Credit Suisse Life (Bermuda) Ltd v Mr Bidzina Ivanishvili

• Jurisdiction: Bermuda
• Judge: Gloster JA,Smellie JA,Clarke
• Judgment Date: 07 October 2020
• Court: Court of Appeal (Bermuda)
• Docket Number: Case No: Civ/2020/5
• Date: 07 October 2020

[2020] CA (Bda) 13 Civ

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE SUPREME COURT OF BERMUDA SITTING IN ITS

ORIGINAL COMMERCIAL JURISDICTION

THE HON. CHIEF JUSTICE

CASE NUMBER 2017: No. 293

Sessions House Hamilton, Bermuda HM 12

Before:

THE PRESIDENT, Sir Christopher Clarke

JUSTICE OF APPEAL Anthony Smellie

and

JUSTICE OF APPEAL Dame Elizabeth Gloster

Case No: Civ/2020/5

Between:

Credit Suisse Life (Bermuda) Limited

Appellant

and

(1) Mr Bidzina Ivanishvili

(2) Mrs Ekaterine Khvedelidze

(3) Tsotne Ivanishvili

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

(4) Ms Gvantsa Ivanishvili

(5) Mr Bera Ivanishvili

(6) Meadowsweet Assets Limited

(7) Sandcay Investments Limited

Respondents

Mr. Stephen Moverley Smith QC (instructed by Mr John Wasty, Mr Hannah Tildesley and Mr Sam Riihiluoma of Appleby (Bermuda) Ltd.) for the Appellant

Mr. Charles Hollander QC (instructed by Ms Sarah-Jane Hurrion and Ms Judith Roche of Hurrion & Associates) for the Respondents

Hearing dates: 4 th June 2020

APPROVED JUDGMENT

Gloster JA

Introduction:

1 This is an appeal by the defendant in the underlying action, Credit Suisse Life (Bermuda) Limited (“CS Life” or “the Appellant”) against certain discovery orders sought by the Plaintiffs in the action (“the Respondents” or “the Plaintiffs”) and made by the Honourable Chief Justice Hargun on 11 February 2020 after a two-day hearing which involved (at CS Life's request) cross-examination of experts on Swiss law. The Chief Justice's reasons for granting the Plaintiffs' specific discovery application are set out in his judgment dated 11 February 2020 (“the Judgment”). The order giving effect to his judgment is dated 2 June 2020 (“the order”) and a copy of it is annexed at schedule 1 to this judgment.

2 By notice of motion dated 18 February 2020 CS Life applied to the Chief Justice for leave to appeal against the orders set out in the Judgment on six grounds as set out in the proposed notice of appeal attached to the notice of motion. CS Life also applied for a stay of the orders in the Judgment pending appeal.

3 In his ruling on the motion dated 25 February 2020, the Chief Justice granted leave to appeal on two grounds relating to: the requirement for CS Life to provide information in relation to its discovery methodology (ground 3); and a short point on waiver of privilege (ground 5). He also granted a stay pending appeal in relation to these orders.

4 The Chief Justice refused leave to appeal on the remaining grounds ((ground 1, 2 4 and 6), which, accordingly, were the subject of a renewed application for leave before this court. The Chief Justice also refused a stay of the other orders in the Judgment but extended time for compliance until 10 March 2020. The Registrar ordered that the application for permission to appeal should be considered at the appeal by the full court by way of a rolled-up hearing.

5 Mr Stephen Moverley Smith QC, together with Mr John Wasty of Appleby (Bermuda) Limited, appeared on behalf of the Appellant, CS Life, both in this court and in the court below. Mr Charles Hollander QC, together with Ms Sarah-Jane Hurrion of Hurrion & Associates Ltd, appeared on behalf of the Respondents, the Plaintiffs, likewise both in this court and in the court below. The court is grateful to counsel for their oral and written submissions.

Factual background relating to the discovery application

6 The Plaintiffs' claim in the action against CS Life is for losses suffered by two unit-linked life insurance policies (“the Policies”), which were issued to Meadowsweet Assets Limited and Sandcay Investments Limited, the Sixth and Seventh Plaintiffs (as policyholders) in 2011 and 2012 respectively. The First to Fifth Plaintiffs are the ultimate beneficiaries of the proceeds of the Policies, as the beneficiaries of trusts within which the Policies are held.

7 The Plaintiffs allege that they entrusted US $755 million to CS Life by way of lump sum insurance premiums (“the Policy Assets”). CS Life is an insurance company incorporated and registered in Bermuda as a segregated accounts company under the Segregated Accounts Companies Act 2000 (the “SAC Act”). The Policy Assets were invested in accounts with Credit Suisse AG (“the Bank”) in the name of CS Life (“the CS Life Accounts”). CS Life is a wholly-owned subsidiary of the Bank, which provides private banking services from various locations around the world. In 2015 the Plaintiffs discovered unauthorised, imprudent and fraudulent trading on the CS Life Accounts resulting in huge losses to the Policy Assets.

8 In particular, the statement of claim alleges that, from the end of 2014 to September 2015, the value of the policy assets had collapsed by over 40%: see SOC at paragraphs 44 to 46. The Plaintiffs' case is that CS Life breached contractual, fiduciary, statutory and common law duties owed to the Plaintiffs resulting in losses estimated to be in the region of USD 400 million. CS Life denies all claims made against it. Nothing in this judgment addresses the merits of the main action.

9 On 20 October 2015, according to the Plaintiffs' case, the Bank informed the First Plaintiff that it had mandated PwC to conduct “a comprehensive due diligence of your relationship with Credit Suisse AG” and that it assured the First Plaintiff that “Once PwC has completed its investigation we will be able to set up a meeting to discuss the results and our proposed way forward”. The Plaintiffs complain that no such meeting took place and the results of the PwC investigation have not been shared with the Plaintiffs.

10 Criminal proceedings subsequently took place in Switzerland against Mr Lescaudron, one of the Bank's employees and relationship manager to the Plaintiffs. The Plaintiffs contend that Mr Lescaudron admitted the majority of the allegations against him and in February 2018 was convicted of embezzlement, simple and aggravated misappropriation and forgery, and sentenced to 5 years in prison.

11 The following is taken from the judgment where the Chief Justice helpfully summarised the rival contentions of the parties:

• 9. “The Plaintiffs complain that to date, CS Life has offered no explanation to the Plaintiffs regarding the cause of the collapse in value in the Policy Assets, nor has CS Life shared the results of any investigation or inquiry conducted into the fraud carried out on the CS Life Accounts, nor accounted to the policyholders for the losses suffered. The position CS Life has taken in this litigation is to put the Plaintiffs to proof of the wrongdoing in relation to bank accounts in CS Life's name which held assets which the Plaintiffs had entrusted to CS Life.

• 10. The Plaintiffs also complain about the piecemeal nature of the discovery given by CS Life. Mutual exchange of discovery was initially due to take place on 4 September 2018 but was extended by the Order dated 21 November 2018 to 10 December 2018.

• 11. On 10 December 2018, CS Life produced its First List of Documents which comprised of 1241 documents.

• 12. On 31 January 2019, CS Life produced its Second List of Documents which comprised of 1666 documents provided to CS Life by the Bank and 18 documents omitted from CS Life's First List of Documents.

• 13. Following correspondence from the Plaintiffs detailing the deficiencies in CS Life's discovery, CS Life produced its Third List of Documents on 5 July 2019. This list comprised of an additional 156 Documents obtained from the Bank.

• 14. Following service of this discovery summons, CS Life produced two further document lists (the Fourth and Fifth Lists of Documents). The Fourth List of Documents disclosed client notes relating to the Policies, which CS Life said it had obtained from the Bank. The Fifth List of Documents comprised of 1283 documents obtained from the Bank on 23 September 2019, including previously disclosed illegible and/or incomplete documents along with a large number of account statements.

• 15. Mr Coffey's Third Affidavit anticipated the Sixth List of Documents disclosing relevant but previously undisclosed documents, which had previously been marked as irrelevant. The Sixth List of Documents was served upon the Plaintiffs a day before the hearing of this application. Mr Hollander complains that no explanation has been provided as to why the Sixth List of Documents was provided the day before the hearing when it was promised to be served in October 2019. Mr Hollander also complains that the Sixth List was provided with a corrupted USB flash drive.

• 16. All of the affidavits filed in relation to CS Life's compliance with its discovery obligations have been sworn by Thomas Coffey, who was the Chief Executive Officer of CS Life between 28 September 2009 and 31 July 2017. The Plaintiffs argue that it is wholly inappropriate for Mr Coffey to be swearing such affidavits and that these affidavits should be sworn by an existing director and/or officer of CS Life.

• 17. The Plaintiffs say that proper discovery is critical in this case given that the Policy Assets were under the control of the Bank, acting as agents for CS Life pursuant to mandates given by CS Life, and that vast sums disappeared as a result of fraudulent, unauthorised and imprudent trading or were simply stolen by an employee of the Bank. The Plaintiffs have no visibility as to how this happened and are therefore dependent on information and documentation provided by CS Life on discovery and (through CS Life) on that provided by the Bank.

• 18. In response CS Life emphasises that its role in the overall transaction was a limited one. CS Life argues that it was required by the Policy documentation to entrust the custody and investment of the Policy Assets to the Bank and it was the Bank's responsibility, not that of CS Life, to acquire and manage the investment under the Policies. Save that investments were acquired for the policyholders through...