Algosaibi v Saad Invs

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 02 December 2011
• Court: Grand Court (Cayman Islands)
• Date: 02 December 2011

Grand Court, Financial Services Division

(Smellie, C.J.)

AHMAD HAMAD ALGOSAIBI AND BROTHERS COMPANY

and

SAAD INVESTMENTS COMPANY LIMITED and FORTY THREE OTHERS

E.A. McQuater, Q.C. and D. Quest for the plaintiff;

M. Crystal, Q.C. for the GT liquidators;

M. Smith, Q.C. for the AWAL defendants;

T. Lowe, Q.C. for SIFCO #5;

J.M. Golaszewski for the Maples defendants;

D. Butler for Mr. Al Sanea.

Cases cited:

(1) Arrow Nominees Inc. v. Blackledge, [2000] 2 BCLC 167; [2000] C.P. Rep. 59; [2001] BCC 591, applied.

(2) Goldcorp Exchange Ltd., In re, [1995] 1 A.C. 74; [1994] 3 W.L.R. 199; [1994] 2 All E.R. 806; [1994] CLC 591, applied.

(3) Grupo Torras S.A. v. Bank of Butterfield Intl. (Cayman) Ltd., 2000 CILR 441, referred to.

(4) Hubbuck & Sons Ltd. v. Wilkinson Heywood & Clark Ltd., [1899] 1 Q.B. 86; [1895–9] All E.R. Rep. 244, applied.

(5) Hunter v. Chief Constable (W. Midlands Police), [1982] A.C. 529; [1981] 3 W.L.R. 906; [1981] 3 All E.R. 727, applied.

(6) Kalley v. Manus, 1999 CILR 566, applied.

(7) Masood v. Zahoor, [2010] 1 W.L.R. 746; [2010] 1 All E.R. 888; [2009] C.P. Rep. 44; [2010] Bus. L.R. D12; [2009] EWCA Civ 650, applied.

(8) RCB v. Thai Asia Fund Ltd., 1996 CILR 9, applied.

(9) Serious Fraud Office (Director) v. Lexi Holdings Plc, [2009] Q.B. 376; [2009] 2 W.L.R. 905; [2009] 1 All E.R. 586; [2009] Bus. L.R. 647; [2008] EWCA Crim 1443, applied.

(10) Space Invs. Ltd. v. Canadian Imperial Bank of Commerce Trust Co. (Bahamas) Ltd., [1986] 1 W.L.R. 1072; [1986] 3 All E.R. 75; [1986] BCLC 485; (1986), 2 BCC 99302, not followed.

(11) TMSF v. Wisteria Bay Ltd., 2008 CILR 231, applied.

(12) Wenlock v. Moloney, [1965] 1 W.L.R. 1238; [1965] 2 All E.R. 871, applied.

(13) Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd., [1986] A.C. 368; [1986] 2 W.L.R. 24; [1986] 1 All E.R. 129, applied.

Legislation construed:

Grand Court Rules 1995, O.18, r.19(1): The relevant terms of this paragraph are set out at para. 23.

Civil Procedure-pleading-striking-out-power not to be exercised lightly and unless clear that fair trial not possible-litigants determined to prevent fair trial forfeit right to participate-fair trial is one conducted without undue expenditure of time and money-strike-out application not to be summary trial on documents-if possible to resolve questions about conduct of litigant before trial, question of case management whether court will do so, including by cross-examination of relevant persons

The plaintiff brought claims against Mr. Al Sanea and companies controlled by him in respect of alleged fraud.

Mr. Al Sanea had been the manager of one of the plaintiff”s businesses-‘the Money Exchange.’ The plaintiff alleged that while Mr. Al Sanea was in control of the Money Exchange, he fraudulently caused loss to the company by misappropriating over US$9bn. through unauthorized loans, to fund his Cayman companies (which were included among the defendants). The plaintiff brought a personal claim against him in respect of his misappropriations and a proprietary claim against his Cayman companies in respect of money they had allegedly obtained or its traceable proceeds.

A syndicate of lending banks brought a claim in the English Commercial Court against the plaintiff in respect of loans granted in its name. The banks alleged that Mr. Al Sanea had actual or ostensible authority and that he and the plaintiff had acted together in a fraudulent scheme to misappropriate the loan proceeds. The plaintiff initially pleaded in its defence that it had given neither actual nor ostensible authority, but abandoned this defence when, in the light of new evidence (‘the N Documents’), it

consented to judgment being entered against it. The liquidators of the first defendant (‘SICL’) subsequently obtained an order from the Commercial Court (Flaux, J.) granting them access to the N Documents, which revealed that substantial borrowings undertaken by Mr. Al Sanea through the Money Exchange may have been authorized.

In the light of this revelation, three of the defendants sought to strike out the plaintiff”s claim as being frivolous and vexatious and an abuse of process of the court; they made secondary applications for the cross-examination of two of the company”s partners-Saud and Yousef Algosaibi-to be conducted before the court would decide on the strike-out applications. They submitted that (i) the information revealed by the N Documents meant that the plaintiff”s evidence must be false and pointed to the likelihood of further suppression; (ii) as the plaintiff had not amended its pleaded case based on lack of authority it was maintaining a case which it knew to be false; and (iii) the plaintiff”s claims were rendered hopeless on the merits as, in the light of the new evidence of the authority it had given Mr. Al Sanea, it could not maintain a proprietary tracing claim based on fraudulent misappropriation-moreover, the plaintiff had failed in its pleadings to identify specific property into which it could trace, which was a necessary part of any proprietary tracing claim.

The plaintiff submitted that the failure to disclose the N Documents was inadvertent, relying on explanations given by Saud and Yousef, supported by members of its forensic accounting and legal teams. Most central to its explanation was Saud”s account-he submitted that (i) he had asked some members of his family to collect documents that might be relevant to the Money Exchange and bring them to his home; (ii) since the bulk of the N Documents consisted of files which were readily identifiable as relating to the Money Exchange, they were likely to have been among those brought (although he did not recall if they were or not); (iii) he did not believe he reviewed these files at that time and his assumption was that when they were delivered he regarded them as historical documents, which were unlikely to be of any help in addressing the immediate problems that AHAB faced from bank demands, and that he therefore put them to one side; (iv) as a result, when the investigation team conducted their detailed inspection of AHAB”s offices the N Documents were not found there; (v) when the investigation team approached the partners to establish whether they had any relevant documents in their homes, he told them that certain documents had been brought to his house; unfortunately, he also told them that (as he believed) the investigation team already had copies of the documents at his home; (vi) as a result, although the investigation team had open access to any of the documents in his home had they wished to look at them, the documents were not inspected at that time; and (vii) when the question of the documents at Saud”s home was later revisited for the purposes of disclosure in the London proceedings, the documents were inspected and some documents which the investigation team had not seen before were found; unfortunately, even at this point, the N Documents

were not found-it appeared that by this time the documents had been returned to AHAB”s head office and been forgotten about.

Held, dismissing the applications:

(1) The claim was not suitable for striking out. The court would exercise its power to strike out under either the Grand Court Rules 1995, O.18, r.19, or its inherent jurisdiction to prevent abuse of process, in accordance with the following principles: (i) it would not be exercised lightly and unless it was clear that a fair trial would not be possible; (ii) however, a litigant who was determined to pursue proceedings with the object of preventing a fair trial would be treated as having forfeited his right to take part; (iii) to the extent that there remained substantial doubt about the possibility of a fair trial because of the litigant”s conduct, the court would bear in mind that a fair trial was a trial conducted without undue expenditure of time and money; and (iv) while a strike-out application was not an occasion for a summary trial on the documents, if it was possible to resolve questions about the conduct of a litigant before the trial so as not to increase the expense and time for trial unduly, it was a question of case management for the court whether it would do so, including by allowing cross-examination of relevant persons. Whilst the plaintiff”s explanations for the late disclosure were patently implausible, a fair trial was still possible-the N Documents had now been disclosed, Saud”s explanation had not been disproved conclusively and there was no evidence that the plaintiff was continuing to neglect its discovery obligations. Further, its claim had not been shown by the N Documents to be frivolous and vexatious; whilst its pleadings were amenable to being corrected and clarified in the light of the N Documents, to the extent that there remained objective evidence of fraud committed by Mr. Al Sanea on some of the defendants, it could not be said that AHAB no longer had a good arguable case (para. 32; paras. 41–42; paras. 49–50; para. 59).

(2) An order directing cross-examination was not appropriate. It had not been shown to be important to the defendants” cases that the alleged falsity of Saud”s and Yousef”s accounts of the disclosure of the N Documents be answered immediately; even if their accounts were disproved at this interlocutory stage, that would not itself suggest that a fair trial was no longer possible. Therefore, ordering cross-examination risked launching a mini-trial about the N Documents involving significant time and expense, but without resolving any significant aspect of the case (para. 48; paras. 56–57; para. 59).

1 SMELLIE, C.J.: Citing recent developments in this action as explained below, certain of the corporate defendants apply for the action to be struck out. The action was commenced in July 2009 by the plaintiff (‘AHAB’) seeking restitution and/or damages against the second defendant Mr. Al Sanea and the corporate defendants-which...