The Precarious Nature Of Trust Assets At Home And Abroad

In Akers (and others) v. Samba Financial Group [2017] UKSC 6, the UK Supreme Court has confirmed the limited nature of British insolvency officer-holders' ability to void dispositions of a company's assets held on trust. The Supreme Court also highlighted the potential dangers inherent in holding on trust assets located in jurisdictions which do not recognise common law trusts.

The case related to the scope of the avoidance provisions in section 127 Insolvency Act 1986 ("s127"), and to conflict of laws rules in relation to trust-based claims against third parties, in particular the application of the lex situs rule as recognised in Macmillan Inc v. Bishopsgate Investment Trust (No 3) [1996] 1 WLR 387. The decision will be of relevance to (a) insolvency practitioners, both in the UK or in jurisdictions with avoidance provisions similar to s127, and those dealing with them in relation to trust assets located anywhere in the world; and (b) anyone dealing with trust assets which may under English law be situated in non-common law jurisdictions.

Facts

The claim arose from the long-running fallout from the multi-billion dollar dispute between the Al-Gosaibi family, Maan Al Sanea and the Saad Group of companies. Liquidators of Saad Investments Company Limited ("SICL"), a Cayman Islands company, alleged that Mr Maan Al Sanea, a Saudi Arabian national, held certain shares in Saudi Arabian companies for SICL under a trust governed by Cayman Islands law. The Liquidators and SICL alleged that Samba Financial Group ("Samba"), a Saudi Arabian bank, received some of those shares at a time when SICL was being wound up. Accordingly, they claimed from Samba alleging that the transfer was void pursuant to s127.

Lord Mance gave the leading judgment, with which Lords Neuberger, Sumption, Collins and Toulson agreed. Lords Neuberger, Sumption and Collins gave separate concurring judgments.

No void disposition of property

s127 provides that "In a winding up by the court, any disposition of the company's property [...] made after the commencement of the winding up is, unless the court otherwise orders, void". It is a powerful tool in an insolvency officeholder's armoury to protects creditors, often operating harshly against those dealing in good faith with a company.

However, although s127 may protect a company's disposition of its beneficial interest, the Supreme Court held that it did not apply where a trustee holds an asset on trust for the company, and the...