12/08/2024

British Virgin Islands court upholds Nissan’s fraud claims against Carlos Ghosn

The High Court of Justice, Commercial Division, of the Territory of the Virgin Islands (BVI) has held that US$32 million was misappropriated from Nissan Motor Company Ltd (Nissan) by its former CEO and chairman Carlos Ghosn. Justice Wallbank determined that US$32 million was cycled through Middle Eastern companies and individuals before being used to purchase a 37-metre motor yacht registered in the BVI.

This is understood to be the first of Nissan’s claims against Mr Ghosn to come to trial, following his highly publicised flight from house arrest in Tokyo.

Joshua Folkard, led by George Spalton KC of 4 New Square, acted for Nissan from commencement of this claim in August 2019. Josh conducted the oral advocacy on the private international law (see below) and fraudulent conveyance points at trial.

Legal implications

The decision will be of interest to legal practitioners for at least three principal reasons:

First, the decision contains a detailed analysis of the BVI/common law applicable law rules. Specifically, the decision confirms that: (i) dishonest assistance claims fall to be characterised as tortious, such that the ‘double actionability’ rule applies to dishonest assistance; and (ii) breach of fiduciary duty claims, including by a company against its director(s), are restitutionary and not company law matters.

As to (i), the characterisation of dishonest assistance claims had previously been the subject of inconsistent authority in the BVI. Hariprashad-Charles J in BVIHCV2005/0174 Sibir Energy PLC v Gregory Trading SA had followed the English High Court in characterising such claims as tortious: OJSC Oil Company Yugraneft v Abramovich et al [2008] EWHC 2613 (Comm). A restitutionary characterisation, however, was favoured in BVIHC (COM) 2018/154 Wilton Trustees (IOM) Ltd v AFS Trustee Ltd.

With regard to (ii), the BVI case law has diverged from the English authorities, which characterise breach of fiduciary duty claims by a company against its director(s) as matters of company law to be governed by the law of the country of the company’s incorporation: Base Metal Trading Ltd v Shamurin [2004] EWCA Civ 1316; [2005] 1 All ER (Comm) 17. This is significant, because it generally diverts the applicable law away from the claimant’s location to that in which the relevant enrichment was obtained.

Second, Wallbank J expressly confirmed that the BVI was a settled – rather than a conquered – territory. As a matter of British constitutional theory, this results in all statutes in force in England when the English settlers arrived (as well as the English common law) applying in the BVI/other territory unless expressly or impliedly repealed. In this case, that led to application of the Fraudulent Conveyances Act 1571, an Elizabethan Act of the Westminster Parliament conferring a broader power to unwind fraudulent transactions than the modern BVI statute.

Third, the decision is understood to be the first BVI case in which the effect of a debarring order on a trial (as opposed to the original decision whether or not to grant such an order) has been considered. The judge adopted the approach of the English Court of Appeal in Hirachand v Hirachand [2021] EWCA Civ 1498; [2022] 1 WLR 1162 – deciding that generally a debarring order prevents a debarred party from participating on either liability or quantum, save for merely attending the hearing to observe.

Finally, the decision shows the power and reach of the BVI courts in cases concerning the return of ill-gotten gains – particularly in circumstances where proceedings in jurisdictions that are more proximate to the underlying events have been unable to run their course.

Josh was instructed by Andrew Gilliland, Malcolm Arthurs and Andrew Blackburn of MK Solicitors LP.