Supreme Court of Bermuda finds liability in long running fraud dispute.

30 March, 2022

On 29 March 2022 the Bermudan Supreme Court (Chief Justice Hargun) handed down judgment following the trial of the dispute between Bidzina Ivanishvili (the former Prime Minister of Georgia) and other plaintiffs and Credit Suisse Life (Bermuda) Limited (“CS Life”), a member of the Credit Suisse group.

The claim arose out of a long-running fraud committed by an employee of Credit Suisse, Patrice Lescaudron, against accounts held by CS Life for Mr Ivanishvili and the other plaintiffs.

Chief Justice Hargun upheld the Plaintiffs’ claims for breach of contract, breach of fiduciary duty and fraudulent misrepresentation. Damages are to be assessed in accordance with the Plaintiffs’ primary case and are expected to exceed USD500m.

Of particular interest:

  1. The 281 page judgment contains a detailed and thorough consideration of the recent authorities in England on implied representations and, in particular, the extent to which the representee must have understood that a representation was being made. The judgment also considers choice of law in the context of misrepresentation claims.
  2. The Chief Justice rejected CS Life’s arguments on the admissibility of certain documents based on the rule in Hollington v F Hewthorn & Co [1943] KB 587 and subsequent decisions.
  3. CS Life had emphasised its status as a distinct corporate entity and refused to admit the fraud of Mr Lescaudron. The judgment is interesting for its consideration, against that background, of the way in which CS Life 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, the “Group Function”) were provided centrally. The Chief Justice found that the Credit Suisse group had investigated Mr Lescaudron’s fraud, including on behalf of CS Life.
  4. The judgment contains serious findings about CS Life’s conduct in the course of the events giving rise to the claim. For example, the Court found that (1) “the failure to take appropriate and effective action to bring Mr Lescaudron’s wrongdoing to an end can only be explained by CS Life having turned a ‘blind eye’” and (2) “extensive issues came to the attention of the Group Function and/or CS Life about Mr Lescaudron’s mismanagement (or potential mismanagement) of client funds and, in particular, his mismanagement of Mr Ivanishvili’s funds” but that steps were not taken to bring his misconduct to an end, and that “it is evident that a significant factor which led to the situation was because Credit Suisse was concerned about losing the revenues that Mr Lescaudron was generating (including from Mr Ivanishvili)”.
  5. In addition, the judgment contains serious findings about the way in which CS Life conducted the proceedings. Amongst other things, the Chief Justice held that CS Life had –
  • (a) failed to call appropriate witnesses and instead called witnesses who generally did not have direct evidence to give: “It is clear to the Court that there are witnesses available to CS Life who could have given evidence in relation to these central issues. Yet CS Life elected to call witnesses who could give no direct evidence in relation to any of these issues”. The Court held that in the specific circumstances of the case, the failure to call certain witnesses amounted to an abuse of process. The Court drew adverse inferences from CS Life’s selection of witnesses.
  • (b) failed to give discovery in accordance with the Court’s orders and found that “CS Life resisted giving discovery on an entirely false basis” and that particular documents were “deliberately withheld from discovery” until a late stage of the proceedings. Given the Court’s finding that discovery was “seriously deficient”, the Court drew adverse inferences against CS Life.
  • (c) failed to disclose to the Court or the Plaintiffs before the start of the trial “the existence of the Group Function and the individuals who performed the Group Function on behalf of CS Life”.

A copy of the judgment is available here.

Joe Smouha QC, Louise Hutton QC and Felix Wardle acted for the Plaintiffs, instructed by Graham Huntley and Ioannis Alexopoulos of Signature Litigation LLP and Sarah-Jane Hurrion and Henry Komansky of Hurrion & Associates Ltd.