In this post, Adam Ferris (Senior Associate) in the Finance Disputes Team at CMS and Henry Powell (Associate) in the Real Estate Disputes Team at CMS comment on the judgment of the Supreme Court in Byers and Ors v Saudi National Bank [2023] UKSC 51, which was handed down on 20 December 2023.


The Supreme Court has clarified the principles applicable to a claim for knowing receipt.

Knowing receipt is an equitable personal claim which can be brought against a person who has received property transferred to them in breach of trust. The principal elements of such a claim are that:

  1. A trustee transfers trust property beneficially owned by the claimant to the defendant in breach of trust; and
  2. The defendant had knowledge of the breach of trust at the time of the transfer or obtained such knowledge prior to disposing of the property.

The successful claimant in knowing receipt has against its defendant remedies requiring the defendant to account as a trustee of the property. Accounting to the claimant is a powerful remedy; the defendant must restore the trust fund to the position it would have been had the breach not occurred.

It has long been established that knowing receipt liability will not arise where the claimant’s equitable proprietary interest in trust property is overridden by a transfer to “equity’s darling”, i.e. a bona fide purchaser for value without notice of the breach of trust. The primary issue before the Supreme Court – Lord Hodge, Lord Briggs, Lord Leggatt, Lord Burrows and Lord Stephens – was whether it is the case more generally that for a claim in knowing receipt to succeed the claimant must have a continuing equitable proprietary interest in the trust property, that has not been overreached or overridden, at the point it is received by the defendant. In particular, can knowing receipt liability arise when the defendant receives clean title to property transferred to it in breach of trust as a result of the claimant’s beneficial interest being extinguished by the foreign law governing the transfer of the property? 

The Supreme Court held, dismissing the appeal from the Court of Appeal, with whom it agreed, that a claimant in knowing receipt must be able to establish a continuing equitable interest, which has not been extinguished by overriding or overreaching, at the point the defendant receives the property. The opposite conclusion would have resulted in a “deep-rooted contradiction” between the recipient holding clean title to property yet being under an obligation to restore it to another. Accordingly, where the claimant’s beneficial interest is overridden upon the transfer to the defendant by the operation of foreign law – as it had been in this case – no liability in knowing receipt can arise.

Therefore, despite Saudi National Bank having knowingly received company shares in breach of trust, it could not be held liable for a claim in knowing receipt in the High Court, the Court of Appeal or, finally, the Supreme Court because the Appellant’s beneficial interest in the shares had been extinguished by the transfer, which was governed by Saudi Arabian law.

Policy arguments that the conclusion reached by the Supreme Court would amount to a “money launderers’ charter” were rejected on the basis that both criminal law and the availability of claims in dishonest assistance (not pleaded in this case) provide a sufficient deterrent to fraudsters who might seek to make use of foreign law transfers to avoid knowing receipt liability.

While this case provides helpful clarification on the law of knowing receipt, the Supreme Court acknowledged that a number of areas of uncertainty remain, including:

  • Whether the level of knowledge required is a fixed standard of knowledge or one based on unconscionability that may vary on a case by case basis;
  • Whether a category of knowledge known as “constructive knowledge” can satisfy such requirement;
  • What is the relevance of unjust enrichment to knowing receipt; and
  • Whether knowing receipt is properly categorised as ancillary to a proprietary claim (as Lord Briggs found) or an “equitable proprietary wrong” (as Lord Burrows found).

These issues will need to be determined on another occasion.  


A Cayman Islands company, Saad Investments Company limited (“SICL”), was the beneficiary of Cayman Island trusts. The owner of SICL, Mr Maan Al-Sanea, declared himself a trustee of shares SICL held in five Saudi Arabian banks (the “Disputed Securities”) and, on 16 September 2009 (the “September Transfer”), transferred the shares to Samba Financial Group to discharge part of the personal debts he owed the bank. Latterly, in April 2021 the assets and liabilities of Samba Financial Group would be transferred to Saudi National Bank and so for the purposes of this article we refer to both as (the “Bank”). On the day of the September Transfer the Bank duly credited Mr Al-Sanea’s account with the market value of the Disputed Securities in the sum of around 801 million Saudi riyals and the shares were registered in the Bank’s name.

SICL collapsed into insolvency in 2009 and joint official liquidators were appointed (the “Claimants”).  In 2013 the Claimants sought a declaration from the High Court under section 127 of the Insolvency Act 1986 that the September Transfer was a void disposition of property belonging to SICL. The High Court imposed a stay on jurisdictional grounds. The Claimants were successful on appeal to the Court of Appeal and, thereafter, the Bank appealed to the Supreme Court in February 2017 (Akers and others  v Samba Financial Group [2017] UKSC 6).

Allowing the Bank’s appeal, the Supreme Court – comprising Lord Neuberger, Lord Mance, Lord Sumption, Lord Toulson and Lord Collins – held that, at common law, the nature of the interest intended to be created by a trust depends on the law governing the trust.

Saudi Arabian law does not recognise a distinction between legal and beneficial (i.e., equitable proprietary) ownership in the way the English common law does. Rather, in the Saudi jurisdiction, the disposition of shares to a third party ‘extinguishes’ any interest of a beneficiary in the shares. As a matter of Saudi Arabian law, the effect of the September Transfer and registering of the Disputed Securities in the Bank’s name meant that SICL had no continuing proprietary interest in the Disputed Securities following the transfer.

It followed that the transfer of the Disputed Securities to the Bank did not ‘dispose’ of any rights belonging to SICL within the meaning of section 127, which applied only to assets legally owned by the company that it sells itself, rather than the transfer of legal rights held by a third party as in the case of Mr Al-Sanea’s transfer of SICL’s shares to the Bank. The appeal was dismissed.

The Claimants applied to amend the particulars of claim to plead a claim in knowing receipt and, as an insurance policy if permission to amend were refused on limitation grounds, issued a new claim in knowing receipt.

Permission to amend was refused on appeal and so the new claim in knowing receipt reached trial in the High Court in October 2020.

Decisions of the lower courts

In the High Court, three substantive issues came before Fancourt J: as to liability, the “Saudi Arabian Law” issue and the “Law of Knowing Receipt” issue and, on quantum, the “Valuation” issue.

Fancourt J gave judgment on 15 January 2021 and held in relation to the first two issues that:

  • Saudi Arabian Law – the effect of the September Transfer under Saudi Arabian law was such that it extinguished SICL’s proprietary interest in the Disputed Securities. As a matter of evidence as to the law and practice in Saudi Arabian capital markets, registration is prima facie evidence and, until displaced, is conclusive as to ownership of shares.
  • Law of Knowing Receipt – the cause of action depends on a defendant’s knowledge that the property it received is trust property which ought to have been dealt with in accordance with the trust. Following the decision of the House of Lords, in Macmillan Inc v. Bishopsgate Investment Trust plc (No.3) [1995] 1 WLR 978, Fancourt J held that a claim in knowing receipt is a personal claim for equitable compensation based on a proprietary interest, but where the Bank acquired clean title – here, by virtue of the foreign law governing the transfer of property, but also in other scenarios such as where clean title is conferred by virtue of statute (e.g. the Law of Property Act 1925, s 2) or by a transfer to equity’s darling – then the claim must fail.

In view of the two hurdles to liability there was no need to decide the third issue on quantum but Fancourt J gave his view that when valuing trust property the proper valuation method for the court would ordinarily be on the basis of market valuation but, on the facts of this case, given the size of the shareholding relative to the average daily traded volumes, it was appropriate to apply a ‘block discount’ from the quoted price.

On all three fronts the Claimants appealed to the Court of Appeal, which handed down judgment on 27 January 2022. Newey LJ, Asplin LJ and Popplewell LJ, dismissed the appeal for these reasons:

  • Saudi Arabian Law is an Islamic system with concepts and principles far removed from those in English law and on the particular facts of the case the practice and culture of Saudi Arabian capital markets was relevant in determining the law. Fancourt J, as trial judge, had heard extensive expert evidence to determine these foreign law issues. The Claimants had failed to satisfy the criteria for the Court of Appeal to interfere with the trial judge’s findings, per Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5, [2014] E.T.M.R. 26, [2014] 1 WLUK 663.
  • Law of Knowing Receipt the Claimants could not establish a continuing proprietary interest capable of making the Bank a knowing recipient as this was entirely inconsistent the unencumbered title it received.

The Court indicated that were the findings on liability not fatal to the appeal it would have allowed the appeal on the Valuation issue. The preferred valuation method was by reference to the cost of the asset had it been purchased by the trustee rather than what it would have achieved on a sale, which would involve no block discount.

Jettisoning the Saudi Arabian Law issue, the Claimants appealed the Court’s decision on Knowing Receipt alone.

Knowing Receipt: the central issue on appeal to the Supreme Court

On the Bank’s case, an action in knowing receipt requires the claimant to have a continuing equitable proprietary interest in the relevant property at the point it is received by the defendant. The September Transfer of the Disputed Securities to the Bank caused the Bank to receive title freed forever from the Claimants’ equitable interest and as such the knowing receipt claim must fail.

On the Claimants’ case, a continuing equitable proprietary interest is not required. Rather, having acquired the Disputed Securities with clean title, the Bank’s knowledge that a breach of trust was involved made it unconscionable for the Bank to continue to treat that property as its own and so liability in knowing receipt arose.

Approving the decision of the Court of Appeal and dismissing the Claimants’ appeal, Lord Briggs and Lord Burrows gave judgment – with whom Lord Hodge, Lord Leggatt and Lord Stephens agreed – setting out the requirements for a claim in Knowing Receipt.

Both Lord Briggs and Lord Burrows agreed that the question with which they were asked to grapple had been addressed head on in the case law to date. As such, they were required to derive their answer from an analysis of principle.

Pertinent to the court’s analysis was its observation of the well-established rules pertaining to a transfer of trust property to equity’s darling, in particular that:

  • a transfer of trust property to equity’s darling overrides the proprietary interest of the beneficiary (even if the transfer is made in breach of trust); and
  • the effect of this overriding is permanent and is not resuscitated when the recipient later becomes aware of the breach of trust or where the recipient subsequently transfers the property to another party that is aware of the breach of trust.   

The Supreme Court found that knowing receipt is not an accessory liability: it requires interference with the claimant’s equitable rights rather than being merely responsible for another’s wrongdoing. Liability in knowing receipt depends on the claimant having a continuing equitable proprietary interest when the property is received. If the claimant’s interest is extinguished, as it is as a result of a transfer to a bona fide purchaser for value without notice, as a result of the operation of statute, or, as in this case, as a result of the operation of foreign law, there can be no proprietary or knowing receipt claims. The effect of Saudi law in this case was to confer clean title to the shares on the Bank, overriding the Claimants’ equitable interest.

If the opposite were true this would imply a suspensory effect on the claimant’s proprietary interest as a result of a transfer to equity’s darling which would offend the basic equitable principles referred to above. The purpose of the doctrine of equity’s darling is to confer full beneficial ownership of property. Equity stops short of ‘interposing equitable interests’ in derogation of that outcome because it regards equity’s darling as having the better right to ownership than the beneficiary. The earlier equitable interest is overridden, once and for all, and cannot be revived against a successor in title to equity’s darling even with knowledge, per Harrison v Forth (1695) Prec. Ch. 51; 24 ER 26.

To say otherwise would seriously detract from the full beneficial ownership equity treats the recipient as acquiring. A legal interest or estate is good against all the world, whereas an equitable interest is (save for statutory intervention or foreign law) good against all the world except equity’s darling.

Further, the Court held that there was no reason why a claim in knowing receipt should survive overriding or overreaching but powerful reasons which tended in the opposite direction. In resolving the “deep-rooted” contradiction between having clean title and being obliged to restore the same property to another, how could equity’s darling say “the property is mine” but also be required to ‘look after [the property] in the meantime’, and to account to the beneficiary for any use of the property falling short of those duties? It could not.

Policy arguments made by the Claimants that this principle would incentivise fraudsters to route assets to third parties via jurisdictions where the law extinguishes equitable proprietary interests could not assist the Claimants either. The criminal law acts as a better disincentive to that fraudulent conduct than the civil law (and in any event a civil law claim in dishonest assistance is likely to be available against a dishonest recipient), and a policy concern of that kind could not possibly undermine the force of the Court’s principled view on continuing equitable interest.

Lord Briggs’ diagnosis for the confusion regarding this issue in previous case law was a looseness in the language of previous authorities, in referring to equitable doctrines and constructive trusts, knowledge and notice, as in Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978 which had obscured the conditions for a claim in knowing receipt. Accordingly, the court emphasised the priority of the conflicting equitable principles.

Lord Briggs disapproved of the Claimants’ argument that knowing receipt was equity’s response to the apparent unconscionability of the defendant treating the property as his own after learning of the breach of trust rather than the best available vindication of the claimant’s continuing equitable proprietary interest in the property where it has been dissipated by the defendant. The test proposed by the Claimants wrongly elevated unconscionability from an equitable objective to an unruly and unpredictable test for liability which would have unacceptable adverse consequences for certainty in resolving issues as to priority of title to property.

The appeal was dismissed.


The Supreme Court was tasked with clearing a fog which had hung over this litigation and the doctrine of knowing receipt. It had been allowed to creep in through imprecisions of language and a tendency for other courts to offer views on matters which were not properly before them.

In the light of the Court’s judgment, which marks a return to basic principles of equity and an unwillingness to defer to an exercise in weighing ‘all the circumstances’ in the face of apparent competing equitable claims, a recipient of property who has received clean title can say “this is mine”. The force of the Supreme Court’s statement on the unimpeachability of such a title has already assisted lower courts, as in Asturion Foundation v Alibrahim [2023] EWHC 3305 (Ch), which had been experiencing difficulties in ‘classifying’ and ‘characterising’ claims in knowing receipt.