Cayman Islands: AHAB v Saad – importance of a particularised and principled tracing claim
By Harneys From Lexology
In the Ahmad Hamad Algosaibi & Brothers Company (AHAB) v Saad judgment handed down on 31 May 2018, AHAB’s attempts to trace into the hands of the defendants were addressed (for further details please see “Grand Court dismisses multibillion-dollar fraud claim in “one of the largest Ponzi schemes in history””). In respect of defendant SIFCO5, the Grand Court found that AHAB’s claims, which attempted to trace its funds to that entity, were “unparticularised and unprincipled”. Further, AHAB was unsuccessful in establishing that funds representing traceable proceeds from the Money Exchange reached SIFCO5 or in articulating any discernible cause of action against SIFCO5 in respect of such funds.
Facts
AHAB argued that it was unnecessary to demonstrate an unbroken chain of transactional links in order to bring a tracing claim. Citing Relfo Limited (in liquidation) v Varsani ((2014) EWCA Civ 360) and Federal Republic of Brazil v Durant International Corp ((2015) UKPC 35), AHAB argued that:
the court could infer that monies were the traceable property of AHAB; and
given that Al Sanea was a defaulting fiduciary, AHAB could elect to follow its beneficial interest into the hands of the defendants, which were required to give an account of how they acquired it.
Decision
Rejecting AHAB’s arguments, the court distinguished the cited authorities from the general rule that a chain of transactional links must be established in order to trace. In doing so, the court held that while a defaulting trustee or fiduciary is required to account for trust funds in their hands, this did not absolve AHAB of the burden of demonstrating that particular funds comprised trust assets.
AHAB also argued that because of Al Sanea’s position as director of the defendants, it should be assumed that he was the “directing mind and will” of each defendant company; therefore, knowledge of his alleged fraud against AHAB could be attributed to each company, including SIFCO5. The court disagreed, finding that:
there can be no assumption that the knowledge of a director of various different companies will be attributed to all of their companies; and
AHAB had failed to establish that Al Sanea’s knowledge could be imputed to SIFCO5.
For further information on this topic please contact William Peake at Harney Westwood & Riegels’ London office by telephone (+44 20 7842 6080) or email ([email protected]). Alternatively, contact Gráinne King or James Elliott at Harney Westwood & Riegels’ Grand Cayman office by telephone (+1 345 949 8599) or email ([email protected] or [email protected]). The Harney Westwood & Riegels website can be accessed at www.harneys.com.
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