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[2008] UKSSCSC CIS_213_2004 (29 August 2008)

CIS/213/2004

CIS/241/2004

DECISIONS OF THE SOCIAL SECURITY COMMISSIONER

Pursuant to the Directions set out at the end of my interim decisions in these appeals dated 18 September 2007 a further opinion in relation to French law has been obtained from Dawn Alderson of Russell-Cooke LLP, solicitors (Mr Croft having ceased to be a suitable person from whom to obtain such advice), and further written submissions have been made by counsel on behalf of the parties.

It is argued on behalf of the Claimant that the fact, as advised by Ms Alderson, that an English Court would appear to have exclusive jurisdiction in relation to the remedies available to Ms V in the event of the Claimant seeking to sell the Property and keep the proceeds, should lead me to reconsider and alter my conclusion, in the interim decision, that the applicable law for the purpose of determining whether a trust exists would be French law.

As I noted in paragraph 50 of the interim decision, one of the points relied upon by Mr Croally in support of his contention that the putative trust was more closely connected with English law than with the law of France was that the putative settlrr/beneficiary and the putative trustee are domiciled in England. However, he did not submit that England would have exclusive jurisdiction to determine whether there was a trust.

Ms Alderson expresses the cautious view that "it is not evident that France would have jurisdiction in this matter to determine the rights of the parties." She points out that the general position under Article 2 of Regulation (EC) 44/2001 (Brussels I) is that persons domiciled in a member state must be sued in the Courts of that member state. She goes on to say that "the only apparent exception" in this case arises from Article 22, which gives exclusive jurisdiction, in proceedings which have as their object rights in rem in immovable property, to the courts of the country in which the property is situated. She points out that the decision of the European Court in Webb v Webb (1994) ECR 1-1717 indicates that proceedings based on the contention that there is a resulting or constructive trust would not fall within Article 22.

Although Ms Alderson states that Article 22 is "the only apparent exception" to Article 2 which is relevant in this case, it appears very possible that the French Court would in fact have jurisdiction to determine the rights and remedies available to V, under the exception to Article 2 contained in para. 1(a) of Article 5. Under that provision a person may be sued "in matters relating to a contract in the courts for the place of performance of the obligation in question." I said in paragraph 42 of the interim decision that I did not think that the agreement between the Claimant and Ms V which I referred to in paragraph 36 of that decision gave rise to an enforceable contract in English law. However, under authority of the European Court "matters relating to a contract" bears an autonomous meaning, not to be interpreted by reference to national law. Its defining characteristic is that there is an obligation, freely entered into with regard to another: see Halsbury's Laws, Vol 8(3), para. 90. The cases there cited show that there is a significant amount of European and English authority on the meaning of that phrase. The content of the 'agreement' between Ms V and the Claimant would appear to be a significant element in any claim brought by Ms V in France. It must also be arguable that the "place of performance" of the agreement is France, since that is where the Property is situated. These would of course be matters for a French Court to decide, were Ms V to bring proceedings in France.

I appreciate that Mr Croally's argument is that the putative trust is most closely connected with English law because only an English Court would have jurisdiction to resolve a claim based on a contention that there is a constructive or resulting trust. However, it does not seem to me that even that is clear. It may well be that Ms V's contention that, as a result of the agreement and the surrounding facts, there is a resulting or constructive trust could be brought within the words "matters relating to a contract", so that a French Court would have jurisdiction to resolve the claim. I note, for example, that in his written submission (p.494) Mr Croally said:

"[the Claimant] cannot be regarded as the beneficial owner of the property. By virtue of his agreement with [Ms V] which is enforceable in the English courts according to English law, [the Claimant] is precluded from being the person entitled to direct the disposal of the property and to receive the proceeds of disposal of the property." (My underlining).

Even if the position is that only an English Court would have jurisdiction to resolve a claim by Ms V to be beneficially entitled to the Property and/or to the proceeds of sale, or indeed to resolve any claim by Ms V based on the fact that she provided the purchase money, that does not lead me to alter my view that the putative trust is more closely connected with the law of France than with the law of England. I agree with Mr Croally that the question of which court would have jurisdiction is a relevant factor, but it cannot in my view be conclusive. Because the general rule in Art 2 of Brussels I is that a defendant must be sued in the courts of his domicile, it must be contemplated, despite the exceptions to that rule in relation to particular categories of claim, that the court which has exclusive jurisdiction will have to apply some foreign law.

I accept that the fact that the Claimant and Ms V are domiciled and resident in England, and (if it be a fact) that the English courts would have exclusive jurisdiction are powerful factors. Nevertheless, the factors which I summarised in paragraph 56 of the interim decision in my judgment make the putative trust more closely connected with the law of France than with the law of England. Indeed, I am somewhat strengthened in this view by Ms Alderson's reference to the French doctrine of fraude à la loi. It seems that the net result of what Ms V and the Claimant were trying to achieve may well have been a "fraude à la loi successorale française", and that French law might well take that into account in determining the outcome. I think that there is a lot to be said for the outcome to be determined in accordance with the law of the country which was sought to be circumvented, rather than (as the Claimant in effect contends was intended) partly (i.e. as to the beneficial interest during the Claimant's life time) by English law and then (after the Claimant's death if the Property is then still vested in him) by French law. Further, as I pointed out in paras. 58 to 61 of the interim decision, the position under English law is far from straightforward. Indeed, in order to determine the outcome under English law an English Court might well consider it necessary to make at least some findings as to the position under French law (see, in particular, para. 59 of the interim decision).

I turn then to the question whether such remedies as might be available to Ms V under French law have the effect, for the purposes of s.134 of the Social Security Contributions and Benefits Act 1992, that the Claimant is not the owner of the Property. Ms Alderson advises that Ms V might succeed in (i) a claim that the Claimant be required to reimburse the purchase monies paid by Ms V, on the basis of a debt or loan or (ii) a claim "to recover the sums advanced from the Claimant" under one of the four possible causes of action mentioned on pages 539 and 540. I am unclear whether the four possibilities outlined under (ii) on page 539 are causes of action separate from that discussed in (i) on p.537, or whether they are means of arriving at the outcome referred to under (i). Having regard to the very cautious terms in which Ms Alderson's views are expressed, I am unable to reach the conclusion, on a balance of probability, that Ms V would have any cause of action under French law, were the Claimant to sell or threaten to sell the Property and to keep the proceeds. Further, it seems that at most she would have a monetary claim against the Claimant for the amount of the purchase price paid by her. In my judgment such a claim would not prevent the Property being included in the Claimant's capital for the purposes of s.134 of the 1992 Act: it would not give Ms V a proprietary claim to the Property or the proceeds.

I do not overlook that Ms Alderson does say, in para 3(B)(ii)(iv) of her opinion (headed société en participation), that that device "has permitted an equitable division of the sale proceeds to give effect to the interests of the partners when one of them has contributed to the immovable property operation of the other. This cause of action would permit [Ms V] to claim compensation for the loss which she has suffered and to be associated with the benefit which the Claimant has received as a result, taking account of the contribution of both parties." I am unable to find, however, that Ms V would, on a balance of probability, have such a cause of action, or that, if she did, it would mean that the Claimant is not the owner of the Property for the purpose of s.134 of the 1992 Act. Ms Alderson's view is too cautiously expressed to enable me to find that Ms V would have such a cause of action.

Mr Croally submits, on the basis of a translation into English of the French case of Caron v Odell, which was referred to by Ms Alderson in connection with the doctrine of fraude à la loi, that "the French court would intervene, not to stymie attempts by Ms V to recover her estate but to prevent [the Claimant] from being regarded as the true owner of the property so as to defeat the succession rights of Ms V's older children." However, the very tentative opinion expressed by Ms Alderson, in relation to the fraude à la loi doctrine, is that Ms V "might be unsuccessful in any proceedings to enforce repayment of the loan in France in a situation where the stated intention of the purchase by [the Claimant] alone was to deprive her other children of their legal rights to the reserve." It is very difficult to understand, on the basis of the very poor translation of Caron v Odell, what it decided. I am quite unable to find, on a balance of probability, that the doctrine of fraude à la loi could be used by Ms V as a means, in effect, of establishing under French law that the Property should be treated as hers. If that had been a real possibility under French law, I would assume that Ms Alderson would have mentioned it.

12. Mr Croally contends that a yet further opinion on French law is necessary because the existing one does not answer the questions posed in the amended question which the Claimant's advisers had proposed should be asked of the expert, and which is set out in para. 3.2 of Mr. Croally's submission at p.551. In my judgment, however, the opinion does address those questions. The question actually asked of Ms Alderson was what remedies would be open to Ms V "in the event of [the Claimant] seeking to sell the property and treat the proceeds as his own, contrary to his earlier agreement with [Ms V]." Any possibility, under French law, of (i) Ms V being able to prevent a sale of the property or (ii) having rights in relation to the proceeds of sale would clearly be remedies which would fall within the terms of the question put to Ms Alderson, and which she was asked to advise about. I must and do assume that, save to the very limited possible extent which I referred to in para. 10 above, no such remedies exist under French law, because none are mentioned by Ms Alderson. It cannot in my judgment be said that, because she does not expressly exclude them, Ms Alderson did not apply her mind to the possibility of (for example) Ms V obtaining injunctive relief preventing a sale, or obtaining some proprietary remedy in relation to the proceeds. On the contrary, the fact that Ms Alderson said (p.539) that "[Ms V] would not have the possibility of claiming a beneficial interest in the property under a trust …." shows that she did consider proprietary remedies. It would be unrealistic to infer that she considered only whether Ms V could claim a beneficial interest under a trust, and did not consider other proprietary remedies.

It follows that I answer the issues in paragraph 20 of the Schedule to the Order of the Court of Appeal dated 9 November 2005 as follows:

(a) French law

(b) Does not arise.

(c) There is no reason, under French law or otherwise, why the value of the Property should not be included in the Claimant's capital.

The result is therefore that, on the Claimant's appeals against the appeal tribunal's

decisions of 8 October 2003, I substitute, for the appeal tribunal's decisions, decisions to the

same effect as those made by Miss Commissioner Fellner on 21 September 2004.

(signed on the original) Charles Turnbull

Commissioner

29 August 2008