Singularis Holdings Ltd (in Official Liquidation) (A Company Incorporated in the Cayman Islands) v Daiwa Capital Markets Europe Ltd

JurisdictionEngland & Wales
JudgeMrs Justice Rose,MRS JUSTICE ROSE
Judgment Date16 February 2017
Neutral Citation[2017] EWHC 257 (Ch)
Docket NumberCase No: FL-2016-000015
CourtChancery Division
Date16 February 2017
Between:
Singularis Holdings Ltd (In Official Liquidation) (A Company Incorporated in the Cayman Islands)
Claimant
and
Daiwa Capital Markets Europe Ltd
Defendant

[2017] EWHC 257 (Ch)

Before:

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

Mrs Justice Rose

I. INTRODUCTION

1

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.

2

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.

3

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.

4

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

5

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.

6

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.

7

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...

To continue reading

Request your trial
13 cases
  • Singularis Holdings Ltd (in Official Liquidation) (a Company Incorporated in the Cayman Islands) v Daiwa Capital Markets Europe Ltd
    • United Kingdom
    • Supreme Court
    • 30 October 2019
    ...1945 to reflect the contributory fault of Mr Al Sanea and the company's inactive directors, for which the company was responsible: [2017] EWHC 257 (Ch); [2017] Bus LR 8 Singularis did not appeal against the dismissal of the dishonest assistance claim. Daiwa did appeal against the finding ......
  • The Federal Republic of Nigeria v JP Morgan Chase Bank, N.A.
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 21 February 2019
    ...breached its duty of care to Singularis in making the payment without any proper inquiry.” (at [5] citing Rose J at first instance [2017] EWHC 257 (Ch), [2017] 1 Lloyd's Rep 226, [164].) ‘[The duty is] a duty not to pay away money in a customer's account without proper inquiry.’ (at [87])......
  • Fiona Lorraine Philipp v Barclays Bank UK Plc
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 14 March 2022
    ...Parker LJ made the same point in Lipkin Gorman at p1377 D-E (noted at first instance by Rose J at paragraph 166 of ( Singularis [2017] EWHC 257 (Ch)). However the judge in the present case, e.g. at paragraphs 128 and 129, appears to have taken paragraph 1 of Lady Hale's judgment in Singula......
  • Scott v ANZ Bank New Zealand Ltd
    • New Zealand
    • High Court
    • 5 May 2020
    ...rea component of an offence under s 17(a) of the Fair Trading Act 1986; Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) at 47, where counsel accepted that Singularis had to show a particular individual within Daiwa was dishonest but the Judge found on the fa......
  • Request a trial to view additional results
2 firm's commentaries
  • Singularis v Daiwa: UK banks beware!
    • United Kingdom
    • JD Supra United Kingdom
    • 13 August 2018
    ...handed down on 1 February 2018, upholding the 2017 first instance decision Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) in which Singularis, a Cayman-registered insolvent company, was awarded judgment against Daiwa for in excess of US$150m in respect of Da......
  • A Question Of Attribution: UK Supreme Court Clarifies Law On The Illegality Defence And The Quincecare Duty Owed By Financial Institutions
    • United Kingdom
    • Mondaq UK
    • 21 November 2019
    ...Bank plc v Quincecare Ltd and another, 1992. 4 All ER 363 at 376. Singularis, at para. 2. First instance reasons of Justice Rose, 2017. EWHC 257 (Ch), at para. 6. Singularis, at para. 3. Singularis, at paras. 4-5. 7.2017. EWHC 257 (Ch) 8.2018. EWCA Civ 84 Singularis, at para. 26. Stone &......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT