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CFI 014/2015 Orient Insurance Pjsc v (1) ABN Amro Bank N.V. (2) Bank of Baroda (3) CITI Bank N.A. (4) Credit Suisse AG (5) Emirates NBD Bank Pjsc (6) Mashreq Bank Pjsc (7) Noor Islamic Bank Pjsc (8) Glints Global General Trading LLC

CFI 014/2015 Orient Insurance Pjsc v (1) ABN Amro Bank N.V. (2) Bank of Baroda (3) CITI Bank N.A. (4) Credit Suisse AG (5) Emirates NBD Bank Pjsc (6) Mashreq Bank Pjsc (7) Noor Islamic Bank Pjsc (8) Glints Global General Trading LLC

May 19, 2016

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Claim No: CFI-014-2015

          THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE DEPUTY CHIEF JUSTICE SIR DAVID STEEL

 

ORIENT INSURANCE PJSC

Claimant

and

(1) ABN AMRO BANK N.V.

(2) BANK OF BARODA

(3) CITI BANK N.A.

(4) CREDIT SUISSE AG

(5) EMIRATES NBD BANK PJSC

(6) MASHREQ BANK PJSC

(7) NOOR ISLAMIC BANK PJSC

(8) GLINTS GLOBAL GENERAL TRADING LLC

Defendants


ORDER WITH REASONS OF DEPUTY CHIEF JUSTICE SIR DAVID STEEL


UPON reviewing the Third Defendant’s Application Notice CFI-014-2015/6 dated 29 November 2015 seeking immediate judgment (the “Application”) and the Second Witness Statement of Tarek Shrayh in support of the Application

AND UPON reviewing the Witness Statement of Mark Beswetherick dated 14 January 2016 filed on behalf of the Claimant in response to the Application

AND UPON hearing Counsel for the Claimant and Counsel for the Third Defendant on 13 April 2016

IT IS HEREBY ORDERED THAT:

  1. The Application is granted.
  2. The Claimant shall pay the Third Defendant’s costs of the Application, to be assessed by the Registrar if not agreed.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 19 May 2016

At: 11am

SCHEDULE OF REASONS

1.The Claim Form in this case was issued on 19 May 2015. The Claimant (“Orient” or “the Claimant”) is an insurance company based in Dubai Festival City.  The claim related to a credit insurance policy no: 16-430-163-13-15 / 349804 (“the Policy”).  The policy insured the Eighth Defendant (“Glints”) against its trading losses.

2. Glints assigned various of its rights and, it was contended, various of its obligations under the policy to some seven banks who were the First to Seventh Defendants. These banks had financed various transactions undertaken by Glints and, by virtue of the assignments, were entitled to be indemnified in respect of any insured claims under the policy.

3. The Claim Form sought a declaration that the policy stood avoided ab initio on the grounds of fraud or misinterpretation. The Particulars of Claim as drafted by leading counsel but undated gave particulars of a number of transactions three of which had been financed by the Third Defendant (“Citibank”).

4. It was Orient’s case that the claims submitted by Citibank in its capacity as assignee on the basis of information and documents furnished by Glints were false or otherwise tendered in bad faith on Glint’s part. It was also pleaded that the claims were otherwise outside the scope of the cover.

5. Against that background the prayer set out at the end of the Particulars of Claim sought a range of declarations:

“(1) declarations that:

(1)  it is entitled to cancel the Policy pursuant to Article 18, has avoided the Policy and has no liability to any of the Defendants under the Policy; and/or

(2)  it is entitled to avoid the Policy pursuant to Article 1033 of the Civil Code and the Policy has been cancelled accordingly; and/or

(3)  that it has no liability to any of the Defendants in respect of the invoices identified in paragraph 39, 40 and/or 41 herein; and/or

(4)  its maximum liability under the Policy is limited to USD 16,575,000 in accordance with Article 9D of the Policy.”

6. Citibank contend that such a claim served no useful purpose and accordingly should be the subject of an order for immediate judgment pursuant to Rule 24.1 of the Rules of the DIFC Courts (“RDC”) on the grounds that Orient has no real prospect of succeeding on the claim. (In the tentative alternative it was submitted that the particulars should be struck out under RDC 4.16 on the grounds that they contained no reasonable grounds for bringing the claim or were otherwise an abuse of process. However I propose to focus on the immediate judgment application as (as presently advised) I can see no circumstances under which on the facts that application might fail but the latter succeed).

7. The policy identified the various assignees in Schedule 1. Both the policy and the assignments were subject to UAE law.  As regards minimising losses and obtaining recoveries, it provided:

“You must appoint Atradius Collection for the purposes of collection of amounts owing or to taking legal proceedings on your behalf…”

8. The assignments of the “benefits” in the policy was dealt with in the following endorsement:

CLASSIC ASSIGNMENT OF BENEFIT (DUB000102001)

By this endorsement the Insured assigns all rights to any indemnities relating to the policy mentioned above to First Gulf Bank (Dubai), Credit Europe Bank (Dubai), Emirates NBD Bank PJSC (Dubai), United Arab Bank (Sharjah), Doha Bank (Dubai), Bank of Baroda (Dubai), Citibank N.A (Dubai), Credit Suisse AG (Switzerland) and Al Kaliji France SA (Dubai), who accepts these rights and acknowledges receipt of a copy of the said policy.  Therefore, all indemnities calculated under the terms of the policy will be paid directly to the assignee.  This assignment may be revoked only within the written agreement of the assignee.

Under the terms of the policy, the assignee can rightfully take the insured’s place with regard to the observance of the Insured’s duties.  Moreover the assignee cannot assign these rights to a third party.

The provisions of this endorsement are applicable to the initial period of insurance stipulated in the policy as well as for all renewals, express or tacit, of the same.

This endorsement does not create any new rights or obligations that are not already stated in the policy.  Consequently, the assignee does not have any greater rights and obligations that are not already stated in the policy.  Consequently, the assignee does not have any greater rights and obligations than those which are held by the insured.  The assignee will however be informed if turnover declarations have not been sent on time and if premium notes remain unpaid.”

9. The scope of the cover under Article 2 concluded “Default”, defined as the “failure of a buyer to pay you the amount owing under the contract within 6 months of original due date of payment”.

10. Article 8 provided: “You must notify us immediately of the occurrence of any event likely to cause loss. Such an event shall include without limitation (a) the failure of a buyer to pay any amount still overdue 20 days after the Maximum Extension Period…”  Article 8 went on to provide: “You must provide us with all information and documents that we require…”

11. Article 9 dealt with claims. Claims had to be made within 6 months using the form provided by the Claimants.

12. Article 11 covered “assignment of policy rights”:-

“You cannot assign or transfer this policy or any of its benefits without our prior written consent.  You may however request claims payments to be made to a named loss payee using the form we will provide, your obligation under the policy remaining unaffected.”

13. Article 18 was headed “Misrepresentation or Fraudulent Acts”:-

Article 18         Misrepresentations or Fraudulent Acts

Any misrepresentation, whether fraudulent or otherwise, or fraudulent conduct on your part (or on the part of any other person who has a legal or beneficial interest in the policy or its proceeds) in relation to this Policy (including the proposal), to any claim under it, or to any contract to which the Policy applies, will render the Policy void but we may retain any premium paid and you will be liable to refund to us any payment we have made under the Policy.”

14. The assignment to Citibank was on a form furnished by Orient. It provided that Glints “assign absolutely all our present and future rights to receive payments” under the policy to Citibank.  It further provided in clause 3(a) that either Glint or Citibank “may submit a claim and all supporting documentation under the policy.”

15. On 6 September 2014 Citibank as assignee gave notice of various outstanding payments due to Glint. The letter went on to request a claim form and a list of the documents needed to support any claim.  Citibank also enclosed a copy of the policy.

16. In their reply dated 11 September 2014, Orient identified various categories of documents required in support of the claim within the following classes:

(1) Claim Form

(2) Invoices

(3) Delivery notes (bills of lading)

(4) Purchases

together with a range of correspondence.

17. The Claim Form dated 17 September 2014 was duly presented on an Orient Standard Form together with invoices said to relate to the shipments for which a claim was being made. The covering letter read as follows:

“Reference is made to the Credit Insurance Policy Number 16-430-163-13-15/349804 (the “Policy”).  Terms defined in the Policy shall bear the same meaning when used herein, unless otherwise stated.

Further to our email correspondence pertinent to the subject matter, please find attached 2 claim forms covering 3 unpaid transactions under the policy assigned in favour of Citibank, UAE branch.

Further, we refer to Paragraph 1 of the section titled Minimizing Loss and Obtaining Recoveries Endorsement which notes that Atradius Collections must be appointed for purposes of collection of amounts.  We request that you waive this requirement in order to allow Citibank N.A., UAE (“Citi”) to directly liaise with the buyers for collection.

In relation to the attached Claim Form, please note that we cannot declare that we have appointed a lawyer/debt collector or insolvency practitioner because the terms of the policy only allow Citi to appoint Atradius Collections, unless otherwise approved by you.

Await your acknowledgement and processing of our claims.”

18. The attached claim form signed on behalf of Citibank declared as follows:

“1. Declaration and authorization

  1. We are notifying Atradius of this unpaid debt in compliance with our policy obligations. We recognise that the policy requires us to take all practicable measures necessary to prevent and minimise loss.
  2. We declare that we have suffered a loss as detailed in this form, and have not entered into any other contract of insurance or indemnity in respect of this. We declare that we have complied with all policy requirements and have taken all possible steps to collect the debt specified under ‘Debt details’.
  3. We acknowledge
  • Nothing in this form amends, alters or waives any of the provisions of the policy.
  • Acceptance of this form is not acceptance of any claim by Atradius.
  1. We accordingly claim payment of the Policy percentage of the amount claimed. Settlement should be made in favour of payable to: Citibank N.A. Dubai, UAE, SWIFT: CITIAEAD”

19. A further claim was filed on 20 November 2014. By an email dated 24 November 2014 Orient called for a large range of further information and documents.  Following emails chasing for this material, Citibank asserted in an email dated 30 March 2015 that all necessary and appropriate information had been furnished: “Please treat our submission as conclusive and inform us on claim.”

20. The Claim Form in these proceedings was issued on 19 May 2015 but not served until sometime in August 2015. In the meantime, by email dated 3 June 2015, which contained a request that it should not be disclosed to Glints, Orient invited Citibank to discuss claims reserving all rights.  The reply dated 14 June 2015 simply stated:

“We will no longer be interested in further discussion about the subject.”

21. There matters remained in regard to these claims which totalled over $9 million until service of a statement of Mr Shrayh, Counsel for Citibank dated 26 November 2015 which said at paragraphs 17 and 18 as follows:

“17. I am instructed and authorised to confirm that:

(1) Citibank has no intention of pursuing the claims notified to Orient and described above or any other claims arising under the Policy;

(2) Citibank will not pursue any such claims against Orient, and

(3) In any event, Citibank no longer has any outstanding sums due to it from Glints which could form the basis of a claim by Citibank against Orient. As such, Citibank has no claims against Orient in relation to the Policy.

18. I am instructed that, if required to do so, Citibank will undertake to record the matters set out at paragraph 17 above in any written form the Court may require.”

22. Citibank seeks immediate judgment pursuant to RDC 24.1(1)(a) on the grounds that Orient has no real prospect of succeeding on its claims for declaratory relief. For this purpose it must be borne in mind that such remedies are discretionary and in order to pursue such a remedy there must be a real and present dispute between the parties as to the existence or extent of a legal right : Rolls Royce plc v. Unite the Union [2010] 1 WLR 318 per. Aikens LJ at para 120.  This threshold requirement is the more necessary where, as here, Orient is seeking negative declarations.  As stated by Lord Woolf in Messier-Dowty v. Sabena [2000] 1 WLR 2040:

“The deployment of negative declarations should be scrutinized and their use rejected where it would serve no useful purpose.”

Indeed as Christopher Clarke J observed in Jewel Ahmed Toropdad v. D [2009] EWHC 567 (QB) at 101:

“Further the court is unlikely to be sympathetic to a claim for negative declaration in circumstances where a claim has never been seriously canvassed (even if at one state asserted).”

23. It is Citibank’s position that there is no real and present dispute between the parties. I agree:

(a) Following a settlement agreement between Citibank and Glints dated 24 October 2014, Citibank was repaid in full by Glints in respect of the claims presented by Citibank to Orient by the end of November.

(b) The terms of the Settlement Agreement provided that upon payment “the Borrower and Guarantor shall be irrevocable and unconditionally released from their obligations under the Finance Documents and each security interest granted under the Security Documents shall be discharged.”

(c) The position was confirmed in correspondence by Counsel for Citibank in a letter dated 15 November 2015:

“For the avoidance of doubt…we confirm: a) That they do not advance any claims against Orient in respect of losses arising under the Policy:  b) That they will not advance any such claims and irrevocably waive any right to do so.”

(d) As already noted, this was duly repeated in Mr. Shrayh’s statement dated 25 November 2015 following payment of the final instalment.

24. It is fair to say that both Glints and Citibank’s position was ambivalent if not inconsistent with this analysis. Quite on what basis Citibank was still pursuing the claims in 2015 is wholly unclear.  Equally given the settlement to which it was a party it is wholly unclear what the claims Glints wanted to discuss in June were.  I accept that even when the claim form was served in August 2015 the position was confused.  This was made all the more unsatisfactory given Citibank’s equivocal stance when rejecting Orient’s invitation to discuss the claims in June 2015.  Their response was simply: “We will no longer be interested in further discussion about the subject.”  The fundamental position was that they had been paid and had nothing to be interested in as assignee.

25. This observation is discussed in a witness statement of Mr. Karande of Citibank furnished after the hearing by the applicants. This was served in response to my request for details of the settlement as referred to above.  The section of the statement dealing with the intended meaning of the quoted response is almost incoherent given that payment had been completed six months earlier.  But I gave no leave for the service of further evidence or submissions.  I accordingly do not regard it as admissible.   Likewise I have no regard to the extensive response from the Claimants.

26. Be that as it may, the settlement was concluded over 6 months prior to the issue of the claim form. Following payment of the settlement sums, no claim could legitimately be pursued by Citibank as assignee.  Furthermore concurrent with the issuance of the immediate judgment application on 29 November 2015, Citibank had made their position absolutely clear even if they were muddleheaded before.  In short, no claim has been canvassed by Citibank since June 2015 and any residual doubts as to the potential for a claim was removed in November 2015.  In my judgment there is no realistic prospect of the Court making the declarations sought in regard to the absence of any liability.  Such would serve no useful purpose.

27. Orient also seeks declarations in regard to avoidance and cancellation of the policy. But again they would serve no useful purpose as Citibank makes no claim that Orient is liable.  In any event, the case advanced by Orient in argument appears to be based on a misconception:

(a) Citibank was an assignee of relevant payments under the policy. Citibank was not a party to the policy nor were any obligations under the terms of the policy assigned to it.

(b) There is no plea of bad faith or misrepresentation against Citibank: see paragraphs 37 and 38 of the Particulars of Claim.

28. It may be there is some room for a difference of view as to whether Orient is not liable to Citibank because there is no claim or alternatively because the policy is invalid. But as explained in Brown v. Innovatorone plc. [2010] EWHC2281 a disagreement as to why a party has no legal liability will not justify proceedings for a declaration.  What is required is a dispute about whether that legal liability exists.

29. There remains a submission by Orient that it was obliged to bring these proceedings in the DIFC Courts by virtue of Articles 271 and 272 of the UAE Civil Code, which provide as follows:

Article 271

It shall be permissible to agree that a contract shall be regarded as being cancelled spontaneously (automatically) without the need for a judicial order upon non-performance of the obligations arising thereout, and such agreement shall not dispense with notice255 unless the contracting parties have expressly agreed that it should be dispensed with.

Article 272

(1) In contracts binding on both parties, it one of the parties does not do what he is obliged to do under the contract, the other party may, after giving notice to the obligor, require that the contract be performed or cancelled.  (2) The judge may order the obligor to perform the contract forthwith or may defer [performance] to a specified time 256, and he may also order that the contract be cancelled and compensation paid in any case if appropriate.”

30. In reliance on the commentary furnished by the Ministry of Justice, Orient appear to assert that where there is a dispute as to whether a contract may be terminated, the party seeking termination must bring the matter before the court. But even on the assumption that such is applicable where the party seeking termination is a party to the contract, it is wholly irrelevant as regards a mere assignee and merely emphasises that declaratory relief would serve no useful purpose.

31. For all these reasons I accede to Citibank’s application for immediate judgment with costs.

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