NABB Brothers Ltd v Lloyds Bank International (Guernsey) Ltd

This is an application to set aside an order for service out of the jurisdiction in proceedings commenced by NABB Brothers Ltd (“the claimant”), which was incorporated in Ghana in 1969, and carries on business as an importer and exporter of rice, foodstuffs, biscuits, coffee and agricultural products, and is also involved in estate development.

In about 1959 Mr Kwabena Ntem, Mr Daniel Kwabena Brifo, Mr Wilson Kofi Brifo, and Mr Joseph Ernest Kwabena Ansah (“Mr Ansah”) formed a partnership known as NABB Brothers. The partnership was based in Kumasi in Ghana. In 1969 the partners took the view that the partnership should become an incorporated limited company, and NABB Brothers Ltd was incorporated in September 1969. Mr Ansah became the Managing Director, and remained so until his death in 2000.

Mr Kwabena Ntem, Mr Daniel Kwabena Brifo and Mr Wilson Kofi Brifo are brothers. Mr. Ansah was a cousin of the brothers. Mr Ansah died in London on July 6, 2000.

The defendant is a professional trustee. On May 16, 1997 it changed its name to Lloyds Private Banking (Guernsey) Ltd and on September 24, 1999 there was a further change of name to Lloyds TSB Offshore Private Banking (Guernsey) Ltd. Pursuant to the Migration of Companies Ordinance 1997 and Companies (Jersey) Law 1991, the defendant became a company under the Companies (Jersey) Law 1991, and ceased to be a company under Guernsey law with effect from January 1, 2004. Trusts administered by the defendant have been transferred to Hill Samuel Offshore Trust Company Ltd (“Hill Samuel”) under Jersey law. On March 5, 2004 the winding-up of the defendant commenced, when a special resolution of the defendant was passed pursuant to Article 146 of the Companies (Jersey) Law 1991. But it will not be dissolved pending the outcome of this claim, and it has been agreed that nothing turns in this action on the transfer. Some of the correspondence in this matter has been conducted by Hill Samuel, but for convenience I shall refer to it as correspondence by the defendant.

On April 20, 1994 Mr Ansah established a settlement called the Tubuoh Trust (“the Trust”), with the defendant as trustee. By clause 2 the settlement was established under Guernsey law, which was to be “the forum for the administration thereof”. The Trust was a discretionary trust, and the beneficiaries were Mr Ansah, his wife (Vida Abrokwah), Sarah Osei, the children and remoter issue of Mr Ansah, the sisters and sisters-in-law of Mr Ansah and their issue, Isaac Kojo Ansah, John Kwaku Ansah, the cousins of Mr Ansah, and the Methodist Church at Atonsu.

According to the claimant, in order to facilitate international and/or other transactions, Mr Ansah made use of bank accounts which were held in his own name with Lloyds Bank plc, now called Lloyds Bank TSB plc (“Lloyds Bank”) at its branch at 32 Oxford Street, London, W1A 2LD. Funds were transferred to and from a sterling account number and a dollar account for the purposes of conducting the international business of the claimant.

Mr Ansah would use the accounts to establish a letter of credit in favour of a supplier of goods to the claimant. The supplier would confirm its willingness to provide goods which had been agreed previously between the supplier and Mr Ansah acting on behalf of the claimant. The agreement by the supplier would facilitate the transfer of funds to the supplier after the goods were sold to the claimant. On the date when the letter of credit was due to take effect payment would be made by Lloyds Bank to the supplier debiting the relevant bank account.

But at the same time Mr Ansah would make arrangements for the claimant to transfer to the supplier through local banks the amount invoiced by the supplier. As a result the supplier would have received two payments in relation to the same goods. The supplier would then refund one of the payments by transferring the refund to one of the accounts at Lloyds Bank in the name of Mr Ansah.

No explanation is given in the evidence as to why the supplier should be paid twice, and in argument Miss Bailey for the claimant suggested that it was to give comfort to the supplier. But it is obvious that in international transactions sufficient comfort is given by the opening of a letter of credit. If there were such double payments, in the absence of further evidence it is a reasonable inference that they were a device to extract money from Ghana in breach of exchange control regulations.

The claim is that on various occasions between September 19, 1969 and July 6, 2000 Mr Ansah (without the knowledge of the claimant) retained the sums which were refunded to the claimant through the Lloyds Bank accounts. It is also alleged that other sums which were transferred to the Lloyds Bank accounts for business purposes were retained by Mr Ansah. Mr Ansah never accounted to the claimant for the funds, or for interest on the funds.

The claimant says that Mr Ansah was in breach of fiduciary duty, and in effect misappropriated the claimant’s funds, and so defrauded the claimant.

According to the particulars of claim, the liability of the defendant is said to arise as follows. First, the claimant claims the sums being held in the Trust or in the alternative such other sum “as money had and received by [Mr Ansah] and by reason thereof by the Defendant [sic] servants agents or successors in title to the use of the Claimant.” Second, the claimant seeks from the defendant or its successors in title “restitution in relation to the monies which have been redirected into the Tubuoh Trust in so far as the same is possible.” Third, it is said that Mr Ansah wrongfully deprived the claimant of the use and possession of the sums deposited in the Trust and has converted the sums therein to his own use, and “the Defendant [sic] servants agents or successors in title have failed to return the said sums to the Claimant as required or at all notwithstanding being given ample opportunity to do so.” Fourth, it is said that the defendant holds the sums in the Trust on trust for the claimant.

In paragraph 41 of the particulars of claim, the claimant, averred, subject to the production of a valid trust instrument, that the Trust was invalid and had not been set up properly or at all.

The prayer claims: (a) a declaration that Mr Ansah and thereby the defendant or its successors in title are liable to account to the claimant for such sums in the Trust as the court thinks fit on the ground of breach of fiduciary duty and/or breach of trust and/or restitution and/or conversion and/or misrepresentation by Mr Ansah; (b) an order that the defendant or its successors in title do pay to the claimant such sums as the court thinks fit; (c) a declaration that the claimant is entitled to trace and/or follow such sums transferred into the Trust and the claimant claims equitable title to the funds sums and/or assets within the Trust and that the defendant or its successors in title hold them or such other assets on trust for the claimant; (d) an order that the defendant’s servants agents or successors in title do deliver up the funds sums and/or assets to the claimant.

The allegations in the particulars of claim and the evidence in support of the application to serve out of the jurisdiction are these:

The claimant also says that the statements generated in connection with a fixed deposit account 71483020 placed with the defendant by the Trust show substantial deposits, which in several cases it says can be identified as coming from the Lloyds Bank dollar account: (1) $807,256 in May/June 1994; (2) $179,000 at the end of June 1994; (3) $988,826.21 in June/July 1994; (4) $58,000 in July 1994; (5) $100,000 in July 1994; (6) $1,150,088.25 in July/August 1994; (7) $677,000 in August 1994; (8) $1,831,897.69 in August/September 1994; (9) $400,000 in September 1994 (particulars of claim, para 20).

The statement of truth in the particulars of claim was made by Mr Emmanuel Ansah, an executive director of the claimant. His witness statement in support of the application for service out of the jurisdiction repeated the allegations, but without exhibiting any documents to support them. Those documents were exhibited to a witness statement of the same date in support of an application against the defendants and Lloyds Bank to compel disclosure of Mr Ansah’s bank statements.

The documents exhibited consisted of: (1) some pages from the dollar account between February and October 1994; (2) a page from the sterling account showing entries between April and July 1994; (3) statements of fixed deposits of an account of Lloyds Bank “re J E K Ansah” with the defendant under account number 71483020.

Those documents showed the following:

The evidence of the defendant is that the fixed deposit account is an account held in the name of the Lloyds Bank Oxford Street branch with Lloyds Bank Finance (Guernsey) Ltd, which was used to place money from Mr Ansah’s dollar current account on deposit in Guernsey. The statements produced by the claimant are not statements which relate to an account in the name of the Trust, and have no connection with the Trust, which has a completely separate bank account with a separate number.

The defendant says that there were only four deposits of funds into the Trust’s account from Mr Ansah’s London account: (1) the initial trust fund of £100 on April 26, 1994; (2) £5,943.64 on April 26, 1994; (3) £700,553.77 on May 3, 1994; and (4) £310,000 on June 27, 1997. Following Mr Ansah’s death, the defendant paid Lloyds Bank £11,461 and US$203,694 in September 2001 under guarantees given by the Trust in respect of Mr Ansah’s liability to Lloyds Bank.

As a result of this evidence (which was not challenged) the only payment which could form part of the claim as pleaded was the transfer of about £700,000 on May 3, 1994.

As I have said, on April 26, 1994 £708,738.01 was received into the Lloyds Bank sterling account. The bank statement shows the receipt as “TRANSFER 72/11 ISY/MMD RETAIL DEPOSIT REF 579.” The claimant’s original case was that this was a payment by a supplier of the claimant.

But in a note in reply to questions put by me, the claimant now says that the reference “TSY/MMD Retail” appearing on the bank statement relates to the repayment of £700,000 plus interest from a Treasury transaction of Lloyds Bank on the Money Market Division. The claimant also says that the additional reference numbers appearing on the bank statement refer to the reference number of the specific transaction, details of which the claimant does not have access to. Mr Ansah placed the £700,000 in a fixed sterling deposit account for a fixed period of time on a date unknown to the claimant. The repayment of the deposit plus interest is the sum which appears on the bank statement on page 73 in the sum of £708,738.01. In the absence of additional bank statements showing the date when the £700,000 was deposited in the fixed deposit account originally, the claimant is not able to identify which suppliers’ and/or supplier’s monies sourced the original deposit of the £700,000 into the fixed sterling deposit transaction which led to the said repayment of the £708,738.01 in circumstances where the claimant was accustomed to dealing with transactions in the region of this sum.

A fourth witness statement by Mr Emmanuel Ansah exhibits documents which are said to show (a) that payments were made to the Lloyds Bank account by suppliers; (b) that some of these payments were placed on deposit; (c) that double payments were made to suppliers, and where the suppliers have sought to repay one of the sums.

The documents show that payments to the Lloyds Bank accounts were made by companies such as Quaker Oats BV (Netherlands), Borden Co Ltd (Ireland), Oxford Biscuits A/S, and Sandoz Nutrition, mainly in the period 1992 to 1993, but with some documents in 1996-1997 and 1999. There are also a number of documents showing payments coming from Nigerian financial institutions to Independent Commodity Supplies Ltd, of Marlow, Bucks, where that company (which would seem to be a commodity broker, but there is no evidence) notifies Mr Ansah that it has received funds, and at least in one case ($400,000 on June 1, 1993) has transferred half to Mr Ansah’s account at Lloyds Bank and has retained the other half.

The claim was first put forward in correspondence from the claimant’s Ghanaian lawyers which was not before the court. The correspondence was conducted from July 2003 by the claimant’s London solicitors, who made on July 11, 2003 an unparticularised claim that Mr Ansah had misappropriated funds belonging to the claimant. The defendant replied on August 7, 2003 to ask for what it described as “hard evidence”. The claimant’s solicitors replied at length on November 3, 2003 to say that large sums of money belonging to the claimant were channelled through Mr Ansah’s private accounts, and that these sums were transferred to the defendant. On January 13, 2004 the defendant replied to say that the letter did not contain credible evidence which would stand up to cross-examination, and that in view of the paucity of evidence presented by the claimant, the claimant’s best course of action might be to pursue the litigation which it had threatened.

The claim form was issued on July 13, 2004, pursuant to an order of Master Bowman of July 6, 2004, which was made following a without notice application supported by a witness statement of Mr Emmanuel Ansah, which relied on Part 6.20(8)(b) (tort), (14) (constructive trust) and (15) (restitution). The witness statement exhibited the draft particulars of claim, and repeated many of the same allegations. Paragraph 38 of the witness statement said that while the defendant was based in Guernsey, the transactions which were being concluded revolved around the bank accounts which were held with Lloyds Bank in Oxford Street. The witness statement went on:

“I submit that by reason thereof that the acts of which the Applicant makes complaint occurred within the jurisdiction, as the act of transferring funds took place by the Deceased’s servant or agent bankers who were based at Lloyds TSB Bank Plc situated at 32 Oxford Street, London, England. In the premises the Applicant is able to satisfy Part 6.20(8)(b), Part 6.20(14) and Part 6.20(15) of the Civil Procedure Rules 1998.”

The witness statement repeated the detailed allegations about the transfers from the Lloyds Bank accounts to the account of the Trust in Guernsey, but did not exhibit any of the bank statements. Those bank statements were exhibited to a witness statement in support of the claimant for non-party disclosure from Lloyds Bank pursuant to CPR Rule 31.17.

On the discretionary aspects, it was said that it might become necessary to gather information from the British suppliers, and to do so would be more difficult were the matter to be tried in Ghana or in Guernsey. Mr Ansah said that he travelled to London from time to time, but the suppliers did not travel to Ghana with the same frequency and he had never been to Guernsey. He said that the claimant was seeking an order for non-party disclosure against Lloyds Bank in respect of the bank statements, and it would be sensible to hold together all the different strands of the case which concerned the release of the funds from the Trust.

On August 12, 2004 the defendant applied for an order that the court had no jurisdiction to try the action, alternatively that it should not exercise any jurisdiction which it might have to try the action, and for an order setting aside the claim form and service. It relied on a witness statement by Mr Acton, a director, which in the material respects was brief, and mainly concerned with a point which the claimant no longer presses, namely the averment that the Trust is invalid. He said:

“At its simplest, the claim is an attack on the Tubuoh Trust, dressed up as a claim framed alternatively as one made in tort, against the defendant as constructive trustee and by way of restitution.

Clause 2 of the Trust Deed establishes the settlement under the laws of the island of Guernsey ‘which said island shall be the forum for the administration thereof’.

Paragraph 41 of the Particulars of Claim contains a claim by the Claimant that the Tubuoh Trust is invalid and has not been set up properly or at all. The Defendant considers that that issue is best resolved by the Guernsey courts, which are familiar with how discretionary trusts are set up on the island, and by applying Guernsey law as the proper law of the Trust…”

This matter first came before the Court on October 4, 2004. Following that hearing, questions were addressed to both parties by me in a note on October 14, 2004. A further short hearing took place on October 19, 2004. A further note from me on October 29, 2004 drew the parties’ attention to some further authorities (beyond those relied upon by the parties and cited to me). Further submissions were tendered by the defendant in response to that note. The claimant indicated a wish to reply to those submissions, and as a result, I made a ruling on November 11, 2004, in which I required further material, and asked the parties to arrange a further hearing in January 2005, which in the event the parties did not arrange until February 28, 2005.

The defendant argues as follows. First, the emergence of the evidence shows that the application to Master Bowman was made on the basis of incomplete or inaccurate information, and his order should be set aside on the basis of material non-disclosure.

There is no serious issue to be tried on the merits. No constructive trusteeship arises as against a fiduciary in respect of money held by that fiduciary in an account lawfully mixed with his personal funds: Henry v Hammond [1913] 2 K.B. 515; Re Bond Worth Ltd [1980] Ch. 228; Neste Oy v Lloyds Bank plc [1983] 2 Lloyd’s Rep 658; R v Clowes (No. 2) [1994] 2 All ER 316; Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400.

The constructive trusteeship as against the defendant would have to be a “knowing receipt” case. The claim under this head would be fundamentally dependent upon the defendant acquiring knowledge that the moneys received into the Trust belonged to the claimant. No such knowledge is, or could be, alleged. But the defendant accepts that it is sufficiently arguable for the purposes of CPR Rule 6.20(14) that notification of a claim some time after receipt of funds may still convert an innocent volunteer into someone liable to account as if it were a constructive trustee.

The defendant concedes that it is arguable that an equitable proprietary claim may be made in circumstances where neither constructive trust nor unjust enrichment have any role to play: Foskett v McKeown [2001] 1 AC 102. But neither CPR Rule 6.20(14) or (15) would apply to such a claim. English law does not recognise a restitutionary proprietary claim: Foskett v McKeown [2001] 1 AC 102, 119-120; Goff and Jones, Law of Restitution, 6^th ed 2002, para 2-007.

Even if a constructive trust could arise, there is no evidence to suggest that money standing to the credit of Mr Ansah’s account at any time was in fact the claimant’s money, and certainly not immediately preceding the transfers into the Trust account.

In any event, the last transfer into the Trust account was June 1997 and the claim form was not issued until July 13, 2004, some seven years later. Any claim against the defendant as constructive trustee (and any restitutionary claim against the defendant to account as if it were a constructive trustee) in respect of any of the transfers is time barred: Limitation Act 1980, section 21(3); Paragon Finance plc v D. B. Thakerar & Co [1999] 1 All E.R. 400.

On the question of the necessary territorial connection for the purposes of CPR Rule 6.20(14) and (15), the defendant argues that the relevant acts must take place in England. Here the relevant acts are the receipt of funds by the defendant, and the acquisition of knowledge by it through notice of the claim, and both took place in Guernsey.

On forum conveniens, the defendant says that the only connection with the jurisdiction is the fact that transfers into the Trust account were made from either of Mr Ansah’s personal accounts with Lloyds Bank in London. In any trial of the issues in this action, the evidence as to the transfers is hardly likely to be contested. Any conflict of evidence as to dates and amounts of transfers would be resolved by production of the Lloyds Bank statements. The claimant has not explained when any application for those bank statements by the personal representatives of Mr Ansah was made and (if it was made) by whom and when it was refused. An application by the personal representatives as successors in title to Mr Ansah to Lloyds Bank for production of the bank statements would have resulted in their production.

The claimant says that because the act of transfer of funds by Mr Ansah’s bankers, Lloyds Bank, took place from London, CPR Rule 6.20(14) (constructive trust) and (15) (restitution) are each satisfied. The tort provision of CPR Rule 6.20(8) is no longer relied upon. That is because no action lies for conversion in respect of dealings with money once it has passed into currency (Clerk & Lindsell, Torts, 18^th ed, 2000, para 14-40, and see Lipkin Gorman v Karpnael [1991] 2 AC 548, 563) and a mere equitable interest in property is not sufficient to allow an action in conversion: MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All E R 675.

The constructive trust provision of CPR Rule 6.20(14) is applicable because the defendant is liable for knowing receipt because it now has notice that the funds in the Trust account belong to the claimant: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437. CPR Rule 6.20(15) applies because the claimant also relies on a restitutionary claim. The fact that the monies were being held in the dollar and sterling accounts which may have held mixed funds does not preclude any finding of a constructive trusteeship: R v Clowes (No. 2) [1994] 2 All ER 316, CA.

The acts occurred within the jurisdiction, as the act of transferring funds took place by Mr Ansah’s agents, namely the staff of Lloyds Bank in London. England is the jurisdiction where Mr Ansah repeatedly broke the trust which existed between him and the claimant. The money belonging to the claimant was in London bank accounts, and England was where the breach of fiduciary relationship occurred by reason of the transfer out of the funds to the Trust.

On discretion, Ms Bailey submits on behalf of the claimant that the burden of proof that England is not a suitable forum rests upon the defendant and not upon the claimant at this stage. If the matter were heard in Guernsey, the claimant would have to instruct another firm of solicitors who are not familiar with the matter. The claimant’s solicitors have travelled to Ghana to meet the officers of the claimant. The inconvenience which will be experienced by the witnesses for the claimant will be far greater than the inconvenience for the defendant. The defendant’s witnesses will be able to travel to London and find somewhere to stay at no personal expense, but the claimant may seek to call a wide range of witnesses, include some of the suppliers, who are based in England. It will be far easier for the witnesses for the claimant to travel from Ghana to England and find accommodation in England, whether with friends or relatives, than to have to find hotel accommodation in Guernsey. She also says that the defendant is an international company with a team of lawyers in England, and the claimant is not in a similar position so it would be forced to instruct another legal team at additional expense. The claimant may need to contact its English suppliers in order to gather evidence, and this will be much easier to do if the matter were to remain within the jurisdiction. The provision in the trust deed that Guernsey law governs does not bind the claimant. The trust deed gives the defendant the power to bring and defend proceedings, and no action has been brought by beneficiaries against the defendant for the failure to release funds in the trust.

The defendant has not disclosed the bank statements relating to the Trust and, notwithstanding requests by the executors of the estate of Mr Ansah, Lloyds Bank has refused to disclose all the bank statements relating to the dollar and sterling accounts. In the absence of a full set of bank statements the claimant is not able to trace back every deposit which has been made into the Trust. That is not the fault of the claimant. The claimant has issued an application against Lloyds Bank for non-party disclosure in relation to these proceedings, which was due to be heard on November 23, 2004, before Master Bragge, and which has been adjourned pending the outcome of this matter. The executors wrote to Lloyds Bank in November 2004, enclosing a copy of the grant, and requesting accounts for the period from 1985 to 2000, and have not received a reply.

The defendant has been aware of the existence of a dispute since about 2000 and has not issued proceedings in England or Guernsey, and the claimant has spent considerable sums on legal fees in England trying to negotiate and thereafter in issuing the proceedings, and it is too late for the defendant to suggest that this is not the appropriate forum.

No specialist knowledge with regard to the operation of the Trust will be required and the dispute concerns whether the defendant is entitled to dissipate the funds in the Trust, or whether they belong properly to the claimant and should be returned. The argument by the defendant that the forum for the administration of the Trust is Guernsey does not take account of the fact that the dispute is not about the administration of the Trust but about Mr Ansah’s misapplication of the claimant’s funds. There is no longer any issue raised as to the validity of the Trust.

According to Mr Emmanuel Ansah’s evidence, the majority of the beneficiaries are supportive of the claim. The brothers, sisters, cousins, nephews and nieces of Mr Ansah were unanimous in their support. The only beneficiaries who had not been supportive were the sons and daughters of Mr Ansah and his wives. I was told at the hearing that there was only one son who was now not supporting the claim.

The defendant wrote to the beneficiaries on August 25, 2004 to notify them of developments and to seek their opinion as to the course of action which the trustees should follow. The defendant has said that it is not at liberty to disclose which beneficiaries have contacted it, and it is making efforts to complete its enquiries.

The Guernsey solicitors for the defendant say that the Guernsey court is the only court which could have jurisdiction to make a Beddoe (Re Beddoe [1893] 1 Ch 547) order. They say that there would be a problem if the defendant applied for and obtained a Beddoe order in Guernsey permitting it to expend trust monies defending the English action, and an English court ultimately decided that the money held by the Trust was in fact subject to the alleged constructive trust. If the proceedings were in Guernsey, then one court would be able to resolve the conflict between the duty of the defendant to use trust funds for the protection of the Trust and the claim by the claimant to have a prior right over the same funds. They do not know whether the English court would consider that it had jurisdiction to make a Beddoe order in favour of the Guernsey trustee of the Guernsey trust with all its assets in Guernsey. The trust deed expressly makes Guernsey the forum for the administration of the trust to avoid that kind of complication. The beneficiaries could have no jurisdictional objection to a Beddoe order made in Guernsey, because the trust deed permits it.

In January 2005 the defendant applied to the Guernsey court for directions. There are approximately 44 beneficiaries, of whom 16 had addresses and England, and 29 had addresses in Ghana or elsewhere. There was a hearing of the application on March 11, 2005, which has been adjourned. No beneficiary appeared.

CPR Rule 6.21(2A) provides that the court will not give permission for service out of the jurisdiction unless it is satisfied that England is the proper place to bring the claim. The claimant has to satisfy the court of three matters: first, that it has a cause of action against the defendant “with a reasonable prospect of success” (CPR Rule 6.21(1)(b)); second, that the case falls within one of the heads of CPR Rule 6.20; and third, that England is the appropriate forum.

On the first question, it was held in Seaconsar Far East Ltd v Bank Markazi Iran [1994] 1 AC 438 that the standard of proof which the claimant must satisfy in showing that it has a cause of action is whether, on the written evidence, there is a serious question to be tried, i.e., a substantial question of fact or law, or both, which the claimant bona fide desires to have tried. It has been held that the effect of the test under CPR Rule 6.21(1)(b) of a “reasonable prospect of success” is the same as that in Seaconsar (Ophthalmic Innovations International (UK) Ltd v Ophthalmic Innovations International Inc [2004] EWHC 2948 (Ch), para [39]) or in substance the same as the test used to determine whether a claimant has a “real prospect of succeeding” for the purposes of summary judgment under CPR Part 24: De Molestina v Ponton [2002] 1 Lloyd’s Rep 271; Swiss Reinsurance v United India [2002] EWHC 741 (Comm), [2004] ILPr 4.

On the second question, the standard to be applied when deciding whether the jurisdiction of the court had been sufficiently established under one or more of the heads of what is now CPR Rule 6.20 is that of good arguable case, which is a concept with some degree of flexibility depending upon the issue: Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547, at 558, per Waller LJ, approved [2002] 1 AC 1, at 10, per Lord Steyn.

On the third question, which goes to the discretion of the court, the claimant must show good reason why service on a foreign defendant should be permitted: Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50, 65-66, 72; Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460: “The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so”: at 481, per Lord Goff of Chieveley.

I take this aspect first. This case has given rise to some very elaborate arguments on the modern law of restitutionary remedies and their application to cases with a foreign element, but in my judgment the claimant has entirely failed to show one of the essential elements, namely that England is the appropriate forum, and the order of Master Bowman must in any event be set aside on that ground.

First, Miss Bailey originally submitted that the burden of showing that England is not a suitable forum rests upon the defendant. That submission was entirely contrary to authority: see Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50, 65-66, 72; Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, 481. Second, she says the witnesses will be officers or employees of the claimant and suppliers based in England, although none is identified. She says that the claimant may need to contact its English suppliers in order to gather evidence, and this will be much easier to do if the matter were to remain within the jurisdiction.

But she fails to identify any issues which had actually been raised to which this evidence will relate. I have not been given any information on the reasons for the opposition of those beneficiaries who are opposing the claimant’s claim. I was told by Miss Bailey that there was now only one such beneficiary, but the defendant says that it is unaware of any beneficiary being opposed. But the beneficiaries defined by clause 1(1) and Schedule 2 of the Trust Deed include remoter issue of Mr Ansah, and the issue of his sisters and sisters-in-law, and the reality of the matter is that the defendant has to seek directions from a court as to how to proceed, and in particular as to whether it will be directed to remain neutral, and give the opportunity for the claimant and any opposing beneficiaries to fight it out as between themselves: cf Alsop Wilkinson v Neary [1996] 1 WLR 1220.

If the action were brought in Guernsey, then the Guernsey court would not only be able to give directions to the trustee, but it would also be in a position to consider whether any of the beneficiaries should be parties to a claim by the claimant (and, if so, which), and how to protect the interest of minor and unborn beneficiaries. The natural place for those directions to be given is in the Guernsey court, to which the defendant has already made an application which is pending. The Trust Deed is governed by Guernsey law and is subject to Guernsey jurisdiction, and any opposing beneficiary, even one not appearing, would be bound by any determination of the Guernsey court.

Much was made of the fact that if the matter were heard in Guernsey, the claimant would have to instruct another firm of solicitors who are not familiar with the matter. It was also said that it will be far easier for the witnesses for the claimant to travel from Ghana to England and find accommodation in England, whether with friends or relatives, than to have to find hotel accommodation in Guernsey. I was told that the claimant is a substantial company with major trading interests and I regard these factors of very little weight.

Nor do I place any weight on the fact that the claimant has issued an application against Lloyds Bank for non-party disclosure in relation to these proceedings, which has been adjourned pending the outcome of this matter. Miss Bailey told me that the executors of Mr Ansah support the claim by the claimant, but have been unable to obtain the bank records from Lloyds Bank. Mr Flannery, who acts for the defendant, was instructed by Lloyds Bank to say that if properly appointed executors asked for bank records which still exist they would be produced. At the last hearing Miss Bailey produced a letter of request from the executors to Lloyds Bank (to which I have already referred) for the records to which she said there had been no response. This was produced without notice to the defendant’s legal team, which might otherwise have been able to take instructions from Lloyds Bank as to whether the letter had been received, and whether it was being dealt with. I have no reason to believe that the records will not be produced, as they obviously should be to a duly appointed personal representative, as Mr Flannery said they would.

I also consider that the factual matter was first presented to Master Bowman on a wholly inadequate basis, which would also have justified setting aside his order. It was said that in 1994 three substantial payments from suppliers were transferred into the Trust, and that in 1994 6 other payments were made from the Lloyds Bank accounts into the Trust. The impression given was that several million dollars was transferred into the Trust from the Lloyds Bank accounts.

Now the only live allegation relates to the transfer of £700,000 in April 1994. It is not suggested that this was directly derived from a supplier’s payments. There is no documentary evidence of any double payments to suppliers, but there are documents showing payments from suppliers, although not in 1994. There is no material to show that the suppliers have been asked about these payments. As I have said, the only obvious explanation for the double payments is exchange control evasion. My conclusion on this aspect would have been that (at least on the factual material presently before the court) there is not sufficient material to show that the claimant has reached the merits threshold.

The defendant also takes the point, as I have said, that on the claimant’s own case the money was not impressed with a trust in the hands of Mr Ansah. In Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, at 416, Millett LJ said: “It is fundamental to the existence of a trust that the trustee is bound to keep the trust property separate from his own and apply it exclusively for the benefit of his beneficiary.” In R v Clowes (No 2) [1994] 2 All ER 316, at 325, Watkins LJ said: “As to segregation of funds, the effect of the authorities seems to be that a requirement to keep moneys separate is normally an indicator that they are impressed with a trust, and that the absence of such a requirement, if there are no other indicators of a trust, normally negatives it” (emphasis in original).

The particulars of claim plead that Mr Ansah was authorised by the claimant to utilise his Lloyds Bank accounts to facilitate the claimant’s international business, and that Mr Ansah was a trustee of money paid into those accounts, and which remained its property. If the merits threshold had been reached, the question whether Mr Ansah was a trustee of the money (as opposed to being merely a person owing fiduciary duties to the claimant with respect to the money) would not have been suitable for determination at the jurisdictional stage. That would have been a factual question dependent on the arrangements made between the claimant and Mr Ansah.

It is therefore unnecessary to decide the interesting questions on the applicability of CPR Rule 6.20(14) and (15). RSC Order 11, Rule 1(1)(t) allowed service out of the jurisdiction where “the claim is brought for money had and received or for an account or other relief against the defendant as constructive trustee, and the defendant’s alleged liability arises out of acts committed, whether by him or otherwise, within the jurisdiction.” This provision was added in 1990 after it had been held that a claim based on constructive trust was not founded on a tort for the purposes of Order 11, Rule 1(1): Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1QB 391.

CPR Rule 6.20(14) allows service out of the jurisdiction where “a claim is made for a remedy against the defendant as constructive trustee where the defendant’s alleged liability arises out of acts committed within the jurisdiction”. CPR Rule 6.20(15) provides for service out of the jurisdiction where “a claim is made for restitution where the defendant’s alleged liability arises out of acts committed within the jurisdiction.” Neither of these provisions contains the words “whether by him or otherwise” which were in the amended Order 11, rule 1(1)(t).

In this case the essence of the claim is that the director misused money which had been entrusted to him by the claimant by transferring it to the defendant as trustee of the Trust. The defendant still holds most (but not all) of the money which was transferred to it. At the time of receipt the defendant had no reason to know, believe or suspect that the money did not belong to the director. The most that can be said is that the defendant has been put on notice of the claim by the claimant to a beneficial interest.

The first issue which would arise is whether this is a claim for a remedy against the defendant as constructive trustee. On one view this is a claim which falls into the category of a proprietary equitable claim: Re Montagu’s Settlement Trusts [1987] Ch 264, 285; Agip (Africa) Ltd v Jackson [1990] Ch 265, 290, per Millett J, affd [1991] Ch 547. Such a claim against a volunteer is not strictly dependent on the imposition of a constructive trust; nor is it dependent on any discretion vested in the court. It does not necessarily follow that the defendant is treated as a trustee of the money: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, at 707.

In Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, at 409, Millett LJ classified constructive trusts in two groups: the first class of case was where the person described as a constructive trustee was actually a trustee, as in the Pallant v Morgan [1953] Ch 43 line of cases, where the defendant holds on trust for himself and another party. The second class of case is where the defendant is implicated in a fraud and is not a trustee, but is held liable to account as if he were a trustee. In this class are the “knowing assistance” and “knowing receipt” cases.

To make a recipient liable as constructive trustee on the basis of knowing receipt, the recipient’s state of knowledge must be such as to make it unconscionable for the recipient to retain the benefit of the receipt: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, at 455 (CA). That knowledge may be acquired at the time of receipt, or later: cf p 457; and Lewin, Trusts, 17^th ed 2000, para 42-51.

But there is no doubt that the concept of constructive trust is used in relation to proprietary claims where the liability of the defendant to restore the property is not dependant on any “knowing receipt” except possibly in the sense of knowledge of the claim to recovery acquired after the receipt of the funds. Thus in Boscawen v Bajwa [1996] 1 WLR 328, at 334-5 Millett LJ treated every case in which a claimant traced his property into the hands of the defendant as one in which the court would treat the defendant as holding the property on a constructive trust. Cf Clark v Cutland [2003] 2 BCLC 393, 403-4, where the constructive trust terminology is used in relation to a proprietary remedy. As Sir Peter Millett himself said in Restitution and Constructive Trusts, in Restitution, Past, Present and Future: Essays in Honour of Gareth Jones (ed Cornish et al, 1998), 199, at 200: “[W]e use [the expression ‘constructive trust’] not only to describe the trust itself but also to describe a particular proprietary remedy, and even as shorthand for saying that proprietary relief is available in equity.” See also Oakley, Restitution and Constructive Trusts: A Commentary, ibid, 219, at 224.

Consequently, in my judgment a claim of this kind falls within the concept of “constructive trust” for the purposes of CPR Rule 6.20(14).

The next question would be whether it also falls within the category of a claim for “restitution” within the meaning of CPR Rule 6.20(15). That question in turn depends on whether the expression “restitution” is to be limited, as some judicial decisions and textwriters suggest, to cases which are founded on unjust enrichment, or also encompasses proprietary claims of the type involved in this case. There would appear to be no authority on the meaning of restitution for the purposes of CPR Rule 6.20(15). An action for breach of confidence was held to be within that rule: Douglas v Hello! [2003] EWCA Civ 139, [2003] EMLR 585, where the publication of the photographs complained of had taken place in England. No doubt that was because such actions have been regarded as being within the field of restitution by such authors as Goff and Jones, who broadly follow the classification established by the American Law Institute, Restatement of the Law of Restitution (First), 1937, which included remedies relating to misuse of confidential information within that field.

The present claim is based on the alleged equitable proprietary interest in the trust fund, and not on unjust enrichment. In Foskett v KcKeown [2001] 1 AC 102, Lord Millett said (at 127, 129):

“The transmission of a claimant’s property rights from one asset to its traceable proceeds is part of our law of property, not of the law of unjust enrichment. There is no ‘unjust factor’ to justify restitution (unless ‘want of title’ be one, which makes the point). The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment. Property rights are determined by fixed rules and settled principles. They are not discretionary. They do not depend upon ideas of what is ‘fair, just and reasonable.’ Such concepts, which in reality mask decisions of legal policy, have no place in the law of property.

…

 … [T]he plaintiffs seek to vindicate their property rights, not to reverse unjust enrichment. The correct classification of the plaintiffs’ cause of action may appear to be academic, but it has important consequences. The two causes of action have different requirements and may attract different defences.

A plaintiff who brings an action in unjust enrichment must show that the defendant has been enriched at the plaintiff’s expense, for he cannot have been unjustly enriched if he has not been enriched at all. But the plaintiff is not concerned to show that the defendant is in receipt of property belonging beneficially to the plaintiff or its traceable proceeds. The fact that the beneficial ownership of the property has passed to the defendant provides no defence; indeed, it is usually the very fact which founds the claim. Conversely, a plaintiff who brings an action like the present must show that the defendant is in receipt of property which belongs beneficially to him or its traceable proceeds, but he need not show that the defendant has been enriched by its receipt. He may, for example, have paid full value for the property, but he is still required to disgorge it if he received it with notice of the plaintiff's interest.”

According to Goff and Jones, para 2-007: “Foskett v McKeown leads to the firm conclusion that English law does not recognise a restitutionary proprietary claim.” See also Burrows, Quadrating Restitution and Unjust Enrichment: A Matter of Principle [2000] RLR 257, 268; Burrows, Law of Restitution (2^nd ed. 2002), pp 5-7. But there is a powerful view that, although restitutionary claims are normally based on unjust enrichment, that does exclude from the scope of the law of restitution proprietary equitable claims: Birks, Misnomer in Restitution, Past, Present and Future: Essays in Honour of Gareth Jones (ed Cornish et al, 1998), 1 at 22; Birks, Unjust Enrichment (2003), p 55. See also Virgo, Principles of the Law of Restitution (1999), p 13. Macmillan Inc v Bishopsgate Investment Trust plc [1996] 1 WLR 387 (CA) involved an equitable proprietary claim to shares. The Court of Appeal did not disagree with the submission that the claim was restitutionary in nature, but it did not follow that the conflict of laws rules relating to restitution were applicable to the issue in the case, namely who had the better title to the shares in question.

It would not be appropriate to seek to express a definitive view on the ambit of restitution for the purposes of CPR Rule 6.20(15) in a case which, given my other findings, it does not arise, but I would express the tentative view that an equitable proprietary claim of the type involved in this case would come within its ambit.

I consider that the arguments on limitation put forward on behalf of the defendant have considerable force. There is a 6 year limitation period under section 21(3) of the 1980 Act for actions to recover trust property or in respect of breach of trust. But there is no limitation period with respect to an action by a beneficiary “to recover from the trustee trust property … in the possession of the trustee.” The defendant would have the powerful support of Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, at 707, for the proposition that a person who comes to hold the legal title is not necessarily a trustee for the equitable owner. But if the court had jurisdiction and had the merits threshold been reached, I would not have considered this a point which should be decided at the jurisdictional stage, depending as it does on a combination of factual issues and difficult questions of law.

CPR Rules 6.20(14) and 6.20(15) apply “where the defendant’s alleged liability arises out of acts committed within the jurisdiction”. Their predecessor, RSC Order 11, Rule 1(1)(t) allowed service out of the jurisdiction where “the defendant’s alleged liability arises out of acts committed, whether by him or otherwise, within the jurisdiction.”

There appear to be no authorities on the territorial link for the purposes of CPR 6.20(14) and (15) in a claim of the present kind. There are three decisions bearing upon RSC Order 11, r 1(1)(t), and two decisions in relation to constructive trusts on Article 5(3) of the Brussels Convention (now in Council Regulation 44/2001). The Brussels Convention, the Lugano Convention, and Council Regulation 44/2001 do not have any special provisions for constructive trust and restitution. In Case 189/87 Kalfelis v Schroeder [1988] ECR 5565 it was held that the expression “matters relating to tort, delict or quasi-delict” in Article 5(3) covers all actions which seek to establish the liability of a defendant and which are not related to a “contract” within the meaning of Article 5(1).

ISC Technologies Ltd v Radcliffe, December 7, 1990, unreported and ISC Technologies Ltd v Guerin [1992] 2 Lloyd’s Rep 430 both arose out of the fraud committed by James Guerin on the arms manufacturer Ferranti. In ISC Technologies Ltd v Radcliffe, Millett J held that the constructive trust provision in RSC Order 11, r 1(1)(t) applied only if all the acts necessary to impose liability were committed in England, and that accordingly it applied to knowing participation by acts in a fraudulent breach of trust committed in England, but not knowing receipt abroad of the proceeds of such fraud.

In ISC Technologies Ltd v Guerin [1992] 2 Lloyd’s Rep 430 jurisdiction was established under other heads of RSC Order 11, and Hoffmann J recognised that it was unnecessary for him to rule on an alternative submission by the plaintiffs that leave should be given under the constructive trust head. At 433 he said that, although it was not necessary to decide the point, Millett J’s construction was too narrow. It was primarily designed for the case of a foreign entity which had not participated in the fraud but had been used as a receptacle for the proceeds. It was not required that every act necessary to create liability should have been committed within the jurisdiction.

In Polly Peck International plc v Nadir, The Independent, September 2, 1992 Knox J said that his own preference was for the construction which did not require all the acts constituting the constructive trust to have been committed within the jurisdiction. So to construe the paragraph would empty it of very nearly all its practical utility when one has regard to the prevalence of foreign corporations whose officers are very likely to be resident abroad and therefore only likely to require the necessary knowledge to establish the claimed constructive trust by events occurring abroad. The decision was reversed on other grounds (The Times, March 22, 1993). In the Court of Appeal Hoffmann LJ said that he remained of the view tentatively expressed in the Guerin case that it was sufficient if a substantial part of the acts, viewed as a whole, on the part of the original fiduciary and the defendant which gave rise to the alleged liability took place within the jurisdiction. It would be anomalous if jurisdiction over an offshore entity used by a fraudulent fiduciary to receive the proceeds of fraud committed within the jurisdiction depended upon whether or not the entity maintained an English bank account into which the proceeds were paid. A broader construction would reflect a more consistent purpose.

The other decisions are on the Brussels Convention. In Casio Computer Co Ltd v Sayo [2001] ILPr 694 the claimant sued in respect of moneys taken from it by Japanese employees, some of which was transferred to London bank accounts. The sixth defendant was domiciled in Spain, and was alleged to be a constructive trustee. It was held by the Court of Appeal, affirming the decision of Mr Anthony Mann QC, that the relevant act for jurisdictional purposes had taken place in England, namely payment into and out of a London bank account, which was the place where the harmful event giving rise to the claim for dishonest assistance occurred.

In Dexter Ltd v Harley, The Times, April 2, 2001 an action was brought against a person domiciled in Spain, who held (it was alleged) money which had been removed from the English claimant through a breach of fiduciary duty. All of the facts which gave rise to the claim against the defendant’s son, the company secretary, occurred, partly, within England, but all the facts which were relied on to attach liability to the defendant occurred outside the jurisdiction, in the Channel Islands, where money was paid into a bank account in the name of the defendant. Lloyd J held that the claim for constructive trust was within Article 5(3). He said that, in principle, in applying the concept of the harmful event to a constructive trust claim based on knowing receipt or dishonest assistance, it was not relevant to show that the original breach of trust or fiduciary duty by someone other than the defendant took place in the jurisdiction if nothing which involved the defendant occurred within the jurisdiction. The harmful event must be a harmful event on the part of the defendant, whether it was the act or omission of the defendant from which the harm results, or the direct result of such an act or omission through its impact on the claimant.

Briggs and Rees, Civil Jurisdiction and Judgments, 3rd ed 2001, para 4.47, suggest that there is no reason to suppose that CPR Rule 6.20(14) was intended to restrict the power of the court to deal with fraudsters, but that by analogy with Article 5(3) and the decision in Dexter Ltd v Harley, the acts within the jurisdiction must have something to do with the defendant. I accept that there must be some link between acts committed within the jurisdiction and the defendant, but those acts in my judgment do not have to be those of the defendant. I do not consider that the decisions on the Brussels Convention are helpful: first, there is no basis (as there certainly was under RSC Order 11, r 1(1)(t) and may also be under CPR Rules 6.20(14) and (15)) for taking into account acts by persons other than the defendant; second, jurisdiction under the Brussels Convention, the Lugano Convention and Regulation 44/2001 is not discretionary and has no forum conveniens filter to avoid the exercise of exorbitant jurisdiction; third, in consequence they have to be applied if possible to avoid the exercise of exorbitant jurisdiction.

In my judgment, if the principal fraudster gives instructions for money in London to be paid abroad to a knowing recipient, it is not necessary for jurisdictional purposes that the recipient should have done anything in London for CPR Rule 6.20(14) to apply. In most cases the principal fraudster will be subject to the jurisdiction under another head, and there will be jurisdiction over the accessory party under the necessary and proper party provision of CPR Rule 6.20(3). The jurisdiction is not exorbitant, because in each case the claimant will have to show as against the foreign defendant that England is clearly the appropriate forum.

I would therefore have decided that the defendant’s liability to account would have arisen out of acts committed in England by Mr Ansah, namely the alleged misappropriation of funds in English bank accounts by giving instructions for them to be transferred to the defendant in Guernsey.

I will therefore set aside the order of Master Bowman.