Ahmad Hamad Algosaibi and Brothers Company Plaintiff v Saad Investments Company Ltd Maan Al-Sanea and Others Defendants
| Jurisdiction | Cayman Islands |
| Judge | Chief Justice,Hon. Anthony Smellie |
| Judgment Date | 20 April 2010 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 54 OF 2009 |
| Date | 20 April 2010 |
The Hon. Anthony Smellie, Chief Justice
Mr. Evan McQuater QC and Mr. David Quest instructed by Mr. Peter Hayden of Mourant for the plaintiff Ahmad Hamad Algosaibi and Brothers Company (�AHAB�)
Mr. Stephen Smith QC, instructed by Ms. Colette Wilkins of Walkers for the Liquidators of SICL, the SIFCo companies (except SIFCo #5)M SHL and Saad Cayman Limited (�the Grant Thornton or GT liquidators�);
Mr. Ali Malek QC, instructed by Ms. Sarah Dobbyn of Harneys for the liquidators of SIFCo #5 � (�The Kinetic liquidators�);
Mr. William Helfrecht of Bodden & Bodden for the liquidators of the Awal Companies, subsidiaries of Awal Bank B.S.c. (�The Johnson Smith liquidators�)
[ Ms. Charmaine Richter of Appleby for the second defendant Mr. AI Sanea, who disputes the jurisdiction of the Court]
This action arises out of allegations raised by the influential Saudi Arabian Algosaibi family against a prominent Middle Eastern businessman, Mr. Maan Abdul Wahed A1 Sanea (�Mr. A1 Sanea�) and a large group of companies, mainly domiciled in the Cayman Islands, beneficially owned and controlled by him. These include the 17 Defendant companies which, for present purposes are referred to thus or together with the other Saad companies, as �the Saad Group of companies�.
There are a number of serious allegations against Mr. A1 Sanea and the Saad Group of companies and claims being advanced in this action by the Plaintiff (�AHAB�) on behalf of the Algosaibis, include claims in conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt of the proceeds of fraud. AHAB alleges that USD 5.2 billion of its money has been directly misappropriated. This massive misappropriation is alleged to have been funded by means of fraudulent loans obtained in AHAB's name for the benefit of the Saad Group of companies, � to as much as USD 9.2 billion. This is therefore the total amounts said to have been defrauded overall.
Serious allegations of fraudulent misconduct have also been raised by AHAB against Mr. A1 Sanea and the Saad Group of companies in other jurisdictions.
On 24 July 2009 at the instance of AHAB, Justice Henderson of this Court made a freezing order against all of the 17 Defendants prohibiting the disposal of assets worldwide up to the amount USD9.2 billion.
The Court then also appointed receivers over several of the Saad Group of companies, including the 17 Defendants and ordered them to give disclosure of relevant information.
The freezing order made by the Court was fortified when, on 21 September 2009 at the instance of AHAB, the English High Court made a further worldwide freezing order in support of these proceedings pursuant to section 25 of the English Civil Jurisdiction and Judgment Acts 1982 U.K. That Order was made on a without notice basis by Justice Flaux against Mr. A1 Sanea and Singularis Holdings Limited (the third defendant �SHL�) in the commensurate amount of USD 9.2 billion. Both Courts in England and Cayman have continued the worldwide freezing and disclosure orders (�the WFOs�) after contested inter partes hearings. Henderson J. in this Court, in making the first order (�the Cayman WFO�), expressed the view that AHAB had a good arguable case on its claim, as a necessary prerequisite for the making of the Order. The English High Court proceeded on the same basis in the grant by Justice Flaux of the English WFO and when it was upheld by Justice Simon on the inter partes basis.
This case of AHAB's rests primarily on its proprietary claim to the very large sums of money allegedly defrauded by Mr. A1 Sanea and used by him to fund the 17 Defendants and others of the Saad Group of companies. Thus, AHAB's claim against the 17 Defendants is that their assets to the extent that they represent the proceeds of Mr. A1 Sanea's fraud or were acquired by use of those proceeds, are now impressed with a constructive trust in favour of AHAB and should be available to satisfy any judgment that AHAB may obtain.
The 17 Defendant companies are now all in liquidation before this Court although none was at the time of the Cayman WFO or at the time AHAB's writ and statement of claim were first filed on 27 July 2009.
The 17 Defendants may be separated out into three corporate groups and identified by reference to the liquidators appointed over them and will be looked at also from that point of view, for the purpose of a better understanding of the alleged manner of their respective involvement in the fraud and of their responses to the applications at hand.
However, the pivotal common issue relating to them at this juncture arises from the fact that their liquidation estates are now subject to claims, not only by AHAB by virtue of its proprietary claim, but also by third party claimants � certain banks which claim to have provided loans directly to them. These Banks were respectively the petitioners at whose instance this Court placed SICL and SIFCO #5 into liquidation. The liquidators then appointed replaced the receivers who had been appointed at the instance of AHAB when Justice Henderson made the Cayman WFO. Each of the SHL, the SIFCOs (with the exception of SIFCO #5) and the Awal Companies were liquidated voluntarily (which liquidations were brought under the supervision of the Court) and Saad Cayman Limited was liquidated compulsorily at the instance of SICL.
Their claims being substantiated by reference to available records, the creditor Banks have had their proofs of debt admitted in the respective liquidations but AHAB, whose claim remains as yet primarily proprietary, has had its creditor's proof of debt in support of its liquidation claim admitted only to the nominal extent of $1 respectively in the liquidations of Saad Investments Company Limited (�SICL�) and of SHL.
The plain reality of AHAB's position then, is that it must first prove its proprietary claim against Mr. A1 Sanea and the 17 Defendant companies by way of judgment upon its writ action, before its constructive trust claim against the assets of the 17 Defendant Companies in Liquidation will be recognised.
In this respect, it is therefore plain that AHAB's claim does not coincide with those of the creditor Banks: to the extent that AHAB's claim is proven as a proprietary claim, the assets of the 17 Defendants will be proven to be AHAB's assets and so not coming within their liquidation estates to be available to meet the claims of creditors, including those of the creditor Banks.
It is against that background that AHAB now applies for the lifting of the statutory stay (imposed by section 97 of the Companies Law) upon proceedings against the 17 Defendant companies as companies in liquidation, in order that it might press ahead with the trial of its proprietary claim against them and against Mr. A1 Sanea himself, in these proceedings.
AHAB's �good arguable case� which it asserts is already apparent from the pleadings and so found to exist by at least four different judges (two here and two in England), a circumstance that is relied upon in support.
The Grant Thornton liquidators, on behalf of their companies in liquidation � SICL, the SIFCo Companies (apart from SIFCo #5), SHL and Saad Cayman Limited � oppose AHAB's application arguing that AHAB's application for the lifting of the stay should at least be adjourned until after the determination of Mr. A1 Sanea's challenge to jurisdiction which is explained below. In this, they are joined by the Johnson Smith liquidators on behalf of their AwalCo defendants. The Kinetic Liquidators (on behalf of SIFCo #5) adopt a neutral stance in this regard. The Kinetic Liquidators' principal concern at this juncture as explained by Mr. Malek QC, is not to take an unnecessarily adversarial position but rather as officers of the Court, to ensure that their responsibilities are clearly defined, and to ensure that there is no adverse exposure as to costs. The Kinetic Liquidators did, in the end though, express the view that AHAB's claims should be resolved in ordinary litigation proceedings, not by disputed debts in the liquidation and that such proceedings should be single, not multiple proceedings; assuming that they would be Cayman Islands proceedings. These are views which assist me in the resolution of AHAB's application to lift the stay.
In respect of their costs, all the Liquidators sought and obtained during the hearing of the present applications, orders from the Court approving of the manner in which they have managed and administered the assets under their control to date, as well as orders indemnifying them out of the assets for their fees and expenses; including for investigating the AHAB claim (but not for in engaging in hostile proceedings or in taking an adversarial stance to the AHAB claim). That relief was given pursuant to the jurisdiction of the Court recognized in Re Berkeley Applegate (Investment Consultants) Ltd.{In Liq) (No. 2) [1989] BCLC 28 and the subsequent case law including Re Telesure Ltd. [1997] BLC Ch. D. 589 and Re Eastern Capital Trustees Ltd. (In Liq.) [1989] BCLC 371. From that body of case law, it is clear that where a liquidator has assets in which a creditor claims an equitable interest:
�The Court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred and for skill and labour expended in the administration of the property� (per Edward Nugee QC sitting as a deputy Judge of the High Court in Re Berkeley Applegate (above) (at p 42�43).
As the deputy Judge also there observed:
The allowance of fair compensation...
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