COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR ANTHONY MANN QC)
Wednesday 11th April 2001
B e f o r e :
LORD JUSTICE TUCKEY
LADY JUSTICE ARDEN
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|SAYO AND OTHERS|
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MR I HUNTER QC & MISS S DAVIES (instructed by Taylor Joynson Garrett, London EC4Y 0DX) appeared on behalf of the Respondent.
Crown Copyright ©
LORD JUSTICE PILL: Lord Justice Tuckey will give the first judgment.
LORD JUSTICE TUCKEY:
"Casio is the well-known Japanese manufacturer and supplier of electronic goods. Sayo, the first defendant, was a manager at its Tokyo office; Hasegawa, the second defendant, was a friend or associate of Sayo and resident in, or frequently posted to, New York. Tsuru, the third defendant, was a friend or associate of Hasegawa, and the fourth defendant, Cranest, is a company incorporated in a United States jurisdiction and is controlled by Tsuru. It is alleged that Sayo conspired with Hasegawa and Tsuru to get control over a substantial amount of Casio's assets and, pursuant to that conspiracy, in February 1997 Sayo got control of US$30 million of Casio's money which he was supposed to invest for the purposes of Casio. Tsuru got control of the money pursuant to a power of attorney which is alleged to have been forged and, having passed the money through various US bank accounts, in March 1997 he procured its transfer to an account at Barclays, Knightsbridge, in Casio's name but on which Sayo and Tsuru were signatories. US$25 million was then transferred by or at the behest of Tsuru in April 1997 to a second account at the same branch, this time under the control of Tsuru alone. The remaining $5 million remained in the first Knightsbridge account until $4.52 million was transferred into the second Knightsbridge account, but that is not germane to the issues I have to consider. Tsuru is said to have become constructive trustee and to owe fiduciary duties to Casio.
At this point Mr Kaiser and some associated defendants come into the story. The fifth defendant is Ocean View Marketing Ltd ("OVM"), an Isle of Man company. Mr Kaiser is said to be its President and Mr Wolpow, the seventh defendant, is said to be its managing director. It is alleged that the acts of OVM complained of in this statement of claim were procured and directed by Mr Kaiser and/or Wolpow and they were therefore personally liable for them. On 1st May 1997 Tsuru entered into an agreement described as the Los Frailes Contract, which provided for investment of the $25 m in the second Knightsbridge account in a project to construct a golf course on Gran Canaria. The agreement provided inter alia for the US$25 m to be transferred by Tsuru into an account in London at Alpha Credit Bank AE, (the 14th defendant to this litigation, joined for discovery purposes only) called "Harris Bank International Ltd New York, Ref [OVM]... Account No 60011"; and it provided for the return of the money in a year and a return in the meanwhile. An agreement entered into four days later is said to provide for an additional secret profit to be made by Mr Kaiser and/or Wolpow by their being allocated an equity share in the Los Frailes Project. On 6th May the money was transferred by Tsuru from the second Knightsbridge account to the Alpha account on which the signatories were Tsuru and Wolpow. In paragraph 8 it is pleaded that this is an OVM account notwithstanding that Tsuru was a joint signatory on it. From the Alpha account in London money was moved on to an OVM account in the Isle of Man on 23rd May, and on 6th June it was moved to an account in the name of OVM and/or Charivari at the Northern Trust Company in Illinois.
Charivari a Barbados company. I need to follow the money on from there, in general terms, in order to show how Miss Patel is said to be implicated and the basis on which she is sued. Missing out one or two events which are not germane to the purpose of this narrative, on 19th August the $25 million was moved into an account at Crane Ltd, the tenth defendant, in Jersey, from where it was moved to an account in New York in the name of Crane and/or Charivari on 9th September. Crane is an Isle of Man company in which a Mr Kelso (the 11th defendant) and Miss Patel are said to be directors, and it is said that the acts of Crane complained of in the Statement of Claim were authorised, directed or procured by Kelso and Miss Patel and that they are personally liable for them. From Crane there were further disposals of the money in various detailed ways; I omit the detail here. On and after 19th September there were further movements of money which are said to have been orchestrated by Tsuru, details of which are not important save to note that they are alleged to have been paid to his order for his own benefit and/or the purposes of (inter alia) OVM, Kaiser and Crane. As a result of all this the Casio money was dissipated."
"8. ... Casio infers that neither OVM or Kaiser or Wolpow intended at any stage that the Casio monies they obtained from Tsuru would be applied towards investment in the or any Los Frailes Project (which did not in fact exist) and their representations to Tsuru to induce him to participate therein and then the steps they took to induce him to relinquish control over the funds were fraudulent. Further, at the latest by about August 1997 they had been informed by Tsuru that the monies in fact belonged to Casio and in the circumstances they knew or had they made the enquiries that an honest and reasonable person would have made, would have realised that Tsuru's transfer of the $25 million was a breach of fiduciary or equitable duties owed by him to Casio or was a transfer of monies impressed with a constructive trust and/or equitable charge and/or equity. Accordingly, on receipt of the monies into their control by the transfer to the OVM account at Alpha, or at latest on being informed by Tsuru that the monies were Casio monies they each owed Casio duties as constructive trustee ...
9. In breach of their duties to Casio as constructive trustee ... OM and/or Kaiser and/or Wolpow:
(1) Failed to take any or any adequate or proper steps to preserve the US 25 million ...
(2) Fraudulently induced Tsuru to invest the same in the Los Frailes Project which was bogus and induced him to transfer the sums to their control outside the jurisdiction at their account at Barclays Bank, Isle of Man;
(3) On about 6th June 1997 transferred the said sum from OVM's account at Barclays Bank, Isle of Man, to an account ... in the name of OVM and/or Charivari;
(4) Thereafter and by 29th July 1997 relinquished control over the US$25 million of Casio monies to Charivari."
"Overall the factual allegations are similar to claims based on constructive trusteeship. They purport to be based on knowing receipt, but that cannot be right for Wolpow or Kaiser who did not technically receive them. (OVM did). As against the individuals the claim would be more appropriately put on a knowing assistance basis."
At paragraph 20 he said:
"It is ... open to (Casio's counsel) to say that as a matter of pleadings he has alleged that Mr Kaiser procured the receipt by OVM of the money within the jurisdiction and procured or directed its payment out again knowing that the money was Casio's and that Mr Tsuru was acting in breach of his own duties. That could be described as an act of dishonest assistance."
"A person domiciled in a contracting state may, in another contracting state, be sued...
(3) In matters relating to tort, delict or quasi delict in the courts for the place where the harmful event occurred. "
Like Article 6, it is part of the special jurisdiction section of the Convention. The general provision in Article 2 is that persons are to be sued in the courts of their domicile. In Kalfelis v. Shroeder  ECR 5565, the ECJ said that the special jurisdiction provisions, as exceptions to the general principle, should be interpreted restrictively. In the interests of uniformity and equality Article 5(3) has to be given an autonomous Convention meaning.
"The same cannot be said of constructive trust claims, or at least those based on knowing assistance. In those cases there is scope for describing what happened as amounting to or involving a harmful event within the meaning of Article 5(3). Such a conclusion is supported by the fact that even though the English law of tort is not operating where equity imposes a constructive trust, one can see parallels. A wrong is being committed and loss can be said to be caused or at least contributed to."
"'Place where the harmful event occurred' must be established in such a way as to acknowledge that the plaintiff has an option to commence proceedings either at the place where the damage occurred or the place of the event giving rise to it"
because either place constituted a significant connecting factor from the point of view of jurisdiction. (Paragraphs 15 and 19).
Mr Doctor, however, relied on paragraph 16 of the judgment where the court said:
"Liability in tort, delict or quasi delict can only arise provided that a causal connection can be established between the damage and the event in which that damage originates."
"Dishonest assistance can therefore be described as equitable wrongdoing (the expression used by Auld LJ in McMacmillan v. Bishopsgate  WLR 387 at page 407, citing Charles Harpum's article, Accessory Liability for Procuring or Assisting a Breach of Trust (1995), 111 LQR 545, 546). The notion that dishonest assistance could be regarded as a tort was firmly rejected by this Court in Metal & Rohstoff v. Donaldson Lufkin & Jenrette Inc  1 QB 391, 474. But that was in the limbed context of the old RSC Order 11, Rule (1)(1)(f). In Dubai Aluminium v. Salaam  LLR 415, page 467, Rix J recognised that equitable wrongdoing, although not a tort in the eyes of English law, has marked similarities to it:
'It is true that liability in dishonest assistance is not a liability in tort: General Bank Nederland NV v. ECGD  1 Lloyds Reports 19. Rather it is a liability in equity to pay damages based on fault as Mr Justice Chadwick said in Arab Monetary fund v. Hashim (July 29th, 1994, unreported) at page 42B:
' ... the defendant is held liable in equity not because he is, or has been, a trustee of trust property, but because his conduct in relation to trust property has been such that he ought to be liable in damages for its loss as if he were a trustee who had disposed of the trust property from breach of trust. The claim is a claim for monetary compensation based on fault ..."
"The knowing assistance type of constructive trusteeship arises where there are acts of assistance with the relevant knowledge. In this case, even if one assumes that Mr Kaiser was outside the jurisdiction when he acquired knowledge, conceived any necessary plans and gave any necessary instructions, nevertheless the actual act of assistance was in my view done in this jurisdiction. The act of assistance was the use of the Alpha account. Without that act the more abstract notions of authority and procurement would be of no use. The company account was the instrumentality by which (on the factual hypothesis of the statement of claim) Mr Kaiser achieved his assistance. The company account into which the money was paid (the Alpha account) so as to come within OVM's sphere for the first time was in this jurisdiction, and that was the account from which it left to come under OVM's sole control in the Isle of Man. I therefore find that the place of the event giving rise to damage for the purposes of Article 5(3) (as interpreted in the Bier case) was England."
He then went on to consider where the damage had occurred. He decided that it had either occurred when the $25 million was first abstracted by the first three defendants from Casio's proper accounts or when it was dispersed after it had left the Alpha account. Neither of these events occurred within the jurisdiction.
"A person domiciled in a contracting state may also be sued:
(1) Where he is one of a number of defendants in the courts for the places where any one of them is domiciled."
"Exist between various actions brought by the same plaintiff against different defendants a connection of such a kind that it is expedient to determine those actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings (Kalfelis, paragraph 13)."
"The fact that the claims against Miss Patel and Mr Kaiser are similar is not enough for these purposes. Nor is the fact that they have the same background in the sense that Miss Patel is in the same flow of money as Mr Kaiser albeit downstream. Of more significance is whether there is anything in those upstream facts or legal issues which might be decided differently in different proceedings so as to affect the end result. It seems to me that there clearly is. At the heart of these claims are the claims that the first three defendants, and in particular Mr Tsuru, were doing what they ought not to have done, and that what they did was a breach of duty. That lies at the heart of the constructive trust claims. Without it there is no constructive trust claim. If those points were decided differently in two different actions if separate actions were brought against each of Mr Kaiser and Miss Patel, then the results of those actions would, or could, be different."
He then went on to consider whether this was a real or theoretical risk. He noted that Tsuru had filed a defence in which he asserted that he had acted with Casio's authority and had done nothing wrong throughout, a defence which Mr Justice Neuberger was not prepared to reject summarily as being incredible, and continued (paragraph 35):
"No defendant (including Mr Kaiser) has yet admitted that Tsuru was acting improperly. Presumably those that ultimately seek to defend the claims will try to show that he was not, or might not have been, and the chances of their succeeding are not negligible. They might or might not succeed; and if proceedings take place in two different courts on two different occasions, the evidence, or even the view of the court of the evidence, might be different. All this means that two different courts approaching the matter in the future might come to two different conclusions on the point, and I think that the risk is real and substantial for these purposes. In my view that, by itself, is enough to entitle Casio to invoke Article 6(1) as against Mr Kaiser. So far as the common background of claims and the other common elements of the claims, can be taken into account, then the picture is even clearer - there is a clear and close link between the claims. Taking the broad common sense view that I am obliged to take of these matters, I think that it is clear that the claims in the unamended writ as against Mr Kaiser and Miss Patel are sufficiently closely linked to bring Kaiser within Article 6(1)."
"It follows that two claims in one action for compensation directed against different defendants and based in one instance on contractual liability and in the other on liability in tort or delict cannot be regarded as connected." (Paragraphs 47 to 50)
I can see nothing in this judgment which cuts down, qualifies or explains what was said in Kalfelis. Rather, the court specifically endorses and follows the principles laid down by the court in that case. Their application to the facts of that case (which was strictly unnecessary) is no more than that.
"Where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."
"For these reasons I am of the view that there should be a broad common sense approach to the question whether the actions in question are related, bearing in mind the objective of the Article, applying the simple wide test set out in Article 22 and refraining from an oversophisticated analysis of the matter."
This judgment makes it clear that the court is not merely concerned with the risks of conflicting decisions giving rise to mutually exclusive legal consequences. It also makes it clear that the court will be concerned with the risks of conflicting decisions on questions of fact as well as law. This Court so held in Gascoigne where Hirst LJ at paragraph 45 said:
"Conflicting findings of fact, on the other hand, are virtually impossible to reconcile if different judges in different jurisdictions within the EEC, hearing and seeing different witnesses, reach different conclusions which have hinged on an assessment of the reliability of individual witnesses; and of course the problem may be compounded in cases where there are different procedures in the different national courts in the way in which they hear the evidence and assess it. Moreover, different findings of fact also frequently lead to different conclusions of law."
"A person domiciled in a contracting state may, in another contracting state, be sued.
(3) In matters relating to tort, delict or quasi-delict in the courts of the place where the harmful event occurred."
"The rule of special jurisdiction in Article 5(3) of the Convention, the choice of which is a matter for the plaintiff, is based on the existence of a particularly close connecting factor between the dispute and courts other than those of the state of the defendant's domicile which justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of proceedings."
"The form of words "place where the harmful event occurred" used in all the language versions of the convention leaves open the question whether in the situation described it is necessary in determining jurisdiction to chose as the connecting factor the place of the event giving rise to the damage or the place where the damage occurred or to accept that the plaintiff has an option between the one and the other of those two connecting factors."
The court's conclusion was (paragraph 24):
"Thus it should be answered that where the place of the happening of the event which may give rise to liability in tort, delict or quasi-delict and the place where the event results in damage are not identical, the expression "place where the harmful event occurred" in Article 5(3) of the Convention must be understood as being intended to cover both the place where the damage occurred and the place of the event giving rise to it."
"Liability in tort, delict or quasi-delict can only arise provided that a causal connection can be established between the damage and the event in which that damage originates."
"The requirement of dishonest assistance relates not to any loss or damage which may be suffered but to the breach of trust or fiduciary duty. The relevant enquiry is ... what loss or damage resulted from the breach of trust or fiduciary duty which has been dishonestly assisted. In this context, as in conspiracy, it is inappropriate to become involved in attempts to assess the precise causative significance of the dishonest assistance in respect of either the breach of trust or fiduciary duty or the resulting loss."
ORDER: Appeal dismissed with costs; appellants aplication to refer this appeal to the European Court of Justice refused; permission to appeal to the House of Lords refused; (formerly sealed) envelope to be delivered to claimant in the event that:
(i) no petition is made to the House of Lords within 28 days;
(ii) such petition is made and refused;
(iii) permission is given by the House of Lords and appeal is subsequently dismissed.