Sheikh Fights Liability Over Share Transfer At Top UK Court
Originally posted on Law360
An Arab tycoon told Britain’s top court Tuesday that he did not breach a fiduciary duty to his former company by transferring shares out of it after it went into liquidation, because he was no longer director by that point.
Sheikh Mohamed bin Issa al Jaber did not owe any fiduciary duty to his former company, MBI International & Partners Inc., when he transferred the shares to a business in the British dependency of Guernsey, his lawyer told the Supreme Court.
He cannot therefore be held personally liable, Philip Rainey KC of Tanfield Chambers said.
By signing off the transfer, Al Jaber did not “assume the power of a hypothetical director because it simply didn’t exist,” Rainey said. “The shares were held legally and beneficially by the company and were under the control of the liquidators,” Rainey said.
Judge Joanna Smith ruled at the High Court in February 2023 that Al Jaber did not strip $3.65 billion in assets from his company to keep it out of the hands of creditors. But she ordered him and Guernsey business JJW Ltd. to pay €67 million ($75 million) in damages for transferring shares out of it after liquidation.
The Court of Appeal in April 2024 upheld the finding that Al Jaber had breached his fiduciary duty, but found he was not liable to pay damages because the creditors failed to establish any actual loss.
The justices ruled that there is no basis that the shares in JJW Hotels & Resorts Holding Inc. would have been sold before its assets were transferred to a U.K. subsidiary of MBI in July 2017. JJW is a British Virgin Islands company that operates hotels, golf courses and cruise liners in Europe, Africa, and the Middle East.
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 ruling that a trial without the tycoon’s oral evidence would be fair.
Rainey conceded on Tuesday that there had been a court finding that his client “dishonestly claimed” that the share transfer had taken place in 2010 but had only been registered in 2016. But he added that “the backdating is a red herring” – by the time his clients was transferring the shares he no longer had a director’s power to do so.
Rainey said the Court of Appeal had erred by “jobbing back” to 2010, when Al Jaber had that power. “Where we are now there is not anything left with which to find that he was personally liable,” Rainey added.
Tom Smith KC of South Square, representing the liquidators, said that Al Jaber was liable “for having intermeddled with the company” by purporting to exercise the powers of a director to transfer the shares. Smith said that a person can assume the position of a fiduciary through their conduct without “expressly” saying they are doing so.
Smith said that Al Jaber had “pretended” to have a director’s powers by backdating the transfer to when he was still in charge of the company.
“On that basis, we say the sheikh must be taken to have accepted that duty that does with what he pretended to be,” Smith said. “That is really the long and short of it so far as the question of breach is concerned.”
Smith said that Al Jaber’s argument, that he can’t assume liability over fiduciary powers that did not exist at the time, “makes little sense.” That is because “the whole point of fiduciary obligation is to impose a liability on a fiduciary for that which he does not have the power to do,” Smith added.
Smith said that it does not make sense for a person who “causes harm” to the company is not liable because a “properly appointed fiduciary” would not have that power at the time of the transfer. “That is all the more reason why the intermeddler should have liability to the principal,” Smith added.
The hearing before Justices Ben Stephens, Michael Briggs, Patrick Hodge, Philip Sales and David Richards is set to continue Wednesday.
Al Jaber is represented by Philip Rainey KC and Marc Glover of Tanfield Chambers.
The liquidators are represented by Tom Smith KC of South Square.
JJW Ltd. is represented by James Fennemore of XXIV Old Buildings.
The case is Mitchell and another (Joint Liquidators of MBI International & Partners Inc. (In Liquidation) v. Sheikh Mohamed Bin Issa Al Jaber and others, case number UKSC/2024/0075, in the U.K. Supreme Court.