Al Sanea v Saad Investments Co Ltd

The Appellant (“A-S”) appeals from the judgment of Walker J, dated 14^th October, 2011 (“the judgment”):

The gravamen of the appeal is that the SICL case on the merits is (to put the matter neutrally) too insubstantial to justify the relief granted. If, however, SICL successfully surmounts this “merits” hurdle, there is no (surviving) independent argument challenging jurisdiction or resisting the grant of the freezing order.

The Judge helpfully described the parties. A-S is a national of Saudi Arabia and resides there. SICL is a company incorporated in the Cayman Islands, created to hold some of the off-shore assets of A-S and his family. SICL was placed into official liquidation in the Cayman Islands on the 18^th September, 2009, by way of a creditors’ petition. This litigation is conducted on behalf of SICL by its joint official liquidators (“the liquidators”).

The litigation involves a claim by SICL against A-S, founded on a Put Option Agreement, dated 1^st April, 2008, as amended by a supplemental agreement dated 20^th October, 2008 (“the POA”), relating to 32,600,000 shares in Berkeley Group Holdings plc (“the shares”) and a Put Option Exercise Notice, purportedly given on the 29^th March, 2011 (“the Notice”). The POA expired at midnight on the 30^th March, 2011 unless, by then, SICL had delivered to A-S a Put Option Exercise Notice conforming to the requirements of the POA. SICL’s case is that A-S is indebted to it in an amount in excess of £57 million, by reason of his failure to satisfy a liability said to have arisen pursuant to an election by SICL under cl. 1(E)(ii) of the POA. By order dated 5^th September, 2011, Simon J granted permission to serve the proceedings on A-S out of the jurisdiction. Subsequently, before Walker J, A-S failed in his challenge to that grant of permission and SICL succeeded in its application for a freezing order.

Three principal issues arise on this appeal:

The POA provided, inter alia, as follows:

“ WHEREAS

(A)

The Buyer [i.e., SICL] owns 32,600,000 ….shares in Berkeley Group Holdings plc, a company licensed under the laws of the United Kingdom.

(B)

For valuable consideration, the Seller [i.e., A-S] has offered to sell a put option to the Buyer and the Buyer has agreed to buy a put option from the Seller for a period of three (3) years, with an option to extend the put option for an additional one (1) year period, at the market price of each Share as of the date of this Agreement and thereafter as of the date of the anniversary of this Agreement that coincides with the date on which any additional option may be exercised, provided, however, that the put option shall be cancelled or avoided at such time as the price on the exchange on which the Shares are customarily listed equals or exceeds GBP 12.50….per share (the ‘Barrier Price’).

…..

1.

PUT OPTION

(A)

The Seller hereby grants to the Buyer an option (the ‘Put Option’) to sell the beneficial ownership of all or any part of the Shares to the Seller at a strike price of GBP 11.97….per Share (the ‘Put Option Price’). Provided the Buyer is not in default of its payment obligation under Clause 1(F) and provided the Barrier Price has not earlier been met or exceeded, the Put Option shall be exercisable by the Buyer at any time and from time to time after the date of this Agreement until the first to occur of (a) 31 March 2011 or (b) … or (c) the delivery to the Seller by the Buyer of one or more notices covering the aggregate of all the shares pursuant to Clause 1(C) of this agreement.

(C)

The Put Option….shall be exercised by the delivery to the Seller of a written notice of exercise (the ‘Put Option Exercise Notice’) signed by the Buyer. The Put Option Exercise Notice shall specify the number of Shares being sold, the amount payable at the Put Option Closing (as defined below) and the Put Option Closing Date (as defined below). If, however, the Barrier Price has earlier been met or exceeded, the Put Option ….shall be cancelled and avoided.

(D)

The sale of all of the Shares to the Seller pursuant to the exercise of the Put Option shall take place at a closing (the ‘Put Option Closing’) to be held at the offices of ….[SICL]….Geneva, Switzerland at 3.00pm local time on the fourteenth day after the date of the Put Option Exercise Notice or such other date, time and place as the parties may agree (the ‘Put Option Closing Date’).

(E)

At the Put Option Closing:

(i)

The Seller shall pay to the Buyer an amount equal to the product of the ….[Put Option Price]… and the number of Shares being sold (the ‘Option Sale Amount’), in cash within a period of sixty days…..; and upon receipt of ‘Option Sale Amount’ by the Buyer, the Buyer shall give an irrevocable instruction to transfer all right, title and interest in and to the relevant number of Shares free and clear of any lien, security interest, mortgage, pledge, charge or other encumbrance of any nature whatsoever to the relevant authorities; or

(ii)

As an alternative to the settlement in clause E(i) above, the Buyer shall have the option to receive payment from the Seller, being the difference between the ‘Put Option Price’ and the price listed on the ‘Put Option Closing’ on the exchange on which the Shares are customarily listed (‘Option Settlement Amount’), but only if the Put Option Price is higher than the listed price on the ‘Put Option Closing’, in cash within a period of sixty days…..

…….

4.

REPRESENTATIONS AND WARRANTIES OF THE BUYER TO THE SELLER

The Buyer hereby represents, warrants and covenants to the Seller as follows:

(B)

The Buyer owns the Shares free and clear of any lien, security interest, mortgage, pledge charge or other encumbrance of any nature whatsoever, except for such restrictions on transfer as may be imposed by applicable laws.

(D)

Each of the representations and warranties contained in this Clause 4 is true and correct as of the date of this Agreement and will be true and correct as of the Put Option Closing Date (if the same shall occur) with the same force and effect as though such representations and warranties had been made on and as of the Put Option Closing Date.

5.

MISCELLANEOUS

(H)

This Agreement shall be governed by and construed in accordance with the Laws of the United Kingdom. Each of the Seller and the Buyer hereby irrevocably and unconditionally submits to the non-exclusive Jurisdiction of the Courts of the United Kingdom.

All notices served shall be sufficiently served on the Seller if delivered to PO Box 3250, Al Khobar 31952, Saudi Arabia……”

The Notice, signed by Mr. Akers, the Joint Official Liquidator and, as already recorded, dated 29^th March, 2011, read, insofar as material, as follows:

“ …..

BY COURIER

……

[4] This letter constitutes the Put Option Exercise Notice specified in Clause 1(C) of the Agreement. In accordance with Clause 1(E)(ii) of the Agreement, the Buyer elects to receive payment from the Seller, being the difference between the Put Option Price and the price listed on the date of the Put Option Closing, on the exchange on which the Shares are customarily listed (the Option Settlement Amount).

[5] The Buyer exercises the Put Option in respect of 32,600,000 shares at a strike price of GBP 11.97 (the Put Option Price).

[6] The share price listed on the London Stock Exchange at the close of business yesterday was GBP 10.34, giving the Put Option a value of GBP 53,138,000. The JOLs will provide you with a revised value at the Put Option Closing.

[7] The Put Option Closing will take place at 3.00pm Swiss time fourteen days from the date of delivery of this notice, which is 12 April 2011. The Option Settlement Amount is the difference between the Put Option Price and the price listed on the London Stock Exchange at the close of business on the 12 April 2011.

[8] Payment of the Option Settlement Amount is due to SICL within sixty days of the Put Option Closing….”

(Paragraph numbering has been inserted, for ease of reference.)

It was not in dispute that the only evidence before this Court as to the factual matrix of the POA was contained in paragraphs 8 – 12 of the second witness statement of Mr. Akers, dated 15^th September, 2011 (“Akers 2”):

“ 8. ….the Liquidators believe that SICL’s purpose was to hold certain offshore assets and manage investments of Mr. Al-Sanea and his family. In this context, SICL also incurred very substantial obligations to financial institutions which lent funds to SICL and incurred obligations to financial institutions which provided other financial services to SICL….

9.

Company records of SICL in the possession of the Liquidators indicate that as at 31 December 2007, 30 June 2008 and 31 December 2008, SICL held 32,699,015 shares in Berkeley Group Holdings plc (‘Berkeley’).

10.

On the basis of our inquiries to date, we believe that it is likely that as at 1 April 2008, the shares in Berkeley were subject to security for any liabilities owed to certain financial institutions under prime brokerage agreements entered into by SICL with those institutions. The custodians of those shares appear from company and bank records in the Liquidators’ possession to have included Citigroup, Citi Private Bank Geneva, Deutsche, Credit Suisse, JP Morgan and Lehman Brothers.

11.

On the basis of SICL’s Interim Report dated 30 September 2008 and its Annual Report for 2008, we also believe that the purpose of the POA was to support the value of the shares in Berkeley as an asset of SICL. The value of SICL’s equity portfolio was reported to have decreased as a result of the global deterioration of equity markets. To limit its exposure to equity market volatility a portion of its equity portfolio was hedged with equity put options. This meant that a minimum value would be maintained in the balance sheet for the equities hedged with put options so in the event of declining share prices the balance sheet value would not decline.

12.

All but 3,566,339 of the 32,699,015 shares originally held by SICL appear to have been disposed of. Bank statements in the possession of the Liquidators indicate that as at 28 February 2011 and 30 June 2011, Citi Private Bank Geneva held 3,566,339 shares in Berkeley for SICL.”

Furthermore, (at least) for the purposes of this hearing, it was not in dispute or must be assumed that:

In addressing the issues, it was common ground before the Judge that the test was whether SICL could show “a reasonable prospect of success”: judgment, at [9].

As to Issue (I), Walker J recorded A-S’s contention that there was nothing in the POA to suggest that SICL could dispose of the shares and still (thereafter) rely on the cash differential election under cl. 1(E)(ii) – and went on to acknowledge that, at a “substantive hearing”, there was much to be said in support of A-S’s case: judgment, at [19] – [20]. SICL admitted that it did not have beneficial ownership of the shares, either at the date when it purported to exercise the option or at the Put Option Closing Date: judgment, at [19]. However (judgment, at [20]), SICL was not thereby deprived:

“….of substantial arguments that the Agreement is to be read in a way which would permit exercise of the cash difference election prior to the Put Option Closing Date, thereby making it unnecessary to comply with requirements which only made sense in the context of an actual sale of shares. ”

As to Issue (II), the Judge rejected various arguments that the Notice did not conform to the requirements of the POA. For A-S, it was submitted that the Notice failed “to do the things which were required by clause 1 in relation to an intended actual sale of shares” (judgment, at [19]); necessarily, that submission followed the fate of Issue (I). Other submissions (judgment, at [16] – [18]) were independent of Issue (I), for instance, the submission that the Notice had been delivered on the 30^th March, 2011 but specified a Put Option Closing less than 14 days thereafter (the date in the Notice being the 12^th April when it should have been the 13^th April). In this regard, the Judge observed (at [17]):

“ To my mind there is at least one seriously arguable answer, namely that the 29 March notice was written on the assumption that it would be delivered that day. Moreover it is strongly arguable that clause 1(D) of the Agreement made it clear that the Put Option Closing was in the absence of contrary agreement to be held 14 days after the date of the POE notice itself, not the date of its delivery.”

Overall, the Judge was satisfied that there was a substantial argument that this and other independent criticisms of the Notice did not invalidate it.

So far as concerns Issue (III), the Judge concluded (at [11]) that the final provision in cl. 5 of the POA (viz., the provision relating to delivery of notices to the specified PO Box):

“ ….gives rise to a strongly arguable case that actual delivery to the PO Box no later than midnight on 30 March 2011 constituted sufficient delivery for the purposes of the Agreement. ”

In this regard, the Judge (at [12]) identified the following facts, derived from Akers 2:

“ (1) The Al Khobar Central Post Office is the post office at which the PO Box is located.

(2)

At approximately 9.30 am on 30 March 2011, an agent of Al Sawwaf [the liquidators’ Saudi Arabian counsel], Mr Abdul Karim Massoud, handed over an envelope containing a copy of the 29 March notice at the Al Khobar Central Post Office for delivery by registered mail to PO Box 3250.

(3)

The 29 March notice was expressed on its face to be ‘By Courier’ because, given the limited time available to the Liquidators to ensure it was delivered in accordance with the Agreement, the original of the 29 March notice was scanned and emailed to Al Sawwaf who in turn sent a copy of it by courier to Mr. Massoud for Mr Massoud to deliver it in accordance with the final clause of the agreement.”

It was, the Judge reasoned (at [13]), at least seriously arguable that the reference to delivery by courier was “a mere deficiency of wording” which did not render the notice invalid. Central to the Judge’s determination of this Issue was his conclusion that (ibid):

“ In practical terms, if an envelope addressed to the PO Box is handed in at 9.30 am at the post office where the PO Box is located then in the ordinary course one would expect it to reach the PO Box later that day.”

The Judge went on to observe that if Akers 2 was “the sole evidence adduced by SICL at trial” then “it might not carry the day”; however, it sufficed to show a reasonable prospect of success on Issue (III).

The Judge was accordingly satisfied that SICL’s substantive claim had a reasonable prospect of success. For completeness, it should be noted that in coming to the conclusion that a freezing order should be granted, the Judge held that there would otherwise be a risk of A-S dissipating his assets (judgment, at [34]); the allegations against A-S subsequent to the appointment of the liquidators were, if borne out, “highly disturbing” and “warrants intervention by the court to safeguard such assets as are known to exist” (judgment, at [35]).

For A-S, Mr. Morgan QC submitted that, on Issue (I), SICL’s claim had no real prospect of success. On a detailed analysis of the POA, there was no basis upon which SICL could be entitled to exercise a Put Option in respect of shares it did not own. Cl. 1(E)(ii) was not autonomous; indeed, if SICL was unable to “settle” under cl. 1(E)(i) – which it could not do as it no longer owned the shares - the option furnished by cl. 1(E)(ii) was not reached. The POA was neither a “bare contract” nor a “pure bet” which it would be if SICL’s case was well-founded. The point was one of construction; there was no contest as to the factual matrix and nothing in the factual matrix to cast doubt on the construction for which Mr. Morgan contended. Commercial considerations, as well as the language of the POA, pointed to the same conclusion. SICL was not entitled to ask the Court to leave the Issue over for subsequent determination in the hope that something might turn up. Accordingly, this Court should decide the point. The Judge had applied the wrong test in considering only whether SICL had a reasonable prospect of success; but if he had applied the right test, he had reached the wrong answer. For completeness, at the stage when SICL had sought permission to serve A-S out of the jurisdiction, there had not been any suggestion of an alternative case to the effect that cl. 1(E)(ii) could be relied upon regardless of ownership of the shares.

On Issue (II), Mr. Morgan submitted that the Judge erred in concluding that SICL’s claim, based on the Notice, had a reasonable prospect of success. The Notice was non-compliant in the following respects:

As to Issue (III), Mr. Morgan categorised the evidence relied upon by the Judge and taken from Akers 2 as “barely admissible”. However, quite apart from admissibility, Mr. Morgan’s submission was that on the basis of that evidence no permissible or proper inference could be drawn of same day delivery of the Notice. All that was known was that the Notice had reached the Al Khobar post office for delivery by “registered mail”; there was no evidence as to what had happened thereafter. If there was other evidence capable of filling the gap, SICL had not taken the opportunity (prior to the hearing before Walker J) of adducing it. Accordingly, there was no evidential basis for the conclusion reached by the Judge and he was wrong to hold that it was “seriously arguable” that the Notice had been delivered before midnight on the 30^th March, 2011.

Plainly, if Mr. Morgan is right on any one of Issues (I) – (III), then the appeal must be allowed.

For SICL, Mr. Atherton QC emphasised throughout and as an “over-arching” point, the position in which the liquidators found themselves, in particular as to their limited knowledge and continuing investigations, consequential on A-S’s failure to cooperate. It could not be assumed that all the relevant material was before the Court.

Mr. Atherton underlined that the relevant test was whether SICL’s claim disclosed a serious question to be tried or had a reasonable prospect of success. It was noteworthy that A-S had not submitted before Walker J that the Judge should go on to decide matters of law and construction. The point was in no sense academic in the present case; the POA was to be construed having regard to all the surrounding circumstances – and it could not here be said that those did not realistically require any further investigation.

As to Issue (I), SICL’s case had a reasonable prospect of success. On the basis of Akers 2, it was (for example) apparent that the representation in cl. 4(B) of the POA was incorrect at the date of inception to the knowledge of both parties; it could not therefore be assumed that cl. 4(D) (much relied on by A-S) had the importance which was suggested. The purpose of the POA was, by hedging, to protect the value of the shares as an asset of SICL. The object was to maintain value for A-S himself, who, at the time had been on “both sides” of the transaction. By treating the cl. 1(E)(ii) option as exercisable regardless of ownership of the shares, the protection afforded by the hedge was enhanced. It was important to focus on the commercial purpose of the POA rather than on semantics; it made sense for cl. 1(E)(ii) to be treated as an “independent obligation”. Even if, contrary to SICL’s primary submission, the Court should determine Issue (I) finally, then, having regard to the factual background, SICL’s construction should prevail.

As to Issue (II), Mr. Atherton’s submission was succinct. The Notice was tailored to SICL proceeding under cl. 1(E)(ii) of the POA. As SICL was not envisaging a sale, it could not specify the number of shares to be sold. There was plainly a serious issue to be tried as to the validity of the Notice; it was “nonsense” to suggest otherwise. Here too, Mr. Atherton stressed that all the facts were not known and that the interpretation of the Notice could not be divorced from the factual and commercial background. If need be, however, the Notice was sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how it was to operate; the Notice was accordingly valid.

Mr. Atherton’s submission on Issue (III) was in similar vein. There was a serious issue to be tried as to the validity of the Notice; it was nonsensical to say that the case was bound to fail. For the purposes of determining whether SICL had a reasonable prospect of success on this Issue, the Judge had been amply entitled to draw the inference that a Notice received at the Al Khobar post office by 09.30 on the morning of 30^th March, 2011 would make its way in the ordinary course into a PO Box physically situated in the same post office, before midnight on that day. That the matter may need to be investigated further at trial was neither here nor there.

We were most grateful to both Mr. Morgan QC and Mr. Atherton QC for their respective submissions.

It is next convenient to address the legal framework.

First, SICL sought and obtained permission to serve A-S out of the jurisdiction pursuant to paragraphs 3.1(6)(c) and (d) of Practice Direction 6B, on the bases that the POA was governed by English Law and/or that the POA contained a term to the effect that the (English) Court shall have jurisdiction to determine any claim in respect of the contract. As is hornbook law, SICL was required to show a “good arguable case” that its claim came within these jurisdictional gateways: Civil Procedure 2011, Vol. I, at 6.37.15.1. As the learned authors there note, a good arguable case “connotes more than a serious issue to be tried or a real prospect of success, but not as much as balance of probabilities”. It is unnecessary to say more about the precise requirements of a “good arguable case”. In the light of cl. 5(H) of the POA (set out above), it is plain that the SICL claim faced no difficulty in coming within the relevant gateways. Moreover, given the non-exclusive English jurisdiction clause, it has (rightly) not been suggested that the English Court would not be the appropriate forum to hear these disputes – subject of course to the point/s taken by A-S as to the “merits” of the claim.

Secondly, jurisdiction having once been established, as to the “merits” of the claim, it is clear that SICL needs to show no more than a “serious issue to be tried” or, amounting to the same thing, a “reasonable prospect of success”: see, Seaconsar Ltd v Bank Markazi [1994] 1 AC 438; BAS Capital Funding Corp v Medfinco Ltd [2003] EWHC 1798; [2004] 1 Lloyd’s Rep 652, esp. at [151] – [153]. This test equates to “the prospects of success needed successfully to resist an application for a Pt 24 order”: Civil Procedure 2011, Vol. I, at 6.37.15.2. It follows, in my judgment, that Walker J applied the right test to the issues he had to decide; indeed, the contrary was not argued before him. At the heart of this appeal is a very different question: namely and with respect, whether having applied the right test, the Judge reached the right answer in holding that the SICL claim satisfied the “merits” test.

Thirdly, in approaching A-S’s contention on the appeal that the Judge reached the wrong answer on the “merits” test, some preliminary observations are appropriate at the outset:

Fourthly, it was common ground that the POA was to be interpreted by way of an “iterative process” in accordance with the principles laid down in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900. It does not seem to me that the determination of the present appeal requires any detailed discussion of the Rainy Sky or the exploration of the true ambit of the iterative process: cf, for example, Lord Grabiner QC, “The Iterative Process of Contractual Interpretation”, (2012) 128 LQR 41. Instead, for present purposes, I would respectfully venture the following short summary, derived from [14] – [30] of Lord Clarke’s judgment.

I direct myself accordingly and turn to the principal Issues.

(1) Embarking on the inquiry: In this case, I do not think that the Court has any realistic option but to entertain detailed argument on the merits of the underlying claim. For my part, the A-S “merits” challenge cannot be summarily rejected, to await a later trial; to the contrary, as a matter of first impression, it is far from apparent that the SICL case on this Issue had “a reasonable prospect of success” or could withstand a Part 24 application. Moreover, the point is one of construction and thus not open-ended – subject, of course, to the need to have regard to the factual matrix in accordance with the Rainy Sky and many previous authorities. Still further, if it should readily appear that the SICL case is devoid of merit, then the continuation of the freezing order could not be justified, despite understandable concern as to the dissipation of A-S’s assets. I return presently to consider the impact on the argument, such as it may be, of the position in which the liquidators find themselves.

(2) The language of the POA: I start with the wording of the POA; it provides powerful support for Mr. Morgan’s argument. Cll. 1(A), (C) and (D) (all set out above) plainly contemplate a sale of the “Shares”. For completeness, so too does cl. 1(B) (not set out above), which deals with a “Successive Put Option”, with which this dispute is not concerned. These provisions therefore envisage that SICL has the beneficial ownership of the shares, as it seems to me, either at the time when the Put Option is exercised or, at the least, at the Put Option Closing Date. It may be remarked that the very notion of the “Put Option Closing” has no content other than in the context of a sale of the shares. Cl. 1(E)(i) is to the same effect.

As a matter of language, cl. 1(E)(ii) is not free-standing or autonomous. Cl. 1(E)(ii) is only reached if SICL would otherwise have been in a position to proceed in accordance with cl. 1(E)(i) – which it would not be if it had already disposed of the shares. The wording of cl. 1(E)(ii) is emphatic in this regard. In the language they used the parties did not provide for cl. 1(E)(ii) to be an alternative to all that had gone before; instead, Cl. 1(E)(ii) is no more than an alternative “to the settlement in E(i) above”.

It follows that, as a matter of contractual language, it seems most unlikely that SICL was entitled to exercise the Put Option under the POA in respect of shares it did not own. However, as underlined by the Rainy Sky, matters do not end there and the rival constructions must be checked, having regard to the scheme and context of the POA and their respective commercial consequences.

(3) The scheme of the POA: Very little needs to be added here. The structure of the POA - with cl. 1(E)(ii) positioned as it is – is to the same effect as the language. Further, the more restricted construction of cl. 1(E)(ii) fits naturally into the scheme of the POA as a whole; by contrast, a construction which treated cl. 1(E)(ii) as free-standing or autonomous would not fit happily into that scheme. It is convenient to defer, if briefly, discussion of cl.4 of the POA (see below).

(4) Context and commercial consequences: For present purposes, importantly and as already underlined, the factual matrix of the POA is not in dispute. In my judgment, consideration of the context of the POA and the commercial consequences of the rival constructions reinforce the conclusion pointed to by the language and scheme of the POA, rather than calling for the Court to fashion some departure from them.

First, I proceed on the footing (as set out in Akers 2) that the purpose of the POA was to support the value of the shares as an asset of SICL. That purpose is readily understandable, having regard to the fact that A-S was on both sides of the transaction creating the POA. In effect, A-S was taking a personal risk to shore up the balance sheet of his company, SICL.

Secondly, however, it does not at all follow that the parties agreed to a scheme whereby SICL could dispose of the shares and thereafter exercise the put option. It is one thing for A-S to have assisted SICL in hedging the asset value of the shares against market volatility; it is a very different thing for A-S to have taken the risk of a market fall in the price of the shares after they had ceased to be an asset of SICL. By way of illustration, on Mr. Atherton’s construction, SICL would be entitled to dispose of the shares at a favourable price – above the Put Option Price but below the Barrier Price – and keep the profit, while thereafter retaining the option of claiming the difference between the Put Option Price and a lower market price, should the shares (no longer owned by SICL) fall in value.

Thirdly, there is nothing whatever in the factual matrix evidence before the Court to support the notion that cl. 1(E)(ii) was free-standing or autonomous, in other words giving rise to an independent obligation involving a “pure bet” on the value of the shares, once no longer an asset of SICL. On the material available to the Court, the POA was premised on the shares constituting an asset of SICL; it was not a bare contract for differences – a financial speculation on the value of the shares over a period of time. There is nothing to suggest that the parties entered into such a financial speculation or had any reason to do so.

Fourthly, the more limited construction of cl. 1(E)(ii) advocated by Mr. Morgan in no way lacks commercial sense. On this construction, SICL would be entitled to take a commercial decision that it would retain the shares but enjoy the benefit of the put option hedge by obtaining the difference between the Put Option Price and the market price. Having regard to the reality of A-S’s interest in SICL at the date of the POA such a construction makes eminently good commercial sense.

Fifthly, I am not at all persuaded that the difficulties canvassed by Mr. Atherton as to cl. 4(B) tell against the narrower construction of cl. 1(E)(ii) to which I am otherwise inclined. Based on the matrix evidence, Mr. Atherton points to the fact that, to the knowledge of both parties to the POA, at the date of its inception, SICL did not have an unencumbered interest in the shares. That submission has force but only so far as it goes: namely, to support a contention that, on the face of it, neither party could have made good a case of material breach in respect of cl. 4(B). It does not, however, follow that (at least) at the Put Option Closing Date, there could not be a breach of cl. 4(D) of the POA, if SICL had already disposed of the shares in respect of which the Put Option was purportedly exercised. Given both the matrix evidence and the prior disposal of the shares, it is unnecessary to express a view as to whether there would have been a breach of cl. 4(D) of the POA, in the event that SICL had owned the shares at the Put Option Closing Date but subject to security interests; that question simply does not arise.

Pausing here, on the basis of the material currently before the Court, I am unable to accept that the SICL case on Issue (I) has a reasonable prospect of success or could survive a Part 24 challenge.

(5) The position of the liquidators: I confess to considerable sympathy for the position of the liquidators, in particular given the facts or assumptions outlined above as to A-S’s conduct. I readily accept that the liquidators do not yet have a full picture as to the affairs of SICL and that they are continuing with their investigations. If I thought that there was any real prospect of such further investigations uncovering material which cast doubt on the matrix evidence thus far available to the Court, I could easily be persuaded that the Court should not now determine the merits of Issue (I) adversely to SICL. Such, however, is not the case. As it seems to me, the liquidators have no more than a very generalised hope that something may turn up; there is not even a hint as to what that “something” might be and it is not at all easy to see what it could be. With a measure of reluctance, I do not think that can suffice to maintain the grant of permission to proceed in this jurisdiction and the freezing injunction.

(5) Conclusion on Issue (I): Differing with respect from the Judge, if perhaps after the opportunity for a more detailed consideration of this Issue, I conclude that SICL has no reasonable prospect in contending that it was entitled to exercise the Put Option under the POA in respect of shares it did not own. I would therefore allow the appeal on Issue (I). This conclusion is sufficient to require the appeal to be allowed, so that permission to proceed in this jurisdiction and the freezing order must be set aside. It follows that Issues (II) and (III) are academic but, in deference to the arguments advanced, I shall deal with those Issues, if only briefly.

In a nutshell, the Judge held that SICL had a realistic prospect of success in contending that the Notice was compliant with the POA and therefore valid. Save to the extent that Issue (II) stands or falls with the outcome of Issue (I), where no more need be said, I agree with the Judge.

Mr. Morgan’s first two submissions were that the Notice was non-compliant in that it did not specify the number of shares being sold or the amount payable. If, however, it had been open to SICL to rely on cl. 1(E)(ii), then there is at least a realistic prospect that these criticisms are not well-founded, essentially for the reasons given by Mr. Atherton. On this footing, SICL could not specify the number of shares being sold, because a sale was not envisaged. Nor, at the time of the giving of the Notice, could SICL know what the amount payable would be. I am not at all persuaded – certainly to a Part 24 standard – that the POA obliged SICL to do something which it could not do or that it precluded the giving of the Notice in advance of the Put Option Closing Date. As it seems to me, these submissions of Mr. Morgan prove too much; they would potentially strike down the giving of a perfectly sensible notice, even when SICL was opting for settlement under cl. 1(E)(ii) where it would otherwise have been in a position to proceed in accordance with cl. 1(E)(i). As it is, I am satisfied that, at the very least, there would have been a realistic prospect of SICL contending that a reasonable recipient, with knowledge of the terms of the POA, would have been left in no doubt as to how the Notice was intended to operate: Mannai Ltd v Eagle Star Ass. Co. Ltd. [1997] AC 749, at pp. 767 – 769, per Lord Steyn.

Mr. Morgan’s third submission went to an alleged failure to identify an unambiguous Put Option Closing Date. I have already summarised the Judge’s reasons for rejecting this submission (see above); I respectfully agree with those reasons and have nothing to add.

Earlier, when summarising the judgment, I recorded in some detail the facts there set out as to the delivery of the Notice to the Al Khobar post office and the inference drawn by the Judge as to it reaching the relevant PO Box (situated in that post office) in the course of the same day. I acknowledge the force in Mr. Morgan’s submission that if there was ever going to be evidence filling the gap in SICL’s case as to what happened to the Notice after it reached the Al Khobar post office, then SICL had ample time prior to the hearing before Walker J to adduce it. That said, I do not think it would be right to conclude that SICL would have had no realistic prospect of succeeding on this Issue at trial. Accordingly, in my judgment, the Judge was right to hold that although SICL’s evidence, if not augmented, might not carry the day at trial, SICL had done enough to surmount the present jurisdictional challenge.

As it is, my conclusions on both Issues (II) and (III) are academic and, in the light of my conclusion on Issue (I), I would allow the appeal.

I have had the opportunity of reading in draft the judgments of Lord Justice Lloyd and Lord Justice Gross. I respectfully agree with their reasoning, the conclusions of them both in respect of Issue (I) and of Lord Justice Gross in respect of Issues (II) and (III). Having regard to the conclusions on Issue (I), I too would allow the appeal.

Lord Justice Gross has set out the relevant facts and contractual provisions. From those it is apparent that, on the reading contended for by Mr Morgan on behalf of the appellant, clause 1(E)(ii) works as an alternative to clause 1(E)(i), as it is said to be in its opening words. If the put option is exercised, then on the put option closing date, defined in clause 1(D), A-S becomes liable to pay to SICL (within 60 days) the put option price (£11.97) for all the shares to be sold under the put option, as specified in the put option exercise notice given under clause 1(C), and on receipt of the money SICL must transfer the relevant number of shares to A-S, free of any incumbrances.

If, but only if, the listed price of the shares is lower than the option price on the put option closing date, then SICL has the choice of using clause 1(E)(ii) as an alternative. Of course if the listed price is higher than the put option price, then SICL would do better to sell the shares at the listed price on the market, rather than to sell them to A-S at the put option price, leaving him to take the profit (if he wishes) by selling the shares on the market (subject to any fluctuation of the price during the 60 days). But if the listed price is indeed lower than the option price, SICL’s commercial interest can be satisfied by retaining the shares and receiving from A-S the difference between the listed price and the put option price.

The evidence indicates that the purpose of the put option agreement was as a hedge, to reinforce the balance sheet of SICL against the risk that its holding of the shares might otherwise decline in value, because of changes in the market, below the put option price. On that basis, that reading of the agreement, and in particular of clause 1(E), makes sense. So long as the agreement was in place and the put option was exercisable, the shares could be regarded as worth whichever was the higher of the listed price and the put option price.

If, however, SICL had in the meantime sold the shares then there seems to be no underlying reason why the value of the shares, no longer on SICL’s balance sheet, should be of any relevance or interest to SICL.

If, as Mr Atherton argued, and the judge accepted to be reasonably arguable, clause 1(E)(ii) could be used even if SICL did not own any of the relevant shares, then its function would be entirely different. It would be capable of operating as a free-standing obligation constituting a bet, or, to put it in more technical language, a contract for differences. If the listed price of shares (albeit no longer held by SICL) declined below £11.97, then SICL could collect the difference, multiplied by any number up to 32.6 million, by serving notice on A-S under the option agreement at any time (or times) up to the expiry of the agreement. It could not do so for more than 32.6 million shares in aggregate, because of the provision in clause 1(A) under which the option ceases to be exercisable on the delivery by SICL to A-S of one or more notices covering the aggregate of all the shares pursuant to clause 1(C). But SICL would have no commercial interest in the value of the shares as such, once it had sold the shares, and accordingly, the nature of its rights under clause 1(E)(ii) would, in that event, be fundamentally different from both (a) the position while it does still own the shares and also (b) the position under clause 1(E)(i).

If SICL had sold the shares, it may well be that it had thereby realised a price for the shares in excess of the put option price (though less than the barrier price of £12.50), since if it sold for less than £11.97, it would have done better to have exercised the put option. It would therefore have the best of both worlds. It could realise the shares at a price at which it did not need the support of the POA, but it could continue to rely on clause 1(E)(ii) to collect from A-S the difference between the listed price and the put option price (if higher) even though the price or value of the shares was by then of no relevance to SICL.

I agree with Gross LJ that this is not the correct reading of the agreement, and that SICL does not have a sufficiently arguable case in favour of that to justify service of the proceedings out of the jurisdiction. It seems that the case was differently argued before the judge. It is apparent that he thought that there might be much to be said for Mr Morgan’s argument at trial: see his paragraph 20 and in particular the reference, entirely justified in my view, to “requirements which only made sense in the context of an actual sale of shares”. He did not approach the matter on the basis that he should determine the case on his own view, on the available information, of the correct construction of the agreement. Like Gross LJ, I conclude that it is right and necessary to decide the appeal on the basis of the true construction of the agreement, that we are in a position to do so, and that the right answer is that for which the appellant contends. Neither the contractual language nor commercial sense seems to me to support the view that the agreement should be read as Mr Atherton contends. In my view SICL has no reasonable prospect of success in arguing that clause 1(E)(ii) is independent and free-standing, available to be used by SICL even if it did not own the shares on the put option closing date and therefore could not complete a sale of the shares under clause 1(E)(i). I therefore agree that the appeal should be allowed on issue I. I do not need to add anything to what Gross LJ has said about the other issues.