Byers v Saudi National Bank [2024] UKSC 42

Facts

• The claimants, beneficiaries of a trust, alleged that funds had been misappropriated from the trust and transferred to the Saudi National Bank (SNB).
• The primary allegation was that SNB was liable for knowing receipt of misappropriated trust property.
• The claimants sought equitable remedies, including restitution and proprietary claims, asserting the funds retained their trust character.
• The Supreme Court examined the requirements for knowing receipt, specifically focusing on the mental element required to establish liability.
• The judgment considered the broader implications for commercial and financial institutions handling large sums in transactions.

Issues

1. Whether SNB received trust property in breach of trust and with the requisite level of knowledge to establish knowing receipt.
2. What constitutes the necessary mental element—actual, constructive, or other forms of knowledge—for knowing receipt liability.
3. Whether proprietary remedies were available, including tracing misappropriated funds.
4. What standard should be required to balance protecting trust beneficiaries and maintaining commercial certainty for financial institutions.

Decision

• The Supreme Court reaffirmed the need to prove the recipient’s knowledge—extending beyond actual knowledge to include constructive knowledge where the recipient ought to have known of the breach.
• The Court rejected the sufficiency of mere notice, requiring a higher threshold of knowledge, thereby protecting innocent recipients.
• Liability was to be determined objectively, taking account of the recipient’s conduct and transaction circumstances.
• The Court confirmed proprietary remedies, such as tracing and restitution, are available if the claimant can establish a continuing equitable interest in the property, including that the trust property has not been dissipated or irretrievably mixed.
• The judgment unified and clarified conflicting approaches from lower courts and prior authorities.

Legal Principles

• Knowing receipt liability requires receipt of trust property, a breach of trust, and knowledge of the breach by the recipient.
• Knowledge for this liability includes constructive knowledge, assessed objectively, not just actual knowledge.
• Mere notice of a breach does not suffice; a higher threshold of awareness is required to hold a recipient liable.
• Proprietary remedies are available when a claimant demonstrates a continued equitable interest and can trace misappropriated property.
• Financial institutions handling high-value transactions must maintain strong compliance and due diligence to avoid constructive knowledge of breaches.

Conclusion

The Supreme Court’s decision in Byers v Saudi National Bank [2024] UKSC 42 clarified the mental element required for knowing receipt and defined the availability and scope of equitable remedies, offering authoritative guidance that balances protection for trust beneficiaries with the operational realities facing commercial recipients.