Analysis
Mr Al-Sanea was the legal owner of shares in five Saudi Arabian banks, including Samba Financial Group (appellant). As a result of six transactions between 2002 and 2008 Mr Al-Sanea agreed to hold the relevant shares in trust for Saad Investments Co Ltd (SICL), a company subject to the laws of the Cayman Islands. Compulsory winding up proceedings of SICL commenced on 30 June 2009 and, six weeks later, Mr Al-Sanea in breach of trust transferred the legal title to the relevant shares to the appellant, purporting thereby to discharge personal liabilities which he had towards it. On 19 August 2013 SICL, by its liquidators, brought proceedings against the appellant in reliance on s127 of the Insolvency Act 1986 (1986 Act). The appellant applied for the proceedings to be stayed on the ground of forum non conveniens. In the course of appeals leading up to the Supreme Court, the ground effectively transmuted into a case that SICL’s claim had no prospect of success because it had no equitable proprietary interest in the relevant shares and, therefore, there was no disposition of the company’s property which was capable of being avoided. At first instance, a stay of the proceedings was granted by the chancellor but, on appeal, was lifted by the Court of Appeal. The appellant appealed.
Held (allowing the appeal)
It was doubtful whether submissions which had focused on the convention on the law applicable to trusts and their recognition (scheduled to the Recognition of Trusts Act 1987) mattered, or even whether SICL’s interests in relation to the relevant shares could properly be described as proprietary, given the more general question whether, whatever the nature of its interest under the trust, there was any disposition of SICL’s property within the meaning of s127 of the 1986 Act. This provision was neither aimed at, nor apt to cover, the present situation. It addressed cases where assets legally owned by a company in a winding up were disposed of and was necessary to enable the company to recover them by treating the disposition as void. Mr Al-Sanea’s disposition of his legal interest in the shares did not involve any disposition of SICL’s property which, whether it consisted of an equitable proprietary interest or personal rights to have the shares held for its benefit, continued unless and until overridden. In this respect, where a legal state is sold to a bona fide purchaser for value without notice, any equitable interest is not transferred to the purchaser; it is overridden or, to put it more colloquially, it is lost or disappears. This is what happened in this case, assuming the appellant was a bona fide purchaser for value of the shares without notice of SICL’s beneficial interest. As Lloyd LJ put it in Independent Trustees Services Ltd v GP Noble Trustees Ltd, a trustee acting in breach of trust cannot vest the beneficial interest in the property in a bona fide purchaser for value without notice since he does not own that title and is not acting in a way which enables him, under the trust, to overreach the beneficiaries’ equitable interest. Nonetheless, the availability of the bona fide purchaser defence means that a transaction in favour of a bona fide purchaser for value without notice is as effective as it would be if he could vest the beneficial interest in the purchaser. The beneficiary who owned the beneficial interest does not by any means lose all its other rights – in particular, it retains all its personal rights against the trustee. Thus, in this case SICL retained its personal rights against Mr Al-Sanea but (assuming the appellant was a bona fide purchaser for value without notice) SICL lost any proprietary rights or interest it had in the relevant shares. In those circumstances, at least on the basis of the meaning which it naturally conveys, s127 of the 1986 Act simply does not apply: ‘a disposition’ normally involves a disponer and a disponee, and so there has simply been no disposition. Although there were arguments for departing from the natural meaning, these were outweighed by the arguments the other way and, consequently, the natural meaning prevailed. Mr Al-Sanea was a bare trustee of the shares and could only transfer the legal title; he could not dispose of SICL’s equitable interest. Only SICL could do that, and it did not do so. Section 127 of the 1986 Act was irrelevant to the disposition of the only interest which mattered for present purposes, namely SICL’s equitable interest in the shares. It followed that the appeal should be allowed, the order made by the Court of Appeal set aside and a declaration made for the purposes of s127 of the 1986 Act that there was no disposition of any rights of SICL in relation to the shares by virtue of their transfer to the appellant.
JUDGMENT 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 …Continue reading "Akers & ors v Samba [2017] UKSC 6"