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The High Court dismisses the claim of the Asturion foundation to Kenstead Hall, the London residence of late King Fahd of Saudi Arabia and of his widow, Princess Jawharah, in Asturion Fondation v. Aljawharah bint Ibrahim Abdulaziz alIbrahaim [2023] EWHC 3305 (Ch) – one of The Lawyer’s Top 20 Cases of 2023

Judgment has been handed down by Mr Justice Adam Johnson after a trial over three weeks this summer in the Chancery Division of the High Court.  The Foundation’s claims had been struck out in 2018, but then restored by the High Court in [2019] EWHC 274 (Ch) in a ruling upheld by the Court of Appeal in [2020] EWCA Civ 32; [2020] 1 WLR 1627; [2020] 2 All ER 965.

The Asturion Foundation (the “Foundation”) claimed title to Kenstead Hall (the “Property”) on Bishop’s Avenue, transferred by the Foundation to Princess Aljawharah (the “Princess”).  King Fahd had given instructions for the transfer (the “Transfer”) in 2001, but his instructions had not been actioned by the former President of the Foundation, Me Assaly, until 2011.

The Court dismissed the Foundation’s claims that the Transfer was beyond the internal competence of Me Assaly as Vice-President of the Foundation’s Board under Liechtenstein law and/or was outside the purpose of the Foundation.  It confirmed that that Me Assaly had the requisite sole signatory power under (i) the Articles of the Foundation (the “Articles”) and (ii) a power of attorney granted in 1988 by King Fahd as primary beneficiary of the Foundation that itself effected a delegation that was consistent with the Articles.

Having heard the parties’ Liechtenstein law experts cross-examined over several days, the Judge preferred the evidence of the Princess’ expert.  He found no distinction between the Me Assaly’s power of external representation and his internal competence under the Articles.  They gave Me Assaly the power to adopt resolutions on his own, including as to the distribution of assets, because that is what King Fahd had wanted, and continued to want. 

The Court went on to find that Me Assaly had been obliged to implement the King’s 2001 instruction as a regulation of binding character issued by King Fahd under the Articles.

The Judge rejected the Foundation’s argument that the 1988 Power of Attorney was governed by Swiss law.  It was governed at common law by the law of the country in which it was to be used, and there was no contrary intention not least as it was concerned with the internal management of a Liechtenstein foundation.  There was no requirement that it be signed by all the members of the Foundation’s Board.  It was drafted in broad terms. 

There was nothing in Liechtenstein law to prevent the delegation of the Board’s power to make distributions, subject only to a general duty of the Board to monitor the delegate’s acts.

The Court further rejected the argument that the purpose of the Foundation had been made frozen or ‘solidified’ by its first Regulation and was limited to making distributions of its assets in strict Shari’a shares. That would be inconsistent with the supremacy of the founder’s will in Liechtenstein foundation law.  It was the clear intention of King Fahd to retain as much power as possible in the Foundation.

The purpose of the Foundation was sufficiently flexible to include the King’s 2001 direction that the Property should be distributed to the Princess, herself one of his Shari’a heirs.  That direction was itself a ‘regulation’ for the purpose of defining the purpose of the Foundation.

The Court further rejected an argument that certain prima facie findings of the Liechtenstein Supreme Court as to whether a decision of the Board had been based on a ‘tenable’ legal view had any res judicata effect as to the propriety or validity of the actions of Me Assaly.  As for the views of the Supreme Court in this matter, these applied expressly to directions as to the distribution of his assets after his death, and not to directions given by him while still alive.

The Judge found that the Princess’ English lawyer had therefore been correct to assume that Me Assaly had been properly authorised to effect the Transfer.  The oral and later written instructions given to him by Kind Fahd were consistent with earlier dealings of the Foundation with other London properties that had been gifted to various of the King’s older sons.  Insofar as he had sought the consent of King Fahd’s Shari’a heirs he did so without having seen the most recent Articles of the Foundation and as a matter of cautious prudence.

The Court found that there may have been some confusion as to whether Prince Mohammed had responded for the Council of Heirs with regard to the Transfer to Me Assaly.  The latter had become exasperated at the lack of a promised response from the Council of Heirs and steadfast in his intention to give effect to the wishes of the late King. Evidence from Prince Mohammed’s Saudi lawyer that he had communicated the Council’s position to Me Assaly was rejected by the Court in the face of contemporaneous documents as being mistaken.

The formal validity of the Transfer was ultimately a matter of English law. The Judge was not inclined to think that the Foundation was not an ‘overseas company’ for the purposes of the Overseas Companies Regulations, so that the formal validity fell to be determined under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989.

A legal issue arose as to whether, if the Transfer were unauthorised or outside the purpose of the Foundation, its effects would be saved by section 26 of the Land Registration Act 2002.

The Judge found that, even if the Transfer had been outside the purposes of the Foundation, the effect of section 26 would be to deem the Princess to have taken free of that limitation on the Foundation’s power to dispose of the Property.

He further found, however, that the protection of section 26 should apply only in respect of restraints affecting the capacity of a registered proprietor but is not engaged by constitutional limitations on the power of disposition arising solely because of an agent’s lack of authority.  To that extent, he agreed with the criticisms made in Emmet & Farrand on Title of the Upper  Tribunal’s decision in Ghai v. Maymask (228) Ltd [2020] UKUT (LC).  If the law were otherwise, that would override the protection that section 26 is designed to afford to disponees.

If, however, Me Assaly had been acting in excess of his internal competencies, so that section 26 did not operate to protect the Princess, then she could not rely on the English doctrine of ostensible authority because, even though there was a relevant holding out of Me Assaly on the Liechtenstein public register, the Transfer was a voluntary disposition for no consideration without any transactional aspect or element of reliance by the Princess, and she had notice by her English lawyer of matters calling into question the authority of Me Assaly.

The Court finally dismissed further claims that the Transfer should be set aside as having been in breach of what would be a breach of fiduciary duty under English law, or under a mistake as to his duties, or that the Princess was liable to make restitution for having been unjustly enriched by the value of the Property or damages for knowing receipt.  It considered that all of these claims were governed by English law, although for different reasons and based on different characterisations of the relevant claims made by the Foundation.

The Judge accepted that, if he were wrong about those claims so that the Foundation had the benefit of an equity at the point of transfer, then that equity would have stood in priority under sections 28-29 of the Land Registration Act to the interest of the Princess because the transfer of the Property to her was not a transfer for value.

The Foundation’s claims accordingly failed.

Rupert Reed KC and Simon Atkinson, together with Simmons & Simmons (David Sandy, Tom McKenzie and Rika Akimoto) acted for the successful Defendant.

To read the full judgment, please click here.