A Court of Appeal has unanimously upheld liability against Sheikh Mohamed Bin Issa Al Jaber for transferring shares from a company, MBI International & Partners Inc (the "Company"), while it was in liquidation.
But there's a twist – the judgment amount of €67,123,403.36 was reversed because the claimant liquidators failed to show that they would have disposed of the shares prior to their loss of value. Disputes Resolution associate Laurence Crees explains the significance of the ruling.
The judgment indicates when the Court will impose personal liability on someone that "intermeddles" with the affairs of a trust or company. It also provides a salutary reminder for liquidators to realise assets swiftly, even in cases involving misinformation.
Setting the scene
Sheikh Mohamed Bin Issa Al Jaber is an international businessman and the founder and chairman of a large number of companies operating in the commercial property, finance, hospitality and food industries.
By 2008, Al Jaber was contemplating a restructuring of companies associated with him. As part of that process, in 2009, the Company acquired 1,020,873 shares in JJW Inc. However, on 10 October 2011, a winding up order was made in the BVI against the Company, which had creditors of some €10.6m.
The liquidation of the Company
Al Jaber challenged the winding up of the Company in 2013 and 2015 but those attempts failed. Then on 8 March 2016, acting as a director of JJW Inc, he effected a transfer of shares based on a stock transfer form. This was, allegedly, executed by him acting as a director of the Company, on 6 July 2010; i.e. before the liquidation.
In July 2017, JJW Inc was acquired by another company, JJW Limited and the shares were dissipated and rendered valueless. The Company's liquidators brought claims against Al Jaber for his part in the share transfer and sought compensation from him personally.
Next stop: the High Court
The trial took place in 2019 but it was adjourned when Al Jaber served numerous corrections to his witness statement before giving evidence. The liquidators were required to re-amend their claim and trial was relisted in 2021.
Al Jaber was too unwell to give evidence at the adjourned trial in 2021 so the trial was adjourned again until 2022. In 2022, the trial took place without the Sheikh, who again was deemed to be too unwell to give evidence, although it proceeded without his testimony.
Nevertheless, the trial judge found that he had actually executed the stock transfer form in 2016, not before the liquidation, in 2010, as purported. The Judge found that, in doing so, Al Jaber did not act honestly, or in good faith.
The Judge ordered that the Sheikh pay €67,123,403.36 as compensation, which was the value of the shares according to accounts as at 31 December 2016.
At the Court of Appeal
Al Jaber argued that the judge was wrong to find he owed duties to the Company while it was in liquidation. He argued that he could not be personally liable for the Company's property, i.e. the shares, when he never held those assets personally.
The Court of Appeal held that any person who acted in the manner that the Sheikh had would assume the duties of a director, even if they were not one (see Revenue and Customs Commissioners v Holland, In re Paycheck Service 3 Ltd [2010] UKSC 51, 1 WLR 2793).
Further, it was irrelevant that Al Jaber had not handled the shares because company property can be the subject of intermeddling without ever being in the hands of the intermeddler.
A "Trustee de Son Tort"
The Sheikh's liability, as a "trustee de son tort" (meaning because of his own wrong act), was therefore confirmed.
However, the Court upheld Al Jaber's appeal that the High Court failed to make sufficient findings in relation to how the liquidators would have sold the shares while they were still valuable, i.e. before the acquisition of JJW Inc in July 2017.
Despite the High Court's findings of stonewalling and misinformation from Al Jaber, the liquidators had failed to overcome the evidential hurdle that they would have realised the shares before July 2017. In all the circumstances, the Court of Appeal held that the liquidators have not established any loss.
The Court did suggest however that loss could be established subsequently, presumably by reference to the receipt of the shares by the acquiring company (rather than the 2016 accounts).
This judgment clarifies when an "intermeddler" will incur personal liability for dealing with trust or company property. However, office holders will be concerned at the lack of sympathy for the liquidators' failure to realise assets swiftly, despite stonewalling attempts by a former director.
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