Langlands v SG Hambros Trust Company (Jersey) Ltd & Anor [2007] EWHC 627 (Ch) (30 March 2007)

Neutral Citation Number: [2007] EWHC 627 (Ch) Claim No. HC06CO2290 In the High Court of Justice Chancery Division Royal Courts of Justice Strand, London, WC2A 2LL 30th March 2007 B e f o r e : MR. N. STRAUSS Q. C. (sitting as a deputy judge of the Chancery Division) ____________________ Christopher Jeremy George Langlands Claimant -and- SG Hambros Trust Company (Jersey) Limited First defendant Osborne Clarke (a firm) Second defendant ____________________ Mr. Andrew Cosedge, instructed by Messrs Lester Aldridge, appeared for the claimant. Mr. David Herbert, instructed by Messrs Thomas Eggar, appeared for the first defendant. ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Introduction and background This is an application by the first defendant, a company incorporated in Jersey which carries on the business of providing its services as trustees, to set aside an order made by Chief Master Winegarten on 19th May 2006 granting the claimant permission to serve the Claim Form and the Particulars of Claim on the first defendant outside the jurisdiction. On 15th November 2006, the application was adjourned by Master Bragge to be heard by a judge, and this is therefore the first substantive hearing of the application. The application to Chief Master Winegarten was made under CPR r.6.20(3), on the basis that the first defendant (which I shall call "Hambros") was a necessary or proper party to the claim against the second defendant, a firm of solicitors ("Osborne Clarke") and under CPR r.6.20(8), on the basis that the claim against Hambros was a claim in tort based on an act which was committed within the jurisdiction and resulted in damage sustained in the jurisdiction. It appears from the correspondence between the parties that the Chief Master granted permission for service out of the jurisdiction only on the basis of CPR r.6.20(8)(a), that is on the ground that the claim was a claim in tort for damage sustained in the jurisdiction. Thus he was not persuaded that it was a case for service out of the jurisdiction either under CPR r.6.20(3), or on the basis that the alleged tort was based on an act committed within the jurisdiction. Nevertheless, in resisting the present application, the claimant relies on CPR 6.20(3) and on both limbs of 6.20(8), thus in effect contending that the Chief Master was wrong not to give permission to serve out of the jurisdiction on all three bases advanced by the Claimant. Hambros' case, put shortly, is that the claim does not fall within CPR 6.20(3) or (8), that the claimant has no arguable claim and that, in any event, the court's discretion should be exercised by refusing permission to serve out of the jurisdiction because Jersey is the only appropriate forum. The action relates to the affairs of a settlement called the C. J. L. Langlands Settlement, which was made by a Trust Deed dated 17th March 1970. By clause 9, the proper law of the settlement is Jersey law. The trusts of the settlement are discretionary. The claimant is the son of a cousin of the settlor. He resides in this country. He is one of a class of beneficiaries of the settlement under clause 1. B(iii), and the benefits which he enjoys include occupation of a house in Dorset at a nominal rent, the use of various valuable assets including pictures and other household goods and two event horses, and the use of a bungalow as a home for his mother. Hambros was the trustee of the settlement until 31st July 2001, when it retired at the request of the claimant. Amongst other property, the settlement owned the entire issued share capital of C. J. L. Investments Limited, a company incorporated in Jersey, which owned properties in England. Hambros held the shares as trustee, and provided the directors of the company. In early 2001, the company's managing agents, Stewart Edwards & Sharpe, advised the company to purchase a freehold property at 9 West Street, Epsom, which was the only unit in the block in which it was situated not already owned by the company. The correspondence exhibited to the witness statement of Mr. Needham, Hambros' Group Head of Private Client Trusts, shows that the company was advised to acquire this property on the basis that it was an ideal opportunity to enhance the value of its existing property holdings by "improving the shape and development potential of the site" and by adding "marriage value in addition to the existing use value as an investment". Accordingly, in May 2001 the board of directors resolved to buy the property at West Street, and to partially fund the purchase by the sale of another property in the same town, 42 Upper Street, Epsom, and that is what happened in July 2001. There is no suggestion that there was anything wrong, commercially, with any of this. However, it has undoubtedly had unfortunate consequences for the claimant. Because of the benefits which he receives from the settlement, he is liable for capital gains realised by it pursuant to section 87 of the Taxation of Chargeable Gains Act 1992, and he has already been assessed for tax for the three fiscal years to 2003/04 totalling some £34,000, on which (because of his inability to pay these liabilities) surcharges and interest have been incurred. He estimates that there will be a further liability of £10,233.12 for 2004/5, and that further liabilities will accrue for so long as he continues to enjoy benefits under the settlement which he estimates will amount to at least another £83,500. Put shortly, the claimant's case against Osborne Clarke is that they were retained to provide expert UK taxation advice in relation to the settlement, and in particular to check the capital gains tax liability which would arise in connection with the sale of 42 Upper High Street, but that they failed to provide any such advice. The claimant alleges that Osborne Clarke knew or ought to have known that he, as a resident beneficiary of a non-UK trust, would be adversely affected and that in the circumstances they owed him a duty of care. Mr. Cosedge on behalf of the claimant accepts that it may be that, even if they had been advised as to the tax consequences, the trustees might properly have proceeded. This would be so if, for example, there was no other property which could have been sold, and thus no other way in which advantage could have been taken of a valuable commercial opportunity. He accepts, therefore, that the claimant may be unable to prove any loss, but contends that, since it is not something which can be ascertained on the evidence available so far, this does not mean that there is no arguable claim. The claimant's case against Hambros is similar. He alleges that, as a professional trustee, Hambros should also have appreciated the risk of serious fiscal repercussions for him as a UK resident beneficiary, and that it should not have proceeded without obtaining legal advice as to the consequences of the sale. He relies on a Hambros internal note dated 23rd March 2001 which suggests that one of its trust officers, Mr. C. J. Martin, telephoned a partner of Osborne Clarke, to ask him to check the capital gains tax position, and was told that they would respond in the following week; he alleges that, despite Osborne Clarke's failure to respond, Hambros nevertheless proceeded with the sale. The note reads:- "I called Chris Kerr-Smiley at Osborne Clarke OWA in relation to the sale of 42 Upper High Street and the corresponding CGT liability. I explained that we knew there would be some tax to pay but asked him to check the structure of the Langlands' settlements to see how this would affect the overall structure. He confirmed that he would speak to Maureen Morgan and respond to me next week." Again, the claimant accepts that he may not, in the end, be able to prove any loss, if there was no way of proceeding with the purchase of West Street without causing the tax liability. There is no dispute as to the principles applicable to an application under CPR r.6.20 and 6.21. Briefly, they are as follows:- (1) The claimant must establish a "good arguable case" that the claim falls within one of the specified grounds for service out of the jurisdiction. Where the facts are in dispute, the standard of proof is higher than that which is sufficient to resist an application for summary judgment, but it is nevertheless not necessary to establish a case on the balance of probabilities. (2) The claimant must establish an arguable case on the merits by the standard applicable to a summary judgment application, that is present a claim which is not fanciful and has a real prospect of success. In appropriate circumstances, where the facts are not in dispute, the court may decide an issue one way or the other. (3) Even if the claimant establishes both (1) and (2), whether service out of the jurisdiction should be permitted is still a matter of discretion for the court. The discretion should be exercised in accordance with principles which are akin to those established in Spiliada relating to a forum non conveniens application: service out of the jurisdiction should not be permitted where there is another available and distinctly more appropriate forum in which the case should be tried. However, unlike an application of that kind, in which the defendant has been properly served within the jurisdiction, the burden is on the claimant to establish that this court is the more appropriate forum. In this case, as already indicated, all three elements of the application are in issue. Does the claim fall within CPR r.6.20(3)? In order to come within CPR r.6.20(3), the claimant must show, first, that as between himself and Osborne Clarke there is "a real issue which it is reasonable for the court to try" and, secondly, that Hambros is a necessary or proper party to the claim against Osborne Clarke. On the first point, the claimant submits that, on the evidence so far available, Osborne Clarke were instructed to consider the capital gains tax position and knew or should have known that a failure to do so would or might harm UK resident beneficiaries of the trust, including himself. Therefore, it is submitted, this case is similar to White v. Jones [1995] 2 AC 207 , in which the solicitor failed to carry out the testamentary wishes of his client; this could not cause loss to the client, but foreseeably caused loss to the intended beneficiary, to whom the House of Lords decided a duty of care was owed. It is not appropriate for me to comment on the strength of the case, either on the facts or on the law, but I am satisfied that there is on the material before me, including in particular the attendance note, a real issue between the claimant and Osborne Clarke which it is reasonable for the court to try. On the assumption that the claimant has an arguable case on the merits as against Hambros (an issue which I examine later in this judgment), this seems to me to be a classic case in which the liability of two parties may, depending upon the precise facts, be cumulative or alternative, and in which it is convenient and appropriate to conduct one investigation into the facts. In particular, much may depend upon what instructions Hambros gave Osborne Clarke in relation to the tax consequences of the transaction, what advice if any Osborne Clarke gave, whether either of both appreciated the adverse tax consequences which would be suffered by the claimant and if so why the transaction proceeded. Accordingly, subject to there being an arguable case against it, Hambros would in my judgment clearly be a proper party: see Massey v. Heynes (1881) 21 Q. B. D. 530; United Film Distribution v. Chhabria The Times 5th April 2001. If, however, Hambros is not arguably liable, it clearly cannot be a proper party: see the note in the White Book at 6.21.29. Does the claim fall within CPR r.6.20(8)? In order to come within CPR r.6.20(8), the claim must be a claim "in tort", in which either damage was sustained within the jurisdiction or the damage (wherever sustained) resulted from an act committed within the jurisdiction. In the present case, it is common ground that the damage was sustained within the jurisdiction and it is therefore unnecessary to consider at this stage the more difficult question of whether it resulted from an act committed within the jurisdiction. It is in fact considered at §50 below, but the important issue between the parties on CPR r.6.20(8) is whether this is a claim in tort. Mr. Herbert relied on the decision of the Court of Appeal in Metall und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc [1990] 1 Q. B. 391 as authority for the propositions (a) that it was insufficient for a claimant to plead a claim which was expressed in the language of tort; it was necessary that the claim should be properly founded on a tort and (b) that a claim for breach of trust was not a tort claim. In that case, the Court of Appeal rejected the argument that a breach of constructive trust was a claim in tort in the following passage at 473D-474H:- "the draftsman of Ord. 11, r. 1(1) has included in it only one reference to trusts, that is to say in paragraph ( j ) which relates to the case (not this case) where: "the claim is brought to executed the trusts of a written instrument being trusts that ought to be executed according to English law and of which the person to be served with the writ is a trustee, or for any relief or remedy which might be obtained in any such action". No doubt for reasons of policy the rules clearly contemplate that any other claim which on its proper analysis is founded on a trust shall not fall within the ambit of the rule. Paragraph (6) of the prayer to M. & R.'s points of claim seeks "damages for breach of trust." Even if damages at common law were recoverable for a breach of trust, which they are not, this particular claim would indisputably fall outside Ord. 11, r. 1(1). Bearing in mind the frequent references in this pleading to "constructive trusts", the question for us is what other claims fall to be likewise excluded. "No satisfactory definition of a constructive trust has yet been enunciated, and perhaps none ever will be; for the concept is still uncertain and the boundaries obscure:" Snell's Principles of Equity, 28th ed. (1982), p. 192. Nevertheless, as appears from p. 194 of Snell , there are, among others, at least three well established categories of constructive trust. A person receiving property which is already subject to a trust becomes a constructive trustee thereof either (1) if he receives the trust property with actual or constructive notice that it is trust property and that the transfer to him is in breach of trust (which we will call a "receipt of property constructive trust"), or (2) if, after receiving it, otherwise than as a purchaser for value without notice of the trust, he acquires notice of the rust and thereafter deals with it in a manner inconsistent with the trust (which we will call a "wrongful dealing constructive trust"), (3) a person who does not actually himself receive the trust property, may also be treated as a constructive trustee if, to use the words of Buckley L. J. in Belmont finance Corporation Ltd v. Williams Furniture Ltd . [1979] Ch. 250, 264, he assists with knowledge a fraudulent design on the part of the trustees. This type of constructive trust was identified by Lord Selborne L. C. in an often-cited passage from his judgment in Barnes v. Addy (1874) L. R. 9 Ch. App. 244, 251-252, and we will refer to it as a " Barnes v. Addy constructive trust." In our judgment, it is clear beyond argument that a claim which is founded on any of the three categories of constructive trust which we have mentioned cannot be said to be "founded on a tort" within the meaning of R. S. C., Ord. 11, r. 1(1)( f ). The law of tort has nothing whatever to do with any such claim. In all such cases the wrongful conduct of the defendant occurs against the background of a pre-existing trust and the claim is founded on that trust. As is stated in Salmond & Heuston on Torts , 19th ed., p. 14, under the heading "Tort and Equity": "No civil injury is to be classed as a tort if it is only a breach of trust or some other merely equitable obligation. The reason for this exclusion is historical only. The law of torts is in its origin a part of the common law, as distinguished from equity, and it is unknown to the Court of Chancery." Our ultimate conclusion will be that each of the relevant paragraphs of M. & R.'s points of claim is founded on one or more of these three well recognised categories of constructive trust and accordingly does not fall within Ord. 11, r. 1(1)( f )." I accept Mr. Herbert's submission that this decision establishes that what matters is not how the claim is pleaded but whether, as a matter of legal analysis, it is a claim in tort. However, what the Court of Appeal was considering was a claim that the defendant was in breach of constructive trust as a result of its having knowingly assisted a fraud. The Court of Appeal held that such a claim was not a claim in tort: the present case is distinguishable, in that what is alleged is straightforward negligence. Mr. Cosedge relied on a passage from the speech of Lord Browne-Wilkinson in Henderson v. Merrett [1995] 2 AC 145 between 204D-206G:- "I add a few words of my own on the relationship between the claim based on liability for negligence and the alternative claim advanced by the names founded on breach of fiduciary duty. The decision of this House in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465 , was, to a substantial extent, founded on the earlier decision of this House in Nocton v. Lord Ashburton [1914] AC 932 . In that case, Lord Ashburton sought to be relieved from the consequences of having loaned money to, amongst others, his solicitor Nocton. Lord Ashburton's leadings were based primarily on an allegation of fraud; in particular, there was no allegation on the pleadings either of breach of contract by Nocton or of negligence. The lower courts treated the case as being wholly dependent on proof of fraud. But in this House Nocton was held liable for breach of a fiduciary obligation owed by him as solicitor to his client. However, although the decision was based on breach of fiduciary duty, both Viscount Haldane L. C. and Lord Shaw expressed such fiduciary duty as being but one example of a wider general principle, viz., that a man who has voluntarily assumed to act on behalf of, or to advise, another in law assumes a duty to that other to act or to advise with care. Viscount Haldane said, at p.948: "Although liability for negligence in word has in material respects been developed in our law differently from liability for negligence in act, it is nonetheless true that the man may come under a special duty to exercise care in giving information or advice. I should accordingly be sorry to be thought to lend countenance to the idea that recent decisions have been intended to stereotype the cases in which people can be held to have assumed such a special duty. Whether such a duty has been assumed must depend on the relationship of the parties, and it is at least certain that there are a good many cases in which that relationship may be properly treated as giving rise to a special duty of care in statement." Viscount Haldane L. C. gave a further explanation of the decision in Nocton v. Lord Ashburton in Robinson v. National Bank of Scotland Ltd. [1916] SC (HL) 154 , 157: "… I wish emphatically to repeat what I said in advising this House in the case of Nocton v. Lord Ashburton , that is a great mistake to suppose that, because the principle in Derry v. Peek (1889) 14 AppCas 337 clearly covers all cases of the class to which I have referred, therefore the freedom of action of the courts in recognising special duties arising out of other kinds of relationship which they find established by the evidence is in any way affected. I think, as I said in Nocton's case, that an exaggerated view was taken by a good many people of the scope of the decision in Derry v. Peek . The whole of the doctrine as to fiduciary relationships, as to the duty of care arising from implied as well as expressed contracts, as to the duty of care arising from the other special relationships which the courts may find to exist in particular cases, still remains, and I shall be very sorry if any word fell from me which suggests that the courts are in any way hampered in recognising that the duty of care may be established when such cases really occur." It was these passages from the speeches of Viscount Haldane L. C., and others, which this House in Hedley Byrne took up and developed into the general principle there enunciated as explained by my noble and learned friend, Lord Goff of Chieveley. This derivation from fiduciary duties of care of the principle of liability in negligence where a defendant has by his action assumed responsibility is illuminating in a number of ways. First, it demonstrates that the alternative claim put forward by the Names based on breach of fiduciary duty, although understandable, was misconceived. The liability of a fiduciary for the negligent transaction of his duties is not a separate head of liability but the paradigm of the general duty to act for or advise others. Although the historical development of the rules of law and equity have, in the past, caused different labels to be stuck on different manifestations of the duty, in truth the duty of care imposed on bailees, carriers, trustees, directors, agents and others is the same duty: it arises from the circumstances in which the defendants were acting, not from their status or description. It is the fact that they have all assumed responsibility for the property or affairs of others which renders them liable for the careless performance of what they have undertaken to do, not the description of the trade or position which they hold. In my judgment, the duties which the managing agents have assumed to undertake in managing the insurance business of the Names brings them clearly into the category of those who are liable, whether fiduciaries or not, for any lack of care in the conduct of that management. …. In my judgment, this traditional approach of equity of fiduciary duties is instructive when considering the relationship between a contract and any duty of care arising under the Hedley Byrne principle (of which fiduciary duties of care are merely an example). The existence of an underlying contract (e.g. as between solicitor and client) does not automatically exclude the general duty of care which the law imposes on those who voluntarily assume to act for others. But the nature and terms of the contractual relationship between the parties will be determinative of the scope of the responsibility assumed and can, in some cases, exclude any assumption of legal responsibility to the plaintiff for whom the defendant has assumed to act. If the common law is not to become again manacled by "clanking chains" (this time represented by causes, rather than forms, of action), it is in my judgment important not to exclude concepts of concurrent liability which the courts of equity have over the years handled without difficulty. I can see no good reason for holding that the existence of a contractual right is in all circumstances inconsistent with the co-existence of another tortious right, provided that it is understood that the agreement of the parties evidenced by the contract can modify and shape the tortious duties which, in the absence of contract, would be applicable." This passage suggests that a claim for negligence against a trustee is a claim in tort. What Lord Browne-Wilkinson is indicating in my view is that such a claim is not based on any duty peculiar to fiduciaries, but on the fact that the trustee has assumed a responsibility to the beneficiaries to use care and skill in looking after the trust assets; this is precisely the justification for holding that solicitors, accountants, managing agents of Lloyd's syndicates and others owe parallel duties of care in tort, as well as their contractual duty of care. However, it is unnecessary to decide whether the ordinary liability of a trustee for a negligent failure to look after the trust assets is a liability in tort, as that is not what is alleged here. The ambit of the trustee's duty of care in English law is set out in section 1 of, and Schedule 1 to, the Trustee Act 2000, which embodies the previous case law. There is no evidence that Jersey law differs in this respect. The claimant's case is not that Hambros was negligent in relation to the assets of the trust, or was otherwise in breach of the trustee's usual duty of care, but that in the circumstances of the case it owed him an additional duty of care in relation to his own personal affairs. That in my view is clearly the assertion of a claim in tort. So CPR 6.20(8) is satisfied. Is there an arguable claim? Mr. Herbert submitted that there is no arguable claim, for each of four separate reasons:- (a) it was not arguable that Hambros owed a duty of care; (b) there was no arguable case that the claimant had suffered loss as a result of the alleged breach of duty; (c) under the terms of the settlement, the trustee was not liable except for gross negligence, and there was no arguable case of gross negligence; (d) the claim was clearly governed by Jersey law, and was statute barred. (a) No duty of care On this issue, there is no evidence that Jersey law differs from English law, and it therefore does not matter which law applies to the claim. Mr. Herbert relied on the recent re-statement by Lord Bingham of the principles relating to the imposition of a duty of care not to cause pure economic loss in Customs & Excise Commissioners v. Barclays Bank PLC [2006] 3 WLR 1 . Lord Bingham referred, at para. 4, to the familiar three tests; the first is whether the defendant assumed responsibility for what he said and did vis à vis the claimant, or was to be treated by the law as having done so. The second is the threefold test, whether the loss to the claimant was a reasonably foreseeable consequence of the defendant's acts or omissions, whether the relationship between the parties was one of sufficient proximity and whether in all the circumstances it was fair just and reasonable to impose a duty of care. The third is the incremental test, namely whether the suggested duty was an incremental development of the categories of negligence. However, as appears from what Lord Bingham said, these are not precisely defined and separate tests, but elements in the court's consideration of the facts of the case seen as a whole. As to the first test, Lord Bingham stressed that it was to be applied objectively, and not "by consideration of what the defendant thought or intended" he referred to the dictum of Lord Slynn in Phelps v. Hillingdon London Borough Council [2001] 2 AC 619 at 654:- "It is sometimes said that there has to be an assumption of responsibility by the person concerned. That phrase can be misleading in that it can suggest that the professional person must knowingly and deliberately accept responsibility. It is, however, clear that the test is an objective one: Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145 , 181. The phrase means simply that responsibility is assumed as that it is recognised or imposed by law." As to the second, threefold test, Lord Bingham said that it provided no straightforward answer to the vexed question whether or not, in a novel situation, a party owed a duty of care. He referred in this context to the dictum of Lord Bridge in Caparo Industries PLC v. Dickman [1990] 2 AC 605 at 618:- "But it is implicit in the passages referred to that the concepts of proximity and fairness embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of difference specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope. Whilst recognising, of course, the importance of the underlying general principles common to the whole field of negligence, I think the law has now moved in the direction of attaching greater significance to the more traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of the varied duties of care which the law impose." As to the incremental test, Lord Bingham regarded this as: "… of little value as a test in itself, and is only helpful when used in combination with a test in itself, and is only helpful when used in combination with a test or principle which identifies the legal significant features of a situation. The closer the facts of the case in issue to those of a case in which a duty of care has been held to exist, the readier a court will be, on the approach of Brennan J adopted in Caparo Industries plc v. Dickman , to find that there has been an assumption of responsibility or that the proximity and policy conditions of the threefold test are satisfied. The converse is also true." Lord Bingham's conclusion is stated at para. 8:- "… it seems to me that the outcomes (or majority outcomes) of the leading cases cited above are in every or almost every instance sensible and just, irrespective of the test applied to achieve that outcome. This is not to disparage the value of and need for a test of liability in tortious negligence, which any law of tort must propound if it is not to become a morass of single instances. But it does in my opinion concentrate attention on the detailed circumstances of the particular case and the particular relationship between the parties in the context of their legal and factual situation as a whole." On the facts of the case, Mr. Herbert's most important submission was in effect that the imposition of the suggested duty of care was not fair, just or reasonable, or indeed sensible. The trustee's primary duty under the trust was to preserve and enhance the value of the trust assets, and the suggested duty owed to an individual beneficiary to take into account his financial affairs might well conflict with that duty. For example, in the present case, there might have been no other way in which the enhancement of the trust property could be achieved, so that the trustee would have been faced with a choice between interests of the trust and the interests of the beneficiary. What, for example, would the position be if the claimant's tax position could have been protected at very moderate cost? In another case, on different facts, the trustee might be faced with the necessity of considering the interests of many beneficiaries, arising possibly in different countries, and indeed between the conflicting interests of different beneficiaries. Therefore, Mr. Herbert submitted, the imposition of the duty of care was in principle unreasonable and unjustified. The trustee should not be put into the position of having to consider potential conflicts of this kind. He further submitted that neither of the other tests was met: there was no assumption of responsibility, and the suggested duty was not analogous with any existing category of duty. These are powerful submissions, but I am not convinced that the claimant's case that Hambros owed a duty of care has no reasonable prospects of success. There was an existing relationship of proximity as between trustee and beneficiary, and it can plausibly be suggested that the additional duty of care is an incremental development of the existing duty. The attendance note suggests that Hambros may have considered that it was part of the duties it had assumed to consider the claimant's tax position. The real issue is whether the imposition of a duty is fair, just and reasonable. It is at least arguable that the considerations advanced by Mr. Herbert are relevant to whether there is a breach, rather than as to whether the duty of care exists in the first place. At least arguably, the position ought to be that a trustee who foresees or ought to foresee that the impact of a transaction may be to impose a tax liability on a particular beneficiary should take reasonable care to avoid that result; however, if he cannot do so consistently with his primary duty to manage the trust property, then he is not in breach of the duty in proceeding with the transaction, notwithstanding its unfortunate effect. To take Mr. Herbert's example, if the claimant's position could have been protected at small cost, a trustee who reflected on the position might be expected at least to offer to protect the beneficiary if he was prepared to meet the cost. (b) No arguable case that loss was suffered The claimant's case is that, on the evidence, it appeared that Hambros had not followed up with Osborne Clarke its enquiry as to the possible tax consequences of the transaction, and therefore had breached its duty to take reasonable care in relation to the claimant's tax position. However, Mr. Cosedge accepted that, if there was no other way of raising the money to buy the West Street property, then there was no loss: even if the advice had been given, their duty to manage the trust assets would have prevailed over the claimant's interests. Hambros was not required to sacrifice the interests of the trust in order to protect that claimant's tax position. From this it follows that, since there is no information before the court as to whether there was other trust property which could equally well have been sold without impact, or with less impact, on the claimant's tax position, the claimant is not presently in a position to establish whether a loss was incurred as a result of the alleged breach of duty. Mr. Herbert submitted that the result of this was that the claimant had no arguable case, since proof of loss is one of the essential ingredients of a tort claim. If this had been an application for summary judgment, the court would have been able to give permission to defend, because CPR r.24.1 provides that permission may be given, even when a defence is not made out, if there is "some other compelling reason". However there is no corresponding wording in CPR r.6.21, and therefore no basis on which permission to serve out of the jurisdiction can be given if there is no evidence that any loss resulted from the alleged breach of duty, even though the test of what is an arguable case is the same under both rules. Mr. Herbert's submission on this point is correct, but it would in my view be unjust to refuse permission to serve out of the jurisdiction in circumstances in which the relevant information is in the possession of the trustee but unavailable to the claimant. Accordingly, if the outcome of this application had depended upon this point, I would have made an appropriate order for the provision by Hambros of the relevant information and documents, and would have adjourned the application to see whether this would enable the claimant to establish an arguable case on loss or not. (c) Gross negligence Hambros relies upon the so-called exculpation clause in the settlement, which provides: "In the professed execution of the trusts and power hereof no Trustee shall be liable for any loss to the trust premises arising by reason of any improper investment made in good faith/or for the negligence or fraud of any agent employed by it or by any other Trustee hereof, although the employment of such agent was not strictly necessary or expedient/or by reason of any mistake or omission made in good faith by any Trustee hereof/or by reason of any other matter or thing except wilful and individual fraud or wrongdoing on the part of the Trustee who is sought to be made liable." The settlement is governed by Jersey law, and there is conflicting evidence before me as to the proper construction of this provision. However, there is no evidence that the principles of construction differ from English law, and it seems to me to be clear that the exclusion of liability is not, as Mr. Cosedge submits, limited to liability for loss to the trust premises. There are four exclusions from liability for loss, of which the first is "loss to the trust premises arising by reason of any improper investment made in good faith", and the second, third and fourth are in each case defined by the words following "or". The third and fourth exclusions are for "loss … by reason of any mistake or omission made in good faith by the Trustee hereof" and "loss … by reason of any other matter or thing except wilful and individual fraud or wrongdoing …" and these would clearly apply on the facts. This is the only construction which makes sense of what is clearly intended to be a wide exclusion clause, and the only one which is grammatical. For example "liable for any loss to the trust premises … for the negligence or fraud of any agent" makes no sense, whilst "liable … for the negligence or fraud of any agent" is perfectly clear. However, it appears that as a matter of Jersey law, at least arguably, the provision cannot be effective as regards gross negligence or wilful default. The evidence of Mr. Kelleher on behalf of the claimant is that a Jersey court would not find gross negligence in this case. He states that "on the evidence, the court would be most likely to conclude that [the Trustee] was simply not aware that it owed [the Claimant] a tortious duty of care in the circumstances". Whilst Mr. Kelleher may be right, I do not think that this is a conclusion which I can reach in the present state of the evidence. There is some evidence that Hambros in fact appreciated the need to take into account the claimant's tax position, raised it with Osborne Clarke but then failed to follow it up. Whether this is in fact what happened, and if so whether it amounts to gross negligence, are in my view matters for the trial judge. It cannot not be said at this stage that the claimant has no reasonable prospect of success on this issue. (d) Limitation Hambros' case is that, whether the claim is for breach of trust or for negligence, it is governed by Jersey law and is statute-barred. It is common ground that, if Jersey law applies, there is a 3 year limitation period which bars the action under section 1 of the Foreign Limitation Periods Act 1984, and it is not contended that there that there is any public policy reason, or undue hardship, which would justify disapplying Jersey law under section 2 of the Act. If Mr. Herbert was right in his submission that this is a claim for breach of trust, that would be the end of the matter, as clearly Jersey law would apply to a claim for breach of a Jersey trust. But if, as I have held, this is a claim in tort, the law governing it depends on sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995, which provide as follows:- " 11. Choice of applicable law: the general rule (1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur. (2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being - (a) for a cause of action in respect of personal injury caused to an individual or death resulting from personal injury, the law of the country where the individual was when he sustained the injury; (b) for a cause of action in respect of damage to property, the law of the country where the property was when it was damaged; and (c) in any other case, the law of the country in which the most significant element or elements of those events occurred. … 12. Choice of applicable law: displacement of general rule (1) If it appears, in all the circumstances, from a comparison of - (a) the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and (b) the significance of any factors connecting the tort or delict with another country, that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country. (2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events." In Morin v. Braham & Brooks Ltd [2004] 1 Lloyd's Reports 702, the Court of Appeal rejected a submission that, in applying section 11, regard should be had to the authorities on where a tort was committed, or where the damage occurred, in cases governed by the former Rules of the Supreme Court. Rather, Mance L. J. (with whom Dame Elizabeth Butler Sloss P. and Keene L. J. agreed) said at para. 16:- "Section 11 of the 1995 Act adopts a geographical test. Where elements of the events constituting a tort occur in different countries, then in the case of personal injury or death resulting from personal injury or property damage, it selects the law of the country where the person or property was when injured or damaged. In any other case, it selects the law of the country "in which the most significant element or elements of those events [i.e.] those constituting the tort] occurred". What is required is an analysis of all the elements constituting the tort as a matter of law, and a value judgment regarding their "significance", in order to identify the country in which there is either one element or several elements, which taken alone or together, outweighs or outweigh in significance any element or elements to be found in any other country. The governing law under s.11(2)(c) will be the law of that country." There is in this case a point which did not arise in Morin , and so far as I know has not arisen in any other case. In most cases, the event which gives rise to the duty of care is the same as the event constituting the breach e.g. the act of driving, or the making of a statement, alleged to have been negligent. In this case, the duty of care arises out of the previous relationship between Hambros as trustee and the claimant as beneficiary and the knowledge of Hambros that the claimant was a U. K. resident. The question which then arises is whether the facts which give rise to the duty of care are "events constituting the tort", or whether only the events relating to the breach of duty and damage are such "events". In my view all the facts which give rise to the duty of care, breach and damage qualify. All three are elements of the tort of negligence, and there is no justification for disregarding the facts establishing one of them. In this case, the relevant facts can be summarised as follows:- (1) The events giving rise to the duty of care are (a) the setting up of the trust in Jersey, and (b) Hambros' decision in Jersey to provide regular benefits for the claimant in the UK, where he resides. (2) The events giving rise to the breach are (a) Hambros' decision, implemented by the decision of the board of directors on 31st May 2001, to sell 42 Upper High Street, (b) taking inadequate steps in Jersey to obtain advice from English solicitors in England about the tax position and (c) giving instructions from Jersey for the carrying out of the transactions in England. (3) The events giving rise to the damage consist of the tax assessments in England. Whilst the precise details of these events might become clearer if there were a full trial, in essence the position is as stated above. I do not think that a judge at trial would be in a better position than I am to arrive at a 'value judgment'. In my view, the balance comes down firmly in favour of Jersey, where the main events establishing the duty of care and the breach, that is the setting up of the trust, and the relevant decisions to benefit the claimant and to carry out the property transactions, took place. As regards the duty of care, there can be no doubt that the main 'event' is the setting up of the trust, or that this took place in Jersey. As regards the breach what matters is not precisely how the claim is pleaded, but its substance. The essence of the claimant's case is that Hambros was negligent in failing to obtain proper advice; the actual sale of the property was the consequence of that failure. It is well established that, where the tort consists of failing to give advice (i.e. what is alleged against Osborne Clarke) or giving negligent advice, the tort is committed where the advice was, or should have been, received and acted on: see Diamond v. Bank of London and Montreal Ltd. [1979] 1 Q. B. 333; FFSB Ltd v. Seward & Kissel [2007] UKPC16. The same must be true of failing to obtain advice, which is what is alleged against Hambros. Therefore, the central 'event' of the breach also took place in Jersey. I therefore consider that these are plainly, and by a substantial margin, the most significant elements of the transaction, and I do not regard the contrary as seriously arguable. Accordingly, applying section 11, I hold that Jersey law is the governing law. Even if I had taken the view that, looking at the events above, the most significant elements were those which occurred in England, I would have held that section 12 applied, because it is "substantially more appropriate" for Jersey law to determine whether the trustee of a Jersey trust owes a duty to a beneficiary, when looking after the trust property, to exercise care over his personal tax position. The trustee is carrying out his duties in Jersey in relation to a Jersey trust, and it is inappropriate for the general ambit of his duties to the beneficiaries to be decided by reference to any other law. The point may be tested by considering the trustee's position if a different law applied. In deciding what to do he would have to have regard to the law of Jersey as regards his duties as trustee, and to some other law or laws as regards his separate duty to the beneficiaries, and there might well be a conflict. In my view, it is essential that the question whether the trustee owed the suggested additional duty, and if so its ambit, should be decided by the law applicable to the trust. Whilst some of the detailed facts might become clearer at a trial of the action, the essential facts are as set out at §48 above, and I do not think that the judge at a trial would be in a better position to deal with this issue than I am. Nor do I think that there is a reasonable prospect of a different decision being reached. It is true that 'value judgments' are involved, both under section 11 and under section 12, but in my view there is only one reasonable conclusion. For both these reasons I think that it is right for me to decide the issue now. Discretion In view of the above, it is unnecessary to decide this, but I will deal with it briefly. In many cases it would follow from the fact that the defendant is a proper party to a claim against a defendant here that England was the more appropriate forum. Certainly, the fact that some of the witnesses reside in Jersey would not be of much significance, especially as the claimant is here. The facts could equally conveniently be investigated in either jurisdiction. I do not agree at all with Mr. Herbert's submission that this is a case of "blatant forum shopping". Nevertheless, even if the claim had not been statute-barred, I would have held that Jersey was the more appropriate forum, because in my view the ambit of the duty owed by the trustees of a Jersey trust to its beneficiaries should be decided by the Jersey courts. This is obviously so if, as I have held, the claim is governed by Jersey law, but it would be so even if it was governed by English law. What is central, according to the English law test, is what is just, reasonable and sensible, and in the context of this case that would be more appropriately considered in Jersey than here. That would outweigh the convenience of hearing the case against the defendants together. Conclusion The result of the above is that Hambros' application succeeds on the ground that there is no arguable claim, alternatively on the ground that the Jersey courts are the more appropriate forum. If the parties are able to agree on all matters arising from this judgment, or are content to deal with any outstanding matters or by written submissions which reach me by no later than 4 p.m. or the day before judgment is given, there is no need for anyone to attend. I am grateful to both counsel, and to their instructing solicitors, for their cogent and interesting arguments. N. Strauss Q. C. Deputy Judge Ch. D. th March 2007 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII