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15 March 2016
The High Court recently considered(1) jurisdictional issues relating to a claim concerning the claimants' entitlement to certain shares held by a deceased businessman. An argument arose as to whether the claim fell within the scope of the 'succession' exclusion in Article 1(2)(a) of the EU Brussels Regulation.
The first claimant, Mr Winkler, claimed that his deceased business colleague, Sami Shamoon, had agreed to transfer certain shares worth tens of millions of dollars to him before his death. He brought proceedings against Mr Shamoon's widow and daughter – the defendants – who (among other things) challenged the jurisdiction of the English court to hear the claim on the basis that it was a matter relating to succession within Article 1(2)(a) of the Brussels Regulation and therefore fell outside of its scope.
On May 29 2009 Mr Shamoon, a successful businessman, passed away. During his lifetime, he was one of the wealthiest people in Israel. He left a large and valuable estate, estimated by an Israeli judge in 2012 to be worth IS1.7 billion (approximately $1 billion).
Winkler was 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. Winkler was the sole beneficial owner of the second claimant, Arzal Finance Corp. The first defendant, Angela Shamoon, was Shamoon's widow and the second defendant, Alexandra Shamoon, was his only daughter. Mrs and Ms Shamoon were the residuary legatees under Mr Shamoon's will.
Mr Shamoon made a number of monetary bequests in his will, including a bequest of $30,000 to Winkler. However, the claimants alleged that they were entitled to 1% of the shares in Ainsbury Properties Limited and 12.5% of the shares in Placido Investments Inc. 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 were worth tens of millions of dollars.
Winkler claimed that in 2008 Mr Shamoon contemplated transferring the 1% of shares in Ainsbury to Winkler, and that Mr Shamoon instructed Philippe Grumbach (the third defendant) to do so. Further, Winkler claimed that in April 2009 – shortly before Mr Shamoon's death – Mr Shamoon decided to transfer the 12.5% of the shares in Placido in order to incentivise Winkler to be involved in the business of the Yakhin Hakal Group after Mr Shamoon's death. Winkler again claimed that Grumbach had been directed to register Winkler as the owner of 12.5% of Placido.
In the claim before the High Court, Winkler sought declarations against Mrs and Ms Shamoon to establish that 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 Winkler – or alternatively in the case of Placido, Arzal – be registered as the owner.
Winkler had previously brought a claim against Mr Shamoon's estate in the Israeli courts, which dismissed his application on June 2 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 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, Winkler issued a claim form in the High Court instead.
Mrs Shamoon applied for an order under Civil Procedure Rule Part 11 to set aside the claimants' purported service of the claim form on her within the jurisdiction, on the basis that she was not domiciled in the United Kingdom for the purposes of Article 59 of the Brussels Regulation and therefore was not served at her 'usual or last known residence' under Civil Procedure Rule 6.9(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:
While Ms Shamoon accepted that she was domiciled in the United Kingdom 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, 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 "wills and succession". The court noted that while the term 'wills and succession' is not defined within the text of the Brussels Regulation, the EU Succession Regulation (650/2010) defines 'succession' as:
"succession to the estate of a deceased person [which] 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 before 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 fell squarely within the succession process of "sharing out of the estate".
The judge concluded that the claim was therefore excluded from the Brussels Regulation and the EU Lugano II Regulation, as its principal subject matter was succession within the meaning of Article 1(2)(a). Accordingly, the judge held that the court had no jurisdiction to hear the claim.
The decision confirms that exclusions in the Brussels Regulation should be construed narrowly, and that the English courts will enter into active consideration of the regulation and reject jurisdiction where it deems necessary. The courts can and will consider other regulations (eg, the Succession Regulations) in order to inform their understanding of the Brussels Regulation, and to ensure that a logical interpretation is applied.
For further information on this topic please contact Simon Hart or Amelia Payne at RPC by telephone (+44 20 3060 6000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
(1) Winkler v Shamoon  EWHC 2017 Ch.
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