Michael Crystal QC, Mark Phillips QC and Marcus Haywood of South Square, assisted from London by Andrew Shaw, have successfully represented Saad Investments Company Limited (“SICL”) and Singularis Holdings Limited (“Singularis”), in their defence of claims for in excess of US$4 billion brought against them by Ahmad Hamad Algosaibi and Brothers Company (“AHAB”) in the Cayman Islands.

On 31 May 2018, the Chief Justice of the Cayman Islands handed down a judgment, which runs to over 1000 pages, following the trial of the claim brought by AHAB against SICL, Singularis and a number of other companies incorporated in the Cayman Islands (the “Defendants”).

The trial took place over 129 days before the Chief Justice in the Cayman Islands over the course of a year, ending on 27 July 2017 when judgment was reserved. The trial involved the cross examination of over fifteen witnesses of fact and nine expert witnesses in relation to expert evidence of accountancy, handwriting and foreign law (including Saudi Arabian and Swiss law).

Michael Crystal QC, Mark Phillips QC and Marcus Haywood acted for Steve Akers, Hugh Dickson, Mark Byers of Grant Thornton, the liquidators of SICL and Singularis.

The trial was the largest which had ever taken place in the history of the Cayman Islands and is understood to have been the largest in the Commonwealth in 2016/2017.

The trial involved allegations made by AHAB, a Saudi Arabian partnership, that during the period from at least 2000 to 2009, Maan Al Sanea (who had married into the Algosaibi family) used his alleged complete managerial control of the Money Exchange, a division of AHAB, to defraud AHAB by misappropriating over US$4 billion from the Money Exchange and funding the misappropriations by causing AHAB to be liable to third parties for, and eventually in default in respect of, over US$9.2 billion in alleged unauthorised debt.

The Money Exchange, the Chief Justice found, in conjunction with certain Bahraini companies owned by AHAB (the “Bahraini Financial Businesses”), had been used to perpetrate one of the largest Ponzi schemes in history, with later borrowing used to repay earlier borrowing, while also providing funds for the ever-increasing indebtedness of the Money Exchange.

From 2000 until the collapse of the Money Exchange in May 2009, some $126 billion was raised by the Money Exchange (including through the Bahraini Financial Businesses) by way of fraudulent borrowing, from at least 118 different banks around the world. From January 2000 to May 2009, the total flow of cash through the Money Exchange was over US$330 billion.  The total amount of the unrepaid borrowings at the time of the collapse, as at end May 2009, was SAR 34.6 bn (US$9.2 bn).

In essence, AHAB’s claims were for fraudulent breaches of fiduciary duties allegedly committed by Mr Al Sanea and restitution, damages and compensation from the Defendants, including SICL and Singularis, on the basis of their alleged conspiracy with Mr Al Sanea, their knowing assistance in his alleged fraud upon AHAB and their alleged knowing receipt of the proceeds of that fraud. AHAB also brought proprietary claims against the Defendants on the basis that their assets were alleged to represent AHAB’s property which AHAB contended it could trace into their bank accounts or other assets.

The pivotal issue in the case was whether the AHAB Partners knew of and expressly or implicitly authorized the enormous borrowings from banks which were obtained by fraudulent means through the Money Exchange.

Dismissing AHAB’s claim, the Chief Justice held that he was satisfied that the knowledge and authority of the AHAB Partners was overwhelmingly and conclusively proven. The Chief Justice had no doubt that each of Abdulaziz, Suleiman, Yousef and Saud Algosaibi knew of and expressly authorized the issuance of fraudulent financial statements and knew of the fraud on AHAB’s lending banks. Dawood Algosaibi also had knowledge of the massive borrowing which he transacted, not only on behalf of the Money Exchange but also on behalf of the Bahraini Financial Businesses, in early 2009.

The Algosaibis, the Chief Justice held, were willing to allow the massive personal borrowing of Mr Al Sanea from the Money Exchange to go unchecked because it was the quid pro quo for his willingness also to use the Money Exchange to procure fraudulent borrowing on behalf of the AHAB Partners themselves. Payments to Mr Al Sanea were not “misappropriations” but loans, which were expected to be repaid. What the AHAB Partners had not reckoned on and what shocked them in May 2009, when the global financial crisis erupted, was that Al Sanea, thought to be one of the wealthiest men in the world, would be unable to do repay his debts. The reality is that the AHAB Partners had made a bad credit decision.

AHAB’s case pivoted around allegations that Mr Al Sanea, in his alleged fraud upon AHAB, engaged in forgery “on an industrial scale”. In this regard AHAB relied on, amongst other things, the presence of “matched” signatures recovered from among the records of the Money Exchange, AHAB’s Head Office and the Bharani Financial Businesses. Dismissing AHAB’s forgery allegations, the Chief Justice held that those allegations had been shown to have been made on a random scatter-shot basis without any reasonable foundation for a finding that the questioned documents and signatures were deployed by Mr Al Sanea without the knowledge and authority of AHAB Partners.

As to AHAB’s allegation of receipt by the Defendants, even if AHAB had been able to establish the antecedent breach of trust by Al Sanea (which it had not), it would still have had to prove the necessary transactional links invariably required by the case law, between its funds taken from the Money Exchange and the accounts of the Defendants. The Chief Justice held that requirement had not been satisfied by AHAB.

The Chief Justice further held that the Defendants’ illegality defence (the legal doctrine which prevents a claimant from pursuing a claim if the claim arises in connection with some illegal act on the part of the claimant) was entitled to succeed, not only on the basis of AHAB’s continuous complicity in the fraud from beginning to end but, because of AHAB’s indisputable involvement through Abdulaziz Algosaibi until October 2000, in what had already become a massive fraud on the banks and one which AHAB must have known would be continued.

In all these circumstances, the Chief Justice held that AHAB’s claim should be dismissed. The Chief Justice also dismissed certain counterclaims advanced by SICL and Singularis against AHAB on the basis that the evidence relied upon in proof of the counterclaims was unsafe and unreliable.

Please click here to read an Executive Summary of the Judgment delivered by the Chief Justice at the hand down.

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