Singularis Holdings Ltd (in Official Liquidation) (A Company Incorporated in the Cayman Islands) v Daiwa Capital Markets Europe Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose,MRS JUSTICE ROSE |
| Judgment Date | 16 February 2017 |
| Neutral Citation | [2017] EWHC 257 (Ch) |
| Docket Number | Case No: FL-2016-000015 |
| Court | Chancery Division |
| Date | 16 February 2017 |
[2017] EWHC 257 (Ch)
Mrs Justice Rose
Case No: FL-2016-000015
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
FINANCIAL LIST
Royal Courts of Justice
Strand, London, WC2A 2LL
Robert Miles QC, Andrew De Mestre (instructed by Jenner & Block London LLP) for the Claimant
John McCaughran QC, Adam Goodison, Michael Watkins (instructed by Ashurst LLP) for the Defendant
Hearing dates: 23 – 25 November, 28 – 30 November, 1 December, 6 – 8 December, 14 – 16 December
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| CONTENTS | PARA |
| I. INTRODUCTION | 1 |
| II. THE PARTIES AND WITNESSES AT TRIAL | 5 |
| (a) Singularis, Mr Al Sanea and the Saad Group | 5 |
| (b) Daiwa | 9 |
| (c) Expert witnesses | 15 |
| III. THE HISTORY OF DEALINGS BETWEEN THE PARTIES | 16 |
| (a) The early relationship between Singularis and Daiwa: November 2006 to August 2007 | 16 |
| (b) The period September 2007 to the end of 2008 | 29 |
| (c) The period 1 January 2009 to 21 May 2009 | 38 |
| (d) The events of late May 2009 to 2 June 2009 | 46 |
| (e) Events between 2 June and the first of the disputed payments | 63 |
| (f) The disputed payments: 12 June – 27 July 2009 | 80 |
| (i) $10 million and $3 million payments on 12 June to SSHC | 80 |
| (ii) Payment of $180 million to SSHC on 18 June 2009 | 86 |
| (iii) Payments of $1,090,000 and $2,935,000 to Saad Air on 1 July 2009 | 101 |
| (iv) Payment of $5.2 million to SSHC on 8 July 2009 | 102 |
| (v) Payment of $1,093,000 to Saad Air on 20 July 2009 | 103 |
| (vi) Payment of $1,174,900 to SSHC on 27 July 2009 | 104 |
| (g) Events after the making of the challenged payments | 105 |
| V. THE ISSUES BETWEEN THE PARTIES IN SUMMARY | 113 |
| VI. MR AL SANEA'S ALLEGED BREACH OF FIDUCIARY DUTY | 119 |
| (a) Was there a prima facie breach of fiduciary duty by Mr Al Sanea? | 119 |
| (b) Could Mr Al Sanea as sole shareholder of Singularis ratify any misappropriation of Singularis funds? | 128 |
| (c) Was Mr Al Sanea entitled to make the payments to himself by way of releasing Singularis' debts to him? | 138 |
| VII. DID DAIWA DISHONESTLY ASSIST MR AL SANEA'S BREACH OF FIDUCIARY DUTY? | 143 |
| VIII. THE CLAIM IN NEGLIGENCE | 163 |
| (a) The scope of the bank's duty under Lipkin Gorman and Quincecare | 163 |
| (b) Was Daiwa subject to a Quincecare duty in respect of the money in the Singularis account? | 171 |
| (i) Is the claim precluded by the fact that the claim is being brought on behalf of the creditors? | 172 |
| (iii) Is Singularis precluded from bringing the claim because it was a one-man company? | 174 |
| (c) Was Daiwa in breach of the Quincecare duty on the facts of this case? | 191 |
| (d) The defence of illegality | 206 |
| (i) Attribution of Mr Al Sanea's wrongdoing to Singularis | 208 |
| (ii) The test in Patel v Mirza | 216 |
| (e) Does Daiwa have an equal and opposite claim in deceit against Singularis? | 221 |
| (f) The inevitable misappropriation of the money | 229 |
| (g) The application of Daiwa's terms of business | 232 |
| (h) Contributory negligence | 243 |
I. INTRODUCTION
The Claimant ('Singularis') brings this claim to recover about $204 million that in early June 2009 was held for its benefit in a segregated client account by the Defendant stock broker ('Daiwa'). At that time, Singularis was wholly owned by Maan Al Sanea, a wealthy businessman who also owned a substantial business group called the Saad Group based in Saudi Arabia. The money in the client account came from two main sources. About $124 million was surplus collateral that was left over when Daiwa closed down a long standing, secured lending relationship it had with Singularis at the beginning of June 2009. About $80 million had arrived in Singularis' account with Daiwa on 2 June 2009 in circumstances that I shall describe later.
Over the course of a month between mid June and mid July 2009, Daiwa paid out that money on Mr Al Sanea's instructions to bank accounts in the names of three other companies within the Saad Group rather than back to a bank account of Singularis. There are eight disputed payments in all, ranging in size from just over $1 million to one payment of $180 million. The money has now been lost to Singularis.
Singularis was incorporated in the Cayman Islands and is now in the hands of liquidators appointed by order of the Grand Court of the Cayman Islands. The liquidators claim back the money from Daiwa on two bases. The first is that Singularis alleges that the employees of Daiwa who authorised the payments dishonestly assisted Mr Al Sanea's breach of fiduciary duty in removing the money from Singularis for the benefit either of himself or of companies in the Saad Group. The second basis is that Daiwa was in breach of the duty of care owed by a bank to its client by negligently failing to realise that Mr Al Sanea was committing a fraud on the company and misappropriating Singularis' monies when he instructed Daiwa to pay the money to third parties. Singularis rely on the duty owed by the bank to its client as described by the Court of Appeal in Lipkin Gorman (a firm) v Karpnale Limited [1989] 1 WLR 1340 and by Steyn J in Barclays Bank plc v Quincecare Ltd and another [1992] 4 All ER 363.
Daiwa defends the claim on the basis that Singularis has not established that Mr Al Sanea was acting in breach of fiduciary duty when asking for the money to be paid to his other companies. They say that Mr Al Sanea was the sole shareholder of Singularis and entitled to move the money to other companies in his control if he so wished. They say that no one in Daiwa acted dishonestly in their dealings with the payments so the claim for dishonest assistance is not made out. As regards the claim in negligence, they say that there was nothing in the surrounding circumstances to alert Daiwa to the possibility that Mr Al Sanea was acting improperly. They also raise a number of legal defences to the claim, asserting for example that the claim is barred by illegality or that the Quincecare duty does not arise in the circumstances of this case. Some of these legal defences boil down to an assertion that any fraudulent conduct on the part of Mr Al Sanea must be treated as the misconduct of Singularis itself so that Singularis is precluded from bringing this claim against Daiwa, even if Daiwa were negligent. Finally, Daiwa relies on clauses in its standard terms of business which it says are binding on Singularis and which exclude Daiwa's liability except for gross negligence.
II. THE PARTIES AND WITNESSES AT TRIAL
(a) Singularis, Mr Al Sanea and the Saad Group
Singularis was incorporated in the Cayman Islands on 3 October 2006 under the name of Saad Investments Finance Company (No. 7) Limited. It changed its name to Singularis Holdings Limited on 21 December 2006. From incorporation until the appointment of the liquidators in September 2009 Singularis' registered office was in the Cayman Islands. The sole shareholder of Singularis as from 30 December 2008 was Mr Al Sanea. Before that date the ultimate beneficiary of the shares in Singularis was the Saad STAR Trust which was a Cayman Island trust settled by Mr Al Sanea. Singularis was set up to manage Mr Al Sanea's personal assets outside the Saad Group. Singularis was not therefore consolidated with the Saad Group companies. There were a number of directors of Singularis in addition to Mr Al Sanea, including Mr Al Sanea's wife Sana Abdulaziz Al Gosaibi, his daughter and four other people. Mr Al Sanea's wife is significant in this narrative because the first problems affecting the Saad Group appear to have arisen from a default by a group of companies owned by the Al Gosaibi family.
Mr Al Sanea is the founder and Chairman of the Saad Group of companies. In 2006 and 2007 Daiwa was provided with a copy of Mr Al Sanea's personal net worth statements, endorsed by PriceWaterhouse Coopers ('PwC') showing him to be a very wealthy man indeed. One Daiwa witness described Mr Al Sanea as an attractive, honest and admirable business person.
A number of companies within the Saad Group play an important role in the events giving rise to this claim:
a) Saad Financial Services SA ('SFS') based in Geneva provided administrative, investment management and advisory services to Singularis. The main contact point for Daiwa with Singularis was through SFS and in particular with Mr Mike Wetherall who worked for SFS in Geneva. It appears that there was no formal services agreement between Singularis and SFS but that the Board of Singularis resolved in March 2007 that the terms of a service agreement between SFS and SICL should apply as between SFS and Singularis. SFS entered into bankruptcy proceedings on 21 January 2013.
b) Saad Investment Company Ltd ('SICL') was originally the counterparty for the stock financing arrangement with Daiwa. It was set up by Mr Al Sanea to manage all his non-Saudi investments.
c) Saad Specialist Hospital Company ('SSHC') is a company registered in Saudi Arabia and is part of the Saad Group. As at 1 January 2009 SSHC was 100 per cent owned by Mr Al Sanea. SSHC was the recipient of most of the money that Singularis is seeking to recover in these proceedings.
d) Saad Air (A320 No 2) Limited and Saad Air (A340–600) Limited (together referred to as 'Saad Air'). These were companies registered in the Cayman Islands which managed the aviation investments of Mr Al Sanea and his family. They were wholly owned subsidiaries of Saad Air Limited of...
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