Strand, London, WC2A 2LL
B e f o r e :
| SINGULARIS HOLDINGS LTD (IN OFFICIAL LIQUIDATION) (A COMPANY INCORPORATED IN THE CAYMAN ISLANDS)
|- and -
|DAIWA CAPITAL MARKETS EUROPE LTD
JOHN McCAUGHRAN QC, ADAM GOODISON, MICHAEL WATKINS (instructed by Ashurst LLP) for the Defendant
Hearing dates: 23 - 25 November, 28 - 30 November, 1 December, 6 - 8 December, 14 - 16 December
Crown Copyright ©
|II. THE PARTIES AND WITNESSES AT TRIAL||5|
|(a) Singularis, Mr Al Sanea and the Saad Group||5|
|(c) Expert witnesses||15|
|III. THE HISTORY OF DEALINGS BETWEEN THE PARTIES||16|
|(a) The early relationship between Singularis and Daiwa: November 2006 to August 2007||16|
|(b) The period September 2007 to the end of 2008||29|
|(c) The period 1 January 2009 to 21 May 2009||38|
|(d) The events of late May 2009 to 2 June 2009||46|
|(e) Events between 2 June and the first of the disputed payments||63|
|(f) The disputed payments: 12 June 27 July 2009||80|
|(i) $10 million and $3 million payments on 12 June to SSHC||80|
|(ii) Payment of $180 million to SSHC on 18 June 2009||86|
|(iii) Payments of $1,090,000 and $2,935,000 to Saad Air on 1 July 2009||101|
|(iv) Payment of $5.2 million to SSHC on 8 July 2009||102|
|(v) Payment of $1,093,000 to Saad Air on 20 July 2009||103|
|(vi) Payment of $1,174,900 to SSHC on 27 July 2009||104|
|(g) Events after the making of the challenged payments||105|
|V. THE ISSUES BETWEEN THE PARTIES IN SUMMARY||113|
|VI. MR AL SANEA'S ALLEGED BREACH OF FIDUCIARY DUTY||119|
|(a) Was there a prima facie breach of fiduciary duty by Mr Al Sanea?||119|
|(b) Could Mr Al Sanea as sole shareholder of Singularis ratify any misappropriation of Singularis funds?||128|
|(c) Was Mr Al Sanea entitled to make the payments to himself by way of releasing Singularis' debts to him?||138|
|VII. DID DAIWA DISHONESTLY ASSIST MR AL SANEA'S BREACH OF FIDUCIARY DUTY?||143|
|VIII. THE CLAIM IN NEGLIGENCE||163|
|(a) The scope of the bank's duty under Lipkin Gorman and Quincecare||163|
|(b) Was Daiwa subject to a Quincecare duty in respect of the money in the Singularis account?||171|
|(i) Is the claim precluded by the fact that the claim is being brought on behalf of the creditors?||172|
|(iii) Is Singularis precluded from bringing the claim because it was a one-man company?||174|
|(c) Was Daiwa in breach of the Quincecare duty on the facts of this case?||191|
|(d) The defence of illegality||206|
|(i) Attribution of Mr Al Sanea's wrongdoing to Singularis||208|
|(ii) The test in Patel v Mirza||216|
|(e) Does Daiwa have an equal and opposite claim in deceit against Singularis?||221|
|(f) The inevitable misappropriation of the money||229|
|(g) The application of Daiwa's terms of business||232|
|(h) Contributory negligence||243|
MRS JUSTICE ROSE:
II. THE PARTIES AND WITNESSES AT TRIAL
(a) Singularis, Mr Al Sanea and the Saad Group
a) Saad Financial Services SA ('SFS') based in Geneva provided administrative, investment management and advisory services to Singularis. The main contact point for Daiwa with Singularis was through SFS and in particular with Mr Mike Wetherall who worked for SFS in Geneva. It appears that there was no formal services agreement between Singularis and SFS but that the Board of Singularis resolved in March 2007 that the terms of a service agreement between SFS and SICL should apply as between SFS and Singularis. SFS entered into bankruptcy proceedings on 21 January 2013.
b) Saad Investment Company Ltd ('SICL') was originally the counterparty for the stock financing arrangement with Daiwa. It was set up by Mr Al Sanea to manage all his non-Saudi investments.
c) Saad Specialist Hospital Company ('SSHC') is a company registered in Saudi Arabia and is part of the Saad Group. As at 1 January 2009 SSHC was 100 per cent owned by Mr Al Sanea. SSHC was the recipient of most of the money that Singularis is seeking to recover in these proceedings.
d) Saad Air (A320 No 2) Limited and Saad Air (A340-600) Limited (together referred to as 'Saad Air'). These were companies registered in the Cayman Islands which managed the aviation investments of Mr Al Sanea and his family. They were wholly owned subsidiaries of Saad Air Limited of which Mr Al Sanea was the chairman. Saad Air received some of the disputed payments, through its bank account with HSH Nordbank AG ('HSH'). HSH is a German bank with which Saad Air had entered into mortgage arrangements relating to two Airbus aircraft used for travel by Mr Al Sanea and his family. Singularis is not a party to these arrangements.
a) Dominique Blanchard was Global Head of Derivatives at Daiwa between May 2008 and December 2012. He had been brought into Daiwa in London to help with the launch of a new area of business for Daiwa in selling derivatives. He now works for an Australasian banking group.
b) Charles Day was recruited to Daiwa by Mr Blanchard and occupied the post of Global Head of Equity Finance between October 2008 and November 2010. He then became European Head of Derivatives. Mr Day had previously worked at Lehman Brothers International Europe from 2007 until the insolvency of Lehman Brothers in September 2008. He reported to Mr Blanchard.
c) Akihiko Sakashita was Vice Chairman and Deputy Head of Europe and Middle East, a role he took up in April 2008. His role was to oversee or supervise the trading business and risk management function of Daiwa. He reported to Mr Kosuge. He now works for Citigroup.
d) Christopher Hudson joined Daiwa's Compliance Department in January 2006. In February/March 2009 he was promoted to Head of the Compliance Department and still holds that position. He reported to Mr Wright. He describes the function of the Compliance Department (part of the Compliance Division) as primarily to ensure that the firm's business is conducted in accordance with regulatory requirements. The Compliance Department is responsible for approving new client relationships and for assigning to each client a risk rating, a number from one to four with one being the least risky and four being the most risky.
e) David Wright was Daiwa's Head of Compliance Division at the relevant time, having joined their Compliance Department in 1999. He was also the firm's money laundering reporting officer. In May 2009 there were six other people working with him in his team. He left Daiwa in December 2014.
f) Roger Massey joined Daiwa in 1998 and at the time of these events was head of the Legal and Transaction Management Division and Company Secretary of Daiwa. He still holds the position of Company Secretary and is now Head of the Legal and Compliance Division. The main role of the Legal Department in Daiwa was negotiating transaction documents, typically agreeing the terms of one or more master agreements which are industry standard documents.
g) Jonathan Metcalfe joined Daiwa in 1998 as a credit officer in the Credit Risk Department. He became a director in that department in October 2003 and remains in that post today.
h) Eishu Kosuge was Chairman of the Board of Directors and Chief Executive Officer of Daiwa between April 2006 and September 2009. He has worked for the Daiwa Securities group of companies since graduating in 1980 and currently works for Daiwa Tokyo's research institute.
a) Richard Smither who was in the Equity Finance Risk Management department. His role was to analyse the level of collateral required to protect Daiwa from market volatility risk and the risk of a default. He reported to Mr Day.
b) Francois Faure who was Global Head of Risk Management.
c) Nick Roberts who worked in Equity Sales and was Daiwa's relationship manager for Singularis. The Daiwa witnesses agreed that Mr Roberts was very 'client-leaning' such that they realised that he would always attempt to put a positive, pro-Singularis spin on events.
d) Mikita Komatsu was Chief Operating Officer and President of Daiwa who oversaw the internal control divisions such as accounting and finance.
e) Toshinao Matsushima was Global Head of Markets at Daiwa Tokyo.
f) Yoshio Urata was Global Head of Equities at Daiwa Tokyo.
g) Hiroshi Kimura, was Daiwa Tokyo's representative in Bahrain.
(c) Expert witnesses
III. THE HISTORY OF DEALINGS BETWEEN THE PARTIES
(a) The early relationship between Singularis and Daiwa: November 2006 to August 2007
"3) Mr. Al-Sanea is a very high profile & wealthy businessman in Saudi Arabia. His wealth & cash flow is driven from his ownership of the Saad Group of Companies. Such group reported 1H2007 net income of $715mn and equity of $7.4bn (excluding $3bn of personal loans to the group). His personal reputation & standing within Saudi business/political arenas is immensely important to him. As such, we believe that it is highly unlikely Mr. Al-Sanea would not fulfil his financial obligations to us.
Mr Al-Sanea has said to the [Daiwa] Relationship manager "counterparties that stick by the Saad Group during uncertain market conditions will become core members of the inner-circle". This is very much in keeping with Saudi culture."
(b) The period September 2007 to the end of 2008
"The main areas that the report highlighted which should be addressed or improved are that senior management should be more proactive in taking responsibility for identifying and assessing fraud risk, as well as ensuring that there is clear and appropriate allocation of anti-fraud responsibilities within firms."
a) There was no formal departmental responsibility for fraud. This created the risk that "If accountability for fraud is not clearly defined there may be confusion with regards to whose responsibility it would be to ensure there are sufficient anti-fraud controls in place. Additionally, these responsibilities may be de-prioritised in favour of other business needs." The Responsible Owner of the task of setting up a suitable committee to ensure that responsibility for fraud was clearly defined was Mr Wright.
b) There had been no 'documented holistic fraud risk assessment' performed by senior management to ensure that the full range of potential fraud risks had been considered and were being controlled. The risk identified as arising from this was that management had not identified all the fraud risks faced by the firm and associated controls and therefore did not have sufficient controls in place to mitigate a potential event. This would be particularly damaging to Daiwa, the report noted, if a fraud were to occur. Again Mr Wright was given the task of drafting a plan to move responsibility from Internal Audit to the Operational Risk department.
(c) the period 1 January 2009 to 21 May 2009
"He said large losses were being crystallised on the portfolio and that if these positions were being hedged elsewhere, [Daiwa] were not seeing them. Mr Sakashita asked that the account continued to be monitored carefully."
a) SFS said that the rating agency Moody's were undertaking a rating review of the Saad Group of companies and SFS expected that the current BAA1 rating would be unchanged though it expected to signal an upgrade from 'stable' to 'positive'.
b) Neither SFS nor Singularis had made any further investments in 2008 or so far in 2009 and because of volatile market conditions SFS had been 'de-risking the portfolios' and hedging their exposure. SFS had said that 90% of the Singularis HSBC exposure had been hedged by acquiring put options, most of which expired in 2010. They also said that they had 'reduced and hedged' the holding in BNP. SFS confirmed that Singularis had been selling off the holding in JP Morgan because it had not been a core holding and cited 'changes in the business model of JPM'. No details were given of the hedging other than that some of the instruments had strike prices of £7 or £8.
c) There was then a discussion about how much Singularis had lost as a result of the falls in the share prices. Mr Hart told the meeting that Mr Al Sanea had injected several billion dollars into Singularis to meet margin calls.
d) Mr Metcalfe when cross-examined was not able to remember whether anyone from Daiwa at the meeting asked for an up to date cash position of Singularis. The note does not record any such question being asked or any such information about Singularis' cash position being provided. The note of the meeting contains an addition, after the meeting, by Mr Metcalfe referring to the October 2008 accounts that had previously been provided. However at the meeting more recent audited accounts of SICL were provided showing a move from a $304 million profit in 2007 to a $75 million loss in 2008. However equity capital had been boosted by funds provided by Mr Al Sanea.
e) The report of the meeting notes that the credit department had requested the latest audited financial net worth statements of Mr Al Sanea. It records that Moody's had reviewed the 2008 personal net worth statement and was satisfied that resources remained sufficient to support the group and the continuation of the investment grade.
f) There was a discussion about the advice from Allen & Overy about the revision of the documentation. The client raised no concerns other than the fact that their Legal team was 'quite busy' so that execution might take a little longer.
g) Daiwa also proposed an increase in the margin requirement to 23 per cent. Mr Wetherall acknowledged that market conditions change from time to time but said that 'any decision to agree increased haircuts would have to be sold internally to the Chairman (Maan Al Sanea)'. The note states that it was agreed to come to a decision on margin by 3 April.
h) The summary section of the note concludes that it was 'a good update meeting'.
(d) The events of late May 2009 to 2 June 2009
"However, because the owner is the same, funds may flow from [Singularis] into Saad in order to support the Saad group, in which case [Singularis] will be put in a tight situation as well. Alternatively, funds may be retained in [Singularis] in order to preserve the personal assets."
"I think we should also have in mind the possibility of not only a liquidity run but also a fraud, a major loss on speculative bets at his level, or something like that. It is unusual that a central bank would freeze the accounts of a locally powerful businessman even when there is a pending restructuring of the foreign debts of its group. There is something fishy."
"The reason of SAMA circular is that one of Al Sanea's powerful investment partner complained to Saudi regulator that Al Sanea borrowed from banks but doesn't repay his debt to his borrowers and it would expose other partners to huge risk. The complaint used the wording "misused, mismanaged" the borrowed money from banks. Therefore, Saudi regulator order SAMA to issue the circular. Originally it was reported that Al Sanea is a sleeping director of the board of TIBC [The International Bank Corporation, a large bank in Bahrain], but he was actually an influential stake holder of the bank and got a huge loan from the bank as an individual and in addition with his partners' names to invest into many project in Saudi and other countries. TIBC's default reason is his default of the loan from the bank.
It seems that he has a big dispute with some Saudi powerful ex-investment partner. That unknown partner must be more powerful than Al Sanea, otherwise Saudi regulator would not listen to him. Possibly the member of Al Gosaibi family."
"As you probably already know, things accelerated over the week-end with the Saudi Central Bank's decision to freeze Al Sanea's accounts in Saudi. This is very unusual and goes much further than a usual Group debt restructuring case. The rumour (from Kimura San's information) is that there might be large amounts of money borrowed by Al Sanea from TIBC and that he failed to repay. Something of this nature could well have happened.
In any case, the solvability of Al Sanea is now clearly in question and the legal situation may quickly become unstable if creditors try to claw money back at Al Sanea's level and to seek Court injunctions overseas, etc. It is therefore necessary to exit more quickly that envisaged last friday. This morning, we have asked Singularis, by phone, to give us an instruction to sell part of the portfolio in order to repay Daiwa's loan. But we are now also preparing necessary legal steps in order to give notice of termination of this facility (which is rolled over on a daily basis) this afternoon London time if they do not give their instruction before that. We will call their Geneva office to advise them at the same time, by the beginning of this afternoon."
(e) Events between 2 June and the first of the disputed payments
"Have just spoken to SICL Geneva.
They were deeply upset that we were unable to assist (much more so than I anticipated). Indeed the phone was literally slammed down on me!
I guess that currently individuals within SICL are under a lot of stress, and the danger is that by adopting this stance we run the risk of joining the ranks of Citigroup etc who have been seen to let the group down in their hour of greatest need!
Although I did not rule out Daiwa facilitating this Swift altogether, I said it was likely to take time for appropriate approval to be granted after we consultation with various regulatory experts etc.
Is there any way we can reconsider maybe sending one sum to a UK Banking entity?
"I'd agree with that. The risk is that we are later challenged over their authenticity and "should we have made them" in which case we can respond (1) there is no suspicion of criminal activity therefore no need to report to authorities for approval (2) the payments are exceptional but so are the circumstances and the transactions are supported by documentation"
" To the extent that Singularis is in a suspect period, the question is whether Singularis' foregoing of that claim is a preference or transaction at an undervalue. This will be very fact specific and will partly depend on whether there are any other benefits to Singularis in entering into this arrangement. If Daiwa is aware of any financial difficulties of Singularis, it is likely that the burden of establishing that there was no preference will (from a practical perspective) be more difficult. Of course this would be a question of BVI law, but assuming that BVI law were equivalent to English law, I would have a concerned that (absent other circumstances to the contrary) this could be challenged."
"As you are all aware the SAAD group and some of the related individuals and entities have been experiencing well publicised problems including downgrades and the freezing of bank accounts. Under these circumstances can I reemphasise the need for care and caution in terms of any activity on their accounts with us. Singularis have reasonably large sums of client money lodged with us and we need to ensure we maintain appropriate oversight of both further deposits and requests for payments. We are not a bank and do not have banking licence and for reasons both regulatory and reputational cannot be seen to be acting as their 'bank account'. We should therefore ensure that any funds received relate to normal business activities and, if they are unsolicited, can clearly be linked back to their normal investment business (e.g. funds from liquidation of positions). Clearly any payment requests we receive must be properly authorised and be 'appropriate' in the context of our business relationship with them. If there are any doubts or concerns please contact Compliance or Legal.
Lastly, our understanding is that the problems that SAAD group is experiencing are fiscal in nature, if that information should change then it is vital that this is communicated to Compliance/Legal as soon as possible so we can take any action necessary.
If there is anyone else who needs to see this note, please forward as necessary.
" was an attempt to keep people focussed, to ask them to consider whether any activity on SICL or Singularis' accounts with Daiwa, including payments in or out, passed the 'smell test', and to refer anything to Legal or Compliance that they were unsure of"
"Q. Now, in relation to the payments out, it wasn't enough just to have a proper Swift request, was it, it also had to be appropriate in the context of the business relationship?
A. That's what I say here, yes.
Q. That meant that you would need to know why the payment was being made. Is that right?
A. Sorry, could you repeat that?
Q. All right, I'll ask it in a slightly different way: in order to know whether the payment was appropriate, whoever was dealing with the payment would need to understand why the proposed payment was being made. Is that right?
A. I don't think in this email I was setting out a fixed process or a policy as such. I was giving broad guidance on the subject to make sure, if we did get payment requests, that people were thinking about those in the context of, you know, is it properly authorised, do we understand the -- who it's being paid to.
Q. Right. Although you didn't spell it out, in order for anyone who received this to then make a decision whether a payment request was appropriate, that person would need to understand why the payment was being made?
MRS JUSTICE ROSE: Is your question limited to third party payments?
MR MILES: Yes, it is.
MRS JUSTICE ROSE: Yes, perhaps make that clear.
MR MILES: Yes. In relation to third party payments, why the payment was being made.
A. And/or is there a valid -- is there an explanation for that, for that payment, yes.
Q. In fact, this email was really prompted by the prospect of third party payments, wasn't it, because you wouldn't have regarded, at this stage, payments back to an account of Singularis itself as really raising these problems, would you?
Q. So you're agreeing with me that this part of the email was really concerned with third party payments?
(f) The disputed payments: 12 June 27 July 2009
(i) $10 million and $3 million payments on 12 June to SSHC
"Q. You didn't give any thought to whether this might be -- this might involve any misappropriation of assets from Singularis?
A. I had no suspicion that this was, no.
Q. You didn't give any thought to that question?
A. I don't recall giving any conscious thought but ...
Q. I am not going to ask you about your unconscious thoughts. I mean, did you think about -- did you give any thought at all to whether there was a risk of misappropriation of assets from Singularis by this payment to a hospital in Saudi Arabia?
A. I don't recall considering that. However, I also had the memo of 5 [June] which said, you know, we do not suspect this is criminal activity, and so I was starting off on that basis, I believe, that everyone thought this was a fiscal situation, no one believed this was any sort of criminal activity with a long-established client. So I'm not saying I ignored the possibility ... but I can't consider -- I can't remember thinking this isn't misappropriation.
Q. And you didn't give any thought to the purpose of the payment beyond just assuming that it was to another Saad Group company; is that right?
A. Yes, I viewed -- as I said, I viewed all these companies as belonging to the same beneficial owner, so I had no suspicion.
Q. I mean, you didn't even know, or check, that it was a Saad Group company, did you?
A. I don't believe I did at the time. With hindsight I should have done.
Q. It was just an assumption you made?
Q. Did you even know the name of the company that it was being paid to, do you think?
A. I must have known the name in order to put the details in the system or to have the check made.
Q. So it was just an assumption you made without knowing anything about the relationship between these companies?
(ii) Payment of $180 million to SSHC on 18 June 2009
"For the record my Compliance people have asked for confirmation that the proposed payment to Saad Hospitals is made pursuant to an appropriate corporate obligation of Singularis Holdings Ltd. Could you please provide me with this confirmation"
"It is problematic when they use a hospital as a front/cover. Practically speaking, since we will be making a transfer to a recipient other than Singularis, please handle this matter extremely carefully by discussing it well with the Compliance and Legal teams."
As per our discussion, please find the attached Agreement between [Singularis and SSHC] and [SSHC] Invoice.
I trust that they correctly reflect the appropriate corporate obligation between the two parties and will satisfy the requirements of your compliance team.
Please call me if you have further questions.
Thanks once again for bearing with us on this matter.
(iii) Payments of $1,090,000 and $2,935,000 to Saad Air on 1 July 2009
"Q. We've seen that you didn't ask any questions at all about any of these payments. The only thing you did was do your check on the computer; isn't that right?"
A. Yes, that's right.
Q. You didn't check whether senior management were aware of them.
A. No, I assumed they were but I didn't check.
Q. You didn't seek to find out the purposes of the payments on any of these cases?
Q. You made an assumption that the payee was something to do with Mr Al Sanea but you had no other information about the payees.
A. That's right.
Q. And you didn't make any enquiries to ensure that these payments were in respect of obligations to the payees, did you?
A. No, I didn't."
(iv) Payment of $5.2 million to SSHC on 8 July 2009
(v) Payment of $1,093,000 to Saad Air on 20 July 2009
(vi) Payment of $1,174,900 to SSHC on 27 July 2009
(g) Events after the making of the challenged payments
a) $171 million remains due to SICL as part of the $192 million of funds provided to Singularis in January 2009;
b) $143,785,190 is claimed by LBIE;
c) $2.8 million is claimed by Daiwa in relation to fees and rebates arising from the sale by Singularis of the HSBC, BNP and JP Morgan shares in June 2009; and
d) $450 million is claimed by Awal Bank, a Bahraini bank which formed part of the Saad Group of companies, relating to equities formerly held by Singularis, which Awal Bank asserts were sold to Awal Bank but retained on trust by Singularis.
V. THE ISSUES BETWEEN THE PARTIES IN SUMMARY
a) Daiwa argue that the claim is barred by illegality, as that defence has recently been explained by the Supreme Court in Patel v Mirza  UKSC 42.
b) Daiwa also argue that they can defeat Singularis' claim because Daiwa has an equal and opposite claim in deceit against Singularis. This depends on whether the fraudulent conduct of Mr Al Sanea is to be attributed to Singularis or whether Singularis is vicariously liable for Mr Al Sanea's misconduct. This involves considering the decisions of Evans-Lombe J in Barings plc (in liquidation) and another v Coopers & Lybrand (a firm) and ors  EWHC 461 (Ch) and  EWHC 1319 (Ch).
c) Daiwa rely on their General Terms of Business which exclude liability for negligence except for gross negligence, wilful default or fraud.
VI. MR AL SANEA'S ALLEGED BREACH OF FIDUCIARY DUTY
(a) Was there a prima facie breach of fiduciary duty by Mr Al Sanea?
(b) Could Mr Al Sanea as sole shareholder of Singularis ratify any misappropriation of Singularis' funds?
"following consultation with my advisers (and without waiving privilege), I had formed the view that [Singularis'] asset position was considerably weaker than it formerly had been; that even if it was not already insolvent, which it might have been, its insolvency was probably inevitable."
(c) Was Mr Al Sanea entitled to make the payments to himself by way of releasing Singularis' debts to him?
VII. DID DAIWA DISHONESTLY ASSIST MR AL SANEA'S BREACH OF FIDUCIARY DUTY?
" which combines an objective test and a subjective test, and which requires that before there can be a finding of dishonesty it must be established that the defendant's conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest"
"dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct."
"By and large dishonest people are dishonest for a reason. They tend not to be dishonest wilfully or just for fun. Establishing a motive for deceit, or conspiracy, is not a legal requirement, but if a motive cannot be detected or plausibly suggested then wrongful intention (to tell a deliberate lie in order to deceive) is less likely. The less likely the motive, the less likely the intention to deceive, or to conspire unlawfully. In many, if not most, fraud cases this would not be a particularly live point. The defendant is often a person who would be a direct beneficiary of the fraud, and a plausible motive is, to that extent, relatively easily propounded. The present case is, however, different."
VIII THE CLAIM IN NEGLIGENCE
(a) The scope of the bank's duty under Lipkin Gorman and Quincecare
"For my part I would hesitate to try to lay down any detailed rules in this context. In the simple case of a current account in credit the basic obligation on the banker is to pay his customer's cheques in accordance with his mandate. Having in mind the vast numbers of cheques which are presented for payment every day in this country, whether over a bank counter or through the clearing bank, it is, in my opinion, only when the circumstances are such that any reasonable cashier would hesitate to pay a cheque at once and refer it to his or her superior, and when any reasonable superior would hesitate to authorise payment without inquiry, that a cheque should not be paid immediately on presentation and such inquiry made. Further, it would, I think, be only in rare circumstances, and only when any reasonable bank manager would do the same, that a manager should instruct his staff to refer all or some of his customer's cheques to him before they are paid."
"If a reasonable banker would have had reasonable ground for believing that Cass was operating the client account in fraud, then, in continuing to pay the case cheques without inquiry the bank would, in my view, be negligent and thus liable for breach of contract, albeit neither Mr. Fox nor anyone else appreciated that the acts did afford reasonable grounds and was thus innocent of any sort of dishonesty."
"I would not, however, accept that a bank could always properly pay if it had reasonable grounds for a belief falling short of probability. The question must be whether, if a reasonable and honest banker knew of the relevant facts, he would have considered that there was a serious or real possibility, albeit not amounting to a probability, that its customer might be being defrauded, or, in this case, that there was a serious or real possibility that Cass was drawing on the client account and using the funds so obtained for his own and not the solicitors' or beneficiaries' purposes. That, at least, the customer must establish. If it is established, then in my view a reasonable banker would be in breach of duty if he continued to pay cheques without inquiry. He could not simply sit back and ignore the situation. In order so to establish the customer cannot, of course, rely on matters which a meticulous ex post facto examination would have brought to light. Such an examination may well show that it was indeed obvious what Cass was doing, but in the present case the inquiry is simply whether Mr. Fox, and therefore the bank, had, on the basis of the facts and banking practices established at the time, reason to believe that there was a serious possibility that Cass was misusing his authority to sign under the mandate in order to obtain and misapply the case handed to Chapman in fraud of the solicitors."
"In my judgment the sensible compromise, which strikes a fair balance between competing considerations, is simply to say that a banker must refrain from executing an order if and for as long as the bank is 'put on inquiry' in the sense that he has reasonable grounds (although not necessarily proof) for believing that the order is an attempt to misappropriate the funds of the company. And, the external standard of the likely perception of an ordinary prudent banker is the governing one. That in my judgment is not too high a standard."
(b) Was Daiwa subject to a Quincecare duty in respect of the money in the Singularis account?
(i) Is the claim precluded by the fact that the claim is being brought on behalf of the creditors?
(ii) Is Singularis precluded from bringing the claim because it was a one-man company?
"a simple and unsurprising consequence of the fact that every physical manifestation of the company Berg was Mr Golechha himself. Any company must as a last resort if it is to allege that it was fraudulently misled, be able to point to some natural person who was misled by the fraud. That the plaintiffs cannot do."
" it is very difficult to see how the law can rationally hold an auditor liable when the entire shareholder body and the entire management is embodied in a single individual who knows everything because he has done everything."
"The position is different where the company is suing a third party who was not involved in the directors' breach of duty for an indemnity against its consequences. In the first place, the defendant in that case, although presumably in breach of his own distinct duty, is not seeking to attribute his own wrong or state of mind to the company or to rely on his breach of duty to avoid liability. Secondly, as between the company and the outside world, there is no principled reason not to identify it with its directing mind in the ordinary way. For a person, whether natural or corporate, who is culpable of fraud to say to an innocent but negligent outsider that he should have stopped him in his dishonest enterprise is as clear a case for the application of the illegality defence as one could have."
"The technique of applying the general rules of agency and then an exception for cases directly founded upon a breach of duty to the company is a valuable tool of analysis, but it is no more than that. Another way of putting the same point is to treat it as illustrating the broader point made by Lord Hoffmann in Meridian Global that the attribution of legal responsibility for the act of an agent depends on the purpose for which attribution is relevant. Where the purpose of attribution is to apportion responsibility between a company and its agents so as to determine their rights and liabilities to each other, the result will not necessarily be the same as it is in a case where the purpose is to apportion responsibility between the company and a third party."
"Subject to these points, the time has come in my view for us to hold that the decision in Stone & Rolls should, as Lord Denning MR graphically put it in relation to another case in In re King  Ch 459, 483, be "put on one side and marked 'not to be looked at again'". Without disrespect to the thinking and research that went into the reasoning of the five Law Lords in that case, and although persuasive points and observations may be found from each of the individual opinions, it is not in the interests of the future clarity of the law for it to be treated as authoritative or of assistance save as already indicated."
a) Sana Al Gosaibi, Mr Al Sanea's wife.
b) Suha Al Sanea, Mr Al Sanea's daughter. She was a graduate from Cass Business School with a BSc in Banking and International Finance and an MSc in Finance.
c) Omer El Mardi who previously had worked at the World Bank and the United Nations. He had also held various legal positions in Sudan (including as a judge).
d) Christopher Hart. Mr Hart was a graduate of the University of Michigan and Georgetown University, and worked at Scandinavian Bank, Bank of America and Citibank before becoming General Manager of SFS.
e) Maan Al-Zayer who worked for 13 years at National Commercial Bank before joining the Saad Group as a manager in the Corporate and Institutional Banking Division.
f) Michael Alexander who was a US attorney.
(c) Was Daiwa in breach of the Quincecare duty on the facts of this case?
(d) The defence of illegality
"99. Looking behind the maxims, there are two broad discernible policy reasons for the common law doctrine of illegality as a defence to a civil claim. One is that a person should not be allowed to profit from his own wrongdoing. The other, linked, consideration is that the law should be coherent and not self-defeating, condoning illegality by giving with the left hand what it takes with the right hand."
100. Lord Goff observed in the Spycatcher case, Attorney General v Guardian Newspapers Ltd (No 2)  1 AC 109, 286, that the "statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case". In Hall v Hebert  2 SCR 159 McLachlin J favoured giving a narrow meaning to profit but, more fundamentally, she expressed the view (at 175-176) that, as a rationale, the statement that a plaintiff will not be allowed to profit from his or her own wrongdoing does not fully explain why particular claims have been rejected, and that it may have the undesirable effect of tempting judges to focus on whether the plaintiff is "getting something" out of the wrongdoing, rather than on the question whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system.
That is a valuable insight, with which I agree. I agree also with Professor Burrows' observation that this expression leaves open what is meant by inconsistency (or disharmony) in a particular case, but I do not see this as a weakness. It is not a matter which can be determined mechanistically. So how is the court to determine the matter if not by some mechanistic process? "
"120. The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case). In assessing whether the public interest would be harmed in that way, it is necessary a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, b) to consider any other relevant public policy on which the denial of the claim may have an impact and c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts. Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather than by the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate."
(i) Attribution of Mr Al Sanea's wrongdoing to Singularis
(ii) The test in Patel v Mirza
(e) Does Daiwa have an equal and opposite claim in deceit against Singularis?
"In the case of these two representations, D&T were negligent in failing to detect the falsity of the very representations which they now claim induced them to suffer loss. It would seem surprising if D&T were able to extinguish their liability for that failure by bringing a claim in deceit based on those representations and invoking Standard Chartered Bank [sc. Standard Chartered Bank v Pakistan National Shipping  WLR 1547]. Almost any auditors' negligence case based on a failure to detect fraud at an audit client will involve deception of the auditors by the fraudster. If the auditor has an automatic and complete defence to any negligence claim by bringing a counterclaim in deceit, it is surprising indeed that the auditors in none of the audit cases I referred to in this judgment took that course. Yet, as D&T admit, this argument "has not been run before".
"The present case is different. Here, B was under a pre-existing contractual duty owed to A's employer to test the truthfulness of A's statements. Had B performed his duty, he would have realised the statements were false. B failed in that duty and believed the statements. His only loss is his liability to A's employer for failure to perform that duty. A's employer can say "it was your job to check the truth of what A said. You cannot sue me for being deceived when, if you had done your job, you would not have been."
(f) The inevitable misappropriation of the money
(g) The application of Daiwa's terms of business
"Without prejudice to the specific provisions of these Terms neither the Company, nor its officers, directors, employees or agents shall be liable for any loss suffered by the Client, except to the extent that the same is caused by the Company's officer's, director's, employee's or agent's gross negligence, wilful default or fraud."
"The Client will indemnify the Company, its officers, directors, employees and agents including where applicable a Broker against any cost, loss, liability or expense whatsoever which may be suffered or incurred by the Company and/or them directly or indirectly in connection with, or as a result of, any service performed or action permitted under these Terms, including where applicable any liabilities to a Broker, except to the extent that the same is caused by the Company's and/or their gross negligence, wilful default or fraud."
"The Client confirms and undertakes that they have and will have all necessary consents ... and authorities to enable all Transactions in Investments under these Terms to be effected and that in respect of each such Transaction all Applicable Regulations have been and (so far as the Client can ensure) will be complied with."
"The Client confirms that any information given to the Company ... is complete, accurate and not misleading in any material respect."
Clause 17.7 (a):
"The Company shall not be bound to act in accordance with the instructions of any person, other than the Client, and the Company's liabilities hereunder shall be fully discharged by performing the same in the Client's favour notwithstanding any instructions received from the Client's principal and any notice received that the Client's authority to act on behalf of that principal has been revoked or varied."
Clause 17.7 (b):
"The Client authorises the Company to rely and act on, and treat as fully authorised by and binding upon the Client, any order, instruction or communication (by whatever means transmitted and whether or not in writing) which purports to have been given and which is reasonably accepted by the Company in good faith as having been given by the Client or on the Client's behalf, without further enquiry on the Company's part as to the genuineness, authority or identity of the person giving or purporting to give such instructions and regardless of the circumstances prevailing at the time; and the Client will be responsible for and bound by all contracts, obligations, costs and expenses entered into or assumed by the Company on the Client's behalf in consequence of or in connection with such orders, instructions or communications."
(h) Contributory negligence
a) The claim in dishonest assistance fails because Mr Metcalfe and Mr Hudson were not dishonest when they approved the disputed payments.
b) Daiwa is liable to Singularis in negligence and for breach of contract for the sum of $203,741,900.
c) Those damages should be reduced by 25 per cent pursuant to section 1 of the 1945 Act to take account of Singularis' contributory negligence.