Greig William Alexander Mitchell & Anor v Sheikh Mohamed Bin Issa Al Jaber & Ors

The Court of Appeal considered whether a director of a British Virgin Islands company (the Sheikh) incurred liability for breach of fiduciary duty by causing the company’s shares in a third company (the 891,761 "JJW Inc" shares) to be registered in the name of JJW Guernsey after the company had been placed into liquidation. The court examined the effect of section 175 of the BVI Insolvency Act 2003 and BVI Business Companies Act 2004 provisions on share registration (sections 41–43), and whether a post‑liquidation "intermeddling" or assumption of fiduciary office can give rise to constructive trust/knowing‑receipt liability.

The Court accepted that a director may continue to hold company property after liquidation and that equitable stewardship obligations can persist in a reduced form where a person purports to exercise or impersonates a fiduciary power and thereby causes company property to be transferred. Applying those principles, the court upheld the judge’s finding that the Sheikh had acted dishonestly in executing share transfer forms and had breached fiduciary duties, and that JJW Guernsey was liable as a knowing recipient.

However, the Court allowed the appeals in part by setting aside the judge’s award of equitable compensation. The Court held that the Liquidators had not proved on the evidence that, but for the Sheikh’s wrongful conduct, the shares would have been realised while they still had value; therefore no loss was established to justify the monetary award. The Court also rejected the contention that the shares were subject to unpaid vendor’s liens, concluding that the 2009 transfer documentation and factual context showed a clear and manifest inference that any such lien was excluded.

Background and parties: The Sheikh was sole shareholder and a director of MBI International & Partners Inc (the Company), a BVI-incorporated company which held shares in JJW Inc. The Company went into liquidation in October 2011. The Company had acquired 891,761 shares in JJW Inc in March 2009. In 2016 the Sheikh caused JJW Guernsey to be registered as the holder of those 891,761 shares by reason of share transfer instruments he executed in 2016 but which he represented had been executed in 2010. The Company’s liquidation was recognised in the United Kingdom under the Cross-Border Insolvency Regulations 2006. The Liquidators sued, alleging the Sheikh breached fiduciary duties by denuding the Company of assets and that JJW Guernsey was a knowing recipient.

Procedural history: The trial was before Joanna Smith J in the Business and Property Courts (Insolvency and Companies List) culminating in a judgment ([2023] EWHC 364 (Ch)) in which the judge found the Sheikh had acted dishonestly in causing the transfer of the 891,761 shares into JJW Guernsey’s name and that JJW Guernsey was liable as constructive trustee/knowing recipient; the judge awarded equitable compensation of €67,123,403.36 jointly and severally against the Sheikh and JJW Guernsey. The Sheikh and JJW Guernsey appealed to the Court of Appeal.

Issues: (i) Liability: whether the Sheikh committed a breach of fiduciary duty, given the Company's liquidation and section 175 IA 2003; (ii) Compensation: whether an award of equitable compensation was open on the evidence and on the correct measure (substitutive v reparative); and (iii) Lien: whether the 891,761 shares were subject to unpaid vendor’s liens that would reduce any recovery.

Court’s reasoning:

• The court accepted the judge’s analysis that, although directors in BVI liquidation remain in office, their powers cease under section 175 IA 2003; nonetheless fiduciary stewardship obligations can survive in a limited form where a person retains or assumes control over company property and improperly causes its transfer. The court relied on equitable doctrines (trustee de son tort / executor de son tort) and authorities discussing "intermeddling" and de facto directorship to conclude that impersonating or purporting to act as a pre‑liquidation fiduciary and causing transfer of company property can give rise to constructive trust/knowing‑receipt liability.
• Applying those principles, the court upheld the judge’s findings that the Sheikh had not acted honestly in signing the share transfer forms and in causing the registration of JJW Guernsey as the holder of the 891,761 shares and that JJW Guernsey was a knowing recipient.
• On compensation, the court held that equitable compensation is assessed with the benefit of hindsight at the date of judgment and that, where the claimant relies on a counterfactual that the property would have been realised before an intervening deterioration, the claimant must prove on the balance of probabilities that the property would in fact have been realised. The court concluded the Liquidators had not proved that, insofar as there was no evidential basis to find the liquidator would or could have realised the shares before the July 2017 restructuring which the parties accepted rendered JJW Inc effectively valueless. Accordingly, the Liquidators had not proved loss and the equitable compensation award could not stand.
• On the unpaid vendor’s lien point, the court concluded (having reviewed the 2009 transfer agreements and the factual context, including the IPO purpose) that there was a clear and manifest inference the parties intended to exclude any unpaid vendor’s lien and therefore no such lien reduced the Company’s interest.

Relief and disposition: The court would allow the appeals in part by setting aside the monetary award while affirming the liability findings; the court indicated it would grant declaratory relief (that the Sheikh breached fiduciary duty and that JJW Guernsey knowingly received company property) if the Liquidators sought it.

The Court of Appeal allowed the appeals in part. It upheld the High Court’s findings that the Sheikh had acted in breach of fiduciary duty in causing the 891,761 JJW Inc shares to be registered in JJW Guernsey’s name and that JJW Guernsey was a knowing recipient, but set aside the judge’s award of equitable compensation because the Liquidators had not proved on the balance of probabilities that the shares would have been realised while still valuable and therefore no loss was established. The court also rejected the argument that the shares were subject to unpaid vendor’s liens, concluding the 2009 transfer documentation and factual context excluded such liens. The court indicated declaratory relief would be appropriate in respect of the liability findings.

Appeal from the High Court of Justice (Business and Property Courts, Insolvency and Companies List (ChD)) (Joanna Smith J) [2023] EWHC 364 (Ch); judgment of the Court of Appeal given [2024] EWCA Civ 423.