Key Facts
- •Saad Investments Co Ltd (SICL) and its liquidators appealed a decision dismissing their knowing receipt claim against Saudi National Bank (SNB), successor to Samba Financial Group (Samba).
- •Mr. Al-Sanea, holding shares (Disputed Securities) in trust for SICL, transferred them to Samba to settle debts, breaching the trust.
- •Samba knew of the breach at the time of the transfer.
- •Under Saudi Arabian law (the governing law), the transfer extinguished SICL's proprietary interest in the securities.
- •The central issue was whether a continuing equitable interest is required for a knowing receipt claim when the claimant's interest has been extinguished by the transfer.
Legal Principles
Transfer of trust property to a bona fide purchaser for value without notice extinguishes the beneficiary's equitable interest, even if in breach of trust.
Established case law; Lord Briggs paras 18 & 20, Lord Burrows para 156
A knowing receipt claim is closely linked to a proprietary claim and requires a continuing equitable interest in the property at the time of receipt.
Lord Briggs' and Lord Burrows' reasoning; Lord Briggs paras 41-42, 46, Lord Burrows paras 145-149
Extinction or overriding of a proprietary equitable interest defeats both proprietary and knowing receipt claims.
Lord Briggs para 44, Lord Burrows paras 158-159, 172 & 201
Knowing receipt is an equitable proprietary wrong, not merely ancillary to the trustee's liability.
Lord Burrows' analysis; Lord Burrows paras 145-152
The knowledge requirement for knowing receipt is not solely based on unconscionability but also involves a continuing equitable interest.
Lord Briggs paras 34-40; Lord Burrows paras 101, 154
Outcomes
Appeal dismissed.
The claimant's equitable interest was extinguished under Saudi Arabian law at the time of the transfer to Samba; therefore, no knowing receipt claim could succeed.