The Recast Brussels Regulation – considering exclusions

The High Court has recently considered jurisdictional issues relating to a claim concerning the claimants' entitlement to certain shares held by the deceased businessman, Sami Shamoon.

An argument arose as to whether the claim fell within the scope of the "succession" exclusion in Article 1(2)(a) of the Brussels Regulation.

Summary

 The first claimant, Mr Winkler, claimed that his deceased business colleague, Mr Sami Shamoon, had agreed to transfer certain shares worth tens of millions of dollars to him prior to his death. He brought proceedings against Mr Shamoon's widow and daughter, the defendants, who inter alia challenged the jurisdiction of the English Court to hear the claim on the basis that is was a matter relating to "succession" within Article 1(2)(a) of the Brussels Regulation and therefore fell outside of its scope.

The facts

On 29 May 2009, Mr Sami Shamoon, a successful businessman, passed away. He was, during his lifetime, one of the wealthiest people in Israel. He left a very large and valuable estate, estimated by an Israeli judge in 2012 to be worth 1.7 billion new Israeli Shekels (approximately US $1 billion).

The first claimant, Mr Winkler, is a Certified Public Accountant who was the Chief Financial Officer and Manager of the Yakhin Hakal Group of Israeli companies, which was owned or controlled by Mr Shamoon. Mr Winkler is the sole beneficial owner of the Second Claimant, Arzal Finance Corp. The First Defendant, Mrs Angela Shamoon, is Mr Shamoon's widow and the Second Defendant, Ms Alexandra Shamoon, his only daughter. Mrs and Ms Shamoon are the residuary legatees under Mr Shamoon's will.

Mr Shamoon made a number of monetary bequests in his will, including a bequest of US $30,000 to Mr Winkler. However, the claimants alleged that they were entitled to 1% of the shares in Ainsbury Properties Limited ("Ainsbury") and 12.5% of the shares in Placido Investments Inc ("Placido"). The shares that were in dispute were registered to Mr Shamoon and were therefore managed and controlled by the Administrator of Mr Shamoon's estate. The shares are worth tens of millions of dollars.

Mr Winkler claimed that in around 2008, Mr Shamoon contemplated transferring the 1% of shares in Ainsbury to Mr Winkler and that Mr Shamoon instructed Mr Philippe Grumbach (the Third Defendant) to do so. Furthermore, Mr Winkler claimed that in April 2009, shortly before his death, Mr Shamoon decided to transfer the 12.5% of the shares in Placido in order to incentivise Mr Winkler to be involved in the business of the Yakhin Hakal Group after Mr Shamoon's death. Mr Winkler again claimed that Mr Grumbach had been directed to register Mr Winkler as the owner of 12.5% of Placido.

In the claim before the High Court, Mr Winkler sought declarations against Mrs and Ms Shamoon to establish that Mr Winkler was entitled to 1% of the shares in Ainsbury, and that Arzal was entitled to 12.5% of the shares in Placido. Orders were also sought that Mrs and Ms Shamoon should have taken all necessary steps to ensure that Mr Winkler, or alternatively in the case of Placido, Arzal, be registered as the owner.

Mr Winkler had previously brought a claim against Mr Shamoon's estate in the Israeli Courts, which dismissed his application on 2 June 2014. The Israeli court ruled that the summary process of asking the court to give instructions to the Administrator of the estate was not suitable where there was a dispute between the parties as to the ownership of the shares in question. The court stated that Mr Winkler was "obliged to file a suitable claim to the competent court". The High Court judge considered that this statement, clearly envisaged a follow up application to an Israeli court. However, Mr Winkler issued a Claim Form in the High Court instead.

Decision

Mrs Shamoon applied for an order under CPR part 11 setting aside the Claimants' purported service of the Claim Form on her within the jurisdiction on the basis that she is not domiciled in the UK for the purposes of Article 59 of the Brussels Regulation 44/2001 ("the Brussels Regulation"), and was not therefore served at her "usual or last known residence" within CPR6.9 (2).

In addition, Mrs Shamoon sought an order declaring that the Court did not have jurisdiction, or alternatively should not exercise its jurisdiction on the grounds that: 

i. The claim related to succession and therefore fell outside of the scope of the Brussels Regulation (pursuant to Article (1)(2)(a) thereto); and

ii. Pursuant to common law rules, the English Court has no jurisdiction in respect of the claim and in any event England was not the natural forum for the claim. Mrs Shamoon contended that she was a resident in Israel for the purposes of domicile and therefore was not properly served within the jurisdiction. 

Whilst Ms Shamoon accepted that she was domiciled in the UK for the purposes of the Brussels Regulation, she applied for an order on very similar grounds stating that the claim related to succession and as a result it fell outside the scope of the Brussels Regulation. 

The court considered the application of Article 1(2) of the recast Brussels Regulation which states that it shall not apply to "(f) wills and succession…" The court noted that whilst the phrase "wills and succession" is not defined within the text of the Brussels Regulation, the Succession Regulation (Regulation 650/2010) defined succession as "succession to the estate of a deceased person and covers all forms of transfer of assets, rights and obligations by reason of death, whether by way of voluntary transfer under a disposition of property upon death or transfer through intestate succession". 

The Claimants had claimed that their proceedings did not fall within the "wills and succession" exception. They asserted that their claims were primarily concerned with the question of whether the Claimants had acquired a beneficial interest in the Placido and Ainsubry shares. They argued that any such rights accrued prior to Mr Shamoon's death. The court disagreed. The court considered that the claimants were suing in order to be entitled to a part of a dead person's estate and that, in effect, Mrs and Ms Shamoon were being sued by reason of their position as beneficiaries under Mr Shamoon's will. 

The judge also stated that as Mrs and Ms Shamoon were not the owners of the relevant shares, which were at the time in the control of the Israeli Administrator of the estate, the Claimants' claim squarely fell with the succession process of "sharing out of the estate". 

The judge concluded that the claim was therefore excluded from the Brussels Regulation and the Lugano II Regulation as its principal subject matter was "succession" within the meaning of Article (1)(2)(a). 

Accordingly, the judge held that court had no jurisdiction to hear the claim.

Comments

The decision indicates that exclusions in the Brussels Regulation should be construed narrowly, and that the English Courts will enter into active consideration of Regulation and reject jurisdiction where it considers it necessary. The courts can, and will, consider other Regulations (for example, the Succession Regulations) in order to inform its understanding of the Brussels Regulation and to ensure a logical interpretation is applied.