Court door "slammed shut" for fake owners

Friday 17 March 2017

The Royal Court has delivered a landmark judgement which is intended to send a message out to those who mislead the financial authorities.

The judgement says that the Court will not help those who engage in any kind of financial deception – even if they are technically entitled to the proceeds.

According to local lawyer Olaf Blakeley, who won the case, the UK has struggled with the issue of how to deal with parties in litigation when one has to rely on an immoral purpose to explain their claim for “hundreds of years”, with the matter even reaching the Supreme Court recently.

In Jersey, the case revolved around some Jersey-held shares of a Dubai couple undergoing divorce proceedings.

While they had been placed in the wife’s name, the husband contested that they were really his, and had just been ‘resting’ in her name. 

This is not an uncommon occurrence, with many people opting to place shares or investments under another person’s or company name for privacy purposes. Nonetheless, the JFSC require anyone doing so to declare if they are the true beneficial owner.

Pictured: Local lawyer Olaf Blakeley, who won the case for his client.

The man had not done so, however, and was therefore left in a tricky situation. If the shares really were his, he had effectively ‘misled’ the Jersey Financial Services Commission. If they were not, his wife would retain the money.

With criticism of Jersey’s offshore financial services often based on, “…assertions of banking secrecy and underlying criminality which is not capable of being discovered by the relevant law enforcement authorities”, Bailiff William Bailhache, presiding, said that it was important for the Island to maintain transparency.  

In handing down his verdict, he commented: “ There is a public interest – a very strong public interest – in the Island being able to demonstrate that it has the ability to identify the beneficial owners of companies, or the beneficiaries under trusts.  In our judgment, this Court should not recognise any arrangement which detracts from the ability of regulators or law enforcement authorities to do so, and, even if we had been satisfied that the shares were held as a nominee or on trust for the Plaintiff, or that the Defendant had been unjustly enriched at the expense of the Plaintiff, we would not have been prepared to grant relief in the exercise of our equitable discretion on that basis.”

Pictured: Bailiff William Bailhache, who presided over the case.

As Advocate Blakeley observed: “In this case the Bailiff has made clear: if someone misleads the JFSC or Island authorities about the true beneficial ownership of companies or trusts, the Court will not assist that person if they come to court with a claim. In effect, the door of the Court will be slammed shut.”