Mahme Trust Reg & Ors v Lloyds TSB Bank Plc

The first Claimant the Mahme Trust Reg was formerly called the Shake Trust Reg. It was established by the Defendant in 1986 under the laws of Liechtenstein. I will hereafter refer to it as “the Shake Trust”. Although described as a Trust, as a Trust Reg under Liechtenstein law it has corporate status and its “trustees” are more equivalent in status to the directors of a company than to trustees in the English Law sense. After various amendments and concessions in relation to the claim, the Shake Trust remains the only Claimant pursuing relief against the Defendant. The Fourth Claimant, Kawther Awni Al Abood (“Mrs AB”) is the widow of Shaker Al Abood (“AB”) who died in Boston on 22^nd February 1986. They were married in 1979. AB was an extremely wealthy Iraqi businessman involved as an intermediary in the defence industry. In the weeks before his death from cancer he took steps to organise his financial affairs. The establishment of the Shake Trust is one of the products of those steps. The Fifth Claimant, Mahmoud Shaker Al Abood (“Mahmoud”) is the only son of the marriage of AB and Mrs AB and the sole capital beneficiary of the Shake Trust.

The Defendant Lloyds TSB Bank Plc (“the Bank”) is the well known banking organisation incorporated in England. The events of this case primarily concern the Geneva branch of the Bank.

Primeway SA (“Primeway”) is a wholly owned subsidiary of the Bank incorporated in Switzerland which, at all material times, acted as a nominee/trustee corporation for the Bank. Philippe Robadin (“Mr Robadin”) is a director of Primeway and previously its managing director. He was, at all material times, employed in the legal department at the Geneva branch of the Bank latterly as its senior manager. Primeway was, at all material times, one of the two “trustees” of the Shake Trust.

Allgemeines Treuunternehmen (“ATU”) is a Liechtenstein trust corporation. Dr Guido Meier (“Dr Meier”) has, at all material times, been president of the board of trustees of ATU. He was a partner in a firm of Liechtenstein lawyers with a Dr Holzhacker. Over the years he has acted as a director and trustee of Liechtenstein trusts and provides his clients with legal tax and financial advice. ATU has, over many years, provided trust services to the Bank. Dr Meier was the second trustee of the Shake Trust for the purposes of which he entered into a mandate agreement with the Bank.

Mr Klonis is a Swiss citizen resident in Switzerland and a long standing employee of the Geneva branch of the Bank who retired in December 2002. He was the Bank’s principal contact with the Al Abood family and took the Bank’s instructions from AB for the establishment of the Shake Trust. He was not a witness before me but gave evidence over four days in May and June 2005, under letters rogatory, copies of the transcript of which were available at the trial.

Nezhet Tayeb (“Mr Tayeb”) is a chartered accountant and experienced businessman with whom AB had had dealings since at least the early 1960’s. He was a longstanding and substantial customer of the Bank. Though not a close friend he advised AB in the final months of his life on the organisation of his financial affairs in anticipation of his imminent death. Thereafter with Mrs AB and AB’s sister Najat Al Abood (“Najat”) who was resident in Iraq he was a member of the Managing Committee of the Shake Trust appointed a few weeks after its establishment. He made available his investment expertise to the trustees of the Shake Trust.

Mrs El-Shamari is Mr Tayeb’s sister and, until they fell out, a friend of Mrs AB. Mrs El-Shamari was present in Boston during the last days of AB’s life. After they fell out she, and Mrs Al Abood, pursued litigation against each other in which she was in general the loser.

Dr Abfalterer is a Liechtenstein lawyer, like Dr Meier a professional trustee of Liechtenstein trusts with his own trust company. As a result of a settlement agreement of the 22^nd June 2000 between the Bank, the then Trustees of the Shake Trust and the fourth and fifth Claimants, Mrs AB obtained control of the Shake Trust and Primeway and Dr Meier resigned as trustees, in favour of nominees of Mrs AB. Dr Abfalterer became the sole trustee of the Shake Trust on the 1^st December 2004 following the resignation of the Second and Third Claimants.

Mrs AB and Dr Abfalterer gave evidence before me for the Claimants. Dr Meier, Mr Robadin and Mr Antoine Courvoisier, an investment manger of the Bank, gave evidence for the Bank.

Because the remaining issues in this case are of a relatively narrow ambit it is not necessary for me to describe them in any great detail.

In January 1986 AB established a family trust known as the SMA Settlement in Jersey under the management of BNP Jersey Trust Corporation Ltd. It had assets whose value was approximately US$ 28M. The trustees were directed to make various distributions to Mrs AB and AB’s siblings on his death and after that it was to be held in three funds, a capital fund, a family maintenance fund and a charity fund. The capital fund was to be distributed to Mahmoud progressively on his attaining certain ages and the charity fund was to be distributed as its name implies. The maintenance fund was to be applied for the maintenance of Mrs AB and Mahmoud, Mahmoud’s education and the upkeep of certain family properties. The maintenance fund was to be fed by the annual transfer of a proportion of the income of the Shake Trust. It was to have a managing committee consisting of Mr Tayeb, Mrs AB and Najat.

Instructions were given for the establishment of the Shake Trust in February 1986 (it was created on 3rd March 1986). At this time AB was on his death bed in the Lahey Clinic in Boston. As a result of the introduction of Mr Tayeb the Bank was approached on behalf of AB to be his principal agent in the setting up of the Trust. There are various issues about what precisely took place at this time but it seems to be common ground that Mr Klonis flew out to Boston and saw Mr Al Abood in the course of the 11^th and 12^th February 1986 at the clinic. It was decided that the Trust should be set up as a “trust Reg” in Liechtenstein, that the assets of the trust should come from the various assets held for AB in specific accounts with Boston Investments and Financial Services SA (“BIFS”) in Geneva and Banque Nationale de Paris (“BNP”). Those assets would be initially transferred into an account at the Bank which came to be called the Body Account (“Body Account”) which was to be opened in the joint names of AB and Mrs AB. From that account those assets were to be transferred to an account in the name of the Shake Trust with the Bank, the Shake Trust having been established in Liechtenstein in the interim. In the result the following documents were signed on or about the 11^th or 12^th of February 1986:-

AB died on the 22^nd February 1986. On the 3^rd March 1986 ATU on the instructions of the Bank established the Shake Trust as a trust Reg in Liechtenstein. It was set up with statutes which are dated 3^rd March 1986 and its first by-laws which are dated the 17^th March 1986. So far as is material to this judgment the statutes provide, in somewhat awkward translation, at article 6 under the heading “Organisation”:-

“The Trust enterprise is organised as follows:

(a)

The settlor respectively his legal successor

(b)

The Board of Trustees

(c)

The auditors, if any”

Then at article 8 under the heading “Board of Trustees”

“The Board of Trustees consisting of one or several natural persons or corporate bodies (trustees) is entrusted with the management and the representation of the trust enterprise. The Board of Trustees is nominated by the settlor respectively his legal successor.

In as far as these statutes or by-laws, respectively the regulations, do not provide anything different, the Board of Trustees decides freely where and in what way the business has to be run. He [this must mean the Board] can nominate directors, signing clerks and general special agents and entrust banks or trust companies with the administration of the funds. The investment of the funds remains in the competence of the Board of Trustees if the statutes do not provide anything else… the members of the Board of Trustees take their decisions by majority of vote of the members present, whereby the president gives if necessary the casting vote. In case there are only two members their decisions must be taken unanimously…all decisions taken must be entered into a minute book and have to be signed by attending members…”

The by-laws of the 17^th March 1986 contained a material difference from the draft by-laws signed by AB in that at clause 2 it was provided that:-

“After the death of the first beneficiary [AB] the Board of Directors will act according to the following rules:

2(a) First of all, the Board of Directors will appoint a managing committee which will be entitled to give written instructions to the Bank concerning the assets management only…. ”

Meanwhile on the 12^th and 28^th February substantial assets amounting in value to many millions of dollars had been transferred by BIFS to the Body account and on the 6^th March BNP had transferred further assets to that account.

It appears that after the death of her husband Mrs AB had decided to set up a separate trust, which came to be called the Kamoud Trust of which she was the lifetime beneficiary. With this in mind she arranged to meet Mr Klonis in Rome on the 25^th March at which meeting Mr Klonis produced, and she signed, the necessary documentation to put this into effect. At this stage there remained some US$ 9M in the Body account which had not been transferred to the Shake Trust account. For reasons which I find puzzling it seems to have been accepted by the Bank that because she was the surviving signatory on the Body account Mrs AB had authority to apply the remaining funds in that account as she wished and not as had been directed by her deceased husband in his letter of 12^th February. Accordingly the remaining sums in the Body account were transferred to accounts set up in the name of the Kamoud Trust. Subsequently the bulk of those assets were lost as a result of currency speculation by the trust ostensibly at the instance of Mrs AB although she alleges she was entering into foreign exchange transactions at the instance of, or at least on the advice, of Mr Tayeb and the Bank. Nothing now turns on this side issue.

On the 6^th March 1992 Mr Tayeb and Mrs AB joined in a resolution of the Managing Committee of the Shake Trust authorising the payment by the Bank of an annual commission of up to 0.5% of the value of the Shake Trust’s assets to the Committee. As a result the Bank commenced on the 7^th April 1992 making quarterly payments to a company Landglaze Holdings SA owned and controlled by Mr Tayeb. Those payments continued until the 29^th September 1998. In 2002 the Shake Trust and Mahmoud in proceedings brought by them to recover these payments for the Trust obtained judgment ordering Mr Tayeb to repay them. There remains an issue whether the Bank is liable to pay the Trust, the Trust’s costs in the proceedings against Mr Tayeb which have not been covered by the order for costs made in those proceedings.

In January 1997 it appears that Mr Klonis became aware from Mr Tayeb that Mrs Al Abood was dissatisfied with the performance of the Bank’s investment management service (“the IMS”) in its management of the assets of the Shake Trust. She had been advised that the investment bank Messrs Goldman Sachs had guaranteed growth of between 15% and 20% per annum if they were put in charge of the assets. On the 21^st February 1997 Mr Tayeb and Mrs AB wrote to the Bank on behalf of the managing committee of the Shake Trust asking it to arrange for the transfer of up to 20% of the Shake Trust assets to Goldman Sachs. The Bank acting on the internal advice of Mr Robadin and on Dr Meier’s advice in a fax to Primeway dated the 6^th March 1997 refused to do this on the basis that it was the “AB’s clear intention” that the Bank should remain bankers for the Shake Trust to whom he had confided the safekeeping of its assets. Mrs AB persisted but the Bank’s only concession was the offer to permit Goldman Sachs to manage 20% of the assets of the Trust as agents for the Bank while the assets themselves remained in the Bank’s custody. This compromise was unacceptable to Mrs AB. There the matter rested. The dispute over the transfer of part of the assets of the Shake Trust to the management of Goldman Sachs is the subject of one of the four surviving claims being pursued by the Shake Trust against the Bank.

It appears that thereafter and, probably as a result of her frustrations over the Goldman Sachs incident Mrs AB started a campaign to attempt to remove the assets of the Shake Trust from the custody of its then Trustees and the Bank. In particular she suggested that it should be declared invalid on the ground that it was established after the death of her husband and consequently without authority. It is, however, common ground amongst the experts in both Swiss and Liechtenstein Law instructed by both sides that the Shake Trust could not be invalidated for that reason.

Subsequently Mrs AB sought to persuade the Bank to transfer all the assets of the Shake Trust to BNP Jersey for an account denominated “Zamroud” held by a company of that name, in turn owned by a trust of the same name, in which Mrs AB had a sole life interest. Again this was refused.

In early 1998, on the suggestion of Dr Meier, ATU, in whom “the founder’s rights” in respect of the constitution of the Shake Trust were vested brought in new statutes for the Trust dated the 4^th January 1998 which removed the founder’s rights, replacing, as it was empowered to do, the 3^rd March 1986 statutes. This was done in order to forestall a claim by Mrs AB on her own behalf and on behalf of Mahmoud as successors under Iraqi Law to take over those rights. The Bank’s justification for initiating this move was the argument that the original statutes did not properly reflect the intention of AB to create a trust, of which his son was the only beneficiary, the constitution of which protected Mahmoud from any attempt by his mother to obtain control over, and dissipate, its assets. This action provoked litigation in Geneva in which Mrs AB claimed relief against the Bank. She failed, the judgment of the Geneva Court being handed down on the 31^st May 2000. That failure led to the Settlement Agreement of the 22^nd June 2000, to which Mrs AB, Mahmoud, the Bank, Primeway and Dr Meier were parties, pursuant to which control of the Shake Trust was handed over to Mrs AB against releases for the Bank and the Trust’s then trustees who resigned in favour of the Zindels. In the present proceedings the Claimants sought to set aside the agreement on the grounds inter alia, of wilful deception by the Bank. That claim was withdrawn in the course of the hearing before me. The effect of the Settlement Agreement remains a live issue in the proceedings.

Whereas in the course of argument it was, for the first time, conceded that the effect of the Settlement Agreement was to release the Bank from all remaining claims by Mrs AB and Mahmoud, it was contended for the Claimants that there was no release in respect of claims by the Shake Trust through its new trustees. The Bank contends that the Settlement Agreement operated as a release not only by Mrs AB and Mahmoud but also by the Shake Trust.

In the meantime early 1998 marked the breakdown of the friendship between Mrs AB and Mrs El-Shamari who in March 1998 commenced criminal proceedings in Nice and Monaco against Mrs AB which the latter successfully defended and herself brought proceedings against Mrs El-Shamari in the United States for fraud.

In September 1998 Mrs AB’s then advisors complained to the Bank, Primeway and Dr Meier that since 1992 a substantial quarterly commission had been paid by the Bank out of Shake Trust assets held by it to a Panamanian company called Landglaze Holdings SA (“Landglaze”) a company owned and controlled by Mr Tayeb. The payments had been made by the Bank on the basis of instructions given by Primeway acting on a resolution of the managing committee of the Shake Trust made on the 6^th March 1992 to which Mrs AB was a party. In April 2000 proceedings were launched in England by the Shake Trust and Mahmoud, as beneficiary of the Shake Trust, against Mr Tayeb and Landglaze claiming recovery of the payments totalling US$1,086,570 and other relief. On the 26^th July 2002 Mr Justice Rimer gave judgment for the Claimants finding that the payments had not been duly authorised because the Managing Committee had no authority to do so. He ordered repayment by Mr Tayeb to the Shake Trust of all the payments together with simple interest of US$587,909.26 and 90% of the Claimants costs on the standard basis. Mr Tayeb has complied with the judge’s order. The Landglaze litigation is another of the matters which remain a live issue in the proceedings. The Trust seeks to recover from the Bank, which made the payments on the instructions of the Managing Committee, its un-recovered costs of the Landglaze proceedings.

In 2000 Mrs AB commenced proceedings against Mr Tayeb in this division of the High Court for the substitution of herself in place of Mr Tayeb as personal representative of AB’s estate, which Master Moncaster described, in giving judgment on the 25^th October 2004 dismissing the application as “something akin to the American pre action oral discovery” to obtain evidence in support of her claim that Mr Tayeb had been fraudulent and was guilty of embezzlement. Her appeal against that order failed in front of Mr Justice Lightman.

The present proceedings were commenced as a Part 8 claim in May 2004 which by order of the Vice Chancellor on the 29^th July 2004 were converted into a Part 7 claim.

At the commencement of the hearing the amended particulars of claim amounted to 137 pages containing 325 main paragraphs. The basis of the claim was summarised in the Claimants’ outline opening submissions between paragraphs 3 to 5 and 7 to 11 as follows:-

“3.

In summary, the Claimants’ argument is that, during the Bank's custody of the assets, the Defendant failed in its duties and obligations in the following general respects:

(a)

The Bank failed to carry out instructions given to it by its principal.

(b)

The Bank carried out actions that were unauthorised because they were given on the sole instructions of one Mr Nezhet Tayeb, another customer of the Bank, who was not entitled to give sole instructions regarding the Claimants’ affairs. As the Court will see, the relationship between the Bank and Mr Tayeb, who was a customer of the Bank, has caused the problems that lie at the heart of this dispute.

(c)

The Bank carried out actions which were designed to further its own commercial interests in retaining the Claimants’ assets, rather than the interests of the Claimants that such assets might be managed (in whole or in part) independently of the Bank. As the Court will see, the Bank was concerned to ensure that it retained control of the management of the assets that had been transferred to the Shake Trust Reg, presumably to ensure that it continued to receive the, significant, fees that it obtained for the management of the assets. As stated above, these totalled USD 2.78 million.

(d)

The Bank carried out actions which were designed to further its own commercial interests in being Mr Tayeb's banker rather than being concerned with the interests of its customers, namely the Claimants.

4.

In doing those things the Bank acted in breach of duties owed to the Claimants under Swiss and Liechtenstein law and the Claimants seek accounts and inquiries either because (a) they are entitled to these as a matter of substantive right under Swiss or Liechtenstein law or (b) they are entitled to those remedies from this Court in order to assess and recompense them for their losses. In addition, the Bank has put itself in a position where it would be appropriate for this Court to make orders for accounts and inquiries, based on the Court's in personam jurisdiction over fiduciaries so that the Claimants can identify and make good the deficiency in the assets for which the Bank was responsible.

5.

The Court is invited to bear in mind the following theme which is reflected in each and every criticism that the Claimants have to make about the Bank’s conduct. The Bank has throughout its dealings with the assets derived from Mr Al Abood preferred its own interests, either directly in wishing to keep control of the assets by any means available, or indirectly, in giving preference to the interests and wishes of Mr Tayeb above those of the Claimants (where Mr Tayeb was a long standing customer of the Bank in his own right). The Claimants submit that the difference in the treatment accorded by the Bank to Mr Tayeb and that accorded to Mrs Al Abood is striking….

7.

It is the belief of Mrs Al Abood that assets that belonged to her husband have gone missing after her husband's death. She knew little about his business affairs at the time of his death and then, and for a number of years, she trusted Mr Tayeb. As will be clear to the Court, she now no longer trusts Mr Tayeb. She believes that assets that belonged to her husband, and that should belong to her son, have been misappropriated, perhaps by Mr Tayeb and/or Mrs El Shamari.

8.

This belief of Mrs Al Abood, who was of course herself a client of the Bank, has been ridiculed and mocked by the Bank, who describe it as "the missing black hole". This trial is not concerned with the black hole or with Mrs Al Abood’s belief, or the reasons for that belief, or whether those reasons are justified or not. The Claimants accept that and assume that the Bank does as well.

9.

This trial is concerned with the stewardship of the Bank of the assets that it received following the death of Mr Al Abood in 1986. The Claimants submit that the evidence reveals that the Bank's stewardship of those assets was, on any view, not satisfactory and that the Bank has preferred its own interests and those of Mr Tayeb and that questions remain unanswered as to what the Bank did and why.

10.

In the light of the role of Mr Tayeb, the fact that the Bank has, over a long period of time, sided with, or appeared to side with, Mr Tayeb, and the manner in which the Bank has dealt with the Claimants’ complaints and requests for information, it is perhaps not surprising that there is clear and understandable anger on the part of the Claimants, and in particular, Mrs Al Abood, at the conduct of the Bank.

11.

The Claimants submit that it is surprising, in the light of the allegations that are made, and in the light of the position as revealed by the Bank's own documents, that the Bank has not sought to ensure that material witnesses come to Court to support the Bank and to explain their actions. This is particularly so in relation to Mr Klonis, who was the relationship manager at the Bank responsible for the Bank's relationship with Mr Al Abood, Mrs Al Abood and the Shake Trust Reg and also, apparently, Mr Tayeb. Mr Klonis’ evidence had to be taken by the Claimants on deposition: that evidence is inevitably treated with scepticism by the Claimants. It extends to other senior managers who, as appears below, played important parts in the story, including Mr Andrew Scott Plummer of the Bank's London head office, legal department. It includes Mr Tayeb, who it is believed remains a client of the Bank.”

At paragraph 287 of the amended particulars of claim the Claimants had pleaded, as was the case, that by letter dated the 5^th March 2004 the Claimants’ solicitors had given notice of setting aside the Settlement Agreement on the grounds of material error and wilful deception pursuant to article 31 of the Swiss Code of Obligations. This was an allegation of fraud against the Bank. At the hearing in the course of openings this allegation was withdrawn. It ought never to have been made. The amendment to remove paragraph 287 had the effect that the claims of Mrs AB and Mahmoud against the Bank were to be treated as settled as at the 22^nd June 2000. As I have already described, there remains the issue whether the Settlement Agreement also settled the claims of the Shake Trust against the Bank.

At the conclusion of the Bank’s opening the Claimants sought and were granted an adjournment to review and further amend the particulars of claim. The result was the re-amended particulars of claim served on the 14^th March 2006. The re-amended points of claim contained an extensive claim for accounts pursuant to Swiss Law, Liechtenstein Law and English Law. At paragraph 317.3 were pleaded 35 separate allegations of ongoing failures by the Bank to account which were said to constitute breaches of duty by the Bank and in respect of which the Bank was to provide an account of the broadest kind. The further amendments swept all this away. An attempt was made to substitute a claim for:-

“(1)

Information explaining describing and demonstrating what the Defendant has done and the reasons for what the Defendant has done, in relation to the assets belonging to or beneficially owned by the Claimants as specified above”

But not including anything which had already been provided to them; and

(2)

Confirmation from the Bank, from an appropriate officer of its Head Office in London that nothing further of relevance to the Claimants and the issues raised above, is in the Bank’s possession or control.”

In the absence of the allegation of any subsisting duty to account and because of its lack of precision, I refused to admit the amendment. It follows that as a result of the further amendments, the entirety of the claim for an account against the Bank disappeared.

In addition to the claims for an account, the amended particulars of claim in its original form also included a number of claims for damages or enquiries as to damages in respect of the following 13 matters:-

(1)

The Envelope;

(2)

The French Franc deposit in the amount of FFr168,766.28;

(3)

The failure to transfer 20% of the assets of the Shake Trust to Goldman Sachs in February 1997;

(4)

The abolition of the founder’s rights;

(5)

The Landglaze payments;

(6)

Improper investments identified as the Barclays shares, the Venezuelan bonds and certain forex transactions;

(7)

The costs incurred by the Claimants in seeking accounts since January 1998;

(8)

Two breaches of confidentiality;

(9)

The failure by the Bank to supervise its personnel;

(10)

Excessive fees charged by the Bank to the Shake Trust;

(11)

Payments to third parties;

(12)

Payments to Drake Securities and Quijano

(13)

Certain fees paid by the Shake Trust to ATU or Meier & Holzhacker.

The further amendments dropped all these items save items (3), (5), (6) and (13).

The effect of the amendments on items (3), (5) and (6) above is summarised in the Bank’s closing submissions as follows:-

It follows that the only surviving claims pursued after the further amendments were the claims in respect of the failure to transfer 20% of the assets of the Shake Trust to Goldman Sachs in February 1997, the claim for damages resulting from making the Landglaze payments, and the claim for the losses incurred in causing the Shake Trust to enter into forward foreign exchange transactions between the 7^th April 1992 and the 24^th February 1995 and the payment of certain fees to ATU and Dr Meier and his partner.

The material facts which the Claimants plead as the basis for this claim are set out in paragraphs 164 to 183 of the further amended particulars of claim. Briefly summarised they amount to this by two letters, one dated the 21^st February 1997 the other dated the 13^th March 1997, two of the three members of the Managing Committee of the Shake Trust wrote to the Bank requesting the Bank to transfer 20% of the Shake Trust’s assets to Goldman Sachs, Zurich, to be managed by Goldman Sachs for the benefit of the Trust. By letter dated the 19^th March 1997 the Bank refused to comply with this request. The reason given by the Bank was that AB had entrusted the Bank with the task of holding the assets of the Shake Trust which were ultimately to be passed to his son and that this precluded them from transferring those assets to another Bank although they were prepared to set on one side 20% of those assets for management by Goldman Sachs. Documents produced in disclosure reveal the reluctance of the Bank to allow a “haemorrhage” of assets from their management with the consequent loss of fee income.

As originally pleaded this claim was made in two ways: the first damages for breach of trust, the second, as described in the Claimants’ counsel’s note of the 31^st March 2006, that, “in breach of mandate, the Bank refused to follow the instructions of the Managing Committee to transfer 20% of the Trust’s assets to Goldman Sachs.” By the same note, it is, as I understand it, accepted that the relevant trust law is Liechtenstein Law and that any claim for damages for breach of trust has become barred by limitation by that law.

The note refers me to a number of paragraphs of the further amended particulars of claim to find where the second ground of claim is pleaded. I have examined those paragraphs and other paragraphs in the pleading but cannot find anywhere clearly pleaded the basis upon which, under Swiss Law, the Bank was obliged to obey the instructions of the Managing Committee of the Shake Trust to transfer assets to Goldman Sachs.

By paragraph 297 (b) it is pleaded, as was the case, that the Shake Trust was a customer of the Bank and as such was a “mandataire”… “for the purpose of Article 394 et seq of the SCO [the Swiss Code of Obligations] and/or as bailee for the purpose of article 472 et seq of the SCO” had a duty [paragraph 297.2] “pursuant to article 397 of the SCO to act on and follow instructions received from the customer regarding the performance of the mandate.” The Claimants seek an enquiry as to damages [paragraph 324.1] in respect of “the losses suffered by any or all of the Claimants by reason of:

On the assumption that the pleaded provisions of Swiss legislation have the effect contended for the claim turns on whether the two letters from the Managing Committee to the Bank are to be treated as instructions from the Shake Trust within article 397 of the SCO which the Bank was bound to follow. I can see no reason why this should be so. The Managing Committee was plainly not an “organ” of the Shake Trust as provided for in its statutes at the relevant time in force. Article 8 of those statutes entrusted “the management and representation of the Trust enterprise” to the Board of Trustees subject, as provided for in the second paragraph of that article, to the provisions of the by-laws of the Trust then in force. The by-laws then in force were those of the 17^th March 1986 which provided at paragraph 2(a) that the duly appointed managing committee “will be entitled to give written instructions to the Bank concerning the assets management only…”.

It seems to me plain that the provisions of paragraph 2(a) of the March 17^th by-laws cannot be construed as giving the Managing Committee the power to direct the Bank to transfer assets of the Shake Trust in its custody to another bank. “Management”, in this context, must mean investment management.

Be that as it may Dr Wenaweser, the Claimants’ Liechtenstein Law expert, accepted under cross-examination that “if the Trustees made it clear they were not prepared to agree to something the Managing Committee was saying then the decision of the Trustees would prevail”. It is clear that at the material time both Primeway and Dr Meier were against the proposed transfer. In an exchange of letters between Miss Popescu of the Bank and Dr Meier dated the 5^th March 1997 and 6^th March 1997, Dr Meier at the request of the Bank gave his advice as to whether “the “Managing Committee” have the power to transfer a proportion of the Trust’s assets, or possibly all of it, to a banking establishment other than Lloyds Bank Geneva.” Dr Meier advised “according to rules of interpretation management of assets in an account comprises powers to operate the account and buy and sell investment instruments but does not include the power to close the account and change the bank according to the by-laws signed by the founder. [the February 1986 draft by-laws] he expressed his clear intention to have Lloyds Bank as the bankers for the Trust. There is no indication of the founder’s intention to give the power to change the bank at the direction of the managing committee. Quite the contrary… as long as these circumstances do not become effective, transferring the account to another bank cannot be justified and would not comply with the intentions of the original founder. The Board of Trustees must by law and statutes and Liechtenstein jurisdiction adhere to the intentions of the founder as much as possible and deviate only for important reasons or under circumstances which would be to the detriment of the Trust or its assets or of the beneficiaries.” The Bank must have been aware of the position of the Trustees at the time it wrote its letter to the Managing Committee refusing to effect the transfer. It does not seem to me to affect this position, as suggested by the Claimants, that the Trustees do not appear to have taken any formal decision to refuse.

No other obligation, such as one arising by contract, is pleaded apart from the pleaded obligations said to be imposed by Swiss legislation on the Bank arising from its banker and customer relationship with the Shake Trust, which bound the Bank to obey the Managing Committee’s instructions.

There is, however, a simpler and much swifter answer to this claim. Before a court will direct an enquiry as to damages the Claimants must show the likelihood of some damage arising as a result of the actions of the Defendant complained of. The only “damage” pleaded is that set out in paragraph 324.2(b) namely the fees received by the Bank as a result of retaining under its management 20% of the Trust’s assets. Whereas in a trust claim a trustee can be required to disgorge benefits which have flowed to it as a result of some breach of trust, damages for breach of statutory duty or breach of contract can only be recovered where it can be shown that the claimant has suffered some loss. As originally pleaded the claim in damages under this head included a claim based on the suggestion that management by Goldman Sachs of the 20% of the assets would have produced a greater increase in the value of the Trust assets than that achieved under the management of the Bank. No evidence has been adduced by the Claimants to establish that this has occurred and, as a result of the amendments, a claim for damages on this basis has been dropped. Equally no attempt has been made to adduce evidence that the fees which would have been charged by Goldman Sachs for their management services would have been less than those charged by the Bank for the same services. There was thus no evidence before the court that the Shake Trust had suffered any damage as a result of the Bank’s refusal to transfer 20% of its assets to be managed by Goldman Sachs.

For these reasons, in my judgment, the claim under this head fails.

The Landglaze payments were made as a result of a resolution of the Managing Committee of the Shake Trust dated the 6^th March 1992 and signed by Mrs AB and Mr Tayeb. This resolution had two effects. The first was to alter the investment guidelines on which the Bank was managing the Trust’s investment policy, the second, was comprised in a purported direction in the following terms:-

“The Managing Committee of the Trust is hereby authorising Mr Nezet M Tayeb to give instructions to the Bank about the payment of an administration fee starting as from 1^st of January 1992.

This fee cannot exceed 0.5% pa of the total assets of the Trust and will be based on quarterly valuation of the Bank. The payments will be effected every three months beginning at the end of March 1992.”

A copy of this resolution was sent by Mr Klonis to Mr Robadin under the cover of an internal memorandum dated 20^th March 1992 in the following terms:-

“Shake Trust A/C No. 174284

Further to our previous conversations, I am sending you the original of a resolution for the aforementioned Trust dated 6^th March 1992 and duly signed by the President and members of the Trust’s Committee. Please enter this document in your records and give appropriate instructions to IMS [the Bank’s Investment Management Service] so that they follow the Committee’s new directives. I shall personally contact Mr Tayeb to ask him for precise instructions as regards payment of the administration commission which I will forward to you on receipt.”

Mr Robadin immediately despatched a copy of the resolution to Mr Des Arts of the IMS to notify him of the change in investment policy. There was a subscript to his communication which reads:-

“PS: in case you would like more informations [sic] please contact the manger of the account Mr Klonis. Thank you.”

The payments started on the 8^th February 1992 and were continued quarterly the last payment on the 30^th June 1998. They were made inter-account transfers from the Shake Trust’s account with the Bank to Landglaze account. Each transfer order was signed by Primeway’s duly authorised signatories at the material time. Primeway was a duly authorised sole signatory on that account pursuant to clause 2 of the fiduciary contract and mandate agreement, made between AB and the Bank and a mandate agreement made between AB and Primeway, both these documents being signed on or about the 12^th February 1986 by AB, and the account opening documentation.

It appears that the Shake Trust is making its claim against the Bank in two ways: the first, under Liechtenstein Law, by way of an allegation that the Bank was constituted a de facto trustee/director/“organ” of the Trust liable to recoup the Trust where it could be found to have been party to a transaction on the Trust’s behalf causing it loss, the second under Swiss Law, for breach of its banker customer contract with the Trust. Under either of these heads the Bank must be shown to have been jointly liable with Mr Tayeb for the consequences of making the Landglaze payments.

There was a conflict of evidence between the experts in Liechtenstein Law called by the parties. It was the evidence of Dr Burger that the Bank’s control over the Trustees by means of its controlling shareholding in Primeway and its mandate agreement with Dr Meier, without more, rendered it a de facto trustee of the Shake Trust for all purposes; see paragraphs 4.86 of 4.91 of Dr Burger’s report although the last sentence of paragraph 4.90 makes the position less clear. Dr Martin Batliner for the Bank, by contrast, was of the view that the Bank’s control of Primeway and its mandate agreement with Dr Meier did not without more render the Bank a de facto trustee of the Shake Trust. It was necessary for such a conclusion to be arrived at that the Bank could be shown to have used its position to interfere in the relationship between the Trustees and the Shake Trust, in particular, in relation to the transaction in which it was sought to make the Bank liable. See paragraph 10 and following in Dr Batliner’s report. By reason of an accidental injury to Dr Burger which made him unable to attend the hearing, his assistant in the preparation of his report Dr Wanaweser deputised for him and answered questions with relation to Dr Burger’s report.

I have come to the opinion that I should accept the expert evidence of Dr Batliner on this point in preference to that of Dr Burger. Dr Wanaweser under cross-examination conceded that there were a number of circumstances which might prove exceptions to Dr Burger’s rule. In particular he conceded that where a Bank combined its position as banker to a trust with a potential de facto trusteeship of that trust as a result of its apparent control of a trustee, but the action of the bank in question was simply to honour a cheque drawn on the trust’s account with the bank, it could not be said that the bank was acting as a de facto trustee. It is apparent that Dr Burger’s view was largely based on a recent decision in 2005 in the Liechtenstein Supreme Court. I was referred to that decision. It does seem to me that the facts on which the Supreme Court came to its conclusion in that case that a de facto trusteeship existed arose from a very extreme factual background where beneficiaries effectively took control of the running of a trust from day to day. See also the cross-examination of Dr Wanaweser on day 16 in particular at page 68 and 77.

In the result I conclude that Liechtenstein law requires that, in order to constitute an individual a de facto trustee of a trust, and so liable for his actions in relation to a particular transaction, it is not sufficient to demonstrate that in a formal sense that person is in a position to control the de jure trustee but he must be shown to have interfered in the transaction so as to affect any decisions which the de jure trustee took in carrying it into effect.

Mr Robadin described the events leading up to the commencement of the Landglaze payments between paragraphs 19 and 21 of his witness statement of the 26^th August 2005. I can find no reason not to accept his description of the facts. Mrs Didisheim was at the time Mr Robadin’s immediate superior at the Bank and an authorised signatory of Primeway for the purposes of the first two payments. Mr Robadin’s witness statement reads as follows:-

“19.

I was provided with the original of the 6 March 1992 resolution under cover of an internal memorandum from Mr Klonis dated 20 March 1992. The resolution, signed by Mr Tayeb and Mrs Al Abood, recited at the outset that the Managing Committee had decided to play a more pro-active role in the Shake Trust's investment strategy. Consequently, it instructed the Bank to replace the existing investment guidelines with new investment guidelines as set out. The Bank was asked to provide a quarterly US dollar valuation to Mr Tayeb and a full report on its performance. The resolution also stated that.

“- The Managing Committee of the Trust is hereby authorizing Mr Nezet M. Tayeb to give instructions to the Bank about the payment of an administration fee starting as from the 1st of January 1992.

- This fee cannot exceed 0.5% p.a. of the total assets of the Trust and wi11 be based on the quarterly valuation of the Bank. The payments will be effected every three months beginning at the end of March 1992.”

Mr Klonis explained to Mrs Didisheim that part of the purpose of the 6 March 1992 Resolution was to enable the Shake Trust to make payments to Mr Tayeb as remuneration for his services as Chairman of the Managing Committee of the Shake Trust. It is almost certain that I discussed the terms of the 6 March 1992 Resolution with Mrs Didisheim given the way in which she worked although I do not now have any specific recollection of that conversation. There was nothing about the resolution which in any way seemed suspicious. It appeared to be simply a change of investment guidelines and an authorisation to pay an administration fee.

20

Primeway notified Mr Des Arts of IMS of the new investment guidelines under cover of my memorandum dated 30 March 1992. This memorandum is signed by Mrs Didisheim and myself (which is another reason why I am sure Mrs Didisheim and myself discussed the terms of the 6 March 1992 Resolution) on behalf of Primeway as one of the Shake Trust's trustees giving instructions to the Bank. On 27 April 1992, Mr Tayeb gave written instructions (as anticipated in the 6 March 1992 Resolution) to pay the ‘quarterly administration commission of 0.5% of the above Trust as on 31 March 1992 and quarterly thereafter to the account of Landglaze Holdings with yourselves.’ Mr Klonis sent a copy of this fax to me under cover of an internal memorandum of 27 April 1992. I sent an internal memorandum on behalf of Primeway to Mr Des Arts of IMS dated 29 April 1992 referring to the new investment guidelines and the calculation of the administration fee. IMS calculated the fee that was due on the basis of the 6 March 1992 resolution and informed Primeway so that it could authorise the payment to Landglaze in accordance with Mr Tayeb’s instructions. The Bank was of course obliged to follow the instructions of Primeway in this respect.

21.

The first administration fee payment of US$35,917 was made pursuant to an inter-account transfer order signed by Mrs Didisheim and I and dated 8 May 1992 and from 8 July 1992 they were made quarterly. There were 26 payments made in all: each of them calculated by IMS and authorised by two individuals duly authorised to sign on behalf of Primeway. A table showing the, date of each payment and identifying the relevant signatories is at Appendix 1 to this statement.”

On the 11^th January 2000 solicitors then acting for Mrs AB wrote to Dr Meier seeking his authorisation on behalf of the Trustees for the commencement of proceedings by the Shake Trust against Mr Tayeb to recover the payments. That authorisation was refused in a letter from Primeway to those solicitors of the 18^th January 2000. The material part of that letter reads:-

“Unfortunately we cannot allow you to commence proceedings against Mr Tayeb on behalf of the Trust for the reasons put forward in your letter.

It seems curious to us to say the least that Mrs Al Abood wants to bring an action against Mr Tayeb for something that she has required and accepted herself by countersigning the demand made by the Managing Committee to the Trustees on the 6^th March 1992.

Therefore we would like on the contrary that your client explains to us why she made such a request at the time, i.e. to be paid for the role of member of the Managing Committee, and required us to follow the instructions given by Mr Tayeb in this respect? We hold her fully responsible for the payments made to Mr Tayeb on behalf of the Managing Committee.”

At a meeting three days later on the 21^st January 2000 attended by Dr Meier, Mr Robadin for Primeway as trustees, Mr Courvoisier for the Bank, and Mrs AB and her lawyer, of which a minute is in evidence, it is recorded that “the Trustees have no objection to any legal action taken by Mrs Al Abood against Mr Tayeb.”

It seems clear, therefore, that the initial decision to refuse permission for the Shake Trust to proceed against Mr Tayeb for the recovery of the Landglaze payments was not a decision of the Bank. The request was made to the Trustees who refused it.

I can find no evidence that the Bank, other than as a conduit pipe for information through Mr Klonis, played any part in the decision to make the Landglaze payments so as to constitute itself a de facto trustee of the Shake Trust for that purpose. The Bank acted solely as a banker honouring transfer orders drawn by the duly authorised signatory on the Trust’s account at the Bank in favour of Mr Tayeb.

The second way in which the claim is put by the Shake Trust against the Bank is under Swiss Law namely breach by the Bank of its mandate from the Trust by honouring the transfer orders made payable to Landglaze by way of payment of commission to Mr Tayeb. It is contended that the Bank is not entitled to rely on the signature of Primeway as sole signatory on the account because the Bank was at all material times aware that the Trustees were required to, but had not, authorised the payments.

Mr Robadin in his witness statement denies that, as matter of fact, the Bank was so aware.

It was Dr Batliner’s expert evidence, given in the course of his cross-examination, that notwithstanding that the Trust’s bank mandate included Dr Meier as a joint signatory the Bank was entitled, in the absence of bad faith on its part to rely on the sole signature of Primeway by its duly authorised signatories from time to time. See transcript day 17 pages 17 -20. Thus unless the Bank can be shown to have been aware that the Trustees had not authorised the payment, notwithstanding that one of them had signed the transfer order, the Bank was within its rights, indeed, possibly, required to honour a cheque validly drawn by the sole signatory trustee.

It is not pleaded that the Bank was aware, at the time the Landglaze payments were made, that due authorisation for those payments had not been given on behalf of the Shake Trust. Mr Robadin deals with this at paragraphs 57 and 58 of his witness statement as follows:-

“57.

I am also aware that Mr Justice Rimer has found that the Managing Committee was not entitled to authorise the commission paid under the authority of the 6 March 1992 Resolution and that a joint resolution of Primeway and Dr Meier was required. This was not the understanding of Mrs Didisheim and myself in 1992 or at any time subsequently.

58.

Primeway’s understanding was that, given the terms of the 6 March 1992 Resolution and the fax from Mr Tayeb dated 27 April 1992, it was entitled to authorise the Bank to pay commissions to Landglaze without Dr Meier’s joint approval. If the position had been otherwise, Primeway would of course have sought Dr Meier’s consent. The Bank paid the commissions to Landglaze on the basis of instructions given to it by two authorised signatories of Primeway. Whatever the fault of Primeway in this regard, the Bank was bound to follow the instructions given to it by Primeway.”

Again I have no reason not to accept Mr Robadin’s evidence.

In my judgment the claims under this head made against the Bank on the basis of breach of trust and contract, under Liechtenstein and Swiss Law respectively, fail.

However if either of those conclusions are wrong it seems to me that as a matter of law this claims fails because it is not established that the Shake Trust has suffered any recoverable damages as a result of the actions of the Bank.

The Shake Trust seeks to recover the costs that it has incurred in the proceedings against Mr Tayeb which it has not recovered from him pursuant to the costs order made by Mr Justice Rimer in the proceedings. It must be borne in mind that Mr Justice Rimer’s order was for Mr Tayeb to pay to the Trust 90% of the costs taxed on a standard basis. The discount of 10% was to take account of the fact that the Claimants in the proceedings had pursued an argument against Mr Tayeb which had failed and of which the judge was of the view that it was unreasonable to have pursued.

The question of the recoverability as damages of costs incurred by a party in other proceedings brought by him by way of mitigation of his loss was dealt with by Mr Justice Carnwath in British Racing Drivers Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667. The facts are complicated but it is sufficient to say that the fundamental proceedings were an action by two companies against their solicitors for negligently failing to advise them of the necessity to comply with section 320 of the Companies Act 1985 before putting into effect a decision to acquire the business of another company. On the way to commencing the proceedings against the solicitors the claimants had sought to get out of the transaction in question by proceedings for rescission which had been settled but after they had incurred substantial costs in their pursuit. A question which the judge had to determine was how those costs were to be assessed as damages. Mr Justice Carnwath, relying on certain dicta in the decision of the Court of Appeal in the Tiburon [1992] 2 Lloyds Rep 26 concluded that where a claim is being made for costs incurred in other proceedings as damages the measure of those costs must be costs as assessed on the standard basis and costs incurred in excess of such an assessment were irrecoverable. The relevant passage in his judgment appears at page 691 of the report as follows:-

“ Conclusions on fees

The expenditure on the professional fees of solicitors and accountants was, as I have held, expenditure incurred by the plaintiffs in reasonably mitigating their loss. Prima facie therefore, it is claimable under the ordinary rules relating to mitigation. However, litigation costs have traditionally been subject to special rules for policy reasons. Prior to the change in the taxation rules there was an established distinction between such costs incurred in proceedings between the same parties, and those incurred in proceedings against third parties. This was anomalous, given that similar policy considerations applied in each case. The most recent cases show that the position must be reconsidered in the light of the changes to the taxation rules. This enables the anomaly to be resolved. Under the new dispensation, taxation on the standard basis is to be regarded as equivalent to the solicitor and client basis referred to by McGregor. Accordingly, where costs on the standard basis have been recovered from the defendant in other proceedings, there is no basis for an additional claim by way of damages.”

My attention was drawn to passages in the most recent edition of McGregor on Damages at paragraph 17-017 and 17-018 in which attack is mounted on this judgment. However I was also shown the judgment of Mr Justice Ferris in the case of Yudt & ors v Leonard Ross & Craig & ors unreported judgment 24^th July 1998. This again was a claim for negligence against solicitors but brought by trustees and beneficiaries of a family trust. Again the facts are complex but it is not necessary for me to attempt to summarise them. It suffices that I set out a passage in the judgment at page 34 where Mr Justice Ferris is recorded as saying this:-

“The costs which are the basis of this part of the claim in the present case are the exact equivalent of the costs considered in the Hextall Erskine case. It is not possible to distinguish that case. It therefore becomes necessary to consider the second question referred to above, namely whether the Hextall Erskine decision ought to be followed in this case.

I confess that I am impressed by the criticism in the latest edition of McGregor on Damages of this part of the decision of Carnwath J and of the dicta in the Court of Appeal on which it is based. The general rule is that one judge at first instance is not strictly bound by the decision of another judge of co-ordinate jurisdiction. But a judge of first instance should, as a matter of judicial comity, follow a decision of another judge of first instance unless he is convinced that it is wrong (see the statement of ‘the modern view’ in Police Authority for Huddersfield v Watson [1947] 1 KB 842, [1947] 2 All ER 193 at page 848 of the former report, and compare Colchester Estates (Cardiff) v Carlton Industries plc [1986] Ch 80, [1984] 2 All ER 601 at page 85 of the former report). While I have doubt, I am certainly not convinced that Carnwath J was wrong. Moreover he based himself on clear dicta in the Court of Appeal. Great confusion might arise if I were to take a different view. If the matter is to be further considered this must, in my judgment, be done by the Court of Appeal.

Accordingly in respect of this head of damages I shall direct an inquiry to determine what amount would be payable in respect of Nicola and Gabrielle's own costs if these costs were taxed on the standard basis and I shall award as damages the amount so found.”

My attention was directed to the decisions of the Court of Appeal in Penn v Bristol and West Building Society [1997] 1 WLR 1356 and Grocutt v Kahn [2003] Lloyds Rep IR 464. It does not seem to me that the judgments in either of those cases bear upon the point in question.

Just as Mr Justice Ferris in the Yudt case felt constrained to follow the judgment of Mr Justice Carnwath in the British Racing Drivers Club case, so do I. However I do so willingly. It seems to me that where the costs of litigation are sought to be recovered as damages the appropriate method of assessment is the amount which would be awarded on assessment by a costs judge on the standard basis. I see no reason why a claimant should recover as damages costs referable to every step that he took in the proceedings in question however unreasonable. In my view it is at least arguable that costs in excess of those which a costs judge would award on the standard basis do not constitute foreseeable damage when sought to be recovered as damages.

Before leaving this aspect of the case I draw attention to the fact that it was not argued that any foreign law rules applied to the Shake Trust claim to recover its unpaid costs of the Landglaze proceedings. In any event no evidence of foreign law was adduced by the parties on this issue.

Between the 7^th April 1992 and 24^th February 1995 the Bank’s Investment Management Services Department undertook currency hedging operations (in the form of forward foreign exchange transactions) in respect of the Shake Trust’s assets. See paragraph 312.2 (c) (i) of the further amended particulars of claim. The Trust’s claim arising out of that happening has altered and contracted substantially in the course of the proceedings. It is now confined to a claim for damages resulting from the Bank, as authorised manager of the investment of the Trust’s assets, applying Trust assets to enter into currency hedging transactions in order to protect that part of the fund not denominated in Dollars from an increase in the value of the Dollar with the result that the assets of the Trust ceased to conform to the guidelines laid down in the 6^th March 1992 resolution of the Managing Committee of the Trust to which I have already referred. The relevant part of the minute of that resolution reads as follows:-

“- The Managing Committee of the Trust has decide to play a more pro-active role in the definition of the investment strategy and the administration of the assets of the Trust.

-

Consequently the Bank is instructed to replace the guidelines of the first page of the by-laws referring to the management of assets with the following conditions:

a)

Cash or assimilated assets (maturity maximum 12 months between 10% and 15%.

b)

USA treasury stripes approximately 5%.

c)

ECU zero coupon Bonds, Public Sector issues including supranationals, rating AAA or equivalent approximately 5%.

d)

Bonds AAA or equivalent up to a maximum of 5 years maturity, between 75% to 80%.

e)

The reference currency of the Trust’s assets remains the US Dollar, with an approximate split: 80% in US Dollars 20% in other currencies.

- The above percentages refer to the total assets of the Trust presently managed by LLOYDS BANK PLC, GENEVA BRANCH.”

The claim is made under Swiss Law and arises from a breach of the Bank’s mandate with the Trust. It is thus a breach of contract claim.

As appears from paragraph 78 and following of the Claimants’ closing submissions the following matters are common ground:-

It seems to me clear that this claim fails completely on the facts.

It is first necessary to be reminded that the Resolution in paragraph (e) uses the words “with an approximate split” of 80/20. Mr Courvoisier gave evidence by means of a witness statement dated the 29^th August 2005. At paragraph 31 he says:-

“I also do not accept KPMG’s conclusion that the effect of the transactions was to convert the Shake Trust portfolio essentially into US Dollars and therefore in breach of the by-laws requiring 20% to be held in other currencies. The foreign exchange transactions only hedged the currency exchange rate risk. They did not remove the interest rate and performance risk of having investments in currencies other than the Trust’s reference currency. The hedging of the interest rate risk would have required exchange rate swaps as well. Thus in my view the interest rate and performance risk of the portfolio remained diversified between US Dollars and other currencies as provided by the by-laws. KPMG’s conclusion is only correct if the underlying assets were foreign currency deposits being hedged. As to this, the first hedging transaction on the KPMG list related to a Deutschmark deposit which, due to the hedge, was considered part of the US Dollar element of the portfolio in the relevant quarterly report. However, the balance of the hedging transactions related to underlying bond investments and not deposits.”

As required by the 6^th March Resolution the Bank made quarterly reports which, inter alia, showed that the requirement of an 80/20 split was being complied with. Those reports were produced on disclosure and were in evidence. That for the 30^th June 1992 has a sheet headed “Shake Trust effective currency/asset breakdown versus by-laws” showing a breakdown of the assets and in the final two columns a comparison between the percentage of the holding of US Dollars and non US Dollars with a split of 80/20 in favour of US Dollars and that the asset make up of the fund complied with the by-laws. There are similar reports in respect of each of the quarters down to the last quarter of 1994 which is not in evidence because I am told it has gone missing. No attempt has been made to falsify any of the figures shown in these reports. There will, of course, be brief periods, when a non-Dollar denominated investment falls to be realised when the make up of the assets will briefly breach the 80/20 rule but that will only be until the proceeds can be reinvested so as to comply with the rule. The wording of the 6^th March Resolution allowed for “approximate” compliance.

At paragraph 85 of the Claimants’ closing submissions it was submitted that “Mr Courvoisier accepted that a consequence of a hedge was that to the extent that the underlying investment was hedged then that part of the non US Dollar assets was in effect converted to a USD asset.” A reading of the transcript of Mr Courvoisier’s cross-examination on day 15 in particular at pages 85, 90 and 98 show that Mr Courvoisier made no such admission.

Even if it were possible to challenge the evidence of the quarterly reports the Claimants have failed to adduce any evidence that the Trust incurred losses as a result of the alleged breaches of the Investment Guidelines. Such evidence would need to show that the overall value of the Trust assets was diminished as a result of failing to balance those assets in accordance with the 6^th March Resolution. No attempt has been made to do this. I repeat that before a court will order an enquiry as to damage it is necessary for the Claimants to demonstrate that there is some possibility of loss.

The Shake Trust claims that the Bank is liable for having paid out three amounts of Swiss francs, namely, 1,054.25 paid to ATU on the 23^rd January 1998, 13,640.59 paid to Meier and Holzhacker on the 18^th November 1998 and 18,705 paid to ATU on 7^th July 2000.

In each case the document instructing the Bank to pay is in evidence and shows that payment was approved by Primeway which, as already pointed out, was a sole signatory on the Shake Trust’s account at the Bank. It follows that, without more, the Bank in paying these amounts was operating within its mandate from the Shake Trust and there has been no breach of that mandate in respect of which damages are recoverable. This is a claim against the Bank, not a claim against the Trustees for authorising inappropriate dispositions of the Trust’s assets.

The only place where I can find that this claim is pleaded is at paragraph 317.3(t) where it is pleaded as one of the items in respect of which an account was claimed which claim has now been dropped although this passage in the further amended particulars of claim has not been struck out. In respect of the first two payments it is simply pleaded that “the Bank should not have approved the payments…” no reasons are pleaded for why that is the case in the light of the Bank’s mandate. As to the third payment it is pleaded that “the Bank should not have charged the whole sum of CHF 18,705 to the Shake Trust…” because Dr Meier, for whose services the payment was made was at the time assisting the Bank in relation to the negotiations regarding the Settlement Agreement and was advising Mr Robadin on how he and Mr Robadin might respond to Barlow Lyde & Gilbert’s letter of the 11^th January 2000 to which I have already referred. It is not said how much of the payment the Claimants regard as justified. No questions were asked of Mr Robadin in the course of his cross-examination, or of Mr Klonis, in the course of his questioning over four days in May and June 2005 in Geneva, about these payments.

It seems to me that the Claimants have failed to discharge the burden of proof which rests on them to show that these sums were recoverable as damages for breach of the Bank’s mandate.

It follows that in my judgment each of the four remaining claims in the case fails for the reasons which I have set out above and that it is not necessary for me to go on to consider whether the Settlement Agreement of the 22^nd June 2000 was effective to settle the 20% transfer claim, the Forex transactions claim, and the first two of the fees claims. But I will do so very briefly.

On the face of the document recording the Agreement the parties were, on the one hand Mrs AB and Mahmoud and on the other hand the Bank, Primeway, Dr Meier and ATU. The Shake Trust was not on the face of the document a party although the two trustees for the time being of the Shake Trust were.

The preamble to the Agreement reads:-

“In order to withdraw the current complaint against Lloyds Bank in Geneva on the subject of Shake Trust Reg. (herein after “Shake Trust”) and put an end to past controversies, the parties agree as follows:”

There is then at clause 1 a provision for the appointment of three new Trustees whereupon Primeway and Dr Meier will resign as such Trustees. At clause 2 are provisions for the registration of the new Trustees and at clause 3 for the Bank to transfer the assets to other banks appointed by the new Trustees or the Managing Committee. Then at clause 4:-

“The plaintiffs [Mrs AB and Mahmoud] shall, with discontinuance, and in execution of this Agreement, withdraw the complaint lodged by them against Lloyds.”

Then at clause 5:-

“The plaintiffs give full discharge to the Bank, to ATU and to the Trustees in all matters concerning Shake Trust, including management of the commissions paid to the Managing Committee.”

It was not in issue between the parties’ Swiss Law experts that in an appropriate case it is open to a court to imply into an agreement a party who is not on the written record of the agreement a party, but whose presence was clearly necessary to carry, what the court believes to be the true purpose of the agreement, into effect. See Mr Vischer’s cross-examination at day 17 page 71.

Given that the circumstances of the Agreement were that after protracted negotiations, following an unsuccessful claim against the Bank in the Geneva courts, where it is demonstrable from the relevant documents recording the stages in the negotiations that the parties intentions were to arrive at a global settlement and that that settlement involved Mrs AB achieving her objective of obtaining entire control of the Shake Trust and its assets, and given also that the existing trustees of Trust were parties who were capable, if the beneficiary of Trust consented, who also was a party, of releasing the Bank from the Shake Trust claim, it seems to me that a strong case is made for the implication of the Shake Trust as a party to the Agreement. It was Mrs AB’s evidence in cross-examination that that was her view immediately after the Agreement was made; see day 9 of the transcript at page 128. It seems to me that this conclusion is supported by the first sentence in paragraph 5 of the Settlement Agreement. “All matters concerning the Shake Trust” must have included the Shake Trust claims against the Bank. Without the Shake Trust being a party the release comprised in that sentence could not have been effective and the result would not have been a “full settlement between the parties”.

For these reasons in my judgment the Claimant’s claims fail.

As a postscript to this judgment directed to Mrs AB personally and not to her present advisors, she must understand that because a large number of the claims which were made in these proceedings were, as a result of the amendments made early in the case, removed from the claim and so are not the subject of this judgment, does not mean that they can hereafter be revived in this jurisdiction (and, I would have thought, in most other jurisdictions). Those claims are also dismissed as are all claims by her, her son Mahmoud and the Shake Trust Reg against the Bank which any of those parties could reasonably have included in the present proceedings but have not done so. I would echo the comment of Mr Justice Lightman in dismissing Mrs AB’s appeal against the order of Master Moncaster in the Part 8 proceedings brought by her against Mr Tayeb on the 26^th July 2005 when he said “it will be a mercy to all concerned to bring this extravagantly expensive litigation to a close.”