Akers & Ors v Samba Financial Group

Article 4 of the Hague Trusts Convention excludes only preliminary issues concerning acts by which assets are transferred to a trustee. It does not exclude declarations by an owner who declares himself trustee without transferring the assets. The lex situs determines whether property can be alienated at all. Once alienation is possible, the Convention’s governing law determines the capacity to create the trust structure and the trust’s validity and effects.

Article 15 preserves mandatory rules of the lex situs, but their application to transfers of beneficial interests may require full evidence. An implied choice of trust law may be arguable from the trust instrument and circumstances. Contested foreign-law issues should not ordinarily be finally resolved on a stay or summary judgment application.

The liquidators of Saad Investments Company Limited challenged a transfer to Samba Financial Group of shares in Saudi Arabian banks. They sought a declaration under section 127 of the Insolvency Act 1986, contending that the shares had been held on trust for the insolvent company when the transfer occurred.

The High Court stayed the proceedings on forum non conveniens grounds. It concluded that Saudi Arabian or Bahraini law governed the trusts and that the claim could not succeed because those systems did not recognise a division between legal and beneficial ownership in shares.

The Court of Appeal considered the scope of articles 4, 5, 6, 7, 8 and 15 of the Hague Convention on the Law Applicable to Trusts and on their Recognition, including whether the issues could properly be determined summarily. The central question was whether the trusts were arguably governed by Cayman Islands law and whether the relevant questions should proceed to a full evidential hearing.

Disposition. The appeal was allowed and the stay imposed by the Chancellor was lifted.

1. The claim under section 127 of the Insolvency Act 1986 depended on SICL having a proprietary interest in the shares. The court was not deciding the ultimate validity of the transfer or any possible validation order.
2. Article 4 of the Convention concerns preliminary issues relating to acts by which assets are transferred to a trustee. The later declarations of trust did not transfer the shares to Mr Al-Sanea, who already owned them. Article 4 therefore did not exclude the Convention from the declarations of trust. The lex situs governed whether Mr Al-Sanea could alienate the shares at all. Once that capacity existed, the law identified under Chapter II of the Convention governed the capacity to create the trust structure, the transfer of the beneficial interest, and the validity and effects of the trusts. This approach was consistent with the narrow dictum accepted from Joint Administrators of Rangers Football Club plc, Noters and with the distinction drawn from Re Pearse’s Settlement. Macmillan Inc v Bishopsgate Investment Trust plc (No 3) supported the general lex situs rule for share ownership, while the observations discussed from Glencore International A.G. & others v Metro Trading International Inc. did not determine the trust-validity issue.
3. Article 15 preserves mandatory, non-derogable rules of the lex situs, including rules concerning transfers of title. But the court could not determine on a stay or summary judgment application whether the alleged Saudi Arabian rules were mandatory. The interaction between article 15(d) and article 8 was better determined after full evidence and cross-examination of the experts.
4. Under article 6, the settlor’s choice of law may be express or implied from the trust instrument and the circumstances. It was at least arguable that the later declarations implied a choice of Cayman Islands law. If so, article 7 was not engaged because Cayman Islands law provided for the trusts. The article 7 factors should be assessed on facts established at trial. The objects of a trust at least included the intention to benefit its beneficiaries. No concluded view was expressed on article 7 or article 5.
5. The Chancellor’s alternative conclusion that a stay would not have been appropriate if Cayman Islands law was reasonably arguable was sound and was not challenged. The requirements identified in Spiliada Maritime Corp v Cansulex Ltd had not been shown to justify staying proceedings in favour of Saudi Arabia.

• Court of Appeal (Civil Division): In [2014] EWCA Civ 1516, allowed the appeal and lifted the stay.
• High Court of Justice, Chancery Division (Companies Court): On 28 February 2014, Sir Terence Etherton, the Chancellor of the High Court, stayed the proceedings on forum non conveniens grounds, holding that Saudi Arabian or Bahraini law governed the trusts and that the section 127 claim could not succeed.