Akers v Samba Financial Group
| Jurisdiction | England & Wales |
| Judge | Lord Justice Vos |
| Judgment Date | 04 December 2014 |
| Neutral Citation | [2014] EWCA Civ 1516 |
| Date | 04 December 2014 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2014/0918 |
[2014] EWCA Civ 1516
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
SIR TERENCE ETHERTON, THE CHANCELLOR OF THE HIGH COURT
Case Number: HC13E03490
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Kitchin
and
Lord Justice Vos
Case No: A2/2014/0918
Mr Mark Howard QC, Mr David BrownbillQC andMr Adam Cloherty(instructed by Morrison & Foerster (UK) LLP) for the Claimants/Appellants
Mr Mark Hapgood QC and Mr Alan Roxburgh (instructed by Latham & Watkins (London) LLP) for the Defendant/Respondent
Hearing dates: 5 th and 6 th November 2014
Overview
This is the judgment of the court, which I am delivering at the invitation of Lord Justice Longmore.
The application that came before the Chancellor of the High Court, Sir Terence Etherton, was in substance a strike out or summary judgment application dressed up as an application for a stay on the grounds of forum non conveniens. It was notionally based on the contention that the Saudi Arabian courts were clearly and distinctly a more appropriate forum for the claim to be brought. But in fact the claim is under section 127 of the Insolvency Act 1986 (the " IA 1986") for a declaration that the relevant transaction was a void disposition. It is a claim that could not and will not be brought either in substance or in form in Saudi Arabia. England is, therefore, in reality the only available forum for the claim (apart perhaps from the Cayman Islands), and the question is and was whether the claim has any realistic prospect of success.
Despite the procedural infelicities, the appeal raises some important questions as to the law applicable to and the validity of trusts which purport to comprise shares registered in civil law countries, whose laws do not themselves recognise either the trust concept or the division of a legal and beneficial interest. These questions have involved a close analysis of the Hague Convention on the Law Applicable to Trusts and on their Recognition (the "Convention"), which was given statutory effect in the United Kingdom by the Recognition of Trusts Act 1987 (the "1987 Act").
The argument before this court has also been markedly different from the argument before the Chancellor. Before us, the focus has been on the meaning and effect of article 4 of the Convention, whereas that article played almost no part in the first instance hearing.
In the broadest outline, the trusts concerned arose from what we shall refer to as the "6 transactions" which took place between 2002 and 2008. In each of the 6 transactions, Mr Maan Al-Sanea ("Mr Al-Sanea"), who is a citizen of and resident in Saudi Arabia, declared himself a trustee of certain Saudi Arabian shares for the 4 th claimant company, Saad Investments Company Limited, a Cayman Islands company which is now in liquidation ("SICL"). SICL was Mr Al-Sanea's family investment vehicle, which was managed in Geneva.
SICL is massively insolvent. When its winding up began, it owed US$2.815 billion plus interest to a syndicate of banks including the defendant, Samba Financial Group ("Samba").
In these proceedings, the 1 st, 2 nd and 3 rd claimants, the liquidators of SICL (the "liquidators") seek to challenge the validity of a disposition to Samba of the shares that were the subject of the 6 transactions, made just before SICL's winding up order was made. The effect of the disposition, if the liquidators are right, was to deprive SICL's creditors of shares to which it was entitled worth some US$318 million. The underlying issue, put shortly, is whether it was at least arguable that the shares were indeed held on trust for SICL.
The Chancellor decided on 28 th February 2014 that each of the relevant trusts was governed by either Saudi Arabian law or Bahraini law, neither of which will enforce foreign laws or recognise any division of the legal and beneficial interests in shares. He held that these proceedings should be stayed on the grounds that the courts of Saudi Arabia were clearly and distinctly a more appropriate forum. The effect of that decision was to bring an end to these proceedings and to any future challenge to the validity of the transfer that lies at the heart of these proceedings.
The liquidators challenge the Chancellor's decision principally on the basis that they contend he should not have decided that the trusts were governed by Saudi Arabian or Bahraini law, and should instead have accepted, for the purposes of the stay application, that it was arguable that the trusts were governed by Cayman Islands law, and therefore valid.
Factual introduction
The shares in question are in 5 publicly quoted Saudi Arabian banks, including Samba itself (the "Shares"). Samba and some of the other 4 banks are listed on the Tadawul, the Saudi Arabian stock exchange. Samba is an international bank with operations in the United Kingdom, the United Arab Emirates, Qatar and Pakistan. Mr Al-Sanea was a director of Samba from 2004 to 2006. The Shares were all originally registered in Mr Al-Sanea's name at either the Securities Depository Centre ("SDC") operated by the Tadawul or, in the case of the shares in National Commercial Bank, in its Saudi Arabian share register.
The transfer of the Shares from Mr Al-Sanea to Samba took place on 16 th September 2009 to discharge Mr Al-Sanea's indebtedness to Samba (the "Transfer"). The liquidators contend that at the date of the Transfer, the Shares were, as we say, held by Mr Al-Sanea on trust for SICL.
In these proceedings, SICL and its liquidators seek a declaration under section 127 of the IA 1986 that the Transfer of the Shares on 16 th September 2009 was a void disposition as having been made after the commencement of the winding up of SICL. The winding up of SICL commenced on 30 th July 2009, when a petition was presented to the Grand Court of the Cayman Islands. The winding up order was made on that petition on 18 th September 2009, two days after the Transfer.
As the Chancellor explained, the effect of the Cross Border Insolvency Regulations 2006 ("CBIR") was to give the force of law in the United Kingdom to the UNCITRAL Model Law on Cross-Border Insolvency, as set out in schedule 1 to the CBIR. It was those provisions and the Companies Court's recognition orders dated 20 th August and 25 th September 2009 that allowed SICL's liquidators to seek to invoke in England the provisions of section 127 of the IA 1986 in relation to the Transfer. The UNCITRAL Model Law has not been adopted in Saudi Arabia.
The Chancellor said that the critical issue between the parties in relation to section 127 was whether, applying the relevant law, SICL had any proprietary interest in the Shares at the date of the Transfer.
It is perhaps worth noting at the outset that we are not at this stage concerned with whether or not the liquidators will ultimately prove to be entitled to a declaration that the Transfer was void or with what other relief they might otherwise obtain. Nor are we concerned with whether Samba might be entitled (as it will no doubt claim) to a validation order in respect of the Transfer on the grounds that Samba was a good faith purchaser of the Shares for value without notice of the trusts. All that will, if the matter proceeds, have to be determined at what one might call the substantive stage of the section 127 application.
The 6 transactions
The Chancellor summarised what he described as "the seven transactions" at paragraphs 26–40 of his judgment. It is now common ground that there were, in fact, only 6 transactions, which we can summarise briefly as follows:-
i) Under the 1 st transaction originally entered into on 30 th November 1998, but replaced by an agreement of 17 th December 2002, SICL bought shares in Samba from Mr Al-Sanea. The agreement provided that the "beneficial ownership" in the shares should be transferred from Mr Al-Sanea to SICL, but that the "nominal ownership" in the shares should remain registered in Mr Al-Sanea's name "in order to comply with legal requirements in Saudi Arabia". Mr Al-Sanea was to have no interest whatever in the shares after the completion of the sale except in his capacity as registered owner. The agreement referred repeatedly to Mr Al-Sanea as a trustee, but had a choice of law clause that provided for "[t]his Agreement and the relationship of the parties in connection with the subject matter of this Agreement" to be governed by the laws of Bahrain.
ii) Under the 2 nd transaction of 17 th December 2003, Ahmad Hamad Algosaibi & Brothers Company ("ALGME") sold SICL certain shares (the "ALGME shares") on terms that Mr Al-Sanea would hold them for SICL as nominee again "in order to comply with legal requirements in Saudi Arabia". The agreement again refers repeatedly to Mr Al-Sanea as a trustee, and had a choice of law clause that provided for "[t]his Agreement and the relationship of the parties in connection with the subject matter of this Agreement" to be governed by the laws of Saudi Arabia.
iii) The 3rd transaction was given effect by a bill of sale and a separate declaration of trust both dated 5 th June 2006. The sale of the shares in question by Mr Al-Sanea to SICL was evidenced by the bill of sale, which referred to the sale being "subject to that certain 2005 Share Sale...
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