DIFC Courts

Claim No: CFI 026/2009

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BEFORE THE DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK

BETWEEN

(1) RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) AMRAH ALI ABDEL LATIF AL HAMAD

(3) ALIA MOHAMED SULAIMAN AL RIFAI

Claimants

and

(1) BANK SARASIN-ALPEN (ME) LIMITED

(2) BANK SARASIN & CO. LTD

Defendants

Hearing: 2-3 March 2015

Counsel: Mr Richard Hill QC and Mr Sharif Shivji with Ms Gayle Hanlon of Hamdan Al Shamsi for the Claimants

Mr Michael Brindle QC and Ms Chloe Carpenter with Ms Rita Jaballah and Mr Robert Maxwell Marsh of Al Tamimi & Co for the First Defendant

Mr Michael Black QC and Ms Sarah Bayliss instructed by Al Tamimi & Co for the Second Defendant

Judgment: 7 October 2015

JUDGMENT OF THE DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK

Deputy Chief Justice Sir John Chadwick:

Following the trial of this action I held, for the reasons set out in my judgment dated 21 August 2014, (i) that the first-named Defendant, Bank Sarasin-Alpen (ME) Limited (“Sarasin-Alpen”), had failed to comply with its obligations under the Dubai Financial Services Authority Rules (“the DFSA Rules) – and, in particular, with its obligations under COB Rules 3.2.2.(1) and 6.2.1(1) – and that it was appropriate in the circumstances to make orders against Sarasin-Alpen, pursuant to the power conferred on the Court by Article 94(2) of the Regulatory Law (DIFC Law No. 1 of 2004), for the payment of compensation to the Claimants, Rafed Abdel Mohsen Al Khorafi (“Mr Al Khorafi”), his mother, Amrah Ali Abdel Latif Al Hamad (“Mrs Al Hamad”), and his wife, Alia Mohamed Sulaiman Al Rifai (“Mrs Al Rifai”), and (ii) that the second-named Defendant, Bank J. Safra Sarasin Ltd (then known as Bank Sarasin & Co Ltd) (“Bank Sarasin”), had dealt with the Claimants in breach of the Financial Service Prohibition imposed by Article 41(1) of the Regulatory Law and that it was appropriate in the circumstances to make orders against Bank Sarasin, pursuant to the power conferred on the Court by Article 65(2)(b) of the Regulatory Law, for the payment of compensation to the Claimants.
At paragraph 428 of my judgment dated 21 August 2014 I recorded that the losses in respect of which the Claimants sought compensation could be divided into the following categories: (i) losses on the sale of the Claimants’ investments with Bank Sarasin (which had been agreed as to amount), (ii) other fees and interest charged by Bank Sarasin and (iii) other fees and interest charged by Al Ahli Bank Kuwait (“ABK”). I recorded, also, that the Claimants sought interest on their losses pursuant to Articles 18 and/or 32 of the Law of Damages and Remedies 2005, and/or Articles 65 and/or 94 of the Regulatory Law of 2004.

The Order of 28 October 2014

The parties were unable to agree the terms of the order to be made following my judgment of 21 August 2014. The matter came before me on 2 October 2014 to settle those terms; which were incorporated in an Order dated 28 October 2014. Paragraphs 1 and 2 of that Order were in these terms:

“1. It is adjudged and declared that [Sarasin-Alpen] was in breach of the Financial Services Prohibition within the meaning of Article 41 of the Regulatory Law and is liable to pay compensation to the Claimants under Article 94(2) of the Regulatory Law.

2. It is adjudged and declared that [Sarasin-Alpen] was in breach of COB 6.2.1 and is liable to pay compensation to the Claimants under Article 94(2) of the Regulatory Law.”

Those paragraphs were intended to give effect to, and must be read in conjunction with, my judgment of 21 August 2014. As I have said, the findings made against Sarasin-Alpen in that judgment were that it had failed to comply with its obligations under Rules made by the DFSA: that is to say, obligations under COB 3.2.1 – read with COB 3.2.2(1) and (3) – and COB 6.2.1(1). The carrying on of a Financial Service by Sarasin-Alpen (as an Authorised Firm) in breach of Rules made by the DFSA was a breach of the Financial Services Prohibition. The breach of the Financial Services Prohibition to which paragraph 1 refers is (or includes) the breaches of COB 3.2.1 and COB 6.2.1(1) which Sarasin-Alpen had been found to have committed. It may be said that paragraph 2 of the Order adds nothing and is unnecessary.

Paragraph 4 of the Order of 28 October 2014 was in these terms:

“4. It is adjudged and declared that [Bank Sarasin] was in breach of the Financial Services Prohibition within the meaning of Article 41 of the Regulatory Law and is liable to pay compensation to the Claimants under Article 65(2)(b) of the Regulatory Law.”

That paragraph, also, must be read in conjunction with the findings in my judgment of 21 August 2014. The finding made against Bank Sarasin in that judgment was that it was carrying on activities which constituted a Financial Service in or from the DIFC – in particular, the prescribed activities “Dealing in Investments as Principal”, “Arranging Credit or Deals in Investments”, “Advising on Financial Products or Credit”, and “Arranging Custody” – in the circumstances that (as was common ground) Bank Sarasin was not a person – within Article 42(3) of the Regulatory Law or otherwise – authorised to carry on prescribed activities in or from the DIFC. The breach of the Financial Services Prohibition to which that paragraph refers is the carrying on of those prescribed activities in or from the DIFC.

Paragraphs 3(a) and 5(a) of the Order of 28 October 2014 quantified the amount of those liabilities “in respect of the losses on the sale of the Claimants’ investments” in relation to each Claimant; together, in each case, “with interest to be assessed”. Paragraph 3(b) was in these terms:

“3. The amount of [Sarasin-Alpen’s] liability under paragraphs 1 and 2 above shall be:

…

(b) further amounts to be assessed in respect of

(i) other fees and interest charged by [Bank Sarasin] and

(ii) losses arising out of the Claimants’ relationship with Al Ahli Bank Kuwait (‘ABK’)”.

Paragraph 5(b) was in similar terms (mutatis mutandis in respect of Bank Sarasin’s liability), save that it contained the words “including amounts” between “assessed” and “in respect of”. That difference in wording was not intended to be of significance; and it has not been suggested that it was of significance.

At paragraph 6 of the Order of 28 October 2014 it was directed that payment of the amounts quantified in paragraphs 3(a) and 5(a) was to be made by the Defendants, jointly and severally, within 14 days. In making that order I rejected the Defendants’ submission that, on a proper reading of my judgment, I had not determined that that sum should be payable by way of compensation. After referring to paragraphs 428 and 429 of that judgment, I said this:

“3. The Defendants say, correctly, that the agreement referred to under paragraph 428(1) was an agreement only as to the calculation of the losses based upon the difference between the amounts invested and the amounts recovered. They say that I did not decide – or should not have decided – that loss measured in that way was the appropriate measure of the compensation which I had indicated in earlier paragraphs of the judgment that I would award under Article 65 and or 94 of the Regulatory Law.

In earlier paragraphs of the judgment I had said this: At paragraph 308, under the sub-heading ‘Was the loss or damage in respect of which compensation was claimed “caused as a result of such conduct’:

“308. It is said on behalf of the Claimants that, given Sarasin-Alpen’s failure to comply with its regulatory obligations, it was not permitted to take on the Claimants as Clients at all; and accordingly was not permitted to market any of Bank Sarasin’s products to the Claimants. In the circumstances, the Claimants should have never been sold the financial products which, by reason of Sarasin-Alpen’s failure to comply with the regulatory obligations imposed upon it under the Regulatory law, they were sold.”

At paragraph 321, after setting out the reasons why I concluded that compensation should be payable, I stated the following:

“321…I am satisfied that it is appropriate, pursuant to the power conferred on the Court by Article 94(2) of the Law, to make orders against Sarasin-Alpen for the payment of compensation to the Claimants in the present case.”

At paragraph 403, this:

“403. I am satisfied that Bank Sarasin dealt with the Claimants in breach of the Financial Service Prohibition; and that the Court should make an order for compensation pursuant to Article 65(2)(b) of the Regulatory Law.”

Put shortly, it said that to measure compensation by reference to the loss on the sale of investments is naive and over simplistic. It is a measure based on a no-transaction approach. It is submitted that, in order properly to measure compensation, it is necessary to make a counter-factual analysis of what would have happened if the investments with Bank Sarasin had not been made. In particular, it is necessary to ask whether, if the Claimants had not invested with Bank Sarasin, they would have invested elsewhere; and, if so, in what they would have invested and what the consequence of such investment would have been. It is only, it is said, through such a counter-factual analysis that the Court can reach a proper conclusion as to what the losses actually were.
I reject that submission; and I take the view that that rejection is clear from the judgment if read as a whole. The position in this case is that these Claimants were not investing their own monies. As to the first tranche of investments, they were proposing to invest monies which would be lent to them by ABK for the specific purpose of investing in 100% capital protected investments with this bank, Bank Sarasin, which would produce a sufficient return to service the lending which ABK was prepared to make. In relation to the second and third tranches of investment, again, the Claimants were not investing with their own monies: they were investing with monies to be lent by Bank Sarasin on a leveraged basis, again, to purchase 100% capital protected investments which would produce a sufficient return to service not only the interest charges that would be made by Bank Sarasin for the lending but also the interest charges incurred in respect of borrowing from ABK.
The conclusion that I reached in my judgment was that an investment which satisfied the two criteria which the Claimants required – that is to say, 100% capital protection and a sufficient income return to service the interest charges on a guaranteed basis – was not available. To suggest otherwise was unrealistic and unreal. There was no question of the Claimants ever proposing to invest in some other product. They should have been advised that a product having the characteristics they required was not one which could be obtained. In those circumstances, to investigate on a counter-factual basis what they would have done if they had not made the investments which they did make, would produce only one answer: they would have not borrowed (as they did) in order to make investments which did not have the criteria which they required.
Accordingly, as I sought to explain in my judgment, the only sensible basis upon which compensation could be ordered was the actual loss suffered on the sale of investments. If I were wrong to reach that conclusion, the Court of Appeal can consider whether to take the opportunity of reversing my decision; but there is little or no point in that matter going to a further hearing by way of assessment in order to be re-argued before me. It is for that reason that I conclude that the right course is to order payment of the US$ 10.4 million forthwith.”
At paragraph 7 of the Order of 28 October 2014 it was directed that:

“7 All other claims for interest and damages including the quantification of the interest referred to at paragraphs 3(a)(i) – (iii) and 5(a)(i) – (iii) above and the quantification of the categories of damage referred to in paragraphs 3(b) and 5(b) above shall, together with any other claims (including in particular claims (if any) under Article 40(2) of the Law of Damages and Remedies (Law No. 7 of 2005)), be adjourned to be determined at a one day hearing to be held on the first available date after 29 January 2015 (‘the Quantum Determination’).”

My Order of 28 October 2014 included directions for filing of evidence in advance of the Quantum Determination. Those included a direction that the evidence to be filed by the Claimants in support of their claims on quantum should – subject to further order of the Court – be limited to events which had occurred since 13 July 2013 (that being the last day of the trial in these proceedings). In the reasons set out in the schedule to the order of 28 October 2014, I explained why that restriction had been imposed:

“9. There is force in the Defendants’ submission that this is not a case in which the Court was asked to order, or did order, a split trial. The evidence on which the Claimants are entitled to rely for the purpose of assessing the quantum of their claims is the evidence that was before the Court at the trial; subject to the possibility that the quantification of those claims may be affected by reason of post-trial events. It is for that reason that I think it right to restrict the evidence which the Claimants may adduce in support of their contentions on the Quantum Determination to post-trial matters, but I leave open the possibility that there may be some further matters which justice requires the Court to consider; and, if there is, the Claimants may apply in writing to rely on evidence of those matters…”

The Order of 4 February 2015

The matter came back before me on 13 January 2015 for further directions as to the evidence which could be relied on at the Quantum Determination. The directions sought by the Claimants included an order that they be permitted to adduce evidence of a pre-trial event: the refinancing on 23 September 2010 of part of Mr Al Khorafi’s and Mrs Al Hamad’s loan accounts with ABK by a new loan in the amount of KWD10.8 million from Commercial Bank of Kuwait (“CBK”). For the reasons set out in the oral ruling given on that day, and issued in writing on 20 January 2015, I made the order sought. I said this:

“12 Paragraph 3(b)(ii) and 5(b)(ii) of my Order of 28 October 2014 provided that the amount of the Defendants’ liability to the Claimants should include ‘losses arising out of the Claimants’ relationship with ABK’. That went beyond the statement of losses in respect of which compensation was claimed as set out at paragraph 428 of my judgment of 21 August 2014. It did so because the Court became aware at the hearing to settle the order in October 2014 that losses arising from the ABK loans might not be limited to fees and interest charged by ABK itself.

The first question, therefore, in this context is whether interest charged by CBK on the KWD10.8 million loan said to have been borrowed by the First and Second Claimants in order to refinance partial repayment of the ABK debt is properly to be considered as ‘losses arising out of the Claimants’ relationship with ABK’ for the purposes of paragraphs 3(b)(ii) and 5(b)(ii) of my Order of 28 October 2014. In my view, the answer to that question is ‘Yes’. If the Claimants can establish by evidence that they needed to refinance the ABK debt or part of that debt in September 2010 and that borrowing from CBK was a reasonable method of funding that need, then (as it seems to me) that cost of borrowing from CBK can properly be said to be a loss arising out of their relationship with ABK.
The further question, then, is whether the Claimants should be permitted to adduce evidence of circumstances in which they did need to refinance the ABK debt in September 2010 and in which borrowing from CBK was a reasonable method of funding that need; given that, as the Defendants emphasize, such evidence could have been adduced at trial. In my view, the answer to that question also is ‘Yes’. The provision in paragraph 8 of my Order of 28 October 2014 under which the Claimants make the application for permission to adduce the evidence of pre-trial events was included for the reason mentioned in paragraph 9 of the Schedule of Reasons contained in that order; that is to say, to meet the possibility that there might be further matters which justice required the Court to consider. The effect of denying the Claimants the opportunity to advance their claims to interest on the CBK loans in relation to both pre-trial and post-trial interest would be that they would be limited to claims for interest on the ABK loans in circumstances where the amount of that interest was less than it would have been if the refinancing by means of funds borrowed from CBK had not taken place. If a claim to interest on monies borrowed by the Claimants to fund the investments which, as I have held in my judgment of 21 August 2014, would not have been made but for the Defendants’ breaches of the DFSA regulatory regime is a claim which, in principle, it is open to the Claimants to advance, then it is unjust that the Defendants should have the benefit of the refinancing of part of the ABK loan – in the sense of a reduced claim to interest accruing on that debt – without suffering the burden of a claim to interest on the borrowing from CBK which gave rise to that benefit.
For those reasons, I will make the order sought by the Claimants in their application CFI-026-2009/21 of 20 November 2014. They may rely on the evidence, such as it is, set out in HAS 2.”

The directions given on 13 January 2015 were subsequently confirmed in an Order dated 4 February 2015. Those directions included (in addition to the Order permitting the Claimants to adduce evidence of the refinancing of part of the ABK loan accounts to which I have just referred) a direction, at paragraph 9, that the parties file a joint statement setting out: “(a) those matters (if any) of quantum on which (subject to legal defences) they are agreed as to calculation and/or as to methodology; and (b) those matters of quantum on which they were not agreed as to calculation and/or methodology, summarising the reasons for such ”
The Quantum Determination came before me for oral hearing on 2 and 3 March 2015. The joint statement which I had directed in the Order dated 4 February 2015 had not been agreed or filed in time to be available at that hearing (although the Claimants had provided the Court with a draft). The definitive version, dated 1 April 2015, (“the Updated Joint Statement on Quantum”) was sent to the Court by the Defendants’ legal representatives on 6 April 2015. It has been of assistance in defining and refining the issues.

The claims to be determined at the Quantum Determination

As I have said the quantification of the losses sustained by the Claimants on the sale of their investments with Bank Sarasin (head (A)) were agreed as to amount; the sums payable by the Defendants to each of the Claimants under this head were set out in the Order of 28 October 2014; and payment of those amounts was to be made within 14 days of that Order. Those payments were made, although belatedly. The quantification of the fees and interest charged to the Claimants by Bank Sarasin (head (B)); the fees and interest charged to the Claimants by ABK down to 18 September 2014 (head (C)); and the interest charged to the Claimants by CBK after 18 September 2014 (head D) remains outstanding.
Paragraphs 3(a), 5(a) and 7 of the Order of 28 October 2014 provided for interest on head (A) losses to be assessed at the Quantum Determination. The Claimants do not, in terms, advance a claim for such interest in their “Written Submissions on Quantum” dated 25 February 2015; nor do they advance a claim for interest on head (A) losses in their “Supplemental Written Submissions on Quantum” dated 28 February 2015 or in the Updated Joint Statement on Quantum to which I have referred. But, in the course of oral argument at the hearing of the Quantum Determination, Counsel for the Claimants indicated that he was seeking an order for interest on head (A) losses at the rate of 4.5% per annum compounded annually. In those circumstances, I do not think it appropriate to treat the claim for interest on head (A) losses as abandoned: in my view it remains outstanding and falls to be determined.
Paragraph 7 of the Order dated 28 October 2014 also provided for “all other claims for interest and damages…together with any other claims (including in particular claims (if any) under Article 40(2) of the Law of Damages and Remedies (Law No. 7 of 2005))” to be determined at the hearing of the Quantum Determination. The Claimants seek an order against Sarasin-Alpen for multiple damages pursuant to Article 40(2) of the Law of Damages and Remedies (DIFC Law No 7 of 2005). That claim also remains outstanding. No order under that article is sought against Bank Sarasin.

The quantification of losses under heads (B), (C) and (D)

The amounts claimed

	Head (B) US$	Head (C) US$	Head (D) US$	Heads (B)+(C)+(D) US$
Mr Al Khorafi	1,338,266	5,747,909	0	7,086,175
Mrs Al Hamad	7,733,387	5,487,040	7,520,100	20,740,527
Mrs Al Rifai	1,506,614	7,491,895	0	8,998,509
All Claimants	10,578,267	18,726,844	7,520,100	36,825,211

The amounts claimed under head (B), head (C) and head (D), as appears from the Updated Joint Statement on Quantum, are these:

The amounts claimed are based on three reports prepared for the Claimants by Mr T J Bramston FCA of Griffins, a firm of forensic accountants: the first dated 3 May 2015 (“the Griffins May 2013 Report”), the second dated 7 January 2015 (“the Griffins January 2015 Report”) and the third dated 27 February 2015 (“the Griffins February 2015 Report”). It is stated in the May 2013 Report that Griffins were asked to review documents provided by the Claimants’ then legal representatives and provide a forensic accounting analysis pertaining to quantum; including a detailed review of the receipt and dissipation of funds through the accounts held by Mr Al Khorafi, Mrs Al Hamad and Mrs Al Rifai, a detailed calculation of the net capital gains arising from those accounts (treating the analysis as if no transactions had occurred, and including within it reference to the initial borrowing from ABK as well as subsequent investment and leveraging) and a conclusion as to the losses sustained by the Claimants in proceeding with the transactions. Those reports were prepared to assist the Claimants in quantifying their claims. They were not adduced as expert evidence (in the conventional sense); rather they and the contents were adopted by Counsel in making submissions.

At paragraph 8 of the Griffins May 2013 Report the analytical methodology which has been adopted is explained:

“8.1. This Report has been prepared on a nil transaction basis, i.e. If the claimants had not entered into agreements to open the accounts reviewed, none of the transactions would have occurred. We have assumed that at the dates on which the accounts were opened the overall financial position between the claimants and the defendants stood at US$0.00. It follows that any costs/losses arising from investments undertaken or drawdowns on loan facilities by the account holder should be identified, together with any gains arising.

8.2. Our approach has been to schedule all of the accounts and to summarise the movements. From those summaries we have identified the items where the claimants have suffered costs and losses, as well as receiving any benefits. We have summarised the identified sums to arrive at an overall figure…”

The Defendants’ response

The Defendants’ primary response to the claims for compensation under heads (B), (C) and (D) is that they are bound to fail, both on procedural and on substantive grounds, and should have been dismissed. In summary it is said:

That, on procedural grounds, it is not open to the Claimants to pursue those claims; given that (i) save for interest charged by ABK in respect of the period up to 6 June 2009 (part of head (C) loss), these heads of loss were not pleaded; (ii) permission to amend the particulars of claim was not sought (and, if it had been sought, should not have been given); (iii) these heads of loss were not advanced in submission at trial; and (iv) there is no good reason to allow the Claimants to advance these heads at this stage of quantum determination.
That, in any event, as a matter of law, those claims cannot succeed; in that (i) the heads of loss are irrecoverable as they fall outside the scope of the duty, or are too remote; and/or (ii) the failure to repay the ABK loans in October 2008, or by 2010, and the decision to take out the CBK loan in 2010 were failures to mitigate loss and so any claim for interest and charges paid thereafter is irrecoverable; and/or (iii) the failure to repay the ABK loans in October 2008, or in 2010, and the taking out of the CBK loan in 2010 was an independent decision of the Claimants which broke the chain of causation and/or resulted from personal borrowings of the Claimants unconnected with the relevant investments and/or was not in law caused by the acts or omissions of Sarasin-Alpen; and/or (iv) each of the heads of loss is irrecoverable because this is not a nil-transaction case.

In those circumstances, it is said, the Court must hold at the Quantum Determination that those claims are to be quantified at zero.

In the alternative, if (contrary to the Defendants’ primary position), the Court finds that any head of loss is in principle recoverable, it is said that, in any event, the amounts claimed are incorrectly quantified, unfounded in fact and incorrect, in that the Claimants have taken an incorrect and overly broad approach to assessing loss on a no-transaction basis (if applicable) and/or the claimed heads of loss are inadequately documented and/or unproven and should therefore be dismissed.
Before turning to the quantification of claims to compensation under heads of loss which are, in principle, recoverable, it is convenient to address the Defendants’ primary response: that, on procedural grounds, it is not open to the Claimants to pursue those claims and that in any event, they are bad in law.

Whether, on procedural grounds, the Claimants are precluded from advancing claims to compensation under heads (B), (C) and (D)

In developing their submission that unpleaded heads of loss should be dismissed (or quantified at zero) it was said that, although the Claimants were granted permission to amend their particulars of claim on three separate occasions prior to trial, their pleaded case on quantum remained, unamended, as set out at appendix B to the re-re-amended particulars of claim dated 18 April 2013. As pleaded, the claim was for losses in an amount said to be the difference between (i) the aggregate of the initial investment of US$80,000,000 and ABK interest and charges of US$9,253,542 accrued up to 6 June 2009 and (ii) the aggregate of US$20,000,000 advanced for partial repayment for partial repayment of ABK loans, US$15,000,000 for a private investment and US$9,460,343 for withdrawals against the initial investment. In seeking to advance a case on loss under head (B), head (C) (save interest and charges accrued up to 9 June 2009) and head (D) the Claimants have to rely on their contention that they do not need to amend. That, it is submitted, is not permissible: the Claimants should be held to their pleaded case.
Further, it is said that, in opening the Claimants’ case at trial, Counsel did not adopt the pleaded case; but purported to substitute a new case (raised, for the first time, at paragraph 202 of the Claimants’ written opening submissions) based on the Griffins May 2013 Report, which, it is said, had been served shortly before trial and without the permission of the Court. The opening submissions at trial – and the Griffins May 2013 Report – advanced a case on quantum based on losses in a total sum of US$33,372,201; being the aggregate of (i) net losses incurred on the investments (US$10,445,049), (ii) the balance of fees and interest charged by Bank Sarasin after giving credit for gains (US$10,578,266.82) and (iii) interest and fees charged by ABK to 14 December 2009 (US$ 12,348,886).
It is pointed out that the Defendants objected at trial that the claims for compensation in respect of fees and interest said to have been charged by Bank Sarasin (head (B)) and fees and interest to ABK post 6 June 2009 (part of head (C)) were unpleaded; and would have to be pleaded if the Claimants could have any possibility of recovery in respect of them. The Defendants submit that the Court never ruled on the Defendants’ objections; which were maintained at the hearings in October 2014 and January 2015 and continue to be maintained. Further, since trial, the Claimants have purported to seek to claim further unpleaded heads of loss: that is to say, ABK interest from 15 December 2009 to date and CBK interest payment and charges.
It is submitted that the Claimants’ contention that they did not need to plead the new heads of loss, that it was sufficient that they had made it clear in their pleading and at trial that they claimed damages on a “nil transaction” basis and it was not necessary to go further and identify in their pleading the heads of loss that would arise on a no transaction basis was incorrect, in that:

The Claimants had not pleaded that they claimed compensation on a nil transaction basis. Their pleaded claim against Sarasin-Alpen was for:

“…an order pursuant to Article 94(1) of the [Regulatory] Law, requiring [Sarasin-Alpen] to compensate the Claimants for the loss and damage suffered as a result of its conduct or to otherwise restore the Claimants to the position they were in prior to such conduct (i.e. before the Claimants made the Investment)”

and, against Bank Sarasin, for an order in like terms pursuant to Article 65(2) of the Regulatory Law. Properly understood, it is said, the Claimants’ pleaded claim was for compensation in respect of the loss and damage pleaded in Appendix B to their particulars of claim, or, alternatively, restitution, under Article 94 or Article 65 of the Regulatory Law (as the case might be).

In any event, even if the Claimants had pleaded that they sought compensation on a nil transaction basis, that would have been wholly insufficient. A claimant is required to plead not the “basis” of its case, but each head of loss claimed and the amount thereof so that the issues between the parties are clearly identified, so that a defendant is not taken by surprise at trial, and so that a defendant can require disclosure of each head of loss and carry out its own investigation of each head of loss claimed prior to trial. In support of that contention the Court was referred to Pedro Emiro Florez v Equion [2013] EWHC 3150 at [9] to [16], [48] to [49] and [55] to [56].
The failure to plead losses now claimed under head (B), head (C) – in respect of interest and charges accrued after June 2009 – and head (D) has led to the Defendants being taken by surprise, and has deprived the Defendants of the opportunity, prior to trial, to seek disclosure in relation to such heads of loss and to carry out their own investigations of each head of loss claimed. This, it is said, is particularly unsatisfactory in circumstances where, because there was not a split trial, it was the Claimants’ obligation to put forward their full and quantified claims at the trial.

It is submitted further that, in so far as the Claimants contend (as, it is said, they appear to do) that it does not matter whether heads of loss were pleaded by them, as the Court has already determined at paragraphs 428, 429 and 433 of the judgment of 21 August 2014 and/or paragraphs 3(b) and 5(b) of the Order of 30 October 2014 that they are entitled to compensation in amounts to be assessed in respect of “other fees and interest charged by the Second Defendant” and “losses arising out of the Claimants’ relationship with ABK” so that it is enough that a head of loss now claimed falls within the terms of the Order and, if so, it can be assessed and is payable, that contention is also incorrect, in that:

Paragraphs 428, 429 and 433 of the judgment and paragraphs 3(b) and 5(b) of the Order simply record the Claimants’ submissions: they do not determine the validity of those submissions. Sarasin-Alpen recognises that the Order of 28 October 2014 defined what matters should be determined at the Quantum Determination; but, it submits, that Order did not determine the Defendants’ pleading objections. It remains open to the Defendants to raise those objections at the hearing of the Quantum Determination.
The concession by Counsel for the Claimants at the hearing on 12 January 2015 (transcript, 12 January 2015, pages 11 and 115) that the pleading objections remain open and to be ruled upon at the Quantum Determination is consistent with that view.
Further, by referring in the Order of 28 October 2014 to “losses arising out of the Claimants’ relationship with ABK” the Court was not intending to broaden, or to allow amendment of, the Claimants’ pleaded claim; still less ordering that the Claimants could advance further claims (unpleaded, and unknown to both the Defendants and the Court) for new heads of loss somehow related to ABK which were not even made by submission at trial.

In further support of their contention that it is not open to the Claimants on their pleaded case to claim as heads of loss (i) ABK interest payments made after 6 June 2009 or (ii) any interest payments or charges to Bank Sarasin or (iii) any interest payments to CBK it is submitted that pleadings are required to mark out the parameters of the case advanced by each party, so that the issues in dispute are clear prior to trial and so that the parties can decide what evidence to place before the Court at trial and what preparations are necessary before trial. It is therefore wrong in principle for the Court to proceed on the basis of an unpleaded case. The Court must insist that permission to amend be sought if the Claimants wish to pursue the unpleaded heads of loss; and then proceed to determine an application for permission to amend if made. If permission to amend is not sought, the Court must dismiss (or assess at zero) the heads of loss claimed on the basis that they are not open to the Claimants on their pleading. In support of that submission the Defendants rely on Loveridge and Loveridge v Healey [2004] EWCA Civ 173 at [23] to [25] and [30].
In that context it is emphasised that the Claimants have not sought to amend their pleaded case on quantum: the Claimants have chosen to limit their pleaded claims to the losses on the Notes and the ABK interest and charges up to 6 June 2009. It is submitted that that choice must have been deliberate and for tactical reasons – given that the relevant information was available when the pleadings were settled – and that the most likely explanation is that the Claimants wanted to control the extent of the disclosure they were required to give to the Defendants. However, now that liability has been established in their favour the Claimants are seeking to broaden their claim without the risk that doing so might undermine their case on liability. It is submitted that the Court should not allow the Claimants to manipulate the course of the proceedings to their advantage in this way. The Defendants should have been given the opportunity to challenge all of the relevant evidence at trial for the purposes of undermining the Claimants’ case on liability as well as quantum, and the absence of that opportunity is likely to have caused them considerable prejudice.
It is said that the Claimants have provided no good reason for their failure to address these issues before trial. In particular:

If and insofar as the Claimants contend they did not have in their possession at trial ABK bank statements for the period post 14 December 2009, due to a dispute with ABK, that contention is not accepted. The Claimants have been asked, but have refused, to provide, documentary evidence of a request to ABK for bank statements prior to trial and a refusal by ABK to provide them. It is said that the correct inference to draw is that the Claimants did have available to them at trial (and now) ABK bank statements for the entire period but have been selective as to which statements they chose to disclose.
In any event, in the circumstances that the Claimants contend they still do not have access to ABK bank statements after 14 December 2009, on their own case nothing has changed. The Claimants could have estimated the post 14 December 2009 interest and charges payable to ABK prior to trial; and it is to be inferred that they made a deliberate decision not to do so.
No reason has been given as to why a claim for loss under head (D) was not advanced at trial. Again, it is said that it is to be inferred that the Claimants made a deliberate decision not to do so.

Further, it is submitted, losses in respect of ABK interest and charges post 14 December 2009 (part of head (C)) and CBK interest and charges (head (D) were not only unpleaded; they were not even argued at trial. There is no good reason why such heads of loss were held back by the Claimants. In circumstances where such heads of loss were not only unpleaded but also unargued and unevidenced at trial, the Claimants should not be permitted to claim them now. The Defendants will suffer particular prejudice if the Claimants are allowed to advance these claims at the Quantum Determination, because they had no opportunity to address them at trial.
The Claimants invite this Court to reject the Defendants’ complaints that their quantum figures were not pleaded; describing them as “a hopeless point and one which has already been unsuccessfully put forward at trial, again on 28 October 2014 and yet again on 12 January 2015”. It is said that the Defendants “have lost on each occasion, the Court should not revisit that point and it is respectfully submitted that it is abusive of the Defendants to continue to invite the Court to do so”. It is said that the point is currently before the Court of Appeal. In that context, reference is made to paragraph 166.3 of the skeleton argument filed on behalf of Sarasin-Alpen in support of its appeal and paragraphs 74 and 82 of the skeleton argument filed by Bank Sarasin. Further, it is said that this Court – at paragraph 428 of the judgment of 21 August 2014 – recognised the heads of loss that were the subject of claims; and, following the hearing in January 2015 at which the defendants attempted to strike out the Claimants’ further evidence on the basis of the same pleading point, refused to do so (save for the evidence of RAFCO losses, which is not material in this context). They submit that the Court cannot and should not now revisit that decision.
In my view, there is force in the Claimants’ contention that this Court should reject what may be seen as the Defendants’ attempt to re-open pleading points which the Court has already determined against them. I find the Defendants’ submission that their pleading points remain to be determined by this Court in the context of the Quantum Determination difficult to reconcile with their apparent reliance on the same pleading points in the context of the pending appeal against the Order of 28 October 2014. But – given the Defendants’ submission that their pleading points do remain to be determined in this Court because, it is said, this Court has never ruled on their objections – I think it appropriate to address the question whether the Claimants are precluded from advancing claims to compensation under heads (B), (C) – save for interest charged by ABK in respect of the period up to 6 June 2009 – and (D) on the grounds that these heads of loss were not pleaded.
In addressing this question it is important to have the following matters in mind:

The Griffins May 2013 Report had been disclosed to the Defendants before the commencement of the trial on 19 May 2013.
At or shortly after the commencement of the trial, the Court (and the Defendants) appreciated from that report – and from what had been said by Counsel in opening the Claimants’ case – that the losses in respect of which the Claimants sought compensation were those recorded at paragraph 428 of my judgment of 21 August 2014 (that is to say losses on the sale of the Claimants’ investments with Bank Sarasin, other fees and interest charged by Bank Sarasin and other fees and interest charged by ABK up to 6 June 2009).
As recorded at paragraph 428 of that judgment, the ABK losses were quantified only up to 14 December 2009 for the reason, it was said, that the Claimants did not have statements in respect of their ABK accounts after that date but that the indebtedness to ABK had not been wholly repaid and interest continued to accrue in respect of that indebtedness;
Although this was not a case in which there had been an order for a split trial, the trial in May 2013 proceeded on the understanding, common to all parties and the Court, that the Claimants would not adduce evidence of quantum at that stage; it being anticipated that there was a real possibility that the forensic accountants whom they had respectively instructed would be able, given time, to reach agreement on the figures.
As explained in paragraph 12 of the ruling given on 13 January 2015, paragraphs 3(b)(ii) and 5(b)(ii) of the Order of 28 October 2014 – which provided that the amount of the Defendants’ liability to the Claimants should include “losses arising out of the Claimants’ relationship with ABK” – went beyond the statement of losses in respect of which compensation was claimed (as set out at paragraph 428 of my judgment of 21 August 2014) because the Court became aware at the hearing to settle the Order (in October 2014) that losses arising from the ABK loans might not be limited to fees and interest charged by ABK up to 6 June 2009 itself.
In that ruling of 13 January 2015 I held that, notwithstanding that the claim could have been raised earlier, justice required that the Claimants should be permitted to advance a claim to compensation on the basis of losses arising from interest and fees charged by CBK following the re-financing of the ABK loans.

I accept, of course, that the purpose of pleadings is to mark out the parameters of the case advanced by each party – so that the issues in dispute are clear prior to trial and the parties can decide what evidence to place before the Court at trial and what preparations are necessary before trial – and that, where the failure of a party to plead his case (or a part of his case) in a manner which enables the other party to obtain and put before the Court the evidence which he needs to meet that case would give rise to injustice, the Court may be expected to take the view that the appropriate response is to strike out that case or (as the case may be) to dismiss that part of the case. But it is important to keep in mind that the purpose of pleadings is to promote justice; not to frustrate it. The relevant question, in the present case, is whether – in the events which happened – the failure of the Claimants to plead their case on quantum in advance of the trial with sufficient particularity to enable the Defendants to obtain and put before the Court at the trial the evidence which they needed to meet that case has given rise to injustice. If it has not, then the Claimants are not to be denied the opportunity to pursue their case on quantum, at the hearing of the Quantum Determination some two years later, on the ground that the case which they now seek to advance differs from that which was pleaded.
In my view the answer to the question posed – whether the failure to plead, in advance of the trial, the losses now claimed under head (B), head (C) (in part) and head (D) has led to injustice is “No”. Given the common understanding (to which I have referred) that – notwithstanding that there had been no order for a split trial – the Claimants would not adduce evidence of quantum at that stage, there is no substance in the contention that the Defendants have been taken by surprise or have been unfairly deprived of the opportunity, prior to trial, to seek disclosure in relation to such heads of loss and to carry out their own investigations of each head of loss claimed. As I have said, the Defendants knew –from the contents of the Griffins May 2013 Report and the manner in which the Claimants’ case had been opened at trial – that losses under head (B) and head (C) (in addition to interest and charges accrued up to June 2009) would be claimed; and, the Claimants were permitted (by the Order of 4 February 2015) to adduce evidence relating to head (D) on terms that the relevant witnesses were available for cross-examination at the hearing of the Quantum Determination.
I reject the submission that the reference in the Order of 28 October 2014 to “losses arising out of the Claimants’ relationship with ABK” did not reflect the Court’s intention that the Claimants should be permitted to advance losses which might be outside their pleaded claims: given the observations in paragraph 12 of my ruling on 13 January 2015, I find it difficult to understand how that submission can be now be advanced. I reject, also, the submission that the Claimants made a deliberate choice “for tactical reasons” to defer advancing their claims in respect of head (D) losses in order “to control the extent of the disclosure they were required to give to the Defendants” or “to manipulate the course of the proceedings to their advantage”. There was no direct evidence to support that submission; and I am not persuaded that the fact that the head (D) losses were advanced after trial justifies the inference that the Claimants were seeking to obtain some tactical advantage. It seems to me at the least equally likely that the Claimants and their advisers had not fully analysed the possible extent of their losses until after the judgment of 21 August 2014.
For those reasons I hold that the Claimants are not precluded on procedural grounds from advancing their claims to compensation under heads (B), (C) and (D).

Whether the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that the losses claimed fall outside the scope of the duties in respect of which the Defendants have been held to be in breach or are too remote

It is convenient to consider, first, the claims against Sarasin-Alpen under Article 94(2) of the Regulatory Law. Article 94 is in these terms:

“94. Civil Proceedings

Where a person:

(a) intentionally, recklessly or negligently commits a breach of duty, requirement, prohibition, obligation or responsibility imposed under the Law or Rules or other legislation administered by the DFSA; or

(b) …the person is liable to compensate any other person for any loss or damage caused to that other person as a result of such conduct, and otherwise is liable to restore such other person to the position they were in prior to such conduct.

(2) The Court may, on application of the DFSA or of a person who has suffered loss or damage caused as a result of conduct described in Article 94(1), make orders for the recovery of damages or for compensation or for the recovery of property or for any other Order as the Court sees fit, except where such liability is excluded under the Law or Rules or other legislation administered by the DFSA…”

As I have said, earlier in this judgment, Sarasin-Alpen has been held to be in breach of the Financial Services Prohibition imposed by the Regulatory Law; in that it carried on Financial Services in relation to each of the Claimants in breach of Rules made by the DFSA. In particular, Sarasin-Alpen acted in breach of COB 3.2.1 – read with COB 3.2.2(1) – and COB 6.2.1 (1).
COB 3.2.1 and COB 3.2.2 – at the time when Sarasin-Alpen accepted Mr Al Khorafi and Mrs Al Hamad as Clients – were in these terms (so far as material):

“3.2.1

(1) An Authorised Firm must ensure that it does not conduct Investment Business…with or for a Retail Customer.

(2) An Authorised Firm must only conduct Investment Business…with or for a Person who is a Client.

…

3.2.2

(1) A Client is a Person who the Authorised Firm has determined, prior to the establishment of a relationship, is:

(a) an individual who:

has at least $1 million in liquid assets and has provided the Authorised Firm with written confirmation of this fact;
appears to the Authorised Firm, after analysis, to have sufficient financial experience and understanding to participate in financial markets; and
has consented in writing to being treated as a Client.

…

(3) Any Person who does not meet the criteria in (1) or (2) is a Retail Customer.”

At paragraph 261 of my judgment of 21 August 2014 I held that Sarasin-Alpen failed to carry out any or any sufficient investigation in order to satisfy itself, in respect of any of the Claimants, that the criteria under COB Rule 3.2.2(1) were met; and that, on the facts, none of the Claimants could properly have been accepted as Clients under the DFSA Rules. At paragraph 262 of that judgment I held that each of Mr Al Khorafi, Mrs Al Hamad and Mrs Al Rifai ought to have been treated as Retail Customers; and that, accordingly, Sarasin-Alpen was not permitted under the DFSA Rules to conduct Investment Business on behalf of any of them. In doing so, Sarasin-Alpen was in breach of the duty (or prohibition) imposed by COB 3.2.1 of the DFSA Rules; and in breach of the Financial Services Prohibition.

Prior to 1 October 2007, COB 6.2.1(1) was in these terms (so far as material):

“6.2.1 (1) Subject to (2), an Authorised Firm may only:

(a) advise a Client who is an individual on Financial Products or Credit;

(b) recommend a Transaction to a Client who is an individual; or

(c) execute a Transaction for any Client on a discretionary basis; where that advice, recommendation or Transaction is suitable for that Client having regard to:

(d) that Client’s investment objectives and risk tolerance; and

(e) any other requirements or relevant facts about that Client of which the Authorised Firm is, or ought reasonably be aware.”

COB Rule 6.2.1 was amended on 1 October 2007: thereafter (so far as material) paragraph (1)(a) of that Rule was in these terms:

“6.2.1(1) Subject to (2), an Authorised Firm may only:

(a) give advice of the kind referred to in GEN Rule 2.11.1(1)(a) or (b) to a Client who is an individual.”

For the reasons set out in my judgment of 21 August 2014, I held (at paragraph 303) that Sarasin-Alpen failed to comply with its obligations under COB Rule 6.2.1(1). In particular, I held (at paragraph 299 of that judgment) that the suitability requirement was not met either (i) in relation to the purchase of the REIT Notes by Mr Al Khorafi and Mrs Al Hamad in June 2007 or (ii) in relation to the purchase of the July 2007 SaraFloor Notes by Mrs Al Hamad or (iii) in relation to the purchase of the February 2008 SaraFloor Notes by Mrs Al Rifai. If (contrary to my finding) Sarasin-Alpen was permitted under the DFSA Rules to conduct Investment Business on behalf of the Claimants (or any of them) it was, nevertheless, in breach of the Financial Services Prohibition; in that, in doing so, it acted in breach of the suitability requirement imposed by COB 6.2.1(1) of the DFSA Rules.

In developing its submission that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that losses under those heads fall outside the scope of the duties in respect of which it has been held in breach or are too remote, it was said on behalf of Sarasin-Alpen that if (as it understands to be the case) the Claimants contend that no scope of duty test applies to a claim under Article 94(2) of the Regulatory Law – so that they are entitled to any consequential losses incurred, irrespective of whether or not the losses fell within the scope of Sarasin-Alpen’s duty, as understood in the light of South Australia Asset Management v York Montague [1996] UKHL 10; [1997] AC 191 (“SAAMCO”) – that contention is incorrect. It is said that Article 94 contains a clear test of causation: that only “loss or damage caused” to the Claimants “as a result of” Sarasin-Alpen’s breach of duty is recoverable; and that scope of duty is an aspect of causation (SAAMCO at [22],[23]; page 214A-C).
Further, it is submitted on behalf of Sarasin-Alpen that, under English law, “the scope of duty principle” applies to cases of breach of statutory duty; and that the question whether a particular type or head of loss is within the scope of a defendant’s duty is as relevant to claims under section 138D of the Financial Services Act 2012 (“the FSA 2012”) (formerly section 150 of the Financial Services and Markets Act 2000 (“the FSMA 2000”)) as it is to claims for breach of contract or negligence. In that context reliance is placed on observations in SAAMCO at 211H; Rubenstein v HSBC Bank Plc [2012] EWCA Civ 1184 (“Rubenstein”) at [114]; Al-Sulaiman v Credit Suisse [2013] EWHC 400 (Comm) (“Al Sulaiman”), at [212]; Camerata Property Inc v Credit Suisse Securities (Europe) [2012] EWHC 7 (Comm) (“Camerata Property”) at [100]-[103]. It is said that, under the principles to be derived from the reasoning in SAAMCO, losses caused by a defendant’s breach of duty in the “but for” sense may, nevertheless, be irrecoverable on the basis that they fall outside the scope of that duty; and that, notwithstanding there has been a breach of duty without which no transaction would have taken place, it does not follow that the defendant is liable for all the losses suffered by the claimant as a consequence of entering into that transaction. Reliance is placed on observations in Zaki & ors v Credit Suisse (UK) Ltd [2013] EWCA Civ 14 (“Zaki”), at [107]. It is submitted that the position under Article 94(2) of the Regulatory Law is the same.
In the context of advisory duties, such as COB 6.2.1(1), it is said on behalf of Sarasin-Alpen that losses will fall outside the scope of the duty where, inter alia, they were not a foreseeable result of a breach of it. In support of that proposition the Court was referred to observations in SAAMCO, at p.214E-F, and in Camerata Property, at [101] to [103]). Applying that test to the facts in the present case, it is said the losses in respect of which claims are made under heads (B), (C) and (D) were caused by a series of unforeseeable events; and so fall outside the scope of the duty imposed by COB 6.2.1(1). In particular:

The unforeseeable effects of the global financial crisis render the losses claimed outside the scope of the duty owed.
The ABK interest and charges after the date of the liquidation of the Notes (October 2008) were outside the scope of the duty as it was not reasonably foreseeable at the time of entry into the contract that the Claimants would maintain the ABK borrowing after the Notes were sold and therefore keep on incurring interest and charges.
The CBK interest and charges were outside the scope of the duty as it was not reasonably foreseeable at the time of entry into the contract that the Claimants would maintain the ABK borrowing after the Notes were sold and then replace it with CBK borrowing (or any other borrowing) and therefore continue to incur interest and charges.

Accordingly, it is said – seeking to draw by analogy on the decision in Al-Sulaiman – the Claimants’ decision not to repay their outstanding debts after the Notes were sold in October 2008 – alternatively, as soon as possible thereafter – was wholly unforeseeable given the strength of the Claimants’ finances at all material times. In that context, it is said that:

The Claimants had access to securities and other readily realisable assets with a total value far in excess of their outstanding indebtedness to Bank Sarasin and ABK; and that they could have provided the required funds by realising the value of some of those securities and assets.
Their failure to do so was wholly unforeseeable; given that the result was substantially to increase the losses made as a result of the investment in the Notes.
Their conduct became all the more surprising and unforeseeable the longer interest and charges continued to accrue on their outstanding debts.
It was entirely unexpected not only that the Claimants would fail to pay off the ABK loans promptly, but that they would refinance those loans by taking out the CBK Loan almost two years after the Notes were sold, and would (allegedly) incur significant additional costs in raising the money which they did inject into their accounts with Bank Sarasin and ABK.

It is pointed out that the Claimants are now claiming ongoing losses incurred (or said to be incurred) over six years after the Notes were sold. It is said that such losses are outside the scope of Sarasin-Alpen’s duty to advise on the suitability of the Notes: liability for breach of such a duty cannot extend to events so far in the future which were plainly not foreseeable at the time of breach.

In those circumstances it is submitted that all of the losses claimed in the Quantum Determination – or, at the least ABK interest after October 2008 and any CBK interest and any financing costs – fall outside the scope of Sarasin-Alpen’s duty under COB 6.2.1(1) to advise on the suitability of the Notes.
Further, it is submitted that, if the losses fall outside the scope of the duty in COB 6.2.1(1), then they must also fall outside the scope of the duty in COB 3.2.2(1); which, it is said, relates to an earlier stage in the parties’ commercial relationship before any advice had been given in relation to specific investments. It is said that, if the losses were not foreseeable under COB 6.2.1(1), it would be illogical if they were nevertheless recoverable pursuant to COB 3.2.2(1).
In what may be seen as a submission which puts the same point – that is to say, the “scope of duty” point – under a different legal label, it was said on behalf of Sarasin-Alpen that, if (as it understands to be the case) the Claimants contend that no remoteness test applies to a claim for compensation under Article 94(2) of the Regulatory Law – so that they are entitled to any consequential losses incurred, no matter how unforeseeable such losses may have been – that contention is also incorrect. The submission that Article 94 contains a clear test of causation – and that only “loss or damage caused” to the Claimants “as a result of” Sarasin-Alpen’s breach is recoverable – is repeated. It is said that remoteness is simply a test of legal causation: if losses are unforeseeable they are in law not caused by the breach of duty. It follows that a test of remoteness must apply. That proposition is supported by English case-law in the context of section 150 of the FSMA 2000. Reliance is placed on observations in Camerata Property at [100] to [103] and in Rubenstein at [116] to [125]).
It is submitted that the test of remoteness is whether each head of loss claimed was reasonably foreseeable at the time of entry into the contract (June 2007 and July 2007 in the case of Mr Al Khorafi and Mrs Al Hamad, and January 2008 in the case of Mrs Al Rifai) as not unlikely to result from the breach (Heron II [1969] 1 AC 350 at 385); in the alternative, the test is “for what losses may the defendant be said to have assumed responsibility” (The Achilleas [2009] 1 AC 61, per Lord Hoffmann at [21]-[25]). It is said that a classic example of losses that are too remote is where unforeseeable market volatility causes losses which otherwise would not have been suffered: The Achilleas, at [60] per Lord Rodger of Earlsferry.
Applying that test to the facts in the present case, the claims are in respect of losses which are said to be too remote to be recoverable for the same reasons as are advanced on behalf of Sarasin-Alpen in relation to the scope of duty. It is said that scope of duty and remoteness cover very similar ground. It was wholly unforeseeable and outside Sarasin-Alpen’s reasonable contemplation that the Claimants would continue to incur losses for over 6 years after the Notes were purchased, and Sarasin-Alpen did not assume responsibility for such extensive losses accruing so long after breach.
In support of the contention that the claims under heads (B), (C) and (D) fail for lack of causation, the Court was taken to a passage in Jackson and Powell on Professional Liability (7^th edition, at paragraph 15-079) for the proposition that the burden is upon the Claimants to prove that Sarasin-Alpen’s breach of duty was the cause of the losses claimed:

“…[this] is confirmed by several other cases in the investment context. In Australia & New Zealand Banking Group Ltd v Cattan the claimant was held to have committed “at best technical” breaches of IMRO requirements as to completion of certain formalities before the defendant could be classified as a non-private customer and as such allowed to make certain trades. Nevertheless it was held that such breaches had not caused any loss. Even if he had not been able to enter the relevant trades before the required formalities had been completed, upon their completion he would still have entered the same trades. There was no evidence to indicate that there would have been any difference in price in the defendant’s favour in that instance. The effect of there being no loss was fatal to the statutory right of action relied upon, loss being an ingredient of that right of action. Similarly, in Ata v American Express Bank Ltdthe claimant failed to establish that the defendant bank’s breach of fiduciary duty caused him any loss. The judge found as a matter of fact that, even if the bank had traded the claimant’s open positions, further losses were as likely as any profits. The Court of Appeal rejected the contention that, in assessing what the claimant’s financial position would have been but for the defendant’s default, every presumption should be made against the defendant. It overruled a previous first instance decision to the effect that, in assessing damages against a stockbroker who had prematurely sold an investor’s shares in breach of contract, the measure of damages was the highest price at which the shares could have been later sold by the investor. Further, the ‘chain of causation’ from the defendant’s relevant failure may be broken by the act or omission of the claimant or some third person. This happened in Gorham v British Telecommunications Plc…where the deceased’s failure to act on helpline advice indicative of the superiority of the BT occupational scheme precluded his dependants recovering a element of loss consisting of lump sum death benefit. See also Zaki v Credit Suisse (UK) Ltd [2011] EWHC 2422 (Comm): no reliance on advice given in breach of COBS 9.2 and hence loss not caused by breach.”

It was submitted that:

(1) The Claimants’ failure to repay the Sarasin loans when the Notes were sold by Bank Sarasin in October 2008 (or alternatively thereafter) was an independent and unreasonable decision of the Claimants which broke the chain of causation; and that, accordingly, the Claimants cannot claim losses under head (B) which accrued after October 2008.

(2) The Claimants’ failure to repay the ABK loans and facilities when the Notes were sold by Bank Sarasin in October 2008 (or alternatively thereafter) was an independent and unreasonable decision of the Claimants which broke the chain of causation; and that, accordingly, the Claimants cannot claim losses under head (C) which accrued after October 2008; and/or

(3) The alleged ABK losses claimed by Mr Al Khorafi and Mrs Al Hamad to date would not have arisen but for other loans totalling US$39.1 million which they had taken from Bank Sarasin to fund expenditure which was wholly unconnected to the investment in the Notes; being required in order to fund the Claimants’ personal expenditure. If that US$39.1 million loan had not been taken out – and/or if funds received on liquidation of the Notes had not been used to repay it – there would have been a surplus position after the liquidation of the Notes, which could have been transferred to the Claimants and used to partially pay down their ABK loans in October 2008 upon the close out of the Notes; thereby substantially reducing the ABK principal loan balances at 11 October 2008 and the interest thereon. The principal loan balances of Mr Al Khorafi and Mrs Al Hamad on their ABK accounts would then have been cleared, as at 14 December 2009, upon a US$21,660,000 incoming guarantee payment from Bank Sarasin into Mr Al Khorafi’s ABK account; which would have resulted in a surplus of US$2,846,566.82 on his account. The ABK interest which accrued on the accounts of Mr Al Khorafi and Mrs Al Hamad on their ABK accounts after October 2008 had little, if any, causal relationship to the Defendants’ mis-selling of the Notes.

(4) The decision to take out the CBK loan in 2010 (or, in the alternative, the decision not to repay the CBK loan thereafter) was an independent and unreasonable decision by the Claimants which broke the chain of causation.

(5) It would not have been necessary to take out the CBK loan, had it not been for the need to repay the US$39,100,000 personal loan. The indebtedness of Mr Al Khorafi and Mrs Al Rifai to ABK would have been effectively paid off on 14 December 2009 if they had not taken the US$39,100,000 personal loan; and so there would be no need for their indebtedness to ABK to be refinanced by a loan from CBK to refinance on 29 September 2010.

The Claimants’ response to those submissions was that this Court has already determined the “scope of duty” (or SAAMCO) point in their favour. It is said that, if the Court had thought that the decision in SAAMCO had the effect for which the Defendants contend (and had ignored the observations in Rubenstein), the Claimants could not have recovered compensation for the losses under head (A) which they did under the Order of 28 October 2014. This, it is said is recognised by Sarasin-Alpen; in that, at paragraph 28.1 of its skeleton argument dated 25 February 2015, it is said that:

“This and other causation points (in particular as to the true cause of the margin calls being made and remaining unpaid) were taken at the October 2014 hearing in respect of the losses on the Notes themselves. It is recognised by [Sarasin-Alpen) that the Court will not take a different view on the same points in connection with the present inquiry. [Sarasin-Alpen] makes the same points again in order to preserve its position on appeal.”

But, in any event, it is submitted that this Court cannot and should not revisit this point.

There is obvious force in the Claimants’ contention that this Court should not revisit points which have already been decided in my judgment of 21 August 2014: a fortiori, in circumstances where, following further argument at the hearing in October 2014, the Court has reflected its decision on those points in the Order which it made on 28 October 2014. It is necessary, therefore, to have in mind those passages of my judgment of 21 August 2014 in which issues of causation were addressed.
At paragraphs 310 to 315 of my judgment of 21 August 2014 I addressed Sarasin-Alpen’s submission that, if (contrary to its contentions) the Claimants were able to establish the other conditions leading to an order for compensation under Article 94(2) of the Regulatory Law, their claims to compensation must fail on the grounds that the loss or damage in respect of which compensation was claimed was not caused as a result of conduct falling within Article 94(1): that is to say, the breaches of the Financial Services Prohibition which it was found to have committed. In particular, it was said (i) that it was to be inferred that, even if the Claimants had been differently informed or advised by Sarasin-Alpen, they would still have bought the same Notes on the same terms, whether or not the transactions were arranged through Sarasin-Alpen; and would have suffered the same losses; and (ii) that, in any event, the Claimants’ failure to pay the margin calls on their account was so unreasonable and irrational as to break the chain of causation. In rejecting those submissions, I said this:

“313. First, I have held that the Claimants’ investment objectives were to obtain 100% capital protection – so that they could be sure of being in a position to pay off the borrowing by means of which the investments were funded – and to obtain an income stream out of which the interest payments on that borrowing could be serviced. For reasons which I have explained those twin objectives could not be met by the Notes, or by any comparable structured financial product which treated the coupon payments as made on account of the return of 100% of the capital invested. Unless the Claimants were ready and willing to change their investment objectives, the Notes were not suitable investments for borrowed money. There was no evidence to support the proposition that, if they had understood that, they would have invested in the Notes or in a comparable structured financial product.

Second, there was no evidence to support the proposition that Mr Al Khorafi (a fortiori, Mrs Al Hamad or Mrs Al Rifai) were in a position to meet the margin calls, when made, within the time set by Bank Sarasin. It is pertinent to keep in mind (i) that the margin calls were made against Mrs Al Hamad and Mrs Al Rifai (there was no margin call against Mr Al Khorafi) and (ii) that the Notes (including the REIT Notes held by Mr Al Khorafi) were closed out on 8 October 2008 on 24 hours notice (the time for payment of the margin calls specified in Bank Sarasin’s letter of 29 September 2008 having been truncated by the subsequent letter of 7 October 2008). There was no material to support the proposition that Mrs Al Hamad or Mrs Al Rifai could have found the monies needed to meet the margin calls made against them (US$5,077,977 and US$3,423,353 respectively) within the 24 hours that they were given to do so.
I am satisfied that the loss or damage in respect of which compensation is claimed was caused as a result of Sarasin-Alpen’s failure to comply with its obligations under COB Rules 3.2.2.(1) and 6.2.1(1). I accept the submission made on behalf of the Claimants that, but for Sarasin-Alpen’s breaches of those regulatory obligations, the Claimants would not have made the investments in the Notes that they did; and I am not persuaded that the causal link between the breaches of the regulatory obligations and the loss suffered by the Claimants on failing to meet the margin calls was broken by the Claimants’ own conduct. In reaching that conclusion, I have in mind that the possibility that the Claimants would be unable to meet margin calls was a factor which leads to the conclusion that the Notes were an unsuitable investment for them: it was a risk against which they needed to be protected.”

I accept the Claimants’ submission that it is not open to the Defendants to re-open those issues in this Court in the context of the Quantum Determination. Further, of course, I have in mind the terms of the Order of 28 October 2014, which provides for the payment of compensation by Sarasin-Alpen (i) of a specified amount in respect of losses on investments (head (A) losses) and (ii) in amounts to be assessed in respect of interest and fees charged by Bank Sarasin (head (B)) and in respect of interest and fees charged by ABK (head (C) losses).

Nevertheless, in relation to the assessment of losses under heads (B) and (C) – and in relation to both liability for and assessment of interest and fees charged by CBK (head (D) losses) – there are issues as to scope of duty/causation which do need to be addressed in this judgment. Those issues may be summarised as follows: to what extent are the losses in respect of which compensation is claimed under Article 94(2) of the Regulatory Law irrecoverable on the grounds (i) that they fall outside the scope of Sarasin-Alpen’s duty, as understood in the light of SAAMCO, and/or (ii) that they are too remote, and/or (iii) that the “chain of causation” linking those losses to the conduct within Article 94(1) on which (in the light of the findings against Sarasin-Alpen) the Claimants are entitled to rely has been broken by “an independent and unreasonable decision of the Claimants”.
As I have said, in developing its submission that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that losses under those heads fall outside the scope of the duties in respect of which it has been held in breach or are too remote, Sarasin-Alpen relies on observations of Lord Hoffman in SAAMCO ([1996] UKHL 10, at [14], [15]), of Lord Justice Rix in Rubenstein ([2012] EWCA Civ 1184 at [114]), of Mr Justice Flaux in Camerata Property ([2012] EWHC 7 (Comm) (at [100]-[103]), and of Mr Justice Cooke in Al-Sulaiman ([2013] EWHC 400 (Comm) (at [212]). ;
In SAAMCO the issue before the House of Lords was the extent to which loss arising from a fall in the property market could be recovered from a negligent valuer. Lord Hoffman, in a judgment with which the other members of the House of Lords agreed, said this:

“[14] A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc. v. Dickman [1990] 2 A.C. 605. The auditors’ failure to use reasonable care in auditing the company’s statutory accounts was a breach of their duty of care. But they were not liable to an outside take-over bidder because the duty was not owed to him. Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares. Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares. As Lord Bridge of Harwich said, at p. 627:

‘It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless.’

In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed.

[15] How is the scope of the duty determined? In the case of a statutory duty, the question is answered by deducing the purpose of the duty from the language and context of the statute: Gorris v. Scott (1874) L.R. 9 Ex. 125. In the case of tort, it will similarly depend upon the purpose of the rule imposing the duty. Most of the judgments in the Caparo case are occupied in examining the Companies Act 1985 to ascertain the purpose of the auditor’s duty to take care that the statutory accounts comply with the Act. In the case of an implied contractual duty, the nature and extent of the liability is defined by the term which the law implies.”

In Rubenstein the plaintiff sought damages against the defendant bank on the basis of an allegation of negligent advice in respect of the recommendation of a safe haven for the proceeds of sale of his home, pending the purchase of another property. His claim was brought for breach of statutory duty (under the FMSA 2000) and in contract and tort. At paragraph [44] of his judgment (with which the other members of the Court of Appeal agreed) Lord Justice Rix referred to section 150(1) of the FSMA 2000. He went on, at paragraph [45] to say this:

“[45] It is said that a section 150 claim is subject to identical principles relating to causation, foreseeability and/or remoteness of damage as may apply in contract or tort, and the judge generally made no distinction between any of Mr Rubenstein’s three causes of action for these purposes, or for the purposes of his finding of negligence. However, whereas the underlying principles may be the same, they may operate in different ways, seeing that the purpose of a statutory rule may be more focussed than the general law of tort or contract is likely to be. Lord Hoffmann referred to this possibility in SAAMCO…[citing the passage at [15] set out in the preceding paragraph of this judgment]”

At paragraph [114] Lord Justice Rix said this (so far as material):

“[114] … As Lord Hoffmann pointed out in SAAMCO in the passage cited above at [45], in a case of statutory duty the question as to scope of duty is to be answered by reference to the statute itself, and in such a context the position in negligence and contract will fall in behind the statutorily discerned purpose…”

In neither of the other two cases on which Sarasin-Alpen rely in this context – Camerata Property and Al-Sulaiman – did the court find it necessary, in reaching its decision, to consider the “scope of duty” point. Such observations on the point as there are in the judgments of Mr Justice Flaux and Mr Justice Cooke, respectively, in those cases, are obiter; and add nothing to the observations of Lord Hoffmann in SAAMCO and those of Lord Justice Rix in Rubenstein.
Of more assistance – although also obiter – are the observations of Lord Justice Rix in Zaki ([2013] EWCA Civ 14, at [103] to [107]. In order to put those observations in context, it is necessary to set out the findings of the trial judge (Mr Justice Teare). For convenience, I take those from the headnote to the report at [2013] 1 BCLC 640, at 641:

“Z [Mohamed Magdy Zeid], a wealthy businessman, bought seven yield-enhanced notes from the defendant bank [Credit Suisse (UK) Ltd], which was the United Kingdom branch of the Credit Suisse banking group. The notes were linked to stock market indices or individual stocks and Z used loans provided by the Swiss branch of Credit Suisse to leverage the purchases. The loans were arranged by a relationship manager who was Z’s contact at the bank with responsibility for his account, although he was in fact an employee of another Credit Suisse company. When Z failed to meet a margin call by the bank it liquidated his position resulting in a loss of $US69.4m. Z brought proceedings against the bank claiming that it was responsible for the loss because it had acted in breach of its statutory duty under the Conduct of Business Rules (COB), issued by the Financial Services Authority pursuant to the Financial Services and Markets Act 2000, to ensure that its advice was suitable for him, in breach of the suitability requirement in COB rule 5.3.5, which obliged the bank to take reasonable steps to ensure that its investment advice was suitable for a client, and its duty to comply with the restrictions on lending in COB rule 7.9.3, which provided that the bank could not ‘lend money or grant credit to a private customer (or arrange for any other person to do so)’in the course of, or in connection with, its investment business unless it assessed the client’s financial standing, based on information disclosed by him, and took reasonable care to ensure that ‘the arrangements for the loan or credit and the amount concerned’ were suitable for the type of transaction proposed and obtained his prior written consent to the essential details of the loan. Z claimed that he had purchased the notes on the relationship manager’s personal recommendation given to him as a private customer of the bank. Z died in 2010 and his wife [Soheir Ahmed Zaki] and two daughters, who were joint account holders with him on his investment account, took over the action. The judge dismissed the claim on the grounds that the restrictions on lending in COB rule 7.9.3 only applied to the overarching contractual arrangements and not to individual draw-downs for the leveraging of the purchase of each note, that it was very likely that Z understood the essential characteristics of the notes and the risk attached to them and the circumstances in which a margin call could be made, that the bank, acting through the relationship manager, had made personal recommendations to Z to buy the notes and owed a duty under COB 5 to take reasonable steps to ensure that its advice or recommendations were suitable for him, but, in the light of Z’s knowledge and experience, his financial situation, his investment objectives and the fact that he had his own views on the markets and what was an appropriate investment and made his investment decisions accordingly, the claimants had not discharged the burden of showing that the recommendations or advice were not suitable or that Z relied on the advice and recommendations or that he would not have purchased the notes if no recommendations had been made.”

The Claimants appealed to the Court of Appeal, contending (i) that the bank had failed to keep a proper record of Z’s financial standing, (ii) that it had failed to take reasonable steps to ensure that the loans drawn down for the individual purchase of notes were in each case ‘suitable’, and (iii) that it had not taken reasonable steps at the time of each transaction to ensure that the amount of leverage was suitable and was not excessive, based on the information which ought to have been available to it if a proper assessment of Z’’s financial standing had been carried out. The Court of Appeal (Sir Terence Etherton, Chancellor, Lord Justice Rix and Lord Justice Patten) dismissed the appeal; holding (in so far as the point was open to appeal on the facts) that the judge was entitled to find that the leverage on the notes was not unsuitable. But, in the concluding sections of his judgment under the heading “Further considerations of causation, scope of duty and contributory negligence”, Lord Justice Rix said this:

“[103] However, even if there had been some breach of either sub-rule (1) or sub-rule (2) of COB 7.9.3, or if there might in theory have had to be a remission to the trial court to investigate the question of such breach further, additional matters are relied upon by the bank as making any success for the appellants beyond their reach. The bank submits that the judge has made conclusive findings against Mr Zeid on causation. The bank also submits that any liability in damages would either lie outside the scope of the statutory duties concerned or be limited, for instance to the extent that the lending exceeded suitable leverage. Finally, the bank relies on contributory negligence. I regard this passage of my judgment as being obiter.

[104] As for causation, this could in theory constitute an entirely separate ground for dismissing this appeal. Although the judge did not think it was necessary to make any finding as to causation with respect to notes 1–7, Mr Beltrami [counsel for the bank] submits that it must follow from the finding that Mr Zeid was the cause of his own losses on notes 8–10 that the same must be true with respect to notes 1–7.

[105] Mr Anderson [counsel for the claimants] does not I think submit otherwise as a matter of inferential fact, but he has a legal submission that the position is different for the purposes of a breach under COB 7.9.3 from that which obtains upon breach of COB 5.3.5, which is what the judge was dealing with. For these purposes Mr Anderson relies on the wording of COB 7.9.3 which is expressed in prohibitory terms, rather than positive mandatory terms. Thus COB 7.9.3 states that a firm ‘must not lend … unless’, and there then follow the cumulative sub-rules (1), (2) and (3), whereas COB 5.3.5 states that a firm ‘must take reasonable steps to ensure’ that any personal recommendation is suitable. On that basis Mr Anderson submits that it follows that, because any lending (or the arranging of lending) is prohibited unless the subrules are complied with, any breach of those subrules renders the firm liable for the full consequences of the lending. The question of causation is not what would have happened if the bank had not made an unsuitable recommendation, but what would have happened if the bank had simply refused to mediate the lending by CSAG, because it was not able lawfully to do so. If the lending simply was not there, how could Mr Zeid have suffered the losses he went on to incur? Mr Anderson points to the events of early 2008 when there was a shortfall of about $3m on Mr Zeid’s account. During this period Mr Zaki purchased two notes (on 1 February and 18 March 2008) without leverage (see the judge’s judgment at [47]). These notes are not among the ten notes made the subject matter of this litigation.

[106] I agree with Mr Anderson’s submission to this extent: that if Mr Zeid would not have been able to purchase notes 1–7 without the assistance of funding from CSAG, then he could not have suffered the losses he incurred. The judge did not have to consider this possibility, because he did not consider that COB 7.9.3 was engaged. He only had to ask himself whether Mr Zeid would have bought the notes even if Mr Zaki had advised against them. If therefore, contrary to my holdings above, the bank had been in breach of COB 7.9.3, I do not consider that it would be safe to extrapolate from the judge’s findings on causation in relation to notes 8–10 and COB 5.3.5 to what the position might have been in relation to notes 1–7 and COB 7.9.3 and the lending arrangements. Much might depend in such circumstances on what the nature of the hypothetical breach of COB 7.9.3 might be. But if the only problem was that the leverage afforded was too great, so that it might have to be assumed that leverage of, say, greater than 70% or 75% could not properly be afforded, there might have to be only a further limited inquiry: such as whether that would have impeded Mr Zeid’s bullishness to any extent at all in the circumstances described at [33], above, especially where Mr Zeid had between $9m and $11m of his own money on deposit, which he could have applied to make up any lending shortfall. It is unlikely that such an inquiry would produce anything like the loss figure put forward on this appeal of $46·1m.

[107] In any event, it seems to me that Mr Anderson’s submissions at this stage of the argument tended to confuse an issue about scope of duty with the question of causation. It may be open to argue that because the scope of the statutory duty is to be derived from the statutory purpose, and because there is an indication that the statutory purpose is to prevent lending in breach of the COB 7.9.3 subrules, therefore a firm in breach of COB 7.9.3 should be responsible for all the consequences of lending in such circumstances. However, the jurisprudence regarding scope of duty led by South Australia Asset Management Corp v York Montague Ltd [1996] 3 All ER 365, [1997] AC 191, Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1998] 1 All ER 305, [1997] 1 WLR 1627 and Aneco Reinsurance Underwriting Ltd (in liq) v Johnson & Higgins Ltd [2001] UKHL 51, [2001] 2 All ER (Comm) 929 (see also Haugesund Kommune v Depfa ACS Bank (Wikborg Rein & Co, Pt 20 defendant) [2011] EWCA Civ 33, [2012] 1 All ER (Comm) 65) rather demonstrates to the contrary: that, even where there has been a breach without which no transaction would have taken place at all, it does not follow that the defendant in breach is liable for all the losses suffered by the claimant in consequence of entering into the transaction³ [ ³ Although, it might do so: see Rubenstein’s case [2012] EWCA Civ 1184; [2012] 2 CLC 747, a case concerned with COB]. In the present case I am doubtful that an investor would be entitled to be compensated in full for an otherwise suitable investment just because there has been some breach, of whatever kind, of COB 7.9.3. Suppose the sole breach was one of process under sub-rule (1), or was one of the requirements for express acceptance of clear terms under sub-rule (3): I do not imagine that there would be full compensation for an otherwise suitable investment which had in the event gone wrong. Suppose similarly that the only fault under COB 7.9.3 was that the lending arrangements came with unsuitably high leverage: I do not think that there would be compensation for losses in full, as distinct from losses to the extent of the unsuitable leverage. Thus, if leverage at, say, 70% would have been suitable, it would only be the losses on leverage in excess of such a figure which would be recoverable.”

As I have said, Sarasin-Alpen submits that, under the principles to be derived from the reasoning in SAAMCO, losses caused by a defendant’s breach of duty in the “but for” sense may, nevertheless, be irrecoverable on the basis that they fall outside the scope of that duty; and that, notwithstanding that there has been a breach of duty without which no transaction would have taken place, it does not follow that the defendant is liable for all the losses suffered by the claimant as a consequence of entering into that transaction. In support of that submission, reliance is placed on the observations of Lord Justice Rix in Zaki which I have just set out. I accept those submissions as far as they go – that is to say, I accept that losses caused by a defendant’s breach of duty in the “but for” sense may be irrecoverable on the basis that they fall outside the scope of that duty and I accept that, notwithstanding that there has been a breach of duty without which no transaction would have taken place, it does not necessarily follow that the defendant is liable for all the losses suffered by the claimant as a consequence of entering into that transaction. But, as the Court of Appeal of England and Wales recognised in Zaki, there may be circumstances where, taking account of the purpose of the statutory prohibition in respect of which the defendant has been found to be in breach and of the nature of the breach, the correct conclusion – on the facts of the particular case – is that the defendant is, indeed, liable for all the losses suffered by the claimant as a consequence of entering into that transaction.
As Lord Justice Rix indicated (by the reference in footnote 3 to paragraph [107] of his judgment in Zaki) Rubenstein was a case in which, on the facts, the defendant was liable for all the losses suffered by the claimant as a consequence of entering into the transaction. I have referred, briefly, to the facts of Rubenstein earlier in this judgment. I take a more complete summary (so far as material) from [2012] All ER (D) 75 (Sep):

“In August/September 2005, the claimant investor wanted to find a safe place for the proceeds of the sale of his home pending the purchase of another property. The defendant bank introduced the claimant to its financial adviser (the adviser). The claimant told the adviser that he could not afford to risk his capital at all and that the prospective time scale was unlikely to be longer than a year. The adviser recommended investment in a company’s (the company) fund, and persuaded the claimant that the investment recommended was the same as an instant access deposit account and that the only risk was the ultimate risk of default, which was no risk at all. The adviser omitted to explain that the essential risk of the investment was that it was an investment in the market and subject to market fluctuations. After the recommendation of the investment, the claimant entered a contract document with the bank providing, inter alia, for its fees. The claimant’s funds had remained invested three years later. In September 2008, the claimant decided to withdraw his investment. Late on the following Monday, the day of Lehman Brothers’ failure, the company told the claimant that withdrawals from the fund had been temporarily suspended. The claimant suffered a capital loss of £179,530.17…The claimant commenced proceedings against the bank for breach of statutory duty under the Financial Services Authority’s Conduct of Business Rules (the COB rules), and in contract and tort. The judge found that the bank was negligent in the advice which it gave, in breach of various statutory duties and in breach of contract, and that the claimant had relied on the bank’s advice (see [2011] EWHC 2304 (QB)). However, the judge further found that the loss suffered by the claimant was not caused by the bank’s negligence or breach of duties: it was, rather, caused by unprecedented market turmoil, and was unforeseeable and too remote…”

The Claimant appealed on the basis that the judge was wrong to hold that no loss flowed from the established breaches. The bank cross-appealed on the basis that the judge had been wrong to rule that the adviser had failed to recommend the most suitable investment. It further contended that it had no duty which extended beyond the claimant’s own projection that he would be unlikely to need the investment for more than a year. The issues before the Court of Appeal of England and Wales included (so far as material) whether the scope of the bank’s duty was set by the claimant’s time scale of up to one year and whether the claimant’s loss was too remote. In allowing the appeal Lord Justice Rix, after observing at paragraph [114], in the passage already set out earlier in this judgment, that “in a case of statutory duty the question as to scope of duty is to be answered by reference to the statute itself”, went on to say this:

“[115] In the present case, therefore, it seems reasonably clear that the statutory purpose of the COB regime pursuant to FSMA is to afford a measure of carefully balanced consumer protection to the ‘private person’. That purpose is elucidated not only by the content of the COB rules themselves, but also by section 2 of FSMA, which speaks of ‘the protection of consumers’, i.e. ‘securing the appropriate degree of protection for consumers’ (section 2(2)(c) and section 5(1)) as among the regulatory objectives. The rules to be created by the regulatory authority are to be informed by a proper regard for ‘the differing degrees of risk involved in different kinds of investment…the need that consumers may have for advice and accurate information…the general principle that consumers should take responsibility for their decisions’ (see section 5(2)). In the present case it is not suggested on this appeal (although it was at trial) that Mr Rubenstein is seeking to avoid responsibility for his decisions. These basic principles and purposes are reflected in the imposition under the COB rules of onerous duties (albeit in a well conducted operation these should not be difficult to achieve and they are couched for the most part in terms of ‘reasonable care’) designed to ensure that the investment adviser understands his client and his client understands risk. Of course, much investment business is conducted with investors who are familiar, even expert, in investment markets. But in the present context of Mr Rubenstein and HSBC we are dealing with a consumer on the one side and an expert on the other. Unfortunately, the judge’s findings establish that Mr Marsden [the adviser] understood neither the client he was advising, nor the product he was recommending. He did not even understand that he was advising, as distinct from merely executing his client’s instructions. He failed therefore to undertake the standard statutory procedures designed to assist the parties to a satisfactory transaction. He misled his client, by omission and commission, into thinking that he had invested in something which was the same as cash. This is not, to my mind, a promising context in which to find that a loss suffered as a result of following a recommendation to enter into an unsuitable investment, when that loss came about because of the very factor which made the investment unsuitable (namely its inherent susceptibility to risk from market movements) was too remote to be recovered from the defaulting advising bank. For reasons discussed above, this is wholly unlike the case of the mountaineer’s knee.

[116] Three arguments are raised by HSBC as to why nevertheless the judge was right to conclude that the loss was too remote.

[117] The first is that, as found by the judge, the loss was ultimately caused by the ‘extraordinary and unprecedented financial turmoil which surrounded the collapse of Lehman Brothers’ (at para 117). To the extent that the judge was saying that this was unforeseeable (see his para 116), what was unforeseeable about it? Was it the insolvency of Lehman Brothers? Was it the run on AIG’s PAB funds which accompanied that insolvency (fear of the default risk)? Or was it the collapse of market values of the securities in which the EVRF, but not, it must be remembered, the SVRF, was invested (the market risk)? The insolvency of Lehman Brothers may have been unforeseeable, but Mr Rubenstein was not invested in Lehman Brothers. (If he had been, because his adviser had recommended him to be so invested, but unsuitably so, would the unforeseeability of Lehman Brothers’ collapse have saved the negligent adviser? It is unnecessary to consider that case, which may well depend on the particular features of the breach of duty.) The extent of the run on AIG may have been unforeseeable, but it was not the run which ultimately caused Mr Rubenstein’s loss: it has to be restated that the SVRF survived any apprehension about AIG’s solvency. In any event, a run on AIG Life was both foreseeable and foreseen, for its brochure discussed the need, in such circumstances of high demand for withdrawals, for a three months’ moratorium. Ultimately, however, it was the collapse in the value of the market securities in which the EVRF (but not the SVRF) was invested which in my judgment, on the findings of the judge as I would analyse them and on my understanding of the situation, caused the loss. If it were otherwise, the SVRF investors would have been caused a similar loss, but they were not. But such a loss was both foreseeable and foreseen, because AIG Life’s brochure referred, albeit rather obliquely, to the ‘costs’ which might accompany ‘selling assets prior to their intended maturity date’ (see at [30] above). Those losses or ‘costs’ may have been unforeseeably high, but that is the nature of markets at a time of stress, and in any event that merely represents an unforeseeable extent of loss of a kind or type which is foreseeable (see Brown v. KMR Services). And in truth, although the Lehman Brothers collapse was both a symptom and a contributory cause of market turmoil, the underlying causes of that turmoil went infinitely beyond Lehman Brothers’ difficulties. It stretched to a failure of confidence in marketable securities in which there had previously been greater confidence. And what is new about that?

[118] It seems to me that in the relevant passages of his judgment, the judge was implicitly selecting, for the purpose of giving effect to the law on remoteness, one out of a number of possible causal factors as the essential cause of Mr Rubenstein’s loss. This, as Lord Hoffmann remarked in The Achilleas, is ultimately an exercise in legal assessment: this court will pay regard and respect to the judge’s choice, but it is not a factual finding such as should deter an appeal court from acting upon its own understanding and analysis of the primary findings of the trial court. In my judgment, the judge was ultimately selecting as the cause of loss an ‘unthinkable’ run on AIG (see his [115]). However, to my mind this was not the right selection. Against the background of the facts found and of the origin of the transaction, and the scope of HSBC’s duties, what connected the erroneous advice and the loss was the combination of putting Mr Rubenstein into a fund which was subject to market losses while at the same time misleading him by telling him that his investment was the same as a cash deposit, when it was not. Therefore, the correct selection of the cause of Mr Rubenstein’s loss was the loss in value of the assets in which the EVRF (but not the SVRF) was invested. Therefore, unlike the case of the mountaineer’s knee, advice and the loss were not disconnected by an unforeseeable event beyond the scope of the bank’s duty. It was the bank’s duty to protect Mr Rubenstein from exposure to market forces when he made clear that he wanted an investment which was without any risk (and when the bank told him that his investment was the same as a cash deposit). It is wrong in such a context to say that when the risk from exposure to market forces arises, the bank is free of responsibility because the incidence of market loss was unexpected.

[119] The second matter to which [counsel for the bank] has drawn attention has been the judge’s finding (among others) that at the time of investment in September 2005, the EVRF would have been regarded as without risk. So it might, but then nearly all the greatest losses come out of a cloudless sky. In some circumstances, which were not those which obtained between Mr Rubenstein and the bank, that might have closed the door on any recovery by the investor. However, as discussed above when I was setting out the judge’s findings, that did not prevent HSBC from being in breach of its statutory duties in recommending an investment in the EVRF, when a proper understanding of Mr Rubenstein’s desires and needs would have led to a recommendation of either the SVRF or a combination of bank deposit accounts. If that was not already obvious when Mr Rubenstein made it clear that he could afford no risk to his capital, it would have become still more obvious had Mr Marsden performed his statutory duties pursuant to COB. In either event, that is to say, whether Mr Rubenstein had invested in the SVRF or in a number of bank deposit accounts, he would have suffered no loss: not merely because he would not have followed the wrong advice (and thus avoided the EVRF), but because it was the bank’s duty to take care to guide him to the right advice which reflected a suitable response to his needs.

[120] It is the third matter on which [counsel for the bank] has relied (in fact his primary submission) which has all along given me greatest reason to consider that the judge might ultimately have come to the right answer, albeit on a somewhat different analysis. That is [counsel’s] leitmotiv concerning the short-term nature of Mr Rubenstein’ investment. The submission is that a loss two years outside of the period about which Mr Rubenstein spoke is simply beyond the scope of the bank’s duties of care and foresight. That is a powerful submission. On balance, however, I have not been persuaded by it

[121] Thus, in one sense the time for investment was undefined and uncertain: it was until the Rubensteins had bought a new home. That was thought to be likely to occur within a year, but the possibility obviously existed that that timescale would be exceeded. The achievement did not lie within their hands, as the example of their failed attempt to purchase in 2007 demonstrated. Moreover, Mr Marsden had himself told Mr Rubenstein that no further advice would be needed, since ‘once the account is open it is effectively an instant access account’; also that ‘We view this investment as the same as cash deposited in one of our accounts’. With instant access to a cash deposit account, why should Mr Rubenstein be concerned about changing financial weather, and why should HSBC be free of responsibility once a year was up? Moreover, it follows from the fact that Mr Rubenstein was misled as to the nature of his investment, that he did not understand that he was exposed to a risk that he did not want. That risk, of market movement in the value of an investment of a type Mr Rubenstein did not even realise he was committed to, was exactly the risk which caused his loss. Finally, the whole purpose of COB was to protect the consumer from a failure to understand risk. If Mr Marsden had done his duty, for instance by warning Mr Rubenstein that, because his investment was not like cash, its safety depended on the financial weather, then Mr Rubenstein would have either been on the qui vive for more advice, which he had been told he would not need, or, as was still more likely, he would have queried the investment, and that would have led to reformulated advice, or he would not have proceeded with the recommended investment.

[122] The question remains: if the scope of the bank’s duty is not set by Mr Rubenstein’s own timescale of up to one year, then what is it set by? Three years, ten years, twenty years? It is a good question, with some reminiscence of a similar question posed by Lord Hoffmann with respect to the length of the follow-on fixture in The Achilleas. Nevertheless, I consider that the question is answered by the factors mentioned above: and in any event, a period of three years is, in terms of a ‘cash’ deposit, not significantly different from an indefinite period of about a year.

[123] Ultimately, the question of remoteness (at any rate in a contractual setting, which Lord Reid in The Heron II suggested was the more restricted one, because a claimant could stipulate contractually for his own protection) is a matter of the reasonable contemplation of the parties. In the context of statutory protection for the consumer, it seems to me that a bank must reasonably contemplate that, if it misleads its client as to the nature of its recommended investment, and thereby puts its client into an investment which is unsuitable for him, when it could just as easily have recommended something more suitable which would have avoided the loss in question, then it may well be liable for that loss. Lord Reid contemplated, but he was thinking in the context of merchants, that a claimant could stipulate for his own protection. However, what may be true of merchants is not likely to be true of consumers. In effect the obligation of explaining matters properly to its clients is put by statute on the advising expert. In such circumstances, if HSBC is to be protected by some relevant, albeit indefinite, time limit for its advice, then perhaps the obligation of making that limitation clear rests on the recommending expert, not on the misled consumer.

[124] Where the obligation of a defendant is not merely to avoid injuring his claimant but to protect him from the very kind of misfortune which has come about, it is not helpful to make fine distinctions between foreseeable events which are unusual, most unusual, or of negligible account (cf Lord Reid in The Heron II). Whether the test of remoteness is expressed in the classic terms found in the leading authorities, or has to reflect that sense of balance (an exercise in judgment) to which Lord Hoffmann referred in SAAMCO at 212E (see [101] above), or has to take account of the manner in which the scope of duty may extend responsibility for even unusual events (see Supershield, cited at [108]-[109] above), in my judgment it should not be said that the loss which Mr Rubenstein has suffered by reason of HSBC’s breach is to be regarded as too remote.

[125] For all these reasons, I consider that the judge came to the wrong conclusion on questions of remoteness, and I would allow the appeal on this issue.”

It is not suggested that the position under Article 94(2) of the Regulatory Law differs from the position under the comparable customer protection provisions in FMSA 2000; or that the approach of this Court to scope of duty and remoteness in the context of breach of the Financial Services Prohibition should differ from the approach of the Courts of England and Wales in the cases to which I have referred. In my judgment of 21 August 2014 I accepted (at paragraph 318) that – if the Claimants were properly to be treated as Clients by Sarasin-Alpen and the advice and recommendations were, in fact, suitable having regard to their investment objectives – then it would not be right to make an order under Article 94(2) for the payment of compensation in respect of the losses which they suffered as a result of their investment in the Notes. But COB 3.2.1 – read with COB 3.2.2(1) – as it seems to me is intended to protect the inexperienced investor from his or her own lack of understanding of the risks associated with sophisticated structured financial products; and the suitability requirement in COB 6.2.1(1) is intended to ensure that he or she is not sold products which are not suitable having regard to his or her investment objectives. For the reasons which I gave in that judgment, I have held that Sarasin-Alpen intended that the Claimants should be denied the protection which those rules were intended to provide. In those circumstances I am not persuaded that the losses in respect of which compensation is claimed under Article 94(2) of the Regulatory Law are irrecoverable on the grounds that they fall outside the scope of Sarasin-Alpen’s duty, as understood in the light of SAAMCO, or that they are too remote.

Nor am I satisfied that the “chain of causation” linking those losses to the conduct within Article 94(1) on which (in the light of the findings against Sarasin-Alpen) the Claimants are entitled to rely has been broken by “an independent and unreasonable decision of the claimants”. In my judgment of 21 August 2014 (at paragraph 314) I found that there was no evidence to support the proposition that the claimants were in a position to meet the margin calls, when made, within the time set by Bank Sarasin; and (at paragraph 315) I held that the causal link between the breaches of the regulatory obligations and the loss suffered by the Claimants on failing to meet the margin calls was not broken by the Claimants’ own conduct. Notwithstanding the further cross-examination of Mr Al Khorafi at the hearing of the Quantum Determination, I find that there is still no evidence that the Claimants (or any of them) were in a position to repay the Sarasin loans before, or after, close-out in October 2008. Nor was there evidence that the Claimants (or any of them) were in a position to repay the ABK loans and facilities in full following close-out and the transfer of the proceeds of the Notes in October 2008 or thereafter (save by further borrowing from CBK). I reject the submission that the decision to take out the CBK loan in 2010 was unreasonable in the circumstances that ABK was pressing for payment and had obtained an order for sale from the Kuwaiti Court over land which stood as security for its lending. There was no evidence that the Claimants (or any of them) were in a position to repay the CBK loan thereafter.
Nonetheless, I accept that part of the ABK losses claimed by Mr Al Khorafi and Mrs Al Hamad in respect of the period after October 2008 would not have arisen but for the need to repay loans totalling US$39.1 million previously made to them to fund personal expenditure. I accept Sarasin-Alpen’s contention that, had that US$39.1 million loan not been taken out (or had funds received on liquidation of the Notes not been used to repay it), there would have been a surplus after the liquidation of the Notes, which could have been transferred to the Claimants and used to partially pay down their ABK loans in October 2008; thereby substantially reducing the ABK principal loan balances at 11 October 2008 and the interest which thereafter accrued thereon. And I accept that to the extent that (but for the US$39.1 million loans to fund personal expenditure) the ABK loans would have been repaid in October 2008, interest charges and fees accrued on those loans and facilities after that date would have been reduced; and that it would not have been necessary to take out the CBK loan (or, at the least, not necessary to take out the whole of that loan) in order to refinance the indebtedness of Mr Al Khorafi and Mrs Al Rifai to ABK on 29 September 2010. Accordingly, it cannot be said that the whole of the head (C) losses accruing after October 2008 – or the whole of the head (D) losses – were the result of the breaches of duty under Article 94(1) that have been found against Sarasin-Alpen.
I turn, then, to the claims against Bank Sarasin under Article 65(2) of the Regulatory Law. The Article is in these terms:

“65. Unenforceable Agreements — Breach by Party to the Agreement

(1) Subject to Article 65(5), a person who makes an agreement in the course of carrying on a Financial Service in breach of the Financial Services Prohibition…shall not be entitled to enforce such agreement against any party (a ‘relevant party’) to the agreement.

(2) Subject to any agreement that may otherwise be reached between the parties, a relevant party may apply to the Court to recover:

(a) any money paid or property transferred by him under the agreement;

(b) compensation reflecting any loss sustained by the relevant party as a direct result of such payment or transfer; and.

(3) …

(4) The compensation recoverable under Article 65(2)(b) is the amount agreed between the parties to the agreement or, following an application to the Court, the amount determined by the Court.

(5) …

(6) …

(7) In Article 65, ‘agreement’ means an agreement, the making or performance of which constitutes, or is part of, the carrying on of a Financial Service.”

Bank Sarasin submitted, correctly, that Article 65(2)(a) provides that the relevant party may apply to the Court to recover any money paid or property transferred under the agreement(s) that were made in breach of the Financial Services Prohibition. It describes that as “the primary right”. It submits that “additionally” Article 65(2)(b) provides for recovery of “any loss sustained by the relevant party as a direct result of…any money or property transferred by him”; and that “on the plain meaning of the words the loss must be a direct result of the transfer of the money, not as a result of the impugned agreement under which the money was paid”. In developing that submission, it was said that:

It could easily have been provided in the legislation that compensation was payable in respect of any loss sustained by the relevant party as a direct result of entry into the agreement made in the course of carrying on a Financial Service in breach of the Financial Services Prohibition. It was not so provided. The clear legislative intention must have been that relief granted under Article 65 is restitutionary in nature. Reliance was placed on the observations of Lord Justice Scott in SIB v Pantell SA (No 2) [1993] Ch 256, at 269-270, in the context of section 5 of the Financial Services Act 1986 (“the FSA 1986”; then in force in England and Wales and on which the Regulatory Law was based). Lord Justice Scott said this:

“The Act not only imposes criminal sanctions for contraventions of its various provisions but also provides remedies for investors who enter into share transactions as a result of the contraventions. The remedies provided by the Act fall into three categories. There are provisions enabling investors to recover loss they have suffered as a result of entering into the share transactions. There are provisions enabling the contravener to be stripped of the profit made out of the transactions and for the profit to be distributed among the investors. And there are provisions of a restitutionary character designed to restore the respective parties to the share transactions to their former positions.

The present case is concerned with the restitutionary provisions contained in the Act. But it is necessary to refer also to the provisions dealing with the recoupment of losses and the disgorging of profits in order to enable the restitutionary provisions to be construed in the context of the Act as a whole.

Section 5 of the Act provides remedies for individual investors who have entered into investment agreements with persons carrying on unauthorised investment businesses. Subsection (1) provides that any such agreement

‘…shall be unenforceable against the other party [i.e. the investor]; and that party shall be entitled to recover any money or other property paid or transferred by him under the agreement, together with compensation for any loss sustained by him as a result of having parted with it.’

The subsection combines, therefore, a restitutionary remedy and a compensatory remedy…”

It is said that, although Lord Justice Scott was not concerned with the nature of compensation payable, he was clearly of the view that the compensatory element of the remedy fell within a restitutionary provision.

Mr Justice David Richards, when considering section 26 of the FSMA 2000 (the successor to section 5 of the FSA 1986) in Re Whitely Insurance Consultants [2008] EWHC 1782 (“Whitely”) , said this (ibid, [27]):

“All policyholders from the Earlier Period who claim a return of the premiums paid by them are also entitled to claim compensation under section 26(2)(b) for any loss sustained by them as a result of parting with the premiums. As Scott LJ observed in SIB v Pantell (No 2) [1993] Ch 256 at 270 on section 5 of the Financial Services Act 1986, it combines a restitutionary remedy and a compensatory remedy. Compensation for the interest which could have been earned on the premiums would certainly be within section 26(2)(b), but it may be that if a party could establish that he had paid the premium out of borrowed money he could recover the actual costs of borrowing incurred by him. The precise scope of the remedy provided by section 26(2)(b) raises difficult issues. Would it for example extend to profits which would have been earned on an alternative use of the money which the claimant can establish he would have pursued, or do the words ‘as a result of having parted with it’ confine the remedy to more direct losses such as interest or, in the case of other property such as shares transferred by the investor under an agreement, dividends and other benefits which the investor would have received on the shares if he had retained them?”

In section 5(1) of the FSA 1986 and in section 26(2)(b) of the FSMA 2000 the legislature had provided for compensation for loss sustained “as a result” of having parted money or property transferred under the relevant agreement. Article 65(2)(b) of the Regulatory Law addresses the question posed by Mr Justice David Richards by the use of the phrase “as a direct result”. In Whitely, Mr Justice David Richards questioned whether a party who could establish that he had paid for the investment out of borrowed money could recover the actual costs of borrowing incurred by him: the inclusion of the word “direct” in Article 65(2)(b) of the Regulatory Law shows that it was intended to exclude claims for the costs of borrowing the sum invested.
Decisions in the courts of England and Wales on the distinction between direct and consequential damages are of no assistance in giving meaning to the word “direct” in the Regulatory Law because DIFC law does not recognise such a distinction, instead adopting a broad test of foreseeability of harm (for example, Article 113 of the DIFC Contract Law). Rather, the interpretation of Article 65(2)(b) must be approached from first principles. In that context, it is submitted that:

(i) The loss in respect of which compensation is granted is “any loss sustained by the relevant party as a direct result of …any money or property transferred by him”. Compensation under Article 65(2)(b) is ancillary to the primary remedy under Article 65(2)(a) – recovery of money paid by the relevant party – not a free-standing right.

(ii) The loss must be the direct result of paying the money.

(iii) The loss is not the direct loss caused by entering into the transaction but something more limited: it is limited to the immediate effect of paying the money.

(iv) The relevant party must prove the direct loss.

(v) This is a limited statutory right to restitution of the principal sum and losses directly consequent on the payment of the principal sum that arises on proof that the relevant agreement was made in breach of the Financial Services Prohibition. It is in addition to all other rights. It is not a right to damages. The relevant party may recover its consequential losses in a claim for damages.

It is submitted on behalf of Bank Sarasin (at paragraph 37 of the Updated Joint Statement on Quantum) that liability under Article 65(2) of the Regulatory Law is restricted to the aggregate of (i) loss of use of the money advanced by Bank Sarasin for the purchase of the Notes until liquidation of the Notes in the sums charged by it, which Sarasin-Alpen quantifies as US$6,234,181, (ii) loss of use of the sums advanced by ABK from the date of purchase of the Notes until their liquidation, which it quantifies as US$6,643,454 and (iii) loss of use on the shortfall on liquidation of the Notes (US$10.4 million), from the date of the liquidation until December 2014, which it quantifies as US$1,503,164.
In response to the submissions advanced on behalf of Bank Sarasin as to the extent of the power of the Court to order compensation under Article 65(2)(b) of the Regulatory Law, the Claimants submit that all of the losses claimed are a direct result of the monies transferred by the Claimants to the Defendants: they dispute that (at least in the present context) the quantification of loss for the purposes of Article 65 of the Regulatory Law differs from (or is narrower than) quantification of loss for the purposes of compensation under Article 94(2) of that Law. It is said that the relevant transfer of monies, for the purposes of Article 65(2)(b), was the transfer of monies from ABK to Bank Sarasin on the Claimants’ instructions. ABK had provided loan facilities to Mr Al Khorafi and Mrs Al Hamad to enable that transfer to be made; and debited the sum transferred to their ABK loan accounts. In those circumstances, it is said, it cannot be argued that the losses were outside the scope of Article 65.
In any event, it is said that this point has also already been determined by this Court; and is now subject to an appeal to the Court of Appeal. Reference was made to paragraph 5 of Bank Sarasin’s grounds of appeal and to paragraphs 73 to 89 of the skeleton argument filed for the appeal on its behalf (paragraphs 77 to 80 of which replicate paragraphs 24 to 27 of the skeleton argument which it put before this Court).
In my view the right to apply to the Court for compensation under paragraph (b) of Article 65(2) of the Regulatory Law is independent of the right to apply under paragraph (a) of that Article for the recovery of money paid or property transferred under an agreement which is unenforceable because it was made in the course of carrying on a Financial Service in breach of the Financial Services Prohibition: there is no reason, as it seems to me, to read paragraph (b) of that article as ancillary to paragraph (a). But, as I have said, Bank Sarasin is correct in contending that compensation under paragraph (b) is limited to loss sustained as a direct result of the payment or transfer made under the agreement: there is no freestanding right under Article 65(2) to apply for compensation in respect of loss sustained as a result of entering into the agreement if that loss was not a direct result of a payment or transfer made under it.
I accept the Claimants’ submission that, in the present case, the transfer of monies from ABK to Bank Sarasin to fund the purchase of the REIT Notes by Mr Al Khorafi and Mrs Al Hamad in June 2007 was a relevant transfer of monies for the purposes of Article 65(2)(b) of the Regulatory Law. Further, as it seems to me, the transfer of the monies borrowed by Mrs Al Hamad from Bank Sarasin itself to fund the purchase of the July 2007 SaraFloor Notes and the transfer of the monies borrowed by Mrs Al Rifai from Bank Sarasin to fund the purchase of the February 2008 SaraFloor Notes were relevant transfers for the purposes of that article.
It is important to keep in mind that – on the facts in the present case – it was known to Bank Sarasin that the monies transferred to fund the purchases of the REIT Notes, the July 2007 SaraFloor Notes and the February 2008 SaraFloor Notes were monies which had been borrowed by Mr Al Khorafi, Mrs Al Hamad or Mrs Al Rifai for the specific purpose of making those purchases. In those circumstances, it seems to me that the answer to the question whether the Claimants can recover compensation in respect of the actual costs of borrowing those monies is “Yes”. There is nothing in the observations of Mr Justice David Richards in Whitely which supports a contrary conclusion; and, if and to the extent that the inclusion of the word “direct” in Article 65(2)(b) of the Regulatory Law suggests that, in some cases, the causal link may be narrower under the Regulatory Law than it was under the FSMA 2000 (which I doubt), on the facts in the present case the word adds nothing. It follows that I am satisfied that (subject to the other defences to which I am about to turn) compensation can be claimed against Bank Sarasin under Article 65(2)(b) in respect of (i) interest and fees charged by Bank Sarasin on the monies borrowed by Mrs Al Hamad and Mrs Al Rifai and transferred to fund their respective purchases of the SaraFloor Notes (head (B) losses), (ii) interest and fees charged by ABK on the monies borrowed by Mr Al Khorafi and Mrs Al Hamad and transferred to fund their purchases of the REIT Notes (head (C) losses) and (iii) interest and fees charged by CBK on the monies borrowed by Mrs Al Rifai to refinance the ABK loans and facilities.
For the reasons which I have set out in the preceding paragraphs of this section of my judgment I reject the Defendants’ submissions that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that the losses claimed fall outside the scope of the duties in respect of which the Defendants have been held to be in breach or are too remote.

Whether the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that the Claimants failed to mitigate the losses in respect of which they now claim

In developing the submission that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that the Claimants failed to mitigate the losses in respect of which they now claim, it was submitted that:

(1) The claimants were at all times subject to a duty to take reasonable steps to mitigate their loss; and cannot recover for loss that which was reasonably avoidable (McGregor on Damages, 19^th edition, paragraph 9-004).

(2) The failure to repay the Sarasin loans in October 2008 (or alternatively thereafter) was a failure to mitigate loss and so any claim for interest and charges paid thereafter is irrecoverable.

(3) The failure to repay the ABK loans in October 2008 (or alternatively thereafter) was a failure to mitigate loss and so any claim for interest and charges paid thereafter is irrecoverable; and

(4) The failure to repay the ABK loans by 2010 and the decision to take out the CBK loan in 2010 (and/or the failure to repay it in 2010 or later) was a failure to mitigate loss and so irrecoverable.

In support of those submissions the Court was referred to Al-Sulaiman ([2013] EWHC 400 (Comm), at paragraphs [203] to [207] and [210] to [211]). It was said that, if the Claimants had acted reasonably and produced the necessary funds to extinguish their indebtedness after the Notes were sold in October 2008 (or, alternatively, shortly afterwards), they would not have suffered the losses claimed under heads (B), (C) and (D).

In Al Sulaiman the claimant, Basma Al Sulaiman (“BAS”), who had entered into a series of leveraged transactions on the advice of the defendants, Credit Suisse, sought compensation in respect of losses resulting from alleged breach of statutory duty under section 150 of the FSMA 2000. It was said on her behalf that she was an inexperienced investor, that the risks of leveraged transactions had not been properly explained to her, and that had proper explanation been given, she would not have purchased the investments in question. Following the collapse of Lehman Brothers and of two Icelandic banks in September and October 2008 and the consequent collapse in both the equities and fixed interest markets, the value of the Notes that she had purchased (both those linked to equities and those linked to interest rates) did drop significantly, with the result that margin calls were made which she did not meet. The Notes were sold in order to recoup the amount of the loans; but the proceeds were insufficient to do so. BAS claimed the losses which (as she said) she incurred by investing in Notes she would not have purchased at all, had she been properly advised. At paragraph [167] of his judgment the judge (Mr Justice Cooke) rejected the suggestion that BAS would not have invested in the Notes, had she been told of the risks of which she said she was not told: he held that investment in these Notes represented exactly the kind of “calculated risk” that she wanted to take. But, nevertheless, he went on to consider whether (if he were wrong in that conclusion) the lack of advice as to the risks was the cause of the losses which she claimed. In that context he held (at paragraph [203]) that:

“[203] …It is effectively now recognised that BAS had the assets available to pledge by way of guarantee for the extant margin call, had she wished to do so. A schedule of her available assets, as disclosed (and there is good ground for thinking that there were further assets which remained undisclosed), was produced by Plurimi’s counsel in the course of argument, showing some $14m- $15m of assets which could have been readily pledged, plus $10m of jewellery, without looking to her real property and contents valued in excess of $60m. There were both personal and trust assets which were apparently available for pledge. She made no approach to her personal bankers, nor to the JP Morgan managers of the BAS 2003 Trust nor to the trustees of the Smile Trust. She never produced the guarantee which was available from Citibank. With available guarantees of $5.8 million, the benefit of the use of the $11 million deposit to pay off loans, the effect on leverage of selling Note 19 and the use of the net proceeds to repay further loans, there should have been no difficulty in producing a further guarantee to meet the shortfall, with all the other assets at her disposal. Alternatively, she could have asked for time and indicated a willingness to come up with collateral which it is highly likely, would have been acceptable. This was not done.”

At paragraph [205] the judge held that it was clear that BAS had no intention of producing further margin; and that, if there had been an intention to meet the call, there would have been a request for more time to pay and, “as everyone realised at the time, BAS would have been perfectly capable of providing the collateral sought”. He went on, at paragraph [207], to say this:

“[207] In my judgment it is plain that a decision was made not to meet the margin call. This was probably done in the hope that [the bank] would not insist on the additional collateral. Such an approach is so irrational as to be almost incomprehensible, explicable only if it really was thought that [the bank] would not liquidate the account. Even then, when it became apparent that her bluff was being called, she could possibly have retrieved the position, but no attempt was made to do so. Not meeting the margin call suggests blind irrational pique at [the bank’s] movement of the goal posts on LTV.”

It was in the light of those findings of fact that Mr Justice Cooke reached the conclusions which he did as to the causation of the losses suffered on liquidation of the claimant’s account. He said this (at paragraphs [210] and [211]):

“[210] In these circumstances, it would not be possible to say that any failure on the part of [the defendants] adequately to explain collateral, margin, margin calls and the consequences of failure to meet such a call was the cause of BAS’ losses. Not only did RR advise the sale of Notes, which BAS declined to do in September and October, which would have changed the LTV ratio beyond recognition, but he advised her to put up margin, in the shape of guarantees which she also failed to do. Even in a market in turmoil, as it was in October/November 2008, the decision on her part not to follow RR’s advice to sell Notes and not to provide additional margin, when she was plainly in a position to do so, provides a break in any chain of causation. Her view of the market was such that she did not want to sell and that may or may not have been a rational view. But, having taken the decision not to sell, the failure to produce margin is explicable only as an attempt to play ‘hard ball’ with CSAG or as the result of a fit of pique. The losses occurred by reason of the fall in value in the Notes and BAS’ deliberate and irrational decision not to meet a margin call, not from any failure to explain that margin calls could occur when the Notes were purchased.

[211] BAS accepts that the investments were suitable for her in the sense that she was able to meet any margin call but her decision not to provide additional margin even in the market of October/November 2008 and thereby incur losses of the order of $30 million is so extraneous to the failure to advise and would in any event constitute a failure to mitigate, that the losses cannot be laid at [the defendants’] door. Whilst these matters should not be considered with hindsight, by looking at the improvement in the market which has taken place in the years since, it is clear that the provision of additional collateral would appear to any sensible person as the prudent course to adopt and a deliberate failure to produce additional margin and thereby precipitate the distressed sale of all the Notes, whether capital protected or not, completely nonsensical.”

It is, if I may say so, entirely understandable that, in the light of the findings of fact which he had made, Mr Justice Cooke reached the conclusions which he did in Al Sulaiman. But, in the absence of comparable findings of fact in the present case, those conclusions provide no assistance to the defendants.
There are no comparable findings of fact in the present case. As I have said, earlier in this judgment, I addressed the submission that the claims for compensation in the present case must fail on the grounds that the loss or damage in respect of which compensation was claimed was not caused as a result of the Defendant’s breaches of the Financial Services Prohibition, but by the Claimants’ failure to pay the margin calls on their accounts, at paragraphs 310 to 315 of my judgment of 21 August 2014. I held that there was no evidence to support the proposition that the Claimants were in a position to meet the margin calls, when made, within the time set by Bank Sarasin. It is not open to the Defendants to re-open those issues in the context of the Quantum Determination. And I have held, earlier in this judgment, that, notwithstanding the further cross-examination of Mr Al Khorafi at the hearing of the Quantum Determination, there was still no evidence that the Claimants (or any of them) were in a position to repay the Sarasin loans before, or after, close-out in October 2008; that there was no evidence that the Claimants (or any of them) were in a position to repay the ABK loans and facilities in full following close-out and the transfer of the proceeds of the Notes in October 2008 or thereafter (save by further borrowing from CBK); that the submission that the decision to take out the CBK loan in 2010 was unreasonable in the circumstances that ABK was pressing for payment and had obtained an order for sale from the Kuwaiti Court over land which stood as security for its lending; and that there was no evidence that the Claimants (or any of them) were in a position to repay the CBK loan thereafter.
For those reasons I reject the Defendants’ submissions that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that the Claimants failed to mitigate the losses in respect of which they now claim.

Whether the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that this is not a nil transactions case

It was submitted on behalf of Bank Sarasin that quantification of the claims under heads (B), (C) and (D) on a “nil-transaction basis” was misconceived in law; and, in any event, is not open to the Claimants on the facts in the present case. Those submissions were adopted by Sarasin-Alpen.
In support of the contention that quantification of the claims on a “nil-transaction basis” is misconceived in law, the Defendants submit that:

The “so-called” nil-transaction basis has no application to a claim for compensation under a statute: properly understood it is a now redundant distinction relating to transactions induced by negligent advice. Reliance was placed on the observations of Lord Hoffman SAAMCO ([1997] 1 AC 191, at page 218F:

“Every transaction induced by a negligent valuation is a ‘no-transaction’ case in the sense that ex hypothesi the transaction which actually happened would not have happened. A ‘successful transaction’ in the sense in which that expression is used by the Court of Appeal (meaning a disastrous transaction which would have been somewhat less disastrous if the lender had known the true value of the property) is only the most common example of a case in which the court finds that, on the balance of probability, some other transaction would have happened instead. The distinction is not based on any principle and should in my view be abandoned.”

The “nil transaction” approach cannot be used as a substitute for proof. If, as is likely in the present case, a party would have entered into a different transaction, he must bring into account what would have happened. Again, reliance was placed on observations of Lord Hoffman in SAAMCO (ibid, at page 217):

“The calculation of loss must of course involve comparing what the plaintiff has lost as a result of making the loan with what his position would have been if he had not made it. If for example the lender would have lost the same money on some other transaction, then the valuer’s negligence has caused him no loss.”

and on the observation of Lord Bingham of Cornhill in his dissenting judgment in Reeves v Thrings & Long [1996] PNLR 265, 278B:

“I accept that had the true position been explained he would not have entered into this transaction at all, but I incline to think that he would be over-compensated by this measure, since whatever he had invested in on the eve of the current recessionary cycle might well have led to loss.”

In the present case, the Claimants had the opportunity to borrow large sums of money from ABK. It is inconceivable that Mr Khorafi would have refused to accept the loans. He was not bound to invest the money with Bank Sarasin; and if he had not done so he would have invested the money elsewhere. In those circumstances the Claimants are required to prove their actual loss: that is to say, the loss directly caused by paying money over under the transactions with Bank Sarasin after taking into account any loss that would have been directly caused by paying money over under the alternative transactions with another financial institution.
The Claimants have made no attempt to discharge the burden of proof which is upon them.

In support of the contention that quantification of the claims on a “nil-transaction basis” is not open to the Claimants on the facts in the present case, the Defendants submit that:

The “nil-transaction basis” on which the Claimants rely in quantifying their claims under heads (B), (C) and (D) were not pleaded: it first emerged in the Griffin May 2013 Report which was disclosed on 7 May 2013, shortly before trial. It is said that, in addition to being misconceived in law, (i) “the so-called ‘nil-transaction basis’ is a fabrication” which “appears to have been devised by someone who realised there were causation problems with the Claimants’ case in or around April 2013” and that “Mr [Al] Khorafi tailored his evidence in order to fit in with it”; and (ii) “the so-called ‘nil-transaction basis’ takes no account of the fact that Mr Al Khorafi borrowed and paid away sums not related to the purchase of the Notes”.
For the first three and a quarter years of the life of these proceedings it was consistently the case of the Claimants: (i) that, before April 2007, their principal banking relationship was with ABK, (ii) that ABK had recommended that they approach Sarasin-Alpen and (iii) that ABK had introduced Sarasin-Alpen to Mr Al Khorafi as “the Middle Eastern Branch of Sarasin Switzerland”; but that in April and May 2013 (just before the trial was to commence) the Claimants’ case changed, in that it was alleged (iv) that the Claimants had had no relationship with ABK before April 2007 and (v) that ABK had insisted that the money lent to the Claimants was invested with Bank Sarasin (rather than merely recommending that the Claimants seek advice from Sarasin-Alpen).
It was to be inferred from the change in the Claimants’ case that, in the period leading up to trial, “someone realised that the case as presented thus far faced insuperable difficulties in relation to causation” – in that, if ABK merely recommended that the Claimants seek advice from Sarasin-Alpen, the Claimants would have to bring into account the losses they were likely to have suffered in any event on alternative investments (given that they were embarking on these investments on the eve of the global financial crisis) – and that, in order to avoid that problem, “Mr [Al] Khorafi tailored his evidence in his fourth witness statement and at trial to support the ‘nil-transaction’ theory that first emerged (for the first time) on 7 May 2013”.
No adequate explanation was given for the change in the Claimants’ case; the evidence shows that had the Claimants not invested with the Bank Sarasin they would have invested with another financial institution; and the “so-called ‘nil-transaction basis’” fails because it takes no account of the fact that Mr Al Khorafi borrowed and paid away sums not related to the purchase of the Notes.

In support of the submission that Mr Al Khorafi has failed to explain the change in his evidence, it was said that:

In later evidence, he denied the truth of the statement in his witness statement dated 1 August 2010 that, prior to April 2007, his family’s principal banking relationship was with ABK; saying that the witness statement was in English and that he did not easily read English (although, at paragraph 15 of that witness statement, he had claimed a good understanding of written English).
His oral evidence that he was told by one Muna Sharwa that ABK would only lend money to him if it was invested with Sarasin was “an entirely new piece of evidence” which was “made up on the spot”; and was inconsistent with the pleaded case and the way in which the case was opened.
The evidence of Mrs Al Hamad was to the effect that ABK was willing to lend money to them to invest outside Kuwait and that Bank Sarasin was recommending certain investments: there was no suggestion that money coming from ABK had to be invested with Bank Sarasin.

In support of the submission that, had they not invested with Bank Sarasin, the Claimants would have invested with another financial institution, it was said that:

The Claimants’ case was first advanced on the basis that, in or around April 2007, one of Mr Al Khorafi’s friends had pointed out to him that he had significant assets, inherited from his father, which “were just sitting there and not working for him”; had suggested to him that he should be using those assets to raise money and then investing that money; and had said that there were plenty of attractive investment opportunities outside Kuwait. Borrowing against assets in order to invest was not a course of action which Mr Al Khorafi had thought of before his friend’s suggestion; but that suggestion made sense to him; and so he started to think about whether it would be possible to raise money (and, if so how much money) against his assets. Following that suggestion, not only did Mr Al Khorafi decide to raise money on his own assets; he also decided to persuade his mother, Mrs Al Hamad, to borrow against her assets. He sent Mr Taha to approach the Kuwaiti banks to ascertain which of them would be willing to lend against his and his mother’s assets; and to identify the best terms on which such lending could be obtained. Mr Taha came back to him with the information that ABK was offering a good deal.
The case on that basis was fully described in a letter from the Claimants’ then lawyers dated 27 January 2009:

“7. Prior to April 2007 our Clients had had no dealings with either BSAME [Sarasin-Alpen] or BSCL [Bank Sarasin]. Our Clients’ principal banking relationship at the time was with Al Ahli Bank (‘ABK’) in Kuwait with whom we understand BSAME and BSCL have a relationship.

In around April 2007 ABK agreed to advance US$ funds to Mr Al Khorafi and Mrs Al Hamad for the purpose of undertaking investments outside Kuwait. Mr Al Khorafi was also interested in optimising his asset base and undertaking a broader range of investments with a view to increasing his income stream. It was agreed with ABK that the funds advanced should be used to purchase capital guaranteed investment products, although no discussions took place as to the precise nature of those products.
ABK stated that it was unable to advise as to the investments that would be suitable. However, Mr Steve Cherian, Head of the Structured Products Unit at ABK, recommended that Mr Al Khorafi discuss the position with BSAME. Mr Cherian explained that BSAME was the Middle East branch of BSCL and that BSCL was a successful Swiss private bank. He recommended that Mr Al Khorafi discuss the position with Mr Sharad Nair (‘Mr Nair’), the Managing Director of BSAME who was based in Dubai and who would be able to provide Investment advice.”

It is clear that the suggestion that the Claimants would only have invested with Bank Sarasin is untrue. Mr Al Khorafi was looking to raise money for investment purposes generally, ABK was willing to lend to him and his mother very large sums on the strength of their assets and ABK recommended, but did not insist upon, the investment being placed with Bank Sarasin. The only requirement from ABK was that the investment be placed with an investment bank rated AA or higher. The “nil transaction” basis is not supported by the facts.

In support of the submission that the “so-called ‘nil-transaction basis’” fails because it takes no account of the fact that Mr Al Khorafi borrowed and paid away sums not related to the purchase of the Notes, it was said that:

That the Claimants borrowed US$39.1 million for purposes unrelated to the purchase of the Notes. There is no finding that these loans were made in breach of the Financial Services Prohibition.
That, on the basis of the Griffins May 2013 Report the Claimants take “the patently absurd position” that loan transactions that had nothing to do with the purchase of the Notes and for which Mr Al Khorafi received value are in some way causally linked with the claim under Article 65 of the Regulatory Law. There is clearly no link with the sale of the Notes. The interest payable in respect of the personal loans cannot be loss sustained by the relevant party as a direct result of the payment of any money under an agreement made in breach of the Financial Services Prohibition, in that, in relation to those loans, (i) the Claimants did not in fact pay any money to Bank Sarasin, rather they borrowed money; (ii) there is no loss – the Claimants received the loans, used the money and purchased assets or discharged liabilities with the loans; and (iii) no right to compensation under Article 65 in respect of the personal loans has been held to exist.

In response to those submissions, the Claimants strongly deny the allegation that the nil-transaction case was manufactured and that Mr Al Khorafi adjusted his evidence in his fourth witness statement to further that case. It is said that the Claimants have always made it clear that their claims were advanced on the basis that this was a nil-transaction case; and that the Defendants knew, at the trial, that that was the case which they needed to address. The Defendants cross-examined extensively at trial on the issue whether the Claimants would have entered into an alternative transaction if the transactions with Bank Sarasin had not gone ahead. The Defendants failed on that issue; and it is now the subject of their pending appeal.
The Claimants submit that this Court has already held that compensation for losses should be assessed on a nil-transaction basis. They rely on paragraph 7 of the schedule of reasons to my Order of 28 October 2014; and, in particular on my observations that:

“to investigate on a counter-factual basis what they would have done if they had not made the investments which they did make, would produce only one answer: they would have not borrowed (as they did) in order to make investments which did not have the criteria which they required.”

It is said that this Court has already reached the counter-factual conclusion that there would have been no investments in structured financial products, no ABK lending and no Bank Sarasin lending; and that, on the basis of that counter-factual conclusion, compensation under each of heads (B), (C) and (D) is properly recoverable.

The Claimants are correct to point out that the Order of 28 October 2014 provides (at paragraph 6) that the Defendants make payments to the Claimants of payment of the amounts quantified in paragraphs 3(a) and 5(a) – amounting in aggregate to some US$10.4 million – within 14 days. As I have said, earlier in this judgment, in making that order I rejected the Defendants’ submission that, on a proper reading of my judgment of 21 August 2014, I had not determined that that sum should be payable by way of compensation in respect of losses sustained by reason of the Claimants’ investment in the Notes (head (A) losses). In particular, I rejected the Defendants’ submissions that to measure compensation by reference to the loss on the sale of investments was naive and over simplistic (because it was a measure based on a no-transaction approach); that, in order properly to measure compensation, it was necessary to make a counter-factual analysis of what would have happened if the investments with Bank Sarasin had not been made; and that, in particular, it was necessary to ask whether, if the Claimants had not invested with Bank Sarasin, they would have invested elsewhere and, if so, in what they would have invested and what the consequence of such investment would have been. I rejected those submissions for the reasons set out in paragraphs 6, 7 and 8 of the schedule to the Order of 28 October 2014 (which I have set out earlier in this judgment). Put shortly, I held that, on the facts in the present case, the only proper conclusion (given the Claimants’ investment criteria and my finding that an investment which satisfied those criteria was not available) was that there was no question of the Claimants ever proposing to invest in some other product: they should have been advised that a product having the characteristics they required was not one which could be obtained. I held that it was appropriate, in this case, to measure compensation on a “no-transaction” basis: in the sense that, in comparing the position in which the Claimants were with the position in which they would have been if the Defendants had not been in breach of the Financial Services Prohibition, it was appropriate to assume that, absent the breaches of the Financial Services Prohibition which had been found against the Defendants, (i) Mr Al Khorafi and Mrs Al Hamad would not have taken loans from ABK in June 2007 for the purpose of investment in structured financial products, (ii) Mr Al Khorafi and Mrs Al Hamad would not have invested in the REIT Notes, (iii) Mrs Al Hamad would not have taken loans from Bank Sarasin in July 2007 for the purposes of investment in structured financial products; (iv) Mrs Al Hamad would not have invested in the July 2007 SaraFloor Notes; (v) Mrs Al Rifai would not have taken loans from Bank Sarasin in February 2008 for the purposes of investment in structured financial products; and (vi) Mrs Al Rifai would not have invested in the February 2008 SaraFloor Notes.
In my view the Claimants are correct to contend that it would be wrong to re-visit, in this Court, the question whether compensation should be measured on a “no-transaction” basis: that is a matter for the Court of Appeal. There is no distinction, in this context, between compensation (under head (A)) in respect of losses on investments which would not have been made and compensation (under heads (B), (C) and (D)) in respect of interest charges and fees in respect of loans which would not have been taken. It follows that I reject the Defendants’ submissions that the claims to compensation under heads (B), (C) and (D) should be dismissed on the grounds that this is not a nil transaction case.
I turn, therefore, to address the assessment of losses under heads (B), (C) and (D) on the basis that, in principle, compensation under those heads is recoverable.

Compensation under head (B): Fees and interest charged to the Claimants by Bank Sarasin

As I have said, the Claimants seek compensation for losses under head (B) in the amount of US$10,578,267. The individual claims are these:

Mr Al Khorafi

US$

Mrs Al Hamad

US$

Mrs Al Rifai

US$

All claimants

US$

Head (B) losses

1,338,266

7,733,387

1,506,614

10,578,267

Claims in those amounts were first made in reliance on the Griffins May 2013 Report. At paragraph 4.1 of that report, it was noted that, in its amended defence dated 22 December 2010, Sarasin-Alpen had quantified losses accruing on capital investments undertaken by the Claimants in the amount of US$10,445,049. As I have explained, that became an agreed quantification in respect of head (A) losses; and was the basis for the figures in paragraphs 3(a) and 5(a) of the order of 28 October 2014. At paragraph 4.2 of the May 2013 Report it was noted that Sarasin-Alpen did not include in that quantification of losses accruing on capital investments “any interest, charges and/or other penalties incurred by the claimants as a result of entering structured investment agreements as referred to within the Amended Defence”; and that that quantification did not take into consideration “the effects of drawdowns on the credit facilities offered by the defendants that were not invested in the structured investment agreements referred to within the Amended Defence”. The report identifies “a number of gains/losses and costs arising on the claimants’ Sarasin accounts that the first Defendant omitted” which are summarised at section 4.3:

		Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Fiduciary gains	(a)	141,100	96,834	116,509	354,444
Interest incurred on Sarasin accounts	(b)	-165,680	-14,602	-968,183	-1,148,465
Fees incurred on Sarasin accounts	(c)	-216,686	-7,815,619	-654,940	-8,687,245
Unreturned fiduciary call in Sarasin accounts	(d)	-1,097,000	0	0	-1,097,000
Aggregate of omitted items	(b)+(c)+(d)	-1,479,366	-7,830,221	-1,623,123	-10,932,710
Additional costs and losses not included by Sarasin-Alpen	(b)+(c)+(d)-(a)	1,338,266	7,333,387	1,506,614	10,578,267

Particulars of those transactions appear in Appendix 10 of the Griffins May 2013 Report.

By the date of the Quantum Determination the Defendants’ quantification of the Claimants’ losses under head (B) remained zero; on the basis that they could succeed on one or more of the points raised in their primary response. In the alternative, the Defendants advanced a quantification of the Claimants’ losses under this head in the amount of US$7,691,355. That amount was attributed to the individual Claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Head (B) losses	1,100,670	5,794,885	795,800	7,691,355

It can be seen from the Updated Joint Statement on Quantum (at paragraph 8) that the difference between the Claimants’ quantification under this head (US$10,578,267) and the Defendants’ quantification (US$2,886,912) is said to be attributable to a difference in methodology; in that the Claimants’ quantification has been made on what is described as a “nil transaction basis” – that is to say, by reversing all fees and interest actually charged by Bank Sarasin – but the Defendants’ quantification has been made on the basis that only those fees and interest charged in respect of the loans which funded the investment in the Notes purchased by the Claimants should be reversed. In my view, for reasons already explained earlier in this judgment, the Defendants’ approach is to be preferred: the Claimants or their advisers have misunderstood that the effect of quantification on a no-transaction basis, in this case, is to reverse only those fees and interest charges in respect of loans which funded investment in the Notes. The appropriate assumption is that (absent the breaches of the Financial Services Prohibition found against the Defendants) it is those loans (and only those loans) that would not have been made.
In the alternative – on the basis that it is only those fees and interest charged in respect of the loans which funded the investment in the Notes that should be reversed – the Claimants quantify their loss under this head as US$8,337,102. It can be seen from the Updated Joint Statement on Quantum (at paragraphs 9 and 10; and, in particular, from the table at paragraph 10) that the difference (US$645,747) between the Claimants’ alternative quantification (US$8,337,102) and the Defendants’ quantification of loss under this head (US$7,691,355) is said to be attributable to the following items:

The Defendants have not included the sum of US$179,450 said by the Claimants to be due to Mr Al Khorafi in respect of interest and early repayment.
The Defendants have not included
the sum of US$158,160 said by the Claimants to be due to Mr Al Khorafi in respect of overdraft interest on the facility which funded the Calyon Witch Hat

The Defendants have not included the further sum of US$3,477 said by the Claimants to be due to Mr Khorafi in respect of overdraft interest charge on his account and unrelated to his personal
The Defendants have included a credit balance of US$3,670 on Mr Al Khorafi’s account.
The Defendants have not deducted the sum of US$141,101 in respect of a fiduciary gain made by Mr Al Khorafi.
The Defendants have not included the sum of US$14,602 said by the Claimants to be due to Mrs Al Hamad in respect of interest on an overdraft balance which arose on her account following liquidation of her investment in the Notes.
The Defendants have not deducted the sum of US$96,824 in respect of a fiduciary gain made by Mrs Al Hamad.
The Defendants have deducted a debit balance of US$648,172 in respect Mrs Al Rifai.
The Defendants have not deducted the sum of US$116,509 in respect of a fiduciary gain made by Mrs Al Rifai.

Making these adjustments, it is said that – adopting the Defendants’ methodology – the Defendants’ quantification should be increased from US$7,691,355 to US$8,337,102.The position is shown below:

	Item	Claimants’ adjustments US$	Defendants’ quantification US$		Claimants’ alternative quantification US$
Mr Al Khorafi	(1)	179,450
	(2)	3,477
	(3)	158,160
	(4)	3,670
	(5)	141,101	+196,316	1,100,670	1,296,986
Mrs Al Hamad
	(6)	14,602
	(7)	96,834	-82,232	5,794,885	5,712,653
Mrs Al Rifai	(8)	648,172
	(9)	116,509	+531,663	795,800	1,327,463
			645,747	7,691,355	8,337,102

As I shall explain, item (1) has been substituted for the amount (US$216,686) described in the table at paragraph 4.3 of the Griffins May 2013 Report as “fees incurred on Sarasin accounts”; items (2) and (3) are comprised in the amount (US$165,680) described in that table as “interest incurred on Sarasin accts”; and item (4) is an addition to the amount (US$1,097,000) described in that table as “unreturned fiduciary call in Sarasin account”. It can be seen that items (6) and (8) appeared in the table (“interest accrued on Sarasin accounts”); and that items (5), (7) and (9) also appeared in that table (“fiduciary gains”).

The Defendants dispute each of the adjustments sought by the Claimants. They adhere to their contention that (if not zero) the losses claimed under this head should be quantified at US$7,691,355. In taking that position, the Defendants rely on two reports prepared by KPMG AG – a report dated 15 December 2014 (“the second KPMG December 2014 Report”), to which there is an addendum dated 10 January 2015, and a report dated 25 February 2015 (“the KPMG February 2015 Report”) – and on a letter from KPMG AG dated 2 March 2015 written in response to the Griffins February 2015 Report (“the KPMG March 2015 letter”). As in the case of the Griffins reports, the KPMG reports and the March 2015 letter were not adduced as expert evidence, in the conventional sense; rather they were prepared to assist the Defendants in responding to the claims and their contents were adopted by counsel in making submissions on their behalf.
I turn, therefore, to examine the items in respect of which the Claimants seek adjustments to the Defendants’ quantification. In doing so, I have in mind that those adjustments are advanced by the Claimants on the basis that the Defendants are correct to take the view that it is only those fees and interest charged in respect of the loans which funded the investment in the Notes that should be reversed.
Item (1): US$179,450 said to be due to Mr Al Khorafi in respect of interest and early repayment.

It can be seen from paragraph 5.3 of the Griffins February 2015 Report that the Claimants advance the figure of US$179,450 in substitution for the earlier figure of US$216,686, which had appeared in the table at section 4.3 of the Griffins May 2013 account (“Fees incurred on Sarasin accounts”). The earlier figure (US$216,686) was the aggregate of US$78,328 charged to Mr Al Khorafi on loans of US$4.1 million which had been made to him by Bank Sarasin and US$138,358 charged to him as a penalty for early repayment of those loans in the post-close out period.

At paragraph 4.3.2.3 of the second KPMG December Report it had been said that that that interest charge and early repayment penalty were not directly related to the funding of the Notes:

“USD 78,328.55 of loan interest expense on [Mr Al Khorafi’s] Sarasin current account no. 6.00566.2 4000 with Bank Sarasin was driven by USD 4.1 million of loans drawn by [Al Khorafi] on various dates from April 28, 2008 until the forced repayment date of October 10, 2008. These USD 4.1 million were not transferred to any of the Claimants’ bank accounts with Bank Sarasin or ABK through which the Notes investment activities were funded and executed. Further, there was USD 138,357.92 of early repayment penalties related to those loans.”

In advancing the substituted figure of US$179,450, the Claimants have deducted US$37,236 from the earlier figure of US$216,686. The reason for the adjustment appears in paragraph 5.3 of the Griffins February 2015 Report:

“…the facility of $4.1 million was not used entirely for third party payments. The net external payments/drawings were $704,562.76 [as set out in paragraph 5.2 of that Report]. The maximum interest, adopting the approach of KPMG that could be excluded is $37,236.39 ({$216,686.47/$4.1m} x $704,562.76) compared with the $216,686.47 ($78,328.55 + $138,357.92). This gives an adjusted figure of $179,450.08 (being $216,696.47 less $37,236.39).”

The Defendants do not accept the premise that the facility of US$4.1 million was not used entirely for third party payments. At section 2 of the KPMG March 2015 letter it is demonstrated – by comparing drawdown under the facility against contemporary payments (amounting in aggregate to US$4,204,541) – that the whole of the facility was used by Mr Al Khorafi for personal expenditure unrelated to the purchase of the Notes. It is said that:

“In section 5.2 of [the Griffins February 2015 Report], Griffins refer to a table with a deposit of USD 10,000,000.00 against eight payments aggregating USD 10,704,562.76, for a net expenditure of USD 704,562.00 as proof that the USD 4,100,000.00 was not used to fund personal expenditures of [Mr Al Khorafi].

This is incorrect. In fact the last four payments in Griffins table aggregating USD 4,204,541.64 were funded by [Mr Al Khorafi’s] USD 4,100,000.00 loan plus USD 107,000.00 fiduciary deposit redemption. These are the same payments as set out in our table above. The USD 10,000,000.00 deposit and four payment transactions aggregating USD 6,500,021.12, which were paid between August 31, 2007 and February 2, 2008, are unconnected with the USD 4,100,000.00 loan. Accordingly these transactions have no impact on the fact that USD 4,100,000.00 in personal payments was funded by the USD 4,100,000.00 loan.”

I find that analysis persuasive. I am not satisfied that the Claimants have established that the premise on which they seek to include item (1) in Mr Khorafi’s claim under the head (B) losses – that is to say, that the facility of US$4.1 million was not used entirely for payments to third parties in respect of personal expenditure – is well founded. I disallow that item.
Item (2): US$3,477 said to be due to Mr Al Khorafi in respect of overdraft interest charged on his account and unrelated to his personal

At paragraph 4.3.2.2 of the second KPMG December 2014 Report, it is said that the figures in the table at paragraph 4.3 of the Griffins May 2013 account (“Interest incurred on Sarasin accnts”) were reconciled to the overdraft interest expense in the Claimants’ current account statements of Bank Sarasin for the period from June 28, 2007 to December 31, 2012 The overdraft interest expense balance in Mr Al Khorafi’s account was US$3,476.65. It was said that that overdraft interest expense was driven by an overdraft balance, funding payments that were not credited to any of the Claimants’ accounts with Bank Sarasin, or the Claimants’ accounts with ABK. On that basis, the Defendants took the view that that Mr Al Khorafi’s overdraft interest expense of US$3,477 was not directly related to the funding of the Notes. Notwithstanding the Claimants’ contention that this small amount of overdraft interest is unrelated to the funding of payments for personal expenses – a contention said in the Updated Joint Statement on Quantum to be based on paragraph 7.19(c) of the Griffins January 2015 Report and paragraph 5.5 of the Griffins February 2015 Report; but not, in my view, supported by the contents of those paragraphs – I am not persuaded that the Defendants were wrong to take that view. I disallow that item.

Item (3):
US$158,160 said to be due to Mr Al Khorafi in respect of overdraft interest on the facility which funded the purchase of the Calyon Witch Hat

The parties disagree on the question whether the interest accruing on the US$30 million loan from Bank Sarasin to Mr Al Khorafi was US$158,160 (as the Defendants contend) or US$162,380 (as the claimants contend); but the adjustment sought by the Claimants reflects the defendants’ figure.

The Defendants’ position is based on paragraphs 4.3.2.2. and 4.3.2.3 of the second KPMG December 2014 Report; where it is said that:

“4.3.2.2 Interest incurred on Sarasin Accounts

The overdraft interest expense balances in [Mr Al Khorafi’s, Mrs Al Hamad’s and Mrs Al Rifai’s] Sarasin accounts were USD 3,476.65, USD 14,601.92 and USD 972,227.45 for a total of USD 990,306.02, which is lower than the USD 1,148,465.66 in the claim [at paragraph 4.3 of the Griffins May 2013 Report], representing a difference of USD 158,159.64.

The overdraft interest expense overstatement of USD 158,159.64 is a classification error as it actually belongs to loan interest expense described in Section 4.3.2.3.

…

4.3.2.3 Fees incurred on Sarasin Accounts

We reconciled the ‘Fees incurred on Sarasin Accounts’ balances presented in the Claim Report to the loan interest expense figures in the account statements for Claimants’ current accounts with Bank Sarasin…from June 28, 2007 to December 31, 2012…According to these bank account statements, the loan interest expense in [Mr Al Khorafi’s, Mrs Al Hamad’s and Mrs Al Rifai’s] Sarasin accounts were USD 379,516.55, USD 7,815,618.84 and USD 654,940.22 respectively for a total of USD 8,850,075.61, which is higher than the USD 8,687,245.53 in the claim for a difference of USD 162,830.08 (all attributable to [Mr Al Khorafi’s] Sarasin current account).

In the analysis of these account statements, we assessed whether loan interest expense was related to loans that directly funded Notes investments.

The loan interest expense understatement of USD 162,830.08 represents a classification error of USD 158,159.64 from overdraft interest expense (see section 4.3.2.2), USD 4,043.93 from fiduciary deposit net interest income (see section 4.3.2.1) and a reconciliation difference between the Claim Report figure and the account statements of USD 626.53. We have made adjustments, accordingly, to increase the claim by USD 162,830.08.

In the following, we set out loan interest expense amounts that we do not consider to be directly related to the loans funding the Notes investments:

…

USD 162,830.08 of loan interest expense on [Mr Al Khorafi’s] Sarasin current account no. 6.00566.2 4000 with Bank Sarasin was driven by a USD 30 million loan that was used to purchase a USD 40,000,000 notional variable rate Calyon investment. The USD 30,000,000.00 loan was drawn by [Mr Al Khorafi] on September 13, 2007 and repaid on October 15, 2007. We observe that this interest expense of USD 162,830.08 is not directly related to the funding of the Notes investments.”

The Claimants rely on paragraph 5.5 of the Griffins February 2015 Report; which is in these terms:

“5.5 The KPMG report of 15 December 2014 at 4.3.2.2. seeks to disallow all interest payments on the Sarasin accounts as it does not directly relate to Note investments. The interest in question totals $1,148,456. This is a good example of the very narrow scope applied by KPMG. We do not take that narrow view of the Sarasin accounts.

The breakdown of the interest was identified at 4.3 of [the Griffins May 2013 Report] and subsequently modified in [the Griffins January 2015 Report] as follows:

C1 – $165,680.82
C2 – $14,601.92
C3 – $972,227.45

Total – $1,152,509.59

For C1 [Mr Al Khorafi] $162,380.08 relates to interest on a $30m (31 day) investment as part of the overall investment activity.

…”

In support of the contention that the US$30 million investment in the Calyon variable rate note (described as “the Calyon Witch Hat Note”) was part of “the overall investment activity”, the Claimants submit (in the Updated Joint Statement on Quantum) that credit has been given for the profit realised on that investment (US$206,451.56) in the computation of head (A) losses – in the agreed figure which was the subject of paragraphs 3(a)(i) and 5(a)(i) of my Order of 28 October 2014 – and that consistency requires that interest costs incurred in generating that profit should be taken into account. They refer to paragraph 4.3 of the Griffins May 2013 Report and Appendix 10 to that Report.
The Claimants’ submission that credit was given in the computation of head (A) losses for the profit realised on the investment in the Witch Hat Note has not been contradicted by the Defendants. In my view, that submission is correct. On a true analysis it may be said that the inclusion of that profit (US$206,451) in the computation of head (A) losses was an error – or, in the alternative, that the interest costs incurred in generating that profit ($162,380) ought to have been off-set against that profit figure in computing the profit – so that the agreed figure understates the head (A) losses. But the Court has not been invited to re-open the computation of head (A) losses; and, in the absence of agreement, I doubt whether this Court would have power to do so. In those circumstances, it seems to me that (although analytically incorrect) justice requires that, in computing head (B) losses, the interest costs incurred in generating the profit on the investment in the Witch Hat Note should be allowed in the sum claimed under item (3).
Item (4): US$3,670 included by the Defendants as a credit balance on Mr Al Khorafi’s account.

It can be seen from paragraphs 4.3.2.4 and 4.3.2.5 of the second KPMG December 2014 Report that this sum (US$3,670) represents a credit account balance in favour of Mr Al Khorafi generated by accrued interest on an investment of US$10 million in a fiduciary deposit.

The Defendants took the view that the fiduciary deposit was unrelated to investment in the Notes – having been funded by Mr Al Khorafi’s own inward payment – and was an asset of Mr Al Khorafi which should be added to the amount (US$1,097,000) claimed in the table under paragraph 4.3 of the Griffins May 2013 Report in respect of “Unreturned fiduciary call in Sarasin account”. It is that addition which gives rise to the Defendants’ figure (US$1,100,670) in respect of the losses attributable to Mr Al Khorafi under this head.
The Claimants, for the reasons set out in paragraph 5.7 of the Griffins February 2015 Report, submit that credit and debit balances are irrelevant to the computation of loss – in that they simply reflect separate claims between the Claimants and Bank Sarasin which are not the subject of claims or counterclaims in these proceedings – and that this credit balance should not have been taken into account in their favour. In my view the Claimants are correct on this point. I allow item (4).
That is not, of course, a ruling that Bank Sarasin does not owe Mr Al Khorafi US$3,670 in respect of the credit balance on his account. It is only a ruling that, on a true analysis of the position, that is not a sum to be taken into account in the computation of losses under head (B).
Item (5), item (7) and item (8): US$141,000, US$96,834 and US$116,509 included by the Defendants as credits due to Mr Al Khorafi, Mrs Al Hamad and Mrs Al Rifai, respectively, in respect of fiduciary gains.

It can be seen from paragraph 4.3.2.1 of the second KPMG December 2014 Report that these items – described as “fiduciary gains” – represent interest income less commissions on fiduciary deposits (net interest income). The Defendants say that the Claimants’ computation of the fiduciary gain in respect of Mrs Al Rifai (US$116,509) is understated by US$4,044 and that the true figure should be US$120,553; but nothing turns on that.

The Defendants take the view that the Claimants’ investments in fiduciary deposits are unrelated to their investments in the Notes; and that, accordingly, all net interest income should be removed from the damage calculation in paragraph 4.3 of the Griffins May 2013 Report. The Claimants’ response (in reliance on paragraph 5.6 of the Griffins February 2015 Report) is that a wider view should be taken of investment activity; and that these gains should be taken into account (as deductions) in computing the losses “in accordance with the nil transaction basis”. In my view, the Defendants are correct on this point. I reject the adjustments sought in respect of items (5), (7) and (9).
Item (6): US$14,602 said to be due to Mrs Al Hamad in respect overdraft interest charged on her account.

It can be seen from paragraph 4.3.2.2 of the second KPMG December 2014 Report that overdraft interest of US$14,602 accrued on Mrs Al Hamad’s account in respect of an overdraft balance that arose because the proceeds from the liquidation of the Notes investment were insufficient to cover both the loan by Bank Sarasin funding that investment, and a US$35 million loan to her by Bank Sarasin which was not related to that investment. It is said that:

“4.3.2.2. The USD 35 million loan not related to the [Notes] investment had been granted on July 25, 2007, and its proceeds paid out on the same day to [Mr Al Khorafi’s] bank account at HSBC…Both the loan related to the [Notes] investment and the loan not related to the investment were called by Bank Sarasin on October 10, 2008, which resulted in an overdraft of the current account of [Mrs Al Hamad] because the proceeds of the liquidation of the [Notes] investment did not cover the amount of the loans…The proceeds of the liquidation of the [Notes] investments, however, would have been sufficient to cover the loan used to fund these investments. The overdraft, and related overdraft interest, therefore, did not arise directly as a result of the investment liquidation and the loan used to fund these [Notes] investments, but rather due to the additional loan not related to the investment.”

It is on the basis that the post-liquidation overdraft would not have arisen but for the additional US$35 million loan that the Defendants take the view that the interest which accrued on that overdraft is not recoverable as a loss under head (B). The Claimants (in reliance on paragraph 7(19)(c) of the Griffins January 2015 Report and paragraph 5.5 of the Griffins February 2015 Report submit that is a “narrow view” and should be rejected. I am satisfied that the Defendants’ view is correct. I disallow this item.
Item (9): US$648,172 said to be due to Mrs Al Rifai in respect of a debit balance on her account.

It appears from paragraph 4.3.2.5 of the second KPMG December 2014 Report that this sum (US$648,172) represents the overdraft balance on Mrs Al Rifai’s current account with Bank Sarasin at December 31, 2012; and that that balance arose from transactions related to the Notes as well as from other transactions. It is said that there has been no activity on the account since December 31, 2012, the balance has remained unchanged to October 31, 2014; and that it represents an obligation of Mrs Al Rifai to Bank Sarasin. Although it is accepted in the report that:

“Mrs Al Rifai’s. debit balance of USD 648,172.00 was not related to the Notes investments…”

the Defendants have deducted that sum from the Claimants’ computation of losses under head (B) on the ground that it is a liability of Mrs Al Rifai which they are entitled to off-set.

The Claimants submit in this case (as in the case of item (4)) that credit and debit balances are irrelevant to the computation of loss – in that they simply reflect separate claims between the Claimants and Bank Sarasin which are not the subject of claims or counterclaims in these proceedings – and that this credit balance should not have been taken into account in their favour. In my view Claimants are correct on this point. I allow item (9).
Again (as in the case of item (4)) that is not, of course, a ruling that Mrs Al Rifai does not owe Bank Sarasin US$648,172 in respect of the debit balance on her account. It is only a ruling that, on a true analysis of the position, that is not a sum to be taken into account in the computation of losses under head (B).
Summary of adjustments in respect of head (B) losses

Making the adjustments that I have allowed – and adopting the Defendants’ methodology – the Defendants’ quantification should be increased from US$7,691,355 to US$8,494,017. The computation is shown below:

		Claimants’ Adjustments US$		Defendants’ Quantification US$	Claimants’ alternative Quantification US$
Mr Al Khorafi	(3)	+158,160
	(4)		+154,490
Mrs Al Hamad				5,794,885	5,794,885

Mrs Al Rifai	(8)		+648,172	795,800	1,443,972
			+802,662	7,691,355	8,464,017

As can be seen, the losses are attributed to the individual claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All claimants US$
Head (B) losses	1,225,160	5,794,885	1,443,972	8,464,017

Compensation under head (C): Fees and interest charged by ABK

The Claimants seek to recover compensation under this head in the sum of US$18,726,823 in respect of all fees and interest charged by ABK on the loan facilities granted to Mr Al Khorafi, Mrs Al Hamad and Mrs Al Rifai to fund their investment in the Notes subsequently purchased from Bank Sarasin. That sum is attributed to the individual Claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All claimants US$
Head (C) losses	5,747,909	5,487,040	7,491,895	18,726,844

By the date of the Quantum Determination the Defendants’ quantification of the Claimants’ losses under head (C) remained zero; on the basis that they could succeed on one or more of the points raised in their primary response.
In the alternative, the Defendants’ position, as set out in the table at paragraph 18 of the Updated Joint Statement on Quantum, in the table at paragraph 8 of the Skeleton Argument on behalf of the First Defendant for the Quantum Determination and at paragraph 77 of that Skeleton Argument was that, in any event, losses under this head must be quantified at zero; on the basis that the Claimants have failed to prove any of the losses which they claim. In summary it was said that the Claimants had provided inadequate (and selective) disclosure of ABK bank statements and other documentation; and that it is to be inferred that the ABK documentation which has been deliberately withheld would have undermined the Claimants’ case in respect of head (C) losses (in that it might have disclosed credits from ABK or others which cancelled out the alleged losses, or that the alleged losses were not caused by the Defendants’ actions or were too remote). A table of ABK documents which (as alleged) were selectively disclosed and withheld was set out under paragraph 73 of that Skeleton Argument. A case of selective disclosure was not pursued at the hearing of the Quantum Determination. In so far as it is necessary to do so, I reject the submission that head (C) losses must be quantified at zero on the ground of inadequate and selective disclosure.
On the basis of the ABK documents that were disclosed the Defendants (relying on the KPMG February 2015 Report), quantify the fees and interest charged by ABK in the period up to 14 December 2009 at US$9,219,076; which they attribute to the individual Claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Head (C) losses	3,454,172	4,664,897	1,100,007	9,219,076

In the further alternative, it is said that the Claimants have failed to provide any, or any sufficient, documentation to enable the Court to quantify fees or interest under this head for periods after 14 December 2009; and that, accordingly, the claim under this head must be limited to the period up to that date and quantified at zero for periods thereafter.
In relation to the period after 14 December 2009 the Claimants rely on a document dated 12 October 2014 and issued by the Head of Capital Execution Department, Ministry of Justice, Kuwait, in execution proceedings brought by ABK against the claimants to enforce security over real property in Kuwait in respect of a loan of US$27.5 million, with interest. The document records that the interest accrued on the loan over the period from 15 December 2009 to 18 September 2014 in the amount of US$6,377,957. Notwithstanding the criticisms of this evidence by the Defendants – and, in particular, the observations in paragraph 4.2.2 of the KPMG February 2015 Report, where it is said, correctly, that the document of 2 October 2014 fails to provide details concerning the calculation of interest in that amount (US$6,377,957) – I accept the document as sufficient evidence of the interest charged by ABK over the period stated. I reject the Defendants’ contention that head (C) losses after 14 December 2009 must be quantified at zero.
On that basis, again relying on paragraph 4.2.2 of the KPMG February 2015 Report (and attachment 12 to that Report), the Defendants quantify the head (C) losses accruing after 14 December 2009 at US$4,373,623.21: that is to say, in an amount which is lower by US$2,004,333.95 than the amount claimed by the C It is common ground that the whole of the interest accrued after 14 December 2009 (US$4,373,623) is to be attributed to Mrs Al Rifai.
In quantifying the losses under this head (C) at US$9,219,076 up to 14 December 2009 and US$4,373,623 thereafter, the Defendants have taken the view (as in the case of the losses under head (B)) that only those fees and interest charged in respect of the loans which funded the investment in the Notes purchased by the Claimants should be reversed. As I have said, I accept that the Defendants are correct to take that view.
The Claimants’ position is that (adopting the Defendant’s methodology) the quantification of their loss under this head is US$17,290,893; being the aggregate of US$10,912,936 in respect of the period up to 15 December 2014 and US$6,377,957 in respect of the period 14 December 2009 to 18 September 2014. It can be seen from the Updated Joint Statement on Quantum (at paragraph 16 and, in particular, from the table at paragraph 18) that the difference (US$3,698,194) between the Claimants’ alternative quantification (US$17,290,893) and the Defendants’ quantification of maximum loss under this head (US$13,592,699; being US$9,219,076 + US$4,373,623) is said to be attributable to two items:

The Defendants have over-deducted (as a result, it is said, of an error in computation) the sum of US$1,693,860 – comprising (a) US$931,623 in respect of Mr Al Khorafi and (b) US$762,237 in respect of Mrs Al Hamad – from interest which accrued on their respective ABK accounts prior to 15 December 2009.
The Defendants have not included the sum of US$2,004,334 said by the Claimants to be due to Mrs Al Rifai in respect of the period after 14 December 2009.

With the addition of these sums, the Defendants’ quantification of maximum loss under this head should be increased from US$13,592,699 to US$17,290,893. The reconciliation is shown below:

Item

Claimants’

Adjustments

US$

Defendants’ quantification

US$

Claimants’ alternative

quantification

US$

Losses accrued prior to 15 December 2009

Mr Al Khorafi

(1)(a)

+931,623

3,454,172

4,385,795

Mrs Al Hamad

(1)(b)

+762,237

4,664,897

5,427,134

Mrs Al Hamad

116,509

648,172

116,509

648,172

116,509

1,100,007

+1,693,860

9,219,076

10,912,936

Losses accrued after 14 December 2009

Mrs Al Rifai

(2)

2,004,334

4,373,623

6,377,957

3,698,194

13,592,699

17,290,893

The Defendants dispute each of the adjustments sought by the Claimants. In examining the items in respect of which those adjustments are sought, I do so (as in the case of the adjustments sought under head (B)) on the basis that it is only those fees and interest charged in respect of the loans which funded the investment in the Notes that should be reversed.
Items (1)(a) and (1)(b):US$931,623 and US$762,237 said to be due, respectively, to Mr Al Khorafi and Mrs Al Hamad.

It is convenient to address items (1)(a) and (1)(b) – in aggregate US$1,693,860 -together.

The issue which underlies the dispute between the parties as to these items turns on the appropriate treatment, post close-out on 10 October 2008, of fees and interest attributable to the Claimants’ personal loans from Bank Sarasin (said to amount to US$39.1 million) which were unrelated to the funding of the Notes purchased from Bank Sarasin. The background is explained at paragraph 4.4.2.1 in the second KPMG December 2014 Report:

“4.4.2.1…Bank Sarasin extended [Mr Al Khorafi] and [Mrs Al Hamad] USD 39.1 million in non-Note related loans which were never paid. On October 10, 2008 Bank Sarasin offset and closed the USD 39.1 million in loans and accrued interest of USD 337,872 against the proceeds from liquidating the Notes held in their accounts. Accordingly, [Mr Al Khorafi] and Mrs Al Hamad] received a benefit of USD 39,437,872.00 on that date because this loan obligation was removed.”

In reliance on the second KPMG December 2014 Report, the Defendants took the view that an amount equal to that benefit (US$39,437,872) should be applied, as at 10 October 2008, to Al Khorafi’s and Mrs. Al Hamad’s ABK Note-related loans. The effect would be notionally to reduce the aggregate balance then outstanding on those ABK Note-related loans from US$ 60,000,000 to US$ 20,562,128. Paragraph 4.4.2.1 of the second KPMG December 2014 Report goes on to explain that, on the basis of that notional reduction, interest in the reduced amount of US$1,260,162 would have accrued on the two ABK Note-related loan accounts between 10 October 2008 and 8 November 2009 (the date on which ABK closed out the US$60 million loans which then, in fact, remained outstanding and transferred the balance to Mr Al Khorafi’s and Mrs Al Hamad’s current accounts). That re-calculated figure for the interest on the ABK Note-related loan accounts (US$1,260,162) is US$2,088,509 less than the interest (US$3,677,135.30) which did, in fact, accrue on the existing US$60,000,000 loans which remained outstanding. On the basis of the second KPMG December 2014 Report, the Defendants made three further adjustments to the interest claimed:

They added an amount of US$105,275.63 in respect of overdraft interest on the notional balance of US$20,562,128 transferred to Mr Al Khorafi’s and Mrs Al Hamad’s ABK current accounts over the period 9 November 2008 to 14 December 2014.
They deducted US$159,062.08 in respect of interest debited to Mr Al Khorafi’s ABK current account for the period 10 April 2007 to 8 November 2008; being interest accrued on a loan of US$865,000 drawn by him on 10 April 2007 which (as they contend) was not related to investment in the Notes.
They deducted US$3,879.73 in respect of interest debited to Mrs Al Rifai’s ABK current account on 17 May 2009; being interest which had accrued over the period 31 March 2009 to 17 May 2009 on a loan of US$568,000 made to her by ABK on 31 March 2009 to cover a guarantee fee of US$550,000 (and accrued overdraft interest of US$18,000) in respect of a guarantee in the sum of US$27.5 million issued by ABK in respect of her investment account at Bank Sarasin which (as they contend) was not related to investment in the Notes.

The combined effect of the recalculation of interest and the three further adjustments was to reduce the claim for interest from US$10,481,302 to US$8,006,662; a reduction of US$2,474,640. The adjustments are summarised in the concluding sub-paragraphs of paragraph 4.4.2.1 of the second KPMG December 2014 Report:

“4.4.2.1

The adjusted claim of USD 8,006,662.37 represents interest on the ABK loans funding the Notes which started with a balance of USD 80,000,000 on June 28, 2007, reduced by the USD 20,000,000.00 loan transfer from Bank Sarasin on June 10, 2008 and finally reduced by the USD 39,437,872.00 financial benefit mentioned above on October 10, 2008 to the balance of USD 20,562,128.00 which runs to December 14, 2009, the final scope date of our work.

[Mr Al Khorafi’s] adjustment of USD 1,470,328.66 comprises removing USD 1,372,772.55 of interest representing his share of the USD 39,437,872.00 financial benefit (USD 19,718,936) from October 10, 2008 to November 8, 2009, adding USD 61,505.97 in interest on his share of the financial benefit from November 9, 2009 to December 14, 2009 and removing USD 159,062.08 of interest on his loan unrelated to the Notes.

[Mrs Al Hamad’s] adjustment of USD 1,000,430.97 comprises removing USD 1,044,200.63 of interest representing her share of the USD 39,437,872.00 financial benefit (USD 19,718,936) from October 10, 2008 to November 8, 2009 and adding USD 43,769.66 in interest on her share of the financial benefit from November 9, 2009 to December 14, 2009.

[Mrs Al Rifai’s] adjustment removes USD 3,880.00 of interest on her loan which is unrelated to the Notes funding.”

Shortly before the hearing of the Quantum Determination in March 2015, the Defendants had further thoughts as to the appropriate treatment, post close-out on 10 October 2008, of fees and interest attributable to the Claimants’ personal loans from Bank Sarasin which were unrelated to the funding of the Notes purchased from Bank Sarasin. Their revised position was explained in section 4.2 of the KPMG February 2015 Report:

“4.2. In accordance with our application of the nil transaction methodology, we seek to remove the causative effect of the personal loans unrelated to the Notes transaction from the claim. We did this by assuming that the personal loans and accrued interest thereon had been used to pay down part of the ABK loans and considering what would have happened in that scenario. We consider this to be the correct assumption. . . .

However, an alternative method to remove the causative effect of the personal loans from the claim is to assume that the USD 39,100,000.00 in personal loans were never borrowed at all by [Mr Al Khorafi] and [Mrs Al Hamad] and consider what would have happened in that scenario.

If the USD 39,100,000.00 in personal loans had never been borrowed at all by these Claimants, there would, at the time of the margin calls, have been excess assets in the Claimants’ Sarasin accounts, including fiduciary deposits, after set off, which could have been transferred back to the Claimants and used to partially pay down their ABK loans. Accordingly, we have reduced the principal balances of the Claimants’ ABK loans by the USD 41,186,566.82, being USD 39,100,000.00 in loan principal and USD 2,086,566.826 in interest on October 11, 2008 and we have also taken into account subsequent guarantee payments paid to/received from Sarasin.”

The explanation of the revised methodology adopted continues at paragraph 4.2.1 of the KPMG February 2015 Report:

“4.2.1 Fees and Interest charged by ABK until December 14, 2009

Our conclusion on the quantum related to the fees and interest charged by ABK until December 14, 2009 is USD 9,219,076.03.This is lower than the amount set out in [the second KPMG December 2014 Report] of USD 9,331,684.37 by USD 112,608.34…”

US$9,331,684.37 was the aggregate of US$8,006,662.37 in respect of interest and US$1,325,022.00 in respect of Note funding related fees. After explaining the basis upon which the sum of US$8,006,662.37 in respect of interest to 14 December 2009 had been calculated in the second KPMG December 2014 Report, paragraph 4.2.1 of the KPMG February 2015 Report continued:

“4.2.1…In this report, we deducted the full amount of interest on the USD 39,100,000.00…loans of USD 2,086,566.82 instead of only the accrued interest of USD 337,871.88 on close-out date. Deducting the full amount of interest is more appropriate as it reflects all of the interest costs on the USD 39,100,000.00 in personal loans that were charged to the Sarasin accounts. These interest costs would not have been charged to the Sarasin accounts if the USD 39,100,000.00 in loans were never granted. Applying the full amount of interest increased the ABK loan principal deduction applied on close-out date by USD 1,748,694.94 from USD 39,437,871.88 to USD 41,186,566.82. Accordingly, the amount of recalculated interest on [Mr Al Khorafi’s] and [Mrs Al Hamad’s] ABK loans to December 14, 2009 fell by USD 112,608.34 to USD 7,894,084.03. Adding the USD 1,325,022.00 of Note funding related fees, which are unchanged from our December 15, 2014 report, brings this adjusted head of loss to USD 9,219,076.03.”

It is said on behalf of the Claimants that, in reaching their computation of the losses sustained by Mr Al Khorafi and Mrs Al Hamad, the Defendants have over-deducted by US$1,693,860 in respect of the interest to be allowed on the borrowings by Mr Al Khorafi and Mrs Al Hamad from ABK. The Claimants’ position is set out at paragraph 5.9 of the Griffins February 2015 Report. After citing the second, third and fourth sentences of the passage from section 4.2 the KPMG February 2015 Report (set out above) – that is to say, from “Deducting the full amount …” to “…$41,186,566.82.” – it is said that:

“5.9…In addition KPMG have reduced ABK’s interest by a further $1,043,243.51 for a reason that we have not been able to identify. Referring to their Executive Summary [at section 2 of the KPMG February 2015 Report] the difference they have disallowed is $3,129,810.33 (being $12,348,886 less $9,219,076.03). The $1,043,243 is calculated after deducting $337,871.88 (discussed above at [5.8]) and $1,748,694.94 from the $3,129,810.33 KPMG have disallowed. Our comments below relate to the sum of $1,043,243.51 plus $1,748,694.94, namely $2,791,938.45 which KPMG have disallowed.

We do not accept KPMG’s analysis and we refer to our comments above in relation to the use of bank facilities. For the reasons stated above we do not accept there is a $39.1m personal loan. We accept that the facility of $35m was transferred to HSBC, however we could only identify a further $704,562.76 after allowing for the net drawings of [Mr Al Khorafi] and payments to third parties (see above).

The sum of $50m was initially transferred from [Mrs Al Hamad’s] ABK account to Sarasin. This sum was invested and at the time of the close-out there was an account balance of $35,064,505.74 at [Mrs Al Hamad’s] Sarasin account which was utilised in repaying the $35m facility which had matured with accrued interest. Had the facility not been taken out this sum would have been available to repay [Mrs Al Hamad’s] facility with ABK which was approximately $30m (the original $50m facility had been reduced by a transfer from [Mrs Al Rifai] which was unrelated to the personal expenditure). The interest accruing on [Mrs Al Hamad’s] ABK account from 01/10/2008 was $1,067,485.55.

The above calculation of interest concerns $30m of the facility of the $35m. A further calculation would be needed for the $5m which was ultimately borne in [Mrs Al Rifai’s] Sarasin account (by virtue of her transferring funds which reduced [Mrs Al Hamad’s] facility with ABK to approximately $30m) from 10 October 2008. Had [Mrs Al Rifai] not reduced [Mrs Al Hamad’s] exposure to ABK from $50m to $30m the entire interest attributable to the $35m facility would have been borne by Mrs Al Hamad. However, as [Mrs Al Rifai] transferred funds to Mrs Al Hamad the effect of this was, [Mrs Al Rifai] had to bear $5m of the $35m facility (as [Mrs Al Hamad’s] exposure was limited to her $30m facility with ABK). The calculation of [Mrs Al Rifai’s] interest on that $5m can be ascertained by apportioning the interest on her Sarasin account from 10 October 2008 of $972,221.70 between the total indebtedness of $31,019,791,83 and the amount attributable to the balance of the $35m facility borne by [Mrs Al Rifai], namely $5m. This results in interest of $156,709.90 ({$5m/$31,019,791.83} x $972,221.70). This sum was borne by the Sarasin account, not by ABK as KPMG’s approach suggests.

The interest attributable to the personal drawings/third party payments of [Mr Al Khorafi] of $704,562.76 (using LIBOR + 2%) for the period from close out on 10 October 2008 until 14 December 2009 is $30,639.88.

In summary, using KPMG’s approach the maximum interest to disallow on the ABK account is $1,067,438.55 plus $30,639.43, being $1,098,078.43. The total interest allowing for the proportion of interest incurred on [Mrs Al Rifai’s] Sarasin account relating to the $35m facility is $1,098,078.43, plus $156,709.90, being $1,254,788.43. This contrasts with KPMG’s deduction of $2,791,938.45. The difference on calculations on the ABK accounts is therefore $2,791,938.45 less $1,098,078.43, being $1,693,860.02.”

The Defendants’ response to that analysis – as appears from their comment on the Claimants’ suggested adjustments in the table at paragraph 18 of the Updated Joint Statement on Quantum – is that it is not sufficiently detailed to assess its correctness and relevance.
In my view the Claimants’ analysis is flawed: in that (i) it adopts an incorrect figure (US$35,704,563; being the aggregate of US$35 million and US$704,563) in place of US$39.1 million as the amount of the personal loans and (ii) it adopts an incorrect figure (US$12,348,886) as the base from which to calculate the deduction which the Defendants have made in respect of the interest claim.
The first of those errors has been addressed earlier in this judgment. As I have said, in the context of considering head (B) losses, I find the analysis at section 2 of the KPMG March 2015 letter – where it is demonstrated, by comparing drawdown under the facility of US$4.1 million against contemporary payments (amounting in aggregate to US$4,204,541), that the whole of that facility was used by Mr Al Khorafi for personal expenditure unrelated to the purchase of the Notes – persuasive.
The second of those errors requires further explanation. It can be seen from paragraph 5.9 of the Griffins February 2015 Report that the figure taken in that paragraph as the Defendants’ deduction from the claim in respect of interest and fees accrued on the ABK accounts prior to 15 December 2009 (US$2,791,938) is derived from the KPMG February 2015 Report. It appears from the table in section 2 (“Executive Summary”) of that report that KPMG had reduced the amount claimed by the Claimants (US$12,348,866) to US$9,219,076: a reduction of US$3,129,810. From that figure (US$3,129,810) the Claimants have deducted US$337,872; to which reference is made at paragraph 5.8 of the Griffins February 2015 Report (where it is said to represent accrued interest on Mr Al Khorafi’s and Mrs Al Hamad’s Sarasin accounts and so not to relate to the ABK accounts at all). US$2,791,938 is the difference between US$3,129,810 and US$337,872. The amount claimed by the Claimants (US$12,348,866) shown in the Executive Summary at section 2 of the KPMG February 2015 Report is derived from figures in the table at paragraph 4.4 of the Griffins May 2013 Report. It is clear that that figure includes fees of US$1,332,017 in addition to interest of US$11,041,869 (a figure which includes “debit interest suspended” of US$744,202). After arithmetical adjustment (explained in the second KPMG December 2014 Report) the figure for interest claimed (excluding fees) was taken by the Defendants as US$10,481,302; as can be seen at paragraph 4.2.1 of the second KPMG December 2014 Report. It is that figure, rather than the figure of US$12,348,866, which provides the appropriate base from which to calculate the deduction which the Defendants have made in respect of the interest claim.
In those circumstances I reject the adjustments sought by the Claimants under items (1)(a) and (1)(b).
Item (2): US$2,004,334 said to be due to Mrs Al Rifai in respect of the period from 14 December 2009 to 18 September 2014.

The aggregate amount claimed by Mrs Al Rifai under head (C), US$7,491,895, included US$1,113,938 in respect of the period prior to 15 December 2009. It can be seen from the table at paragraph 4.4 of the Griffins May 2013 Report that US$1,100,007 of that sum was attributable to “fees incurred on letter of credit”; and the balance, US$13,931, was attributable to “interest incurred on loans” (US$3,879.73) and “interest incurred on ABK account” (US$10,049.49). The defendants have included only the sum of US$1,100,007 in their quantification of pre-15 December 2009 losses. The Claimants have not sought to include the sums attributable to interest as an adjustment to the Defendants’ figure.

The dispute is as to the amount to be allowed in respect of interest charged by ABK on a US$27.5 million loan to Mrs Al Rifai for the period 14 December 2009 to 18 September 2014. The Claimants’ figure is US$6,377,957: being the amount of interest shown on a certificate issued by the Kuwaiti Ministry of Justice on 12 October 2014 to which I have already referred. The Claimants rely on the analysis in the section of the Griffins January 2015 Report headed “Settlement monies paid to Sarasin by ABK/ABK debit to C3 account”:

“6.5 At paragraph 10.2.10 of [the Griffins May 2013 Report] it was identified that Sarasin had ‘called in’ a guarantee provided to it by ABK. As a consequence ABK had debited the account of [Mrs Al Rifai] by $27,500,000 on 14 December 2009, providing a letter of credit for a 3 year term to [Mrs Al Rifai]

6.6 At Appendix M…of the Grant Thornton report [dated 20 November 2014] we note a translation of a Ministry of Justice document dated 12th October 2014 Execution File number 0910848580 that identifies the following as repayable to ABK by [Mrs Al Rifai]: –

$26,808,170.79 capital

$6,377,957.16 interest

Total $33,186,127.95

6.7 The sum identified in the Ministry of Justice Execution file document as a loan to be repaid was the same value as the overdrawn balance that appears at paragraph 9.3 of [the Griffins May 2013] Report and is not an additional identified cost. The interest ordered to be paid by the claimants was, however, an additional cost of $6,377,957.16.

6.8 …

6.9 Without Sarasin calling on their guarantee from ABK, the claimants would not have been ordered by the Ministry of Justice to settle the additional $6.377m of interest.”

As I have said, the Defendants’ primary case is that the amount of interest charged on this loan has not been established by evidence, and so should be quantified at zero; but, in the alternative, they quantify this interest at US$4,373,623. The difference between the Claimants’ figure (US$6,337,957) and the Defendants’ figure (US$4,373,623) is US$2,004,334.
The Defendants’ figure (US$4,373,623) is reached – as explained in paragraph 4.2.2 of, and Attachment 12 to, the KPMG February 2015 Report – by recalculating the interest that would have accrued on the basis of a notional reduction to the loan principal on Mrs Al Rifai’s ABK loan account; that is to say, on the basis of the loan principal as it would have been if there had been no set-off of the US$39.1 million of personal loans by Bank Sarasin to Mr Al Khorafi and Mrs Al Hamad against the proceeds of the liquidation of the Notes. As in the case of the pre-15 December 2009 interest, it is said that, following the close-out of the Claimants’ accounts with Bank Sarasin, the proceeds of the liquidation of the Notes were used to offset the Claimants’ personal loans, together with all accrued interest; that, if the Claimants had not taken those personal loans from Bank Sarasin, that set off would not have taken place and the call on the ABK guarantee (and so the amount debited by ABK to Mrs Al Rifai’s loan account) would have been less than it was. In those circumstances, it is said, correctly in my view, that in quantifying the losses under this head, it is incorrect to include the interest which accrued on the whole amount of the principal outstanding on Mrs Al Rifai’s ABK loan account; outstanding after that set off had taken place; and the claimants’ quantification should be adjusted accordingly.
If, as I hold, the adjustment of interest is correct in principle, the Claimants do not challenge the recalculated figure. Accordingly, I disallow the Claimants’ proposed amendment under item (2).
Summary of adjustments in respect of head (C) losses

Given that I have rejected the Defendant’s submissions that head (C) losses should be quantified at zero (either in whole or in respect of the period after 14 December 2009); and have also rejected the adjustments to the Defendants’ alternative quantification (US$13,592,699) sought by the Claimants, the head (C) losses are quantified at that figure, attributed to the individual Claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Head (C) losses	3,454,172	4,664,897	5,473,630	13,592,699

Compensation under head (D): Fees and interest charged by CBK

The Claimants seek to recover compensation under this head in the sum of US$7,520,100 in respect of all fees and interest charged by CBK on the loan facilities granted to Mrs Al Hamad to fund the repayment of the ABK loans, with interest on that sum from 30 April 2014 (to be assessed). The Claimants submit that the interest on the CBK loan should be included in the losses which Mrs Al Hamad has suffered for the same reason as (they say) the interest on the ABK loans should be included in their losses under head (C): in that the CBK loan was incurred in order to refinance lending by ABK to fund the purchase of the Notes purchased from Bank Sarasin. The whole of that sum is attributed to Mrs Al Hamad:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Head (D) losses	0	7,520,100	0	7,520,100

The Defendants’ primary position is that the Claimants are not entitled to any compensation under this head; on the basis that, had Mr Al Khorafi and Mrs Al Hamad not taken personal borrowings of US$39.1 million from Bank Sarasin – that is to say borrowings used for personal expenditure wholly unrelated to the Notes transactions – the loans from ABK would have been paid off on close-out from the proceeds of liquidation of the Notes and the CBK loan taken out by Mrs Al Hamad to re-finance lending by ABK would not have been required. Therefore, fees or interest charged in respect of the CBK loan are not recoverable by the Claimants; the claim under this head must fail; and, accordingly, the Defendants’ quantification under this head is zero.
In advancing their primary contention, the Defendants rely on the analysis in section 4.3 of the KPMG February 2015 Report:

“4.3…The purpose of the KWD 10,697,384.42 loan granted to [Mrs Al Hamad] on September 29, 2010 was to refinance the outstanding indebtedness amounts of USD 37,574,220.44 on [Mr Al Khorafi’s] (USD 12,684,236.16) and [Mrs Al Hamad’s] (USD 24,889,984.28) ABK accounts at September 29, 2010…

As mentioned in section 4.2 above, the alternative method of removing the causative effect of the personal (non-Note related) loans was to decrease the ABK loan principal balance by USD 41,186,566.82 in loan and interest at October 11, 2008 which would have reduced the ABK loan principal to USD 18,813,433.18. After recognising the USD 21,660,000.00 incoming guarantee payment from Sarasin on December 14, 2009, the cumulative Claimant principal loan balance (representing [Mr Al Khorafi’s and [Mrs Al Hamad’s] loans) would have been a negative USD 2,846,566.82 (see Table 2). This means that Mr. [Al Khorafi’s] and [Mrs. Al Hamad’s] ABK loans would have been effectively paid off on December 14, 2009 if they had not taken the personal loans. Accordingly, there would have been no need for CBK to refinance their indebtedness on September 29, 2010. Therefore, we consider this claim amount at zero”.

Without prejudice to their primary contention, the Defendants take a procedural objection to the Claimants’ quantification under this head. It is said that, in claiming interest of US$7,520,100 in respect of interest accrued up to 30 April 2014, the Claimants have changed their case – in that the claim had been for interest of US$4,564,819.21 to 31 July 2012 (with interest to be assessed) – and that the new claim is based upon new documents not previously disclosed and only provided to the Defendants under cover of a List of Documents dated 18 February 2015. The Defendants contend that the Claimants should not be permitted to rely on this new documentation: on the ground that it falls outside the scope of the orders of 28 October 2014 and 4 February 2015. Reference is made to that point at section 4.3 of the KPMG February 2015 Report:

“4.3…According to the Letter from Hamdan Al Shamsi…dated February 17, 2015, the Claimants’ claim for fees and interest charged by CBK from September 29, 2010 to April 30, 2014 is now USD 7,600,000.00. This is because the Claimants now include fees and interest charged by CBK from July 31, 2012 to April 20, 2014 based on the Additional CBK Documents…, to which there is a dispute as to their admissibility. These Additional CBK Documents also include a loan extension facility which increased the principal of the CBK loan from KWD 10,697,384.42 to KWD 11,100,000.00 and for which the Claimants have not provided any explanation. Further, the Claimants claim additional interest subsequent to April 30, 2014 which they have not yet quantified.”

As I have said, at the date of the Quantum Determination, the losses claimed under this head had been quantified at US$7,520,100 (with interest from 30 April 2014) rather than at US$7,600,000 (the figure mentioned in the letter of 17 February 2015). Although the Defendants adhere to their contention that interest charged by CBK should be quantified at zero, section 4.3 of the KPMG February 2015 Report includes a re-calculation of the interest accrued on the CBK loan (on the basis of “the limited information provided”) in the amount of US$7,484,813.65.

The Claimants’ response to the contention that, had the Claimants not taken personal borrowings of US$39.1 million, the loan from CBK taken out by Mrs Al Hamad would not have been required, is that the Defendants have erred in consolidating the losses of Mr Al Khorafi and Mrs Al Hamad. If their respective losses are treated separately – as the Claimants submit they should be – the correct conclusion (applying the Defendants’ methodology) is that Mrs Al Hamad’s losses under this head should be quantified at US$2,538,622.

Head (D) losses

Claimants’

Adjustments

US$

Defendants’ quantification

US$

Claimants’ alternative

quantification

US$

Mrs Al Hamad

2,538,622

In contending that (adopting the Defendant’s methodology) the correct conclusion is that the Defendants’ quantification of Mrs Al Hamad’s losses under this head should be adjusted upwards from zero to US$2,538,622, the Claimants rely on the analysis in paragraph 5.11 of the Griffins February 2015 Report:

“5.11 …

KPMG at 4.2 of their 25 February report have produced a consolidated loan schedule to justify why no interest accrues on the CBK account.

We disagree with a consolidated approach. The CBK interest resulted from repayments made to [Mr Al Khorafi’s] and [Mrs Al Hamad’s] ABK accounts. In the analysis of personal expenditure above only [Mrs Al Hamad’s] ABK account is relevant, therefore any interest payable in relation to the [Al Khorafi] balance represents a valid claim. The interest attributable to the [Al Khorafi] account is {$7,520,100,27 x [Mr Al Khorafi’s] advance ($12,684,236.16)} ÷ {the total of [Mr Al Khorafi’s] and [Mrs Al Hamad’s] advances ($12,684,236.16 + $24,889,984.28) $37,574,220.44}[;that is to say] $2,538,621.60.”

If the interest accrued on the CBK loan is taken to be US$7,484,813.65 (as recalculated in section 4.3. of the KPMG February 2015 Report), rather than US$7,520,100.27 (as calculated by Griffins) the interest to Mr Al Khorafi’s account (adopting the methodology in the Griffin February 2015 Report) reduces by US$11,912.00 to US$2,526,709.60.

The issue between the parties in relation to quantification of head (D) losses turns on whether the Defendants are correct to contend that it is appropriate to treat those losses, as between the individual Claimants, on a consolidated basis – so that losses suffered by Mrs Al Hamad in paying off the balance on Mr Al Khorafi’s ABK loan account are not to be taken into account – or whether the Claimants are correct to contend that the losses incurred by each Claimant must be quantified on an individual basis – so that losses suffered by Mrs Al Hamad in paying off the balance on Mr Al Khorafi’s ABK loan account are to be taken into account in quantifying the compensation which she can claim. In advancing the case for treatment on a consolidated basis the Defendants assert (in the table at paragraph 25 of the Updated Joint Statement on Quantum) that a consolidated approach should be adopted “given that, inter alia, the Claimants’ accounts were seen as one account as evidenced by the Swift messages exchanged between ABK and [Mrs Al Hamad] and operated as one account by reference to the Powers of Attorney on the accounts.” I am not persuaded that the Defendants are correct in that contention. It seems to me that the appropriate course is to quantify the losses incurred by each Claimant on an individual basis.
In my view there is no substance in the Defendants procedural objection to the late production of documents which support the calculation of the total interest accrued in respect of the CBK loan; but given the late stage at which the supporting documents were produced – and the possibility that that may have caused the Defendants some practical difficulties in calculation – I think it appropriate to resolve the dispute as to figures in favour of the Defendants; and to adopt their figure for total accrued interest (US$7,484,813.65) rather than the Claimants’ figure (US$7,520,100.27). The effect is that I allow the adjustment sought by the Claimants in the amount of US$2,526,709.60; not in the amount of $2,538,621.60 as sought.
Summary of adjustments in respect of head (D) losses.

For the reasons set out in the preceding paragraphs, the head (D) losses are quantified at US$2,526,709, attributed to the individual Claimants as follows:

	Mr Al Khorafi US$	Mrs Al Hamad US$	Mrs Al Rifai US$	All Claimants US$
Head (D) losses	0	2,526,709	0	2,526,709

Summary of conclusions as to the quantification of losses under heads (B), (C) and (D)

For the reasons set out in this judgment, the heads of loss are quantified as follows:

	Head (B) US$	Head (C) US$	Head (D) US$	Heads (B)+(C)+(D) US$
Mr Al Khorafi	1,225,160	3,454,172	0	4,679,332
Mrs Al Hamad	5,794,885	4,664,897	2,526,709	12,986,491
Mrs Al Rifai	1,443,972	5,473,630	0	6.917,602
All Claimants	8,464,017	13,592,699	2,526,709	24,583,425

Other issues

Assumed costs of financing cash flows

In the event that the Claimants do not succeed on their claim under head (D) to fees and interest charged by CBK, they seek compensation for the costs of financing their cash flows. They quantify this loss as US$734,369, and attribute it equally between Mr Al Khorafi and Mrs Al Hamad. But, it is conceded that this claim does not arise if the Claimants are able to recover on the CBK interest claim: if they were this claim would be double-countin
The Defendants dispute this claim; on the ground that there is no evidence to support it. It is said that, in fact, there were no cash inflows to the Claimants: on the contrary, the relevant accounts showed a positive position at the relevant time; and so there were no such In any event, it is said that the Claimants have adduced no evidence that, if there were cash inflows, these were funded by them by borrowing: rather it is said to be an assumption that cash inflows were funded by borrowing. The Defendants submit that the Claimants cannot advance a claim for loss based on an unsubstantiated assumption.
Given that the Claimants have succeeded on their claim under head (D) – at least in part – I find it unnecessary to add to the length of this judgment by addressing this issue.

Multiple damages under Article 40(2) of the Law of Remedies and Damages

The Claimants seek an award of multiple damages against Sarasin-Alpen, pursuant to Article 40(2) of the Law of Remedies and Damages (DIFC Law No 7 of 2005). The article is in these terms:

“40(2) The Court may in its discretion on application of a claimant, and where warranted in the circumstances, award damages to an aggrieved party in an amount no greater than three (3) times the actual damages where it appears to the Court that the defendant’s conduct producing actual damages was deliberate and particularly egregious or offensive.”

Sarasin-Alpen’s primary response to the claim for multiple damages is that, on a true construction, Article 40(2) of the Law of Remedies and Damages has no application to an award of compensation under Article 94(2) of the Regulatory Law. It is submitted, first, that the Regulatory Law contains a complete code of all remedies available for breach of that Law and that, if a remedy cannot be found in the Regulatory Law, it is not available for breach of that Law; and, second, that the Law of Damages and Remedies applies only to claims for damages which fall within the scope of that legislation – that is to say, claims under the Law of Contract (DIFC Law No 6 of 2004) and the Law of Obligations (DIFC Law No 5 of 2004) – and does not apply to claims under other enactments.
In support of the first of those contentions – that the Regulatory Law contains a complete code of all remedies available for breach of that Law – it was pointed out on behalf of Sarasin-Alpen: (i) that Article 65 of that Law contains a provision as to the consequences which follow if a person enters into an agreement in breach of the Financial Services Prohibition (the agreement is unenforceable, and the innocent party may apply to the Court to recover money paid and/or compensation); (ii) that Articles 73 and 80 contain provisions enabling the DFSA to enter premises and obtain information; (iii) that Article 76 contains a provision enabling the DFSA to place restrictions on dealing with property; (iv) that Articles 84 and 92 contain provisions enabling the DFSA or any aggrieved person to apply for injunctions, search warrants or orders prohibiting transfer of assets; (v) that Article 85 contains a general contravention provision; (vi) that Article 87 contains powers for the DFSA to impose fines; and (vii) that Article 94 contains a provision enabling a person who has suffered loss or damage to apply to Court for compensation. It was said that there is no provision, either in Article 94 or elsewhere in the Regulatory Law, for an award of multiple damages (or for any other kind of exemplary damages). In those circumstances it is said to follow that there is no ability to award triple/additional damages for breach of the Regulatory Law. Reliance was placed, by way of analogy, on the decision of the Court of Appeal of England and Wales (dismissing an application for leave to appeal) in Collins v Office for the Supervision of Solicitors [2002] EWCA Civ 1002 (“Collins”).
In support of the second of those contentions – that the Law of Damages and Remedies applies only to claims for damages under the Law of Contract and the Law of Obligations (and, it is said, to the law of restitution) – it was submitted that, although Article 40(2) is contained within Part 4 (“Remedies”), it is clear from the structure of the Law of Damages and Remedies that it only applies to claims that fall within Part 2 (“Damages under the Law of Contract”), or within Part 3 (“Damages in Law of Obligations”), or within Part 5 (“Remedies in the Law of Restitution).
I reject the submission that, on a true construction, Article 40(2) of the Law of Remedies and Damages has no application to an award of compensation under Article 94(2) of the Regulatory Law. In my view it is open to the Court, as a matter of jurisdiction, to award compensation in the form of multiple damages against Sarasin-Alpen in the present case. I reach that conclusion for the following reasons:

I accept that the Regulatory Law contains a complete code of all remedies available for breach of that Law; and that, if a remedy cannot be found in the Regulatory Law, it is not available for breach of that Law. But the remedies for which the Regulatory Law provides include those in Article 94(2). Under that article the Court may make “orders for the recovery of damages or for compensation…or for any other order as the Court sees fit”. There is no reason to read that article restrictively, so as to exclude a power to award multiple damages to an aggrieved party in circumstances where the general law so permits.
Collins provides no assistance to the Defendants, even by analogy. The question in that case was whether the Office for the Supervision of Solicitors (a regulatory body) owed any private law duty to a complainant in carrying out its functions under the relevant regulatory legislation. It was held – refusing leave to appeal – that it was plain that it did not. The Court of Appeal of England and Wales was not concerned with the quite different issue which arises in this case: what are the remedies available to the Court under regulatory legislation in circumstances where a private individual has been found to have acted in breach of that legislation.
There is no reason to read Chapter 3 (“Other Remedies”) of Part 4 (“Remedies”) of the Law of Damages and Remedies restrictively, so as to confine its scope to cases brought under the Law of Contract or the Law of Obligations. Article 34 of the Law of Damages and Remedies (in Chapter 1 (“General”) of Part 4) is in these terms:

“34. Remedies stipulated under this Law

Where this Law provides that a person may claim or otherwise has a right to or is entitled to compensation, damages, restitution, specific performance, or any other relief or remedy the Court may, on application made by such a person, make orders accordingly, together with any other order as the court sees fit, except where the making of any particular order may be excluded under this Law.”

Article 35 provides, so far as material:

“35 Other orders

(1) Where a person commits a breach of any requirement, duty or obligation which is imposed under any DIFC Law the Court may, on application of any person who is aggrieved by such conduct or has suffered loss or damage arising from such conduct, make one or more of the following:

an order for damages;
an order for compensation;

…

(g) any other order that the Court thinks fit.

…

(3) The Court may make an order under this Article in addition to or as an alternative to any order it is empowered to make elsewhere under the Law or under any other law, except as such Law or other law may otherwise provide.”

Article 37 (in Chapter 3 of Part 4) gives the Court power to make binding declarations on points of law or fact whether or not any other remedy is claimed; Article 38 gives the Court power to grant an injunction “in all cases in which it appears to the Court to be just and convenient to do so…” and Article 40(1) gives the Court power, in any case where it has jurisdiction to entertain an application for an injunction or specific performance, to award damages in addition to, or in substitution for, an injunction or specific performance. That is the legislative context in which Article 40(2) must be read.

I turn, therefore, to the question whether an award of compensation in the form of multiple damages against Sarasin-Alpen would be warranted in the circumstances: that is to say, whether Sarasin-Alpen’s conduct “producing actual damages was deliberate and particularly egregious or offensive”.
It is submitted on behalf of Sarasin-Alpen that that requirement is not met in the present case. It is said that the only finding of deliberate misconduct that has been made against Sarasin-Alpen was the finding, in my judgment of 21 August 2014, that in categorising the Claimants (and each of them) as “Clients” Sarasin-Alpen filled in the AGBCs so as to give the impression that those documents had been completed by the Claimants themselves. That conduct, it is said, was not the conduct which produced “actual damages” as required by Article 40(2) of the Law of Damages and Remedies; rather, it is said, the conduct which produced “actual damages” was, as the Court found, the recommendation of unsuitable investments. The Court found that conduct to have been reckless: it did not find that it was deliberate. Further, it is said, the Court has made no finding that the conduct of Sarasin-Alpen was “particularly egregious or offensive”.
If, contrary to the submissions to which I have referred in the previous paragraph, the Court were to hold that the conduct of Sarasin-Alpen in producing actual damages was deliberate and particularly egregious or offensive, it is further submitted (i) that the power to award compensation in the form of multiple damages is to be exercised, as a matter of discretion, only “where warranted in the circumstances”; (ii) that Article 40(2) of the Law of Damages and Remedies gives no further guidance as to the principles upon which the Court should exercise its discretion; and (iii) that, in those circumstances, the Court should have regard, by analogy, to the principles which would guide the courts of England and Wales in determining whether to award exemplary damages. The Court was referred to Kuddus v Chief Constable of Leicestershire [2002] 2 A.C. 122, [5], [32] and [52] and [80] for an authoritative statement of those principles. It is said to be plain that the present is not a case under which exemplary damages would be awarded under the law of England and Wales; and it is submitted that, by analogy, the Court should hold that (even if there were jurisdiction to do so) this is not an appropriate case to award multiple damages under Article 40(2) of the Law of Damages and Remedies.

I do not accept those submissions. Properly understood, my judgment of 21 August 2014 includes a finding that Sarasin-Alpen acted in deliberate breach of the Financial Services Prohibition in treating (and dealing with) the Claimants, (and each of them) as “Clients” rather than as “Retail Customers”. It was that breach which gave rise to the losses sustained by the Claimants: as Retail Customers they should never have been exposed to the risks of investing in a structured (and leveraged) financial product. The submission that the Court made no finding that the conduct of Sarasin-Alpen was “particularly egregious or offensive” ignores, first, my observations in the penultimate paragraph of my judgment of 21 August 2014; where I said this:

“432. …I am satisfied that the present is a clear case of mis-selling unsuitable investments to an unsophisticated investor, and to his equally unsophisticated wife and mother. That was carried out by employees of Sarasin-Alpen – motivated, at least in the case of Mr Walia, by a personal interest in the fees that would be generated by the exercise – and without regard to the protection that the Regulatory Law was intended to afford Retail Customers (as these Claimants were).”

and, second, the reasons set out in paragraphs 17 and 18 of the schedule to the Order of 28 October 2014, where – in explaining why I took the view that this was a case in which it was appropriate to make an order against Sarasin-Alpen for the assessment of costs on an indemnity basis – I said this:

“17.In my judgment of 21 August 2014, I found that the First Defendant, Bank Sarasin-Alpen (ME) Limited, had deliberately decided to act in breach of the regulatory regime applicable to those institutions providing financial services in the DIFC. It had chosen to accept these Claimants as ‘Clients’ in circumstances in which it had no reason to think that they qualified as clients under that regime. In order to achieve that end, the First Defendant deliberately falsified documents, known as AGBC’s, to make them appear as if they had been completed by the Claimants in their own hands in circumstances in which there were employees in the employ of the First Defendant’s offices who must have known that that was not the case. The only reason for completing the schedules to those forms in the first person (so as to make it appear that they had been completed by the Claimants themselves) can have been to mislead anyone inspecting those schedules; and, in particular, any regulatory authority. That was, as I held, deliberate malpractice on the part of the First Defendant; done with intent to deceive.

That conduct, as it seems to me, does take this case out of the norm; it is conduct which deliberately seeks to avoid the compliance which ought to be expected of financial institutions operating within the regulatory regime. This is not a case of the First Defendant making a mistake; this is a case of the First Defendant deliberately falsifying its records in order to mislead. That, in my view, is conduct in relation to which this Court ought to mark its disapproval by make an order for costs on an indemnity basis.”

Nor do I think that Sarasin-Alpen obtains assistance from the principles which would guide a Court in England and Wales when deciding whether or not to award exemplary damages. Article 40(2) is not derived from the law of England and Wales: rather, it reflects an intention to depart from that law in favour of the law in the United States of America. The law making authority in this jurisdiction has given the DIFC Courts power to award multiple damages in appropriate cases; and this Court should not decline to exercise that power – when circumstances require – on the ground that a court of England and Wales would not make such an order.

In my view this is a case in which the conduct of Sarasin-Alpen calls for an award of multiple damages under Article 40(2) of the Law of Damages and Remedies. The appropriate order, as it seems to me, is that Sarasin-Alpen pay compensation to the Claimants (and each of them) of an amount equal to twice the losses which they have sustained under each of head (A), head (B), head (C) and head (D.
Interest on losses.

As I have said, earlier in this judgment, the Claimants do not, in terms, advance a claim for interest on Head (A) losses in their “Written Submissions on Quantum” dated 25 February 2015; notwithstanding that, at paragraph 2.2 of that document, “Interest” is included in the summary of “the issues for determination”. In the section headed “Interest” (paragraph 31) it is said only that:

“31. Since the Claimants are already seeking damages for the interest charges by ABK and CBK, the Court only needs to order interest from the point of the last interest charge from ABK and CBK (30 April 2014 and 18 September 2014 respectively). It is submitted that the appropriate order would be to order interest at the rate charged by each of ABK and CBK.”

Sarasin-Alpen, at paragraph 5.5 of its skeleton argument filed for use at the Quantum Determination, refers to a claim against both Defendants for “compound interest…under Articles 18 and/or 32 of the Law on Damages and Remedies 2005”; and rejects that claim (at paragraph 6.2) on the basis that:

“6.2.1…The claim is misconceived as the Law of Damages and Remedies 2005 deals with interest on damages for breach of contract, breach of the law of obligations and restitution and not with Regulatory claims.”

At paragraph 87 of that skeleton argument it is said that:

“8.7 If the Court does not accept that the Claimants are not entitled to prejudgment interest, the normal rate of interest in commercial matters is EIBOR + 1% – see CFI025/2013 GFH Capital Limited v (1) Mr Joseph Zahra, (2) Zedklym Investment Company and (3) Fujairah National Construction Company.”

I accept that this is not a case within Articles 18 or 32 of the Law of Damages and Remedies; but, as it seems to me, Article 35(1)(g) and/or Article 35(3) of that Law – and Article 94(2) of the Regulatory Law itself – empowers the Court to award interest on head (A) losses. I am satisfied that it is appropriate to make such an order in this case against both Sarasin-Alpen and Bank Sarasin. Interest on the head (A) losses is to run at the rate from time to time charged by Bank Sarasin to commercial customers in good standing. If the parties are unable to agree that rate, the Claimants may apply to the Court for the rate to be fixed.

Conclusion

For the reasons which I have set out in this judgment I hold:

that Sarasin-Alpen should pay to the Claimants, in addition to monies already paid, a total of US$59,611,899 (being the aggregate of (i) a further US$10,445,049 in respect of head (A) losses and (ii) 2 x US$24,583,425). That sum to be attributed to the individual Claimants as follows:

Mr Al Khorafi	10,622,213
Mrs Al Hamad	34,512,982
Mrs Al Rifai	14,476,704

(2) that Bank Sarasin should pay to the Claimants, in addition to monies already paid, a total of US$24,583,425. That sum is to be attributed to the individual Claimants as follows:

Mr Al Khorafi	4,679,332
Mrs Al Hamad	12,986,491
Mrs Al Rifai	6,917,602

(3) that Sarasin-Alpen alone is to be liable for payment to the individual Claimants of the difference between the sums payable under sub-paragraph (1) and the sums payable under sub-paragraph (2);

(4) that the Defendants are to be jointly and severally liable for payment of the sums payable to the individual Claimants under sub-paragraph (2): and

(5) that the Defendants should pay, jointly and severally, interest on head (A) losses (being the sums ordered to be paid by sub-paragraphs 3(a) and 5(a) of the Order dated 28 October 2014) from 8 October 2008 until payment at the rate from time to time charged by Bank Sarasin to commercial customers in good standing.

The costs of the Quantum Determination will be stood over for further determination in the light of such representations as the parties may wish to put before the Court.

Issued by:

Mark Beer

Registrar

Date of Issue: 7 October 2015

At: 4pm

The post CFI 026/2009 (1) Rafed Abdel Mohsen Bader Al Khorafi (2) Amrah Ali Abdel Latif Al Hamad (3) Alia Mohamed Sulaiman Al Rifai v (1) Bank Sarasin-Alpen (ME) Limited (2) Bank Sarasin & Co. Ltd appeared first on DIFC Courts.

Signed by:	Signed by:
Michael Hwang SCChief Justice, DIFC Courts	Kairat MamiChairmanSupreme Court of the Republic of Kazakhstan

Requesting party	The Dubai International Financial Centre (DIFC)
The case about which a legal opinion is requested	The jurisdiction of the DIFC Courts with respect to hearing the lawsuits where a Dubai Government entity is party.

Approval of the Secretary-General of the Supreme Legislation Committee in the Emirate of Dubai
Signature	(signature)	Date	30/ 6/ 2015

DIFC COURTS SUPPORT FAST-GROWING UAE-KAZAKHSTAN BUSINESS TIES

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Q 2 2015

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