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

After a company enters liquidation under the BVI insolvency regime, a director’s formal continuation in office does not preserve ordinary powers or fiduciary duties. But a person who purports to exercise a fiduciary power and causes company property, including intangible property, to be transferred may be liable as an intermeddler, even without receiving the property and without being a de facto director.

Equitable compensation is assessed with hindsight at trial. A substitutive award cannot compensate for property that has become worthless; consequential loss requires proof that the property would probably have been realised while valuable. An unpaid vendor’s lien is excluded where the transaction’s objective purpose gives rise to a clear and manifest inference that the parties intended no lien.

Joint liquidators of MBI International & Partners Inc appealed from the High Court judgment reported at [2023] EWHC 364 (Ch). The High Court found that Sheikh Mohamed Al Jaber had breached fiduciary duty by causing 891,761 shares in JJW Inc to be transferred to JJW Guernsey, and that JJW Guernsey had knowingly received company property. It ordered both defendants to pay €67,123,403.36 in equitable compensation.

The appeals challenged liability, compensation and the existence of an unpaid vendor’s lien over the shares. The central issues were whether a post-liquidation director could incur liability as an intermeddler, whether the liquidators had proved loss, and whether the 2009 transfer arrangements excluded any lien.

Both appeals allowed in part as to remedy. The Court of Appeal upheld the finding that the Sheikh had acted in breach of fiduciary duty and agreed that the shares were not subject to an unpaid vendor’s lien. It set aside the order requiring the Sheikh and JJW Guernsey to pay equitable compensation.

1. Liability. Under the Insolvency Act 2003, a director remains in office after liquidation but loses all powers, functions and duties except those required or permitted by the insolvency legislation. The Sheikh was therefore not liable merely because he remained a director, and his isolated conduct did not make him a de facto director under Paycheck Services 3 Ltd [2010] UKSC 51.
2. Equitable principles concerning trustees and executors de son tort apply by analogy to company property. A person who purports to act as a fiduciary and causes company property to be transferred may be liable as an intermeddler. Receipt of the property is unnecessary where the person causes title to intangible property, such as shares, to pass elsewhere. Although the Share Transfer Forms were invalid, they facilitated registration and the transfer of legal title. The Sheikh could not rely on the fact that he had actually signed them after liquidation when he had represented that they were executed while the director’s power still existed.
3. Compensation. Equitable compensation is assessed at judgment with the benefit of hindsight. A substitutive award cannot provide a money equivalent for shares which have become worthless. A claim based on consequential loss required proof that, absent the breach, the shares would probably have been realised while they retained value. The evidence did not establish that the liquidators would have sold or otherwise realised the shares before JJW Inc’s 2017 restructuring. The company therefore suffered no proved loss.
4. Unpaid vendor’s lien. The issue was open on appeal because the liquidators had not objected at trial and the Judge had determined it. The objective question was whether the transaction documents and their commercial context produced a clear and manifest inference excluding the lien. The IPO’s purpose, the agreed method of payment from sale proceeds and the nature of the transaction showed that no lien was intended.

The compensation order was set aside. The Court indicated that declaratory relief for breach of fiduciary duty and knowing receipt might be appropriate.

• High Court of Justice, Business and Property Courts, Insolvency and Companies List (ChD): Mrs Justice Joanna Smith found breach of fiduciary duty and knowing receipt and ordered equitable compensation: [2023] EWHC 364 (Ch).
• Court of Appeal (Civil Division): The appeals were allowed on the compensation issue. The liability and unpaid vendor’s lien findings were upheld, and the compensation order was set aside: [2024] EWCA Civ 423.