Case No: HC 01 C00336
Neutral Citation No: [2002] EWHC 1304 (Ch)
 
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date:  5 July 2002

Before :

THE HONOURABLE MR JUSTICE JACOB

In the matter of the Trusts and Settlement dated 26th July 1961 and made by
Anna Gula Carapiet
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Between :

	His Beatitude Archbishop Torkom Manoogian, the Armenian 
Patriarch of Jerusalem
	Claimant	
	- and -		
	
(1)  Yolande Sonsino
(2)  National Westminster Bank plc
(3)  Her Majesty’s Attorney General	
Defendants	

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Frank Hinks QC (instructed by Gulbenkian Harris & Andonian) for the Claimant
Shân Warnock-Smith QC (instructed by Victor Sonsino) for the 1st Defendant
Francesca Quint (instructed by Osborne Clarke) for the 2nd Defendant
David Blayney (instructed by Treasury Solicitor) for the 3rd Defendant

Hearing date : 25 June 2002
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Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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THE HON MR JUSTICE JACOB

Mr Justice Jacob : 

1.	The Armenian Patriarch of Jerusalem seeks the determination of a number of questions arising under a settlement dated 26 July 1961.  He has an interest in the income arising from the capital of the settlement.  The first defendant, Mrs Sonsino, is the residuary beneficiary under the will of the Settlor, Mrs Carapiet.  She is the person beneficially interested in the Trust Fund if the trusts declared by the settlement fail as not being charitable.  However, although that is the technical position her stance has essentially been neutral.  Her Counsel, Mrs Warnock-Smith QC, was more concerned to assist the court as an amicus than to fight for what, on one view, might be her client’s money. The second defendant is the National Westminster Bank plc.  It is named as the Trustee in the settlement.  It takes a neutral position because it is also the executor and trustee of Mrs Carapiet’s will although it does contend that if the settlement does create a valid charity it is within the charitable jurisdiction of the High Court.  The Charity Commissioners have expressed certain views on the position.  They are in principle willing to deal with the retirement of the second defendants as Trustees and the appointment of alternative Trustees, but have indicated that there may be difficulties.  In particular, they have questioned whether the Trust is charitable.  They are not represented before me but have indicated that they are likely to accept my decision on the point.  Mrs Warnock-Smith for the first defendant was prepared to argue so far as she could on an amicus curiae basis the corner of the Charity Commission.  The remaining defendant is HM Attorney General acting in his capacity as protector of the interests of Charity. I am told that the Inland Revenue have accepted that they will be bound by my decision.

2.	The questions are as follows:

1.	What is the proper law of the settlement?

2.	Is a purpose of the settlement payment of income to the Patriarch in his office?

3.	Are the objects wholly charitable?

4.	Who is or are the trustees?

What is the proper law of the settlement?

3.	The settlement does not expressly choose any applicable law.  Accordingly the proper law is to be determined either in accordance with the common law or in accordance with Article 7 of the Hague Convention whose terms are annexed as the schedule to the Recognition of Trusts Act 1987.  I say either the common law or under the Act because the Act is obscure as to its retrospective effect.  Article 22 of the Convention says:

“The Convention applies to trusts regardless of the date on which they were created.”

Section 1(5) says:

“Article 22 shall not be construed as affecting the law to be applied in relation to anything done or omitted before the coming into force of this Act.”

In this case the settlement was created before the coming into force of the Act but the operative provisions only came into play with the death of the Settlor in 1999.  So it is a moot point as to what the effect of Article 22 and Section 1(5) might be.  Fortunately I do not have to decide the point.  Counsel were all agreed that whether the Act applied, or the previous common law applied, the position was the same.

4.	Counsel further agreed that that position is as set out in the Convention.  This provides as follows:
“Article 6

A trust shall be governed by the law chosen by the Settlor.  The choice must be express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary, in the light of the circumstances of the case.

Where the law chosen under the previous paragraph does not provide for trusts or the category of trust involved, the choice shall not be effective and the law specified in Article 7 shall apply.

Article 7

Where no applicable law has been chosen, a trust shall be governed by the law with which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be made in particular to –

(a)	the place of administration of the trust designated by the Settlor;
(b)	the situs of the assets of the trust;
(c)	the place of residence or business of the trustee;
(d)	the objects of the trust and the places where they are to be fulfilled.”

5.	This is an Article 7 case – with which law is the trust most closely connected?  To determine that one must have regard particularly to the enumerated items though all surrounding objective circumstances are relevant.  Direct evidence of the Settlor’s intention as to governing law is not admissible, see Chellaram v Chellaram [1985] 1Ch 40 at p.425.   

6.	What then were the surrounding circumstances?  There is no dispute as to these.  The Settlor was originally born in Iraq.  During or before the war she married a Scot thus acquiring British citizenship.  The marriage ended and she lived in London with her mother, remarrying in 1948.  Her husband was domiciled in India and she acquired, by the marriage, Indian domicile of dependency.  Thereafter she lived in Calcutta but with frequent visits to London.  Her husband died at the beginning of 1956.  There was litigation in India between the Settlor and the then Armenian Patriarch.  That litigation was settled by an agreement executed in England at a time when the Settlor said she was resident in England.  In due course the agreement became a schedule to a consent order of the Indian Court of Appeal.  There is evidence that at the time there was very strong currency control in India.  The Settlor was given special permission by the Indian authorities to remove all such assets as were in India to London.  The Settlor then returned to London, thereafter moving to live in Italy although she returned from time to time to London.  The settlement itself was executed on 26th July 1961.  It was presented for United Kingdom stamp duty shortly thereafter.

7.	The settlement itself is between the Settlor who gave a London address and the National Westminster Bank, also with a London address.  The settlement recites the Indian proceedings and recites that it is made in accordance with the agreement settling the litigation.  Clause 1 provides as follows:

“The Settlor as Settlor hereby declares that the Bank shall hold the said assets upon trust, that the Bank shall sell and convert into money such portion thereof as does not consist of money with power to postpone such sale and conversion …”

So Clause 1 expressly says that the Bank shall hold the assets upon trust.  Clause 2 gives the Bank power to invest the residue of monies (after payment of its own fees):

“In such manner during the lifetime of the Settlor as the Bank may in its absolute discretion think fit.”

8.	Clause 3 gave the Settlor an entitlement to the income from the trust fund.  It provided as follows:

“The Bank shall stand possessed of the said investments or any investments and money for the time being representing the same (hereinafter referred to “the trust fund” which fund it is intended shall henceforth be generally known as the “Gregory George Carapiet Trust”) upon trust during the lifetime of the Settlor out of the income arising from the trust fund to pay the Bank’s management fees as hereinafter declared and contained and to pay the residue of the said income to the Settlor during her life.”

9.	It is Clause 4, providing for what happens after the Settlor’s death, that causes the questions the subject of this case:

“After the death of the Settlor the Bank shall pay the income arising from the trust fund subject in the first place to the payment thereout of the Bank’s management fee to the Armenian Patriarchate of Jerusalem or to pay or apply the same as the said Patriarchate of Jerusalem in Palestine shall direct for the purpose of the education and advancement in life of Armenian children or for such other charitable purpose or purposes as the said Patriarchate may consider allied thereto and the receipt of the proper officer of the said Patriarchate shall be in all respects a sufficient discharge to the Bank.”

10.	Clause 7 gave the Bank power to compromise any proceedings and to adjust and settle and approve all accounts.  Clause 8 provided as follows:

“Subsequent to the death of the Settlor the Bank shall have the same powers of investment of the trust funds as are vested in it during the life of the Settlor save that the Bank shall make such investments as may from time to time be particularly and specifically directed to be made of it in writing from time to time by the Armenian Patriarchate of Jerusalem by its duly authorised representatives including investments in the purchase of land or buildings in England or Wales but not outside those countries unless the Bank in its own full and absolute discretion thinks fit.”

11.	The various candidates for the applicable law are English and Welsh, Indian or some sort of law applicable in Jerusalem.  No one was prepared to argue for the latter – not least because it would not be clear whether it would be Israeli law or the law of Jordan.  

12.	So the contest is essentially between England and India.  I have no doubt that the balance falls down in favour of England.  The Settlor was trying to get the money out of India.  There is objective evidence that doing that was extremely difficult at the time.  The difficulty of getting money out of India has been held to be a pointer to India not being the governing law of a trust and was a matter considered relevant by Scott J in Chellaram at p.425, albeit that his observation was obiter.  More significantly, in this case, is the fact that the trustee chosen was a professional trustee based in England.  Moreover, at the time the Settlor was resident in England.  Furthermore there was a particular direction about investment in English property in Clause 8.  As far the assets were concerned they were to come out of India and, in the first instance, to come under the control of the Bank trustee in England.  The fact that the Bank was in a position to invest elsewhere is to my mind irrelevant.  The whole position in my judgment is abundantly clear.  This Settlor wanted the trust controlled from England.  The closest connection is with England.

13.	Mrs Warnock-Smith argued, to be fair faintly, that there was an Indian connection.  In particular the settlement document was the result of the settlement of Indian probate proceedings.  The action was settled by a court order and the document of settlement was itself annexed to the court order.  None of those things, to my mind, outweigh the more significant connections with England.

14.	Accordingly I hold that the governing law of the trust is England.  I note with some satisfaction that Mr Paul Baker QC took the same view (under the common law) when he advised upon the settlement some time before the coming into force of the Act.  None of the other Counsel contended that the proper law was other than England.  The Charity Commission has also formed that view.

Is there a separate purpose of payment to the Patriarch in his office - does Clause 4 have two or three objects?

15.	For the Patriarch, Mr Hinks QC, argued that Clause 4 provided for three objects to whom the income could be paid (subject first of all to the Bank’s management fee).  They were:

1.	the Patriarchate as such, or
2.	the Patriarchate for the purposes of the education and advancement in life of Armenian children, or
3.	“such other charitable purpose or purposes … allied thereto”

16.	Mr Blayney for the Attorney General, and Mrs Warnock-Smith (purely in the capacity of amicus), contended otherwise.  They said that what the clause really meant was that payment should either be to the Patriarchate or at the Patriarchate’s direction, for the purpose of the education and advancement in life etc. There was no distinct general direction to pay the income to the Patriarchate as such.

17.	I prefer that construction.  Mr Hinks accepted that the juxtaposition of the “or” and the “to” was unhappy.  The real question is which of the two words is redundant.  Mr Hinks suggested that it was “to” and that the structure of the clause was that there were three objects of the income.  The difficulty with that is that the second object “pay or apply etc” is over elaborate.  If you read the clause omitting the first “or” it reads perfectly sensibly.  The payment is to the Patriarchate for the defined purpose, or to be paid at the direction of the Patriarchate for the defined purpose.

Are the objects wholly charitable?

18.	It does not matter which of the two constructions is adopted, so far as the question “charitable or not” is concerned.  If there is a separate object to the Patriarchate as such, the donation would still clearly be charitable being a donation not to the Patriarch in his personal capacity, but in his capacity as leader of the church and for the purposes of the church, see e.g. Re Garrard [1907] 1 Ch 382 and Halsbury’s Laws 4th Edn. 2001 Reissue Vol. S(2) para 35.  Mrs Warnock-Smith did not think she could argue otherwise, nor did any other Counsel.

19.	Thus argument centres upon the words “for the purpose of the education and advancement in life of Armenian children or for such other charitable purpose or purposes …”  

20.	The first question is whether or not the word “and” is to be read conjunctively or disjunctively: does it really mean “or"?   Mr Hinks pointed to two cases in which the word “and” was construed conjunctively.  These were Re Lloyd (1893) 10 TLR 66 and Re Best [1904] 2 Ch 354.  In Re Lloyd Stirling J held the phrase “for religious and benevolent” meant both religious and benevolent.  In Re Best Farwell J was concerned with the phrase “such charitable and benevolent institutions” and held that “benevolent” qualified “charitable” and therefore did not take the objects outside charitable purposes.  

21.	Mrs Warnock-Smith suggested that the real difficulty in construing “and” conjunctively in this case was the decision of the Privy Council in the Attorney General of the Bahamas v Royal Trust Co [1986] 1 WLR 1001.  The trust was “for any purposes for and/or connected with the education and welfare of Bahamian children”.  The Privy Council held that “welfare” was not restricted to welfare ancillary to education and that the words had to be construed disjunctively, that is to say there were two separate purposes and not the single purpose of welfare which was educational.  However, the advice to Her Majesty of the Privy Council expressly recognised that:

“In the end however the question is one of the construction of those particular dispositions of this testator and references to the construction placed upon different expressions in the wills of other testators, whilst perhaps useful as guidelines, are necessarily of limited assistance.”

22.	The Privy Council of course had to deal with the particular wording of the will before it.  The difficulty was that it was impossible to read “welfare” as having a narrower meaning than “education”.   Lord Oliver observed:

“It is not easy to imagine a purpose connected with the education of a child which is not also a purpose for the child’s welfare”.

23.	The problem was compounded by the additional words “for any purposes for and/or connected with”: even a purpose merely connected with education was included.  This made it even more difficult to read "welfare" as qualifying "education."   Thus  “welfare” had a wider meaning than "education or any purpose connected with education".   Unless it was meaningless it took a purpose outside the limits of charity.

24.	Turning to this case, I do not think that sort of difficulty arises.  The reference to “advancement in life of Armenian children” is indeed qualifying the sort of education to which the income is to be applied.  One can think of subjects which might be taught which are of a purely academic nature.  They are excluded by the compound phrase.  It is education which will advance the children’s future life, which is the object of the charity.

25.	This is confirmed by a significant difference between the current settlement and that in the Bahamas case:  the Bahamas case was “for any purposes …”  In the present case “purpose” is used in the singular to qualify “education and advancement etc.”   It shows that the Settlor regard the composite as a single purpose.   The use of the singular is not an accident, for the clause goes on to talk about such other “charitable purpose or purposes as the Patriarchate may consider allied thereto”.

26.	Accordingly I have come to the clear conclusion that the expression should be read conjunctively.  Once that is so there is no doubt that the overall purpose is educational, and thus within the second purpose identified in Lord Macnaghten’s speech in the Commissioners of Income Tax and Pemsel [1891] AC 531 at p.583:

“ ‘Charity’ in its legal sense comprises four principal divisions: trusts for the relief of poverty;  trusts for the advancement of education;  trusts for the advancement of religion;  and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.  The trusts last referred to are not the less charitable in the eye of the law, because incidentally they benefit the rich as well as the poor, as indeed, every charity that deserves the name must do either directly or indirectly.”

 27.	If I was wrong about that then Mr Hinks, supported by the Attorney General, contends that “the advancement in life of children” is itself charitable under Lord Macnaghten's fourth head ("beneficial to the community").   There is a lot to be said for this view and I would, if necessary, have so held.  It is unlikely that in this context "advancement" takes its jargon meaning in the law of private trusts - which covers, for instance, the payment of money out of a fund to a beneficiary for all sorts of purpose, for instance the purchase of a house.   Here the phrase is "advancement in life of children" which is not the same thing.   There is a close analogy with two parts of the preamble to the Statute of Elizabeth, i.e. "the education and preferment of orphans" and "the supportation, aid and help of young tradesmen, handicraftsmen and persons decayed." Putting aside decayed persons ("and" here is clearly disjunctive) makes the analogy obvious.

28.	For much the same sort of reasons, Lightman J held the purpose of setting up the unemployed in trade or business to be charitable (see IRC v Oldham Training and Enterprise Council [1996] STC 1218).  Mr Blayney, for the Attorney General, drew my attention to the view of the Charity Commissioners on this point.   They consider that "the care, upbringing, and establishment in life of children and young people" to be charitable.     That seems to me to be right.   

29.	Accordingly, but for the fact that this is a second head case this would be a fourth head case, i.e. one for other purposes beneficial to the community.  This is subject to the point I come to next. My attention was drawn to page 28 of the third edition (1999) of The Law and Practice Relating to Charities by Mr Picarda QC.  Mr Picarda says:

“Charities within the fourth head of the classification in the Pemsel case, i.e. for other purposes beneficial to the community will, according to the Commissioners only be charitable if of benefit to the community of the United Kingdom.”

30.	The general idea here is that benefiting a foreign public will only suffice if there is a knock-on benefit back in the UK.   No Counsel thought this to be supportable.  The true position, they submitted, was that there can be valid charitable trusts for purposes abroad under all four heads.  However, there might be a foreign purpose which would not be recognised as being contrary to English law of public policy.  Counsel went on to point out that the book was in error in suggesting that the Commission took the view stated.  The Commission's position is as follows:

“We consider that in determining the charitable status of institutions operating abroad, one should first consider whether they would be regarded as charities if their operations are confined to the United Kingdom.  If they would, then they should be presumed also to be charitable even though operating abroad unless it would be contrary to public policy to recognise them.  (see Re Vagliano [1905] 75 LJ Ch 119;  Armstrong v Reeves [1890] LR 25 1r 325;  Re Jackson [1910] Times 11 June;  Mitford v Reynolds [1842] 1 Ph 185 and Re Jacobs [1970] 114 Sol Jo 515 and also the Canadian case of Re Levy Estate [1989] 58 DLR (4th) 375 and the Australian cases of Re Stone [1970] 91 WN (NSW) 704 and Lander v Whitbread [1982] 2 NSW LR 530).  We consider that this approach reconciles the decision in Keren Kayemeth Le Jisroel Limited and the comments made in the Dreyfus Foundation case.  In particular, we noted the words of Lord Evershed MR in the Dreyfus Foundation case that “to such cases the argument of public policy [meaning the United Kingdom public policy] might be the answer” and of Jenkins LJ in that case that “it is here only necessary for me to observe that it cannot be maintained that no purpose is recognised  as charitable under our laws unless it is carried out in and for the benefit of the public, or some section of the public, of the United Kingdom.” (1993) 1 C. Comm. Dec. 17.

31.	I think the Commission is clearly right about this.  Perhaps the most important authority is the Dreyfus case, [1954] Ch 672.    The Court of Appeal was invited in argument to overrule the decision in Re Robinson [1932] 2 Ch 122.  In that case Maugham J had held the purpose of benefiting of German soldiers injured in the First World War to be validly charitable.  The Court in Dreyfus refused the invitation and indicated that the key factor was public policy (see per Sir Raymond Evershed MR and especially per Jenkins LJ at p.704).

32.	Accordingly I hold the purposes of the trust to be wholly charitable.

Who is the Trustee?

33.	This point arises as a result of some correspondence between the Bank’s solicitors and the Charity Commission.  The Patriarch would like, if it is possible, that the Bank should retire as a trustee in favour of the partners of a firm of solicitors.  The Bank is content with this if it is possible.  It wrote to the Commission to ask if this could be done.  The Commission replied raising some points.  It said, amongst other things:

“There is in addition a more fundamental problem of jurisdiction that may call into question the charitable status of the trust.  The proper law of the trust appears to be that of England and Wales and its status falls to be determined according to English law.  A trust must not only be established for charitable purposes but it must be subject to the control of the High Court in the exercise of the court’s jurisdiction with respect to charities.  We see no difficulty in the separation of the roles of “investment trustees” and the trustee responsible for the application of the charitable funds, but the Patriarch has the power to direct how the investments should be made, subject only to the restriction that there may be no investment in land or buildings outside England and Wales (Clause 8 of the 1961 Settlement).  The power on the part of the Patriarch raises the question of whether he is in fact the sole trustee, with the “investment trustees” merely acting as his agent or exercising delegated powers.  If so, the trustee would be outside the jurisdiction and the trust would not be charitable.”

34.	With respect the last sentence cannot be right.  It is not essential to a valid charitable trust that there be a trustee within the jurisdiction.   Would, for instance, a charitable trust with resident trustees cease to be charitable simply because the trustees went abroad, whether temporarily or permanently?   The answer to my mind is obviously no.    Of course if the trustees went abroad permanently and the objects and assets of the trust were all abroad, the trust might cease to be within the remit of the Charity Commissioners.  But that is a separate question from whether or not the trust is charitable.

35.	Further, I very much doubt whether it is necessary for there to be a trustee within the jurisdiction for a charitable trust to fall within the scope of the 1993 Act.  Section 96(1) of the Charities Act 1993 says:

"In this Act …

'charity' means any institution, corporate or not, which is established for charitable purposes and is subject to the control of the High Court in the exercise of the court's jurisdiction over charities."

36.	"Control of the High Court" does not, to my mind, necessarily require presence within the jurisdiction.  Equity acts in personam and can make orders against people who are abroad.  Furthermore the Court has ample powers to permit service out of the jurisdiction, see CPR 6.20(11).  Other rules for service out of the jurisdiction might also come into play (e.g. 6.20(3), "necessary or proper party" or 6.20(10), "property located within the jurisdiction").   In the present case, for example, the Bank is within the jurisdiction and, if he is a trustee, the Patriarch is a necessary or proper party.  Further, of course, even if a foreign trustee were outside any of the categories of CPR 6.20 he could submit to the jurisdiction.

37.	There is perhaps this further notion conveyed by the phrase "control of the High Court", namely that the Court has power not merely to make an order but actually to enforce it.   It would not be practical to punish for contempt a trustee who physically stayed out of the jurisdiction.  But even then the Court would have other ways of making its order effectual - in particular by exercising the power conferred by s.39 of the Supreme Court Act 1981 to order that a document be indorsed by a nominated person.

38.	I do not, however, decide finally whether there must be a trustee within the jurisdiction for a charitable trust to come within the scope of the 1993 Act.   It is not necessary to do so in this case. No-one was prepared to argue that there must be so I have not heard what might be said for a more restrictive view.   The reason I do not decide the point is that I am quite satisfied that there is a trustee within the jurisdiction, namely the Bank.

39.	The Commission's concern arises from paragraph 8 of the Settlement.   The idea is that because the Patriarch is given power to direct investment of the Trust Fund (save not into land outside England and Wales without the Bank's approval) the Bank should be regarded as mere nominee.   But that is not right.   The Bank is holding all the trust property in its name.  It is not holding the property as a bare trustee:  no one is entitled to call for the property to be transferred to him or her.    It has the general management of the trust (e.g. the duties to prepare accounts).  It has a power to direct investments generally.  True that power is subject to any orders from the Patriarch but, in the absence of such orders, it is the Bank which is entrusted with the job and, as trustee, must do it.  Additionally, it is only the Bank who can compromise claims involving the trust pursuant to power given by para. 7 of the Settlement.

40.	All this adds up to enough to bring the Bank within the definition of "charity trustees" provided by s.97 of the Act:

"'charity trustees' means the persons having the general control and management of the administration of a charity."

41.	Given that the Bank is a trustee, the trust is within the scope of the 1993 Act, it probably does not matter whether the Patriarch is too, as tentatively suggested by the Commission's letter.   However I do not think he is.  His power to direct investments is not an obligation to do so.  His position is analogous to powers of a life tenant under a conventional strict settlement.   The life tenant is often given powers to possess land, direct investments and so on, but none of those things make him a trustee of the settlement.

42.	Accordingly I hold:

1.	The proper law is that of England and Wales;
2.	Clause 4 has only 2 objects;
3.	The Trust is for wholly charitable objects;
4.	The sole Trustee is the Bank.