Mark Byers v The Saudi National Bank

JurisdictionEngland & Wales
JudgeLord Justice Newey
Judgment Date27 January 2022
Neutral Citation[2022] EWCA Civ 43
Docket NumberCase No: CA-2021-000441
CourtCourt of Appeal (Civil Division)
Between:
(1) Mark Byers
(2) Hugh Dickson (as joint liquidators of Saad Investments Company Limited)
(3) Saad Investments Company Limited (in liquidation)
Claimants/Appellants
and
The Saudi National Bank
Defendant/Respondent

[2022] EWCA Civ 43

Before:

Lord Justice Newey

Lady Justice Asplin

and

Lord Justice Popplewell

Case No: CA-2021-000441

(Formerly A3/2021/0292)

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

Mr Justice Fancourt

[2021] EWHC 60 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Jeff Chapman QC, David Murray and Adam Cloherty (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Appellants

Andrew Onslow QC, Brian Green QC, Alan Roxburgh, Edward Harrison and Sarah Tulip (instructed by Latham & Watkins (London) LLP) for the Respondent

Hearing dates: 13–17 December 2021

Approved Judgment

This judgment was handed down remotely at 10:30am on Thursday 27 January 2022 by circulation to the parties or their representatives by email and by release to BAILII and the National Archives.

Lord Justice Newey
1

This is the judgment of the Court. All three of us have contributed to it.

2

The appeal is brought by the claimants against the dismissal by Fancourt J (“the Judge”), in a judgment dated 15 January 2021, of their claim for knowing receipt. The appeal raises issues as to, first, whether such a claim depends on the claimant having had a continuing proprietary interest in the property in question when in the hands of the defendant and, secondly, whether such an interest existed in the present case having regard to the relevant Saudi Arabian law.

3

The claimants are Saad Investments Company Limited (“SICL”), a company registered in the Cayman Islands, and its joint official liquidators, Mr Mark Byers and Mr Hugh Dickson. The Grand Court of the Cayman Islands made a winding-up order against SICL on 18 September 2009 pursuant to a petition presented on 30 July 2009. The Cayman Islands proceedings were recognised by the English Court as foreign main proceedings pursuant to the Cross Border Insolvency Regulations 2006 by orders made on 20 August and 25 September 2009.

4

On 14 August 2013, Mr Byers, Mr Dickson and Mr Stephen Akers, who at the time was also one of SICL's liquidators, issued proceedings against Samba Financial Group (“Samba”), a Saudi Arabian bank, whose assets and liabilities were transferred on 1 April 2021 to the defendant, the Saudi National Bank (“SNB”, formerly the National Commercial Bank). The claim challenged the transfer to Samba in September 2009 by Mr Maan Al-Sanea of shares in five Saudi Arabian banks (“the September Transfer”). Mr Al-Sanea was registered as the owner of the shares (“the Disputed Securities”) either (in the case of four of the five banks) at the Saudi Arabian Securities Depository Centre or (in the fifth case) on the bank's register of shareholders, but the liquidators alleged that he had come to hold the shares on trust for SICL as a result of various transactions in 2002–2008 (“the Six Transactions”). The shares were said to have been worth about US$318 million at the date of the September Transfer.

5

The liquidators' proceedings were based on section 127 of the Insolvency Act 1986, rendering void unless the Court otherwise orders “any disposition of the company's property” made after the commencement of its winding up. That case eventually foundered when the Supreme Court held in judgments given on 1 February 2017 ( Akers v Samba Financial Group [2017] UKSC 6, [2017] AC 424) that “for the purposes of section 127 of the Insolvency Act 1986 there was no disposition of any rights of SICL in relation to the shares by virtue of their transfer to Samba” (to quote from paragraph 57 of Lord Mance's judgment). However, the Supreme Court considered that the liquidators should be given the chance to apply to the High Court for permission to re-amend their particulars of claim. The liquidators then sought to re-formulate their existing claim as one for knowing receipt of trust property, but the attempt failed and the proceedings were dismissed on limitation grounds: see Akers v Samba Financial Group [2019] EWCA Civ 416, [2019] 4 WLR 54. In the meantime, though, on 31 May 2017, the claimants had issued new proceedings, again alleging knowing receipt, and it was that claim which came on for trial before the Judge in October 2020 and with which we are concerned now. The receipt relied on was the legal transfer of the Disputed Securities into Samba's name. There was no pleaded claim of any antecedent agreement to transfer, or of any receipt of rights under such an agreement as being receipt of property founding a claim in knowing receipt.

6

The trial was of limited scope. Samba had failed to comply with an order for disclosure and, as a result, had been debarred from defending the claim otherwise than on specific grounds which the Judge had decided in a judgment dated 8 April 2020 could fairly be tried without the missing disclosure. As the Judge noted in paragraph 19 of the judgment now under appeal (“the Judgment”), the effect of his April 2020 decision was that “all factual questions other than the content of Saudi Arabian law and the valuation issues were deemed to have been resolved in accordance with the claimants' pleaded case”. In the circumstances, the only substantive issues which fell to be determined at the trial were those identified in paragraph 4 of the Judgment, namely:

“i) Whether the effect of Saudi Arabian law, as the governing law of the September Transfer, was to extinguish SICL's rights in the Disputed Securities even if Samba had knowledge of SICL's interest (‘ the Saudi Arabian Law Issue’);

ii) Whether the claim, pleaded by the claimants as governed by Cayman Islands or English law, must fail if SICL's interest was so extinguished (‘ the Law of Knowing Receipt Issue’);

iii) The value of the Disputed Securities at the date of the September Transfer and at the date of judgment – in reality, this was only a dispute about whether a ‘block discount’ should be applied to the quoted prices of the Disputed Securities on the Saudi Arabian stock exchange on those days (‘ the Valuation Issue’)”.

7

Having regard to the Judge's April 2020 decision, the following allegations by the claimants were (and are) to be taken to be true:

i) Until the September Transfer, Mr Al-Sanea held the Disputed Securities on trust for SICL under Cayman Islands law as the law governing their relationship in respect of the Disputed Securities, Cayman Islands law being materially identical to English law;

ii) The purpose of the September Transfer was to discharge indebtedness of Mr Al-Sanea to Samba;

iii) Samba knew that Mr Al-Sanea was holding the Disputed Securities on trust for SICL; and

iv) “a reasonable bank in [Samba's] position would have appreciated that (alternatively would or ought to have made inquiries or sought advice which would have revealed the probability that) … the September Transfer was a breach of trust; and/or … Samba recklessly failed to make such inquiries about the September Transfer … and the Disputed Securities as an honest and reasonable bank would make”.

8

At trial, Samba did not dispute that the knowledge which it was alleged to have had was “sufficient in principle to establish the overarching requirement for knowing receipt liability, namely that ‘the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt’” (see paragraph 32 of the Judgment). As, however, the Judge noted in paragraph 33 of the Judgment, “neither in the re-amended particulars of claim nor in the amended reply to Samba's amended defence have the claimants alleged that Samba acted dishonestly” and so the claimants “in argument – though at times they came close to alleging that Samba was an accessory to theft of the Disputed Securities – did not (and could not) argue that their pleaded case could be taken as an allegation of dishonesty, such as would be required to establish liability as a constructive trustee for dishonest assistance in a breach of trust”.

9

The Judge determined both the Law of Knowing Receipt Issue and the Saudi Arabian Law Issue in favour of Samba and, accordingly, dismissed the claim. He concluded in paragraph 117 of the Judgment that, “absent a continuing proprietary interest in the Disputed Securities at the time of Samba's registration, the claim in knowing receipt as pleaded will fail” and, in paragraph 206, that “SICL had no continuing proprietary interest in the Disputed Securities after the September Transfer capable of supporting a claim against Samba in knowing receipt”.

10

The Judge nevertheless went on to consider the Valuation Issue, viz., “whether, in valuing the Disputed Securities, there should be a discount (‘block discount’) from the quoted market price on the relevant dates for each of the substantial holdings in the five banks, and if so the size of each discount”. The Judge explained that, had he reached a different conclusion on liability, he would have agreed with Samba that a block discount was applicable in the case of each of the holdings comprised in the Disputed Securities.

11

The claimants now challenge the Judge's decision in this Court. They contend that the Judge erred in relation to each of the three issues he identified in paragraph 4 of the Judgment. In short, it is their case that (a) the claimants did not need to have a continuing proprietary interest in the Disputed Securities to succeed in their knowing receipt claim, (b) in any event, SICL's interest in the Disputed Securities was not in fact extinguished as a matter of Saudi Arabian law and (c) the Judge was also mistaken in thinking it appropriate to apply a “block discount”.

The Law of Knowing Receipt Issue

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