January 27, 2022
Latham & Watkins has successfully defended Saudi National Bank (SNB, formerly Samba Financial Group until its merger with National Commercial Bank on 1 April 2021), one of Saudi Arabia’s largest banks, against a claim brought by a Cayman Islands Company, Saad Investments Company Limited and its liquidators, that Samba knowingly received trust assets in part settlement of a client’s debts. The long-running dispute arose from the collapse of SAAD Group in 2009, and involved a number of Saudi and Western banks and institutional creditors.
In 2011, during initial information-gathering proceedings, Samba had disclosed that in September 2009 Mr Al Sanea transferred in excess of USD 400 million worth of shares in Saudi companies to Samba, in part settlement of his debts. In 2013, the Claimants alleged that Mr Al Sanea held USD 318 million of those shares on a Cayman Islands trust for SICL, and brought proceedings for a declaration under UK insolvency law that the transfer was a void disposition of SICL’s property. An appeal went to the UK Supreme Court, and in February 2017, the Supreme Court struck out the claim on the basis that SICL’s trust interest was extinguished, and was therefore not a “disposition” under UK insolvency law.
Following a hearing in October 2017, the Claimants were subsequently granted permission to bring the claim on different grounds, replacing their insolvency claim with a trust-based claim in knowing receipt.
Following a two week trial in October 2020, on 15 January 2020 the English High Court ruled in favour of Samba on all issues, dismissing the Claimants’ claims in their entirety. The Court found that there was no valid cause of action under English law even on the alleged facts, because under Saudi law Samba had taken good title to the shares, and that took priority over any equitable proprietary rights which SICL might have had under Cayman Islands law.
The Claimants obtained permission to appeal to the Court of Appeal on all issues, and the appeal was heard on 13-17 December 2021 before Lord Justice Newey, Lady Justice Asplin, and Lord Justice Popplewell. On 27 January 2022, the Court of Appeal handed down judgment dismissing the appeal.
In relation to English law issues the Court held that in order for liability to arise in knowing receipt, the claimant must have a “continuing proprietary interest in the relevant property”, and as such, a defendant could not be liable in knowing receipt if they took the relevant property “free of any interest of the claimant”. The Court therefore concluded that the trial judge was correct when he held that “absent a continuing proprietary interest in the Disputed Securities at the time of registration, the claim in knowing receipt as pleaded will fail”.
On Saudi Arabian law matters, the governing law on the proprietary effect of the share transfers, the Court agreed with SNB’s argument that it need not review Mr Justice Fancourt’s view of the expert evidence, and concluded that there were no grounds on which to overturn the trial judge’s findings.
The Court of Appeal refused permission to appeal.
Commenting on the judgment, London counsel, Dan Smith said: “We are delighted to have achieved this result for our client. The judgment represents a comprehensive rejection by the Court of Appeal of the claims by SICL and its liquidators under both English law and Saudi Arabian law, and also clarifies important aspects of English trusts law and its interaction with other legal systems. We hope this decision marks the end of this long-running litigation.”
The Latham & Watkins team was led from London by Litigation & Trial counsel Dan Smith and partner Oliver Browne, with associates Anna James, Olivia Featherstone, and Callum Rodgers. Principal of The Law Office of Salman M. Al-Sudairi and Latham partner Salman Al-Sudairi led the team advising on Saudi law matters. Latham instructed Brian Green QC of Wilberforce Chambers, Andrew Onslow QC of 3 Verulam Buildings, Alan Roxburgh, and Ed Harrison of Brick Court Chambers, and Sarah Tulip of 3 Verulam Buildings.