“41.1 In the context of what Samba actually knew, a reasonable bank in its position would have appreciated that (alternatively would or ought to have made inquiries or sought advice which would have revealed the probability that): 41.1.1 The Relevant Securities (and therefore the Disputed Securities) were held by Mr Al-Sanea on trust for SICL; and 41.1.2 The September Transfer was a breach of trust; and/or 41.1.3 In the light of what Samba actually knew, Samba recklessly failed to make such inquiries about the September Transfer, the Relevant Securities and the Disputed Securities as an honest and reasonable bank would make: had Samba made such inquiries, it would have learned that Mr Al-Sanea held the Relevant Securities (and therefore the Disputed Securities) on trust for SICL.” 41.1.1 The Relevant Securities (and therefore the Disputed Securities) were held by Mr Al-Sanea on trust for SICL; and 41.1.2 The September Transfer was a breach of trust; and/or 41.1.3 In the light of what Samba actually knew, Samba recklessly failed to make such inquiries about the September Transfer, the Relevant Securities and the Disputed Securities as an honest and reasonable bank would make: had Samba made such inquiries, it would have learned that Mr Al-Sanea held the Relevant Securities (and therefore the Disputed Securities) on trust for SICL.”
“… upon its receipt of the Disputed Securities: 43.1 an equity arose and remains between SICL and Samba in relation to the Disputed Securities; and 43.2 Samba became accountable to SICL as a constructive trustee of the Disputed Securities, and remains so.”
“Even if (contrary to Samba’s case) the claim against Samba is governed by English (or Cayman Islands) law: 61.1 The cause of action in unconscionable receipt requires the claimant to have retained a proprietary interest in the assets received by the defendant. 61.2 As set out in paragraphs 53 to 56 above, under Saudi Arabian law, which as the lex situs governed the proprietary effects of the September Transfer, any proprietary interest that SICL may have held in the Disputed Securities was extinguished. 61.3 This provides a complete defence to the claim. ” 61.1 The cause of action in unconscionable receipt requires the claimant to have retained a proprietary interest in the assets received by the defendant. 61.2 As set out in paragraphs 53 to 56 above, under Saudi Arabian law, which as the lex situs governed the proprietary effects of the September Transfer, any proprietary interest that SICL may have held in the Disputed Securities was extinguished. 61.3 This provides a complete defence to the claim. ”
“A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another. In the first class of case, however, the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his own uses a breach of that trust… In these cases the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property. The second class of case is different. It arises when the defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be ‘liable to account as constructive trustee’. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were. He never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the plaintiff by an unlawful transaction which is impugned by the plaintiff. In such a case the expressions ‘constructive trust' and ‘constructive trustee’ are misleading, for there is no trust and usually no possibility of a proprietary remedy; they are ‘nothing more than a formula for equitable relief’: Selangor United Rubber Estates Ltd v Cradock (No.3)[1968] 2 All ER 1073 at 1097,[1968] 1 WLR 1555 at 1582 per Ungoed Thomas J.”
“The plaintiff seeks a personal remedy based on “knowing receipt”
“For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.”
“[31] The essence of a liability to account on the footing of knowing receipt is that the defendant has accepted trust assets knowing that they were transferred to him in breach of trust and that he had no right to receive them. His possession is therefore at all times wrongful and adverse to the rights of both the true trustees and the beneficiaries. No trust has been reposed in him. He does not have the powers or duties of a trustee, for example with regard to investment or management. His sole obligation of any practical significance is to restore the assets immediately. It is true that he may be accountable for any profit that would have been made or any loss that would have been avoided if the assets had remained in the hands of the true trustees and been dealt with according to the trust. There may also, in some circumstances, be a proprietary claim. But all this is simply the measure of the remedy. It does not make him a trustee or bring him within the provisions of theLimitation Act 1980 relating to trustees.”
“There is at the outset a fundamental disagreement between the parties as to the proper characterisation of the dispute for the purposes of English conflict of laws. The defendants insist that the question at issue is concerned with the priority of competing interests in a chose in action. Macmillan insists that its claim lies in restitution and, being brought by an equitable owner, must be decided in accordance with equitable principles. Even its claim to the return of the Berlitz shares or their proceeds in specie, it submits, which can loosely be described as proprietary, was in truth no more than an invocation of the power of a court of equity, acting in personam as a court of conscience, to require the defendants to take whatever steps were necessary to restore the shares to Macmillan’s ownership. Accordingly, Macmillan submits, even if the question of priorities falls to be decided under New York law, this would at best result in a conflict between the English choice of law rules governing priorities and those governing restitutionary claims which would still need to be resolved. In order to resolve that conflict, Macmillan submits, it is first necessary to identify the purpose for which it is sought to characterise its claim. In the present case that purpose is to determine whether the defendants or any of them is under any obligation to Macmillan to restore the relevant Berlitz shares or their proceeds. Such a claim is properly regarded as a restitutionary claim, and the liability of the defendants to satisfy the claim as a restitutionary obligation. In my judgment that argument is circular. It is manifestly correct to characterise Macmillan’s claim as lying in restitution, but that is only the first step in the analysis. In order to ascertain the applicable law under English conflict of laws, it is not sufficient to characterise the nature of the claim: it is necessary to identify the question at issue. The English law of restitution makes a fundamental distinction between the unjust enrichment of the defendant which is occasioned by depriving the plaintiff of his property and enrichment which results from a wrong done to the plaintiff by the defendant. In the first category of case the plaintiff’s restitutionary claim is said to have a proprietary base. The enrichment of the defendant is at the direct expense of the plaintiff and is matched by a corresponding diminution of his assets. The plaintiff brings the claim in order to recover his own property and must succeed, if at all, by virtue of his own title. In the latter class of case his claim arises from a breach of fiduciary or other obligation on the part of the defendant. The distinction is that drawn by equity between the claim of an equitable owner to recover his property, or compensation for the failure to restore it, from a person into whose hands it has come and a claim by a plaintiff in respect of a breach of fiduciary obligation owed to him. In the former case he relies upon his continuing equitable interest in the property under an express or resulting trust; in the latter upon an equity between the parties which may in appropriate circumstances give rise to a constructive trust. The distinction, which is crucial, may have been lost sight of in the language of some of the more recent decisions on knowing receipt. Macmillan’s claim is of the former kind. In respect of the Berlitz shares there was no relationship of any kind between Macmillan and any of the defendants. There is no equity between them. In the absence of such an equity, any liability of the defendants to restore the shares or their proceeds to Macmillan or to pay compensation for their failure to do so must be based upon Macmillan’s continuing equitable ownership of the shares. In the language of restitution, Macmillan’s claim must rest upon “an undestroyed proprietary base”
“The difference between the two cases is that in the second there is no equity or privity between the parties which the court can enforce except such equity, if any, as may arise from the transferee’s notice; while the sufficiency of such notice to affect the transferee’s title is a matter for the lex situs. If, by that law, the transfer to the defendant extinguished the plaintiff’s interest notwithstanding the defendant’s notice, the plaintiff no longer has any proprietary interest upon which he can base his suit in England. The common law position is the same: see Cammell v Sewell (1860) 5 H.& N. 728.”
“It is clear that Macmillan’s claims in the present case are to some extent proprietary. Mr Oliver asserts that they are receipt based. But he needs to do more than show that the defendants received the shares; he must also plead, in effect, that they are Macmillan’s shares; and the statement of claim does indeed say that. Millett J. described this requirement as “an undestroyed proprietary base”…. I am prepared to accept that Macmillan’s claim is restitutionary in nature; and I would accept without deciding that rule 201 of Dicey & Morris, 12th ed. determines what system of law governs such a claim. But the issue is not, or not any longer, whether Macmillan have a cause of action for restitution; it is whether the defendants have a defence on the ground that they were purchasers for value in good faith without notice of Macmillan’s claim.”
“In my view, the Judge correctly identified the transaction for this purpose via his identification of the issue. The authorities relied on by Mr Oliver were all cases where there was privity of contract or some fiduciary relationship between the parties stemming from more than mere receipt of property with notice of another’s claim to an interest in it. That is not so here. The negotiations and agreements in England proceeding the transfer were not with Macmillan; there was no privity of contract between the parties and, apart from the claimed equity which Macmillan relies upon to support its “receipt-based restitutionary claim”, no equitable or other fiduciary relationship between them.”
“Macmillan submitted that their claim was in essence a claim for the performance of an obligation by the defendants to restore their property or the proceeds or the value of the property. That, it was said, was a claim in equity for restitution. That is true, but to succeed it involves establishing a number of facts, including that they owned the shares and that they were transferred to the defendants in breach of trust. The reply of the defendants is that the shares are registered in their names and they were bona fide purchasers for value without notice. The issue between the parties concerns the title to the shares and, in particular, whether Macmillan or the defendants have the better title. The issue is one of priority. I agree with the judge…”
“As was pointed out by Millett LJ when sitting at first instance in Macmillan Inc v Bishopsgate Trust (No 3)[1995] 1 WLR 978 at page 989 (commenting on Norris v Chambres (1891) 29 Beavan, 246, affirmed 3 De Gex Fisher and Jones 583), where a plaintiff invokes the in personam jurisdiction of the English court against a defendant amenable to the jurisdiction and there is an equity between the parties which the court can enforce, the English court will accept jurisdiction and apply English law as the applicable law, even though the suit relates to foreign land. In contrast if the equity which is asserted does not exist between the parties to the English litigation, for example where there has been a transfer of the property to a third party with notice of an equity but by the lex situs governing the transfer, the transfer extinguished the plaintiff’s equity, the English court could not then give relief against the third party even though he is within the jurisdiction.”
“Although the claims to personal and proprietary relief are separate, the appellant in the present case seeks to defeat them both by the same argument resting on the provisions of the RLO which, he asserts, have the effect that the appellant never received any trust property since any trust was eliminated at the moment of registration. The respondent has not sought to argue that, even if the proprietary claim is barred by the provisions of the RLO, the personal claim can nevertheless be advanced. Both sides appear to have proceeded on the assumption that knowing receipt claims, even though for personal relief, are properly viewed as a vindication of pre-existing property rights and are parasitic on those property rights and so are inappropriate against a purchaser who takes free from the prior trust interests by virtue of the Torrens system in question: see “Knowing Receipt and Registered Land” by Matthew Conaglen and Amy Goymour in Constructive and Resulting Trusts (op cit).”
“The expression ‘any duty or obligation to which he is subject as trustee’ is quite general and refers to the personal obligations of the registered proprietor as trustee whether or not the transferee is registered as trustee and even though beneficial interests under a trust are excluded from the register. The constructive trust for knowing receipt is imposed as a matter of law at the moment of receipt. On the appellant’s case, the Property was received at the moment of his registration as proprietor. At that moment, all the essential requirements summarised by Hoffmann LJ in El Ajou were satisfied: there was a disposal of property in breach of fiduciary duty; the property was traceable as representing the property of the Crown; and the appellant had the requisite knowledge.”
“The initial inquiry is therefore whether an equity subsists, which it will prima facie do at common law, so long as the relevant property (original or substitute) does not pass into the hands of a transferee for value of the legal interest without notice of the equity. But a further issue may arise under the law of the situs of the relevant property.”
“It is established by Court of Appeal authority (and was not challenged on this appeal) that, where under the lex situs of the relevant trust property the effect of a transfer of the property by the trustees to a third party is to override any equitable interest which would otherwise subsist, that effect should be recognised as giving the transferee a defence to any claim by the beneficiary, whether proprietary or simply restitutionary: Macmillan Inc v Bishopsgate Investment Trust plc (No 3)[1996] 1 WLR 387 .”
“The issue before the court in the light of the expanded submissions which it has received is whether SICL has any basis for alleging that there was a disposition of property within the meaning of section 127. Viewing the matter in the light of the common law principles set out in paras 21-34 above, I would regard the present trusts not only as intended to create, but also as creating equitable proprietary interests in the Saudi Arabian shares, enforceable at common law at least as between SICL and Mr Al-Sanea and anyone else other than a transferee from Mr AlSanea in circumstances giving the transferee a good title under Saudi Arabian law. But, in the context of the present issues under section 127, there is to my mind a considerable case to be made for saying that it cannot matter. The definition of “property” in section 436 is wide enough to embrace both equitable proprietary and purely personal interests.”
“Where an asset is held on trust, the legal title remains capable of transfer to a third party, although this undoubted disposition may be in breach of trust. But the trust rights, including the right to have the legal title held and applied in accordance with the terms of the trust, remain. They are not disposed of. They continue to be capable of enforcement unless and until the disposition of the legal title has the effect under the lex situs of the trust asset of overriding the protected trust rights. If the trust rights are overridden, it is not because they have been disposed of by virtue of the transfer of the legal title. It is because they were protected rights that were always limited and in certain circumstances capable of being overridden by virtue of a rule of law governing equitable rights, protecting in particular (under common law) bona fide third party purchasers for value…”
“SICL’s problem is not that it lacked a beneficial interest in the shares but that Mr Al-Sanea did not dispose of that interest by transferring the shares to Samba. Mr Al-Sanea purported to transfer the legal interest to Samba. That was the only interest that he had. He did not purport to dispose of SICL’s interest. Only SICL could do that, and it did not do so. The disposition of the legal interest did not itself extinguish any equitable interest of SICL in the shares. It only meant that that interest fell to be asserted against Samba, subject to the usual equitable defences. Samba’s position in law was that it took the shares on a bare trust to restore them to the beneficial owner, unless it was a bona fide purchaser for value without notice. Since Samba gave value in the form of the discharge of Mr Al-Sanea’s debt, its liability to restore the shares must depend on whether they are accountable on the basis of notice. Section 127 is irrelevant to the disposition of the only interest which matters for present purposes, namely SICL’s equitable interest in the shares. It is arguable, as Lord Neuberger of Abbotsbury PSC observes, that the transfer of the legal interest in movables may constitute a “disposition” of an equitable interest if its effect is that the equitable interest is extinguished. But the difficulty about the argument, and the reason why I would reject it, is that equitable interests arise from equity’s recognition that in some circumstances the conscience of the holder of the legal interest may be affected. When the asset is transferred to a third party, the question becomes whether the conscience of the transferee is affected. On the facts pleaded in the present case, the equitable interest of SICL was defeated not by the act of the transferor (Mr Al-Sanea) but by absence of anything affecting the conscience of the transferee (Samba). The rules of equity which protect transferees acquiring in good faith and without notice are among the fundamental conditions on which equitable interests can exist without injustice.”
“59. The foundation of the claim in knowing receipt seems to me quite different. It is that a person has got their hands on property which belongs to somebody else, in this case [SFPL]. If that is the analysis -- and I read a short passage from Lord Sumption’s judgment in Williams [ie Williams v Central Bank of Nigeria[2014] UKSC 10 ] at [31] “the essence of a liability to account on the footing of knowing receipt is that the defendant has accepted trust assets knowing that they were transferred to him in breach of trust and that he had no right to receive them… His sole obligation of any practical significance is to restore the assets immediately.” which suggests, when dealing with a limitation point, but that that was the analysis that he adopted, because he said that the obligation of the recipient was to restore the assets immediately -- the foundation of that is that the assets do not belong in equity to the recipient; and the foundation of the fact that the assets do not belong to the recipient in equity is that the transfer by which the assets were transferred is a flawed transfer. It may be a voidable transfer, it may indeed, for example if a company’s assets are disposed of in a way that is ultra vires, be an entirely void transfer. But what gives the equity to the claimants is not the knowledge of the defendants by itself, or antecedent breaches of duty, but the fact that the transaction which is impugned is not one which transfers a good title to the recipient. It is in those circumstances that the recipient, unless a bona fide purchaser for value without notice, is liable, if he still has the property, to give it back, and can be made liable to account as constructive trustee, whether he still has the property or not, if he received it in circumstances that make his receipt unconscionable.”
“A breach of trust is usually essential because it is the basis on which the beneficial title is retained by the beneficiaries and does not pass to the recipient. If the beneficial title does pass to the recipient there is no occasion for the imposition of liability in equity on the recipient under the knowing receipt head of constructive trusteeship.”
“That case was concerned with tracing, not title. It was not disputed that the defendant received the money from the fraudsters - it had remained in their ownership or under their control throughout - and that they could not extinguish their victim’s beneficial interest in the money of which they had defrauded him. The question was whether the money which the defendant received could be identified with the proceeds of the fraud, whether it represented other property of the fraudsters not derived from the fraud. The present is the converse case. It is concerned with title, not tracing. There is no doubt that the Berlitz shares in which the defendants claim security interests are the selfsame shares in which Macmillan’s beneficial interest formerly subsisted. That is not in dispute. The question is whether any of the defendants has acquired an interest in the shares which is superior to that of Macmillan.”
“Applying that to the present case, I say it would be most unconscionable to allow the defendants here, who have registered their assignment in Mexico subject to the obligations created in favour of the Plaintiffs, who have obtained the land at a consideration measured to some extent by the existence of those obligations and the taking by the English Company upon themselves of the burden of satisfying those obligations; in my opinion it would be as unconscionable as anything could be to say that now, because they had registered their transfer before the hypothecation to the Plaintiffs had been registered, they are at liberty to set the Plaintiffs at defiance altogether. It was said that the case I have cited went upon fraud. Such a fraud as there was in that case would equally exist in the present case if the English Company were attempting to do what their counsel claims for them a right to do.”
“It is said, what if the sale [of the foreign land] had been to a third person? I am glad I have not to determine that.”
“First, in following and approving in this respect the two decisions in Assets Co. Ltd. v Mere Roihi and Boyd v Mayor, Etc., of Wellington, their Lordships have accepted the general principle that registration under the Land Transfer Act, 1952, confers upon a registered proprietor a title to the interest in respect of which he is registered which is (under sections 62 and 63) immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant. That this is so has frequently, and rightly, been recognised in the courts of New Zealand and of Australia: see, for example, Boyd v Mayor, Etc., of Wellington and Tataurangi Tairuakena v Mua Carr. Their Lordships refer to these cases by way of illustration only without intending to limit or define the various situations in which actions of a personal character against registered proprietors may be admitted. The principle must always remain paramount that those actions which fall within the prohibition of section 62 and 63 may not be maintained.”
“Then it is contended that a registered owner may hold as trustee and be compelled to execute the trusts subject to which he holds. This is true; for although trusts are kept off the register, a registered owner may not be beneficially entitled to the lands registered in his name. But if the alleged cestui que trust is a rival claimant, who can prove no trust apart from his own alleged ownership, it is plain that to treat him as a cestui que trust is to destroy all benefit from registration. Here the plaintiffs set up an adverse title and nothing else; and to hold in their favour that there is any resulting or other trust entitling them to the property is, in their Lordships’ opinion, to do the very thing which registration is designed to prevent.”
“(1) Subject to subsection (2), a person’s right to exercise owner’s powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition. (2) Subsection (1) does not apply to a limitation – (a) reflected by an entry in the register, or (b) imposed by, or under, this Act. (3) This section has effect only for the purpose of preventing the title of a disponee being questioned (and so does not affect the lawfulness of a disposition).”
“(1) If A transfers trust property to B in breach of trust and B knows or (perhaps) has notice of this, B is liable as constructive trustee for “knowing receipt” of trust property. Liability is personal and not proprietary and the obligation is to make restitution for the loss suffered by the trust. It has been assumed that this form of liability may apply where the trust property transferred is registered land and the rights of the beneficiaries have not been protected, so that as a matter of property law, the transferee takes the land free of the trust. ”
“… where the disposition is in fact unlawful, the consequences of that unlawfulness can be pursued so long as these do not call into question the validity of the disponee’s title. The example may be given of trustees of land, A and B, who had limited powers of disposition, but who failed to enter a restriction on the register to reflect this fact. If they transfer the land to a buyer, C, in circumstances that were prohibited by the trust, they would commit a breach of trust. Furthermore, although C’s title could not be impeached, the protection given by Clause 26 does not extend to any independent forms of liability to which she might be subject. Thus if C knew of the trustees’ breach of trust when the transfer was made, she might be personally accountable in equity for the knowing receipt of trust property transferred in breach of trust.”
“… the disponee’s title cannot be questioned if it transpires that [the disponor] did not have power to make the particular disposition. This protection is limited to that purpose and does not affect the lawfulness of the disposition. This means that if, for example, trustees sold land without obtaining the consent of a beneficiary, which was required under the trust, where there was no restriction in the register to indicate the need for consent, the purchaser’s title could not be challenged. The trustees would still have committed a breach of trust and would be liable for that breach. It is possible that, although the disponee’s title could not be challenged, the disponee might be personally implicated in the breach of trust and be accountable in equity for the knowing receipt of property transferred in breach of trust.”
“If the requisite degree of knowledge on the part of Mr Khan is established, his liability as a constructive trustee arises as a matter of law and attaches to the Property while it remains in his ownership. It is a liability which affects his conscience directly, and is not dependent upon the survival of the claimant’s original beneficial interest as one which binds the Property in his hands. This way of putting the claim is therefore unaffected by the technicalities of overreaching and land registration, as Ms Williamson rightly accepted.”
“… knowing receipt should be inapplicable against a registered purchaser who can claim the benefit of section 29. In general terms, outside the context of registered land, the knowing receipt claim is parasitic on the proprietary nature of the beneficiaries’ equitable interests in the trust property: it is a claim to vindicate those property rights once they are no longer able to be vindicated in specie. The purpose served by such claims runs directly counter to the purpose of section 29, which is to protect purchasers from the effect of pre-existing interests irrespective of whether the purchaser has notice of those interests.”
“Dishonest receipt gives rise to concurrent liability, since the claim can be based on the defendant’s dishonesty, treating the receipt itself as incidental, being merely the particular form taken by the defendant’s participation in the breach of fiduciary duty; but it can also be based simply on the receipt, treating it as a restitutionary claim independent of any wrongdoing: see John v Dodwell & Co Ltd [1918] A.C. 563.”
“As a matter of Saudi Arabian law the September Transfer had no effect on SICL’s purported rights in the Relevant Securities, because SICL never had any rights in the Relevant Securities”
“Nominal shares are transferred by registration in the shareholders register, prepared by the company, and containing the names, nationalities, domiciles and occupations of the shareholders, the serial numbers of shares and the part paid on account of the share. Said registration shall be endorsed on the share. The assignment of a registered share shall, in regard to the company and third parties, be reckoned the date of being entered in the said register. Bearer shares shall be negotiated by mere delivery.”
“Securities listed on the Exchange shall be traded through transactions among brokers, each on behalf of its client, and shall be evidenced by entries in the Exchange records, in accordance with the provisions of Chapter Four of this Law, unless such transactions are excluded from trading pursuant to the rules and instructions issued by the Authority.”
“a. The registration of ownership of Securities traded on the Exchange and the settlement and clearance of Securities shall be made by entries in the Depository Centre’s records. Ownership of securities traded on the Exchange must be registered with the Depository Centre in order to be protected against third-party claims. The Depository Centre’s records will also report pledges or other claims related to the Securities traded on the Exchange. b. The Depository Centre shall be the sole entity to register all property rights in Securities traded on the Exchange. The final mentions reported in the records of the Depository Centre shall serve as conclusive evidence and proof of ownership of the Securities indicated therein together with the encumbrances and rights associated therewith, subject to the provisions of paragraph (d) of this Article. c. Registration of ownership of Securities shall be effective from the time of final verification by the Depository Centre of the authenticity of the ownership documents. The Depository Centre shall promptly register all transactions effected upon being reported to and received by the Depository Centre with no delay. If the Depository Centre has reason to doubt actual or legal facts or consequences related to the registration of ownership or if the Depository Centre receives any notice that registration will cause damages to third parties, the Depository Centre may make a preliminary registration and, if it does so, it shall immediately commence an appropriate process to decide how the final registration for such Security shall be effected. d. A person who believes that there is an error in the information entered into the registry so that the registry needs to be corrected or otherwise amended should make a written request to the manager of the Depository Centre or the person appointed by the manager to receive such requests. The Depository Centre shall correct or amend the registry after confirming the validity of the comments and information that are requested to be corrected or amended in the registry. Such correction or amendment can only be effected after notice and opportunity to comment by the personal persons the registry identifies as owning the Security, and giving them a reasonable opportunity to comment on the required correction or amendment. e. The Depository Centre shall issue a certificate of registration upon request by the investor…. f. Complaints about decisions with respect to the registration of Securities listed on the Exchange shall be brought before the Committee.”
“ ‘Characterising’ the Six Transactions into categories familiar to him in Saudi Arabian law, a Saudi Arabian judge therefore has several routes open to him. In the presence of these instruments, the judge will not accept that the Six Transactions had no effect whatsoever and rule as if they simply did not exist. Nor will he tolerate a harm done to a party without providing a remedy. The judge would consider that SICL had sufficient interests concerning the Disputed Securities, such that he would permit it to bring a claim in respect of them.”
“I disagree with the following statement set out in Paragraph 24.1 of the Particulars of Claim: ‘The law of Saudi Arabia does not recognise the concept of trusts’”
“Saudi Arabian law does not recognize the concept of a trust within the meaning of the term underArticle 2 of the Convention on the Law Applicable to Trusts and on their Recognition dated1st July 1985 …”
“… he [the judge] will look at the contracts [the Six Transactions], he will look at the intent of the parties and he will say there is an interest there. He will recognise that this sort of interest can be a mahassa, a bailment or a waqf without ascribing – and it may be justified of my opacity in this [sic] because the judge will not worry about this. He will look at the contracts and will want to give them effects to see whether SICL has a right somewhere hidden there and if it is the right, what nature is this right. And if this right has been taken away from it unlawfully then it has to be remedied.”
“[In case of] receipt of money belonging to a third party from the party in possession of that money without authorization from the owner, if he [the party in possession] was allowed to pass it on, the money shall be deemed to be in trust [amaana] with the latter [the third party] if the former [the possessor] is a trustee [amin]; otherwise the money shall not be deemed so [in trust]. If he [the possessor] cannot pass on the money, liability shall fall on both [the possessor and the third party]. Another possibility in law is that liability falls on the former alone.”
“If the seizor deposits the misappropriated (object), or mandated a person in selling it, and delivers it to him and the object perishes, the owner can ask for compensation from either one he chooses; the seizor because he interfered between the owner and his property, and he has proven the misappropriating hand on the object seized, and the depositee or the agent proven in possession of the misappropriated object without right (unlawfully, bi-ghayr haqq). If the owner requests compensation from the seizor, and they (the depositee and/or the agent) did not know of the misappropriation, compensation is on the seizor, and he [the owner] cannot turn for compensation to anyone else. And if the owner makes them (the depositee and/or the agent) pay for compensation, they can turn to the seizor for the value or rent which they had to compensate, because they entered (into the transaction) with the understanding that they are not liable in any of this; but if they knew that the object was misappropriated, compensation is on them [alone]”
“Based on several reported decisions of the CRSD, it is clear that the CRSD will not accept disputes over shares unless the disputed transactions were conducted in accordance with the applicable rules of the Capital Market Regulation and delegated legislation issued thereunder.”
“I do not agree with Professor Mallat’s statements that SICL is or would have been entitled to call for the Disputed Securities to be registered in the name of its nominee in place of Mr Al-Sanea, or later SAMBA. Article 27(b) of the Capital Market Regulation … States, among other things: “The final mentions reported in the records of the Depository Centre shall serve as conclusive evidence and proof of ownership of the Securities indicated therein together with the encumbrances and rights associated therewith, subject to the provisions of paragraph (d) of this Article.”
“Tadawul is not concerned with the sale contracts executed outside the Exchange or proving their validity. Instead, it is concerned with proving the ownership of transactions executed in the Exchange, settled and have their prices cleared under the controls is registered in the records of Tadawul Center of Securities Deposition in consistence is with Article (27) of the Capital Market Law.”
“Whereas CRSD found that the claimant had not fulfilled the procedures required for transferring the ownership of the shares under consideration according to the said Article, CRSD can not oblige Tadawul Trading Company to transfer the ownership of shares prior to the fulfilment of such procedures. Hence, CRSD decided claimant’s ineligibility for what he claims the respondent for.” [sic] In view of this decision, and the other cases referred to in paragraph 46, below, there is no possibility that the Six Transactions could have been used as the basis of an application to force Tadawul to change the ownership records of the Relevant Securities.”
“Q. … the CRSD would only exercise jurisdiction over transactions which had been conducted within the confines of the Capital Markets Law; in other words, transactions that had been – A. Yes, you are right. Q. .. on exchange. A. Sorry, I misunderstood you. I thought that it was had an exclusive right to adjudicate such disputes. No, it is true, it can only look at shares that are listed. Q. It is not just that it can only look at shares that are listed, if it is being asked to look into transactions in the shares, it has to be satisfied that the transactions have taken place on the exchange through authorised persons. That is right, is it not? A. Yes. Q. We probably do not need to go through them, but there are a number of cases, quite a large number of cases, that Mr Haberbeck refers to that support precisely that proposition. That is right, is it not? A. If I am following you correctly, yes it is right.”
“Q. I think where we are is this, that a judge would not understand, you say, anything about the word “proprietary” and “proprietary interests” and so on. He would regard Samba’s legal ownership of the shares as unaffected by any suggested proprietary claim because Saudi law does not recognise any proprietary claim or interest other than sole legal title. A. I think I dispute the process in which the judge will approach this. You are really in this format putting in his language a matter that he will not be comfortable with, he will not be able to relate to because he does not have the same, as I understand it, sharp division between proprietary rights under… Q. He will not recognise any interest other than legal title. I think I can put it even simpler than this. A. Yes. Q. Your position is that the Saudi court would award compensation to SICL against Samba because SICL has been deprived of its interest in the shares? A. Excellent, yes. I would subscribe to that. Q. And what that would involve would be the Saudi court acknowledging, well Samba has the shares now, it has legal title to the shares, and there is no interest here that can upset that legal property but because they have been, you would say, taken in dishonest or other circumstances by virtue of Mr Al-Sanea’s dishonesty - and Samba knew that the shares were being held on trust - the court would award compensation for the loss of that interest? That is your case, is it not? That is your argument? A. I think it is close enough, yes. I would quibble, but for the purpose of clarity, I think we have the useful shared territory for his Lordship. …… Q. So we are left in a position that your evidence is, and we see it in your reports, that SICL would have a claim for compensation but could not upset the transfer of the title as such to Samba? A. I think it would yes, but it would be immaterial. The harm would be at the bottom of it. The court will try to understand how the deprivation of that interest would need to be fully remedied. Q. But it is a deprivation by virtue of the transfer of legal title to Samba. That is what we have here. A. Yes. Q. By that means, whatever property interest, other interest, SICL previously had has been lost to it? A. No, I mean, SICL has benefits arising from the contracts and there were various types of contracts.”
“Q. …transparency and efficiency requires that someone who buys listed shares in Saudi Arabia knows that he is getting security of title, does he not? A. Yes. Q. He has to be sure that what he is buying he is getting what he is buying? A. That is right. Q. And unless other adverse interests are registered he is always going to be entitled to assume that he is getting a completely secure title? A. Yes, a title in any context, whether it is ownership of a share or an ownership of a piece of land requires stability, transparency and security, yes. Q. We will look at Article 27 in due course, but what Article 27 is designed to ensure is that all registrable interests, including claims of the incumbrances, appear on the register so that the acquirer, the transferee of the shares knows exactly what he is getting? A. Yes, of course. Q. And he takes free, to use that expression, of any interests that do not appear on the register. That is Saudi law. That is registration everywhere? A. That is right. Yes, it is true.”
“…the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
“There can to my mind be no doubt that a trustee who has himself defrauded his beneficiaries by taking trust moneys for his own purposes is liable to restore the moneys he has taken without regard to any fiscal liabilities that might have fallen on the trust fund if he had not misappropriated the funds. If as a result of the decision of the Estate Duty Office not to charge estate duty on the restored fund there is a windfall, the windfall cannot be allowed to benefit the defaulting trustee. Equally, if a trustee has sold an investment in order to misappropriate the proceeds, he must restore the investment or if it is shown or admitted that the investment would have been sold at a later date (as in the case of Churchill Farm) restore its value at that later date.”
“… the value of an asset to a particular owner or prospective owner for individual investment or operational objectives. Investment Value is an entity specific basis of value. Although the value of an asset to the owner may be the same as the amount that could be realised from its sale to another party, this basis of value reflects the benefits received by an entity from holding the asset and, therefore, does not involve a presumed exchange. Investment Value reflects the circumstances and financial objectives of the entity for which the valuation is being produced. It is often used for measuring investment performance.”
“It is critical that the basis (or bases) of value be appropriate to the terms and purpose of the valuation assignment, as a basis of value may influence or dictate a valuer’s selection of methods, inputs and assumptions, and the ultimate opinion of value. (10.1) “Valuers must choose the relevant basis (or bases) of value according to the terms and purpose of the valuation assignment. The valuer’s choice of a basis (or bases) of value should consider instructions and input received from the client and/or its representatives. However, regardless of instructions and input provided to the valuer, the valuer should not use a basis (or bases) of value that is inappropriate for the intended purpose of the valuation… (20.2)”
“…the amount that would be realised when an asset or group of assets are sold on a piecemeal basis. Liquidation Value should take into account the costs of getting the assets into saleable condition as well as those of the disposal activity”
“Another method of estimating a blockage discount suggests that there are two separate and distinct cost components of blockage that should be measured. The first cost component is price pressure. This can be defined as the impact on stock price when a large block of stock depresses the market and lowers the price that can be obtained for the stock. The second cost component is market exposure. This is the cost associated with bearing the risk of holding a position in the marketplace without the ability to close the position, for a specified period of time. The appropriate blockage discount is that combination of price pressure and market exposure that produces the least cost to the seller of the block. Using this approach appears to satisfy both requirements of the tax regulations: (1) that the taxpayer show that the length of time is reasonable, and (2) that the sale of smaller blocks of stock would depress the sales price. In estimating price pressure, the factors listed earlier should be taken into consideration. The valuation analyst should analyze the daily price volatility in relation to trading volume over at least a three- to six-month period (longer if deemed appropriate) in order to identify the amount of additional price movement that is created by the trading of the additional shares. From this analysis, the amount of the excess volatility or negative pricing pressure created by selling the shares is estimated. Market exposure is estimated by calculating the cost of buying a put option on the subject company shares (1) at a strike price equal to the traded sales price at the valuation date…, (2) exercisable in the number of days determined under the different trading period scenarios, (3) based on the results of the analyst’s due diligence. The cost of the put option is determined under a conventional option model (e.g., the BlackScholes option pricing model). Such a model takes into consideration the five variables of stock price, exercise price, risk-free rate, time to expiration, and volatility (all on an annualized basis).”