Bidzina Ivanishvili et Al v Credit Suisse Life (Bermuda) Ltd

• Jurisdiction: Bermuda
• Judge: Hargun, C.J.
• Judgment Date: 13 September 2018
• Neutral Citation: [2018] SC Bda 67 Civ
• Docket Number: CIVIL JURISDICTION 2017: No. 293
• Court: Supreme Court (Bermuda)
• Date: 13 September 2018

[2018] SC (Bda) 67 Civ

In The Supreme Court of Bermuda

COMMERCIAL COURT

Hargun, C.J.

CIVIL JURISDICTION 2017: No. 293

Between:

(1) Bidzina Ivanishvili

(2) Ekaterine Khvedelidze

(3) Tsotne Ivanishvili

(an infant, by his mother and next friend, Ekaterine Khvedelidze)

(4) Gvantsa Ivanishvili

(5) Bera Ivanishvili

(6) Meadowsweet Assets Limited

(7) Sandcay Investment Limited

Plaintiffs

and

Credit Suisse Life (Bermuda) Limited

Defendant

Ms Sarah-Jane Hurrion and Judith Roche, Hurrion & Associates Ltd., for the Plaintiffs;

Mr John Wasty and Ms Hannah Tildesley, Appleby (Bermuda) Limited, for the Defendant.

Strike out application - Serious and prolonged argument — Soundness of pleadings — Decisive — When inappropriate

RULING

(in Chambers)

INTRODUCTORY

1 By a summons dated 6 July 2018 the Plaintiffs seek an order that the applications contained within paragraphs 1 to 5 inclusive of the Summons of the Defendant dated 1 ^st June (the Defendant's Summons) be not entertained and/or summarily dismissed, in accordance with the power of the court exercised in Williams & Humbert v W&H Trade Marks (Jersey) Ltd [1986] 1 AC 368 and/or the Court's inherent jurisdiction and/or RSC Order 18, rule 19, and RSC Order 1A, rules 1 and 4. Alternatively, the Plaintiffs seek an order that the applications contained in the Defendant's Summons be stayed generally pending trial of this action.

2 By the Defendant's Summons the Defendant seeks an order pursuant to RSC order 18, rule 19 or under the inherent jurisdiction of the Court to strike out the entirety of the claims made by the 1 ^st to 5 ^th Plaintiffs in the Statement of Claim. These claims consist of damages based on breach of statutory duties contained in the Segregated Accounts Companies Act 2000 (the “SAC Act”) (Statement of Claim 31, 58 – 59) and damages for breach of “common law duties” (Statement of Claim 60).

BACKGROUND

3 The background to this action is taken from the Statement of Claim dated 22 August 2017 and filed on behalf of all the Plaintiffs. The 1 ^st Plaintiff is a Georgian national, a prominent businessman, and who was the Prime Minister of Georgia from 25 October 2012 to 20 November 2013. The 2 ^nd Plaintiff is the 1 ^st Plaintiff's wife. The 3 ^rd, 4 ^th and 5 ^th Plaintiffs are the children of the 1 ^st and 2 ^nd Plaintiffs. The 1 ^st to 5 ^th Plaintiffs (the “Family Plaintiffs”) are the beneficiaries of the Mandalay Trust and the Green Vals Trust.

4 The Mandalay Trust is a trust established under the laws of the Republic of Singapore by declaration of trust dated 7 March 2005. At all material times Credit Suisse Trust Limited (the “Mandalay Trustee”) has been the trustee of the Mandalay Trust. The 6 ^th Plaintiff, Meadowsweet Asset Limited (“Meadowsweet”), is a company incorporated in the British Virgin Islands. The Mandalay Trustee at all times owned, and continues to own, the entire share capital of Meadowsweet.

5 The Green Vals Trust is a trust established under the laws of Prince Edward Island by declaration of trust dated 10 August 2012. On 1 ^st July 2014 Credit Suisse Trust Limited became the trustee of the Green Vais Trust (the “Green Vals Trustee”) and the proper law of the Green Vals Trust was changed to New Zealand law. The 7 ^th Plaintiff, Sandcay Investments Limited (“Sandcay”), is a company incorporated in the Bahamas and has, at all material times, been owned by the Green Vals Trustee.

6 The Defendant, Credit Suisse Life (Bermuda) Ltd (“CS Life”), is an insurance company incorporated and registered in Bermuda as a segregated accounts company under the SAC Act. CS Life is a wholly owned subsidiary Of Credit Suisse AG (the “Bank”), which provides private banking services from various locations around the world. The Trustees, the Bank and CS Life are all subsidiaries of Credit Suisse Group AG (“Credit Suisse”), a global financial services company headquartered in Zurich, Switzerland.

7 In or around 2004, the Bank approached the 1 ^st Plaintiff to offer private wealth management services to him and his family. The 1 ^st Plaintiff agreed to invest monies through the Mandalay Trust established by the Mandalay Trustee. In 2010 or 2011, the investment in an insurance policy under the Mandalay Trust was suggested and/or recommended by the Bank. At all material times it was envisaged that the premium payable under the life insurance policy would be held and invested by the Bank acting as agent for CS Life. On 7 November 2011, CS Life issued unit – linked life insurance policy to Meadowsweet in consideration of a single premium payable by Meadowsweet in the amount of USD 480, 267, 313. Meadowsweet paid that premium in due course.

8 On or around August 2012 at the bank advised the 1 ^st Plaintiff that he should establish a new trust to hold and invest with the Bank proceeds relating to the sale of a pharmaceutical business, which could then be used to provide more generally for inheritance purposes for the 1 ^st Plaintiff's family members. The Bank suggested and/or recommended the investment in an insurance policy which would be held by a company, the shares in which be held by the Green Vals Trustee. At all material times it was envisaged that the premium payable under the life insurance policy would be held and invested by the Bank acting as an agent for CS Life. On 7 December 2012, CS Life issued a unit – linked life insurance policy to Sandcay in consideration of a single premium payable by Sandcay in the amount of USD 275, 075, 927. Sandcay paid that premium in due course. The total premiums paid by Meadowsweet and Sandcay amounted to USD 755, 343, 240.

9 On various dates between 2011 and 2013, the Bank recommended certain investments for the Mandalay Trust and the Green Vals Trust. In particular, the Bank recommended that a large part of the Mandalay Trust and the majority of the Green Vals Trust fund should be invested in life insurance policies issued by CS Life, sister company of the Trustees and a subsidiary of the Bank.

10 In September and October 2015, the Bank made a number of margin calls in relation to the CS Life accounts. On 29 ^th of September 2015, the Bank issued a margin call of USD 5, 550, 000 in relation to the Meadowsweet accounts and a margin call of USD 26, 880, 000 in relation to the Sandcay accounts. On 16 ^th and 30 ^th October 2015, the Bank issued further margin of USD 9,420, 000 and USD 12, 500, 000 respectively in relation to the Sandcay accounts. On 11 ^th and 12 ^th January 2016, the Bank issued margin calls of USD 6, 285, 000 and USD 7, 500, 000 respectively in relation to the Sandcay accounts. In paragraph 61.2 (b) of the Statement of Claim it is averred that “The Plaintiffs have satisfied margin calls by liquidating other assets held by them by the Bank which, but for the margin calls caused by the Bank's misconduct aforesaid, would not have been liquidated and which would have continued to appreciate”.

11 On 27 ^th September 2015, the Bank sent to the 1 ^st Plaintiff the Investment Reports for Sandcay and Meadowsweet CS Life accounts showing the values of the assets held in those accounts as at 31 ^st December 2014 and 25 ^th September 2015. These revealed that from 31 ^st of December 2014 to 25 ^th of September 2015 the Meadowsweet account assets had reduced from USD 202.7 million to USD 119.6 million and the Sandcay account assets had reduced from USD 257.4 million to USD 144.8 million.

12 It is alleged by the Plaintiffs that the fall in the value of the accounts is due to the fraudulent activities of certain employees within the Bank. Criminal proceedings have since taken place in Switzerland against one of the Bank's employees, Mr Lescaudron, who has admitted most of the allegations against him. In February 2018 he was convicted of embezzlement, simple and aggravated misappropriation and forgery and sentenced to 5 years in prison.

13 The detailed allegations of misconduct on the part of the Bank are set out in paragraph 49 of the Statement of Claim. They include the allegations that the Bank had caused funds to be stolen and transferred from the Meadowsweet and Sandcay accounts to the accounts of certain other customer of the Bank for no or less than market consideration; the Bank caused the Meadowsweet and Sandcay accounts to acquire certain assets (stocks) from the accounts of certain other customers of the bank at a price in excess of their market value; the Bank facilitated (hidden) transfers, ostensibly loans, from the Meadowsweet and Sandcay accounts to the Bank's own employees or their associates which have not been repaid; and certain of the transfers, acquisitions and trading had been completed using forged signatures and/or instructions.

14 In the Statement of Claim the Plaintiffs pursue four causes of actions against CS Life. Meadowsweet and Sandcay, 6 ^th and 7 ^th Plaintiffs, alone assert causes of action based upon breach of contract and breach of fiduciary duty (Paragraphs 51 – 57). All the Plaintiffs assert a cause of action based upon breach of statutory duty under the SAC Act (paragraphs 58 – 59). The Defendant accepts that Meadowsweet and Sandcay have the necessary legal standing and are entitled to pursue the claims for breach of statutory duty under the SAC Act but disputes that the Family Plaintiffs are entitled to do so. The Family Plaintiffs also assert a cause of action based upon breach of common law duty of care (Paragraph 60). The Defendant denies that such a cause of action is open to the Family Plaintiffs.

15 The Plaintiffs say that they are entitled to damages and/or equitable compensation to put them into the position they would have been in had CS Life properly discharged its duties. The plaintiffs seek payment of damages and/or equitable compensation in order to reconstitute the CS Life accounts. The Plaintiffs assert that the losses claimed will remain the same whether the Plaintiffs succeed on any one or more of the causes of...