London High Court determines jurisdiction in succession dispute

In Winkler and Another v Shamoon and Others [2016] EWHC 217, the London High Court held that it did not have jurisdiction to determine a claim to entitlement to certain shares held by a deceased Israeli businessman. In its decision, the Court indicated that exclusions to the Brussels Regulation (which provides a set of rules determining jurisdiction over disputes in EU member states) should be narrowly interpreted. In this case; however, an exclusion for "will and succession" cases applied even though the Claimant's claim was presented in trust and proprietary estoppel. The case is also a reminder that a defendant will not be taken to have submitted to the English Court's jurisdiction by taking procedural steps as long as all such steps are expressly stated to be taken without submitting to the jurisdiction.

Facts

The case arose from the death of a successful Israeli businessman who left a large and valuable estate worth approximately US$1billion. The deceased's widow and daughter (the First and Second Defendants respectively) were the residuary legatees under the deceased's will (which was being administered in Israel). The First Claimant, Mr Winkler, was a business colleague of the deceased and brought proceedings claiming that the deceased's estate included shares which the deceased had agreed to transfer to him and his company (the Second Claimant).

After the proceedings had been commenced, the Defendants took a number of procedural steps including applying to strike out the claim and applying to set aside a judgment in default.

The following applications were then made:

1. The Defendants applied for an order that the English Court did not have jurisdiction because the claims related to succession which was expressly excluded from the scope of Regulation (EU) no. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the "Brussels Regulation"). The Brussels Regulation applies to EU member states and provides rules determining which court has jurisdiction over a dispute (as well as rules regarding enforcement). Subject to various exceptions, the Brussels Regulation provides that a defendant should be sued in his country of domicile and it was the Claimants' case that this was England (although the First Defendant argued that her country of domicile was actually Israel).
2. If the Defendants were correct and the Brussels Regulation did not apply, whether the English Court had jurisdiction fell to be determined by English common law rules. Here, the Defendants argued that the English Court did not have jurisdiction and in any event, England was not the natural forum for the claim.
3. The Claimants claimed that the application should be dismissed. However, if the Court found that the Brussels Regulation was excluded (and so did not bring the claim within its jurisdiction), the Claimants sought permission to serve the First Defendant outside England. This would give jurisdiction under the common law rules which provides that the English Court has jurisdiction if the defendants have been served with proceedings (although this can later be challenged on the basis that another forum is more appropriate).

The parties also asked the Court to decide whether the Defendants had submitted to the English Court's jurisdiction as this might establish jurisdiction under common law rules. The Claimants argued the Defendants had submitted, by making the applications detailed above.

Decision

Firstly, in relation to the submission point, the Court held that the Defendants had not submitted to the English Court's jurisdiction. This was because, although they had taken a number of procedural steps, they had at every step made it clear that they were not submitting to the English Court's jurisdiction.

As to the issue of whether the claim fell within the exclusion in Article 1(2)(a) of the Brussels Regulation, which provides that it shall not apply to "wills and succession" matters, the Court commented that exclusions should generally be interpreted narrowly but that in this case, the exclusion applied. This was despite the fact that the Claimants had presented their case as claims for a beneficial interest under trust or a proprietary estoppel rather than a dispute as to the will. However, the Court held that, in reality, the object of the proceedings was to frustrate the claims of the First and Second Defendants to succeed to the shares under the terms of the will. Therefore, it was a succession dispute and fell within the exclusion.

Further, the First and Second Defendants were not then the owners of the relevant shares which were currently within the control of the administrator. The Claimants accepted that if the proceedings had been brought against the administrator, the succession exclusion would apply. However, the Court held that bringing the claim against the Defendants who were not owners of the relevant shares was an "obvious device, which does not alter the substance of the claim".

Since the Court held that the Brussels Regulation did not apply, it then considered the second issue of whether the English Court had jurisdiction under English common law rules. Here, the rules require a properly constituted representative of the estate before the Court for it to have jurisdiction (Rule 146 of Dicey, Morris & Collins, The Conflict of Laws, 15th Edition). This was not met because the administrator had not been made a party to the claim. In any event, the Court held that Israel was the more appropriate forum. This was because the estate was situated and being administered there; all the main witnesses lived in Israel; and the alleged promises which gave rise to the claim had been made in Israel. Further, numerous other claims against the estate, including claims by non-Israel claimants, had been brought before the Israeli courts and the administrator was also waiting for the Israeli Family Court to determine its application as to whether the disputed shares formed part of the estate. The Court also held that the First Defendant, on the facts, was domiciled in Israel. Therefore, the only connection the dispute had with England was the Second Defendant who was domiciled there and this was not sufficient to establish jurisdiction under the common law rules.

As for the Claimants' application to serve the First Defendant outside the jurisdiction, this failed on the facts. The Court held that the conditions in CPR 6.37 had not been met: there was no real issue between the Claimants and the First and Second Defendants in that there was no realistic prospect of the claim succeeding; and even if there had been a real issue, it would not have been reasonable for the English Court to try that issue.

Comments

The case demonstrates that the Court is prepared to take a pragmatic approach to determining whether an exclusion to the Brussels Regulation applies. Here, the Court held that the principal subject matter of the claim was succession even though the Claimant's case had been presented on trust and proprietary estoppel grounds. It therefore appears that attempts to re-characterise will/succession disputes as other forms of action through careful pleading or choice of defendants will not succeed.

The Court's comments that exclusions to the Brussels Regulation should be narrowly interpreted is also worth noting. It suggests that, unless a case clearly falls within one of the exclusions, the Court will be slow to find that the Brussels Regulation does not apply. Given the prescriptive nature of the Brussels Regulation, an approach which furthers its application could help achieve greater certainty and predictability for parties in determining which court has jurisdiction. However, the Court did not provide further guidance on how this narrow interpretation might apply and how this reconciles with the more pragmatic approach the Court took in holding that the succession exclusion did apply in this case.  Therefore, defining the scope of the exclusions may be revisited in future cases.

The case is also a reminder that defendants wishing to challenge the Court's jurisdiction must ensure that this is expressly stated when taking all procedural steps.