Litigating beyond the grave – when foreign heirs must answer to UK debt

The Court of Appeal (CoA) ruled that the claimant was justified in joining the deceased defendant’s foreign heirs to the English proceedings, even though they were only being joined for the purpose of ensuring that the resulting judgement on liability would be enforceable against the estate’s substantial assets, as governed by Swiss succession law.

Facts:

The lawsuit was initiated by the Public Institution for Social Security (PIFSS) against its former Director General, the late Mr. Fahad Al Rajaan. It was alleged that Mr. Al Rajaan had extensively orchestrated corrupt schemes between 1984 and 2014 to secure secret commissions for himself and his associates while working at PIFSS.

The children of the late Fahad Al Rajaan, who died on 6 September 2022, are residents outside of the jurisdiction. PIFSS does not allege that the children participated in the corruption, but seeks to join them to the claim, as they are their father’s heirs under Swiss law. The goal of PIFSS is to enforce any judgement against his substantial assets located in Switzerland, as the English assets are insufficient to satisfy the claim.

Decision:

The CoA dismissed the appeal and held that the children were lawfully joined to the case, allowing the authority to attempt to recover the proceeds of the alleged scheme from Al Rajaan’s heirs if it wins its case. The CoA determined that the High Court was correct to rule that PIFSS had a good, arguable case that the children would be necessary and proper parties to any enforcement action.

The core reasoning for joining the Al Rajaan children revolves around two key private client concerns. The first is managing the litigation risk against the estate, and the second is ensuring seamless asset distribution and debt satisfaction across borders.

The Court’s primary goal was to ensure the finality of litigation and prevent the estate from being subjected to multiple, costly trials regarding the same debt. For the private client, the worst outcome is having a large debt determined in one jurisdiction (England) only to be forced to re-litigate the entire liability issue, specifically PIFSS’s claim against Mr. Al Rajaan in a second jurisdiction (Switzerland), due to procedural failures.

By joining the Al Rajaan children, the English Court ensures that the final judgement on Mr. Al Rajaan’s liability is binding on all successors to the estate in Switzerland, where universal succession applies. This protects the heirs from future litigation risk concerning the debt amount, allowing them to focus solely on the separate Swiss enforcement procedures.

Implications:

The most direct implication is how a deceased client’s litigation risk is handled across jurisdictions with differing succession laws. The case confirms that, where the deceased’s liabilities affect assets governed by a universal succession system (for instance, in Switzerland, where heirs automatically become joint owners), a claimant can successfully join the heirs in English proceedings solely to bind them to the determination of the deceased’s liability. This is crucial for the estate’s stability.

Private client advisers must perform a thorough conflict of laws analysis during estate planning, particularly where assets are located in universal succession jurisdictions. They must anticipate that foreign courts will apply their own rules regarding who is bound by a given judgement.