Bidzina Ivanishvili (and others) v Credit Suisse Life (Bermuda) Limited [2022] SC (Bda) 19 Civ

Bidzina Ivanishvili (and others) v Credit Suisse Life (Bermuda) Limited [2022] SC (Bda) 19 Civ

About Michael GoulbornMichael Goulborn

Mike Goulborn’s expertise includes trust and contentious probate disputes (he represented two of the plaintiffs in the Alhamrani litigation, which remains Jersey’s longest-running civil trial), and he also has experience of a wide range of contractual and commercial disputes, regulatory investigations, compliance and connected non-contentious advice.

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Bidzina Ivanishvili (BI) was a successful businessman and former Prime Minister of Georgia. From 2005, he invested more than USD 1 billion with Credit Suisse Life (Bermuda) Limited (CS), a member of the Credit Suisse group. The primary allegation in the case was that BI’s relationship manager at CS misappropriated funds, calculated at approximately USD 550 million at the time of trial. Although CS took action to stop the actions of the relationship manager in 2015, it was alleged that CS were aware of the wrongdoings as early as 2011 . BI’s investments were through a Bermuda life insurance investment structure: BI paid a significant up-front premium to CS, which CS then invested through its parent bank.
On 29 March 2022, Chief Justice Hargun of the Bermuda Supreme Court gave a 281 page judgment, upholding BI’s claims for breach of contract, breach of fiduciary duty and fraudulent misrepresentation.
Key points:

  1. CS had emphasised its status as a distinct corporate entity and refused to admit the fraud of the relationship manager. Against that background, the Chief Justice examined the way CS operated on a day-to-day basis as part of the wider Credit Suisse group, and the legal effect of the fact that many of its functions (including compliance, legal support, fraud prevention) were provided centrally. The Chief Justice found that the Credit Suisse group had investigated the relationship manager’s fraud on behalf of CS.
  2. The court made serious findings about CS’s conduct in the events giving rise to the claim, including, CS turning a “blind eye” to the relationship manager’s wrongdoing, as CS was concerned about losing the significant revenue he was generating for CS through BI and other clients.
  3. The judgment also contains serious criticisms about the way in which CS conducted the proceedings. In particular, CS:
    a) failed to call appropriate witnesses and instead called witnesses who generally did not have direct evidence to give, which amounted to an abuse of process, and the court drew adverse inferences accordingly;
    b) failed to give discovery in accordance with the Court’s orders, and gave discovery that was seriously deficient; and
    c) failed to disclose to the Court or the Plaintiffs before the start of the trial that many key functions crucial to the case were provided centrally by the Credit Suisse group.
    Damages are to be assessed in accordance with BI’s primary case and are expected to exceed USD500m.
    CS has appealed to the Bermuda Court of Appeal, arguing that there was no claim in contract or tort by way of misrepresentation, and that the Court of Appeal should refer the matter back to the Supreme Court to determine the entitlement of the policyholders, being beneficially entitled to assets included in the premium. BI countered that the relationship manager had falsely represented to BI that he would manage his accounts honestly once they were moved into policy accounts with CS.
    As a postscript, BI has made a claim on a similar factual matrix against Credit Suisse Trust Limited in Singapore for $1.27 billion. The case is currently proceeding before the International Commercial Court in Singapore.
    Rulings from both the Bermuda Court of Appeal and the Singapore International Commercial Court are expected early in 2023.