Byers and Others (Appellant) v. Saudi National Bank (Respondent)

[2023] UKSC 51
On Appeal From: [2022] EWCA Civ 43

Parties Involved

Appellants: Byers and Others (Joint Liquidators of Saad Investments Company Limited)
Respondent: Saudi National Bank (formerly Samba Financial Group)

Representation

Justices: Lord Hodge (Deputy President), Lord Briggs, Lord Leggatt, Lord Burrows, Lord Stephens

Hearing Details

The case reached the UK Supreme Court after decisions from the High Court of England and Wales and the Court of Appeal dismissing the appellants’ claim.

Key Facts

1. Between 2002 and 2008, Mr. Al-Sanea held shares in five Saudi Arabian companies in trust for Saad Investments Company Limited (SICL).
2. In September 2009, Mr. Al-Sanea transferred these shares to Samba Financial Group (Samba) in breach of the trust terms.
3. Under Saudi Arabian law, which governed the transfer, SICL’s equitable interest in the shares was extinguished, making Samba the sole owner.
4. SICL went into liquidation later in 2009.
5. In 2017, SICL’s joint liquidators filed a claim for knowing receipt against Samba, alleging receipt of trust property in breach of trust.
6. In 2021, Samba’s assets and liabilities were transferred to Saudi National Bank (SNB), making SNB the respondent.

Main Legal Issues

1. Extinction of Equitable Interest: Can a claim for knowing receipt proceed if the claimant’s equitable interest in the property has been extinguished under the governing law before the defendant’s receipt?
2. Nature of Knowing Receipt Claims: What is the relationship between a knowing receipt claim and a proprietary claim in equity?

Judgment

The UK Supreme Court unanimously dismissed SICL’s appeal. The Court held that a claim for knowing receipt cannot succeed if the claimant’s equitable interest in the property has already been extinguished.

Observations and Legal Principles

1. Bona Fide Purchaser Rule: A transfer by a trustee in breach of trust to a bona fide purchaser for value without notice extinguishes the equitable interest of the trust’s beneficiary.
2. No Revival of Equitable Interest: Awareness of the breach by subsequent recipients does not revive the extinguished equitable interest.
3. Link Between Claims: Knowing receipt claims are closely linked to proprietary claims. If a proprietary claim is precluded (as in this case), a knowing receipt claim cannot survive unless the recipient has dissipated the property.
4. Distinction Between Claims: Knowing receipt is treated as a proprietary wrong while dishonest assistance is an accessory claim to the trustee’s breach.
5. Application of Principles: Since Saudi law extinguished SICL’s equitable interest at the time of the transfer, SICL could not bring a knowing receipt claim against SNB.

Reasoning

1. Lord Hodge’s Judgment: Summarized the agreed principles and outcomes.
2. Lord Briggs: Analyzed knowing receipt claims as ancillary to proprietary claims.
3. Lord Burrows: Categorized knowing receipt as an equitable proprietary wrong, examining its implications across different scenarios.

Decision

The Supreme Court confirmed that SICL’s equitable interest in the shares had been extinguished, barring its knowing receipt claim. The judgments clarified critical principles of equitable law, reinforcing the interplay between proprietary claims and claims for knowing receipt.