SICL Liquidators’ claw-back claim rejected – important analysis of knowing receipt principles
Byers and Dickson v Samba Financial Group (Samba)  EWHC 60 (Ch)
The liquidators (Claimants) of Saad Investments Company (SICL) have lost their seven-year battle in the English Courts to claw-back US$318 million worth of shares from the Saudi bank, Samba. The shares were transferred to Samba in 2009 by Maan Al Sanea, SICL’s founder, the Kuwaiti-born former fighter pilot whose business affairs have been the subject of litigation for over a decade, including the long-running case of AHAB v Saad & Ors in the Cayman Islands.
In its judgment of 15 January 2021, the High Court of England and Wales considered various substantive issues, including the legal principles of the law of knowing receipt, namely whether the claim pleaded by the Claimants, as governed by Cayman Islands or English law, must fail if SICL’s interest was extinguished, i.e. whether it was necessary for there to be an “undestroyed proprietary base”.
The Court also dealt with an important question of whether a transferee, who upon receipt obtains title to property which is free from a beneficiary’s equitable proprietary interest, can be liable in equity for knowing receipt because he received the property with sufficient information to know that the transfer was a breach of trust.
The Claimants argued that it is irrelevant whether under Saudi law, Samba’s title overrode or extinguished SICL’s proprietary interest because under English or Cayman Islands law, Samba received the shares with sufficient knowledge that they had been transferred in breach of trust. The Claimants also claimed that Samba knew that SICL has been placed into liquidation and that a Cayman Islands worldwide freezing order had been made against SICL and Al-Sanea two months prior to the transfer.
In its judgment, the High Court held that, as a matter of Saudi law, SICL did not have a continuing proprietary interest in the shares after they had been transferred to Samba by Al Sanea. Notably, the fact that no pleading was, or could have been made that Samba acted dishonestly appears to have been a crucial element in the decision. An allegation of dishonesty would be required to establish liability as a constructive trustee for dishonest assistance in a breach of trust.
The Court held that a claim in knowing receipt, where dishonest assistance is not alleged, will fail if, at the moment of receipt, the beneficiary's equitable proprietary interest is destroyed or overridden so that the recipient holds the property as beneficial owner of it, ie there is no “undestroyed proprietary base”.
It remains to be seen whether the judgment will be appealed. Further judicial guidance on the issues of knowing receipt and dishonest assistance is expected when the Cayman Islands Court of Appeal hands down its eagerly-awaited decision in AHAB v Saad & Ors.