds, which had been very successful, were liquidated in 2000. As part of a settlement agreement between the first and second defendants, the funds in the AEB Trust were divided between them and transferred into other trusts.

The plaintiff (to whom S assigned his claim against the first defendant) claimed that with interest S's 25% share of the fees amounted to US$97m. and that the various transfers of the fees, which had been unknown to S, had been intended to defeat his claim. It alleged that the fees paid to the Cayman and Anguillan companies were held on trust pursuant to the Amber agreement as to 75% for the first defendant and 25% for S; that the first defendant owed fiduciary duties to S in relation to those fees; and that the majority of S's share of the fees had been paid into the AEB Trust, from which a substantial proportion had been transferred under the settlement agreement into the further trusts. The plaintiff therefore brought the present proceedings, essentially alleging breach of contract, breach of fiduciary duty and breach of trust against the first defendant, and that the second, third and fourth defendants were liable as constructive trustees.

The third and fourth defendants, being Jersey residents, were served as of right. The plaintiff was granted leave under r.7 of the Service of Process Rules 1994 to serve its Order of Justice out of the jurisdiction on the first defendant in Costa Rica and on the second defendant in Japan. They applied to the Royal Court for the order granting leave to serve them out of the jurisdiction to be set aside because, inter alia, the plaintiff's claims did not fall within r.7 and Anguilla was a more appropriate forum for the trial. They did not also advance New York and concurred with the judge during the proceedings that it did not appear to be an appropriate forum and that they were not advancing it as well as Anguilla.

The Royal Court (Birt, Deputy Bailiff) dismissed the defendants' applications (in proceedings reported at 2006 JLR 1). It held that the plaintiff had made out a good arguable case that its claims against the non-resident defendants fell within r.7(c) of the Service of Process Rules, i.e. that they were brought against persons duly served within the jurisdiction (the third and fourth defendants) and that the other defendants were necessary or proper parties thereto. The evidence supported the plaintiff's contentions that the fourth defendant, a Jersey resident, had been centrally involved in the alleged breach of trust. In addition, the court held that there was a good arguable case that the plaintiff's claims also fell under r.7(q), which allowed for service out of the jurisdiction if a claim was brought against defendants as constructive trustees and their alleged liability arose from acts committed in Jersey. It held that Jersey was the most appropriate forum for the trial of the case.

The first and second defendants sought leave to appeal against the Royal Court's refusal to set aside service on them out of the jurisdiction. They also sought leave, under r.12(1) of the Court of Appeal (Civil) Rules 1964, to adduce fresh evidence as to the law of New York in order to challenge certain findings of the Royal Court. They submitted that (a) although it could not be said that the evidence could not have been obtained with reasonable diligence for use in the Royal Court, it should nevertheless be admitted as it was relevant; (b) the plaintiff should not have been granted leave to serve them under r.7(c) of the Service of Process Rules, as its claims had not been properly brought against the third and fourth defendants, who were minor parties with limited funds, and they were brought merely to enable service out of the jurisdiction on others; (c) nor did the plaintiff have a good arguable case that its claims, which were based on constructive trust, fell within r.7(j), which allowed for service out of the jurisdiction in respect of a claim brought within art. 5 of the Trusts (Jersey) Law 1984, as that applied only to express trusts; and (d) further, the plaintiff did not have a good arguable case under r.7(q), as that provision did not include claims for accessory liability for breach of trust and, in any event, there was no territorial connection between the first defendant's alleged breach of trust and Jersey. The first and second defendants also submitted that New York was a more appropriate forum than Jersey for the trial of the proceedings and that service out of the jurisdiction should not therefore have been granted under r.9 of the 1994 Rules. Although they had not advanced New York before the Royal Court, the defendants claimed that the plaintiff should have excluded it.

Held, ruling as follows:

(1) The first and second defendants would not be granted leave, under r.12(1) of the Court of Appeal (Civil) Rules 1964, to adduce fresh evidence, as the plaintiff's application to serve the defendants out of the jurisdiction had been heard on the merits by the Royal Court and they had not established special grounds on which fresh evidence should be admitted. They had failed to show that the...

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  • The Asset Tracing And Recovery Review – 3rd Edition
    • Jersey
    • Mondaq Jersey
    • 14 April 2016
    ...Corporation and Anor [2012] JRC211. [2011] JRC 093. [2010] JRC 116 (Lloyds v. Fragoso). [2013] JRC 211. [2002] JLR 53. See UCC v. Bender 2006 JLR 242. View Full Briefing PDF...

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