Byers and others v Saudi National Bank

A personal claim in knowing receipt requires the claimant to retain an equitable proprietary interest in the property when the defendant receives or retains it with the requisite knowledge. The claim therefore fails where a transfer, including one governed by applicable foreign law, gives the recipient unencumbered title and extinguishes or overrides that interest.

Knowing receipt is closely linked to the proprietary claim for restoration of trust property. It differs from dishonest assistance, which is accessory liability and requires no continuing proprietary interest. Later knowledge does not revive an interest extinguished by a transfer to a bona fide purchaser for value without notice, nor does liability attach to that purchaser’s successor merely because the successor knows of the original breach.

Shares in five Saudi Arabian companies were held on trusts governed by Cayman Islands law for Saad Investments Co Ltd. The trustee transferred them in breach of trust to Samba Financial Group in discharge of his personal debts. Samba had the level of knowledge necessary for knowing receipt, but Saudi Arabian law governed the transfer and registration gave Samba unencumbered title, extinguishing Saad’s equitable proprietary interest.

Fancourt J dismissed the knowing-receipt claim in [2021] EWHC 60 (Ch). The Court of Appeal dismissed the appeal in [2022] EWCA Civ 43; [2022] 4 WLR 22. The Supreme Court granted permission solely on whether knowing receipt requires the beneficiary to retain a continuing equitable proprietary interest in the received asset.

1. Disposition. The Supreme Court unanimously dismissed the appeal. Lord Hodge, with whom Lord Leggatt and Lord Stephens agreed, identified the matters common to the reasoning of Lord Briggs and Lord Burrows which determined the outcome.
2. A transfer of trust property to a bona fide purchaser of the legal title for value without notice extinguishes or overrides the beneficiary’s equitable proprietary interest, even where the trustee acts in breach of trust. Applicable foreign law may produce the same effect. The interest is extinguished once and for all, rather than merely suspended: later knowledge does not revive it, and a subsequent transferee with knowledge ordinarily takes free from the former interest. The exception is the defaulting trustee who reacquires the property, because the trustee cannot use the intervening transfer to escape the original trust obligations.
3. A personal claim in knowing receipt requires the claimant to have a continuing equitable proprietary interest when the property reaches, or is retained by, the defendant with the requisite knowledge. If that interest has already been overreached or overridden, the recipient owns the property free of the claimant’s interest and no knowing-receipt claim can arise. Saudi Arabian law gave Samba unencumbered title on registration. Saad therefore lacked the proprietary basis required for its claim.
4. Per Lord Briggs, knowing receipt is ancillary to the proprietary claim. It supplies a personal remedy where a recipient, after becoming subject to restorative and custodial duties, transfers, dissipates or destroys property and thereby prevents proprietary recovery. Per Lord Burrows, it is an equitable proprietary wrong involving knowing interference with equitable proprietary rights. Lord Hodge did not adopt that particular categorisation because it had not been fully argued, but held that both analyses established the same essential requirement.
5. Knowing receipt is materially different from dishonest assistance. Dishonest assistance is accessory liability arising from participation in a breach of trust and does not require the assister to receive property or the beneficiary’s proprietary interest to continue. The policy concern that assets might be routed through jurisdictions which extinguish equitable interests could not justify altering the proprietary basis of knowing receipt.
6. The court did not determine whether constructive knowledge suffices, whether knowing receipt should be subsumed within unjust enrichment, or whether sections 26 and 29 of the Land Registration Act 2002 preclude knowing receipt following registration. Those questions were unnecessary to the appeal.

1. United Kingdom Supreme Court: In [2023] UKSC 51, unanimously dismissed the appeal and affirmed that knowing receipt requires a continuing equitable proprietary interest.
2. Court of Appeal: In [2022] EWCA Civ 43; [2022] 4 WLR 22, dismissed the appeal and upheld Fancourt J on Saudi Arabian law and knowing receipt. It did not decide valuation.
3. High Court: Fancourt J in [2021] EWHC 60 (Ch) held that Saudi Arabian law extinguished the company’s proprietary interest and that the absence of a continuing interest defeated knowing receipt. The claim was dismissed.