Ahab v Saad Investments Company Limited and Maan Al-Sanea and Others

¶ IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES J)JVISION CAUSE NO. FSD 54 OF 2(109 BETWEEN AND IN CHAMBERS AHM.<\D HAMAD ALGOSAIBI AND8ROTHERS COMPANY ("AHAB") SAAD INVESTME'ITS COMPANY LIMITED MAAI~ AL-SANEA AND OTHERS PLAINTIFF DEFENDA"ITS THE 1ST _2ND NOVEMBER, 2012 AND 22ND FEBRUARY 2013 BEFORE THE HON. ANTHONY SMELLIE QC, CHIEF JUSTICE APPEARANCES: Mr. Michael Crystal QC, instructed by Ms. Colette Wilkins of Walkers for the GT JOLs Mr. Marcus Smith, QC instructed by Mr. Ian Lambert of Bodden and Bodden for the AWALCOs JOLs Mr. Thomas Lo"'e! QC instructed by Mr. David Herbert Rnd Ms. Heather "Seilson of Harneys for SIFCO 5 JOLs Mr. Ewan McQuatcr, QC and Mr. David Quest instructed by Mr George Kelghtley of Mourant for AHAB JUDGMENT

¶ [1] Now, fully three years after the institution of this action by AHAR, T have hefoTe me applications by the present defendants to strike it out.

¶ [2] Described compendiously, the basis for their strike out applications is the complaint that AHAB has failed by its proprietary tracing claim, to plead "a reasonable cause of action." but merely one that is 'frivolous and vexatious" and Page I of77 so "has no hope of Sli'CCess. " The proprietary tracing claims are those upon which AHAB's case primatily proceeds against the present defendants. To the,;: extent proven, they would have estahlished that the assets of the present defendants are AHAB's property. Thus, the consideration that is of pivotal importance to these strike out applications, for reasons to be explained below. AHAB pleads other restitutionary and dar.l18ge claims as well and these too will be discussed.

¶ [3] The strike out applications are all tn terms of Grand Court Rules Order 18 where the well known rules are set out.

¶ [4] AHAB's response, also described compendiously, is that it has pleaded a good arguable case, one already recognised and described as such in judgments of this Coun 111 interlocutory proceedings, the earliest of which is reported at 2010 CILR 555 (at para 80).

¶ [5] To the extent its pleadings still lack particularization and specificity, ARAB asserts that as parties who are ·'mixed up" in the fraud perpetrated against AHAB by their principal Mr. Al Sanea, the present defendants have an obligation to give discovery of all infonnation that may be relevant tu dssist AHAB'~ auvi~crs in the more detailed and S1)ecific pleading of its claim. For this proposition AHAB relles on Arab Monf!tarv Fund v Hashim (No.2) [199011 AIL E.R. 673 as applied by this Court in Grupo Torros v Bank o(Butterfield 2000 CILR 441 and this is a proposition to be more fully considered below.

¶ [6] The history of this a(tion is already well documented in the several judgments of this Court and of the Court of Appeal issued since the action was commenced. Thosi: juugrm:nls de:ilt with the several interlocutory applications which have, Page 2 of77 however well intentioned, nonetheless beset the progress of the action to trial. These included an earlier strike oul application brought on behalf of the present defendant:;:;:.

¶ [7] In that application, 1he basIs for strike out was said to be the deliberate and contumelious breach by AHAB of its disclosure obligations resulting in an abuse of the process of the Court as well as prcjudicc to thc applicants. Whilc a breach was admitted by AHAH, the threshold test for strike out - the alleged abusive nature of the breach -- was not established and so that application was dismissed. A detailed judgment was delivered on Znd December Z011 ("the December 2011 judgment").

¶ [8] Considerable time and expense have also been spent in addressing jurisdictional and procedural challenges which have been unsuccessfully raised by the 2nd Defendant Mr. AI Simea. In those challenges, going all the way to the Privy Council, he InSIsted that AHAB should bring its claIm agamst him not In this jurisdiction but in Saudi Arabia.

¶ [9] Steps have also been taken by AHAB itself. Having successfully resisted Mr. Al Sanea's challenges and having obtained default judgment against him in light of his failure to file a defence, AHAB also moved to obtain an interim award of damages pending the final determination of the action. This too was, however, resisted by the preselilt defendants. They argued unsuccessfully that an interim award should not be made against Mr. Al Sanea lest It results in inconsistent outcomes in the event the allegations raised against him and which implicated them as his accessories, were not to be substantiated as against them ultimately at Page 3 of77 trial. That unsuccessful argument was addressed in a written judgment delivered on lih June 2012 ("the June 2012judgmenC). It is the subject of an application now also raised befi)re me by the present defendants for leave to appeal; an application which will be separately addressed in this judgment.

¶ [10] That is a brief overview of the already protracted history of this action. The following is an essential brief summary of the factual background. The action arises from allegations that Mr. Al Sanea abused his position of trust in which he was placed by AHAB as managing director of AHAB's Money Exchange, the financial division of AHAB's extensive business interests in Saudi Ar<lbia.

¶ [11] It is ARAB's pleaded case that. primarily by means of his forgery of the signatures of AIIAB partners on hundreds of bank loan and letters of credit transactions, Mr. AI Sanea, over the course of several years, was able to obtam fraudulently and misappropriate to his own purposes, funding from many banks to the order of magmtllde of some USD9.2 billion. Further, that some USD6.2 billion of the proceeds have been shm.\oll by forensic accounting investigations to have been used by Mr. Al Sanea tu fuml i:l \:(mgiL.lIIlerate ufinvestment companies called the SAAD Group, established by him in this jurisdiction. The present defendants arc 16 members of thc Group. AHAB sues to recover the proceeds of the fraud in this action by way of its personal claim against Me. Al Sanea as well as by its proprietary tracing, restitutionary and damages claims against the present defendants. Page 4 01'77 The present defendants

¶ [12] The present defendants are, 16 along with others of Mr. Al Sanea's SAAD GnJup of companie.. are now, in compulsory winding up before this Court.

¶ [13] AHAB having obtained its default judgment and interim award personally against Mr. Al Sanea, must now establish its claims against the present defendants in ordcr to succeed in the action by which it seeks to claim ahead of the proven creditors in the liquldatlon of the present defendants. These are in the main banking creditors w:~o provided investment capital to them, some by way of secured loans.

¶ [14] Without a proprietary tracing claim, AHAB would be able to resort, as against the present defendants, only to its claim for damages and/or equitable compensation or restitution, as pleaded at sections K5 and K6 of its Amended Statement of Claim.

¶ [15] Those claims are ba~:ed upon the allegations that the present defendants by their dishonest assistance to and conspiracy with ML Al Sanea, were in knowing receipt of and unjustly enriched by AHAB's money misappropriated by Mr. AI Sanea from the Money Exchange. If proven at trial, those claims would allow AHAB to rank only as a judgment creditor, and thus at best pari passu with other unsecured creditors and behind the secured creditor banks.

¶ [16] However, if AHAB IS successful in its proprietary tracing claims, given the USD6.2 billion magnitude of those claims; the claims of all creditors would likely be entirely defeated. The assets which hElve heen recovered hy the liquidators Page 5 of77 would be insufficient. to satisfy AHAB's proprietary claim, let alone those of the banks and other creditors.

¶ [17] The liquidators of thl~ present defendants are therefore understandably concerned to know, and to know as soon as possible, whether AHAB's proprietary tracing claim could succeed. Hence, 1 am told, this application.

¶ [18] The present defendants are members of different sub-groups of Mr. AI Sanea's SAAD Group and have differenlliquidators. 19 The fin;t suh-group comprises nine companies - the 1 SI, 81h, 30 111 to 33m and 35 th tu 37th Defendants. These Companies have appointed as their joint official liquidators, directors of Grant Thornton Speclahst Services (Cayman) Limited. They will be referred to as the GT Defendants and their liquidators as the GTJOLs.

¶ [20] Most prominent among the GT Defendants from AHAB's point of view, are the 1" Defendant, SAAD Investments Company Limited ("SICL'") and the 8 1h Defendant, Singulariis Holdings Limited ("SHL"). The information so far discovered by AHAB indicates that SICL and SHL were, as among the SAAD Cayman Group, primary recipients of funds by way of shareholder contributions by Mr. Al Sanea, funds which AHAB alleges were misappropriated by him from the Money Exchange,

¶ [21] The second sub-group comprises six companies - the J3lh to 18th Defendants, members of the A WAL sub-group. They will, as the context requires, be referred to herein as the "A WALCOs". The AWALCOs are also alleged to have received Page 6 0[77 massive injections of capital by way of shareholder contributions ITom Mr. A 1 Sanea using money misappropriated from the Money Exchange.

¶ [22] The third sub-group comprising what may be described as the SAAD Investments Fmance Compames, IS that sub-group within which the 34th (and last of the present defendants) ~ SAAD Investments Finance Company (No.5) Limited ("SIFCO 5"), comes. The (!haUenge to the legal basis of AHAB's claim

¶ [23] The applicable law is not controversial as the principles of law relating to striking out are agreed hy aiL The challenge goes to the inadequacy of A.HAR's pleaded !,;a~~. Tht: GT Dt:rt:ndani~, lh~ A WALCO~ and SIFCO 5 havt: t:al,;h moo st:parait: summonses but seekirrg similar relief pursuant to OCR 0.18 r. 19.

¶ [24] The GT DcfcndantE:' summons seeks thc strikc out of AHAB's claim on alternative bases: (i) that the entiIe claim as against them be struck out as disclosing no reasonable cause of action andlor as being vexatious andlor because it prejudIces or embarrasses the fair trial of the action andlor because it is otherwise an abuse of the process of the court; (ii) alternatively; thaI ARAB's alleged proprietary and/or tracing claims (as sct out in par.~graph 187 of the statement of claim) be struck out for the same reasons and on the same basis as in paragraph (1) above; (iii) in the further alternative, that the claim in paragraph 187 be struck out unless within 28 days of so being directed by the Court, AHAB gives full particulars which identify: Page 7 of77 (a) which of the specific assets in the hands of the GT Defendants it is a1legt!:d are subjel:t to proprietary and/or tracing claims; (b) the pmcise basis upon which any such alleged proprietary and/or tracing claim ariscs in relation to those assets (by reference to the claim of recipients. individual transactions and/or individual transfers pursuant to which the assets identified in sub-paragraph 1 above are alleged to be the subject of AHAB's proprietary and/or tracing claim. (emphaSIS added)

¶ [25] The AWALCOs' summons seeks an order that AHAB's claim be struck out as against them on the basis that it discloses no reasonable cause of action and/or that it is an abuse oftfIe process of the Court.

¶ [26] SIFCO 5 in its summons more specifically seeks an order striking out: (i) each and all of those paragraphs in (AHAB's pleadings) which assert claims against 11, and/or (ii) each and all of the allegations in particular paragraphs of the claims (that is: paragri:l.ph~, 161, 166, 176-189 i:1J1lJthe Pmyer); in each case on the ground that the pleadings disclose no reasonable cause of action as against SIFCO 5 andlor arc frivolous, vexations and abusivc of thc Court's process.

¶ [27] Each summons also of course seeks the usual order as to costs.

¶ [28] While each summons invokes GCR 0.18 r. 19 seeking similar reliet: given the different roles played by the different sub-groups of companies within the SAAD Group, the basis upon and extent to which they are said by AHAB to be Page 8of77 implicated in Mr. Al Sanea's fraud, is differently factually premi<;ed_ These strike out applications must therefore be considered in the cunh;,d ur the different circumstances of each set of applicants, in particular the nature and manner of funding they are said to have received from Mr. Al Sanca. Pleadings in general

¶ [29] It is axiomatic that a lPlaintiff must plead clearly all the facts necessary to give rise to its claim: see GCR Order 18, rule 12. An insufficiency of pleading in regard to an important issue can result in the action being struck out.

¶ [30] The purpose of a pleading is to ensure that the parties and the court know what the matters in issue are_ This is settled law; most recently reaftinned by this Court in TMSFv Wisteria .Bay Limited 2007 CILR 310 at 315-316 (paragraph 18).

¶ [31] The requirement to glve adequate particulars reflects the ovemding principle that litigation, and particularly the tnal itself, should be conducted fairly, openly, free from surprise and without unnecessary delay or expeme. A clear discussion of this equally settled proposition is presented in Aktieselskabet Dansk Skibs(inansiering v Wheelock Marden & Co Ltd {1994J] HKC ]64. 3L In that judgment delivered by Borkhary JA on behalf of the Hong Kong Court of Appeal, the following passagt:: uf gt::ner<ll ilpplicability appears; (at page 5 -b): " ... there are a number of things which pleadings should do. Ideally, they "tVould do diem from the outset. In any event, they must do them by the time they have been properly particularized ... whether particuLarized on the pleader .,\' own initiative upon the olher side's request, or pursuant to the court's Page 9 of77 order. What those things are i<; to he gathered from the decided c.:m;e~'. Thul exerc.:i~'e hu~ been performed by the learned editors of the 1993 Supreme Court Practice. And as one sees from the note 18112112 at pp307-30R of Volume 1 thereof, the things which properly particularized pleadings must do are to: (i) inform the other side of the nature ~f the case they have to meet Q'S distinguished from the mode in which Ihat case is to be proved; (ii) prevent the other side from being taken by surprise at the trial; (iii) enable the other side to know what eVidence they ought to be prepared with and to be prepared jar trial; (iv) limit the generality ~f lhe pleadings, the claims and the evidence: (\) limit {md define the igsues to he tried, and a<; to which Jiswvl~ry is required; und lhe hands uJ lhe purty :w thul he cannol without leave go into any malters not included (although ~f the opponent omits to ask for paniculars, evidence may be given which supports any materia! allegation in the pleadings).

¶ [33] The obligation that rests upon AHAB to give adequate particulars of its claim must also be considered as juxtaposed with the obligation resting upon the present defendants to give discovery. This discoyeryobligation must also be examined ill Page 10 of77 this judgment, given the nature of AHAB's response to their strike out application as mentioned above. Discovery

¶ [34] The obtaining of disc:overy of documents in a proper case always was, according to Rngli~h Law, a right a~ hetween ~uhject and ~uhject. It i::. a right which continues to exist unless taken away by order of the court. Discovery is aulomatic upon close of pleadings and a party dissatisfied with the opponent's compliance with the rules may require him to swear an affidavit and, of course, may seek an order for discovery from the court in the usual way: see generally the Notes to Order 24 RSC 1999 "Ed. at pp 442-443 and GCR O. 24 rr. 1 and 2. A refusal or contumelious failure to meet this obligation can itself result in a pany's case being dismissed: TMSF v Wisteria Bay 2008 CILR 231

¶ [35] The rules place a mul:ual obltgation Oll parties to disclose documents which are or have been in their po:;session, custody or power relating to any matter in question between them in th,,: action. The words "relating to any matter in question between them " do not refer simply to the subject-matter of an action, but to the questions in the action.

¶ [36] The concept is explained at Notes 24/12111 to the RSC op. cit. (at pp448-449): "So. [for example] in an action for l}()s,\'essinn ()f land when the plaintiff's title is in queMion, (the wurdCl) refer tu the tille. nut tu the land (per Lindley 1. in Philipps v Philipps (1879) 40 L T. 815 at 811. They are not limited to documents which would be admissible in evidence (Compagnie Financier du Pacifique v Page 11 of77 Peruvian Guano Co. (1882) 11 Q.B.D. 55, per Brett L.J. at pp62,63; O'Rourke v Darbishire /1920} A.e 581 at 630) nor to those which would prove or disprove any malter in qliestion; any document which. it is reasonable to suppose "contains i'1iormation which may enahle the party (applying jor discover)~ either to advance his own case ur tu damage that ~l his adversary, If it is a document which may fairly lead him to a train o/" inquiry which . . . may have either of those two consequence ", must be disclosed (Compagnie Financier du Pacifique v Peruvian Guano Co. (1881) 11 Q.lW. 55 at 63)"

¶ [37] The later case law also explains the proper limitations on the principle, clarifylng file test of relevance for discovery purposes.

¶ [38] Tht: formulation of the principle above cited from Compagnie Fillonciere was approved by the English Court of Appeal in Talilor v Anderson {1995J w'LR. 447 when it stated that the fonnulation was stated to make it clear that the definition of relevance was framed in the widest possible terms.

¶ [39] It may be noted that a more restricted approach was however proclaimed at first instance in O. Co. v M. Co. /1'J96} 2 Lloyd's Rep. 347, but that was a case in which it appears that the Court of Appeal's decision in Tavlor v Anderson (aboye) was not cited.

¶ [40] In O. Co. v M. Co. the Court criticized the formulation in Compagnie Financiere (aboye) as "exeessiv€:ly wide", stating (as Cited at RSC (op. cit.) page 449) that: Page 12 of77 "The formulation mllst not be understood as jllst(fying discovery demands which would involve parties to civil litigatIOn being required to turn out the contents Q{their filing systems as ({under criminal investigation merely in the oiT-chance that something miKht show up from which some relatively weak inference prejudicial to the case of the disciosing party might be drawn. On the contrary, the document or class of documents must be shown by the applicant to offer a rea! probability of evidential materiality In the sense that it mllst be a document or class of document which in the ordinary way can be expected to yield !'n/ormation 0/ substantial evidential materiality to the pleaded claim and defence to it .. , If the document or class cannot be demonstrated to be clearly connected to issues which have already been raised in the course of the proceedings, or which would in the ordinary way be expected to be raised in the course of the proceedings, if sl.ifficient information ).t~re available, tIle application [jor discovery] should be dismissed. "

¶ [41] These limitations upon the discovery obligations are, of course, nothing more or less than a re-afIinnation of the courfs long-standing refusal to allow the process of dlscovery to be us(;d as a "fishing expedi[ion", This is the wa)' the concern was pointedly put by M:r, Lowe QC on behalf of SIFCO 5 in arguing that the unsatisfactory state of AHAR's pleadings would he an improper basis upon which to require the defendanls lu go lu disCllv~y. AHAB, h<lving not managed to Page 13 of77 purticularise its proprietary tracing claim now three years SInce its inception, the parties should be sav'ed the time and expense of going to the discovery phase of the action. This, in the end and as will be explained below, became the real practical issue to be n:solved as I see the case as it is prt:scr1tly positioned. Proprietary Tracing

¶ [42] It is for its admitted failure to plead with full particularity and specificity the basis upon which it alleges that a:oisets held by the present defendants are or represent its assets, lh<tt tht:y suy AHAB's claim should be struck out.

¶ [43] Having pleaded its proprietary claim, AHAB will not succeed unless it can trace the funds misappropliatcd by Mr, AI Sanea into the assets held by the present defendants and what is ultimately required of AHAB's pleadings therefore, is that AHAB explains how this tracing exercise can be done. This too is uncontroversial as a matter of legal principle.

¶ [44] As Millet U said in Trustee or the Pr-()pertv (){ FC .Tone.40 & Son (A Firm) v Jone:5' fl997J Ch 159 at 179, tracing is the process "by which the Plaint(f[ establishes what has happened to his property and makes good his claim that the wsets which he claims can properly be regarded as representing his property ".

¶ [45] The pleading ot a tracing claim must ultlmately moreover be distmguished from one based more simply and directly on 'following ", the exercise that involves a process whereby an owner recovers his property Identified as his in the hands of another. "Tracing" -- the exercise upon which AHAB must rely in the case if it might succeed - on the other lmnd "idelll(fies a new thing as the potential subject matter 0/ Q clQlm, on the basis that it is the substitute for an original thin.~ which Page 14 of71 was Use?f fhe subject mailer of {I claim" See Smith. the Law or Tracing, r! Ed. (1997) p6.

¶ [46] Given the complex corporate chain through which monies from the Money Exchange would havI: been passed before reaching the present defendants and the multiplicity of likely transactions involved, AHAB does not claim to be able to "follow" its money_

¶ [47] There is yet a further distinction to be drawn in this regard: that between reliance on tracing and relianee on the so-called ·'swollen assets" theory. As Smith also explains (ap_ cit, p270): "Swollen Assers is shorthand for approaches which de- emphasize the necess.ity for a claimant to trace beyond the point of receipt by the defendant. _. The ideet i.~ that showing the receipl amouflIs (v ;shuwing IhUi the assets of the delendatlt were augmented or swollen; and that it is not necessary to conduct the normal I~racing exercise to permit a conclusion thai the defendant remains enriched (and so liable to make re.~titUlion to the Piaintur)".

¶ [48] The notion that the swollen assets theory, instead of tracing, may be relied upon to prove a proprietary claim, has been disapproved in the case law; a position already noted and recognIsed in the December 2011 judgment at paragraph 36.

¶ [49] \Vhen the foregoing principles are applied, it 'bcx:omes clear that the alleged propnetary andlor tral;ing claims asserted by AHAB are critical to its case against the present defendatJlts and this is already recognised by this Court. As is recorded at paragraph 6 of the December 2011 Judgment: ., .. AH4R's claim may be described in general terms as a personal claim against Mr. Ai Sanea in respecr of his fraudulent and Page 15 of 77 unauthorized misappropriations and a proprietary claim against his Cayman companies in respect of monies which they obtained - or assets representing (hose monies - as heing or as representing the property of AllAn. "

¶ [50] Thus, it can also be said that the specific basis upon which AHAB must partieularise its claim has already, for more than a year now, been brought to its attention by this Court.

¶ [51] Indeed, the rules themselves of tracing explain the need for clarity of pleading. As Lord Millet explained in Foskill v McKeown [1001J 1 AC 101 at 117-138 (after explaining the distinction between ·'tracing" and 'following"): "Tracing is the process of identifying a new asset us the ~'ub~'litu{f! for the old. Where one asset is exchanged for another, a claimant can elect whei'her to follow the original asset into the hands oj the new owner or to trace its value into the new asset in the hands of the same owner, .. Tracing is thus neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, andjust(fies his claim that the proceeds can properly be regarded as representing his property. Tracing is also distinct/rom claiming. II idenl~fies the traceable proceeds of the claimant '.1' property. it enables the claimant to substitute the Page 16 of77 traceable proceeds for the original asset as the subject matter ~r his claim. BUl if does nor affect or establish his claim"

¶ [52] And so, although the fact that a wrongdoer has misappropriated another's property (as alleged here against Mr. AI Sanea) is necessary to create the plaintiffs claim, the fact that such a claim exists does not automatically mean that the plaintiff can trac4~: tracing can only occur when the plaintiff can prove (the burden being on it) that some properly held by the misappropriator or his accomplice represent:; the substitute of what was once his asset. See Smith op. cit p270.

¶ [53] As Justice Christopher Clarke further explained in DJSC Oil Company YueraneO (in Liquidation) l' Ahramovich & Others {1008} EWHC 1613 at para 349 - three distinct premises must be established.

¶ [54] First, in order to be able to trace property it is necessary for a plaintiff to identify property of his, which has been unlawfully taken from him (that is: "a proprietary base").

¶ [55] Second, that that property has been used to acquire some olher new identifiable property. The new property may then itself have been used to acquire another identifiable asset; thu:) "a series of transactional links".

¶ [56] Third, the chain of substitutes must be unbroken. This is in the sense that the unbroken chain of transactional links leads to new, identifiab1e property which has ended up in the h.mds ofthe defendant. :;7. The main thrust of the arguments of the GT Defendants and the AWALCOs, is that AHAB's case falters at the first premise as it can show no "proprietary base" Page 17 of77 for its claim. This is an argument that SIFCO 5 also endorses along with its further arguments pr(;sented by Mr. Lowe QC, which go as well to the second and third premises of the tracing principle as explained hy Christopher Clark J; that is: the lack of an unbroken series of transactional links which could lead to property now found in the pos:;ession ofSIFCO 5.

¶ [58] The arguments as to the lack of the first premise - the absence of the proprietary base of AHAB's claim - are prompted by a falrly recent event of disclosure in this case, an event itself the subject of the earlier strike out application and the December 2011 judgment.

¶ [59] Essentially, that recent disclosure (circa June 2011) - which first came to light in the foml of so-called! "N Files" disclosed in proceedings in London brought by certain banks against AHAB - revealed that significant amounts of borrowings undertaken by Mr. Al Sanea on AHAB's behalf through the Money Exchange had been authonzed. This led to the Immediate and untimely collapse of AHAB's defence in the London proceedings; which, until then, had been premised on the basis that borrowings from those banks by Mr. Al Sanea were all unauthorized by AHAB and so that Mr. AI Sanea had neither actual nor ostensible authority to bind AHAB as its agt:nt to the loan agreements with those banks.

¶ [60] The N File discloswre redOlmded in this action as well, resulting In AHAB's concession that the Worldwide Freezing Order which had been granted by this Court in AHAB's favour over all Mr. AI Sanea's assets (including any held by the present defendants) had been improperly obtained on the asserted basis that all borrowings had been unauthorized by AHAB. Page 18 of77

¶ [61] The proprietary base of AHAB's claim as originally pleaded equally depended upon the assertion that all bOITowmgs had been unauthorized and the extent of the purportedly unauthorized borrowings are listed in Schedule 6 of the Statement of Claim, showing a total of some SAR 34 billion or $9.2 billion, the total sum allegedly misappropriated by Mr. Al Sanea.

¶ [62] 111e distinction bctwl::en authorized and wlauthorized borrowings is said by the present defendants to be fundamental to the proprietary base of AHA8's tracing claim. This is for the asserted reason that to the extent that borrowings by Mr. AI Sanea were authonzc:d by AHAB, funds derived from them and transferred by Mr. Al Sanea to the present defendants (whether as shareholder contributions or otherwise) must be regarded as having taken place with the knowledge and approval of AHAB. Such funds, if regarded as the proceeds of authorised borrowings by Mr. Al Sanea cannot now be regarded as AHAD's property so as to provide a proprietary base for its proprietary tracing claim.

¶ [63] "What is more, the ilIgument goes (per the written submissions of the Mr. Smith QC on behalf of the AW ALCOs): " ... an approwd loan will have had some approved purpose. It cannot be said that by using the lent money, Mr. Al Sanea was ipso facto misappropriating 11. The question 0/ misappropriation would tum on the purpose of the loan, -which will have to be investigated. To the extent that Mr. At Sanea used money for its authorized purpose, then all questions of misappropriation must go out of the Page 19 of77 window, and thf' clmm againsf Mr, Al Sanea (and ... 0 the claims against the other Defendants) would/ail"

¶ [64] The argwnent continues that AHAB must now therefore specify that borrowing which was authoriZ4~d and that which was not. Having failed to do so, (notwithstanding an attempted amendment of its pleadings since the N File disclosure came to light); AHAB can point to no property that was unlawfully misappropriated by :Mr. Al Sanea and so, to no proprietary base for its tracing claim.

¶ [65] Mr. Crystal QC put the argument in this way on behalf of the GT Defendants: "A plaintijj'cannot begin to conduct a tracing exercise withoUl.first identifying the property to which his ciaim relate ... and explaining why that particular property is capable of beinR the sukiect of a proprietary claim (that is: by idcnt~fying the property that has been appropriated and the reasons why the alleged appropriations were unlawfuO. AHAB has Jailed 10 do this. !n particular, it is now ciearfrom the N Files Ihal very substantial payments to Mr. Al Sanea were authorized by AHAB. In this latest evidence to the Grand Cow·t, Saud (Algosaibi) accepts (hal Mr. AI Soneo had authorization to borrow substantial sums from the Money Exchcmge. Paragraph 47 0/ his Affidavit dated 10 Septemher 201l ('Saud 4 ") stotes asfollows "As to Mr. AI Sanea's borrowing .from Ihe Money Exchange. [ have previously said in evidence Page 20 of 77 prepared for the English Commercial court proceedings that whilst I was aware at about this limp (200Ill0m) that Mr. Al Sanpa had horrowed frum the Muney Exchange, I never knew Ihe amuunt of the borrowing, or at any rate I had no recollection of the amount (see paragraph 56 of my second witness statement and paragraph 95 oj my third witness statement to the English proceedings). In light of [he information contained in the work sheet. l must arcept that at lemt in lOn'120m I was aware of the amount, and that 1 believed it to be in the region oj SAR 4 billiun (grus~), albeit that I subsequently forgot this (that IS: that the amount was somewhat in excess of US$l billion, /Wt SAR 1 billion [as had been believed)}. Saud goes on to stale in Saud 4 at paragraph 58 that: It was also my understanding that Mr. Al Sanea was not continuing to take money from the Money Exchange. I was told (by Mr. Al Sanea, but also 1 believe by Mr. Badr [a Money Exchange employee] that Mr. Ai Sanea had made repayments of his indehtedness which I took to confirm my understanding. I did not check those repr~·en(atiom; vI repayment, bul I had flO reason to doubtlhOi they were true at the time. ,.

¶ [66] Given that state of Al-IAB 's evidence, Mr. Crystal submits that in the absence of AHAB saying which transactions with Mr. Al Sanea were "authorized" and which were "unauthorized", AHAB can have no proprietary tracing claim; the "proprietary base" carmat be established. Page 21 of77

¶ [67] Further, that AHAB's Amended Statement of Claim does not remedy this fundamental problem. Indeed, the amendments recognize the eXIstence of substantial authonzed borrowing~ hy Mr. Al Sanea from the Money Exchange: see paragraphs 99E and 99H.

¶ [68] The ongoing failure is that there is no attempt to identify which specific borrowings by Mr. Al Sanea wcrc authorized. Plainly, says Mr. Crystal, discovery from the GT Detendants will not assist AHAB in identifying the property It is alleged has been unlawfully taken from it. It is only AHAB who can identify the "proprietary base" for its case. This is particularly so now that Mr. Al Sanea will be under TIO ohligation to pmvide discovery to AHAB (it having now obtained the Default Judgment against him).

¶ [69] Pointed criticisms of the Amended Statement of Claim itself are made in this rcgard.

¶ [70] It is said that Paragraph 99.0(d) simply asserts that any documents signed by Sulaiman Algosaibi (the Head of the Family then in charge of AHAB) after 30 September 2000 wert~ signed on the understanding that the moneys so advanced would "he used for the henefit of the Honey Rxchange, and would simply replace ur re.finaru:e (withuUi' jncrease) the ulreudy existing burruwings of the Mone)' Exchange" [This has come to be called the "new for old" borrowing policy J

¶ [71] And further that: "{(and to the extent that the advance was used for that purpose then AHAB accepts for the purpose of the proceedings that Mr. Al Sanea was authorized to arrange the facility. Ij however. the advance was used for some Page 22 of77 other purpose, and in particular, iIi( was u.~ed lofund mi.~appropriati()ns tn Mr. AI Sanea, then Mr. Al Sanea was not authorized 10 arrange the facility".

¶ [72] It must be recognised that this is rather equivocal pleading. Paragraph 99.0(d) does not state what lhe existing bOllowing of the Money Exchange was at the time of Sulaiman Algosaibi, nor what its purpose was. Nor does paragraph 99.0(d) identify the loan facility agreements in question. In particular, it fails to identify what facility agreements were signed by Sulaiman Algosaibi or executed under his signing authority after 30 Septemher 2000 and ~o to he regarded as authoriz.ed only [or tile purpuses of tht: new fur uld burruwing, lhal whir.;h is .'jaid by AHAB to have been the only kind of baIT owing for which Mr. AI Sanea was authorized after that date. Neither, for that matter, does the Amended Statement of Claim identify which facllittes were used to fund the alleged mIsappropriations by Mr. AI Sanea.

¶ [73] Not apparently being able to identify and particularize the proprietary base of its claim, it must follow, goes the argument, that AHAB has failed to identify specific assets in the hands of the GT Defendants (and other present defendants) and the precise basis upon which any alleged proprietary and/or tracing claim arises in relation to those assets. No link is pleaded between the money Me. Al Sanea is said to hay\::: misappropriated from AHAB and the money that Mr. Al Sanea is said to have paid to the GT Defendants.

¶ [74] ~or, it is said, do the pleadings which allege "shareholder contributions" to SICL and SHL (and to AWAL Bank as well) by Mr. Al Sanea assist AHAB's case. Those pleadings are in sub-paragraphs 188.1 and 188.2 of the Amended Page 23 of77 Statement of Claim 1,'1here it is alleged that contributions of USD2,318 million, USD3,OOO million and USDl,250 million allegedly paid respectively to SleL, SHL and A W AL Rank by Mr. Al Sanea, are moneys to which AHA8 has equitable title, havin:~ been received by those entities subject to a constructive trust in favour of AHAB. Indeed paragraph 1 RS is that which is proffered as the particularization of paragraph 187 which avers that "AliAB was und remains the equitable owner of the money misappropriated _from the Money Exchange as pleaded in Section E above. It is entitled to trace those moneys into and through the hands of the recipients and claims an account from Mr. Al Sanea. SICL, the SlFCOs, Singularis, AWAL Bank. the AWALCOs, SAAD Air and Awol Trust Company oflhe rece~,J/ of and use of the moneys. "

¶ [75] It is said by Mr. Co,stal QC that even if such shareholder contributions can be proven by AHAB, the proprietary base and transactional links to prove that they were paid with AHAB's money has not been pleaded nor will likely be established by ARAB. This is because the alleged contributions would necessarily have been pald to SlCL and/or SHL (and/or AWAL Hank) by Mr. AI Sanea or some third party and not by AHAB directly.

¶ [76] In such a scenario, thl~ alleged misappropriated money may have been mixed with Mr. Al Sanea's money to which AHAB will not be entitled. Thus, the "transactionailinks" would also have been broken,

¶ [77] Moreover, said Mr. Crystal, the GT Defendants were themselves funded by third party banks. For example, on 24 August 2007 SICL entered into a USD2.815 billion facihty agreement with Harclays Hank PLC acting as agent for a syndicate Page 24 of77 of banks and that facility was drawn down in three lranches: (i) 1:SD2.l billion on 31 August 2007; (ii) USD500 million on 3rd April 2008; and (iii) usn 215 million on 2 nd January 2009. SICL's indebtedness under this facility agreement fonned the basis for Its v:inding up at the instance of the s)1ldicatc banks and it is above the claims ofthese banks thai AHAB seeks priority.

¶ [78] AH of this will, of course, ultimately have legal consequences for AHAB's proprietary claim.

¶ [79] As already shown, it is a fundamental feature of the doctrine of tracing that the property to be traced has to be identified at every stage of its journey through life, and that it can be identified as property to which a fiduciary obilgation still attaches in favour of the person who traces it: Borden (UK) Ltd. r Scott;"ih Timber Products [1981/ Ch 25 at 46 per Buckley U (although stated in a case dealing with the impossibility of tracing resin so as to recover it after it had been mixed with other products to create chipboard, this dictum has stood as having general applicability to tracing claims).

¶ [80] The consequence, says Mr. Crystal QC, is that tmcing is no longer available where it is not possible to show that an asset or fund in a defendant's possession represents the plaintiff's money (for example, where a plaintiffs money is paid into an overdrawn bank account which is not an asset but a liability): Re Goldcorp Exchange Ltd. [1995} 1 AC 74 at 104-105, per Lord Mustill; and Shalson v Russo [20tl5J Ch 18/ at paragraph 140 per Rimer J. Page 25 of 77

¶ [81] And once a right to trace has been lost, it is extinguished: OJSC Oil Company ¥ugrllnet't (in Liquidation) v Abramovish and Others (above at para 353, per Clarke J).

¶ [82] Further, once a plaintiff's assets have been mix~u wilh the defendant's assets, the plaintiff will not usually be entitled to subsequent additions to the mixture made by the defendant, unkss the defendant intended them to be made for the benefit of the claImant (and so designated them): Re Goldcoro Exchange Ltd. (above); apply1ng James Ros,r:oe (Bolton) Ltd. v Winder {1915} 1 Ch 62. See also Bishopgate lnvestmentManagementv Homan [1995} 1 Alll!,:R. 347.

¶ [83] Accordingly, in the absence of a specific identification of property, a plaintiff can have no proprietary dailll. AHAB'~ di11iL:ulty with its claim in this regard is already recognised by this Court. As stated in paragraph 35 of the December 2011 judgment: "In the absence of specific identification 0/ property, a plaintiff can have no proprietary claim. A plaintif[ has to identifY his original proprietary right in respect of particular assets and then show that there is a nexu.~ or causal link hehveen the .~tnlen property and the assets being cluimed. Withuut that link no proprietar)' {racing can be established: see for instance Serious Fraud Offlce v Lexi Holdings Pic [1009} QR 376 at paragraph 49-5U, per Lord Justice Keene."

¶ [84] It was also already recognised m the December 2011 Judgment (at paragraph 36), that neither it is open to a plaintiff to overcome an inability to trace its specific Page 26 of77 property by instead asserting a general property right to or lien over assets of a defendam on the basis of the so-called "swollen assets theory"; already also discussed abo\le at paragraph 47 of this judgment.

¶ [85] This aspect of the principles is of application and generally relied upon by all the present defendants but is of particular significance now to SIFeO 5 for the following reasons.

¶ [86] As its Defence shows., SIFCO 5 was an SPY established for bona fide commercial reasons in order to acquire interests in private equity vehicles. It was established to implement a commercial agreement between SICL and Barc1ays Capital, a division of Barciays Bank PIc ("Barclays") which provided refinancing ofSICL's mterest in a portfolio of private equity funds. And as taken from paragraph 8.4 of SIFCO 5's Defence: "SIFCO 5 did not receive anyfunds directly from Mr. Al Sanea or from AHAB or the Money Exchange .. (aj It received very sign{{lcant funding from sources which ........ ... did not or could not have been involved in any fraud on AHAB. (b) (c) In respect of payments of money received from SICL (which amounted to at least $68. 7m). SIFCO 5 relies on (i) the terms '~f the (financing agreement) under which Barclays paid SJCL the sum of S70m for the financing of the (investment) Funds Plaljorm; and (Ii) that capital calls Page 27 of 77 made in respect 0/ the Flmds Por(folio over the lifetime of SIFCO 5 amounted to c.$82.9m. If is inferred that the cash payments from SICL were funded largely by money from Bmdays and were used to meet the ongoing capital calls. (d) In respect or the claims for J...'1Iowing receipt [in AHAB's statement of claiml AHAB is required to prove that (i) the Funds Portfolio as transferred to if by SICL was AHAB's traceable property and that it remained such notwithstanding the COnTribution of capital p'om Barclays and other sources: and (ii) it is denied in any event that SIFCO 5 had the requisite knowledge such that ARAB can found such a claim. In particular, it is denied that the knowledge of Mr. Al Sanea is that ~rSlFCO 5.

¶ [87] AHAli's reply to SIFCO 5's Defence remains essentially in terms of paragraph 11.2 of its Reply thus: "AHAB COnTends that since SIFCO 5, on AHAB 's case, received the proceed~ of Mr. Al Sanea's fraud by way 0/ capital or shareholder contributions (to SICL and then by SICL to SIFCO 5) {( was or should be treated as having been enriched in the Cayman Islands. that being the place whcre SICL and SIFCO 5 werc incorporated and maintamed their share registers. "

¶ [88] Thus, Mr. Lowe QC'~, criticism - that the entire edifice of AHAB's claim against SIFCO 5 is based on <m inference that Mr. AI Sanea "must have ... through SICL" Page 28 of77 (to qllote from paragraph 161 of AHAB'~ Statement of Claim) paid misappropriated mow:y to the SIFCOs by way of "equity capital used to purchase investments" - is justified.

¶ [89] Seen in that light, th,) proprietary tracing claim is based on nothing more thEUI U theory that the assets of SlFCO 5 must have been swollen by receipt of AHAH' s money paid into SICL by Mr. AI SEUIea and passed on down to SIFCO 5.

¶ [90] As explained above and more fully in the December 2011 Judgment in respect of SlFr:O 5. that is not a proper hasis on which to mOllnt a proprietary tracing claim.

¶ [91] Givl;;n Lhiit SIFCO 5 must bl;; n::ga:nl,"u as having pkadeu its rt;l.;eipts wiLh full particularity to the b~:st of its JOLs' ability (as they are officers of this Court); I see no prospect of AHAB being able successfully to plead a proprietary tracing claim against SIFCO 5 and for that reason am compelled to accede to SIFCO 5's summons where it se.eks strike out on the basis that the proprietary tracing claim is frivolous and vexatious, disclosing no reasonable cause of action. See Kalier v Manus 1999 CILR 566 and Grupo Turra.'t v Bank of Butterfield 2000 CILR 441 where it is explained tIlat a casc will be struck out if it can be shown to have no basis in incontrovertible fact.

¶ [92] Nor does AHAB's case against SIFCO 5 based on knowing receipt fare any better. AHAB has pleaded no facts to show that Mr. AI Sanea's knowledge 'Should be attributable to SIFCO 5.

¶ [93] It is fundamental that a pleading, if it is not to be merely embarrassing to a defendant (and so also an abuse of process), should state those facts which will put those against whom it is directed on their guard and tc:ll thcm what is the case Page 29 of 77 which they will have~ to meet (see Phillip.~ v Phillips (1878) 4 GBD 127). No averment can be omitted which is essential to the claim succeeding. Mere as~ertion will not sutlice: See TMSF v Wisteria Bay Ltd. 1007 CILR 310.

¶ [94] An allegation of bad faith, for example; the delllal that a person is an innUl.:rnt purchaser for value (as SIFCO 5 claims in its Defence to be in respect of the funding received from SleL), must be specifically and distinctly pleaded with the utmost particularity. The claims in knowing receipt require proof of knowledge of dishonesty in retation to each receipt: Belmont Finance Corporation v Williams [1979 Ch. 250.

¶ [95] AHAR's only allegation agaim;1 STFf:O :) ha<; heen and remam~ that STeT. pruviut;d its iAjUlty capitaJ (pamgraph 153 uf lht: Stait::mrnt of Claim). AHAB has not identified any receipt of its money and is unlikely to be able to do so, given the nature of the third party funding known to have been received by SIFeo s. There is no evidence that any other funds received by STFCO 5 are the product of AHAB's funds received by SICL. The paucity of the pleadings against SJFCO 5 was already the subject of comments made at paragraphs 96·100 of the December 2011 Judgment. Then, the view was expres~ed that at that stage of proceedings it Wd~ tuu t;arly to sLrikt; uut AHAB'~ ca:s~ agaimt STFCO 5 for lack ur particularization and Ithat SIFCO 5, if so advised, could later bring an application for summary judgmcnt.

¶ [96] Now the picture - after AHAB has amended its Statement of Claim without advancing its claim ag·ainst SIFCO 5 - has crystallized more clearly in its favour Page 30 of 77 and in favour of the indisputably innocent party - 8arclays - who provided its known financing. 97 _ For those reasons, I grant the application of SIFeo 5 that AHA H's case against it be struck out in its entirety.

¶ [98] The same result does not necessarily follow, however, in respect of AHAB's proprietary tracing cillims against the GT Defendants and the A WALeDs.

¶ [99] As direct recipIents allegedly of some S6.2 billion from Mr. Al Sanea by way of capital contributions, their position is very different from that of SIFCO 5. IOU. A further basis for ARAB's claim against them, addressed specifically to the "lack of proprietary base" and "broken transactional links" arguments, was presented by Mr. McQuater QC by reliance upon the authority of Sinclair Investments v Versailles (CA) [lOll) 4. All E.R. 335. The well established principle discussed in the case is most clearly explained by Lord Neubugcr MR (as he then was) at paragraph 138: 1 do not doubt the general principle reiterated by Lord Millett in Foskett v McKeown {above} that ~l a proprietary claim is to be made good by tracing, there must be a clear link between the claimants' funds and [he asset or money into which he seeks to trace. However, 1 do not see why this should mean that a proprietaty daim is lost simply because the defaulting .fiduciary, while still holdin~ much of the money. has acted particularly dishonestly Of' cunningly by creating a maelstmm. Where he has mixed the funds held on trust with his own funds, the onus should Page 31 of77 be on the jidz,lciary to establish that part. and what part. of the mixed fund is his propero'. "

¶ [101] By reference to that plinclple, Mr. McQuater argued that: "II is ... already arguable Ihal [ARAB '!}j injen:ntiu/ W!}'e i!}' strung enough such that the burden sh!fts to the defendants in liquidation to prove thaI assels are not derived from our money. because Mr. Ai Sanea created a black hole. or a maelstrom if there is one. And even if our in/erential case is 1101 yet sufficiently strong for that, following discovery. it may be . ..

¶ [102] This is of course present.ed here on the further premise that the defendants in liquidation stand, a::; Mr. Al Sam::a's alter egos, in the same position as the archetypal "defaulting fiduciary" of Lord Neuberger's dictum.

¶ [103] Mr. Crystal's response is that the circumstances of AHAB's pleaded case do not permit of reliance upcln the principle from Sinclair Investments. He submits that the cited principle is authority for the proposition only that where a trustee has mixed and confused flfoperty which he held in a fiduciary character with his own property, so that they cannot be separated with perfect. accuracy, then the onus is un tht:: trustet:: tu dislilliguish the separate assets and to the extCrIt he failed to do so, they belonged to the tJUSt.

¶ [104] Thus the principle can have no application to the present casc because it applies only where the plaintiU is seeking to trace into property held by the "defaulting fiduciary" himself. No allegation is made in the present case that the GT Defendants owed fidluciary duties to AHAB, only that Mr. AI Sanea owed Page 32 of 77 fiduciary duties to AHAB. Rather, the allegation made against the GT Defendants is that they were the recipients of IDunt!ys misappropriated by Mr. Al Sanea. Sinclair Investment.'fI does not support the proposition that the burden of proofis reversed in such a situation.

¶ [105] Assuming for present purposes only, that Mr. Crystal is correct in this argument, I must nonetheless tum to consider the evidence relied upon by AHAB in support of its proprietary tracing claim against his clients, the GT Defendants.

¶ [106] It comes primarily from Mr. Simon Charlton's 8th AffidaviL He is the senior Deloitte accountant who heads AHAB's forensic investigalion learn. t 07. This is evidence upon which AHAB relies by way of inference for the proprietary base of its tri:lClng claim, that its property was received by the OT Defendants (and AWALCOs) and, if given the proper disclosure that their JOLs are obliged in law to give (see paragraphs 33-40 above); will allow AHAB to develop its pleadings of the transactionallmks leading to identification ofits property still in the hands of their JOLs. As a matter of the law of discovery. this is a proposition in support of which Mr. McQua.ter QC placed strong reliance un Grupe Torras 1I Bank of Butterfield as that case applied Arab Monetary Fund 1I Hashim (both above).

¶ [108] In Grupo TorNs a~, in this case, the allegation centered around fraudulent breaches of trust by which the plaintiffs, agencies of the KUWaIti Government, were defrauded hundreds of millions of dollars some of which was traced to a Cayman Islands trust established by the fraudster Sheikh Fahad AI Sabah, giving rise to the inference that further large amounts harllikely been secreted away by him into that and oHler trusts established in uther jurisdictions. Among other Page 33 of77 claims, Grupo Torras brought a proprietary tracing claim against Sheikh Fahad's trusts. Lpon the defendants' application to strike out the claim for lack of a reasonable cause of action, it was held, inter alia, that: "Although, in .order to succeed at trial, the plamtUfs would have to prove the precise path hy which their moneys were acquired by the defendants, it was unnecessary (at that interlucutury strike out stage)for them to be able to do so Rather, they needed only to show that the dr;fendants held property ident~fiable (vJ.'ilh the benefit of discovery) as representing their moneys. In the interests ~lju!,tice they were entitled to expect the cooperation of the court and would be permitted to proceed so as to abtain the meal1.~ ()f particularizing and proving their claims. tr necessary by working buckward.s, tracing .from the defendants' assets to themselves. The d~fendanl's who had become [as trustees of Shickh Fahad's trusts] "mixed-up" in their grantor's .fraud, had a duty 10 assist them by giving foil iliformation, and would not be permitted to use the rules afpleading to defeat arguable ciaims . . , J 09. As in the present case, in Gruno Torras I was faced with the question whether the plaintiJT:s' pTUprit:t.ary tracing claim was unsustainable fOT lacking what is here identified as the "proprietary base" and so should be struck. This became a matter of what reasonable in1ferences could be drawn.

¶ [110] At pages 446-447 I am recorded as having said the followmg: Page340f77 "Can the wider claim in tracing or unjust enrichment be sustained? The answer to that question would depend on whether the inferences which the pleadings invite are themselves prima facie sustainable. In answering that question and havinJ? reKard to authority (see eH Ltd. v F 19$8-89 CILR 516), I consider it would be inappropriate to seek a definite answer at this stage to the further question whether the plaintifft. at trial. will ever be able ta present the eVidence necessary to prove those inferences 10 the appropriate st.rmdards. Given the known and relevant background of the pleadings, I can find no basis for concludinl? tnat they obviously will nol be able to do so. It is a matter of procedure and evidence. Now that the pleadings are settled and the issues may be fairly joined. there is already. to my mind. sufficient to allow the plamtijls to invoke the course of dlscovery which the court may properly direct. For the follOWing reasons. I consider that the Statement of Claim. in para~raphs 18 and 19. invite inferences which are reasonable and. as a maficr of meeting the formal requirements of pleadings, suj}/ciem to disclose the ofore50id cause of ac/lOn. " Page 35 of77

¶ [111] Then followed a listing of the circumstances giving rise to the inference that the defendants may hav·e been in receipt of moneys or assets representing the proceeds of Sheikh F~Lhad' s fraud.

¶ [112] First, among that list of circumstances and in striking similarity to the relationship which Mr. At Sanea as the fraudster is said to have enjoyed with AHAB here, was the following: "As their chief executive officer, Sheikh Fahad was the plaintiffs' fiduciary. Thus fiduciary obligations still attach to all of the plaintijJ.~' money stolen by him and passed on by him to an) person or entity: see Borden (UK) Ltd. v Scottish Timber Prods. Ltd. {1981J Ch. 25,,"

¶ [113] In the same way, Mr. McQuater QC urges me to accept here that AHAB may rely upon the inferences, those already arising from the evidence it has adduced and disclosed (and which even earlier in the judgments of this Court was found to show a good arguable case); the same inferences which point irresistibly to a proprietary base tor AHAB's moneys being comprised in the massive capital contributions, made by Mr. AI Sanea to his Cayman companies, including the present defendants. [t is the irresistible inference, says Mr. McQuater QC, that those contributions - to the tune of USD6.2 billion - must, from all the known circumstances, have been AHAD's moneys borrowed from banks OT othcnvisc obtained and then misappropriated by Mr. Al Sanea through the Money Exchange. Page 36 of77

¶ [114] When paid over to the GT Defendants and AWALCOs by way of capital contributions those moneys were still attached with the fiduciary ubligations which they carried.

¶ [115] Mr. Crystal would have me distinguish Grupo Torras from this case primarily on the basis that there, unlike in the present case, the Plaintiffs were already able to idcntify specific property paid into Sheikh Fahad's trust (some USD2.2 million) which they could trace as the1r property.

¶ [116] Moreover, no question arose in Grupo Torras as to significant sources of third party funding available to the defendants as is the case here. The Court's decision in Gruna Tarras was based on the reasonable inference, specific to the facts of that case, that Sheikh Fahad's trust would likely have been thc recipient of further proceeds of the fraud. No comparable mference arises in this case, says Mr. Crystal.

¶ [117] But further evidential basis for the "strong inferential case" of the existence of the proprietary base of AHAB's claim, is said by \itr. McQuater to be now provided by Mr. Charlton's 8th Affidavit. In summary: (1) ARAB applied to the United States District Court for the Southern District of New York for Judicial Assistance pursuant to 28 U.S.C. § 1782 in order to obtain documents from various US banks, Against the strong opposition of those banks, AHAB eventually obtained 17,000 pages of account statements and 1,200 pages of account-opening and know-your- customer materials. Because of the difficulty in obtaining the document~ and certain re:;trictions on their use, Deloitte's lIDalysis uf the materials is Page 37 of77 not yet complete. Mr. Charlton explains (paragraphs IOta 25), that the documents have gone a long way to evidence the transfer of moneys misappropriatEd by the use of fraudulent I.etters of rredit ("J .rs) (a.o:; ut:sl"Tibed in st:ction E4 of the Statement of Claim) from TIBC (described below) and the Money Exchange to STCC, the princIpal SAAD Group company controlled by Mr. AI Sanca. STCC was based in Saudi Arabia and is shown to have been the direct reCJpient of some $6 billion as the proceeds of Les, cheques, cash withdrawals and electronic transfers from the Money EXI;!hange (see paragraph E.I.62 of the Amended Statement of Claim)_ The SAAD Group's own statements and the financial records relating to the lending bank~ are nuw rtA.juireu in onler to trace the transfers further. says Mr. Charlton. Further requests under § 1782 are also pending. For its part, it is to be noted that TIBC was a bank promoted and operated in Bahrain by \J1r. Al Sanea as an AHAB entity and Itself now the subject of criminal investigations and proceedings in Bahrain. (It is one of the more remarkable features of this case that the current AHAB partners disclaim any dl!lt:lil~J knuwkJg~ ofTIBC's operations). (2) AHAB has initiated a claim against the Saudi bank SABB with the Saudi Arabian Mondary Authority Committee (SAMA) seeking, inter alia, a complete set of bank and porttolio account statements and account opening documents and cheques. SABS was a banker to the Money Exchange and Mr. AI Sanea used the SABS account in order to draw the Page 38 of17 fraudulent cheques as described in section E3 of the Statement of Claim (at a rate of US 1 million or more per day). It is clearly a central part of the tracing exercise to identify the recipients of those cheques, which was the large.st .single mechanism of mi.sapprupriation usoo by Mr. Al Sunea. SABB has consistently resisted provIding the infonnation but AHAB is pursuing its claim in SAMA. (3) [n connection with proposed criminal proceedings in Switzerland, AHAB obtained through the Swiss procureur (prosecutor), inter aha, account statements from financial institutions holding funds frozen pursuant to the procureur's attachment order. Those included 32 files of (hard copy) documents frClIn Citibank. From an analysis of those uocuments, the Dewitte inve:stigation team was able to identify 110 transactIons with ARAB which result in a net cash outflow of funds (within this particu1ar portfolio), amounting to approximately US$223 million, from AHAB to SICL. All of these 1ransfers have been traced and matched with the Money Exchange Bank of America Ilccount statements. On review of one of SICL's bank accounts with Deutsche Bank. in Geneva, the investigatioll team has also found US$50 million from the Money Exchange transferred to that account. These arc clearly highly significant findings as they appear to show direct, and therefore easily traceable, payments from AHAB to a D~~fendant in liquidation; SICL. Page 39 of 77 (4) The Investigation Team also noted two significant payments of LS$50 mlllion each in 2006 into SICL's Citi Bank acCOlll1t from STCC (Mr, Al Sanea's principal business in Saudi Arabia), As set out in paragraph 63 of the Amended Statement of Claim, cheque pa)ment~ (tuLaling USD2.185 billion), I.C payments (totaling USD2.03 billion) and withdrawals (totaling USD560 million), were regularly made from the Money Exchange for the benefit of STCC. These two further huge payments of $50 million each from STCC to SICL indicate a further potential link between funds, from the Money bxchange benefitting one of the present defendants.

¶ [118] Mr Charlton set out (at paragraphs 48 and 49) some further investigatlom:l still to be conducted, including: production of the banking records for the accounts set out in Scheduk: A of his affidavit, which filay -in due course be obtained from the banks; further Swiss bank records, which may be obtained from the procureur; continued efforts to obtain documents through SAMA from SA88 in Saudi Arabia.

¶ [119] At the end, however, ~)ays Mr. McQuater, the records obtainahle from third parties are at best an indireet means of finding out what happ~neU within the SAAD Group. It -is the SAAD Group's own records which should show the money flows din::(,;t1y.

¶ [120] Despite that state of the evidence potentially in support of the existence of a proprietary base of AHAB's tracing claim, the GT Defendants (per Mr. Crystal) Page 40 of77 emphasize four reasons in particular why AHAB' s claims should nevertheless be struck out now, befon: discovery.

¶ [121] First, they say (at paragraph 82(1) (i) of the written ~ubmlssions) that ARAB "now accepts thul ut least some of the mone), borrowed by Ak AI Sanea from AHAB was authorized". referring to the N Files Disclosure. But, says Mr. McQuater, that is a mischaractcrization of Al-{AB's case and it confuses the difference between urmuthorized borrowings on behalf of the Money Exchange and unauthorized or misappropriated payments away from the Money Exchange. AHAB's case is that all of the payments away from the Money Exchange to the SAAD Companies w{:re unauthorized and so misappropriated.

¶ [122] I consider this to bl;: ~m important point for present purposes having regard to the following matters. First. as 1 undentand ARAB's case as now pleaded in its Amended Statement (If Claim, borrowings on behalf of the Money Exchange and from it for Mr. Sanea's own purposes, were only ever authonzed up until 200112002 when it is said that Sulaiman Algosaibi authorized only that such new borrowings be made 1:0 replace those existing before and so to the extent that the old hOTTowings (acknowledged by Saud Algosaibi to have been then at 4.1 billiDn Saudi Riyals) had be·en repaid. It would follow, if that were proven to be true, that further borrowings after that time made for funding Mr. Al Sanea's STCC and A WAL Bank, \-'I.'ere unauthonzed and, even if not made solely for those purposes but also for AHAH's purposes, to the extent used for Mr. Al Sanea's purposes were unauthorized (and largely forgeries) and misappropriated, Page 41 of77

¶ [123] Second, the GT Defetldants say - at paragraph 82(1){ii) of Mr. Crystal's written submIssions and as discussed above by reference to Sinclair lnvestments " Vel'saille!.· - that the money may have passed from AHAB to the Defendants in liquidation by a rome which precludes tracing, for example by mixing or through a bona fide recipient (eg. via an overdrawn bank account).

¶ [124] That is a possibility but, as Mr. McQuater submits, whether such obstacles exist cannot be determined until the Court has seen all the relevant evidence, in particular thc cVldcn(:c which may become available on discovery from the GT Defendants themselvt::s. It would therefore be wrong to assume tor the purpose of a strike-out, that such a defence is available.

¶ [125] Third, the GT Defendants argue that "various and significant sources of third party funding were available to the GT Defendants'",

¶ [126] Again, ~ays Mr. McQuater, while that might ultimately affect the tracing claim. it must nonetheless be III matter to be detennined at trial. It is important to note that thc third party borrowing alleged was at the SICL level; yet the massive shareholder contributions to SICL and SHL appear to have come from Mr, Al Sanea himself: There is no evidence that those capital contributions were funded by thlrd parties.

¶ [127] Fourth, the GT Defendants say that AHAB should not be permitted to put their estates to the great tmuble and expense of providing discovery simply in the hope that something "may tum up" to allow AHAB to particularize its proprietary claim, But, says Mr. McQuater, that is not what AHAB has done or seeks to do, AHAB has properly pleaded its case by reference to a strong mference that Mr. Al Page 42 of77 Sanea has fraudulenlly funded the GT Defendants with AHAB's money, an mference that is supported by volumes of contemporaneous documents. It is a legitimate use Df discovery to obtain material from which an existing pleaded case can be further particlilarized. And the further argument that discovery will not a.<.;si<;:t AHAB in identifying its misappropriated property is also misconceived. That is bCI,;i:lUse, as iO.lreauy nuted, it proceeds on the basis that the proprietary claim depends on whether the borrowings were unauthorized, rather than on whether the payments to Mr. At Sanca were unauthorized.

¶ [128] On the latter basis, a proprietary base for the claim is established sufficient to justify giving access to the records of the defendants in liquidation for the purposes of the tracmg exercise. To the extent that a loan facility taken in AHAB's name (even if its existence was known to AHAB) was in fact used to fund a misappropriatiun tu Mr. At Sant::a, the loan would be unauthorized and so a link developed betwt::en the question of authorization and the destination of the borrowed funds. Anall'.fOi.\· o(the GT Defendants' argument!J'

¶ [129] In my analysis of these arguments, it must, to begin with, be acknowledged that massive borrowings t-ook place through the Money Exchange whilst under Mr. AI Sarrea's control and that AHI\B is liable to the banks for it. The alleged sum of USD9.2 bilhon is said to represent the total indebtedness claimed by some 118 banks in legal actions taken in many jurisdictions against AHAB.

¶ [130] AHAB is entitled to ask the rhetorical question at this stage: where did all that money go? Page 43 of77

¶ [131] While in charge of the Money Exchange, the evidence shows that Mr. Al Sanea injected some USD6.2 billion inlu his Cayman cumpanies through STCC and AWALBank.

¶ [132] AHAB's liability to the banks would, by itself, be sufficient reason, assuming that AHAB can establish proper legal causes of action, to pursue Mr. AI Sanea and his companies on the basis of the reasonable inference that the contributions by Mr. Al Sanea to his companies were made with AHAB's money.

¶ [133] Even AHAB's inability to den}' the banks' claims alleged in the London proceedings because of its ostensible knowledge and authorization of certain loans allegedly borrowed in cahoots \\ith Mr. Al Sanea in a scheme to "Tob Peter to pay raul" and allegedly also to maintain Mr. Al Sanea's and AllAll's partners' lavish lifestyles; would not mean that AHAB must be estopped from pursuing Mr. Al Sanea for moneys misappropriated by him. AHAB's capitulation in the London proceedings was made expressly without prejudice to its claims in this

¶ [134] Furthennore, I must he mindful that the GT Defendants' further argument, that their discovery will not establish AHAB's tracing claim because it will not show an unbroken cham of links in the transfer of money, is not the same thing as forensic evidence to that effect.

¶ [135] The GT JOLs have not said that they have themselves undertaken a reverse tracing exercise such as could establish any such premise. They have instead steadfas;tly refus;ed (no douht on legal advice) to provide discovery to AHAR and tlllS, despite specific requesls fur disd{}~un; uf bank lil,;cuunl n:wnb as spukt:n lu Page 44 of77 alr.;o by Mr. Charlton in his 8th Affidavit. Bank account records are the obvious plal:e to begin a search for the transactional links with any money that Mr. Al Sanea (or STCC or AWAL Bank on his hehalf) would have paid into the Cayman SAAD Companies.

¶ [136] Rather than provide such records one of the GT JOLs, Mr. Akers (in his 8th Affidavit) in response to Mr. Charlton's evidence, argues that despite having obtained certam SICL bank account records from the Swiss authorities, AHAB has not been able to particularise its proprietary claim agrunst SICL. He also argues that AHAB will never be able to establish a chain of payments from SICL's discovery bt:cause SICL is "nnly ()ne link in a chain nf pnssible recipients" induding STCC. He emphasizes (at paragraph 37) that STCC I::; nul if party to Ihis action alild moreover, IS an entity that had its own sources of third party funding. Thus, from a practical perspective, tracing funds where there is a missing link In the chain is virtually Impossible, says Mr. Akers. Moreover, It would be extremely dlifficult for an effective tractllg exercise to be undertaken in circumstances where the GT Defendants themselves still do not have access to all relevant company documentation

¶ [137] I am not persuaded by the arguments on behalf of the GT JOLs. 1 8m fimlly of the view that they should consider themselves, as officers of the Court in search of the true ownership and proper disposition of the assets under their control, duty bound to aSSIst the Court in the proper resolution of AHAH's claim. An obstructionist approach will not do. The GT JOLs have a common interest with AHAB in securing full discovery of their companies' documentation from entities Page 45 of77 or sources controlled by Mr. AI Sanea wherever they might be. In this regard, efforts taken by them in Saudi Arabia with the approval of the Court have not yet bome fruit, having been met at every tum with obstruction or lack of co-operation by Mr. A1 Sanea.

¶ [138] Recourse to the Saud-i Authonties may be the only answer, recourse of the kind AHAB has sought with SAMA. It simply will not do for the GT Defendants to refuse to assist AHAB by way of discovery by pleading - for instance as SICL doe." - that important 'STCL documents salted away from SFS (the related entity in Swilzcrland) to Saudi Arabia by Mr. Al Sanea, remains beyond their control. As a matter of Cayman b.w, those remain SICL documents and so potentially come within the purview of the GT JOLs' discovery obligations as described above (at paragraphs 33-40).

¶ [139] Moreover, criticisms of AHAB's case as being still unparticularized despite the passage now of thre·e years since ils inception, ring rather hallow when the impediment of the various interlocutory skinnishes to its claim are considered.

¶ [140] Rather than striking out AHAB's claims against the GT Defendants now, it must be right, as Mr. McQuater submits, that the discovery process should be allowed to run its proper course, with all parties doing their reasonable best to comply and so at trial for the Court to determine whether the argwnents such as those sought to be advanced by Mr. Akers in his 8th Affidavit against the practical feasibility of tracing, are correct. Page 46 of77 Analysis of the AWALCO's arguments 141, In respect of the A WALCOs, further arguments were put by Mr. Smith QC against AHAB's tracing claim as it relates specifically to them, relying on the third Affidavit of Mr. Carlton-Kelly (one of the JOLs of the AWALCOs) and on the first affidavlt of \1r. Mark Oldfield, a chartered accountant and analysis in Baker Tilly Restructuring and Recovery LLP, Me. Carlton-Kelly's firm.

¶ [142] Mr. Oldfield provides a very detailed analysis of funding obtained by the AWALCOs which were fonned, like the SIFCOs, as special purpose investment vehicles. In essence, his analysis shows that their funding came from A W AL Bank BSc and (respectively for each AW ALCO) from various well-known international banks ("the external banks"). In one case - that of AFCLS or AWALCO 5 (timnerly SIFCO 6) - some financmg also came from SICL. 143 Mr. Oldfield's analys:is explains that, in aJI but one of the AWALCOs, the AWAL Bank/external banks ~rinancing was co-mingled for investtnent purposes and later investments were liquidated or othewise redeemed and distributed back to the investors, including AW AL bank In the case of each AWALCO, the net position is retained on its books as reflecting a net liability owed to AWAL Bank: or receivable due from it.

¶ [144] The sole exceptJon among the A WALCOs as recipients of ffilxed funding from AWAL Bank (or SICL) and the external banks, is AFCL 3 (AWALCO 3 or present defendant #16). As Mr. Oldfield explains at paragraph 44, AWALCO 3 was established as a !,pecial purpose Jflvestment company to invest in a portfolio of investment securities using loan finance provided by AWA L Bank. According Page 47 of 77 to its audited financial statements for the year ended 31 December 2008; between November 2006 and December 2006, AW ALCO 3 purchased investment securities from a "rellated party" at a fair value of LSD73.7 million. As at 31 D~L·rnIber 2007. lilt: .ltuditoo. accuunt~ reflected the USD73.i million as owed to AWAL Bank and as at 31 October 201 0, the net effect of the financial positIOn of AWALCO 3 is that rt is a donnant SPY, apparently owing some USD38 million to A W AL Bank.

¶ [145] This summary of th~, financial history of the AWALCOs tends to suggest that lwith the possible ex.ception of AWALCO 3 because of its direct source of funding from AWAL Bank) a proprietary tracing claim for AHAB's money would no longer be sustainable against them, even had they been in direct receipt of AHAB's money. The view of the JOLs of the AWALCOs is that moneys could no longer be traced into assets acquired by the comingled use of external bank financing and subsequently liquidated and divested back to the banks. there being no way of knowing whether any positive net assets remaining with the respechve A WALCOs. represent money contributed by A W AL Bank andior SICL or not.

¶ [146] Thus, it appears that this proprietary tracing claim which emerged against the AWALCOs only afkr their initial ensnarement in the action for being parties relatcd to Mr. Al Sanca, AWAL Bank and SICL (on TBS ~ Shamhra grounds ([1992) 1 WLR 131) is unsustainable as against them.

¶ [147] Even the exceptional position of AWALCO 3 is said by the AWALCO JOLs not to justify AHAB's claim. Page 48 of 77

¶ [148] This is because, although funded exclusively by AWAL Bank, that entity itself (now in administraticlTI in Bahrain and the subject along with Mr. At Sanea, of criminal proceedings or investigations in that country), is shown to have received funding from sources other them Mr. AI Sant;:a. On that bw.is, lhere would be no way of knowing whelher the USD73.7 million It received from AWAL Bank and used to pwchase sc~curities from a "related party", was AI lAB's moneys transferred to A W AL Bank by Mr. AI Sanea.

¶ [149] This too is a plausiblc;~ but yet, to my mind, inconclusive argument.

¶ [150] On the contrary and illS Mr. McQuater argued, /'\ WAL Bank (which is admitted to have made the loan to fund AWALCO 3 investments) was owned in part hy Mr. Al Sanea directly as well as otheIv:ise by his holding oompany SICL and so inferentially was likely to have been funded directly by him.

¶ [151] AWAL Bank is in ailministration in Bahram and AHAB docs not have access to its documents; it seems that the A WALeD JOLs are able to request access to relevant AWAL Bank documents (as indicated by the Bahraini authorities) and AHAH has been taking steps in the United States to gain access to A W AL banking documentation, at least for US dollaT transaction~. A WAL Bank has also already been the subject of a detailed report, PTepared by representatives of t11e international accounting firm Kroll at the behest of the Bahraini Public Prosecutor, so there are good prospects that, by timc of trial, further and better infonnation relating tD Mr. Al Sanea's use of AWAL Bank will be available.

¶ [152] And, while the A WALCQ JOLs have shown that much if not all of the alleged contributions by .\Itr. Al Sanea to AWAL Bank (totaling USD1,250 million as Page 49 of77 pleaded) could not have been paid from monies transferred from tile Money Exchange al limes aller I January 2007 when those contributions were largely made (see Oldfield paragraph 24); AHAB's case is that contribution.., to AWAY. Bank by Mr. Al Sanca or SICL were not limited to those amounts. As at 1 January 2007, A W AL Bank already had eXisting equity capital of USD750 million which inferentially must also have been provided by Mr. Al Sanca andlor SICL (as AWAL Bank's shareholders) between 2004 (when AWAL Bank was established) and the end of 2006.

¶ [153] For those reasons and the further reason that the Bahraini Public Prosecutor has recently indicted Mr. Al Sanea and other members of the AWAL Bank's management on a sc:ries of criminal charges (including false accounting and aiding and abetting the destruction and concealment of documents); Mr. McQuater argues th~rt it would be premature to strike out, based merely on findings at this interlocutory stage, AHAB's tracing elanD against the AWALeD,.

¶ [154] I agree. While the makings of a proprietary tracing claim appear to exist as relating to the AWALCOs, only as agamst AWALCO 3; a case for knowing receipt and dishonest assistance, and restitution could well be sustainable against all the A WALCOs as fully particularized, after discovery.

¶ [155] That being so, the A WALCO IOLs may not avoid their discovery obligations in this case simply by virtue of their minimization of AHAB's proprietary tracing claim. AHAR's claim overall has not been shown, as against the AWALCOs, to Page 50 of77 he devoid of a reasonable cause of action or to be an abuse of the process of the Court.

¶ [156] I ccmclude that, as in the case of GT Defendant~, the A WAI ,COs' summons does not meet the strict te:st for striking out as explained (and accepted by all ~iut:s now) in the earlier case law. A concise summary appears at page 445 of the Grupo TorrQS judgm~mt (above): "The rules governing an application to strike out a pleading for disclosing no reasonable cause of action are well settled. They have been inl'oked and applled in these courts on a number of occasions In the past. The following passage from a leading English case is an appropriate summary. I quute frvm lhe well known passage in the judgment by Stephenson U in McKay v Essex Area Health Authority ([1982)] 2 All E.R. 771 at 778}: "The .dejimdants have to show that the case is "obviously unsustainable". See A_G of Duchy 0/ LancaSler v London and North Wesfern Riley Co ... ; "obviously and almost incontestably bad": See Dyson v A-G .. , "one which caTinot .,ucceed", "unarguable": See Na~le v Fielden ... ; "quite unsustainable: See Schmidt v Secretary of Home Affairs"; "hopeless .'. See Riches v DPP. ... " This is all summed up in a sentence from the judgment Qf Lord Pearson in Drummond-Jackson v British Page 51 of77 Medicol Association ._ which I-aw,wn .l followed in this ewe. " ... the urderfur striking out sh()uld only be made if it becomes plain and obvious that the claim or defence calmof succeed. "

¶ [157] For the reasons dis(:ussed above by reference to the case law, the precise particularization of every pleading (or here every unauthorized loan facility and its subsequent dispersal) is not necessary for a party to be allowed to proceed with its claim to discovery. Here. although precise pleadings of that kind may yet be required before ARAB is allowed to proceed to trial on its proprietary tracing claim, an inability now to give such particulars is not a valid ground for striking out those claims, let alone to preclude discovery for the other claims for knowing receipt and dishonest assistance which may not require the same degree of specificity of pleadin,f:s.

¶ [158] ~either do I accept, as the present defendants have variously argued, that the unparticularized state of AHAB's pleaded ca<;e i<; <;uch that it i~ "impossihle" for them to give discovery as rtxtuirtd by lht: rult:s.

¶ [159] My view is that whille the proprietary tracing claim certainly needs to be better particulariscd in tcmlS of the "proprietary base" and thc "unbroken chain of transactional links"; it is clear that the enquiry must begin with the funds received by the present defendlmts either directly from Mr. Al Sanea or indirectly from him through STCC, A WAL Bank or any other channel revealed by the forensic investigation. Page 52 of 77

¶ [160] The prima facie case already observed in AHAB's favour by the Courts support the inference that any such funds were probably obtamed by means of Mr. Al Sanea's position at t~e Money Exchange. No evidence to refute that inference (save in the case of SlfCO 5 as discussed above) has been presented ~u faT in this case so as to justify insulating any other of the present defendants from the discovery process.

¶ [161] There is not a "mere coincidence In time" explaining the transfers of funds to the present defendants, as Mr. Crystal submits. It is a reasonable inference based upon the circumstan(;es that no other source of such massive amounts of funds appears to have been available to Mr. AI Sanea apart from the Money Exchange.

¶ [162] It is thlS prima facie inference that creates, in Illy juugment, tht: ubligatiun upon the GT Defendants and the AWALCOs to respond by way of giving discovery. And it is in this context that, in my yiew, thc distinction sought to be struck by the present detendants between "authorised" and "unauthorised" borrowings becomes inconclusive. If AHAB can establish its "new for old" borrowing policy at trial (as now pleaded in the Amended Statement of Claim) and further, that all subsequent transfers -Df money away from the Money Exchange by Al Sanea to his SAAD Companies were unauthorised or misappropriated; the fact tlw.t SOIn!;: earlier borrowings were authorised will likely change nothing.

¶ [163] For all the foregoing reasons, in my view AHAB's pleaded ease has brought it to the stage where it i;; entitled to discovery from the GT Defendants and the AWALCOs. Page 53 ofn

¶ [164] Neither on the summons of the GT l1efendants nor on that of the A W Ar J"~Os, am I satisfied that the test for striking out is ml!t and so their appli(.;aliuns <:LTe rdus~. Further specific arguments in relation to the Letters of Credit

¶ [165] Mr. Crystal QC furlher argued that in any event AHAB's proprietary tracing claim specifically as it relates to LC payments must be struck out because those payments were made directly by the banks not with AHAB's money but with the banks' money and so can provide no proprietary base for AHAB's claim.

¶ [166] This argument again invokes the dictum of Clarke J from OJSC Oil Co. v Abramovich and Others (above) at paragraph 349: in order to be able to trace property it is necessary for a plaintiff first tD identify property of his which has been unlawfully taken from him; that is "a proprietary base ".

¶ [167] Of the sums alleged to have been misappropriated by Mr. Al Sanea from the Money Exchange., USD2030 million is said, at paragraph 62 of the Amended Statement of Claim to have been derived from "payments received/or the benefit of the SAAD Group under letters 0/ credit issued for the account of the Jfoney Exchange. "

¶ [168] AHAB's case in relation to these LC payments is particularised in paragraphs 72 to 79. [n paragraph 72, as follows: "Mr. Al Sanea caused the Money Exchange 10 open Ies as payme1lts for goods purportedly supplied to AHAB. The goods included very..' larRe quantities of air condilioning and heating equipment, lift machinery, marble and fabriCS. ARAB had no need jor these goods, did not order them and never received them - they Page 54 of77 did not exist. The p~oceeds 4 the LCs )1,'ere paid initially to the purported suppliers but then retransferred to Mr. Al Sanea or the SAA n Group. !!

¶ [169] This is an allegation of an elaborate fraud perpetrated by the use of false letters of credit and false invoicing by Mr. Al Sanea and his intennediary abettors, by which he was able to misapproprillte the massive sum ofUSD2030 million.

¶ [170] It is a fraudulent scheme in respect of which the Ueloitte forensic mvestigations have unearthed strong pnma facie evidence. Nonetheless, the thrust of Mr. CrystaJ's argument is that this was not AHAB's money but the banks'. This is an argument he now presents notwithstanding the unrefuted evidence from AHAB that it remains liabll: and has been sued by the Banks in multifarious actions around the world for these proceeds of the LCs and the other sums all totaling US09.2 bilhon.

¶ [171] Mr. Crystal's argUIm~nt is that crucially, AHAH does not allege in the Amended Statement of Claim (It at it ever received any sums paid under the Les. Rather its complaint is that as the ostensible applicant (or the opener of the Les) it was liable to reimburse the issuing banks: see paragraph 7 of the Statement of Claim.

¶ [172] Put shortly, AHAB does not as regards the LCs identify property of it, which has been unlawfully taken and so identifies no proprietary base for its claim.

¶ [173] In GI'OUp Josi Re (formerly Group Josi Reassurance SA) v Walhrook Insurance Co. Ltd. [1995} 1 HLR 1017, Philhps J. (as he then was) held that 1t was not possible for a plaintiff to assert a proprietary interest in moneys paid by a bank. pursuant to a LC but not received by the plaintiff. [n Group Josi the plaintiffs Page 55 of77 were reinsurance companies which had procured the opening of LCs in favour of the defendant insurallce companies. The plaintiff reinsurers sought injunctions restraining the banks from honounng the LCs and secondly, restraining payments under the LCs to th~) defendants. The plaintiffs relied on allega.tions of fraud tainting the underlymg reinsurance contracts (referenclflg certain fraudulent claims for commissiCln payments) in respect of which the Les were to be paid. The applications for i:l1junctions were refused. In particular, as to the second basis for the application jto restrain payment of the proceed" of the J ,Cs to the defendants), Phillips JI. held as follows: (at 1037 -H): "Mr. Bartlett (for the plaintiffi) hw jailed to persuade me that there is any basis upon which his clients can assert a proprietary interest in moneys that may be paid to the reinsured [defendants} by banks, aul of the banks' own funds pursuant to obligations undertaken under letters of credit. True It is that the (plaintiffs) reinsurers will have to reimburse those banks. directly or indirectly, but I cannot see how that can give rise to a proprietary claim to the monies advanced by the banks. "

¶ [174] This dictum was delivered, not in the context of a case in which a defrauded bank customer was seeking to recover the proceeds of fraudulent letters of credit from a fraudster. It was delIvered, as explained above, in circumstances where it was sought to restrain payment on letters of credit which were themselves regularly authorised by the barik's customer (the plaintiffs) and issued to payees who had Page 56 01'77 allegedly procured their issuance by an underlying arrangement that was tainted by fraudulent commission claims.

¶ [175] In those circumstances, the fact that the monies to be paid were to be paid from the banks' own funds pursuant to obligations undertaken under letters of credit provided, las Phillips J described It): "barren ground in which to attempt to nurture a remedial N.ln.structlvc trust".

¶ [176] That view was hardly surprising, given the long line of settled cases that showed, as Phillips J. further declared at 1036 H - 1037 - that payments made hy a hank under a letter of credit are not to be treated as payments of funds beneficially owned by the opener ofthe credit.

¶ [177] This long line of casc;:s also explains the reasons, as much based in legal policy as m banking contract, lor refusing the mjunctive relief that was sought in the case. As Phillips J also explained: "More generally. the claim to relie(which Mr Bartleu advances would if well founded, be available in every case where a plaintiff challenged the right of a beneficiary under a letter of credit to payment under the underlying transaction. Such relief would clot what has been described a.s the l{feblood of international commerce as surely as an injunction restraining drawing on the credit. For these re('lsons, I am not prepared to gram the injunctions sought under Order 29 rule 2. " Page 57 ofn

¶ [178] Later on appeal, the rourt of Appeal agreed wlth that decision and the general reasons given in it for tht: refusal of the injunctions, while declining to answer the question: "Js there a constrnctive trust, and do reinsurers have a proprietary right?" (that is: a proprietary right to proceeds of a letter of credit paid out by reliance upon an underlying fraudulent Iransaction): seef1995] CLC 1532.

¶ [179] Vvbether the circumstances presented by the present case would provide more fertile ground for the nurturing of a constructive trust may well be a more arguable proposition_ What is alleged here is that proceeds: were paid out by reliance upon Les which were themselves fraudulently procured [rum and issued by the banks by reliance upon forged mandates from the Money Exchange. l80. This is the kind of proposition more fully explained also by Phillips I. In Group Josi at 1035 H - 1036 F: "Such a [remedial constructive] trust has been recognised in a number of Commonwealth Jurisdictions. In Mctall and RohstoJf AG v Donaldson /,eif/dn & .lenvette 'nc_ {19m] J Q.B. 391, 479 Slade U considered whether such a frust could arise under English law: "The extent to which a constructive trust can properly be treated as a fair remedy lS jar from clearly d4ined in the authorities. The position is staled thus in Snell's Principle,\' a/Equity, Nt' Ed. (19R2) p 193 Page 58 of77 "In .wme jurisdictions the constructive trust has come to be treated as a remedy for many cases of unjust enrichment; whenever the court considers that the property in question ought to be re.~tored, it simply Imposes a constructive trllst on the recipient. in England, however, the constructive crust has in general remained essentially a substanti"e institution; owllership must not be confused with obliKotion, nor must the relationship of debtor and credilOr be cOllverted into one of trustee and cestui qui trust Yet the attitude of the courts may be changing: and although the constructive trust is probably not confined to cases arising out of a .fiduciary relationship, it is far from clear what other circumstances suffice to raise it or how far it can be Page 59 of77 employed as a species 0/ equitahle remedy (0 enforce legal right~. " However, the authors of Goff and Jones, the Law of Restitution, 34d Ed. (1986), after a comprehensive review of the authorities, state their views at p. 78: 'Equity rules were formulated in litigalion arising out of the administration of a trust. In contrast, restitutionary <:laims arr infinitely \.'aried. In our view, Ihe question whether a restilutionary proprietary claim should be granted should depend on whether it is just, in the particular circumstances a/the case, to impose a constructive trust on, or an equitable lien over, particular assets, or to allow subrogation to a lien over such assets. While we have had the bene/It qf very full argument on almost all other aspects of the law involved in {hi~· ca,se. we have neither heard nor invited comprehensive argument to impose a constructive trust de novo as a foundation jor the grant of equitable remedy by way of account or otherwise. Nevertheless, we are satisfied that there is a good arguable case that such circumstances may arise ... and. for want of a Page 60 of77 better descriptIOn, will refer to a constmctivc trust of this nature as a "remedial constructive trust n. "

¶ [181] Whether the proceed:; of the fraudulent Les in the hands of Mr. AI Sanea should be impressed with a remedial constructive trust in the circumstances of this case has not been specifk,lllly pleaded, although the constructive trust claim appears in paragraphs 187 and 188 of AHAB's Amended Statement of Claim (and discussed above at paragraph 74).

¶ [182] Nonetheless, in effeCil Mr. McQuater's response to Mr. Crystal's arguments is that the payments out to Mr. Al Sanea, ultimately fraudulently obtained by him as AHAB's fiduciary under forged letters of credit, were impressed with a constructive trust in AHAB's favour.

¶ [183] For this proposition he relied lJPon the case of Agip (Africa) Ltd. v Jackson [1991/ Ch. 547, a case also discussed by Phillips J. in Group Rosi (at 1036 G-H) but distingll1shed by him because the payments made by the bank in dJ:iJ! and deemed to be traceable as being the property of the plaintiff, were payments by wire transfer of the banks' money although secured against the Plaintiffs' money only hours later received in its account held with the bank In that way those moneys were distinguishable from payments made by a bank of its own money by way ofletters of credit.

¶ [184] While that distinct10rl might yet prove to prevent AHAB's reliance upon dgiJ!. or other case law for founding a constructive trust, the further distinction to be recogmsed and not overlooked on the allegations in this case, is that Mr. Al Sanea is here alleged to have obtained the proceeds of the letters of credit by fraudulent Page 61 of77 breach of his fiduciary duties owed In AHAB. Viewed in this light, these were moneys whieh the balilks paid ading in dual capacities, not only to discharge their own apparent obligations under the letters of credit, but also as agents on AHAR's behalf. t 85. rhus, argued Mr. Mc;Quater, when ultimately received by Mr. AI Sanea as the fruits of his fraud ullon AHAB, the payments were made to him on AHAB's behalf in his capacity as AHAB's fiduciary, giving rise to compelling circumstance~ for the imposition of a constructive trust in AHAB's favour upon Lhe prut:(Xd~. Mr. Al Sanea received not the banks' property but a new species of property derived from his breaches of fiduciary duty. And hence, at least arguably, a proprietary interest of AIIAD's existed in those proceeds and AHAB's proprietary base for its tracing claim is established.

¶ [186] A strike out application is not the appropriate means for the determination of such issues, argued Mr. McQuater. They involve complex questions of fact and law which should he left to the t.rial.

¶ [187] In response Lo these i:lfgumt':nts, I must begin by noting that the concept of the remedial constructiv() trust as a means by way of the exercise of judicial di:.cretion to vary proprietary rights in thc context of insolvency has been finnl)' denounced by the En!~ish Court of Appeal in Re Polly Peck International pic (in administration) No.2: [1998} 3 All E.R. 812.

¶ [188] There it was said that there was no prospect of the imposition of a remedial constructive trust on the as~ets of an imolvent company so as to give the claimants a proprietary inlere.st, to the detriment of creditors. To do so would Page 62 of77 confer priority not accorded by the insolvency legislation. A1though the law moves, "it cannot be legitimately moved by judicial decision down u road signed "No Entry" by Parliament. The insolvency road is blocked 10 remedial constructive trusts, ai least when judge-driven in a vehicle of discretion" (ibid, at 826, per Mummery LJ). Nourse LJ emphasized (ibid, ~31) that his conclusions were not confined to insolvency, because property rights in general could only be varied by statute.

¶ [189] This decision has been heralded by academic writers as "the end nf the remedial constr"Uctive t,Wit" ill English law (1998 12 T.LI. 202 (P. Birk!J). St:t: also critJque of Sir Peter Millett (as he then was) at (1998) 114 LQ.R. 399.

¶ [190] The concept of the remedial eomtruetive trust continues to thrive elsewhere in the Commonwealth as anticipated by Phillips J in his dictum clted above from Group Rosi (at paragraph 171).

¶ [191] The Privy Council dl!cision in Anornev-General (Hong Kong) v Reid (1994} 1 A.C. 314 is most authoritatively on point. The case shows that a constructive tru~t may be imposed on the trustee or fiduciary who receives a bribe from a thin.] party, thereby enabling the bribe to be seized or its product to be traced and all profits deriving from it to be stripped in favour of the principal (there the Crown in the Right of Hong lK..ong). t 92_ A leading text book notes that the remedial constructive trust has been accepted in Australia (.lttJuschinski v Dodds (1985) 160 C.LR 583); New Zealand (Powell v Thompson [1991J 1 N.Z.LR. 579 - descnbed at 615 as a "broad equitable remedy for reversing (hat which is inequitable or unconscionable") and Canada - Page 63 of 77 although recognised there more in the context of property disputes between cohabitees than in thc~ commercial context. See: llanburv & Martin; Modern Eguity 17TH Ed" Swt)et & MaxwelL 2005, paragraph 12.

¶ [193] The New Zealand Courts have noted that caution is required before a remedial constructive trust may be enforced m insolvency cases: Forttt Group Ltd. v MacIntosh [1998J 3 N.Z.LR. 171. 194, But perhaps more to the point in the present case, as Hanbury &: Martin explain (op. cit. para 12-007): "One distinction betliVeen institutional and remedial constructive trusts may lie in the date from which the claimant may assert proprietary rights, This question has sign!ficance jar third parties acquiring interests in the property (in dispute) before the cou.rt makes its order. It seems clear that the traditional institutional cOllstnlctive lrusl vindicates a pre-existing propnetary interest which is operative before rhe date of the court order. The effect of a remedial constructive trust. on the other hand. may be to confer a new proprietary interest on the daimant. In such a case it will have prospective ~ffect only, operating form the date of the court order which creates it. " (citmg Llovds Bank pIc v Rossett {1991Jl A.C. 107 and Westduetsche Landes Bank. GironuntraJi v Islington LBC /1996} A.C. 669)."

¶ [195] Given the nClture of the fiduciary relationship between Mr. Al Sanea and ARAB and the alleged breaches of fiduciary duties involving the forgery oftile LCs, it is thc implicit argument of Mr. McQuater that the constructive trust sought to be Page 64 oi77 relied upon here by ARAB is of the institutional kind; citing the receipt of the proceeds of the LC:; as being impressed with the constructive lrust as al the moment they were received.

¶ [196] As noted above, the existence of such an institutional constructivc trust arising from fraudulent or (Ither breach of duty by II trustee or other fiduciary 15 well established in English law going back at latest to 1878 in De Bussche v Alt (1878) 8 Ch. D. 286 and autilontatively settled in Boardman v Phipps [1967} 2 A.C. 67.

¶ [197] The well settled principle is that a fiduciary may not abuse his position to gain a benefit for himself. In Boardman v Phipp~ the House ()f Lords held that Boardman was constructive trustee for his principal (the trust fur which he acted as solicitor) of the profit he had made from investments made (albeit in good faith) by reliance on confidential infonnation he had obtained in his fiduciary position as sohcitor.

¶ [198] The principle applies a fortiori of course when the fiduciary has acted fraudulently or otherwise dishonestly as alleged here against Mr. Al Sanea.

¶ [199] The local case law already records instances uf oonstruL:tive trusts being recogmsed OT enforcfd in such circumstances. Most notably, are Carman islands News Bureau Ltd. v Cohen 1988-89 CILR 542 (Grand Court); Grupo Torras SA V Bank of Butterfield int'l (above); and Contadora Enterprises S.A. v Chile Holt/ings (Carman) Ltd. 1999 C1LR 194 (Court of Appeal); Hampshire Cosmetic Labs r Mutschmann 1999 CILR 21; and Codelco v Interg[obal Inc. 2002 ClLR 198. Page 65 of77 200_ A proprietary tracing claim, having a proprietary base in property derived from and held upon an institutional constructive trust may at least arb'llably, it seems to me, come to be regarded differently than did the remedial constructive trust invoked in the Pollv Peck case a'l a basis for claiming against an insolvent corporate estate, Whether the Court in Group Rosi (above) would have viewed the proceeds of the l,~tters of credit differently had they been impressed with an institutional constructive trust is also a question, as shown from the deliberations of Phillips J, to be regarded as yet to be settled_

¶ [201] Such a question as it may well arise in this case, may not properly be addressed by way of a strike out application without the benefit of full legal arguments. For this reason, I do not accede to Mr. Crystal's further arguments for the striking out of AHAB's proprietal) tracing claim as it is premised upon the proceeds of the Les. Effect of AHAB's election under the default judgment against Mr. AI Sanea

¶ [202] As a separate matter the GT Defendants assert through Mr. Crystal, that because AHAB is no longer pursuing a proprietary tracing claim against Mr. Al Sanea, AHAB is no longer entitled to pursue it....;; propnetary andlor tracing claims against them.

¶ [203] For this proposition they rely on obiter dicta from an Australian case, Yeshiva Properties No. 1 Ptv Ltd v ),t1.arshall [2005} NSWCA 13 where; at paragraph 80 Bryson JA said: 'Tn my mind ,it is dnllhtjill whether an equitahle remedy against an alleged accessory [({or present purposes such as the GT Page 66 of77 D(!fendants are alleged to be)l should be granTed to a plaintiff who has given the alleged defaulting trustee or fiduciary a release, or has decided not to sue the trustee or .fiduciary. Doing equity as between the plaint!!! and the accessory, who is not the perSOIi principallv liable, seems to me to be possible only if the pLaint~fr also pursue.~ his claim against the person principally liable. "

¶ [204] While the pursuit of equitable remedIes will always require a plaintiff to behave fairly, Bryson lA's dictum does not appear to leave room for circumstances where it may be feasible onlly to pursue the accessory (such as where a principal wrong- doer IS beyond the jUIisdiction and cannot for practical reasons be pursued).

¶ [205] In addition to that consideration, I agree with and adopt the following submissions from Mr. McQuater: (1) The statement. of principle was clearly obiter; Bryson JA also said that his concerns "were not debated on appeaL and the appeal case vvas disposed of without reoching conclusions on them ". The GT Defendants have not referred to any other case in which Bryson JA 's observation was followed or considered. (2) The facts of l.'eshiva Properties were far removed tram thc present action. It IS not the case that AHAB has released or ignored Mr. Al Sanea. On the contrary, AHAB has pursued him as vigorously as possible. It was only hiS resolute refusal to engage with the merits of the claims that led ARAB to seek the be~~t and most convenient remedy available against him. Page 67 of77 (3) The so called "'abandonment" of the clmms (which wa'! made expre!':sly for the purpose of the application for an mterim award on the uefauH judgment) was not an acceptance that the claims would not have succeeded but simply a procedural limitation on the rc1icfbcing sought. (4) Moreover, by virtue of GCR O. 21 r.4 ARAB is not precluded in principle from bringing again its proprietary tracing claims against Mr. Al Sanea. They not having been determined in his favour on the merits, AHAB could bring them again in a new action_ For those reasons, this argued basis for striking out is also refused. Leave to Appeal against the interim award

¶ [206] For reasons explained in the June 2012 judgment, I awarded an interim payment of damages to ARAB against Mr. Al Sanea in the amount of usn 2.5 billion. That award was made on the express basis set out at paragraph 116 that: "(a) such (an award) represents a reasonable proportion of the damages which in the opinion of the Court. are likely to be ultimmeiy recoverable by AHAjj from Mr. Al Sanea: (b) this order and the reasons herein given for it shall 1I0t be binding on the Dejendanrs In Liquidation, and shall be with(Jut prejudice to their right to pursue any argument pleaded in their Defences .... " 207, Those express limitations upon the interim award notwithstanding, the GT Defendants (but not the A WALCOs or SIFCO 5) now apply for leave to appeal against the award. Page 68 of"

¶ [208] AHAB's position is tnEt the award wa~ rightly made for the reasons given in the 12 June 2012 judgrnt:nL. In lhal regard, Mr. McQuater's submissions are persuaSlVe. I fully agree with them and adopt them in refusing the aT Defendants' application for leave to appeal, being satisfied that it shows no prospect of success and that no point of public Importance arises for consideration by the Court of Appt;~al; and as required by the case law; see: In Re Universal and Surety Co, Ltd. 1991-93 CILR 157 and Practice Directions 1999 1 WLR 1 (per Lord Woolf; followed and applied in Streeter v Immigration Board 1999 ClLR 264.

¶ [209] The submissions whi(;h I adopt (and ex:panded upon by me) are as follows: (I) There are two mam questions which arose on the application for the interim award: first, whether it was appropriate to make an award at all; and, second, what was the appropriate amount. (2) Grounds (1) and (8) of the GT Defendants' proposed appeal relale to the first question. (i) In Gwunu (7), the GT Defendants repeat their argument that the making of an award gave rise to a risk of inconsistent decisions by different tribunals. As AHAB explained at the original application, and the Court accepted, there is no mconsistency because the Court should and did approach the application on the express assumption that, as against Mr. Al Sanea, all allegations of liability are established as a result of his default of defence and the ddaull judgment entered against him. Page 69 of77 (ii) In ground (8). the GT Defendants argue that GCR 0. 37 required the Court to wail to as~ess damages at trial when: there are multiple defendants. However, the Court has an express discretion under o. 37 to assess damages earlier. As the Court rightly held (paragmphs 34 to 35 of the Ruling), the reason for the rule is the avoidance of the risk. of inconsistent decisions. In the present case, there was no risk and it was entirely proper for the Court to exercise its. discretion to maKe an (interim) assessment. (3) Grounds (1) to (5) are not matters of law or principle but go to the calculation of the appropriate amount of the interim award. As the Court had well in mind, there is no need for the Court to formally or finally assess the damages, the exercise is rather one of finding a figure which represents a lower bound on the future recovery. AHAB presented a number of difFerent approaches to assessing damages, each of which came out, even on tIle mmt conservative basis, at [.ISD2.5 hillion or more. (4) Ground (9) is a reilcmtion of the GT Ddendants' argUIm:nt at the interim award hearing that the Court was bound to take into account in assessing the damages payable by Mr. Al Sanea a potential counterclaim whieh he had not actually made. The Court rightly said (in paragraph 47 of the Judgment) that this argument would result in "obvious unfairness and absurdity". The OT Defendants say that an appeal is justified (in the puhlic interest) hecause there is no reported case on thlS Issue, hut that is hardly surprising given that the point is wholly wuueritorious. Page 70 of77 (5) In ground (6) the GT Defendants argue that the Court was not entitled to take into aceount the contemporaneous records of Mr. Al Sanea's misappropriations prepared by Mr. Mark Hayley which was pleaded verbatim in the Statement of Claim. However, the existence and authenticity of those documents is not challenged (they can be produced if necessary and have been exllibi ted on more than one occasion in the proceedings) and the Court was entitled to have regard to them. Mr. Hayley was 1\,1r. AI Sanea's immediate subordinate at [he Money Exchange and, having acted on his instructions, has direct knowledge of the payments (at times running to $1 million per day) from the Money Exchange to STCC. (6) Finally, as the Court rightly observed in paragraph 110 of the Judgment, "While the Defendants in liquidation remain entitled to raise Iheir objections and counter-arguments at the trial of the case as against them, they are nol t'nti/led, in my view, to raise those objections and counler- arguments now in effect. as surrogates of Mr. Al Sanea" As AHAB has repeatedly said, the Defendants in liquidation have no legitimate interest in intervening in an applicalion which only concerns and only affects AHAB and Mr. Ai Sanea. " (7) For all those reasons, leave to appeal is refused. The amendment of AHAB':! Statement of Claim: Leave to Appeal

¶ [210] As discussed above, AHAB on 23 Ju1y 2012 filed and served its Amended Statement of Claim to reflect its case in light of the N Files disclosure. AHAB's Page 71 of77 obl1gation to plead those amendments was recognised in the December 2011 Judgment when refusing to strike outAHAB's claim but an undertaking was then given to the Court by AHAA to file and serve amendments. The Court having deh:rmined that AHAB's failure to earlier disclose the N Files was not contumelious, did not strike out AHAB's claim as had been contended for by the prcsent dcfendants, but, as they also contended, the Court recorded AHAB's obligation to amend its pleadings to retlect its case as dictated by the N Files disclosure and hence AHAB· s undertaking in that regard. 2 I I. However, by the time of its application for an interim award of damages on its default jlldgment against Mr. Al Sanea, AHAB had not yet filed anel. ~erved the Amended Statement of Claim. The GT JOLs complained strongly about this as a basis for refusing AHlAB's application; complaining that AHAB was in contempt of the Court and so bad no standing to apply for an award. AHAB's application for an mterim award was nonetheless granted by me but with the requirement that AlIAB first rectify its breach of the undertaking by filing and serving the appropriate amendm(!nts before a fonnal order for the interim award would be issued.

¶ [212] AHAB tht:n immedialely filed and served the Amended Statement of Claim and the formal order for the interim award was issued.

¶ [213] Against that background, Mr. Smith QC on behalf of the A WALCOs seeks leave to appeal against the "permission" granted to AHAB by the Court for the filing and service of the Amended Statement of Claim. Page 72 of77

¶ [214] Mr, Smith's arguments (whieh I gather are adopted by the other present defendants) are as follows:

¶ [215] The Order of the Court of 31 July 2012 awarding interim damages to AHAB appt:a.rs tu havt: gi\it:TI AHAB pt:IInission to amt:Ild ils Stalement of Claim. The Court has indicated in the present proceedings to the parties that they should proceed on the basis that the Court did indeed grant permission to AHAB to amend,

¶ [216] On this basis, the Court has permitted AHAB to amend its Statement of Claim without: I. Requiring it to make an application at which the A WA I.CO~ can he heard and their objections properly considered; and

¶ [2] Submitting to an appropriate cost order.

¶ [217] Purther, that in doing so, the Court has acted improperly and in breach of the rules of fairness and natural justice. There can be no justification for disregarding - without any heanng whatsoever - the objections of the parties affected by the amendment. Such objections were notified in writing to the Court, but ignored. Equally, the process adopted by the Court meant that matters nonnally aired on amendment - such a:. oo.sls and cunSt::ljut:ntial amendments - could not be raised by the defendants and were completely unconsidered by the Court.

¶ [218] In these circumstances, permission to appeal to the Court of Appeal should be granted.

¶ [219] I disagree, for the following reasons. Page 73 of77

¶ [220] In Swiss Bank & Trust v lorgulescu 1994-95 CILR 149, the Court of Appeal adopted the long-st,mding dictum of Brett MR from Clarapede & Co. v Commercial Union Association (1883) 32 w.R. 262 as cited and approved most authoritatively by Ih~ House of Lords in Ketteman v Hansel Properties Ltd. (19871 A.C 189 per Lord GriffithiJ': "The rule of conduct of the cOllrt [(in a case where lea~'e to amend a pleading is sought)] is thor, however negligent or careless may have been the first omission. and however late the proposed amendment. the amendment :should be allowed if it can be made without injustJ:ce to the other side. There;s no injustice {ltke other side can be compensated by costs."

¶ [221] That being the state of the law on whether amendments to pleadings should be allowed and given the background described above to AHAB's amendment to its Statement of Claim, (including the insistence of the present defendants that it bt: done); there appeared no good reason why I should have entertained an inter partes contest over w·b.ether leave to amend should have been granted. I th(;r(;forc allowed AHAB to obtain its interim award on the basis that it had completed its undertaking given to the Court, was therefore no longer at risk of being in contempt in that regard and most important, there was no conceivable prejudice to any of the present defendants in allowing the amendments to be filed and flerved without a contested h~aring.

¶ [222] They would. of course, he entitled to any consequential costs resulting from the amendments. This is another settled proposition of law. And a still further settled Page 74 of77 proposition is that th(;y would also be entitled to make consequential amendments to their own pleadings.

¶ [223] In keeping with the Overriding Objectives of the Rules, the Court must deal with every cause or mattl~r in a just, expeditious and economical way. This will include as far as is practicable "- (b) ensunng that the nonnal advancement of the proceedings isfacilitate.d rather than delayed; and (c) saving expense".

¶ [224] Funher, as to the app:lication of the Overriding Objectives, the Court must seek to give effect to them by ensuring that: "2 (2) These Rules shall be libemlZv construed to give effect to the over-ridinJ{ objectives and, in particular, to secure the just, most expeditlOus and least expensive determination o}" every cause or matter on its merils. "

¶ [225] By Overriding Objeclive 3, the parties are obliged to help the Court to further the Overriding Objectives. In applying the Rules Ie !,rive effect to the Overriding Objectives, the Court may take into account a party's failure to help in this respect. 226, When it was brought to my attention that the AWALCOs wished to oppose AHAB's proposed amendments to its Statement of Claim, I fonned the distinct impreSSIOn that they were not being mindful of their obligations under the Overriding Objectives to assist the Court in their fulfillment. I remain of that impression. Neither the A WALCOs nor any other of (he present defendants have sought to argue that any prejudice to them arises from the amendments being allowed. Page 75 01"77 227_ The application for ll!ave to appeal is refus.ed. 1 confirm that, in the usual way, the present defendants will be entitled to their costs arising from having to make any amendments to their pleadings in tum. as the result of AHAB's amendments. Directions to trial

¶ [228] The draft proposed directions for trial previously circulated hy AHAB are reasonable. They allow for four months fOl" disco\,ery, three months thereafter for witness statements, two months for expert reports, with a view to a trial in a year's time. I propose to issue such directions as port of the formal order to arise Costs from this judgment unless other more reasonable proposals are submitted In writing within 10 days of the delivery hereof.

¶ [229] There are two outstanding issues in relation to oosts; as well as the issue of the costs of this strike out application. (1) The costs of the earlier application by the Defendants in liquidation to strike out AHAB's claim and in which the Defendants were unsuccessful must fonow that event. AHAB is therefore entitled to its costs incurred in that application in any event to be taxed if not agreed and it is so ordered. (2) AHAB is also entitled in any event to its costs occasioned by the adjourned hearing of the application fOT the intenm awac d hearing on 14 February 2012. That hearing was adjourned to allow for two days of argument in April 2012, on which AHAB was ultimately Page 76 of77 AHAB shall have its costs of the adjourned hearing to be taxed if not agreed, in any event. Security ror Costs

¶ [230] J am not oblivious to 1he concern (now reiterated by the GT and A WALCO JOLs) about AHAR's ahility to meel any costs arising from this action to which their estatc;:s may uitimah::ly become entitled. In particular, the GT JOLs have expressed Iheir concerns through Mr. Crystal, about the likely very large costs to be incurred in giving discovery on the scale that AHAB's claims would demand and AHAB's already demonstrated inabIlity 10 meet the mounting costs of ittigalion here and in the United Kingdom.

¶ [231] This, as well as the disruptive impact AHAB's c1ajrn has had upon the liquidation proceedings, are coneerns already recognised at paragraph 91 of the December 2011 judgment.

¶ [232] But those are not proper objections 10 raise in support of strike out applications as they have been raised on this occasion. They may, however, be a proper basis for seeking further security for costs from AHAH, but that is a matter about which I must reserve my opinion unless and until an application is brought. February 22, 2013 Page 77 of77