The nature of the proceedings falling within Article 5(6)

Difficulty may arise where the question is whether the person being sued is being sued as settlor, trustee or beneficiary, as distinct from being sued in an individual capacity, as stranger to the trust. For not everyone who is trustee or beneficiary is sued as trustee or beneficiary. In the Gomez case, proceedings were brought against the defendant, who was a discretionary beneficiary of the trust, to recover property which, it was said, had been paid to her in breach of trust. The claimant alleged that as she was not entitled to receive it, and knew that fact, she was liable to account as constructive trustee. The defendant argued that this meant that she was not being sued in her capacity as beneficiary, but as a person outside the circle of relationship established by the trust who was liable to be treated as a constructive trustee, and that that took the proceedings outside Article 5(6). The question whether she was sued as beneficiary appears not to have been answered by reference to the way in which the claim was pleaded. The court appears to have decided for itself that she was really being sued as an overpaid beneficiary to whom the distribution should not have been made, rather than as a stranger or appointee who had received trust property in a way which bound her conscience to account for and return it.

If the analysis of the claim was correct, the conclusion certainly follows. But it is hard to avoid the suspicion that, because the dispute would call for the application of English trusts law to determine its merits, it was at the very least convenient for the court to be able to reach the conclusion that the English court had special jurisdiction over the Spanish defendant. For where there is a trusts dispute which arises from a trust which is governed by English law, it is surely sensible that it be heard in an English court which will have some idea of what it is dealing with. One imagines that the Spanish court of the defendant’s domicile would appreciate the concern.

The claimant also alleged the defendant had acted unlawfully when, as donee of a power of appointment, she appointed herself as Appointor’ of the trust. It was held that that allegation was not within what is now Article 5(6), but this is much less easy to understand. It is true that the Appointor’ is not a settlor, trustee or beneficiary, but that cannot be a sufficient reason. The justification for Article 5(6) is that disputes which arise inside the perimeter of relationships created by the trust should be within the special jurisdiction of the court best placed to deal with them. Given that English trusts law will be pretty alien to a court in a Lugano State which does not have a law of trusts, the question whether the defendant had acted lawfully might well have been one practically impossible to determine before the Spanish court of her domicile. The court was unwilling to interpret the words of the Article in a broader sense than they are written, but it was wrong to do that. When this provision was drafted, the peculiar offices of Appointor, Enforcer, Protector, Guardian and so forth were not common, and Article 5(6) would have looked very odd if they had been all spelled out in it. The correct way to read Article 5(6) is to construe the cast of characters ejusdem generis, as including within it all the participants who make up the body of the trust as trusts are now conceived. On this point the decision conflicts sharply with the requirements of the sound administration of justice. It is surely wrong.

Jurisdiction over payment in respect of salvage claims: Article 5(7)

Article 5(7) of the Lugano Convention provides that:

A person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued: (7) as regards a dispute concerning the payment of remuneration claimed in respect of the salvage of a cargo or freight, in the court under the authority of which the cargo or freight in question (a) has been arrested to secure such payment, or (b) could have been so arrested, but bail or other security has been given; Provided that this provision shall apply only if it is claimed that the defendant has an interest in the cargo or freight or had such an interest at the time of salvage.

This provision of the Convention does not appear to have given rise to any reported decision. It appears to be self-explanatory.

¹

See the previous footnote.