Mark Byers v The Saudi National Bank

A claim in knowing receipt requires beneficial receipt of assets traceable to the claimant’s trust property and knowledge making it unconscionable to retain them. Receipt of a benefit is insufficient. Knowledge and possession of trust property must coincide, although the property need not still be held when proceedings begin.

Where dishonest assistance is not alleged, the claimant must have retained a proprietary interest in the property while it was held by the recipient. A transferee who takes good and unencumbered title, free from the beneficiary’s interest, cannot be liable in knowing receipt. The lex situs determines the rights remaining after a transfer; English law then characterises those rights. Findings of foreign law based on expert evidence are ordinarily subject to the usual appellate restraint.

SICL and its liquidators alleged that Mr Al-Sanea transferred shares held on trust for SICL to Samba Financial Group in breach of trust. Samba’s assets and liabilities later transferred to the Saudi National Bank. The pleaded allegations, including Samba’s relevant knowledge, were deemed true following Samba’s disclosure default.

Fancourt J dismissed the new claim for knowing receipt: [2021] EWHC 60 (Ch). He held that Saudi Arabian registration had left SICL without a continuing proprietary interest in the shares, and that such an interest was necessary for knowing receipt. He also addressed, contingently, a proposed block discount in valuing the shares.

The appeal challenged the legal requirement for a continuing proprietary interest, the findings on Saudi Arabian law, and the valuation approach.

1. Appeal dismissed. The Court upheld the dismissal of the knowing-receipt claim.

2. Knowing receipt is not a fault-based claim detached from property. The defendant must beneficially receive assets traceable to the claimant’s trust property, and must have knowledge making retention unconscionable. A person who merely benefits from trust property, without receiving it, is not a knowing recipient. Nor is dishonesty required, but knowledge and possession of the relevant trust property must coincide.

3. Where dishonest assistance is not alleged, a claimant must have a continuing proprietary interest in the property when it is in the recipient’s hands. A recipient who acquires full beneficial title at the moment of receipt, free of the claimant’s equitable interest, has not received trust property for this purpose and has no custodial duty to restore it. The Court treated this conclusion as consistent with El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685, Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, and later authorities.

4. The lex situs determines the ownership rights remaining after a third-party transfer. English law then characterises those rights for the purpose of the English claim. The Court would not interfere with the judge’s expert-evidence findings on Saudi Arabian law. Registration was conclusive of Samba’s ownership of the listed and unlisted shares, and SICL could not obtain rectification. SICL therefore had no proprietary interest capable of supporting knowing receipt.

5. The valuation issue did not arise. The Court nevertheless indicated, without deciding the point, that where a trustee elects for value rather than return in specie, restoration may often be measured by the cost of acquiring the asset rather than its hypothetical sale value. It did not endorse the judge’s proposed block-discount analysis.

• Court of Appeal (Civil Division): dismissed the claimants’ appeal and upheld the dismissal of their knowing-receipt claim.

• High Court, Business and Property Courts: Fancourt J dismissed the claim in [2021] EWHC 60 (Ch), holding that SICL lacked a continuing proprietary interest after registration under Saudi Arabian law.