Defendant Breached Fiduciary Duty;  MBI Liquidators Unable to Evidence Share Sale at Time of Transfer

Originally posted on Law360

Law360, London (April 26, 5:41 PM BST) — An Arab tycoon does not have to pay €67 million ($72 million) in damages for transferring shares out of his company after liquidation because the creditors failed to establish any actual loss, an English appeals court ruled Friday.

The Court of Appeal found that the liquidators of Sheikh Mohamed bin Issa al Jaber’s company MBI International & Partners Inc. did not prove that they would have sold the shares he transferred to a business in the British dependency of Guernsey.

Justice Guy Newey, leading the three-judge panel, said there is “no proper evidential basis” the shares in JJW Hotels & Resorts Holding Inc. would have been sold before its assets were transferred to a U.K. MBI subsidiary in July 201. JJW is a British Virgin Islands company that operates hotels, golf courses and cruise liners in Europe, Africa, and the Middle East.

“On that basis, the liquidators would not have been any better off if the share transfer had never happened,” Justice Newey said. “They would have retained the shares, but the would still have become valueless.”

The appeal comes after High Court Judge Joanna Smith ruled in February 2023 that Al Jaber did not strip $3.65 billion in assets from his company to keep it out of creditor’s hands. But she ordered him and Guernsey business JJW Ltd. to pay the €67 million in damages for transferring shares out of it after liquidation.

Al Jaber’s wide, Makiyah Mahmood Al Jaber, urged the High Court in June to hold off from finalizing a charging order over a London property pending the outcome of her husband’s appeal.

Liquidators overseeing the insolvency of Al Jaber’s leisure and hotel group sued the tycoon and his daughter for breach of fiduciary duty, negligence and conspiracy over a series of transactions between 2008 and 2017.

The trial began in February 2021 and was adjourned multiple times after Al Jaber became ill. It resumed and closed in October 2022 following a High Court judgement that a trial without the tycoon’s oral evidence would be fair.

The panel on Friday declined to overturn a finding that Mohamed had breached his fiduciary duty to MBI by transferring the 891,000 JWW Inc. shares. The justices sided with the liquidators’ argument that Al Jaber that “had impersonated” a pre-liquidation director by claiming the transfer has taken place in 2010, but only registered in 2016.

“The court’s ruling fully vindicates the Sheikh’s fortitude and courage in defending these malicious claims, which were brought by Messrs Mitchell and Krys in the BVI and continued to be funded by a mysterious, unknown entity,” a spokesperson for Mohamed said after the judgement. “These cases have been a distraction and Sheikh Mohamed is pleased now to be able to focus once again on his business and philanthropic endeavors.”

Representatives for JJW Ltd. and the liquidators declined to comment.

The case was before Justices Guy Newey, Richard Arnold and Richard Snowden.

The liquidators are represented by Joseph Curl KC of 9 Stone Buildings, Jon Colclough of South Square instructed by Clyde & Co. LLP.

JJW Ltd. is represented by James Fennemore of XXIV Old Buildings, instructed by Clyde & Co. LLP.

Mohamed is represented by Jonathan Crow KC of 4 Stone Buildings, and Clare Stanley KC an Jia Wei Lee of Wilberforce Chambers, instructed by Mishcon de Reya LLP.

The cases are JJW Limited (In Liquidation) v. Michell and another Mitchell and another v. Bin Issa Al Jaber and others, case numbers CA-2023-000643 and CA-2023-000615, in the Court of Appeal of England and Wales.

–Additional reporting by Christopher Crosby, Lucia Osborne-Crowley and Joanne Faulkner. Editing by Alyssa Miller.