Akers and others (Respondents) v Samba Financial Group (Appellant)

Cite as:[2017] UKSC 6
Hand-down Date:February 01, 2017
 
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Hilary Term [2017] UKSC 6 On appeal from: [2014] EWCA Civ 1516

JUDGMENT

Akers and others (Respondents) v Samba Financial Group (Appellant) before

Lord Neuberger, President Lord Mance

Lord Sumption Lord Toulson Lord Collins JUDGMENT GIVEN ON 1 February 2017 Heard on 27 and 28 April 2016 Appellant Respondents Mark Hapgood QC Mark Howard QC Lord Pannick QC David Brownbill QC Brian Green QC Adam Cloherty Alan Roxburgh (Instructed by Latham & Watkins (London) LLP) (Instructed by Morrison and Foerster (UK) LLP) LORD MANCE: (with whom Lord Neuberger, Lord Sumption, Lord Collins and Lord Toulson agree)

  1. This is an appeal from an order of the Court of Appeal (Longmore, Kitchin and Vos LJJ) dated 4 December 2014, which set aside an order of the Chancellor dated 28 February 2014 staying the present proceedings. The points raised are novel and difficult, and the focus of submissions has shifted at each instance.

  2. The proceedings are brought by a Cayman Islands company, Saad Investments Co Ltd, in liquidation, ("SICL") and its Joint Official Liquidators ("the Liquidators"), appointed as such in winding up proceedings commenced in the Cayman Islands on 30 July 2009. The English Companies Court has recognised the Cayman Islands winding up proceedings as a foreign main insolvency proceeding by orders under the Cross-Border Insolvency Regulations 2006 (SI 2006/1030). The proceedings are against Samba Financial Group ("Samba"), which was served as of right within the jurisdiction on 19 August 2013, but which then applied for the proceedings to be stayed. The ground then given was that "there exists another forum which is clearly and distinctly more appropriate" than England. In the course of the appeals leading to the Supreme Court, the ground has effectively transmuted into a case that SICL's claim has no prospect of success, for a reason or reasons which will appear. The parties have argued the appeal, and the Supreme Court will address it, on that basis.

  3. Before the Supreme Court many of the issues which required attention below are no longer relevant. The appeal can as a result be approached on the basis of assumed facts and matters which can be shortly stated. They include the following.

  4. Mr Al-Sanea, a Saudi Arabian citizen and resident closely involved with SICL, was the legal owner of shares, valued at around US$318m, in five Saudi Arabian banks, one of them Samba itself. He was registered as their owner in the Saudi Arabian Securities Depositary Centre. SICL claims that Mr Al-Sanea had agreed to hold these Saudi Arabian shares at all material times on trust for SICL. The trusts arose allegedly as a result of six transactions. In the first transaction in 2002, Mr Al-Sanea by share sale agreement agreed to transfer to SICL the "beneficial ownership" of the relevant shares, but to continue to hold the legal title "in order to comply with legal requirements in Saudi Arabia". In a second transaction in 2003, Mr Al-Sanea agreed to hold "legal ownership of [the relevant] shares as nominee for SICL in order to comply with the legal requirements in Saudi Arabia". In the remaining four transactions, in respectively 2006, 2007 and on two

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    occasions in 2008, Mr Al-Sanea made declarations of trust for SICL in respect of the relevant shares.

  5. It is now common ground, for the purposes of this appeal, that all six transactions by which Mr Al-Sanea purported to constitute himself a trustee for SICL can be treated as subject to Cayman Islands law. It is also common ground that the law of Saudi Arabia, where the shares are sited, does not recognise the institution of trust or a division between legal and equitable proprietary interests, although it does recognise a different institution, amaana, the precise implications of which have not been explored in evidence.

  6. On 16 September 2009, Mr Al-Sanea transferred all the Saudi Arabian shares to Samba, purporting thereby to discharge personal liabilities which he had towards Samba.

  7. The present proceedings are brought by SICL and the Liquidators against Samba in reliance on section 127 of the Insolvency Act 1986, which provides:

    "Avoidance of property dispositions, etc.

    In a winding up by the court, any disposition of the company's property, and any transfer of shares, or alteration in the status of the company's members, made after the commencement of the winding up is, unless the court otherwise orders, void. ..."

    By section 436 of the 1986 Act the concept of "property" is defined in wide terms:

    "'property' includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property; ..."

  8. In the courts below, and when the matter first came before the Supreme Court, the critical issue was identified as being whether SICL had equitable proprietary interests in the shares in respect of which Mr Al-Sanea had purportedly constituted himself trustee. It appears to have been assumed that, if SICL had such interests, then they were disposed of by Mr Al-Sanea's transfer of title in the shares to Samba. Samba's submission was that SICL could have no such equitable

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    proprietary interests, since the law of Saudi Arabia, the lex situs of the shares, does not recognise purely equitable proprietary interests.

  9. Following the oral hearing before it, the Supreme Court invited and received two sets of supplementary written submissions focusing more precisely on the questions (a) whether there was any "disposition" within section 127, even if SICL had equitable proprietary interests in the shares, and (b) why, if there was, it could not also be said that there was such a disposition, even if SICL only enjoyed personal rights in respect of the shares.

  10. At all instances of this case, detailed submissions have been addressed on the Convention on the Law Applicable to Trusts and on their Recognition, scheduled to the Recognition of Trusts Act 1987. These submissions focused, before the Chancellor, on article 15 and, before the Court of Appeal and Supreme Court, on both articles 4 and 15 of that Convention. The 1987 Act states in section 1(1) that "The provisions of the Convention set out in the Schedule ... shall have the force of law in the United Kingdom". The Convention as scheduled contains the following provisions:

    "CHAPTER I - SCOPE

    Article 1

    This Convention specifies the law applicable to trusts and governs their recognition.

    Article 2

    For the purposes of this Convention, the term 'trust' refers to the legal relationship created - inter vivos or on death -by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.

    A trust has the following characteristics -

    (a) the assets constitute a separate fund and are not a part of the trustee's own estate;

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    (b) title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee;

    (c) the trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law.

    The reservation by the settlor of certain rights and powers, and the fact that the trustee may himself have rights as a beneficiary, are not necessarily inconsistent with the existence of a trust.

    Article 3

    The Convention applies only to trusts created voluntarily and evidenced in writing.

    Article 4

    The Convention does not apply to preliminary issues relating to the validity of wills or of other acts by virtue of which assets are transferred to the trustee.

    Article 5

    The Convention does not apply to the extent that the law specified by Chapter II does not provide for trusts or the category of trusts involved.

    CHAPTER II - APPLICABLE LAW

    ...

    CHAPTER III - RECOGNITION

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    Article 11

    A trust created in accordance with the law specified by the preceding Chapter shall be recognised as a trust.

    Such recognition shall imply, as a minimum, that the trust property constitutes a separate fund, that the trustee may sue and be sued in his capacity as trustee, and that he may appear or act in this capacity before a notary or any person acting in an official capacity.

    In so far as the law applicable to the trust requires or provides, such recognition shall imply in particular -

    (a) that personal creditors of the trustee shall have no recourse against the trust assets;

    (b) that the trust assets shall not form part of the trustee's estate upon his insolvency or bankruptcy;

    (c) that the trust assets shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustee's estate upon his death;

    (d) that the trust assets may be recovered when the trustee, in breach of trust, has mingled trust assets with his own property or has alienated trust assets. However, the rights and obligations of any third party holder of the assets shall remain subject to the law determined by the choice of law rules of the forum.

    Article 12

    Where the trustee desires to register assets, movable or immovable, or documents of title to them, he shall be entitled, in so far as this is not prohibited by or inconsistent with the law of the state where registration is sought, to do so in his capacity as trustee or in such other way that the existence of the trust is disclosed.

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    Article 14

    The Convention shall not prevent the application of rules of law more favourable to the recognition of trusts.

    CHAPTER IV - GENERAL CLAUSES

    Article 15

    The Convention does not prevent the application of provisions of the law designated by the conflicts rules of the forum, in so far as those provisions cannot be derogated from by voluntary...

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