Walanpatrias Stiftung v Lehman Brothers International (Europe) & Ors

These proceedings have raised a number of concerns in my mind which I expressed in the course of the hearing. They arise in the not unusual context of a jurisdiction dispute. But the underlying issues and protagonists and the litigation to which they have given rise are less usual and have, I think, given rise to real risks that the interests of those beneficially concerned may become, if they have not already become, lost in an ever-escalating legal morass.

There are two applications before the court.

The first is an application by AMP Services Limited (AMP) for an order setting aside service of these proceedings upon it out of the jurisdiction, alternatively for a stay on forum nonconveniens grounds or on case management grounds pending “judgment or other final order in proceedings between AMP and Walanpatrias Stiftung (Walanpatrias) before the court in Florida”. Cooke J granted permission to serve the proceedings on AMP in the British Virgin Isles on 7 October 2005. The relevant court in Florida is the Circuit Court of the 17^th Judicial Circuit in and for Broward County.

The second application is an application by Lehman Brothers International (Europe) (LBIE) for an order staying the claims against LBIE pending final determination of (1) the dispute between Walanpatrias and AMP concerning the legal and beneficial ownership of assets held by LBIE in an investment management account known as the Doraw Account and (2) of the claims made by the Government of the United States of America on behalf of the Internal Revenue Service (the IRS) in proceedings before the federal court in New York in which the IRS asserts that the Doraw Account is situated in New York and is subject to a substantial tax liability.

Walter Bronner and his wife Anna Bronner were of German origin. They had each separately moved to Colombia before the Second World War where they met and, in 1946, married. Mr Bronner established a successful business. When they moved to Monaco in the early 1980s, Mr Bronner was a very wealthy man. The Bronners had no children and the evidence suggests that they made generous provision for such of their relatives as they wished during their lives. In August 1995, Mr and Mrs Bronner made wills leaving their estates first to each other and thereafter to certain Israeli charities. A Mr Harry Joseph, a lifelong friend, who lived in Florida, was the named executor of both wills. Mr Bronner died in 1996, aged 89. His estate passed under his will to Mrs Bronner. That is reflected in an Order of the Tribunal of First Instance of the Principality of Monaco dated 22 April 1996. In August 1996, then aged 91, Mrs Bronner made a new will, revoking all previous wills, and providing that 70% of the annual net income on her estate be distributed to various Israeli, Monegasque and other charities. The new will also stated that Mrs Bronner was “looking at the creation of a trust or foundation” to carry out the specified charitable purposes but that if she was not left enough time to do this a Mrs Whyte, her and Mr Bronner’s secretary, a notary in Monaco (Mr Rey) and her Bank Manager in Monaco (Mr Jacques) should carry out that task and ensure that all her wishes were executed.

Walanpatrias was created on 16 October 1997. It is a Liechtenstein Foundation. The beneficiaries are charitable institutions in Israel and Monaco. The original directors were Mrs Bronner, Mrs Whyte, Mr Jacques and a Mr Simmen, a Liechtenstein lawyer. Mrs Bronner is said to have transferred “the bulk of her substantial wealth to the Foundation during her lifetime”. Whilst the Bylaws of Walanpatrias have been disclosed, they are not very informative. They provide that the Board is obliged to distribute the assets “in accordance with the bylaws and regulations” and that “contributions” can be made to persons and institutions in a manner consistent with “the regulations”. But the regulations have not been disclosed.

Mr Bronner had created an investment vehicle (a Panamanian Corporation) called Monavest Corporation which owned an investment account (the Monavest account) opened in January 1992 and held with and managed by CIBC Oppenheimer International Limited (CIBC) an investment firm incorporated in England with its principal place of business in London. On his death, Monavest was owned by Mrs Bronner. On 30 July 1998, by an agreement made between Monavest, Walanpatrias and CIBC, Monavest transferred legal and beneficial ownership of the Monavest account to Walanpatrias to be held in the name Doraw. The transfer was governed by English law. Mrs Bronner signed the agreement (with others) on behalf of both Monavest and Walanpatrias.

On 15 January 1999 Mrs Bronner died in Monaco where she had continued to reside. The August 1996 will was produced to the Tribunal of First Instance in Monaco which, on 6 January 2000, made an Order vesting her estate in Walanpatrias.

AMP was incorporated in the British Virgin Isles on 19 February 1999. It is a trustee services company. On 10 October 2002 AMP agreed to become a trustee of a settlement created under Jersey law and called “the Walter and Anna Bronner Trust” (“the Bronner Trust”). The beneficiaries of the Bronner Trust (with stated percentages of interest in the assets of the Trust) are 9 Israeli charities led by the Weizmann Institute of Science with a 20% share. Three of the charities, including the Weizmann Institute, are also discretionary beneficiaries of Walanpatrias and it is said, albeit no accounts or other details have been given, have received distributions of income from Walanpatrias.

The Weizmann Institute is, the court was told by Mr Flint QC, for AMP, financing the legal costs of AMP. None of the other beneficiaries of the Bronner Trust, apart from the other two overlapping beneficiaries, are aware of the present proceedings and issues. The beneficiaries of Walanpatrias are, the court was told by Mr Malek QC, for Walanpatrias, aware of the proceedings but it was not known in what detail. It is one of the concerns to which I referred in the first paragraph of this judgment that not only does it seem that, through Walanpatrias and AMP, some of the beneficiaries are in a real sense suing themselves but also those on whose behalf the two trusts purport to be acting may be ignorant or less than fully aware of matters in which they have a real interest. The substantial legal costs being incurred are a further concern.

AMP claims to represent the interests of the charities which are the beneficiaries of the Bronner Trust and, by way of assignment, the claims (if any) of relatives of Mr and Mrs Bronner, the estate of Mr Joseph (who died on 27 December 2001) and the estates of both Mr and Mrs Bronner. To quote from Mr Flint’s skeleton argument:

“The Bronner Trust, planned by the Bronners before Walter’s death, was formalised after the subsequent death of Anna and is the vehicle by which assets of the estates of Walter and Anna Bronner are sought to be recovered from those who AMP believes to have stolen them.”

The targets of this allegation of theft are those who control Walanpatrias, Mrs Whyte and Messrs Simmen and Jacques.

LBIE is an investment firm incorporated in England. Its principal place of business is London. LBIE is an affiliate of Lehman Brothers Inc (LBI), a company incorporated in Delaware and having its principal place of business in New York. Lehman Brothers Holding Inc (LBHI) is the ultimate holding company of both LBIE and LBI. LBHI also has its principal place of business in New York.

LBI acquired the rights of CIBC in CIBC’s contracts with certain of its customers, including Walanpatrias. The Walanpatrias account at CIBC (see paragraph 7) in the name of Doraw consisted predominantly of US securities and $US cash. LBI custodied the US securities and cash through an account in the name Doraw at LBI. This account was the subject of a client agreement between LBI and Walanpatrias governed by New York law entered into by February 2000.

The account was managed by LBIE and LBI acted as custodian for LBIE acting on LBIE’s instructions in relation to the account (“The Doraw Account”). The management by LBIE was the subject of a number of agreements, made between January 2000 and August 2001, between LBIE and Walanpatrias. The agreements provided that they were governed by English law and Walanpatrias agreed to submit to the exclusive jurisdiction of the courts of England in relation to any dispute in connection with or arising out of the agreements. In about February 2004, Walanpatrias instructed LBIE to transfer the assets custodied with LBI to be custodied by LBIE itself. LBIE and Walanpatrias entered into a “Master Custody Agreement”, signed by LBIE on 2 March 2004, which was subject to English law and by which both parties irrevocably agreed to submit to the jurisdiction of the courts of England.

The assets of the Doraw Account are valued at a sum of about $US 100 million. Walanpatrias also holds other assets of very substantial worth (the evidence suggests a value of the same order as the Doraw Account) derived from Mrs Bronner but which were and are not part of the Doraw Account.

Although Walanpatrias obtained permission to serve these proceedings out of the jurisdiction on both LBI and LBHI, on 12 June 2006 the proceedings were discontinued by Walanpatrias against both of them.

The Claim Form in these proceedings was issued by Walanpatrias on 30 September 2005. It was accompanied by Particulars of Claim. The relief sought in the Claim Form, so far as relevant, is:

“(1)

A Declaration that the Claimant is the legal and beneficial owner of the assets transferred to the Claimant by the late Mrs Bronner during her lifetime or by her last will dated 29 August 1996.

(2)

A Declaration that the Claimant is the legal and beneficial owner of the funds held by the First Defendant in the name of the Claimant in Global Investment Management Account Doraw No 022-35030 (“the Doraw Account”) and entitled to the full value thereof from time to time shown in the books and records of the First Defendant.

(3)

A Declaration that the Claimant is entitled to direct transfers from and/or payments out of the Doraw Account to the full value thereof from time to time shown in the books and records of the First Defendant without deduction or set off of any sums paid by the First and/or Second and/or Third Defendants to the United States Internal Revenue Service (“the IRS”) or for which the First and/or Second and/or Third Defendants incur, accept or acknowledge liability to the IRS, in response to the IRS Notices of Levy dated 5 January 2005 (“the January 2005 Notices”).

(4)

An Order restraining each of the First, Second and Third Defendants from (i) transferring to the IRS and/or realising and paying to the IRS any funds in the Doraw Account in respect of the Jeopardy Assessment (as defined in the attached Particulars of Claim) and/or the January 2005 notices, and/or debiting to the Doraw Account and paying to the IRS any amounts in respect of the same, or procuring or facilitating any of the foregoing actions, other than on the express instructions of the Claimant in accordance with its mandate; and/or (ii) treating the Doraw Account as subject to a purported contractual indemnity and/or security and/or lien in its or their favour having priority to the Claimant’s rights in respect thereof, or permitting or facilitating such treatment.”

As I have said, the proceedings against LBI and LBHI (the second and third defendants) have been discontinued. In order to address the issues which arise on the present applications, I shall describe the first Declaration as “the overall ownership claim”, the second as “the Doraw Account ownership claim”, and the third and fourth order as “the IRS claim”. The IRS is seeking to realise the tax claim from the Doraw Account. LBIE claims to be entitled to pay the claim (if valid) from the Account and to be entitled to an indemnity, should the claim have to be met by LBI or itself, from Walanpatrias.

The Particulars of Claim allege, by reference to proceedings brought by AMP in both Florida and New York, described in more detail below, that AMP has “impugned the creation” of Walanpatrias and the gifts and transfers made to it by Mrs Bronner, alleging the 1996 will was procured by “coercion, duress and undue influence against” Mrs Bronner and conspiracy to control the assets of her estate. The Particulars of Claim also allege that LBIE “does not accept” that Walanpatrias is the owner of the Doraw Account. The basis for this allegation is an agreement dated 21 May 2004 made between LBIE and AMP which has been referred to as “the AMP Holding Agreement”.

Walanpatrias’ case on the IRS claim is that any tax levy can only be effective to seize assets in the custody of a person within the U.S.A., whereas neither LBI nor LBHI have custody of the assets and LBIE has not even been served with the Notices and is in England.

The Prayer makes it clear that the Declaration sought in the overall ownership claim is sought only against AMP, unlike the Declaration in the Doraw Account Ownership claim which is sought against both AMP and LBIE. The relief sought in relation to the IRS claim is only sought against LBIE.

The Application was made on 4 October 2005. It was supported by a Witness Statement of Mr Ford, a principal in Withers, the English solicitors for Walanpatrias. The application relied against AMP on the two grounds of “jurisdiction” to be found in CPR Part 6.20(3) and (10), namely that:

“(3): a claim is made against someone on whom the claim form has been or will be served … and-

(a)

there is between the claimant and that person a real issue which it is reasonable for the court to try; and

(b)

the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim”.

“(10)

the whole subject matter of a claim relates to property located within the jurisdiction.”

The “other” person relied upon under 6.20(3) was LBIE. Mr Ford was careful to state that 6.20(10) was relied upon only in respect of the Doraw Account ownership claim and not the overall ownership claim. But he added, referring to Walanpatrias as “the Foundation”:

“AMP in the US litigation has challenged the Foundation’s title not only to the funds in the Doraw Account but also to all assets gifted or transferred by Mrs Bronner to the Foundation during her lifetime or by the 1996 Will. The grounds of challenge are the same in both cases. Accordingly (i) in determining the legal and beneficial ownership of the Doraw Account the Court will inevitably have to rule upon the grounds alleged by AMP to vitiate the lifetime or testamentary gifts and transfers made to the Foundation by Mrs Bronner; and (ii) the Foundation anticipates that AMP will seek declaratory or other relief against it in relation to such gifts and transfers by way of counterclaim.”

That anticipation has not of course been fulfilled to date. Mr Malek QC, for Walanpatrias, rightly acknowledged that, absent agreement, there was no basis on which this court could take jurisdiction over the overall ownership claim because, other than the Doraw Account, the further assets were not wholly located within this jurisdiction. Unsurprisingly, AMP were not prepared to agree to jurisdiction even if they were unsuccessful in their general challenge to jurisdiction. On the other hand, and again rightly, Mr Flint accepted that as Walanpatrias’ claim to ownership of the Doraw Account was a claim to a chose in action against LBIE which, in view of the English law and jurisdiction clauses and the corporate status of LBIE, was wholly located in England, that claim was “property” located in England within the words of CPR 6.20(10) which are wider than the predecessor rule in the RSC: see In Re Banco Nacional de Cuba [2001] 1 WLR 2039 per Lightman J at paragraph 33. No grounds of challenge to the other assets held by Walanpatrias has in fact ever been advanced by AMP which does not mirror those it relies upon in respect of the Doraw Account.

Mr Flint placed some emphasis on the fact that Mr Ford said in his Witness Statement that: “one of the purposes of the London proceedings is to expose the false, unfair and concocted nature” of the allegations made by AMP in the Florida and New York proceedings. Mr Ford addressed the question of forum conveniens at some length in his Witness Statement but that is better considered later in this judgment.

In the 1970s the Bronners bought a condominium in Fort Lauderdale, Florida. In the context of their wealth their assets in Florida were wholly insignificant. The condominium was valued in 2001 at some $US 225,000. A Bank account in Florida had a credit balance of some $US 20,000.

On 16 January 2001, (two years after Mrs Bronner’s death), Mr Joseph commenced a petition for administration of the estate of Mr Bronner in Florida. The petition related only to the assets in Florida. It asserted that Mr Bronner was domiciled in Monaco at the date of his death, that his will was nonetheless ineffective with respect to the condominium (as realty) but effective with respect to personal property in Florida “since under conflict of law principles personal property is governed by the law of the decedent’s domicile at death….” The petition alleged that Mr Joseph and Mrs Bronner had been prevented from forming the trust for Israeli charities which the Bronners had desired “by the inappropriate actions of third persons in Monaco through the exercise of fraud, undue influence, and tortious interference by such persons”.

On 9 October 2001, a Florida lawyer, Mrs Schwarz, filed a “petition for ancillary administration” in the Florida court in respect of Mrs Bronner’s estate. There is uncontested evidence that Mrs Schwarz was acting for Walanpatrias and some evidence that she misled the court as to the source of her instructions. The petition asserted that Mrs Bronner had been domiciled in Monaco at the time of her death, that Walanpatrias was the only beneficiary of her estate, and sought the appointment of Mrs Schwarz as personal representative of “the Florida estate” of Mrs Bronner.

Mr Joseph died on 27 December 2001. His estate, in February 2002, filed 9 claims in the Florida court in the estates of both Mr and Mrs Bronner. 7 of the claims were for fees and expenses said to be due for administering the estate of Mr Bronner and the “contemplated trust”. Two of the claims, in the most general terms, were for “punitive damages due to the fraud, misrepresentation and tortious interference with the administration” of the estate of Mr Bronner claimed in the sum of $25 million, and “to recover assets sought to be administered on behalf of charitable beneficiaries” of the estate of Mr and Mrs Bronner in a sum of some $178 million “plus increases generated” from 10 February 1996, the date of Mr Bronner’s death.

On 10 October 2002, the estate of Mr Joseph assigned all 9 claims to the Bronner Trust for $10. On 4 November 2002, AMP commenced a civil action in the Florida court as trustee of the Bronner Trust as assignee of Mr Joseph against a Mr Judd “as Curator of the Estates” of Mr and Mrs Bronner. Mr Judd was appointed as such by Judge Speiser. The claim was limited to the fees and expenses claims. On 22 May 2003, AMP filed its First Amended Complaint in the Florida civil action asserting claims against Walanpatrias, Mrs Whyte, Mr Simmen and Mr Jacques and the estates of Mr and Mrs Bronner. These claims were brought as trustees for the Bronner Trust, as assignees of Mr Joseph’s estate and of the nieces and nephews of Mr Bronner (“the Bronner Family”). The Bronner Family were said to be “the sole intestate beneficiaries under Florida law” of the estate of Mrs Bronner.

The estates of the Bronners were sued in the name of a Mr Myers who had been appointed their personal representative in respect of their estates in Florida by Judge Speiser on 7 March 2003.

Jurisdiction was claimed against the non-resident defendants (all save Mr Myers) “by virtue of their conspiracy and actions to procure title to the Bronners’ real property located within the State and to defeat the expectancies of the Bronners’ beneficiaries with regard to real property and personal property within the State”. The allegations were that Mrs Bronner’s 1996 will had been secured through undue influence. The relevant counts alleged “Constructive Trust”, “Intentional Interference with an Expectancy” and “Conspiracy to interfere with an Expectancy”. The first of these counts is a personal claim for damages. The second and third are tortious claims recognised by the law of Florida, but not England, and not (as I understood what was said by Mr Flint in submission) Monaco. Certainly there is no evidence to suggest that Monaco recognises such a tort.

Mr Myers admitted the liability of the estates of the Bronners for the claims. The consequence was that, on 27 May 2003, judgment was entered against Mr Bronner’s estate for Mr Joseph’s claimed fees and expenses and against Mrs Bronner’s estate for over $193 million. The claim against Mrs Bronner’s estate was, it seems, made on the basis that the sum was “owed … to the Bronner [Family] under Florida’s intestacy rules”. On what basis Mr Myers felt able to admit such a claim is not revealed. None is apparent to me.

On 28 October 2003, the Florida Court entered default judgments against both Walanpatrias and Mr Simmen on the basis that there were “no genuine issues as to any material fact” on the claims made against Mr Simmen and that he and Walanpatrias had been validly served and “had not filed any response”. These judgments were also for over $193 million with interest to be determined at a later date.

On 6 February 2004 AMP served a post-judgment subpoena on LBI seeking documents relating to any assets belonging to Walanpatrias. On 1 March LBI sent AMP a statement of the Doraw Account showing assets of a value approaching $100 million. Not long afterwards, to quote the evidence of Mr Hodkin (Florida co-counsel for AMP) “Walanpatrias transferred securities and cash in the Doraw Account with a total value in excess of $98,900,000 from its New York account with (LBI) to an account in London with (LBIE)”. It is this transfer, as will be seen, which lies at the heart of the further proceedings in New York. It is the transfer which is described in paragraph 15 above.

On 23 March 2004 the Florida court entered final (amended) judgments against Walanpatrias and Mr Simmen and also Mrs Whyte. The substance of the judgments was unchanged.

On 26 April 2004, AMP, as trustees of the Bronner Estate as assignee of the estate of Mr Joseph and the Bronner Family, commenced proceedings in the Supreme Court of the State of New York, County of New York. The named defendants were Walanpatrias, LBI, LBIE and a depository trust company shortly described as DT&C. DT&C was alleged to hold the securities of the Doraw Account. The basis of the claim was the allegation that the transfer of the Doraw Account from LBI in New York to LBIE in London (paragraph 36) was “fraudulent” because it was implemented to prevent or hinder the enforcement of the default judgments entered against Walanpatrias in the Florida court.

On the next day, 27 April, Judge Kapnick granted AMP a temporary restraining order against each defendant preventing any transfer of the Doraw Account or the transfer or disposal of the funds in it other than for the purposes of purchasing securities to be held in the Doraw Account.

On 26 May 2004 Walanpatrias issued a motion to dismiss the complaint in AMP’s New York proceedings on various grounds, including lack of jurisdiction and failing to state a prima facie cause of action for fraudulent conveyance.

On 18 May 2004, Walanpatrias (again described as “the Foundation”) wrote to LBIE with reference to AMP’s New York proceedings and the temporary restraining order granted by the Court. The last paragraph of the letter said:

“We appreciate the fact that the restraining order has placed LBIE in a difficult position. Therefore, please be advised that, as long as the restraining order (or any order that replaces it) remains in place, the Foundation will not give any instructions to LBIE that, if followed, would require LBIE, or any of its affiliates, to take actions that are inconsistent with the terms of the restraining order (or any order that replaces it). If we do issue such instructions, as long as the restraining order (or any order that replaces it) is in force, you need not comply with them.”

On 21 May 2004 LBIE and AMP made an agreement which, so far as material (and with my emphases), provided that:

“… LBIE agrees that: (a) in accordance with the 18 May letter (the “Letter”) from WALANPATRIAS … (the “Judgment Debtor”) … LBIE will not disburse, remove, transfer, convey, assign, pledge, hypothecate, sell, conceal, and/or secrete (hereinafter collectively, “Transfer” or “Transferred”) any of the assets it is now holding for the Judgment–Debtor that are within the jurisdiction of the Courts of the United States and/or the United Kingdom; and (b) if the Judgment-Debtor’s instructions as set forth in the Letter are withdrawn, cancelled, modified, changed, altered, revoked or attempted to be revoked, LBIE shall issue interpleader proceedings in the United Kingdom pursuant to English law with respect to such assets as may be within its possession, custody, or control and which are within the jurisdiction of the Courts of the United Kingdom, and shall provide notice of said interpleader proceedings in the form and manner provided for under English law and contemporaneous notice to the undersigned counsel. Nothing set forth in clause (a) of this paragraph shall prohibit the trading of the aforementioned assets provided that: (i) any assets sold are sold for other assets of reasonably equivalent value at the time of the sale; and (ii) none of the sale proceeds or newly purchased assets are Transferred out of the Judgment-Debtor’s account at LBIE.

….

The sole and exclusive forum and venue for any disputes between AMP Services and LBIE arising out of or connected to this letter agreement shall be the Courts of London, England, United Kingdom.”

On 21 May 2004, Judge Kapnick made an Order reflecting an agreement made between AMP and LBI and LBIE with reference to the temporary restraining order. The essence of the order and agreement was that LBI agreed to an injunction until final judgment not to give any instructions to DT&C to transfer any assets of Walanpatrias. The Order also recited the 18 May 2004 letter and that LBIE and AMP had entered into the AMP Holding Agreement. AMP’s claims against LBI and LBIE were dismissed “without prejudice”, and it was recorded that LBIE did not waive and had not withdrawn its objections to the jurisdiction of the New York State Court.

On 8 July 2004, the Florida courts heard a Motion by Walanpatrias, Mrs Whyte and Mr Simmen (“the defendants”) to vacate (set aside) the default judgments entered against them. The Motion had been filed and served on 11 June. On 12 August, Judge Speiser made an Order granting the Motion. He held that AMP had failed to serve the process properly on the defendants, that none of the defendants were subject to personal jurisdiction in Florida, that the causes of action alleged did not arise from the defendants’ activities in Florida, and the default judgments were “void for lack of jurisdiction”. The judge was also critical of AMP’s failure to disclose material facts when it applied for the judgments.

On 24 September 2004 the Florida court stayed the vacation of the default judgments pending an appeal by AMP.

On 21 September 2004, AMP served a Second Amended Complaint in the New York Proceedings. This Complaint alleged again (the “first cause of action”) that Walanpatrias had been guilty of “fraudulent transfer” in arranging for the Doraw Account to move from LBI to LBIE when AMP was its judgment creditor “and is currently a present or future creditor of Walanpatrias under the N.Y. Debtor and Creditor law”. Otherwise, the Complaint (the second, third and fourth causes of action) made claims to ownership only of such assets (if any) as were located in New York, on the basis that Mrs Bronner’s estate was entitled to them or by way of enforcement of the default judgment AMP had obtained against her estate. The relief claimed on the first cause of action included orders setting aside or disregarding the transfer of the Doraw Account from LBI to LBIE.

On 22 October 2004, Walanpatrias issued a motion to dismiss this Complaint. On 7 February 2005, the New York Court continued the temporary restraining order.

On 6 July 2005, a Florida District Court of Appeal affirmed the vacation of the default judgments entered against Walanpatrias, Mrs Whyte and Mr Simmen. The Court, “on procedural grounds only, and not on the merits”, reversed all other parts of the Order of Judge Speiser for a “de novo determination”.

As stated, the Claim Form and Particulars of Claim in these proceedings were issued on 30 September 2005 and permission to serve out of the jurisdiction on AMP was granted by Cooke J on 7 October.

LBIE served a defence on 2 December 2005. Essentially, as regards the IRS claim, the defence claims that the relevant terms of business agreed with Walanpatrias entitle LBIE to an indemnity if LBI or LBIE is called upon to meet the claim of the IRS. As regards the ownership claims:

“The LBIE Account” referred to in the Defence is referred to in this judgment as the Doraw Account.

On 11 October 2005, Judge Kapnick granted AMP a temporary anti-suit order restraining Walanpatrias from pursuing the English proceedings pending the hearing of an application by AMP for a preliminary injunction.

At a hearing on 24 October, Judge Kapnick continued this temporary restraining order against Walanpatrias. She also commented that the essence of the case was “who should be entitled to the money” whereas it “has gotten all mushed up with all sorts of jurisdictional issues and lots of parties and money being transferred around and all that kind of stuff”. Those are sentiments with which, if it is appropriate for me to say so, I respectfully and wholeheartedly agree.

On 2 March 2006, Judge Kapnick dismissed all the complaints by AMP save the fraudulent conveyance complaint. The claims to property in New York (giving rise, if true, to in rem jurisdiction) were dismissed because there was no property in New York and, in any event, under New York law, such claims would have to be litigated by AMP against LBIE. The fraudulent conveyance claim, as the judgment makes clear, depended on the existence of the Florida default judgment against Walanpatrias at the time of the transfer from LBI to LBIE. It seems that the fact the judgment had been set aside was not fatal to the pleading that a tort had nonetheless been committed in New York such as, if proved, to give the New York Court personal jurisdiction over Walanpatrias to that extent.

Inevitably, perhaps, both AMP and Walanpatrias appealed this decision.

On 13 March 2006, against strenuous opposition from AMP, Judge Kapnick lifted the temporary anti-suit restraining order against Walanpatrias pursuing these proceedings. She did so because, after her rulings, and as I read her judgment, the only cause of action available to AMP was fraudulent conveyance whereas in these proceedings a determination was sought as to the obligations of LBIE (“an English banker located in London [the obligations of] which are governed by English Law”) and as to ownership of the assets, neither of which was before the New York court. The New York State Supreme Court, Appellate Division, First Department, refused AMP’s application to stay the lifting of the anti-suit restraining order and these proceedings were then served on AMP on 29 March 2006. Judge Kapnick also refused to set aside the restraining order in respect of the Doraw Account which she had made in April 2004 (paragraph 39).

The IRS had issued a “Jeopardy Assessment” for $86 million against the estate of Mrs Bronner and Notices of Levy addressed to LBI, LBHI and LBIE on 13 December 2004. Further Notices of Levy were addressed to LBI, LBHI and LBIE on 5 January 2005 in respect of the property and rights to property of Walanpatrias. A “Notice of Deficiency” was issued on 9 February 2005. The estate filed a petition contesting the Notice in the US Tax Court on 16 May 2005.

On 3 March 2006, the United States of America filed a Complaint in the United States District Court, Southern District of New York, against DT&C, LBHI, LBI and the estate of Mrs Bronner claiming some $84 million. The tax liability was alleged to arise from trading on the New York Stock Exchange. “Venue” was alleged to be “proper” because DT&C, LBHI and LBI were “located within the Southern District of New York and the property subject to the levies and liens is located within the Southern District of New York”.

On 22 March 2006 the United States of America filed its First Amended Complaint in the IRS Claim. Walanpatrias and AMP were added as Defendants to the Complaint. A Second Amended Complaint was filed in April, and a Motion for leave to file a Third Amended Complaint was filed on 14 July. Neither Walanpatrias nor LBIE have accepted the jurisdiction of the New York Court in the IRS Claim. The Third Amended Complaint seeks to advance a case of “fraudulent conveyance” based on the default judgment of the Florida court against Walanpatrias and the transfer in February or March 2004 of the Doraw Account from LBI in New York to LBIE in London said to have been made with knowledge of the Florida judgment “and/or the potential liability to the United States for estate taxes”, albeit in March 2004 the Jeopardy Assessment had not even been issued. This Complaint also seeks alternative relief on a personal (not in rem) basis against LBIE and Walanpatrias including setting aside the transfer from LBI to LBIE “and ordering Walanpatrias and/or LBIE to return the financial assets to LBI … or to the extent the financial assets no longer exist, awarding judgment for damages as against Walanpatrias….”

The Motion to file the Third Amended Complaint has yet to be heard, and, as it was put in a letter dated 3 November 2006, from LBIE’s solicitors to the solicitors for AMP and Walanpatrias “through multiple motions, the US Government, the parties and the court are still in the process of attempting to establish whether the US Government has a viable cause of action at all”. There are Motions by LBI and DT&C to dismiss the Second Amended Complaint, and opposing the filing of the Third Amended Complaint (for want of jurisdiction and cause of action). LBIE has not appeared nor has any order been made for LBIE to be served out of the jurisdiction.

Walanpatrias, Mrs Whyte, Mr Simmen and Mr Jacques’ Motion to Dismiss the Second Amended Complaint of AMP and Mr Myers in the Florida Court came before Judge Speiser in March 2006. On 4 October 2006, the Judge made an Order denying the Motion in part, granting it in part and deferring it in part. The part which was deferred was the Motion to dismiss on the ground of lack of personal jurisdiction which was not, and has not yet been, heard by the Florida Court. The judgment addressed, first, the Motion to dismiss on the ground of forum nonconveniens. That Motion was dismissed. Mr Flint understandably places considerable reliance upon this decision and I should, therefore, summarise the reasoning of Judge Speiser.

Judge Speiser said it had not been shown that this court would have jurisdiction over Mr Myers or the individual defendants, and “the primary claims” in Florida were for a tort (interference with an expectancy) which was not recognised by English law. The extensive litigation in Florida made it “very inconvenient” for AMP to start again in London.

Addressing the public interest factors, Judge Speiser said:

“The primary cause of action against the defendants is that they conspired to and did tortiously interfere with the expectancy of the Bronner Trust acting on behalf of the intended charities and as assignee of the claims of Harry Joseph and the Bronner family. Plaintiffs allege that part of this interference involved an effort by defendants to wrongly obtain title to a condominium apartment located in Florida which was owned by the Bronners. Assuming this is true for purposes of this motion, Florida has a public interest in the litigation where allegedly wrongful conduct occurs in Florida. A substantial aspect of the alleged tort was purportedly committed in Florida, and the success of the tort was allegedly dependent in part on activities directed toward Florida or a Florida resident.

The Court finds that this case also has other connections in Florida. The plaintiff personal representative, Thomas Myers, is a Florida resident, and probate estates for the Bronners were opened in Broward County, Florida. Walanpatrias retained a Florida attorney to commence a probate proceeding for Mrs Bronner in Broward County, and the plaintiffs filed this separate civil action in the same court. Additionally, while alive, the Bronners owned a condominium and an automobile in Fort Lauderdale and had a bank account there.

The Court also finds that London has no substantial interest in this litigation or concern for any party. None of the parties or entities in this case is a resident of London. No relevant transaction or injury occurred there. Walanpatrias owns no property or other assets there other than the disputed LBIE funds. No relevant witness or document was identified there. Again, the only contact or “nexus” defendants allege the parties have with London are the defendants’ claim that the Lehmann Brothers’ account and its funds are currently in London (which claim has been disputed by the plaintiffs) and the agreement of Walanpatrias to submit to the jurisdiction of the London court for purposes of an interpleader action concerning the funds. Furthermore, the funds defendants argue have a London situs were located in New York until Walanpatrias had them moved to London, some substantial time after this suit was filed against it in Florida and only after the original default judgments were entered against defendants. The Court finds that even if some of the disputed assets are allegedly located in London, this tenuous and untimely connection is insufficient to justify the transfer of the litigation to the alternative forum of London.”

I would make the following comments:

The defendants also contended that AMP had no standing to bring the claims against them. Judge Speiser concluded that AMP had no standing to sue on behalf of Mr Bronner’s estate, nor the Bronner Family, and that AMP had failed to provide any evidence of its authority to act on behalf of the Israeli charities which were “the real parties in interest in this action” other than the Weizmann Institute, concluding that “absent such evidence, the Court will consider dismissing this action for lack of standing”. Judge Speiser also left open the issue whether the claims were time-barred. The claims on behalf of the Bronner Family were predicated on Mrs Bronner dying intestate. Judge Speiser held she had not died intestate and that in any event the Family would not have inherited if she had. Mr Myers had therefore admitted a claim which the Court held had no foundation.

On “Choice of Law” Judge Speiser said:

“Defendants argued that Monaco law is applicable to plaintiffs’ tort claims under the “most significant relationship” test. The Complaint is premised on Florida law and, therefore, it is possible that it does not state any valid cause of action under Monaco law. The Court notes that the alleged actions constituting undue influence occurred in Monaco, and the subject of the alleged undue influence, Anna Bronner, resided in Monaco. As of this juncture, plaintiffs have offered little evidence to support their view that Florida law governs their tort claims. Choice of law is a threshold issue that must be decided before the Court reaches the merits of plaintiffs’ claims. However, the Court is not prepared, based on the existing record, to make a final ruling on this issue. Upon appropriate application by either party, the Court will consider the issue further and rule thereon.”

Walanpatrias says that, if it does not succeed on the issue of personal jurisdiction, it is likely that it will appeal both that decision and the decision on forum nonconveniens. There is an unfettered right to pursue such an appeal, and an order on the record on forum nonconveniens will not, on the evidence, be entered until the logically anterior issue of personal jurisdiction has been determined. AMP has very recently (on 6 November) filed a Third Amended Complaint in Florida. It runs to 532 Paragraphs. It asserts 37 different “Counts” or causes of action. Mrs Schwarz has been added as a further defendant. A “recently discovered grand nephew and sole survivor of Anna Bronner” (a Mr Stichnau, a German resident and citizen) has assigned to AMP “all of his claims as an intestate beneficiary” of Mrs Bronner. It is now asserted that Mrs Bronner’s 1996 Will “was never proved or proven” in Monaco. All this should keep the Florida lawyers occupied for years. The basic facts are, as it seems to me, that:

I hope I do not need to say that this is not intended to be in any way a criticism of the Florida Court; but it is the fact.

The appeals against Judge Kapnick’s decision (paragraphs 54 and 55) were recently determined by the First Department of the Appellate Division on 2 November 2006. Both appeals were dismissed. Thus, in these proceedings in New York:

In the context of the present applications, LBIE’s solicitors, in a letter dated 3 November, have described LBIE as “a mere stakeholder” whose primary concerns are that “it is not required to transfer [the assets of the Doraw Account] until the questions of their rightful ownership and whether they are subject to any US tax claim have been judicially determined by the appropriate Courts” and that if tax has to be paid it is paid out of the assets. It is also LBIE’s case and evidence that Walanpatrias’ rights and property in the account at LBIE are located in England for the reasons stated in the letter.

There are numerous other issues between Walanpatrias and AMP. Those of some relevance to the present applications are:

Walanpatrias’ claim against LBIE as regards the Doraw Account is a claim (paragraph 18) for a Declaration that it is the owner of the funds in the Account. The Account is held in London on the terms of an agreement between Walanpatrias and LBIE governed by English Law and which requires Walanpatrias to pursue its claims against LBIE in the Courts in England (paragraph 15).

LBIE has, indeed, found itself in an invidious position. It knows that AMP (in one or more capacity) also claims to own and control the Doraw Account. LBIE cannot therefore acknowledge the claim to ownership of the party with which it has contracted to manage the assets in the Account and it has so pleaded in its defence in these proceedings (paragraph 50).

Mr Flint submitted that nonetheless there was no more than a “contrived issue” between Walanpatrias and LBIE, not a “real issue”, and so CPR 6.20(3) did not apply. I do not agree. The real issue in these disputes is the ownership of and right to control the assets in the Doraw Account (and the other assets) and, even if LBIE itself has no side to take in that issue, it is LBIE which holds the assets and does not acknowledge the instructions of its counterparty. Whilst it might suffice for the Doraw Account ownership issue to be resolved only between Walanpatrias and AMP in proceedings binding upon them and recognised in this country to which LBIE was not even a party, there are presently no such proceedings and Walanpatrias is entitled to demand that LBIE comply with its instructions and LBIE is, I think, itself entitled to have the protection of a Court order in the jurisdiction to which it is, and the assets are, undoubtedly subject, before it acts on such instructions. It is, I think, wholly artificial for AMP to contend, as it does, that the only issues between Walanpatrias and LBIE concern the terms of the agreement between them which govern the operation of the accounts of Walanpatrias. Those terms are not, in the context of the Doraw Account ownership claim, in issue; what is in issue, and underlies the 18 May 2004 Letter and the AMP Holding Agreement, is the dispute between AMP and Walanpatrias about who owns the assets in the Doraw Account.

Mr Flint also submitted that because AMP, Walanpatrias and LBIE had all agreed that LBIE should not deal with the assets in the Doraw Account for so long as the restraining order granted in AMP’s New York proceedings remained in force (which it does) not only was there no urgency in seeking the resolution of the claims before this court but no purpose either. I recognise the logic of the submission but I do not think it follows that the Doraw Account ownership issue is thereby rendered a “contrived” or “non-issue” nor that it becomes unreasonable to try it. It remains, in my judgment, the key to the path through the legal morass. Moreover it is not AMP’s case that the issue should be (or indeed would be) resolved in New York, but in Florida.

There is, in my judgment, a real issue between Walanpatrias and LBIE as to the ownership of the Doraw Account which it is reasonable for this court to try. Plainly AMP is a proper party to the resolution of that issue.

As stated (paragraph 25) Mr Flint has acknowledged that the Doraw Account ownership issue falls within CPR 6.20(10).

It follows that as regards the Doraw Account ownership issue (but not the overall ownership issue) I am satisfied that Cooke J had jurisdiction to make the order he did that the proceedings be served on AMP out of the jurisdiction. The question is, therefore, whether this court is satisfied that England “is the proper place” in which Walanpatrias should bring this claim. The burden of proof is upon Walanpatrias to satisfy the Court that England is the appropriate forum for the claim: Spiliada Maritime Corp. v Cansulex [1987] AC 460. The existence of the proceedings in Florida and New York is, of course, a highly material factor in addressing this issue. I shall refer to the issue as “the Discretion Issue”.

It will be apparent from what I have already said that this court has a great reluctance to give any encouragement to yet further litigation in any jurisdiction between AMP and Walanpatrias. The proceedings in Florida have taken up four years but have yet to resolve issues of jurisdiction and whether any cause of action has been alleged: paragraph 67. The proceedings by AMP in New York are extant only for the tortious claim of “fraudulent conveyance”. Their progress and merits remain incapable of assessment but plainly involve issues of some continuing difficulty and complexity for AMP. The IRS claim is not in a condition which suggests any rapid or even foreseeable conclusion: paragraph 60.

The depressing fact is, or is said to be, that come what may in this court, AMP’s claims in Florida and New York will proceed unless and until the courts there decide they cannot or should not do so. But that is also true, subject to the stay application on case management grounds, of the proceedings in this country. LBIE has no basis on which it can challenge the jurisdiction of this court. Further, Walanpatrias has not yet been determined to be subject to the jurisdiction of the courts in Florida and I think it is obvious that AMP still faces serious problems in establishing that Florida is an available jurisdiction. LBIE is not and probably could not be made a party to those proceedings. Granted that both AMP and Walanpatrias seek to have the ownership claims resolved, that the claims address the real dispute upon which the other disputes in large part depend, and yet they are at best on the periphery of what is left in New York and probably unlikely to be resolved in Florida at all, or in a judgment which would be effective against Walanpatrias or LBIE, I asked Mr Flint why it was AMP were keener on Florida than this country to resolve the claims. The claims are squarely before this court and could be determined here, where the relevant assets are situated, in a reasonably short timescale and in a manner binding upon AMP and Walanpatrias and LBIE. I do not think I ever got an answer, or at least an answer I found compelling, to my question.

The major points, I think, which were made by Mr Flint were that the proceedings in Florida were well established with a Judge who was fully acquainted with the issues, and who had determined that England was not the appropriate forum for the resolution of the matters still in issue in Florida. Mr Flint relied, in this context also, on the fact that LBIE could not distribute the assets whilst the restraining order remained in force and that it was AMP’s (and the IRS’) complaint that the assets were no longer in New York but in London only because of the very matters of which AMP complained as a fraudulent conveyance.

On the other hand, as Mr Malek submitted, it is the proceedings in Florida, not New York, on which AMP relies as the available and appropriate forum, and I have already commented on their progress and efficacy: see paragraphs 64 to 67. Mr Malek points, in my judgment with considerable force, to the undoubted fact that when AMP addressed the Doraw Account ownership issue with LBIE, like Walanpatrias, AMP agreed that the application of English law and jurisdiction alone were appropriate to resolve ownership issues: see the AMP Holding Agreement (paragraph 42) and the agreements referred to in paragraph 15. The connections with Florida are, I think, minimal relating as they do to assets there of little value and which are not part of the Doraw Account. Further, as regards the proceedings in New York, the courts there have held that claims by AMP to ownership of the Doraw Account must be made against LBIE: see paragraphs 54, 55 and 69. The only, or at least the only indisputable, jurisdiction in which AMP could pursue such a claim is England.

If these considerations alone had to be balanced I think the balance would come down firmly in favour of this court as the proper forum to resolve the Doraw Account ownership claim. Whilst there are factors which favour both parties, I think the greatest weight must be given to the fact that both Walanpatrias and AMP (by the AMP Holding Agreement) have agreed with LBIE that the dispute is one appropriate for resolution only by English law and the courts of this country, and that it is here, and not in Florida, that the issue can be expected to be resolved and resolved in a manner effective to bind the parties and the assets concerned. AMP, of course, entered into the AMP Holding Agreement in the context that it was known the Doraw Account had been transferred from LBI to LBIE and was held by LBIE in London.

There remain two further considerations: the IRS claim and whether or not it is right to stay the claim against LBIE. Insofar as the resolution of those issues might impact upon the Discretion Issue, or the appropriateness of a stay on case management grounds, I propose to address them before expressing my final conclusions on those issues.

It is (rightly) agreed that the IRS Claim, or, more accurately, the tax issues to which it gives rise, can only be resolved in the New York courts. That is not to say that its resolution there will be binding on any of AMP, Walanpatrias or LBIE. If the IRS succeeds in its claim no doubt any resulting judgment would be enforceable against assets within the jurisdiction of the Court. It might, I suppose, also be enforceable against LBI or LBHI. But foreign tax laws are not enforceable in this country. Mr Flint submitted that one possible outcome of the IRS Claim would be an order that the assets of the Doraw Account be returned to New York and, if they were, they would then be available for attachment. In my judgment that is, at the lowest, a remote possibility, both in terms of any order that might be made in New York and in terms of the effectiveness of such an order in this country should it be made. Nonetheless, there remains a risk that one or more of LBI, LBHI or even LBIE would be exposed to some form of execution in the USA and so that LBIE would seek to pursue reimbursement from the Doraw Account and would claim to be entitled to resist disbursement of the assets of the Account until the IRS Claim was resolved. If, of course, the IRS Claim failed in New York, the IRS Claim in these proceedings will not arise.

It is in that context that the parties are agreed that the claim in these proceedings relating to the tax demand of the IRS should be stayed pending the outcome of the IRS Claim in New York or further order. I agree and will so order. I think, however, that the IRS Claim in these proceedings raises discrete questions which do not impact upon the Doraw Account ownership claim (or the overall ownership claim) which claim must in any event necessarily be resolved. Even if the tax had to be paid there would remain a significant sum at issue. In my judgment, therefore, the existence and pursuit of the IRS Claim in New York is of no real relevance to the appropriate forum for or need to resolve the Doraw Account ownership issue.

It is also agreed (with one minor qualification) that should the Doraw Account ownership claim not be stayed in favour of the Florida court proceedings, that claim in these proceedings should nonetheless also be stayed against LBIE. The reason is that, as LBIE makes no positive case one way or the other as regards the claim, there is no reason for it to incur further expense in the proceedings once the main protagonists are, if they are, before the court. Again, I agree. The qualification is that Mr Flint was concerned that LBIE should disclose any documents it held material to the Doraw Account ownership claim. Mr Handyside, for LBIE, suggested this could be addressed by ordering a stay without prejudice to the rights of AMP and Walanpatrias to seek an order for such disclosure if the matter cannot be, as Mr Handyside said it could be expected to be, dealt with by consent. That, I think, would be a sensible solution.

Mr Flint submitted not only that this conclusion substantiated his submission that the claim by Walanpatrias against LBIE was contrived but also that it further exposed the fact that the issues in these proceedings were in reality issues between AMP and Walanpatrias which were before and should be resolved by the Florida court. I do not agree. The Doraw Account ownership issue is squarely raised in these proceedings and a judgment upon the issue, whether or not there is a stay against LBIE, would be and remain binding upon LBIE and so upon the assets held by LBIE in this country. Any order for a stay could and should so provide.

I should add that Mr Flint submitted further that it was also a possible outcome of AMP’s New York proceedings that the Court would order Walanpatrias to return the assets of the Doraw Account to New York. It is, however, notable that AMP does not seek a stay of these proceedings in favour of the New York proceedings. That, no doubt, reflects the views of AMP’s advisers as to the issues in and merits of the claims in Florida and New York. As Mr Flint acknowledged, the underlying issues would not be determined by any decision in New York. All that is left in New York is the fraudulent conveyance claim: see paragraph 69(i). In this context I do not think it realistic to give weight to any prospect of the assets being ordered to be returned to New York in these proceedings either.

A stay of the IRS Claim and a stay of the Doraw Account ownership claim against LBIE would not, in my judgment, affect the conclusion expressed in paragraph 83 above. Indeed, to some extent, they support it. A speedy, and, in relative terms, less costly, resolution of the Doraw Account ownership claim is all the more achievable if the IRS claim is stayed and LBIE is not to take part in the hearing.

It will already be apparent to the reader of this judgment that I see no reason to stay the Doraw Account ownership claim for case management reasons. It needs to be resolved. The parties should get on with resolving it.

(1) AMP’s application to set aside service of these proceedings upon AMP out of the jurisdiction is to be dismissed as regards the Doraw Account ownership claim but granted as regards the overall ownership claim;

I will hear the parties when this judgment is handed down on the wording of the Order and any ancillary matters, including directions to take these proceedings forward, insofar as they cannot be agreed. I should record that this judgment was provided to the parties in draft on Monday 27 November.