Andrew Onslow QC and Sarah Tulip successfully defend knowing receipt claim

On 15 January 2021, Fancourt J handed down judgment in Byers v Samba Financial Group [2021] EWHC 60 (Ch), dismissing a USD300m knowing receipt claim brought by the Joint Official Liquidators of SICL against Samba, a Saudi Arabian bank, Samba. 3VB’s Andrew Onslow QC and Sarah Tulip acted, with Alan Roxburgh and Edward Harrison of Brick Court Chambers, for the successful defendant bank.

The claim arose from a transfer of shares from Maan Al-Sanea to Samba in September 2009 (the “September Transfer”). The Claimants alleged that the September Transfer was made in breach of trust, and that Samba was liable as a knowing recipient of the shares because it had knowledge of SICL’s interest in the shares.  Having been unable to provide disclosure, Samba was debarred from defending the claim except in respect of certain limited issues. Samba was accordingly obliged to accept, among other matters dependent on factual evidence, that the governing law of the claim was English law (see Byers v Samba Financial Group [2020] EWHC 853 (Ch)). The issues for trial were therefore limited to:

• Whether Saudi Arabian law was the law governing the September Transfer (the “Governing Law Issue”).
• If Saudi Arabian law was the governing law of the September Transfer, whether its effect was to extinguish SICL’s rights in the shares even if Samba has knowledge of SICL’s interest (the “Saudi Arabian Law Issue”).
• If SICL’s interest was so extinguished as a matter of Saudi Arabian law, whether the Claimants’ claim in knowing receipt must fail as a matter of English law (the “Knowing Receipt Issue”).
• The value of the shares; and, in particular, whether a block discount should be applied to the quoted prices of the shares on the Saudi Arabian stock exchange (the “Valuation Issue”).

The Claimants effectively conceded the Governing Law Issue, and Fancourt J found in Samba’s favour in respect of the three remaining issues.

Fancourt J’s analysis of the Knowing Receipt Issue will be of particular interest to practitioners and to academics alike. In summary, Fancourt J held that a claim in knowing receipt will fail if, at the moment of receipt, the beneficiary’s equitable proprietary interest is destroyed or overridden so that the recipient holds the property as beneficial owner of it. The Judge considered that this issue had been decided by Millett J (as he then was) in Macmillan v Bishopsgate [1995] 1 WLR 978 and that, in any event, it would be wrong as a matter of principle to treat a knowing receipt claim as being unconnected with the proprietary rights of the beneficiary because “It is of the essence of such a claim that the beneficiary asserts that the recipient has, or had, the beneficiary’s property.” The Judge noted that whilst the distinction between dishonest assistance and knowing receipt is often blurred as a matter of fact (because a defendant can be liable for both) as a matter of law the distinction is both clear and important. In circumstances where the Judge found that, as a matter of Saudi Arabian law, Samba took good title to the shares, the English law claim in knowing receipt therefore failed.

The Judge granted the Claimants permission to appeal on the Knowing Receipt Issue, but otherwise refused permission.

Read the full judgment.