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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Asturion Foundation v Alibrahim [2023] EWHC 3305 (Ch) (21 December 2023) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2023/3305.html Cite as: [2024] WLR 2947, [2023] EWHC 3305 (Ch), [2024] 1 WLR 2947, [2024] WLR(D) 52 |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE (ChD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
ASTURION FOUNDATION |
Claimant |
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- and - |
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ALJAWARAH BINT IBRAHIM ABDULAZIZ ALIBRAHIM |
Defendant |
____________________
Rupert Reed KC and Simon Atkinson (instructed by Simmons & Simmons LLP) for the Defendant
Hearing dates: 5, 6, 7, 10, 11, 12, 14, 17, 20, 21 July 2023
____________________
Crown Copyright ©
Paragraph | |
Introduction | 1 |
The Case in Outline | 15 |
The Evidence | 17 |
Factual Evidence | 17 |
For the Foundation | 18 |
For the Princess | 20 |
Expert Evidence | 24 |
Liechtenstein law | 25 |
Swiss Law | 29 |
Saudi/Shari'a law | 33 |
The Foundation | 37 |
Me Assaly/the 1977 Regulation | 38 |
The 1978 Power of Attorney | 46 |
1985 – Changes to the Articles/Me Assaly reappointed to the Board | 48 |
1988 – The 1988 Power of Attorney | 54 |
1993 – Sole Signature Right for Me Assaly | 55 |
The Relevant Articles in full | 56 |
Public Register | 57 |
Other Relevant Background | 61 |
The 2001 Instruction | 62 |
2005 – The Death of King Fahd | 67 |
2006 – Initial plans for the transfer of Kenstead Hall | 74 |
2007-2009 – A period of inactivity | 76 |
January and February 2010 – Permission of the Council of Heirs | 85 |
February 2010 – Mr Davies' Letter of 26 February | 96 |
Consent of the Heirs – Prince Mohammed visit to London | 104 |
Consent of the Heirs – Dr Al Rowaished visit to Me Assaly in Geneva | 109 |
2011- Transfers of the Spanish Property and of Kenstead Hall | 117 |
2012 –Exchanges between Me Assaly and Prince Mohammed | 127 |
The French Property | 133 |
Litigation in Liechtenstein | 134 |
Some Initial Observations | 139 |
The Foundation's Primary case: Is the Transfer of Kenstead Hall Void? | 151 |
The TR1 | 151 |
Formal validity | 154 |
Section 26 Land Registration Act 2002 | 156 |
The Foundation's Purpose | 169 |
The Purpose as an Expression of the Founder's Will | 169 |
Decisions of the Liechtenstein Courts | 185 |
The 2001 Instruction | 194 |
The Internal Competency Argument | 195 |
The Issue of Principle | 195 |
Execution of the TR1 – the 2001 Instruction as a "regulation" | 207 |
The 1988 Power of Attorney | 218 |
Non-delegability of duties/decisions of the Liechtenstein Courts | 227 |
Summary | 239 |
Representative Authority/Ostensible Authority | 240 |
The Argument based on the law of Liechtenstein | 240 |
The Argument based on English law | 243 |
Discussion and Analysis | 244 |
Some points about ostensible authority (and on the facts) | 265 |
Summary and Conclusion on the Foundation's Primary Case | 271 |
The Foundation's Secondary and Tertiary Claims | 272 |
The Foundation's Claims | 272 |
Secondary Claims | 275i |
Tertiary claims | 275iii |
The Princess's Arguments | 277 |
Choice of Law | 282 |
Land Registration Act 2002 | 297 |
Conclusions on the Foundation's Secondary and Tertiary Claims | 305 |
Conclusion | 307 |
Mr Justice Adam Johnson:
Introduction
The Case in Outline
i) To start with, it argues that the transfer of Kenstead Hall to the Princess, supposedly effected by means of the TR1, is in fact void, since such transfer was contrary to the Foundation's purpose, and/or was executed by Me Assaly in excess of his powers under the Foundation's constitution. Either way, Me Assaly lacked authority to execute it and consequently it is of no legal effect.
ii) If that is wrong, and the Princess did acquire title to Kenstead Hall by means of the transfer, that transfer is liable to be set aside (rescinded), either because it was a voluntary disposition of property undertaken in breach of what English law would characterise as fiduciary duties owed by Me Assaly, and/or on the basis that the transfer was effected by Me Assaly acting under a mistake as to his duties and obligations, which was sufficiently serious as to make it unconscionable for the Princess to retain the benefit of it (see Pitt v. Holt [2013] UKSC 26, [2013] 2 AC 108).
iii) Alternatively, if that is wrong and if the title acquired by the Princess cannot be set aside and rescinded, then she should be liable nonetheless either (a) to make restitution for having been unjustly enriched, the value of her enrichment corresponding to the value of Kenstead Hall, or (b) to pay damages for having knowingly received and retained the Foundation's property, knowing that it had been transferred by Me Assaly in breach of what English law would characterise as his fiduciary duties.
i) The Foundation's purpose was not as the Foundation now argues, and specifically it was not limited by any requirement that its assets were to be distributed to the King's heirs only in accordance with their Shari'a shares or in equal 1/10th shares. On the contrary, it was consistent with the purpose of the Foundation for its assets to be distributed as indicated by the King while alive, and he had an unrestricted right to require the transfer of individual properties to those who would become his heirs on death as he saw fit.
ii) Me Assaly had power under the Foundation's constitution to act alone. That follows from the Foundation's basic constitutional document – i.e., its Articles – taken together if necessary with a Power of Attorney granted to Me Assaly by the Foundation board in 1988 (the "1988 Power of Attorney"), pursuant to which the board delegated to him all necessary powers of management and administration, including (it is said) a power of disposition.
iii) In any event, determining the extent of Me Assaly's authority is exclusively a matter of the law of Liechtenstein, which makes no distinction between the concepts of actual or ostensible authority known to English law, and instead asks only whether circumstances have arisen in which the acts of a "representative body" (such as a board member) have engaged the liability of the corporation in question – here, the Foundation. Such circumstances have arisen here as regards the transfer of Kenstead Hall, and so the Foundation is to be taken as bound by Me Assaly's actions in transferring it, which were within the scope of his representative authority.
iv) If that is wrong, and the correct approach is in fact to distinguish between Me Assaly's actual and ostensible authority, then Me Assaly did have ostensible authority to effect a transfer of Kenstead Hall, even if he was not actually authorised to do so. That is because the Foundation held him out as able generally to enter into transactions on its behalf, by including in the relevant public register in Liechtenstein a reference to him having sole signing rights on behalf of the Foundation. The Princess and her agents relied on that representation in entering into the transfer.
v) Further and in any event, the Princess says she is entitled to the protection afforded by s.26 of the Land Registration Act 2002 ("LRA 2002"), the effect of which is that she is deemed to take free of any limitation on the Foundation's power to dispose of the registered estate in Kenstead Hall. Consequently, her title to Kenstead Hall cannot be questioned. That disposes of any argument that the transfer is void, or any argument that it can be rescinded, or indeed any argument that she is liable to account personally for damages for knowing receipt, because any such claim is defeated by the acquisition of an unimpeachable title to the property in question (see, for example, Byers v. Saudi National Bank [2022] EWCA Civ 43, [2022] 4 WLR 22, now affirmed by the Supreme Court [2023] UKSC 51), and that is what happened here by operation of s.26.
The Evidence
Factual Evidence
For the Foundation
For the Princess
Expert Evidence
Liechtenstein law
Swiss Law
Saudi/Shari'a law
The Foundation
Me Assaly/the 1977 Regulation
"Article 6 – Purpose
The purpose of the foundation consists of the management of the foundation assets and in the payment to the beneficiaries of regular or extraordinary benefits from the foundation assets or from its earnings within the meaning of the instructions contained in a special regulation."
"Article 7 - Regulation
It is the responsibility of the founder or his legal successor to issue a regulation regarding the beneficiaries."
"The undersigned … declares that he is setting the present Rules according to Article 7 of the Articles of Association of the above-mentioned Foundation:
1) during his lifetime, the undersigned will be the sole beneficiary of the Foundation,
2) in the event of his decease, the beneficiaries of the Foundation will be his legal heirs according to Islamic law (Koran/Shariat).
Only the majority of all the heirs may decide:
(a) liquidation of the Foundation,
(b) the resignation and the appointment of members of the Board of the Foundation,
(c) any other decision whatsoever concerning the Foundation."
The 1978 Power of Attorney
1985 – Changes to the Articles/Me Assaly reappointed to the Board
"Article 7 - Regulation
It is the responsibility of the primary beneficiary to issue a regulation about the beneficiaries [recipients] and if need be further entitled parties. This regulation is irrevocable and binding for the legal heirs of the primary beneficiary, no matter what circumstances, motives or facts have to be taken into consideration."
"The Foundation council shall only be bound by the joint signature of its president and vice-president or one of the other members. The foundation council adopts its resolutions in accordance with this principle during meetings or through written correspondence (circulars, telegrams, telex). The foundation council may transfer the exercise of part or all of the powers vested in it to one of its members, to the primary beneficiary, or to another person nominated by the latter."
1988 – The 1988 Power of Attorney
1993 – Sole Signature Right for Me Assaly
" … The Foundation council shall only be bound by the joint signature and one of its president and one of the other members. Notwithstanding the foregoing, the Vice-President shall be entitled to sole signature. The Foundation council adopts its resolutions in accordance with this principle during meetings or through written correspondence (circulars, telegrams, telex)."
The Relevant Articles in full
"Article 6 – Purpose
The purpose of the foundation consists of the management of the foundation assets and in the payment to the beneficiaries of regular or extraordinary benefits from the foundation assets or from its earnings within the meaning of the instructions contained in a special regulation, but excluding the operation of a business managed in a commercial manner.
Article 7 - Regulation
It is the responsibility of the primary beneficiary to issue a regulation about the beneficiaries and if need be further entitled parties. This regulation is irrevocable and binding for the legal heirs of the primary beneficiary, no matter what circumstances, motives or facts have to be taken into consideration.
Article 8 – Disbursements
(1) Within the regulations issued by the primary beneficiary the foundation council decides the amount and the type of payments to the foundation beneficiaries.
(2) If the primary beneficiary has not issued a regulation the foundation council will decide at its own discretion regarding the appointment of beneficiaries and the extent of their benefits.
(3) The foundation beneficiaries shall not be deprived of the amounts allocated to them by possible creditors, either through enforcement or through bankruptcy.
Article 9 – Foundation council
(1) The foundation will be administered by a foundation council consisting of at least three members.
(2) The members of the foundation council will be appointed or revoked by the primary beneficiary.
(3) Each member of the foundation council must inform the secretariat of the foundation council by means of registered letter in a case of his resignation.
(4) Should the primary beneficiary be prevented under all titles from appointing a member of the foundation council, the remaining members of the foundation council are empowered to proceed to the appointment as long as this appears necessary in the interests of the primary beneficiary as well as those of the foundation.
(5) If no members of the foundation council remain or if the same is no longer in a position of fulfilling the duties allocated to it, the right to appoint new members of the foundation council will be granted to the legal representative; in such case, the same has to take into account the intention of the primary beneficiary expressed in the regulation of the foundation.
Article 10 – Function of the Foundation Council
(1) The foundation council represents the foundation in a legally binding manner toward the foundation beneficiaries as well as third parties, and determines the will of the foundation through its resolutions in accordance with the provisions of these statutes.
(2) It constitutes itself according to the instruction of the primary beneficiary and designates those persons who are authorized to represent the foundation. The foundation council shall only be bound by the joint signature of its president and one of the other members. Notwithstanding the foregoing, the Vice President shall be entitled to sole signature. The foundation council adopts its resolutions in accordance with this principle during meetings or through written correspondence (circulars, telegrams, telex).
(3) The foundation council may transfer the exercise of part or all of the powers vested in it to one of its members, to the primary beneficiary, or to another person nominated by the latter.
(4) It administers the foundation in agreement with the purpose of the same and in line with the instructions and directives of the primary beneficiary, the same being of a binding character in this context.
…
Article 13 – Amendments to the statutes and dissolution of the foundation
The primary beneficiary is authorised to amend the statutes or the organisation of the foundation and may dissolve the foundation, either wholly or in part, in observance of the provisions of the law. Such amendments to the statutes, in their entirety or in part, must be within the framework of the purpose of the foundation. They must always comply with the intention of the primary beneficiary expressed in the regulation of the foundation."
Public Register
"Purpose – the purpose of the Foundation is to manage the assets of the foundation and to provide the beneficiaries with regular or extraordinary benefits from the assets of the foundation or from its income in accordance with the instructions contained in special regulations, but excluding the operation of a business operated for commercial purposes."
"Notes –
…
General rules on representation: The President shall sign jointly with one of the other members. The Vice President shall sign individually.
…
Administrative details -
…
Assaly, Faisal – Vice President of the Board of Trustees – Individual signature."
Other Relevant Background
The 2001 Instruction
"own name: ALJOHARA ALABDULAZIZ ALBRAHIM
King in his name to his wife in her own name"
"This letter is my formal and binding authority to His Excellency, Mr. Faisal Hikmat Assaly, holder of Saudi Arabian Diplomatic passport No. 994-2, to do all that is necessary to effect the transfer by way of gift of all of my legal and beneficial ownership and interest of any nature in the property known as Kenstead Hall, the Bishops Avenue London N.2., registered at H.M. Land Registry in the name of Asturion Foundation and registered with Title Number MX 384245, to my wife, Princess Aljohara Brahim Al Abdul Aziz Al Brahim.
This formal binding authority empowers His Excellency Mr. Faisal Hikmat Assaly to instruct all persons, companies, trustees and other agents and representatives responsible for the legal and administrative affairs of Asturion Foundation of Vaduz, Liechtenstein, to prepare and execute all documents and resolutions as may be required to effect the said transfer of Kenstead Hall to Princess Aljohara Brahim Al Abdul Aziz Al Brahim and to co-operate with representatives of Princess Aljohara Brahim Al Abdul Aziz Al Brahim in all matters relating to the registration of her name as the legal and beneficial owner of the property at H.M. Land Registry without restriction or encumbrance and as may otherwise be necessary.
His Excellency Mr. Faisal Hikmat Asaly [sic] is also hereby empowered to employ such legal and other representatives as he may think fit to prepare and advise upon the transfer referred to above."
"(a) To execute sign and deliver on my behalf all such deeds and documents … necessary … for carrying out into complete effect … the transfer of the Property from my husband … and the Asturion Foundation to me and to ensure registration of me as owner of the Property.
(b) To manage the Property and to take all necessary measures to do so including giving instructions and appointing any person which my Attorney shall think fit."
2005 – The Death of King Fahd
"Furthermore, Maitre Assaly can no longer fulfil instructions which would have been given to him by King Fahad before his death without the agreement of his heirs."
"I met His Royal Highness Prince Mohamad Bin Fahd Bin Abdul Aziz at his house in Jeddah that day upon his request and he told me:
'We agree to respect the will of His Majesty the King Fahd and to carry out his orders with regards to the transfer of the four relevant palaces on behalf of his wife, Princess Alijohara Alibrahim
And I answered: it is a noble decision."
2006 – Initial plans for the transfer of Kenstead Hall
2007-2009 – A period of inactivity
"You asked me about my statement with regard to the four palaces of which my late father ordered the transfer of ownership in the name of my mother, Princess Al-Jawharah-Alibrahim.
I declare and swear before God that he gave her these houses. I also swear before God that this matter was settled after the death of the King during a meeting […] Please finalise all of this by transferring the ownership into the name of my mother … as soon as possible."
"1. Formalities on behalf of Asturion
It will be necessary for Asturion to execute one or more documents to give effect to the transfer to HRH Princess Alijoharah's company. I understand that Maitre Faisal Assaly remains on the Asturion Board and is a signatory on behalf of Asturion. It therefore seems likely that Faisal Assaly will need to sign any transfer documents, as has been the case with previous transfers, together with any other stipulated signatories …
2. HM King Fahd's Heirs
As a matter of professional conduct, I would need to receive confirmation that HM King Fahd's other heirs are aware of and approve the transfer of the Property from Asturion to HRH Princess Aljoharah."
" … obtaining up to date information from the Register or other authentic source as to the good standing, Board members, signatories etc of Asturion."
" … a confirmation from Asturion Foundation that Asturion Foundation has the authority of the beneficiaries following HM King Fahd's death. I appreciate that this may be sensitive but I believe it is appropriate in the circumstances."
"Pursuant to the extract of the Register dated 14 December 2009 I may confirm that Maitre Assaly has a sole signature right, so he is entitled to sign on his own for and on behalf of the Foundation!"
January and February 2010 – Permission of the Council of Heirs
"As some time has passed since the proposed transfer was first discussed, I believe it to be appropriate to notify the King's other heirs of the proposed transfer as soon as possible. In this way, the heirs or a senior member of the Family will have an opportunity to acknowledge the position and confirm that there is no objection to the transfer."
"… His Highness replied that the approval of the Commission is a legal requirement in such transactions, and promised to contact Dr Abdulmohsin Al Rowaished, the authorized member of the said Commission, in this regard to ask him to respond officially."
"According to the letter from Faez Martini … [Prince Mohammed] told him on 13 January 2010 that he would contact Dr Abdul Mohssen Alrwaished … to reply officially concerning the agreement of the council of heirs on the transfer of the four properties … according to the orders of his late majesty King Fahd."
"When I spoke to Faez [Martini] he reported to me that he had had a conversation with the (sic.) Dr Al-Rowaisheed, the lawyer, in respect of the confirmation awaited from the other heirs regarding the transfer. Faez reported that Dr Al Rowaisheed said that there would be a definitive answer during the course of this week."
February 2010 – Mr Davies' Letter of 26 February
"Whether Maitre Assaly (respectively the Foundation Council in its entirety) is empowered to dispose of the London property in general and to transfer said property to a company linked to one of the beneficiaries in special can only be answered after examination of the foundation documents (i.e. the Statutes and By-Laws)."
"I also confirm that subject to any express contrary provisions in the Statutes and By-Laws of the Foundation and within the usual boundaries of the law you are entitled to transfer Kenstead Hall to a company linked to one of the beneficiaries."
"I confirm you are legally entitled, subject to any express contrary provisions in the Statutes and By-laws of the Foundation, to transfer Kenstead Hall, situated in London, in compliance with the instruction given to you by the late King Fahd to his wife Princess Alijawhara bint Ibrahim A Al Ibrahim".
"I also confirm that you are legally entitled to transfer Kenstead Hall, situated in London, in compliance with the instruction given to you by the late King Fahd to his wife Princess Alijawhara bint Ibrahim A Al Ibrahim."
Consent of the Heirs – Prince Mohammed's visit to London
" … instructed me, Faez Martini, together with Abdulmohsin Al Rowaished, to offer these properties, or any part thereof, to determine their market value. As such, I requested from His Highness to provide me with a written order, to be signed by him or by his authorized delegate, that clearly confirms his desire and instruction to take this measure and provide Their Highnesses or whomever he specified with the information I collect in this regard."
Consent of the Heirs – Dr Al Rowaished's visit to Me Assaly in Geneva
"This resulted in me hastening to suspend the proceedings relating to the three palaces: Hampstead in London, Al-Shourouq in the South of France and Al-Nahda in Marbella, and to inform her Royal Highness Princess Aljawharah while awaiting the position of the person in charge officially for the 'Committee of heirs', Dr Abdel Mohssen Alrwaished."
"Dr Abdel Mohssen Alrwaished told me that HRH Prince Mohamed bin Fahd will reply to me on this subject and that he (Prince Mohamed) will be visiting Geneva in two weeks."
"This never happened. To date, I have not received any reply from them."
"After the lapse of more than seven months since the promise by Dr Abdel Mohssen Alrwaished and without obtaining from him, as the party responsible for the council of heirs, the transfer measures shall resume on the basis of the declaration by HRH Prince Mohammed bin Fahd on 31/10/2005, at his home in Jeddah, regarding the four orders of his late Majesty King Fahd: 'the orders given by His Majesty King Fahd while alive must be respected and executed."
"I would be grateful if you could send to Dr Alrwaished a report on all the real property that you supervise, whether the properties are located in Europe or elsewhere, accompanied by a separate financial valuation for each property so that we and the other heirs can give a ruling on them."
2011- Transfers of the Spanish Property and of Kenstead Hall
"1. that Asturion Foundation is in good standing;
2. obtaining extracts of the Public Registry and confirming the current members of the Foundation Council and the Foundation's domicile;
3. that Maitre Faisal Assaly still has sole signatory powers (You mentioned last time that this means that Maitre Assaly can represent the Foundation within the boundaries of the law, the Articles ('Statutes') and the By-laws; and
4. can you obtain copies of the statutes and the by-laws or do we need to obtain these from Maitre Assaly direct? (Please do not make any contact with Maitre Assaly)."
"Asturion Foundation is a registered foundation and no liquidation proceedings have been started.
The current members of the Foundation Council are Maitre Faisal Assaly (Vice-Chairman), Prinz Mohamed Ben Fahad (Member) and Dr Alex Wiederkehr (Member and Secretary). There is no Chairman.
…
Maitre Assaly has sole signatory powers."
2012 –Exchanges between Me Assaly and Prince Mohammed
The French Property
Litigation in Liechtenstein
"The failure to document the business activities and to obtain formal resolutions from the board of trustees when selling assets of the resolution would have been grounds for his removal from office."
i) The first instance Liechtenstein Court dismissed the claim on 15 December 2015.
ii) The Princess and Prince Abdul Aziz appealed, and on 6 April 2017 obtained an order that all of the board members should be removed from the board. Prince Mohammed was dismissed owing to a conflict of interest arising out of his dispute with the Princess, while Dr Beck and Dr Kolzoff were dismissed on the basis that the 1985 Regulation required their appointment to be approved by all of King Fahd's heirs.
iii) Prince Mohammed, Dr Beck and Dr Kolzoff appealed to the Liechtenstein Supreme Court. Dr Beck's and Dr Kolzoff's appeals were successful, on the basis that Art. 9(4) of the Articles (which permitted the Foundation's board to appoint board members in circumstances in which the King was indisposed) prevailed over any contrary provision in a regulation or bylaws, including para. 2(c) of the 1977 Regulation (see above at [44]). Prince Mohammed's appeal was unsuccessful.
iv) During the course of its judgment dated 7 September 2017, the Liechtenstein Supreme Court made certain observations about the propriety of Prince Mohammed, Dr Beck and Dr Kolzoff having caused the Foundation to make its claims for recovery of the properties transferred to the Princess, including Kenstead Hall. These observations are said by the Foundation to include findings about the purpose of the Foundation, which have res judicata effect in the present proceedings. It will be necessary to consider them below (see at [189]).
v) Prince Mohammed thereafter appealed to the Constitutional Court, but again unsuccessfully.
Some Initial Observations
The Foundation's Primary case: Is the Transfer of Kenstead Hall Void?
The TR1
"Signed as a deed on behalf of ASTURION FOUNDATION, a foundation incorporated in Liechtenstein, by MAITRE FAISAL ASSALY being a person who, in accordance with the laws of that that territory, is acting under the authority of the foundation."
Formal validity
Section 26 Land Registration Act 2002
"Protection of disponees
(1) Subject to subsection (2), a person's right to exercise owner's powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition.
(2) Subsection (1) does not apply to a limitation—
(a) reflected by an entry in the register, or
(b) imposed by, or under, this Act.
(3) This section has effect only for the purpose of preventing the title of a disponee being questioned (and so does not affect the lawfulness of a disposition)."
The Foundation's Purpose
The Purpose as an Expression of the Founder's Will
i) The purpose of the Foundation is as expressed in Article 6. The purpose of the Foundation is to manage its assets and to make payments from those assets to the beneficiaries, within the meaning of regulations issued under Article 7. That is a sufficient statement of the Foundation's purpose. Indeed, that is the purpose of the Foundation as expressed publicly in the relevant entry in the Liechtenstein public register (see above at [58]).
ii) It is true that the Foundation's purpose as stated in Article 6 cannot be changed (i.e., it solidified), but built into it is an inherent flexibility as regards the identity of the Foundation's beneficiaries/their interests/the nature of any dispositions to them of Foundation assets, because of the King's ability to issue regulations under Article 7.
iii) Thus, although the King's initial regulation under Article 7 was the 1977 Regulation, naming himself as primary (and sole) beneficiary of the Foundation during his own lifetime, and his heirs under Shari'a or Islamic law as secondary beneficiaries after his death, he was fully entitled during his lifetime to amend that regulation however he wished. He could do so by further regulation requiring transfer of a particular Foundation asset, at his direction, to a person who would qualify as one of his heirs after his death, and that would not involve any infringement of the Foundation's purpose, because any such further regulation would itself be an expression of the purpose.
iv) Dr Bösch expressed the point as follows, in a passage in his First Report (para. 241) which I accept as an accurate reflection of the position under Liechtenstein law:
" … it makes no sense to suggest that a distribution or transfer of an asset of the Foundation pursuant to a regulation or instruction of King Fahd could be constrained by reason of its being found to be outside the 'purposes' of the foundation. That is because King Fahd as founder and principal beneficiary had the power during his lifetime to issue and amend at any time the very regulations that would specify the Foundation's purposes as provided in Art. 6 of the Articles."
Decisions of the Liechtenstein Courts
" … the will of the founder [must be] expressed to such an extent that the purpose of the foundation can be sufficiently identified when interpreting the deed of foundation in accordance with the principle of will in order to be permanently ('solidified') implemented by the foundation bodies".
"The power of amendment and revocation conferred on the economic founder as the principal beneficiary in Article 13 subpar. 1 of the Articles of Association … experienced a significant restriction in the following sentence, namely that 'all amendments to the Articles of Association total as well as partial … [shall] ensure that the objective of the Foundation is protected" and "[shall] in any event comply with the intention of the principal beneficiary stated in the by-law of the Foundation'. In the by-law, the King directed that after his death his statutory heirs under Islamic law would become the beneficiaries of the Foundation without any distinction. In connection with the property transfers to the first claimant instructed by the King and arranged by the then member of the board of trustees Faisal Assaly, the question thus arises as to whether these sales substantially reduced the assets of the Foundation, undermined the objective of the Foundation or resulted in unequal treatment of the beneficiaries (both claimants as well as the second respondent and a further eight descendants of the King are statutory heirs and hence have equal rights as beneficiaries of the Foundation).
From this perspective, the instructions given to the member of the board of trustees, Faisal Assaly, by the King prove to be dubious, if not a violation of his power of amendment, so that the decision by the member of the board of trustees at the time to institute legal proceedings with the aim of transferring these properties back to the Foundation certainly appears to be based on a tenable interpretation of the law. A breach of duty by the second respondent is thus excluded as the lower courts have already ruled. The same applies to the third and fourth respondents."
The 2001 Instruction
The Internal Competency Argument
The Issue of Principle
i) Under Article 8, it is for the Foundation council (i.e., the board) to make decisions about disposals of the Foundation's assets, not Me Assaly acting alone.
ii) That approach has been endorsed by the Liechtenstein Courts on two occasions: first, in the decision on Me Assaly's application to remove Dr Beck, rendered following Me Assaly's death (see [135] above), in which the Court said that grounds existed which would have justified Me Assaly's removal from the Foundation board; and second, the decision of the Liechtenstein Court of Appeal dated 6 April 2017 (see [138(ii)] above), which resulted in the removal of Prince Mohammed, Dr Beck and Dr Kolzoff from the Foundation board, during the course of which the Court of Appeal made certain observations about "the principle of joint management" applying to the Foundation board.
iii) It is true that the Articles allow for the board to delegate part or all of its powers to one of its members (see Article 10(3)), but that has not validly been done here as regards any power to dispose of the Foundation's property. That is because the 1988 Power of Attorney, insofar as it achieved any form of delegation to Me Assaly, was effective only to confer on him the power to manage and administer the Foundation's assets, and that did not include the power to dispose of them.
i) I consider that the wider construction of the Article is consistent with its language. On the face of it, it deals both with management of the Foundation's affairs externally and internally. No attempt is made as a matter of language to separate them. On the contrary, the structure of the Article suggests they are to be looked at together. As regards the Foundation's external affairs, the change introduced in 1993 was that Me Assaly was to be "entitled to sole signature", whereas for the other board members, two signatures were to be required, one of which was to be that of the President (i.e., Prince Mohammed). As regards internal management – i.e., decision-making – the language of the Article was that the same structure would apply - "The foundation council adopts its resolutions in accordance with this principle …". Since no distinction is made as a matter of language between the external and internal functions of the board, it seems to me natural to construe the wording overall as saying that the same modalities would apply in the case of the Foundation adopting its internal resolutions, as in the case of its external relations.
ii) I think that also makes sense in terms of the overall picture. The changes introduced by amendment to the Articles in 1985, and then by means of the 1988 Power of Attorney three years later, had resulted in an increasing concentration of power as regards the Foundation's operations in the hands of Me Assaly. The changes introduced in 1993 were a natural development of that same theme, and in that broader context it seems to me quite natural to think that in making them King Fahd's intention was to confer decision-making authority on Me Assaly to the fullest extent he was able to.
iii) It is said in response that the wider construction of Article 10(2) cannot be correct, because it would lead to the possibility of conflicting resolutions being made – one by Me Assaly, and another by Prince Mohammed acting together with another board member. I think that is correct as a matter of language; but the answer must be that there was no expectation that that would ever happen, because in practice the day-to-day management of the Foundation was to be the responsibility of Me Assaly, and King Fahd wished him to have all the powers necessary to manage the Foundation effectively.
Execution of the TR1 – the 2001 Instruction as a "regulation"
The 1988 Power of Attorney
i) The first is the Foundation's argument that it is invalid, because a valid delegation of powers to a single board member would itself require a decision of the Foundation's board, and here there was no such decision because the 1988 Power of Attorney was signed only by two members of the four person board at the time (i.e., Prince Mohammed and Me Christ), and that was not a valid decision because there was no majority. On this point, however, I am persuaded by the evidence of Dr Bösch. A number of points may be made. (1) Under Article 10(2) of the Articles, as explained above, the board was entitled to adopt resolutions "in accordance with this principle", which included where the resolution had the support of the President (Prince Mohammed) and another board member. (2) In any event, I agree with Dr Bösch's analysis that it was natural for Me Assaly not to have joined in a decision for the purpose of conferring a general power of attorney on himself. He had an obvious interest in the outcome of the decision which made it inappropriate for him to vote. I also agree with Dr Bösch that the further board member at the time, Dr Batliner, was effectively in the same position because under a contract of mandate with Me Assaly he was apparently bound to act in accordance with Me Assaly's directions. (3) As to the formalities of the decision-making process, resolutions could be adopted under Article 10(2), " … during meetings or through written correspondence (circulars, telegrams, telex)." I therefore see nothing in the Foundation's point that there is no evidence of "… any of the essential trappings of a board meeting, such as the circulation of an agenda …". The Articles did not require such formality. Signature of the 1988 Power of Attorney itself was sufficient expression of consensus.
ii) The Foundation argues that, whatever else may have been delegated by the 1988 Power of Attorney, its wording was not sufficiently clear to include delegation to Me Assaly of the power to effect disposals of Foundation assets. I respectfully disagree. In agreement with Dr Bösch's analysis, I think the wording perfectly clear. It provides expressly that "The Board of the ASTURION Foundation … hereby delegates its powers to: His Excellency, Mr Faisal Assaly …" (my emphasis). That introductory language to my mind signals a very broad intention to delegate all of the board's powers, to the fullest extent permitted by law. It is true that the language then goes on to provide that the delegation is " … for the purposes of the following …", and that the matters thereafter set out do not expressly refer to the making of disposals of Foundation property; but the first matter mentioned is as follows: "… for the purposes of the following … Govern, manage and administer, both actively and passively, all current and future assets and business …". Again, that is very broad language. I think it entirely natural to suppose that the idea of administering the Foundation was intended to include the disposal of its assets as required, to or for the benefit of its beneficiaries from time-to time. That was an essential part of the purpose of the Foundation. That construction is reinforced by the reference to the "active" administration of "all current and future assets", which strongly suggests administration of a fluid and changing pool of assets over time, rather than management of a static and unchanging collection. Although perhaps not directly apposite given the way the Foundation operated, I also think significant the reference later in the document to the relevant purposes including Me Assaly having the ability to "carry out and accept the delivery of all bequests". This again is consistent with the idea that part of his delegated function would include making distributions of the Foundation's assets, at the behest of King Fahd, at least in accordance with instructions given during the King's lifetime.
iii) Finally, Dr Walser in his evidence submitted that the law of Liechtenstein provides that a specific power of attorney is necessary in order to effect a gift (see Article 1008 ABGB). On this point, however, I again prefer the evidence of Dr Bösch, namely that the general law on the conferral of authority to an agent to make a gift has no obvious application in a case where the issue is about delegation of powers already conferred on the board of a Liechtenstein foundation under its Articles.
Non-delegability of duties/decisions of the Liechtenstein Courts
i) Article 10(3) of the Foundation's Articles is quite clear about it: it provides that the council (i.e., the board) may transfer to any one of its members " … the exercise of part or all of the powers vested in it." That must include the power to make decisions about distributions.
ii) The conclusion is reinforced by consideration of the relevant provision of the PGR, Article 181, which provides (in effect) for the principle of collective management by a foundation's board, unless "the articles of association … specify otherwise." Here, they do. In my view, the terms of Article 181 are quite inconsistent with the idea that there is any inhibition in principle as regards the delegation of powers by a foundation board to an individual member, including as regards the making of decisions about distributions of foundation assets.
iii) Finally, as Dr Bösch explained, Article 561 of the old PGR, and Article 552(28) of the new PGR, allow the founder to institute a separate foundation organ – aside from the board – to determine distributions. This again is consistent with the idea that there is no overriding or mandatory provision of Liechtenstein law to the effect that decisions about distributions are exclusively the domain of the foundation board acting as a collective, and therefore cannot be delegated to any individual board member.
"The failure to document the business activities and to obtain formal resolutions from the board of trustees when selling assets of the foundation would have been grounds for his removal from office."
"The trustees … do not have any of the foundation's business documents. They are not even aware of the foundation's bank account number. Despite requests to do so, Respondent no. 2 [Me Assaly] failed to relinquish any of the business documents to the other trustees."
"Costs are awarded on the basis of Art. 78 of the Liechtenstein Law on Non-Contentious Proceedings (Ausserstreitgesetz): the Applicants' request for release of the business documents is upheld. Likewise, their application for the removal of Respondent no. 2 would have been accepted as his failure to release business documentation as a basis for the exercise of joint management rights or, at least, for efficient monitoring of the activities of the trustee with de facto management rights constitutes a breach of duty. The Applicants disclosed their costs correctly and in good time."
"Under Art 182 PGR trustees must manage the foundation with the appropriate standard of care; specifically, the must observe the principles of prudent and conscientious business management and representation. If two trustees allow the third one to conduct the foundation's business on his own in the absence of any authorisation under the statutes or a resolution, this puts them in breach of their duties of collective management. Even if (de facto) management duties are lawfully transferred to one of several trustees, the other trustees are still obliged to monitor the trustee to whom such powers have been transferred effectively (LES 2013, 73). It follows from this that the trustees – particularly [Prince Mohammed] – are under an obligation to participate in the management of the foundation if they do not want to be in breach of their duties. By the same token, it also means that he must concern himself with the corresponding business documents and take appropriate measures to obtain them of necessary. [Me Assaly] was under an obligation to document the foundation's business and to duly notify the other trustees of his activities so that they were also able to comply with their duties. This was neglected in the present case. The late [Me Assaly] did not even consider it necessary to obtain formal resolutions from the board of trustees for his activities in the present case. The failure to document the business activities and to obtain formal resolutions from the board of trustees when selling assets of the foundation would have been grounds for his removal from office."
" … the Respondents must first in principle be granted that in internal relationships with a multi-level Foundation Board the principle of joint management applies … regarding which the former member of the Foundation Board Faisal Assaly flouted …".
Summary
Representative Authority/Ostensible Authority
The Argument based on the law of Liechtenstein
"Article 187: Power of attorney of the governing bodies and representatives
(1) The governing bodies as well as the other persons appointed for the entire business management and representation (representative bodies) shall be authorised by law vis-à-vis bona fide third parties to conclude all transactions for the legal person. This is subject to the provisions of law and the articles of association regarding the manner in which representation is exercised.
(2) [Not relevant]
(3) In the relationship between the representative bodies and the legal person, the representative bodies are obliged to comply with the restrictions imposed by the articles of association or corresponding resolutions of the competent bodies imposed by the articles of association or corresponding resolutions of the competent bodies within the framework of legislative provisions.
(4) [Not relevant]
(5) The power of representation of the persons authorised to act shall be based on the power of attorney granted to them; in case of doubt, it shall extend to all legal acts which the execution of such transactions customarily entails.
Article 187a: Limitations of the representation effect
(1) The legal person shall not be bound by acts of representative bodies which exceed the powers which are or may be assigned to these bodies by law.
(2) The legal person shall not be bound by acts of representative bodies which exceed the scope of the object of the company if the legal person proves that the third party was aware or should have been aware under the circumstances that the object of the company was exceeded by the act. Disclosure of the articles of association and corresponding resolutions of the competent bodies shall not be sufficient as evidence.
(3) If the representative body exceeds its powers internally defined by the articles of association or by resolutions of the competent bodies, the legal person shall not be bound by such actions if it proves that the third party was aware or should have been aware under the circumstances that the internally defined powers were exceeded by the act."
i) Art 187a is intended to deal with the situation in which a "representative body" of a "legal person" – a "representative body" including for example a board or council member – acts in a manner which is either inconsistent with the objects of the legal person or in excess of his powers under its constitution. The effect is that the legal person will still be bound by such acts, unless it can show – the burden being on the legal person for these purposes – that the relevant third party dealing with the "representative body" was aware or should have been aware that there was an issue.
ii) Liechtenstein law makes no distinction, in a case where there is such an issue but the burden of proof is not discharged, between the actual authority of the "representative body" or what English law would call his ostensible authority. The legal person is simply regarded as being bound because, in the circumstances, the acts of the "representative body" are regarded as having that effect in law – he is said to have representative authority.
iii) Thus, says the Princess, Me Assaly should be regarded as having bound the Foundation by his acts, because whatever shortcomings there were as regards the Foundation's purpose or his internal competencies, on the facts he had the appropriate representative authority.
The Argument based on English law
Discussion and Analysis
"… a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract."
"The doctrine can also apply in respect of transfers of property, and sometimes in other contexts as well, including in a limited way in tort and the giving and receiving of notices. However, subject to true estoppel and restitutionary defences, the recipient of a gift from an agent purportedly on behalf of a principal needs to prove actual authority in the agent, not apparent."
"A principal is bound by dispositions of property made by an agent within the scope of such agent's actual authority or which are ratified, and, where for value, within the scope of the agent's apparent authority."
"Where the disposition is made by the agent and received by the donee as a gift, the broad concept of apparent authority does not operate to protect the done. In such cases, while a true representation by the principal of entitlement in the agent to make a gift that is actually relied upon by the donee might suffice to defeat the principal's ownership, the weak form of estoppel that lies behind apparent authority would not. In particular, the reliance element within apparent authority is nominal where there is a contract, but could not be allowed to be nominal where the third party has given no value … ".
Some points about ostensible authority (and on the facts)
i) The Foundation's case was that the Princess was on notice of matters serving to limit the scope of Me Assaly's authority stemming from two sources. The argument was based primarily on the knowledge and state of mind of Mr Davies.
ii) The first source concerns knowledge of the Foundation's purpose – i.e., knowledge that the purpose included the possibility of distributions to the King's heirs only in accordance with their Shari'a shares or perhaps in equal shares. Of course I have rejected that view of the Foundation's purpose, but even if I am wrong on that, it seems to me that logically any suspicion or even knowledge about it on the part of Mr Davies or indeed anyone else would be irrelevant to the question whether there was a valid transfer of the legal title to Kenstead Hall under English law. I think that follows given my conclusion about s.26 LRA 2002. Any question of knowledge or suspicion concerning the purpose of the Foundation is obviously a function of a limitation on the right of the registered owner to exercise its usual "owner's powers", and as such, the transferee takes legal title free of it unless the limitation appears on the register.
iii) The second source concerns knowledge of limitations on the competency of Me Assaly as a matter of the internal management and organisation of the Foundation. Again, I have already expressed the view that there were no such limitations, on a proper construction of the Articles, and so there was nothing for Mr Davies to be on notice of. If I am wrong about that, however, and if the Foundation is correct that approval of the wider board was needed, then I would say that the Princess (via Mr Davies and perhaps otherwise) was on notice of matters which sufficiently called into question the extent of Me Assaly's authority, because Mr Davies was aware that the Foundation had a board, that Prince Mohammed was on it, and that there was at least a serious question about whether Prince Mohammed consented to the transfer, because he was also a key member of the Council of Heirs, which had been asked to confirm its position and had not done so.
Summary and Conclusion on the Foundation's Primary Case
i) Section 26 LRA 2002 precludes any complaint that Me Assaly was acting in a manner contrary to the Foundation's purpose, because any such limitation was not reflected in a restriction on the register (see [156] et seq. above).
ii) In any event, my opinion is that in effecting the transfer of Kenstead Hall, Me Assaly did not act contrary to the purpose of the Foundation (see [169] et seq. above).
iii) Neither do I consider that Me Assaly acted in excess of his internally specified competencies, because he was competent acting alone both to decide to implement a regulation made by King Fahd (to the extent such a regulation allowed space for the exercise of any residual discretion), and actually to do so – in the present case by executing the TR1 (see [195] et seq. above).
iv) If those points are wrong then (broadly) I do not consider that any issue arising from Me Assaly's lack of authority can be addressed by reference to Article 187a of the PGR, because the law which applies to such issues is English law. Under English law, although s.26 LRA 2002 would serve to validate any disposition of the legal title to Kenstead Hall made contrary to the purpose of the Foundation, it would not serve to validate any disposition made by Me Assaly in excess of his internal competencies as a member of the Foundation's board or as a delegee of its powers. Neither would the English law doctrine of ostensible authority be available on the facts, given that the transfer of Kenstead Hall was a voluntary disposition effectively by way of gift.
The Foundation's Secondary and Tertiary Claims
The Foundation's Claims
Secondary Claims
i) A claim founded on the principle that a gratuitous disposition of property which involves a breach of fiduciary duty is liable to be rescinded without any requirement to show wrongdoing on the part of the donee: see, e.g. Baron v Willis [1900] 2 Ch at 130-137, and Willis v. Baron [1902] AC at 276-278, 280-282. Here, it is said that Me Assaly, in effecting the transfer of Kenstead Hall, acted in breach of duties which are properly characterised as fiduciary.
ii) A claim based on the principle that a gratuitous disposition may be set aside where the donor is acting under a mistake, provided the mistake is of a sufficiently serious character that it would be unjust for the donee to retain the property received: Pitt v. Holt [2013] UKSC 26, [2013] 2 AC 108, at 103-142. Here, it is said that in effecting the transfer of Kenstead Hall, Me Assaly was acting under such a mistake, in believing that he was entitled or obliged to transfer Kenstead Hall to the Princess, when in fact he was not so entitled or obliged.
Tertiary claims
iii) A claim in unjust enrichment, arising as a result of the Princess having been enriched by the receipt of Kenstead Hall at the expense of the Foundation, in circumstances which render the retention of Kenstead Hall unjust. Such circumstances are said to be that the transfer arose as a result of Me Assaly's breaches of duty and/or lack of authority and/or mistake as to what he was entitled or obliged to do, each of which factors would constitute an unjust factor in the relevant sense: see, e.g., Moses v. Moses [2022] UKPC 42 at [68], Refco Limited v. Varsani [2012] EWHC 2168 (Ch) at [85]-[90] and Hampton Capital Limited [2015] EWHC 1905 (Ch) at [24]-[30].
iv) A claim in damages for knowing receipt, arising on the basis that the transfer of Kenstead Hall involved a breach of (in effect) fiduciary duty by Me Assaly (as in (i) above), and the retention of Kenstead Hall by the Princess would be unconscionable now that she knows (even if she did not know it before) that the asset received by her is traceable to a breach of fiduciary duty: see, e.g., Agip (Africa) Ltd v. Jackson [1990] 1 Ch 265, at 291G.
The Princess's Arguments
Choice of Law
"It may be necessary for a person to demonstrate that the assets received by the assets received by the defendant are the claimant's property. If the question is whether the claimant was originally the owner of that property, or whether his equitable interest is defeated by, for example, a bone fide purchaser for value without notice, the claim is one of property law."
"Where the Rome II Regulation applies, however, there appears to be no basis for the court routinely to 'translate' foreign duties into fiduciary duties and it should apply the lex causae directly."
Land Registration Act 2002
i) I think it correct to characterise the equitable interests contemplated by claims (i), (ii) and (iv) as proprietary interests said to stand in priority to the legal title transferred by the Princess. As regards the claim for knowing receipt (claim (iv)), that conclusion would seem to me consistent with Newey LJ's statement in the Byers case at [75], that " … it makes sense to think of a knowing recipient owing such duties [i.e., custodial duties – see above at [289]] in circumstances where the property is subject to an interest having priority to the recipient's" (my emphasis). I do not see why logically claims (i) and (ii) should be any different.
ii) To my mind, all three claims therefore assume a subsisting equity on the part of the Foundation, and thus an equitable interest at the point of transfer which stands in priority to the interest acquired by the Princess, and which in the case of claims (i) and (ii) entitles it to unwind the transfer, and in the case of claim (iv) entitles it to damages corresponding to the value of the interest transferred.
iii) Priorities are dealt with not in s. 26, but in ss. 28-29 LRA 2002. Leaving aside the special category of overriding interests, the broad scheme of those sections, as I understand it, is that a prior interest in registered land existing before a relevant transfer is protected if shown on the register. The transferee will then take subject to it. But if the prior interest is not shown on the register, and if the transfer is made "for valuable consideration" (see s. 29(1)), then it is postponed (i.e., stands behind) the new interest created as a result of the transfer.
iv) The upshot, it seems to me, is that an equitable interest in registered land which would otherwise subsist will effectively be lost on transfer if not registered and even if the transferee is on notice of it, provided the transfer is made for valuable consideration. But if it is not made for valuable consideration, then the original order of priorities remains, and the transferee cannot resist a claim based on the prior interest by relying on s. 26.
v) In Ali v. Dinc & Ors [2020] EWHC 3055, Dame Sarah Worthington (Sitting as a Deputy High Court Judge) said at [313] that " … in my view s. 26 is directed at protecting the disponee's title (i.e., his legal title), not its priority". I respectfully agree, and so I think the Princess is wrong to say that, come what may, she acquired an unimpeachable title to Kenstead Hall which cannot be subject to attack, whatever the circumstances in which it came about and whatever breaches of duty were involved in making it happen.
Conclusions on the Foundation's Secondary and Tertiary Claims
i) Claim (i) (voluntary disposal in breach of fiduciary duty): In my view this fails because there was no breach by Me Assaly of any duty which is properly characterised as fiduciary for the purposes of English law. At most, there was a general failure in terms of record keeping and provision of information (see [235] above). But there was no improper disposal of the Foundation's assets either in contravention of the Foundation's purpose or in excess of Me Assaly's internal competencies.
ii) Claim (ii) (mistake): In my view this fails for similar reasons. There was no mistake by Me Assaly about either his entitlement or obligation to transfer Kenstead Hall. He was both entitled and obliged to act as he did. Consequently, there was no mistake of sufficient seriousness to create an equity entitling the Foundation to rescind the transfer of Kenstead Hall to the Princess.
iii) Claim (iii) (unjust enrichment): In my view this fails also. There was certainly enrichment, but it was not unjust.
iv) Claim (iv) (damages for knowing receipt): In my view this fails for essentially the same reasons as claim (i). There was no breach by Me Assaly of any obligation properly classifiable as fiduciary under English law.
Conclusion