Awal Bank BSC v Al- Sanea

The Claimant, Awal Bank BSC, is a company (now in administration since 31 July 2009) incorporated in Bahrain. The appointment of Messrs Charles Russell as external administrator on 6 August 2009 was recognised under the Cross-Border Insolvency Regulations 2006 by order of Mr Registrar Jaques on 23 September 2009. The Defendant, who resides in Saudi Arabia, was the Chairman and controlling mind, and owner of 47% of the shares, of the Claimant prior to its administration. The Claimant’s claim against him is for £189,838,000 plus interest, pursuant to the service of a Put Option Exercise Notice (“the Notice”) dated 25 June 2009, issued pursuant to a Put Option Agreement (“the Agreement”) made between the Defendant as Seller and the Claimant as Buyer on 5 October 2008.

By the Agreement, the Defendant granted to the Claimant an option to sell the beneficial ownership of all or any part of 44 million shares in HSBC Holdings plc (“HSBC”) and the Notice purported to exercise that option. By letter dated 14 July 2009, the Claimant wrote to Messrs MacLeod and James, the signatories of the Notice, acknowledging receipt of (inter alia) the Notice, but reserving all his rights, and he has made no payment, which subsequently resulted in the issue of these proceedings in December 2009. It is not in dispute that (by Clause 5H of the Agreement), the Agreement was to be “governed by and construed in accordance with” English law, and that there was an irrevocable and unconditional submission to the non-exclusive jurisdiction of the English courts (the words in fact used in the Clause are not England but ‘the United Kingdom’, but the Defendant concedes English law and English non-exclusive jurisdiction). The Agreement provides that “all Notices served shall be sufficiently served on [the Defendant] if delivered to PO Box 3250 Al Khobar 31952 Saudi Arabia”.

This has been the hearing of an application by the Defendant, for whom Mr Richard Morgan QC has appeared, to set aside orders by Andrew Smith J on 9 December 2009, giving permission to the Claimant to serve the Defendant out of the jurisdiction, at the offices of Saad Trading, which it is common ground is his company and has the address PO Box 3250 Al Khobar 31952, at that address marked for his personal attention in Arabic, and at the London offices of Messrs Simmons and Simmons, who had been the Defendant’s UK solicitors in other proceedings. The application issued on 23 March 2010 is to set aside Andrew Smith J’s order, the service that took place pursuant thereto and the default judgment entered on 16 February 2010 in the absence of an Acknowledgment of Service by the Defendant, notwithstanding his instruction of solicitors (his present solicitors Messrs Olswang) in this country by (at least) 1 February 2010.

Mr Morgan’s skeleton concentrated substantially upon one issue, namely that there was not before Andrew Smith J (or now) a serious issue to be tried in respect of the Claimant’s claim, as is required before there can be service out of the jurisdiction, inter alia as spelt out in Seaconsar Far East Ltd v Bank Markazi [1994] 1 AC 438; but a plethora of other points had been raised on the part of the Defendant, with which the thorough skeleton of Mr Marcus Smith QC and Miss Carpenter on the Claimant’s behalf comprehensively dealt.

In the event, as I announced at the end of the hearing, I would have found for the Claimant on all the issues as to which not a great deal of time was spent at the hearing, namely relating to (i) the application for and grant of an order for service by alternative means (pursuant to CPR 6.15) (ii) the service pursuant to such order and its effectiveness (iii) the knowledge of the Defendant of such service and his opportunity to enter an Acknowledgment of Service (iv) the availability (and alleged non-disclosure of them to Andrew Smith J) of a raft of defences (two of which were impliedly abandoned prior to the hearing, relating to putting to proof his signature on the Agreement and the payment of the consideration of US$5m, whose receipt by the Defendant was acknowledged in Clause 1(F) of the Agreement) namely of alleged lack of authority on the part of the signatories of the Notice, of the alleged non-availability of the HSBC shares, and of set-off. But I indicated that, for reasons which became entirely apparent in the course of oral submissions and which are now set out in this judgment, I would nevertheless grant the Defendant’s application, by reference to the invalidity of the Notice.

The relevant clauses of the Agreement in issue before me were as follows:

“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 9.2775 … 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 exerciseable by the Buyer … until … 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 or any Successive 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) …

(D)

The sale of all the Shares to the Seller pursuant to the exercise of the Put Option shall take place at a closing (the “Put Option Closing Date”) to be held at the offices of Awal Bank … at 3.00 p.m. 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 relevant Put or Successive Put Option Prices and the number of Shares being sold (the “Option Sale Amount”), in cash within a period of sixty days, in immediately available funds by transfer to the account of the Buyer notified to the Seller in the Put Option Exercise Notice …

(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, in immediately available funds by transfer to the account of the Buyer notified to the Seller in the Put Option Exercise Notice.”

It is now clear that in sending the Notice the Claimant, not yet in Administration, was acting on the express instructions of the Central Bank of Bahrain (“CBB”), which subsequently was responsible for putting the Bank in administration, pursuant to a Formal Direction issued on 25 June 2009 to the Claimant, with which the Claimant was required to comply. It is plain from the Notice itself that the Claimant had decided, in advance of any Put Option Closing Date, to exercise its option under Clause 1(E)(ii), rather than Clause 1(E)(i). The Notice, dated 25 June 2009 and addressed to the Defendant at the necessary PO Box as set out in paragraph 2 above, read as follows:

“We refer to the terms of the Put Option Agreement dated 5^th October 2008 between yourself in your personal capacity and Awal Bank in respect of forty-four million shares in HSBC Holdings PLC.

In accordance with the terms of the agreement, we hereby serve notice of our decision to exercise the put option at yesterday’s closing price of GBP 5.149713 and as per the terms of Clause E(ii) of the agreement, we request payment of Option Settlement Amount of GBP181,622,628 within 60 days of today’s date.

Meanwhile we look forward to your acknowledgment of receipt of this notice.”

The Notice was sent on the Claimant’s headed notepaper and was signed by Mr Macleod as Acting Chief Executive Officer and Mr James as Chief Operating Officer. There was a space for the Defendant to sign under the word “Accepted”, which remains blank, but, as set out in paragraph 2 above, he acknowledged receipt in a letter dated 14 July 2009. Attached to the Notice was a Schedule which provided as follows:

“EXERCISE OF HSBC HOLDINGS PLC PUT OPTION

Number of shares in the put 44,000,000

Strike Price GBP 9.28

Put option closing price 5.149713

Payable per share GBP 4.127787

Amount payable to Awal GBP 181,622,628”

The Strike Price is inaccurately recorded by reference to the provisions of Clause 1(A) of the Agreement, for the 9.2775 Strike Price was for some reason rounded up to 9.28: however, it is common ground that the rounding up did not affect the correct calculation to six decimal points of the balance of the calculation, so that in fact the correct Strike Price must have been used, though not recorded. No point arises out of this.

Mr Morgan’s submission that there is no serious issue to be tried because the Notice is plainly invalid arises by reference to consideration of Clauses 1(C) and 1(D) (with collateral reference to 1(E)(ii)), which set out the requirements for validity of the Notice. There was no issue between Counsel as to the relevant authority. Apart from their passing reference to cases setting out general principles of contractual construction, the significant authority was that of the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. Lord Steyn, at 768F-G made plain that “even if … notices under contractual rights … contain errors, they may be valid if they are “sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate”. Lord Hoffmann made clear at 780G that it could be interpreted that a notice containing errors was valid if and when “construed against the background of the terms of” the agreement. On the other hand, even if generously so construed, it must comply with the requirements of the Agreement: “if the clause had said that the Notice had to be on blue paper, it would have been no good serving it on pink paper, however clear it might have been that the tenant wanted to terminate the lease” (at 776B).

I have already set out above that it is clear that the Claimant was exercising its option as between its entitlement under Clause 1(E)(i) and that under (E)(ii) early. I do not conclude that so electing in the Notice (rather than on the Put Option Closing) itself renders the Notice invalid, provided that it is clear and otherwise complies with the terms of the Contract. The Notice does not specify, as it should have done, according to the terms of Clause 1(E)(i) and (ii), the account into which the Defendant is required to pay immediately available funds, which in each subparagraph is required to have been“notified … in the … Notice”. However, I find it persuasive that such requirement was not stated in the crucial paragraph (1)(C), which spells out the requirements of the Notice, and conclude that failure to comply with it does not render the Notice invalid. Mr Morgan did not strenuously contend to the contrary.

I turn then to the central argument, namely whether there was satisfactory and sufficient compliance by the Notice with the terms of the Agreement so as to render it valid. Other than the requirement for the Notice to be signed by the Claimant, the three essential requirements are as follows, and I number them:

“The … Notice shall specify (1) the number of Shares being sold (2) the amount payable at the Put Option Closing (as defined [in E] below and (3) the Put Option Closing Date (as defined [in D] below.”

I shall address each of these three requirements in turn:

All that thus would be necessary for a valid Notice in this case would have been, once the Defendant had decided to exercise the E(ii) option, to specify that, in respect of 44 million shares, the Defendant was obliged to pay (preferably into a notified account) a sum representing the difference between £9.2775 per share and the price listed on the London Stock Exchange at 3pm local time on 9 July (being the fourteenth day after the date of the Notice), such sum to be payable within a period of 60 days from 9 July.

That is, however, not what this Notice did, as set out in paragraphs 7 and 8 above. It stated that the Claimant was exercising or had exercised its option under Clause E(ii) that day or the previous day (“yesterday”)(24 June), that the closing price on 24 June had been £5,149713, and that the difference between yesterday’s closing price and the Strike Price, amounting to £4.127787 per share (in total £181,622,628) was payable within 60 days of the date of the Notice. That bears no relationship whatever to a Notice in accordance with the Agreement and in particular with Clauses 1(C) and (D). The Put Option Closing has already (impermissibly) occurred, as opposed to its being going to occur at the Put Option Closing Date, 14 days after the date of the Notice, and a figure is being sought which is not calculated in accordance with E(ii).

Mr Smith produced a number of similar Notices previously served by the Claimant on the Defendant in respect of other Put Option Agreements. In every case, the E(ii) option purported to be or have been exercised on that day or the previous day, and the calculation of the sum due was by reference to the difference between that closing price and the Strike Price. However, Mr Smith did not seek to rely upon those Notices as indicating any implied variation, or waiver, of the terms of this Agreement. He accepted that it simply indicated that there had previously been offers in those terms, which the Defendant had accepted. He submitted that this Notice fell into a similar category, and he described it as a “Combined Instrument”. It was, he submitted, an offer, capable of acceptance by the Defendant, to carry out a transaction in accordance with its terms, which, if refused, could also serve as a Notice in accordance with the Agreement, impliedly incorporating into the Notice, once it was clear that E(ii) was to be exercised, an implied Put Option Closing Date fourteen days from the date of the Notice, with the consequent calculation by reference to an as yet unascertainable quoted price on that day. This was a brave effort by Mr Smith, but it is quite plain that, after stripping out the (unaccepted) offer, the Notice, for the reasons set out in paragraph 15 above, would not comply with the terms of the Agreement, and there is no basis upon which those terms can be implied, when a positively different Option Closing Date, i.e. yesterday rather than fourteen days from the Notice, is identified and a positively different and quantified sum of £181,622,628 is demanded to be paid within 60 days of 25 June.

I am satisfied that, with due account taken of the dicta of their Lordships in Mannai, this is not a Notice containing errors which can be ignored or overridden when construed against the background of the terms of the Agreement, and which would nevertheless have remained comprehensible to a reasonable recipient: it is not a Notice pursuant to the Agreement at all.

I am therefore satisfied that there is no serious issue to be tried, and that the permission to serve out, together with the resultant service and entry of judgment in default, must fall away. It is noteworthy that the Particulars of Claim, when considered in the light of the foregoing, do not actually recite the terms of the Notice, or its effect. The Notice is exhibited as Appendix 2, as referred to in paragraph 4, which states:

“On 25 June 2009, Awal issued a Put Option Exercise Notice (Appendix 2) pursuant to Clause 1(C) of the Put Option Agreement. In the premises, the Put Option Closing Date was 3.00pm on 9 July 2009.”

This paragraph may thus assert that “In the premises” the Put Option Closing Date was 3pm on 9 July 2009, but the Notice actually says that the Put Option Date (though not one according with the Agreement) had occurred on the previous day. In paragraph 5(3) of the Particulars of Claim, it accurately records that the Notice specified the 44 million shares. It is then pleaded that “the Put Option Price was £9.2775 per HSBC share, giving an amount payable at Put Option Closing of £408,210,000”. None of this was stated in the Notice, and this of course would assume exercise of an Option under E(i), when in fact the alternative under E(ii) had already been purportedly exercised yesterday.

In paragraph 5(4), it is pleaded that the Notice “Stated that Awal was further exercising its option pursuant to Clause 1(E) to receive the Option Settlement Amount (being the difference between the Put Option Price and the price listed on Put Option Closing on the exchange on which the HSBC Shares are customarily listed).” It did not do so: it recorded that the Claimant had exercised its Option pursuant to E(ii) yesterday.

In paragraph 7, it is stated:

“On 9 July 2009 (being the Put Option Closing Date), the lowest price of one HSBC Share on the London Stock Exchange (being the exchange on which HSBC Shares are customarily listed) was £4.963. In the premises, the difference between the Put Option Price and the price listed on Put Option Closing was £4.3145, and the Option Settlement Amount was £189,838,000.

It may be that £4.963 was the share price on 9 July 2009, leading to a difference between the Strike Price and such figure of £4.3145, and a product of £189,838,000. However, no such price was (or was capable of being) disclosed in the Notice, and the sum that was claimed in the Notice was of course a very different figure.

Finally, paragraph 8 of the Particulars Claim asserts that the “Option Settlement Amount” purportedly of £189,838,000 was payable within 60 days of 9 July 2009. The Notice of course provided that a different, differently calculated, figure, was payable within 60 days of 25 June.

It is apparent that the pleader of the Particulars of Claim must have appreciated that the Notice upon which the claim purportedly relied was in substantially different terms from the way in which the claim was now made.

In support of an application for permission to serve that claim out of the jurisdiction, the witness statement of Mr Sykes on behalf of the Claimant was put before the Judge; the application was considered on paper. The relevant paragraphs of his witness statement are as follows:

“16.

I shall not describe the nature of the Put Option Agreement in this statement, as its effect is fully set out in the Particulars of Claim [exhibited]. However, I do exhibit to the statement … copies of the following [the Agreement, the Notice and the Defendant’s letter of 14 July acknowledging receipt].

28.

… [T]he merits Awal’s claim against Mr Al-Sanea are plainly strong. Awal’s rights and Mr Al-Sanea’s obligations under the Put-Option Agreement are clear cut; Awal has exercised the option; the time for performance has passed, and Mr Al-Sanea has not performed. So far – beyond pleading lack of assets – Mr Al-Sanea has not raised any kind of substantive objection to Awal’s claim under the Put-Option Agreement: I refer to Mr Al-Sanea’s letter to Awal [of 14 July 2009]. The only objections that I believe Mr Al-Sanea might seek to raise would be technical ones, relating (for instance) to the form of the Put Option Exercise Notice or the manner of its service. As I have indicated, such points have not (to date) been articulated by Mr Al-Sanea, and, for the record I do not believe them to be well-founded even if they were made.”

It should perhaps be added, that there can be no basis for any assertion that the letter of 14 July 2009 in any way constituted a waiver of any invalidity in the Notice, nor is such asserted. The letter both referred to the Claimant’s 25 June Notice as “purporting to exercisePut Options” and went on to “reserve all rights under” the Agreement.

It is perhaps noteworthy that in December 2010 the Claimant served “expressly without prejudice to the validity” of the 25 June 2009 Notice a fresh Notice dated 27 December 2010, which obviously cannot be (and is not) relied upon to support these proceedings. The Notice complied entirely with the provisions of Clause 1(C) and 1(D) and with the way in which the present Particulars of Claim sought to rewrite retrospectively the Notice in these proceedings. It gives notice of a Put Option Closing Date fourteen days thereafter and, because at that stage there is no exercise of any option under E(ii), indicates the total amount of shares and, by reference to the Strike Price, reaches a product of £408,210,000. Then, by subsequent letter dated 12 January 2011, the Claimant indicates that, on the Put Option Closing Date, the election under E(ii) had taken place, and now seeks a properly calculated figure, by reference to the difference between the Strike Price and the Closing Price on the Put Option Closing Date, demanding payment within 60 days of the Put Option Closing Date. Of course, as the Claimant has made clear, since this was without prejudice to the validity of the earlier Notice, it cannot prevent them relying on that Notice if it was valid. I am satisfied however, as I have stated, that it was not valid. The fact that the fresh Notice accords with the wishful thinking of the Particulars of Claim however only underlines the inadequacy of the disclosure to the judge.

I am satisfied that such disclosure was indeed inadequate. As has been pointed out, for example in Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428 by Bingham J, the fact that somewhere in an exhibit the true picture could become clear if a judge worked his way through to it is no answer. On an ex parte paper application in particular, the judge cannot be and is not expected to discover for himself what only after full understanding such as I have gained on this inter partes application can be revealed as the stark and irreconcilable contrast between the Particulars of Claim and the content of the Notice. I would accordingly set aside the order of Andrew Smith J and its consequences, both on the ground of there being no serious issue to be tried and on the basis that there was material non-disclosure of matters which, in the event, disclosed the flaw in the Claimant’s case.

In those circumstances, and in the light of the fact that, no doubt because of the strength of Mr Smith’s submissions in his skeleton argument (but also my encouragement to Counsel), there was little or no oral submission with relation to them, I can deal briefly with the other issues raised.

First, I address the question as to whether it was appropriate on the evidence before the judge for an order to have been made for service by an alternative means. For this purpose, I shall assume that the judgment of Stanley Burnton LJ on this aspect in Bayat Telephone Systems International Inc v Lord Michael Cecil [2011] EWCA Civ 135 was not obiter, as has been argued in other cases, but I am satisfied that any additional requirement to those which have been previously considered, particularly by the Commercial Court, in such cases, would in any event in this case be satisfied. There was sufficient evidence before Andrew Smith J in paragraphs 29 to 38 of Mr Sykes’ witness statement, and by reference to affidavits sworn in Cayman Island and English proceedings which were exhibited to that witness statement (subsequently supplemented in further witness statements by Mr Sykes and by Mr Al-Alawi on behalf of the Administrator) to found and justify a concern that there would be difficulties in, and obstruction in the course of, service on the Defendant through consular channels.

As for the service which took place, the Defendant has suggested that there was not effective service. The order of Andrew Smith J provided for service upon both Messrs Simmons and Simmons and, as set out in paragraph 3 above, by reference to the address expressly provided for the giving of notice in the Agreement. Service upon the former was plainly effected on 21 December 2009. It is clear that this must have become known to the Defendant, because the Defendant’s own evidence through a Mr Al-Badawi, the supervisor of the Mail and Delivery Services at Saad Trading, was that he was advised on or about 23 December that there was likely to be delivery of a package from the Claimant’s solicitors. I am satisfied from the evidence that there was good service in accordance with Andrew Smith J’s order in relation to the latter also. First, and sufficiently, I am satisfied on the evidence that there was delivery at the Central Post Office for Al Khobar, where PO Box 3250 is situated, and a receipt (number 54907) is exhibited by the Claimant. Additionally, and in any event, I am satisfied that there was service of an agent on behalf of the Defendant at the offices of Saad Trading, described in the Order, by the name of Suliman, who wore a name tag, in circumstances fully described by Mr Al-Hussan in two witness statements. The denials by the Defendant in these (and, as is clear from the evidence, in other) proceedings of such service (coupled with his acceptance that there may be an employee named Suliman - indeed, according to Mr Al-Badawi, “hundreds of Sulimans”) at the premises, are wholly unconvincing. Given therefore that I am satisfied that the Defendant was effectively, indeed, thoroughly, served, and, as set out in paragraph 3 above, that it is accepted that Olswang had instructions from the Defendant prior to 1 February 2010, I would neither have set aside the service nor been sympathetic to any justification to set aside a judgment regularly entered into in default, absent a good arguable defence.

As to defences, I have already referred, in paragraph 5 above, to two defences previously raised which were not even pursued by Mr Morgan in his skeleton, but I have also dealt at length in this judgment with the defence which I have concluded was not simply arguable, but left no serious issue to be tried. As for the other three defences raised, I shall deal with them briefly in turn, by reference to the headings (i) Authority (ii) The HSBC Shares (iii) Set-Off. As will be seen, I am satisfied, having read the detailed submissions of Mr Smith and such oral submissions as Mr Morgan wished to make, that they raise no arguable defence.

The defence was raised that those who signed the Notice, Messrs Macleod and James, did not have authority to sign it on the Claimant’s behalf at the relevant time. This is supported to an extent by witness statements served on behalf of the Defendant by both of them. There is plainly a powerful answer to that assertion, as set out in Mr Smith’s skeleton at paragraph 77; however he accepts, at paragraph 78, that if that were the only matter raised, it would not be capable of summary determination. Similarly, any answer of waiver by the Claimant would be difficult of resolution in the Claimant’s favour, at any rate in the light of the wording of his letter of 14 July, referred to in paragraph 26 above. However, the precise position and authority on behalf of the Claimant of Mr Macleod and Mr James falls to be set against the background first of the 25 June direction by the CBB (referred to in paragraph 7 above) and then the fact of the Claimant entering into administration. So far as concerns the 25 June direction, I am satisfied, for the reasons set out in paragraphs 80 and 81 of Mr Smith’s skeleton, that there is no answer to the proposition that, in the light of the CBB Rulebook, the Central Bank of Bahrain and Financial Institutions Law Articles 10 and 38, Article 4 of the Memorandum of Association of the Claimant and the detailed letter dated 13 October 2010 from Mr Ashley Freeman on behalf of the CBB, there is no doubt that the Notice was properly issued by the Claimant pursuant to the 25 June direction, which was a valid direction by the CBB, with which the Claimant was required to comply. In any event, any lack of authority of the Claimant in respect of the issuing of the Notice has been ratified by the Administrator subsequent to the Defendant entering into administration. That this is so as a matter of Bahraini law is supported by the legal opinion dated 30 September 2010 from Shaikha Haya Al Khalifa. Although the Defendant himself, in his witness statement, does not agree with this, and says that he has been advised by his Bahraini Counsel that “the purported [Notice] could only be ratified under Bahraini law if both parties to the Agreement agreed to the ratification”, Mr El-Mardi, the Defendant’s Bahraini law expert, does not support this somewhat unlikely proposition in any event. Although he says that he does not agree with Shaikha Al Khalifa’s opinion, he does not say why, and (contrary to the assertion expressed by his client) accepts that unilateral ratification by a principal is valid and effective at Bahraini law. In the absence of any material view to the contrary, I would have accepted the Claimant’s case that there can be, and has been, ratification, although, as I have indicated, that would not be necessary, given my conclusion as to the effect of the 25 June direction.

The Claimant purchased from Singularis Holdings Ltd (“Singularis”), a company within the Defendant’s Saad Group of Companies, 43,543,014 shares between April and November 2007, and, as a result of Bills of Sales and Declarations of Trust, although Singularis continued to be the legal owner of the shares, they plainly and admittedly held the beneficial interest on behalf of the Claimant thereafter. It would seem that these shares formed the majority, if not all, of the beneficial shareholding of the Claimant in HSBC. There is, however, no definition of The Shares in the Agreement as specifically relating to the shares held by Singularis. The Defendant produced some evidence that Singularis may have in some way dealt with the legal title to the shares inconsistently with its obligation to the Claimant under the Declarations of Trust. Deloittes, on behalf of the Claimant, were unable, when they investigated the position in September 2009, to discover what had happened to the shares. Mr Sykes, in his third witness statement, points out, however, that since the HSBC shares are fungible assets, easily traded, even if the Claimant had elected under E(i) to transfer 44 million shares to the Defendant, they would not have needed to have transferred the Singularis shares: and Mr Morgan’s reliance on Clause 4(B) and (D) of the Agreement, in which the Claimant gave a continuing warranty to the Defendant that it had not encumbered its interest, would not in my judgment have been breached by reference to whatever Singularis (particularly Singularis as controlled by the Defendant) might have done with its legal interest in the shares. But in any event I am satisfied, as Mr Smith contended (in his comprehensive dealing with this purported defence in paragraphs 52 to 56 of his skeleton), that, by virtue of its election under E(ii), the Claimant was not obliged as a result of the Notice to transfer the shares, but was simply entitled to the difference in price, such that the asserted defence of the Defendant by reference to the alleged unavailability of the Singularis shares is of no substance.

The Defendant asserts that he has a set-off. This arises in paragraph 30 of his witness statement of 13 June 2010, when he says “In any event, as per the creditor claims position updated w/c 11 October 2009 and prepared by Charles Russell LLP there is net balance of approximately US$223 million payable to me by the Claimant as at 31 July 2009. Thus, the amount due to me from the Claimant exceeds the amount the Claimant says is due from me to it”. He does not exhibit the document to which he refers. This can perhaps be characterised as ‘leading with the chin’. The Claimant produces the document, and, although there is a figure of $223 million in the left hand column, it is wholly extinguished by the sum of $2,743,345,137 in the right hand column, showing a net indebtedness of the Defendant to the Claimant of $2,519,969,382. The unarguability of this Defence is further confirmed by the evidence from Mr Sykes (in his third statement) and from Messrs Oldfield and Mackay of Baker Tilly, the independent accountants instructed by the Administrators.

For the reasons set out in paragraphs 15 to 28 above, however, I grant the relief sought by the Defendant.