Byers & Ors v Samba Financial Group

A claim in pure knowing receipt, where dishonesty is not alleged, requires the claimant to retain a proprietary interest in the property when it is received. If the applicable law gives the transferee better title and extinguishes or overrides that interest at receipt, the claim fails. The characterisation of the claim as personal does not avoid this requirement. The effect of a transfer of foreign securities on the beneficiary’s rights is determined by the law governing the securities, including the lex situs rules recognised by English law. The court also held that registration of listed securities under the Saudi Arabian capital-markets regime was conclusive unless corrected under the statutory scheme, which did not permit an off-market trust claim of this kind.

The claimants, joint official liquidators of Saad Investments Company Limited, sought equitable compensation from Samba Financial Group for shares transferred to Samba by the trustee, Maan Al-Sanea, in alleged breach of trust. The shares were in Saudi Arabian companies and remained in Samba’s possession. The claim was pleaded in knowing receipt under Cayman Islands or English law.

The Supreme Court had previously held that the trusts were valid but that there was no disposition of SICL’s beneficial interest for the purposes of Insolvency Act 1986, leaving the claimants to pursue a knowing-receipt claim. The central issues were whether such a claim required a continuing proprietary base and, if so, whether Saudi Arabian law had extinguished or overridden SICL’s interest. A valuation issue was addressed contingently.

1. Knowing receipt. The claim was a pure knowing-receipt claim. No dishonesty or dishonest assistance was pleaded. Such liability is distinct from dishonest assistance: the recipient’s obligation arises because he has received trust property with sufficient knowledge and must deal with it as if he were a trustee.
2. The court followed the analysis in Macmillan Inc v Bishopsgate Investment Trust plc (No 3). The claimants’ personal formulation did not alter its substance. The claim sought recovery of the value of property allegedly belonging in equity to SICL and therefore required a continuing proprietary base. If the recipient acquired good title immediately on receipt, the claim could not succeed.
3. The relevant question was not avoided by describing the claim as governed by English or Cayman Islands law. The effect of the transfer on rights in foreign securities was determined by Saudi Arabian law as the lex situs, applying the conflict-of-laws principles of English and Cayman Islands law.
4. Under Saudi Arabian law, the Six Transactions would probably be characterised as giving SICL ownership rights, rather than merely contractual rights. Islamic-law principles also supported a remedy against a knowing third-party recipient in principle. However, the capital-markets registration scheme made registration conclusive as to listed securities, subject to correction under article 27(d) of the Capital Market Regulation 2003. That provision did not permit an off-market transaction to displace the registered title of a purchaser who acquired the shares through the authorised system. SICL therefore retained no proprietary interest in the listed securities.
5. Registration of the National Commercial Bank shares was prima facie evidence and, until displaced, conclusive as to ownership. The evidence did not establish on the balance of probabilities that SICL could rectify the register against Samba, a registered purchaser.
6. A possible compensation claim under Saudi Arabian law did not amount to a continuing proprietary interest and was not shown likely to succeed. The claim in knowing receipt therefore failed and was dismissed.
7. As an alternative in case of appeal, the court held that market value was the appropriate valuation basis and that block discounts were applicable. The claim was dismissed.

The judgment records earlier stages of the same litigation, including decisions of the Court of Appeal and Supreme Court, but those decisions are excluded from the cited-case dataset because they form part of the same litigation.