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||Neutral Citation Number:  EWHC 907 (Fam)
||Case No: FD14F00212
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR JUSTICE MOSTYN
Robert Miles QC, Andrew Child & Seth Cumming
(instructed by Harcus Sinclair) for the claimant
Tracey Angus QC & Jordan Holland (instructed by Mishcon de Reya)
for the 1st to 6th & 8th defendants
Eason Rajah QC & Leon Pickering (instructed by Charles Russell Speechlys) for the 7th defendant
Hearing dates: 19 & 20 March 2015
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Mostyn:
- This case concerns a claim under the Inheritance (Provision for Family and Dependants) Act 1975 in respect of the estate of the legendary property dealer Jack Dellal who died on 28 October 2012 aged 89. I shall refer to the deceased as Jack in this judgment. The claimant is his widow, now aged 61. She married Jack on 1 February 1997 following 10 years' cohabitation. It was his second marriage, her first. They had two children now aged 15 and 12. The first to fourth defendants are the children of Jack's first marriage to Zehava, who are all now middle aged. The fifth and sixth defendants are Jack's children of a non-marital relationship. They too are middle aged. The seventh defendant is Jack's sister, Violet. She lives in Switzerland and is aged 96, having been born on 18 August 1918. The eighth defendant is the son of the first defendant and is one of a number of grandchildren of Jack. He is aged 31.
- In all Jack had 9 children. His daughter Suzanne tragically died aged 25 in 1983.
- Jack's obituaries make interesting reading. He was born in the Chorlton area of south Manchester to parents who had emigrated here from Baghdad and who joined the Sephardic community which made its living on the edges of the city's textile industry. According to the obituary in the Daily Telegraph:
"He was educated at Heaton Moor College, and set to work in the post-war years buying and selling cloth and dabbling in local property, before moving to London. He first came to wider prominence in the early 1970s as the force behind a fast-growing, Knightsbridge-based "fringe bank", Dalton Barton Securities, which he and his business partner, Stanley Van Gelder, sold for £58 million in late 1972 to Keyser Ullmann, the bank chaired by Edward du Cann, MP."
- On any view Jack was phenomenally successful. The Sunday Times Rich List stated that he was worth £580m in 2008, £480m in 2009, £500m in 2011 and £445m in 2012. Based on these, and other, rich lists, as well as on other evidence (to which I will refer), the claimant says that at the time of his death Jack personally held, or ought to have held, a vast fortune.
- Jack's will dated 15 November 2006 to all intents and purposes left his entire estate to the claimant. However the disclosed assets which comprise his estate amount only to £15.4m comprising overwhelmingly realty and personalty. There was only minimal cash and no income generating assets. The claimant says that this is an absurd presentation of the true scale of his personal wealth at his death. If it had shrunk to £15.4m then in the period before his death he must have given most of it away to the defendants without her knowledge.
- Therefore she commenced this claim on 10 March 2014. Her principal claim is for reasonable provision to be made for her from Jack's estate pursuant to section 2 of the 1975 Act. Obviously she does not seek an order under section 2 against the actual death estate as identified and declared to HMRC as that was, effectively, left to her alone. She seeks an order under section 2 against the deemed "net estate" as defined by the 1975 Act. This is not the same as the actual death estate. Sections 8 and 9 treat certain property as forming part of the "net estate" which would not in fact form part of the actual death estate. And section 25 defines the "net estate" as not only including property captured by sections 8 and 9 but also to include any sum of money or property which is ordered under section 10 to be provided for the purpose of making provision under the 1975 Act. In this case the claimant's real substantive claim is her application made under section 10 of the 1975 Act, as supplemented by section 13.
- The decision of Campbell J in Morrow v Morrow  NIJB 46 shows that, while uncommon, the fact that a claimant stands to inherit whatever may fall into the actual death estate does not preclude an order being made under sections 10 and 2 in her favour.
- So far as is material to this case sections 10 and 13 of the 1975 Act provide:
10. Dispositions intended to defeat applications for financial provision.
(1) Where an application is made to the court for an order under section 2 of this Act, the applicant may, in the proceedings on that application, apply to the court for an order under subsection (2) below.
(2) Where on an application under subsection (1) above the court is satisfied—
(a) that, less than six years before the date of the death of the deceased, the deceased with the intention of defeating an application for financial provision under this Act made a disposition, and
(b) that full valuable consideration for that disposition was not given by the person to whom or for the benefit of whom the disposition was made (in this section referred to as "the donee") or by any other person, and
(c) that the exercise of the powers conferred by this section would facilitate the making of financial provision for the applicant under this Act,
then, subject to the provisions of this section and of sections 12 and 13 of this Act, the court may order the donee (whether or not at the date of the order he holds any interest in the property disposed of to him or for his benefit by the deceased) to provide, for the purpose of the making of that financial provision, such sum of money or other property as may be specified in the order.
(4) Where an order is made under subsection (2) above as respects any disposition made by the deceased which consisted of the transfer of property (other than a sum of money) to or for the benefit of the donee, the amount of any sum of money or the value of any property ordered to be provided under that subsection shall not exceed the value at the date of the death of the deceased of the property disposed of by him to or for the benefit of the donee (or if that property has been disposed of by the person to whom it was transferred by the deceased, the value at the date of that disposal thereof) after deducting therefrom any capital transfer tax borne by the donee in respect of the transfer of that property by the deceased.
(6) In determining whether and in what manner to exercise its powers under this section, the court shall have regard to the circumstances in which any disposition was made and any valuable consideration which was given therefor, the relationship, if any, of the donee to the deceased, the conduct and financial resources of the donee and all the other circumstances of the case.
13. Provisions as to trustees in relation to ss. 10 and 11.
(1) Where an application is made for—
(a) an order under section 10 of this Act in respect of a disposition made by the deceased to any person as a trustee, or
(b) an order under section 11 of this Act in respect of any payment made or property transferred, in accordance with a contract made by the deceased, to any person as a trustee,
the powers of the court under the said section 10 or 11 to order that trustee to provide a sum of money or other property shall be subject to the following limitation (in addition, in a case of an application under section 10, to any provision regarding the deduction of capital transfer tax) namely, that the amount of any sum of money or the value of any property ordered to be provided—
(i) in the case of an application in respect of a disposition which consisted of the payment of money or an application in respect of the payment of money in accordance with a contract, shall not exceed the aggregate of so much of that money as is at the date of the order in the hands of the trustee and the value at that date of any property which represents that money or is derived therefrom and is at that date in the hands of the trustee;
(ii) in the case of an application in respect of a disposition which consisted of the transfer of property (other than a sum of money) or an application in respect of the transfer of property (other than a sum of money) in accordance with a contract, shall not exceed the aggregate of the value at the date of the order of so much of that property as is at that date in the hands of the trustee and the value at that date of any property which represents the first-mentioned property or is derived therefrom and is at that date in the hands of the trustee.
- Section 10 is similar in its language to section 37 of the Matrimonial Causes Act 1973 although there are real conceptual and structural distinctions between the two provisions. I endeavoured to explain these differences in my decision of AC v DC & Ors (Financial Remedy: Effect of s37 Avoidance Order) (No 1)  EWHC 2032 (Fam),  2 FLR 1483. The effect of an order under section 37 is to annul or "avoid" the transaction under attack. Moreover, the bad intention to defeat the principal ancillary relief claim is presumed for transactions done within the three year period before the avoidance claim. There is no time limit on attackable transactions. A transaction done 20 years earlier is, at any rate in theory, capable of being annulled. By contrast, a claim under section 10 of the 1975 Act does not affect the validity of the disposition under attack. If relief is granted then it takes the form of a money judgment against the disponee to pay a specified sum to the estate. There is no presumption as to the necessary bad intention and there is a six year time limit on attackable transactions. If the disponee is a trustee then by section 13 the money judgment cannot exceed the value of the disposition left in the hands of the trustee.
- In this case the six year period began on 28 October 2006.
- Accordingly if the claimant is to succeed in her application under section 10 she will have to show at trial the following as against each separate defendant:
i) At least one disposition was made by Jack in favour of the defendant in question after 28 October 2006.
ii) For these purposes a disposition is an outright transfer of the beneficial ownership of the transferred thing done otherwise than for full valuable consideration. A transfer to a person to hold the thing as agent or nominee or bare trustee is not within the section. A transfer to a person as trustee presupposes that the trust is more than just a bare trust.
iii) Where it is said that the disposition was to a trustee that the trustee actually holds some money or property deriving from the disposition.
iv) The disposition was done by Jack with the intention of defeating the claimant's claim for financial provision under section 2 of the 1975 Act. The motive does not have to be the dominant motive in the transaction; if it is a subsidiary (but material) motive then that will suffice: see Kemmis v Kemmis Welland and Others Intervening); Lazard Brothers and Co (Jersey) Ltd v Norah Holdings Ltd and Others  1 WLR 1307, CA.
v) A payment order would facilitate the making of an award for financial provision under the 1975 Act in favour of the claimant.
vi) Where the defendant is out of the jurisdiction that the order for payment would be enforceable in the foreign land: see Hamlin v Hamlin  Fam 11, CA, at 18 per Kerr LJ.
vii) The court should exercise its discretion to make an order for a payment to the estate.
- The defendants have applied to this court for an order summarily terminating the claimant's section 10 application without a trial. This is my judgment on that application.
- There are two routes whereby summary termination may be sought. They are, first, for an order for strike out under CPR 3.4(2) and, second, for summary judgment under CPR 24.2. Both routes are travelled by the defendants. In addition they say that the ex parte orders granting leave to serve the claim out of the jurisdiction on the second and seventh defendants are flawed by a breach of the duty of candour and the grant of leave should therefore be set aside. Frankly this additional argument struck me as a makeweight.
- CPR 3.4(2) has three heads or grounds whereby a strike-out may be sought. The first is that "the statement of case discloses no reasonable grounds for bringing or defending the claim". This is explicated and exemplified by CPR PD3A paras 1.4 and 1.6 as follows:
- claims which set out no facts indicating what the claim is about, for example 'Money owed £5000';
- claims which are incoherent and make no sense;
- claims which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant;
- a defence which consists of a bare denial or otherwise sets out no coherent statement of facts; or
The second head or ground is that "the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings". This is explicated by CPR PD3A para 1.5, which says that "a claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded".
- the facts set out in a defence, while coherent, would not even if true amount in law to a defence to the claim.
The third head or ground is where "there has been a failure to comply with a rule, practice direction or court order", which is not relevant here.
CPR PD3A para 1.7 provides:
"A party may believe he can show without a trial that an opponent's case has no real prospect of success on the facts, or that the case is bound to succeed or fail, as the case may be, because of a point of law (including the construction of a document). In such a case the party concerned may make an application under rule 3.4 or Part 24 (or both) as he thinks appropriate."
This language appears to suggest that a strike-out application under CPR 3.4 may be made where a party believes that his opponent's case has no real prospect of success on the facts. This is, to put it mildly, very odd as a dismissal of a case in such circumstances is precisely what CPR 24.2 is for, as will be seen. The Family Procedure Rules contain similar provisions (but no provision for summary judgment). FPR 4.4(1) contains very similar strike out provisions to those in CPR 3.4(2). FPR PD4A paras 2.1 – 2.3 are near replications of CPR PD3A paras 1.4 – 1.6. Para 2.4 is very similar to CPR PD3A para 1.7, and provides:
"A party may believe that it can be shown without the need for a hearing that an opponent's case has no real prospect of success on the facts, or that the case is bound to succeed or fail, as the case may be, because of a point of law (including the construction of a document). In such a case the party concerned may make an application under rule 4.4."
These family rules and practice directions were very recently considered by the Supreme Court in Wyatt v Vince  UKSC 14. At para 27 Lord Wilson JSC described FPR PD4A para 2.4 as "an unhelpful curiosity". He stated:
"I suggest that Rule 4.4(1) of the family rules has to be construed without reference to real prospects of success. The three sets of facts set out in paragraph 2.1 of Practice Direction 4A exemplify the limited reach of rule 4.4(1)(a), valuable though no doubt it sometimes is. The touchstone is, in the words of paragraph 2.1(c) of the Practice Direction, whether the application is legally recognisable. Applications made after the applicant had remarried or after an identical application had been dismissed or otherwise finally determined would be examples of applications not legally recognisable. Since the greater includes the lesser, it is no doubt possible to describe applications which fall foul of Rule 4.4(1) as having no real prospect of success. Nevertheless paragraph 2.4 of the Practice Direction remains in my view an unhelpful curiosity which cannot override the inevitable omission from the family rules of a power to give summary judgment."
By parity of reasoning I reach the same conclusion concerning CPR PD3A para 1.7 inasmuch as it suggests that CPR 3.4(2)(a) can be construed to encompass serious arguments about real prospect of success. Such arguments should be reserved for applications under CPR 24.2. Under CPR 3.4(2)(a) arguments about real prospect of success can only arise in a literal sense, as described by Lord Wilson i.e. a claim which is legally unrecognisable has no prospects of success.
I similarly conclude that the reference in CPR PD3A para 1.5 to an abusive claim being one which is "obviously ill-founded" is another unhelpful curiosity. What that adds to a claim which is "incoherent" or "makes no sense" or which does "not disclose any legally recognisable claim" in para 1.4 is hard to imagine.
So I turn to CPR 24.2. This provides:
"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that [the] claimant has no real prospect of succeeding on the claim or issue; or
(ii) that [the] defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
PD24 does not take matters further.
The central question is whether or not a party has real prospects of success. It is the mirror image of the test for permission to appeal in CPR 52.3(6) and FPR 30.3(7). Under those provisions I had suggested that the test should be whether the appellant had shown that there was a better than evens chance of the appeal succeeding. I reasoned, I believe with logic, that if that were not so there would be a real prospect of failure not success (see NLW v ARC  EWHC 55 (Fam)  2 FLR 129). But that has been roundly condemned as heretical from all quarters and I have repented of my error.
The test for summary judgment and for permission to appeal is the same (see Tanfern Ltd v Cameron-MacDonald (Practice Note)  1 WLR 1311 at para 21). It is as pronounced by Lord Woolf MR in Swain v Hillman  1 All ER 91:
"The words 'no real prospect of succeeding' do not need any amplification, they speak for themselves. The word "real" distinguishes fanciful prospects of success or ... they direct the court to the need to see whether there is a "realistic" as opposed to a "fanciful" prospect of success."
The bar is set low to weed out the hopeless case or appeal. As Lord Hobhouse put it in Three Rivers DC v. Bank of England  UKHL 16,  2 AC 1 at paragraph 158:
"The criterion which the judge has to apply under CPR Part 24 is not one of probability; it is absence of reality."
In Easy Air Limited v Opal Telecom Limited  EWHC 339 (Ch) Lewison J, as he then was, at para 15 helpfully set out a list of principles in play on an application for summary judgment:
" .. the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman  1 All ER 91;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel  EWCA Civ 472 at ;
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at ;
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725."
Principles (v), (vi) and (vii) address the possibility that evidence may yet emerge which may turn a fanciful prospect of success into a real one. In Three Rivers DC v. Bank of England at para 160 Lord Hobhouse stated:
"The difficulty in the application of the criterion used by Part 24 is that it requires an assessment to be made in advance of a full trial as to what the outcome of such a trial would be. The pre-trial procedures give the claimant an opportunity to obtain additional evidence to support his case. The most obvious of these is discovery of documents but there is also the weapon of requesting particulars or interrogatories and the exchange of witness statements may provide a party with additional important material. Therefore the courts have … recognised that they must have regard not only to the evidence presently available to the plaintiffs but also to any realistic prospect that that evidence would have been strengthened between now and the trial."
In Fraser & Ors v Oystertec Plc & Ors  EWHC 2787 (Patent) Peter Prescott QC put it this way at para 38 under the heading "If the Evidentiary Materials Are Incomplete":
"This does not mean that a party can successfully resist summary judgement by suggesting, like Mr Micawber, that something may turn up to save him, though he does not know what: see per Megarry V-C in Lady Anne Tennant v. Associated Newspapers Group Ltd  FSR 298: per Jacob J in World Wide Fund for Nature v. World Wrestling Federation  FSR 504, 515 ("There must be some reasonable basis… It is not enough that something might turn up out of the blue"). The court must be able to see that the prospect is real, not fanciful. For example, "the hope that something may turn up during the cross-examination of a witness at the trial does not suffice. It is of course different if the admissible material available discloses a reasonable prima facie case which the other party will have to answer at the trial" (per Lord Hobhouse in the Three Rivers case)."
An alternative expression is that of Briggs J (as he then was) in Lexi Holdings (in administration) v Pannone and Partners  EWHC 2590 (Ch) at para 4:
"The particular aspect of the court's approach to summary judgment applications about which submissions were made to me concerns what is sometimes labelled Micawberism. Put shortly, the principle is that, in order to challenge an assertion that a party has no real prospect of success, or of successfully defending, in relation to a claim or issue, it is necessary to do more than say that some evidence currently unavailable might turn up in time for the trial. The party facing the summary judgment application must, whether by evidence or submission, persuade the court that there is a sufficient prospect that material will become available in time for trial so as to afford the defendant the real prospect of a successful defence."
These statements recall the Ampthill Peerage Case  AC 547, where the claimant John Russell sought to persuade the Committee of Privileges to order a blood test on him and his cousin Geoffrey Russell. John suggested that this evidence would prove that Geoffrey was illegitimate (contrary to a judicial declaration of legitimacy 50 years earlier by Swift J on 28 July 1926). The Committee refused to allow such evidence to come into being. Lord Simon of Glaisdale stated at 594 "if admitted, there is no reason why there should be any end to litigation. The bitter waters would never ebb". It was not a case, as Lord Wilberforce stated at 574, "where a certain and conclusive answer is waiting the moment it is asked for".
In the course of the hearing before me two cases were discussed where a summary judgment application was adjourned in order that disclosure might happen. They were Emerald Supplies Ltd & Ors v British Airways Plc & Ors  EWHC 3514 (Ch), which is under appeal, and Arsenal Football Club Plc v Elite Sports Distribution Limited  EWHC 3057 (Ch). In the latter case Mr Vos QC, as he then was, drew an analogy with the power to grant pre-action disclosure pursuant to the (renamed) Senior Courts Act 1981, section 33, and CPR 31.16, where it may be said that Parliament has equipped Mr Micawber to go angling. Mr Vos QC stated at para 35:
"There is a further reason why I am not inclined to strike out the Statement of Claim at this stage on the grounds relied upon by Mr Purvis. It seems to me that the position under the Civil Procedure Rules is somewhat different from what it was under the previous Rules of the Supreme Court. This is because under the Civil Procedure Rules, Part 31.16 enables the court to order disclosure in a case like the present to enable a potential claimant to ascertain whether he has a pleadable claim or not. Mr Purvis says of course the claimants do not apply for pre-action disclosure under Part 31.16 so I should not take this into account, but it seems to me that it is a relevant factor. Even if, which is not the case here in my judgment, the case was not pleadable and was too speculative as in the cases of A to Z Couriers and UpJohn, the courts could and would consider an application for pre-action disclosure. In my judgment, there is no reason why, in order to save costs in this case, disclosure should not be ordered now to see whether the claim is doomed to fail as the defendants implicitly suggest. It would be pointless and contrary to the over-riding objective to strike the case out and force the claimant to seek pre-action disclosure before starting the case again."
And he concluded at para 40:
"For these reasons, therefore, I have decided that I will not strike out the action, and that I will make an order for disclosure of the material the claimant seeks, but under Part 31.12 within the action. I will hear counsel on the form of the disclosure order in due course. It seems to me also that the defendant should have an express liberty to apply to strike out the action again should the disclosure demonstrate that the pleading is unsustainable at that stage. I want to make it perfectly clear that I am not in any way pre-judging the issue of what the disclosure may show or what the facts actually are. I am simply deciding two things: (i) that on the evidence before me, as a matter of inference from the facts that the claimants have put forward, I regard the claim in paras 8 to 10 as pleadable with the exclusion of the words I have mentioned in para 10; and, (ii) that for those reasons I do not regard the claim as too speculative to go forward. That deals with the strike out application."
When considering the question of incomplete evidentiary materials I do regard the analogy with the rules governing pre-action disclosure as helpful and relevant. It would be bizarre if a claimant was in a worse position vis-à-vis disclosure after starting an action than before. The test for pre-action disclosure is by no means stringent. It has recently been confirmed by the Court of Appeal in Jet Airways (India) Ltd & Ors v Barloworld Handling Ltd  EWCA Civ 1311 at para 4 by Moore-Bick LJ as being no more than:
"The applicant must be able to show that he has some sort of prima facie case against the respondent which is more than a merely speculative punt."
This is a world away from Lord Wilberforce's test of asking whether there is a certain and conclusive answer waiting the moment it is asked for.
Having completed this somewhat lengthy legal tour d'horizon I turn to the applications before me.
On behalf of the defendants (apart from the seventh defendant) Miss Angus QC argues that the claim should be struck out or summarily dismissed for the following reasons:
i) The claimant has not identified one single disposition that took place in favour of a defendant between October 2006 and October 2012.
In addition, as I have stated above, as regards the second defendant, who lives in New York, the order for service out was flawed by a want of full and frank disclosure. Further, a payment order under section 10 may not be enforceable in New York.
ii) The claimant has not identified any matters which could conceivably prove the necessary bad motive. The reliance on a letter written by Jack in 1952 just before his first marriage is hopeless.
iii) The claimant has no prospect of success at trial in persuading the court to exercise the discretion under section 10 in her favour having regard to the scale of her assets as stated in her first witness statement at para 133. The fact that she may have lost some of that value since then by mismanagement cannot avail her.
For the seventh defendant Mr Rajah QC adopts Miss Angus QC's arguments (i) to (iii) and advances equivalent arguments in relation to service on his client in Switzerland. He also argues that the claim against his client is additionally abusive because the claimant has commenced two actions against his client in Switzerland which are inconsistent with the claim brought against her here.
I propose to address the argument about a breach of full and frank disclosure at the end of this judgment when I have disposed of all the other arguments. In order to address those arguments it is necessary to fill in some more of the factual background.
One piece of evidence which is relied on by the claimant is a letter written by Jack to his business partner Len Brown on 13 January 1952 just before his first marriage to Zehava on 20 January 1952. In it he stated "Please see to it that all my possessions in banks, etc and shares in [Allied Commercial] etc [go] to my sisters and their children and mother (Charlotte Dellal) and the most Zehava receives is £1,000. … This may sound a strange request. But DO IT." (emphasis in original).
This is relied on by the claimant as showing that an abiding concern of Jack's was to favour his own blood relations over those he happened to marry.
I move forward 45 years to 1997. Shortly after his marriage to the claimant Jack transferred all his remaining shares in Allied Commercial Holdings (ACH) to his then living children. Company accounts show that ACH's net assets as at 31 March 2008 were £56.4 million.
The existing evidence, such as it is, shows that ACH was by no means the sole vehicle through which Jack conducted his business. A witness for the claimant is Mr James Woolf, who was a friend and business partner of Jack. On 13 July 2009 Jonathan Raymond, Jack's godson and assistant, sent an email to Mr Woolf, explaining that ACH was merely a trading vehicle and that the larger investments were held in other entities. He wrote in his witness statement:
"Allied is simply a trading vehicle of the Dellal family – hence the size. All the larger transactions, (Odeon/Shellmex) and investments are done through individual trusts. We have not identified which one/ones we would use for this."
This suggests that substantial transactions were undertaken through single purpose vehicles which may well have been trusts.
In his witness statement Mr Woolf further explains that a Panamanian company called Tatich Financing Inc was "the entity which provided all the money" in respect of the deals that he and Jack did. Tatich is a company established in Panama in 1978. There is evidence deriving from a SEC filing for a US company, Brilliant, in which Tatich was a shareholder, which suggests that the seventh defendant had the authority to vote and dispose of the shares held by Tatich. Further, Jack's sister Violet, the seventh defendant, was stated by an accountant employed by ACH to be the beneficial owner of Tatich in a letter written to Artemis Trustees Ltd in Guernsey on 1 August 2006. In his witness statement at para 23 Mr. Woolf explained that "during Jack's lifetime Jack was Tatich and Tatich was Jack." He referred at paras 20 - 22 to a number of emails which showed, he suggested, that Tatich was Jack's alter ego.
In 2007 difficulties arose in the marriage of Jack and the claimant. The claimant consulted Mr Raymond Tooth. A document from Mr Tooth's file has been produced which shows that the claimant believed that Jack was "probably worth £750m although he will deny this". In her witness statement at para 61 she refers to Jack having told her that he has a "secret stash" of money, if he needed it. She believed that that "stash" was £50m.
In reaction to the claimant consulting Mr Tooth, Jack consulted Sandra Davis of Mishcon de Reya. Miss Davis's assistant was Melissa Lesson. Jack attended along with his son Guy, the first defendant, two meetings with Miss Davis and her helpers on 18 April and 7 June 2007, and there was a telephone discussion between Jack and Miss Lesson on 3 May 2007. Following Jack's death the claimant secured the file of Mishcon de Reya (but not certain internal emails which were disclosed later). In her witness statement the claimant summarised the meetings in the following terms at para 113:
"The principal matters which emerge from these attendance notes are:
(i) Jack feared disclosing his assets.
(ii) He did not dispute an estimate of his wealth at £400million.
(iii) That he had given away a lot of his assets. He states that he gave away his shares in Allied Commercial "before his marriage"; in fact he gave them away to his children in August 2000, three years after we married.
(iv) Sandra Davis advised that because of our long relationship followed by marriage (20 years in 2007), any divorce would be decided on the basis of 50%, not a needs basis.
(v) It is suggested that Guy was holding monies on trust for Jack.
(vi) Jack confirms that Violet is the settlor of some of the family trusts and Sandra advises that it looks "fishy".
(vii) Guy referred to me seeing Jack lose a million pounds in a casino as though it were a regular occurrence (which it was).
(viii) He said he might leave me another £20million in his Will.
(ix) Lorraine Dellal (the "sister in NYC") has $50million, who if asked would say she has money from her mother.
The final advice was that he should string matters out with me because the Courts could not go back more than 6 years from death. As matters transpired, it appears that that is what he did."
That was not a complete or correct summary. The claimant is wrong to suggest that the shares in ACH were transferred three years after her marriage to Jack. They were transferred less than five months after her marriage to him. Perhaps more significant is that there was a clear understanding between Jack and Guy on the one hand and the lawyers at Mishcon de Reya that there were in existence a number of trusts with the inference that they held large sums. This is hardly surprising. The letter to Artemis Trustees Ltd in Guernsey to which I have referred above speaks volumes.
The account by the claimant in her witness statement omits reference to the telephone conversation with Miss Lesson on 3 May 2007. In it Jack stated that he had no property, which was obviously incorrect as he owned a country house in Hampshire the value of which the claimant has estimated at £5m. He further stated he had £10m in banks; £5m in investments; no policies; £400,000 owed to him; £5m in chattels; tax liabilities of £500,000; no borrowings, trusts or pensions; and income of £1.5m net annually. The claimant should not have omitted reference to this. On the other hand the later email disclosure from Mishcon de Reya shows that the lawyers there did not believe this statement of means by Jack to be true. I agree with their scepticism.
I have referred above to the statements of Jack's wealth in Rich Lists. The claimant relies on these. It is very dangerous to rely on these lists as an accurate or even approximate statement of an individual's wealth. Anyone who has practised in the field of big money ancillary relief knows how wildly inaccurate they can be, both in terms of overall quantum and also as to the division between wealth held by the individual and wealth held by members of his or her family or by family trusts or similar structures.
By the time the six year period began to run in October 2006 Jack was very old and there is evidence from the claimant that he was preoccupied with things eschatological. However, it is the evidence of Mr Woolf that right up to his death Jack remained commercially active in property deals. Mr Miles QC makes the fair point that the defendants have never denied this. In his skeleton argument at para 40 Mr Miles QC lists a number of transactions in the six year period as follows:
"(1) The sale of the Shell-Mex House initially acquired in 2002 for £327m and sold by a consortium in July 2007 for £490m. Mr Raymond's email in 2009 shows Jack had an interest (through an offshore vehicle) in the Shell-Mex Transaction.
(2) Robert Tchenguiz, another investor told the claimant that, "Jack was their co-investor, and shared the £150 million profit with the sale of the Shell-Mex Capital House when the building was sold". Jack's share of that investment is believed to have been £75 million.
(3) A putative deal referred to as "Rompa" which was floated in response to Mr Raymond telling Mr Woolf in September 2010 that Jack had "50 million in cash in a bank account" that had been lying around doing nothing for the previous 6 or 7 years.
(4) Jack had also told the claimant something similar, that he had a "secret stash" of money.
(5) A €15 million Hotel Jalta/Verdi deal in Prague.
(6) A €22.8 million "Big Box" deal in relation to a warehouse in Prague and the related acquisition of Silver Palm Investments.
(7) A contemplated £26.5 million deal in Belgrade.
(8) A contemplated €25 million residential development in Montenegro.
(9) A contemplated €106 million deal in May 2009 with Tesco in the Czech Republic."
In July 2008, within the six year period, Jack and the claimant came close to concluding a post-nuptial settlement. This would have provided:
i) A lump sum of £11.5m
ii) Transfer of the country property, now estimated to be worth £5m
iii) Transfer of all paintings and contents to the claimant, now estimated to be worth £4m
iv) Transfer of the shares of the company which owned the hotel in Prague, then estimated to be worth £8m.
These provisions amount to £28.5m. In addition in 2007 Jack had via his sister, the seventh defendant (who was the ostensible settlor), previously settled £20m on trust for the two children of his marriage to the claimant. Thus in 2007 and 2008 Jack had provided, or intended to provide, a total of nearly £50m to the claimant and their children.
On any view the lifestyle of Jack and the claimant was very high. In para 42 of his skeleton Mr Miles QC wrote:
"Jack's casino spending and his household expenditure imply an average annual spend/income of some millions (£4.5m in 2006), only a proportion of which can be explained by his ACH salary, which in 2006-07 was £50,000 before tax. The claimant's evidence is that Jack's annual household expenditure was £1.1m p.a. Further, Jack would regularly gamble and lose large amounts. See also the note of his meeting with Mishcon de Reya. The claimant says she regularly witnessed Jack winning or losing between £600,000 and £1m a night and says that this would happen 4–5 times a year. His gambling records bear her out. They show that in 2006 he spent £3.4 million and in just one night in April 2006 Jack spent £1.7m."
This was not disputed by counsel for the defendants.
In her oral submissions Miss Angus QC described the claimant's case as "extraordinarily weak". Mr Rajah QC described the claim against the seventh defendant as "non-existent". Mr Miles QC described the applications for summary termination as "completely misconceived". These are submissions of which Marshall Hall KC would have been proud.
In my judgment the claimant has put up a strong prima facie case that at his death Jack had access to very considerable resources. The evidence is however thin as to how those resources were held. It is a reasonable inference that most were held in trusts. It may be that some trusts were established long ago. On the other hand there is the hearsay evidence of Mr Raymond that individual trusts were set up for specific deals.
The evidence is thin indeed that outright dispositions were made to the defendants during the six year period. The case for the claimant in this regard is almost entirely inferential. It goes like this. If Jack was very rich, and if his estate appears to have mysteriously shrunk then the money can only have gone to his blood family. There are no other candidates.
In his will made on 15 November 2006 Jack did not make any provision for his children other than the children of him and the claimant. In clause 8 he expressly stated that he left his adult children nothing as "provision has been made for them during their life times". Yet the claimant's case is that from that point onwards vast sums were funnelled by Jack directly to those very children. I suppose this is possible, but it does seem unlikely. It seems much more likely that if dispositions were made that they were to trusts, probably settled by his sister who he always seemed to use for such purposes.
It is noteworthy that in the inheritance tax return signed by the claimant as personal representative on 19 August 2013 she declared to HMRC that Jack had not made any lifetime gifts or transfers of value after 18 March 1986. However she hedged that declaration by stating that Jack had involvement in a number of offshore structures, either as beneficiary or settlor, and that there may be significant assets within such structures. These statements do not sit well with a case of outright dispositions since 26 October 2006 in favour of the defendants.
Miss Angus's case on the strike out route is that the claimant has failed to comply with the elementary requirements of CPR 8.2(b) in that the claim form does not specify with sufficient particularity what the claimant is seeking or the legal basis for it. She argues that it is a requirement of adversarial proceedings that those who make charges must state at the beginning what they are and the facts upon which they seek to base them and it is an abuse of process for a claimant to issue a claim against a party at a time when she is not able to plead a factual basis for a claim against him in the hope that facts that will enable her to properly plead her case will emerge on disclosure. She relies on Hytrac Conveyors Ltd v Conveyors International Limited  1 WLR 44 at 47G-48.
As I have shown, we have moved on a long way since 1983, particularly with the extension of section 33 of the Senior Courts Act 1981 to all forms of proceedings by section 8 of the Civil Procedure Act 1997 and the Civil Procedure (Modification of Enactments) Order 1998 (S.I. 1998 No. 2940). Before that the power had been confined to personal injury cases. These wider powers are procedurally regulated by CPR 31.16 and came into force with the rest of the CPR on 26 April 1999. It seems to me that we now operate in a different legal world to that which pertained when Hytrac was decided in 1983. This brave new world allows full pre-action disclosure to be made where the applicant can put up a prima facie case which is more than a speculative punt. Mr Vos QC was undoubtedly right in my judgment in the Arsenal case to say that a claimant can plead a case in a laconic or protean way in anticipation of particularisation following disclosure. That is what the claimant has done here. I reject Miss Angus's contention.
As regards the seventh defendant Mr Rajah QC asserts that it is abusive for the claimant to issue proceedings against her in circumstances where she (the claimant) has issued two sets of proceedings against the seventh defendant in Switzerland. Mr Rajah QC says that these Swiss proceedings are inconsistent with the claim made here. He says that the claimant is approbating and reprobating, having her cake and eating it and running with the hare while hunting with the hounds. In effect he says that the claimant must elect which proceedings to pursue.
The Swiss proceedings are described by the claimant's Swiss lawyers, Froriep, in a letter dated 27 February 2015. The claimant has commenced separate proceedings in Nyon and Geneva. The Nyon proceedings sought an "account" and a freezing injunction. The proceeding seeking an "account" is made under Art 400 of the Swiss Code of Obligations. This is within Title 13 of the Code which is about agency contracts. Art 400(1) provides that:
"The agent is obliged at the principal's request, which may be made at any time, to give an account of his agency activities and to return anything received for whatever reason as a result of such activities."
The claimant argues that as Jack's personal representative she has replaced him in all his contractual relationships with third parties, and this includes his agency contract with the seventh defendant.
According to the letter from Froriep an "account" here does not mean an "account" in the term-of-art sense used by equity lawyers here. It means only "a detailed report of the activities carried out by the agent". It can be seen therefore that the claimant is not seeking anything more than information, although it is true, as Mr Rajah QC says, that to obtain this relief the seventh defendant has to be acting as an agent, whereas under section 10, as I have explained the bedrock premise is that the seventh defendant has either received dispositions outright or as a full (i.e. not bare) trustee.
Interestingly, in those proceedings the seventh defendant is arguing that it was purely a succession dispute and that the only place of jurisdiction is the UK.
The application for a freezing injunction was to preserve documents held by the seventh defendant. That was initially granted but was later discharged. The claimant is not appealing as she has been advised that by the time the appeal would be heard the documents would likely have disappeared.
The Geneva proceedings concern monies held by Tatich with Leumi Private Bank SA. An ex parte freezing order has been made in respect of a bank account at the Bank. That is still in force. The claimant has applied for witnesses to be summoned before the court in Geneva. That has been denied, and an appeal has been mounted which is pending.
Mr Miles QC argues that it is perfectly legitimate to run alternative cases within a single English suit. A fortiori, alternative cases in different suits in different jurisdictions. To say "if, which is denied" has been the mainstay of pleaders for centuries. He relies on Clarke v Marlborough Fine Art (London) Ltd  1 WLR 1731, Ch D. There at para 30 Patten J (as he then was) stated:
"If one of the consequences of CPR Pt 22 is to exclude the possibility of pleading inconsistent factual alternatives then it will have achieved far more than the prohibition of dishonest or opportunistic claims. It will prevent even claimants in the position of an executor or liquidator from advancing alternative claims based on incomplete but plausible evidence in circumstances where they are not able to choose decisively between the rival possibilities without access to the trial processes of disclosure and cross-examination. A defendant to an honest claim will be able to compel the claimant either to choose between seemingly viable alternatives or to abandon the claim altogether. The former will require the claimant to make a judgment on the basis of incomplete information and in relation to witnesses to whom he may not have ready access and will mean that in many cases the alternative claim will resurface at trial compelling the claimant to make a late application to amend with all the obvious difficulties which that will entail. I do not believe that this is what CPR Pt 22 was intended to achieve. Nor do I believe that it is what the statement of truth requires. If the alternative set of facts is clearly pleaded as such then the claimant is not necessarily stating that he believes both sets of facts are true. In the present case if Parts E1(a) and E1(b) are properly expressed as alternatives leading to an allegation of undue influence then what the claimant is affirming is his honest belief that on the basis of either one set of facts or the other Bacon was the subject of undue influence in his dealings with the defendants. It is really a matter of drafting but unless it can be said that one of the alternatives is unsupported by any evidence and is therefore pure speculation or invention on the claimant's part he is entitled in my judgment to sign a statement of truth in these circumstances. I reach this conclusion not without some hesitation and those responsible for reviewing the operation of the Civil Procedure Rules should take the earliest opportunity of reconsidering the provisions of Part 22 in order to provide some proper and clearer guidance in relation to alternative pleas."
In my judgment it is not abusive, at least at this early stage, for the claimant to proceed against the seventh defendant on different bases in different places.
I have concluded that the defendants' applications to strike out the claimant's section 10 application does not in any respect meet the standards specified in CPR 3.4(2)(a) or (b) and accordingly that limb of the termination application is dismissed.
However, I am by no means so satisfied in relation to the defendants' applications for summary judgment. I have already adverted to the present poverty of the claimant's case as to actual dispositions and the existence of the statutory motive. On the other hand, I do not go so far as to say that the claimant's case is merely a speculative punt. In my judgment I should follow the course mapped out by Mr Vos QC in the Arsenal case. The application for summary judgment should be adjourned with liberty to restore and there should be specific disclosure pursuant to CPR 31.12. The disclosure should be limited to all documents in the custody possession or power of each defendant which evidence any individual transfer of money or any other thing of (or worth) £10,000 or more to or for them from 28 October 2006 until Jack's death and which derived directly from him, or from any entity over which he had de jure or de facto control. The scope of the disclosure proposed by the claimant is too wide; that proposed by the defendants is too narrow.
For the purposes of determining if an entity, such as a trust, was under Jack's de facto control the test to be applied should be as set out by me in para 5 of BJ v MJ (Financial Remedy: Overseas Trusts)  EWHC 2708 (Fam),  1 FLR 667.
These documents will enable everyone to determine if the claimant has a real prospect of successfully proving her section 10 claim, or whether it is hopeless. It may well be hopeless, but the judgment whether it is, or is not, should be made on an informed basis.
My overarching conclusion is that it would be fundamentally unjust to terminate the application at this stage before there has been a scrutiny of the underlying documents which would prove conclusively whether or not the averrals by each of the defendants that there have been no relevant dispositions in their favour are true or false.
For the avoidance of any doubt I do not order that any defendant should file a witness statement at this stage. I am merely ordering disclosure of those key documents which will allow an informed decision to be reached at to whether this claim is hopeless or realistic.
The second and seventh defendants are resident overseas in New York and Switzerland respectively. Mr Rajah QC submitted that an order for disclosure cannot be made against them unless and until they have submitted to the jurisdiction. I think that what he meant was that until and unless the challenged orders authorising service out have been affirmed disclosure cannot be ordered against them. I did not understand him to say that disclosure cannot be ordered against a non-resident defendant who has been properly served out unless that defendant has made an elective submission to the jurisdiction. That would be a very surprising position. As will be seen, I will dismiss the challenge by the second and seventh defendants to the order granting leave to serve out. Therefore the disclosure order is properly made against them. If I am wrong about this then, if these defendants have not submitted to the jurisdiction by 1 May 2015, I authorise, in lieu of the order for disclosure, letters of request pursuant to CPR 34.13. The request will be for those defendants to attend their local court and to produce the documents I have specified above.
At para 32.iii) above I have set out a further argument of Miss Angus QC. She says that having regard to the scale of the claimant's wealth there is no prospect of the court awarding her more in these proceedings. In her first witness statement the claimant set out assets and liabilities as follows:
In her second witness statement the claimant asserted that her overall fortune had somewhat diminished. I agree that she cannot rely on her mismanagement or unwise speculations in a rising market. However, although it seems improbable that she would be awarded more having regard to what she has (or had), I cannot say that her claim is hopeless.
|25 York Terrace West
|New Cavendish Street
|22 Nottingham Terrace
|Middle East development
|Cash and investments
It is true that as regards the second and seventh defendants the claimant has adduced no positive evidence that a payment order would be enforceable against them in, respectively, New York and Switzerland. Mr Rajah QC concedes that a substantive section 10 order would be enforceable against the seventh defendant in Switzerland. Miss Angus QC suggests that a section 10 order would not be enforceable under the New York Recognition Act (as expressed in section 5301 of the New York Civil Practice Law and Rules) but may be under principles of international comity. In my judgment these doubts are not a reason for concluding now that the claimant's claim is hopeless against the second defendant. That is for another day.
In his written submissions Mr Rajah QC also suggested, somewhat faintly, that the claimant may struggle to show that the section 10 application against the seventh defendant is governed by English law. I can give this argument short shrift. In my judgment it just cannot be said that the claimant has no prospect of success in showing that English law applies. On the contrary it seems to me that it is overwhelmingly likely that it does.
I now turn, finally, to the argument that the orders granting leave to serve the second and seventh defendants out of the jurisdiction should be set aside for want of full and frank disclosure.
CPR PD6B para 3.1(20)(a) stipulates that leave to serve out of the jurisdiction is required where "a claim is made under an enactment which allows proceedings to be brought and those proceedings are not covered by any of the other grounds referred to in this paragraph". Proceedings under the 1975 Act were expressly named under the old version of this subparagraph. They are not covered in subparagraphs 1-19. Therefore leave to serve out is required. The test for the grant of leave is that there must be shown a serious issue to be tried. That test must be interpreted conformably with the test for pre-action disclosure otherwise strange inconsistencies would arise.
Service out of the jurisdiction has been described in cases as "the exercise of an exorbitant jurisdiction" and therefore requiring much caution, but again, as in so many other areas, we have moved on. Leave to serve out is not required where the defendant is resident in one of the other 27 countries of the EU. Or in another part of the United Kingdom. It is not required in any family proceedings (see FPR 6.41). So it is only occasionally the exercise of an exorbitant jurisdiction.
Putting aside the question of non-disclosure, I am satisfied that the claimant demonstrated "a serious issue to be tried" and that the orders for service out were properly made by District Judge Hess.
In my decision of L v K (Freezing Orders: Principles and Safeguards)  Fam 35 I sought to analyse all the relevant principles governing the grant of and challenge to an ex parte freezing order. An ex parte freezing order is one of the law's nuclear weapons. If improperly obtained it can cause untold and potentially irremediable damage both economically and reputationally. Therefore a very strict and unyielding approach is adopted by the courts. The same cannot be said of an improperly obtained order for service out. If it has been improperly obtained then any harm caused can easily be remedied by orders for costs or damages. In truth it is hard to see what actual harm would be caused, other than costs and some inconvenience, if the defendant improperly served moves quickly to set aside the order.
In the Hida Maru  2 Lloyd's Rep 510 the Court of Appeal upheld a decision by Neill J not to set aside service, because he took the view that, if the full facts had been before the judge, he would still have given leave. This was also the case in Network Telecom (Europe) Ltd v Telephone Systems International Inc  EWHC 2890 (QB). In Masri v Consolidated Contractors International Co Sal & Ors  EWHC 1780 (Comm) the non-disclosure was described as "very material", but service was not set aside. On the other hand in Ophthalmic Innovations International (UK) Ltd v Ophthalmic Innovations International Inc  EWHC 2948 (Ch),  I.L.Pr 10 service was set aside on this ground, as it was in Re Yugraneft  EWHC 2614 (Ch). As in so many fields it all depends.
In Masri Burton J considered a failure to reveal foreign proceedings to be "particularly material" (para 59). At para 61 he stated, unsurprisingly, that "much depends upon the seriousness of the non-disclosure, and whether or not it is accompanied by other non-disclosures".
Apart from some nit-picking points, which I ignore, the big instances of non-disclosure which are relied on are the failure to disclose, when referring to the Mishcon de Reya file, the conversation between Jack and Melissa Lesson on 3 May 2007, and, as far as the seventh defendant was concerned, the existence of the Swiss proceedings.
I am of the view that those matters ought to have been disclosed but had they been leave to serve would definitely have been granted nonetheless. In my judgment the "but for" test in the Hida Maru is the one to be generally used rather than the strict, almost penal, approach which obtains where an ex parte freezing order has been improperly obtained.
I therefore reject this aspect of the application by the defendants.
Note 1 It also created an IHT nil-rate trust which is irrelevant for my purposes. [Back]
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