Grand Court dismisses a multibillion-dollar fraud claim

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In a landmark ruling for the Cayman Islands, the Grand Court emphatically dismissed a multibillion-dollar claim in Ahmad Hamad Algosaibi & Brothers Company (AHAB) v Al-Sanea, which involved allegations of fraud arising from one of the largest corporate collapses of the financial crisis.

Dismissing the claims, the court found that the AHAB partners had known of and authorised fraudulent borrowing through the Money Exchange, as well as AHAB’s other financial businesses over a period of 30 years.


Maan Al-Sanea was the head of AHAB’s investment division, known as the Money Exchange, and married to the daughter of one of AHAB’s founding partners. It was alleged that, over a 30-year period, Al Sanea abused his authority to enter into billions of dollars’ worth of revolving credit facilities using only the AHAB name as collateral, unknown to the AHAB partners.

Matters came to a head in 2009 when crisis-weary banks began calling in their loans. The AHAB partners insisted that they had no knowledge of the level of borrowings incurred on their behalf and that they were the victims of a $9.2 billion fraud (which they were required to reduce to $6 billion during the proceedings). The claims included allegations of forgery and the siphoning off of proceeds of fraud to special purpose vehicles incorporated by Al Sanea in the Cayman Islands, Switzerland and Bahrain (including defendant SIFCO5). The defendants successfully defended these allegations.


In addition to the key finding in relation to knowledge and authority set out above, the court’s 1,300-page judgment found that the ‘new for old’ case pleaded by AHAB did not exist and constituted a recent invention by AHAB, which was unsupported by the evidence.

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Through ‘new for old’, AHAB had belatedly (several years after the proceedings) sought to maintain that it implemented a policy in 2000 to restrict borrowing by Al Sanea to loans which had already been taken before the time of the policy’s implementation. The court found that “‘New for Old’ is indeed a recent invention, raised in a desperate attempt to salvage AHAB’s falsified case” and held that:

  • The facility documents relied on by AHAB in order to demonstrate that documents were manipulated (as well as forged) cannot bear the weight of inference that AHAB sought to place on them.
  • AHAB’s forgery allegations were made on “a random scatter-shot basis” and its claims of forgery “on an industrial scale” without any reasonable foundation for a finding that the questioned documents and signatures were deployed by Al Sanea without the knowledge or authority of the AHAB partners.
  • Al Sanea’s withdrawals, described by AHAB as “misappropriations”, were not so, and instead constituted loans which AHAB expected to be repaid and which were meticulously accounted for in its books. The AHAB partners were willing to allow the massive personal borrowing of Al Sanea from the Money Exchange to go unchecked in return for Al Sanea’s willingness to use the Money Exchange to procure fraudulent borrowing on behalf of the AHAB partners.
  • AHAB failed to satisfy the test to establish a proprietary tracing claim against the defendants as it could not establish an antecedent breach of trust or fiduciary duty; identify the traced asset or traceable proceeds in the possession of the defendants; or prove the necessary transactional links between the funds taken from the Money Exchange and the defendants’ accounts.
  • Since AHAB’s tracing claim failed, so too must each of the claims of dishonest assistance, conspiracy and unjust enrichment, as these rested on the claim that the defendants received money or assets that represented the proceeds of funds misappropriated from the Money Exchange.
  • The proper law governing AHAB’s equitable claims is the law of Saudi Arabia. These claims all depend on AHAB being able to trace its funds to the defendants in the Cayman Islands. No such claim has been found to be tenable, either as a matter of Saudi or Cayman Islands law.
  • Fundamentally, the defendants’ illegality defence is entitled to succeed. This is not only on the basis of AHAB’s continuous complicity in the fraud from beginning to end, but even (contrary to the findings) in the event that ‘new for old’ existed, because of AHAB’s involvement in what had already become a massive fraud on the banks, which AHAB must have known would be continued, even if curtailed, in order to give effect to ‘new for old’. In doing so, the court considered the factors enunciated by the Supreme Court in Patel v Mirza ((2016) UKSC 42).
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The case has showcased the court’s ability to manage high-profile large-scale litigation, demonstrating especially the quality of the Cayman Islands judiciary and the court’s ability to use cutting-edge technology, as well as the resources and flexibility to manage a year-long, multi-jurisdictional trial.


Source Credit: International Law Office


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