Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd, Court of Appeal - Chancery Division, February 16, 2017, [2017] WLR(D) 109,[2017] EWHC 257 (Ch)

Issuing Organization:Chancery Division
Actores:Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd
Resolution Date:February 16, 2017
 
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Neutral Citation Number: [2017] EWHC 257 (Ch)

Case No: FL-2016-000015

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

FINANCIAL LIST

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 16/02/2017

Before :

MRS JUSTICE ROSE

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Between :

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ROBERT MILES QC, ANDREW DE MESTRE (instructed by Jenner & Block London LLP) for the Claimant

JOHN McCAUGHRAN QC, ADAM GOODISON, MICHAEL WATKINS (instructed by Ashurst LLP) for the Defendant

Hearing dates: 23 - 25 November, 28 - 30 November, 1 December, 6 - 8 December, 14 - 16 December

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MRS JUSTICE ROSE:

  1. INTRODUCTION

    1. The Claimant (`Singularis') brings this claim to recover about $204 million that in early June 2009 was held for its benefit in a segregated client account by the Defendant stock broker (`Daiwa'). At that time, Singularis was wholly owned by Maan Al Sanea, a wealthy businessman who also owned a substantial business group called the Saad Group based in Saudi Arabia. The money in the client account came from two main sources. About $124 million was surplus collateral that was left over when Daiwa closed down a long standing, secured lending relationship it had with Singularis at the beginning of June 2009. About $80 million had arrived in Singularis' account with Daiwa on 2 June 2009 in circumstances that I shall describe later.

    2. Over the course of a month between mid June and mid July 2009, Daiwa paid out that money on Mr Al Sanea's instructions to bank accounts in the names of three other companies within the Saad Group rather than back to a bank account of Singularis. There are eight disputed payments in all, ranging in size from just over $1 million to one payment of $180 million. The money has now been lost to Singularis.

    3. Singularis was incorporated in the Cayman Islands and is now in the hands of liquidators appointed by order of the Grand Court of the Cayman Islands. The liquidators claim back the money from Daiwa on two bases. The first is that Singularis alleges that the employees of Daiwa who authorised the payments dishonestly assisted Mr Al Sanea's breach of fiduciary duty in removing the money from Singularis for the benefit either of himself or of companies in the Saad Group. The second basis is that Daiwa was in breach of the duty of care owed by a bank to its client by negligently failing to realise that Mr Al Sanea was committing a fraud on the company and misappropriating Singularis' monies when he instructed Daiwa to pay the money to third parties. Singularis rely on the duty owed by the bank to its client as described by the Court of Appeal in Lipkin Gorman (a firm) v Karpnale Limited [1989] 1 WLR 1340 and by Steyn J in Barclays Bank plc v Quincecare Ltd and another [1992] 4 All ER 363.

    4. Daiwa defends the claim on the basis that Singularis has not established that Mr Al Sanea was acting in breach of fiduciary duty when asking for the money to be paid to his other companies. They say that Mr Al Sanea was the sole shareholder of Singularis and entitled to move the money to other companies in his control if he so wished. They say that no one in Daiwa acted dishonestly in their dealings with the payments so the claim for dishonest assistance is not made out. As regards the claim in negligence, they say that there was nothing in the surrounding circumstances to alert Daiwa to the possibility that Mr Al Sanea was acting improperly. They also raise a number of legal defences to the claim, asserting for example that the claim is barred by illegality or that the Quincecare duty does not arise in the circumstances of this case. Some of these legal defences boil down to an assertion that any fraudulent conduct on the part of Mr Al Sanea must be treated as the misconduct of Singularis itself so that Singularis is precluded from bringing this claim against Daiwa, even if Daiwa were negligent. Finally, Daiwa relies on clauses in its standard terms of business which it says are binding on Singularis and which exclude Daiwa's liability except for gross negligence.

  2. THE PARTIES AND WITNESSES AT TRIAL

    (a) Singularis, Mr Al Sanea and the Saad Group

    1. Singularis was incorporated in the Cayman Islands on 3 October 2006 under the name of Saad Investments Finance Company (No. 7) Limited. It changed its name to Singularis Holdings Limited on 21 December 2006. From incorporation until the appointment of the liquidators in September 2009 Singularis' registered office was in the Cayman Islands. The sole shareholder of Singularis as from 30 December 2008 was Mr Al Sanea. Before that date the ultimate beneficiary of the shares in Singularis was the Saad STAR Trust which was a Cayman Island trust settled by Mr Al Sanea. Singularis was set up to manage Mr Al Sanea's personal assets outside the Saad Group. Singularis was not therefore consolidated with the Saad Group companies. There were a number of directors of Singularis in addition to Mr Al Sanea, including Mr Al Sanea's wife Sana Abdulaziz Al Gosaibi, his daughter and four other people. Mr Al Sanea's wife is significant in this narrative because the first problems affecting the Saad Group appear to have arisen from a default by a group of companies owned by the Al Gosaibi family.

    2. Mr Al Sanea is the founder and Chairman of the Saad Group of companies. In 2006 and 2007 Daiwa was provided with a copy of Mr Al Sanea's personal net worth statements, endorsed by PriceWaterhouse Coopers (`PwC') showing him to be a very wealthy man indeed. One Daiwa witness described Mr Al Sanea as an attractive, honest and admirable business person.

    3. A number of companies within the Saad Group play an important role in the events giving rise to this claim:

      a) Saad Financial Services SA (`SFS') based in Geneva provided administrative, investment management and advisory services to Singularis. The main contact point for Daiwa with Singularis was through SFS and in particular with Mr Mike Wetherall who worked for SFS in Geneva. It appears that there was no formal services agreement between Singularis and SFS but that the Board of Singularis resolved in March 2007 that the terms of a service agreement between SFS and SICL should apply as between SFS and Singularis. SFS entered into bankruptcy proceedings on 21 January 2013.

      b) Saad Investment Company Ltd (`SICL') was originally the counterparty for the stock financing arrangement with Daiwa. It was set up by Mr Al Sanea to manage all his non-Saudi investments.

      c) Saad Specialist Hospital Company (`SSHC') is a company registered in Saudi Arabia and is part of the Saad Group. As at 1 January 2009 SSHC was 100 per cent owned by Mr Al Sanea. SSHC was the recipient of most of the money that Singularis is seeking to recover in these proceedings.

      d) Saad Air (A320 No 2) Limited and Saad Air (A340-600) Limited (together referred to as `Saad Air'). These were companies registered in the Cayman Islands which managed the aviation investments of Mr Al Sanea and his family. They were wholly owned subsidiaries of Saad Air Limited of which Mr Al Sanea was the chairman. Saad Air received some of the disputed payments, through its bank account with HSH Nordbank AG (`HSH'). HSH is a German bank with which Saad Air had entered into mortgage arrangements relating to two Airbus aircraft used for travel by Mr Al Sanea and his family. Singularis is not a party to these arrangements.

    4. Singularis called only one witness in support of their claim, Stephen Akers. Mr Akers is a partner of Grant Thornton UK LLP and was appointed together with Hugh Dickson and Mark Byers also of Grant Thornton to be the Joint Officials Liquidators of Singularis. Mr Akers was a straightforward and truthful witness though of course he was not able to give evidence about the events from which these claims arise.

      (b) Daiwa

    5. Daiwa Capital Markets Europe Ltd (`Daiwa') is the London based subsidiary of the Japanese investment bank and brokerage company Daiwa Securities SMBC Co Ltd headquartered in Tokyo (`Daiwa Tokyo'). In May 208 Daiwa was principally an equity and bond brokerage business, specialising in the sale of Asian stocks to European investors, facilitating European issuers of notes to sell those notes in the Japanese market through Daiwa and more general bond and equities brokerage and repo activity. One important point to note is that it was not a licensed deposit taker and so could not operate ordinary bank accounts for its clients.

    6. One of the Daiwa witnesses, Mr Blanchard, noted in his witness statement some of the differences between the culture in a Japanese company compared with that in a `Western' organisation. He described a certain lack of sophistication and a tendency to treat counterparties with the utmost respect. It was not suggested, however, that some different legal test applied to Daiwa from that which would apply to any company doing business in London or that their conduct should be judged by a standard different from the standard set out in the relevant case law.

    7. Daiwa called eight witnesses. Some of them were able to give evidence primarily about the events leading up to the ending of the relationship between Daiwa and Singularis and some gave evidence about the making of the disputed payments:

      a) Dominique Blanchard was Global Head of Derivatives at Daiwa between May 2008 and December 2012. He had been brought into Daiwa in London to help with the launch of a new area of business for Daiwa in selling derivatives. He now works for an Australasian banking group.

      b) Charles Day was recruited to Daiwa by Mr Blanchard and occupied the post of Global Head of Equity Finance between October 2008 and November 2010. He then became European Head of Derivatives. Mr Day had previously worked at Lehman Brothers International Europe from 2007 until the insolvency of Lehman Brothers in September 2008. He reported to Mr Blanchard.

      c) Akihiko Sakashita was Vice Chairman and Deputy Head of Europe and Middle East,...

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