May 10, 2022 court of first instance - Orders
Claim No. CFI 065/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
(1) EMIRATES NBD BANK PJSC
(2) AL KHALIJI FRANCE S.A.
(3) HSBC BANK MIDDLE EAST LIMITED
(4) UNITED ARAB BANK PJSC
(5) UNITED BANK LIMITED
(6) NATIONAL BANK OF FUJAIRAH PJSC
(7) COMMERCIAL BANK OF DUBAI PJSC
(8) NOOR BANK PJSC
(9) DUBAI ISLAMIC BANK PJSC
(1) ADVANCED FACILITIES MANAGEMENT LLC
(2) NASER BUTTI OMAIR YOUSEF ALMHEIRI (PERSONALLY AND TRADING AS NBB GROUP ESTABLISHMENT)
(3) ADVANCED INTERNATIONAL EMPLOYMENT SERVICES LLC
(4) ADVANCED LAUNDRY LLC
(5) ADVANCED ENVIRONMENTAL SERVICES LLC
(6) AL ETIHAD INTERNATIONAL TYPING & TRANSACTION FOLLOWING CENTRE LLC
(7) ADVANCED NATIONAL CONTRACTING LLC
(8) CRUISE EXPRESS RENT A CAR LLC
(9) BIN BUTTI INTERNATIONAL HOLDINGS LLC
AMENDED ORDER WITH REASONS OF JUSTICE SIR JEREMY COOKE
|Hearing :||20 and 21 April 2022|
|Counsel :||Tom Montagu-Smith QC instructed by Al Tamimi and Company on behalf of the Claimants
Orlando Fraser QC instructed by Taylor Wessing LLP on behalf of the Defendants
|Judgment :||9 May 2022|
UPON reviewing the Claimant’s Application No. CFI-065-2020/5 dated 14 January 2022 for immediate judgment (the “Application”)
AND UPON the Order of Justice Sir Jeremy Cooke dated 6 April 2022
AND UPON reviewing the Amended Claim form dated 7 April 2022
AND UPON reviewing the Amended Defence and Counterclaim dated 12 April 2022
AND UPON reviewing the Claimants’ skeleton argument dated 19 April 2022
AND UPON reviewing the Defendants’ skeleton arguments dated 19 April 2022
AND UPON reviewing the Claimants’ Statement of Costs dated 19 April 2022
AND UPON reviewing the Defendants’ Statement of Costs dated 19 April 2022
AND UPON hearing Counsel for the Claimants and Counsel for the Defendants at the hearing on 20 and 21 April 2022
AND UPON reviewing the Claimants’ further submissions filed on 25 April 2022
AND UPON reviewing the Defendants’ submissions in response filed on 28 April 2022
AND UPON reviewing the Claimant’s reply submissions filed on 29 April 2022
IT IS HEREBY ORDERED THAT:
1. The Application is granted.
2. The Claimants are therefore entitled to judgment for sums to be calculated and submitted by the Claimants on the basis of the Finance Documents for a date sufficiently far ahead for any submissions to be made by both parties as to the accuracy of the figures put forward.
3. It appears inevitable that the Claimants will also be entitled to their reasonable costs of the action and a Schedule of Costs should be provided with submissions, to which the Defendants can reply. The Claimants should also provide a draft order in relation to the specific performance claimed as well as the sums of money, interest and costs claimed, so that a final judgment can be issued. The Parties should liaise with the Court to fix a short timetable for all such submissions to be made in writing so that the Court can enter judgment for sums that are agreed as a matter of mathematics on a given date and determine any outstanding issues in dispute.
Date of issue: 9 May 2022
Date of re-issue: 10 May 2022
SCHEDULE OF REASONS
1. The Claimants seek immediate judgment against the Defendants in respect of their claim for approximately AED 1.9 billion including late payment sums and interest under Syndicated Facility Agreements concluded on 27 December 2018 (“the Facility” or “the Syndicated Facility Agreements”) and specific performance of the First Defendant’s obligations to register a short form mortgage in relation to a property known as the “DIP 365 Camp” with the Dubai Lands Department and to perfect that security.
2. The First Defendant (“Advanced Facilities”) was the borrower. The First to Sixth Claimants advanced conventional lending under a Conventional Facility Agreement (the “CFA”). The Seventh and Eighth Claimants advanced Islamic Finance under a Master Murabaha Agreement (“the MMA”) and Investment Agency Agreement (the “IAA”) (together the “Islamic Facility”). There was also a Common Terms Agreement governing the loans (the “CTA”) and an Accounts, Intercreditor and Security Agency Agreement (“the “Intercreditor Agreement”). All are agreed to be governed by English law as are the alleged torts or collateral contracts of which complaint is made. The Eighth Claimant (“Noor”) arranged the syndication and acted as Investment Agent for the Islamic lending and transferred its office and its rights and liabilities under the Facility to the Ninth Claimant which acquired it in January 2020. Although no admissions have been made as to the validity of that transfer, the evidence was sufficient to allow for joinder shortly before the hearing of this application and no positive case has been made as to its ineffectiveness. For reasons which appear later, it is of no significance whether the cause of action is vested in the Eighth or Ninth Claimant. In this judgment, the expression “the Claimants” refers to the First - Eighth Claimants, save where expressly stated otherwise since the Ninth Claimant’s rights are derived from the Eighth Claimant, and the expression “the other Claimants” refers, in contradistinction to Noor, to the First – Seventh Claimants.
3. The Second – Ninth Defendants are guarantors of the obligations of Advanced Facilities by guarantees contained in the CFA and MMA. The Second Defendant (“the Chairman”) is the beneficial owner of the group to which all the corporate Defendants belong (called the “BBIH Group”). Whilst he gave a personal guarantee which is governed by UAE law, he also operated through a Dubai establishment, called NBB Group Establishment, for the debts of which he is personally liable and it gave a guarantee in the CFA and MMA, both of which are governed by English Law. No claim is made on his personal guarantee, but a claim is made on the guarantee given by NBB Group Establishment.
4. It is common ground that Advanced Facilities failed to make payments on 31 October 2019 and 30 January 2020 in accordance with the CFA and the Islamic Facility (together the “Facility”), constituting Event of Defaults, leading to notices of default and a Notice of Acceleration on 3 February 2020 with subsequent demands under the guarantees. No payments have been made and Advanced Facilities has failed to register the short form mortgage and perfect the security referred to above.
The History of the Proceedings
5. Following Notices of default of 10 October 2019 and 10 December 2019 and the Notice of Acceleration dated 3 February 2020 and demands of the Guarantors, the Claimants issued a Claim Form on 25 August 2020 which was served on all the Defendants in October and November 2020. Acknowledgements of Service were filed by Taylor Wessing on behalf of each of the Defendants and, on 23 December 2020, a fifty-six day extension was sought for filing the Defence which was ultimately served on 9 March 2021. A Reply was served on 22 June 2021 and the current application for Immediate Judgment was filed on 14 January 2022 with supporting evidence. In the absence of any response from the Defendants to the Application itself, on 11 March 2022 the hearing date was fixed for 20/21 April. An application was made by the Defendants for an adjournment on 31 March 2022 which was refused, and the Defendants then served a witness statement from the Chairman on 12 April 2022 with an amended Defence and Counterclaim, responding to the amended Particulars of Claim which had deleted one allegation and additionally pleaded the transfer of the Eighth Claimant’s rights to the Ninth Claimant.
6. The Amended Defence and Counterclaim runs to 162 paragraphs and raises a number of defences to the claim for monies owing under the Facility. The Defendants’ Skeleton Argument for the purposes of the hearing runs to 84 pages and 234 paragraphs. The Defendants submit that the Application is an inappropriate and abusive use of the immediate judgment procedure because there are serious issues of fact which require resolution at a trial following disclosure and cross examination of witnesses and other complex issues of fact and law which are not susceptible of determination on an application for immediate judgment. When seeking an adjournment, the Defendants pointed to 17 issues where the Claimants maintained that the Defendants had no realistic prospect of success and, in their submissions for the hearing, sought to deal with each.
7. Nonetheless, the defences essentially arise out of the arrangement of the Facility and largely centre on a meeting on 16 December 2018, eleven days prior to the execution of the Facility documents, which was attended by employees of Noor, including Mr Ali, Mr Khan, Faisal Sheikh and Muhammed Naqvi, and representatives of the BBIH Group, including the Chairman, Mr Vig, the BBIH Group’s Chief Financial Officer, and Mr Mustafa, its CEO. This meeting took place at the Chairman’s villa on the Palm. It is common ground that Noor’s representatives stated that it would not participate in the syndicate unless the Chairman procured the provision of security by another company that he owned, OBN Energy (“OBN”), which he duly did on 25 December 2018 which allowed the syndication to occur and the Facility to be concluded on 27 December. The Defendants allege that, at that meeting, Noor was acting as agent for all the Claimants and stated that if the Defendants did not agree to provide security in respect of OBN’s assets in its favour, it would decline to participate in the facility with the inevitable consequence that the proposed Facility would not proceed and that, if the Chairman did agree to provide such security, Noor would seek to arrange for up to AED 450 million working capital to be provided but, in the event that the other Claimants declined to provide that working capital, “the Eighth Claimant’s representatives guaranteed that they would arrange for a minimum of AED 100 million working capital to be provided to the BBIH Group by the Eighth Claimant itself immediately and latest by March 2019”. No such working capital was forthcoming, whether immediately, by March 2019 or at all and the Defendants maintain that it was this which led to the inability of Advanced Facilities to meet its obligations under the Facility and to the demise of the BBIH Group.
8. On the basis of the events occurring at the meeting of 16 December 2018, the Defendants put forward four lines of defence:
8.1. Duress/intimidation: the Defendants claim that Noor, as agent for the Claimants placed illegitimate economic pressure upon the Defendants to enter into the Facility by threatening not to participate in the Facility unless security was provided by OBN. It is said that such a threat was unlawful because it amounted to a breach of the IMLA Agreement of 1 August 2018 by which the BBIH Group appointed Noor as (inter-alia) the Initial Mandated Lead Arranger of the Facility. In consequence, it is said that the Syndicated Facility Agreements can be rescinded on the grounds of duress and that the Claimants are liable in the form of duress and/or intimidation for damages caused by the destruction of the value of the BBIH group and OBN.
8.2. Misrepresentation: the Defendants claim that in guaranteeing the provision of a minimum of AED 100 million working capital, the Eighth Claimant impliedly represented that it had a reasonable basis for making the statement that it did and that this representation was made as agent for the other claimants or that the other claimants are vicariously liable. It is alleged that this implied representation was false and induced the Defendants to enter into the OBN security and the Facility Agreements, with the result that they can be rescinded. Additionally, or alternatively, damages are claimed under section 2 (1) of the Misrepresentation Act 1967.
8.3. Breach of Contract: the Defendants allege that it was an implied term of the Syndicate Facility Agreements that Noor provide the working capital referred to above. In consequence it is submitted that the failure to provide such working capital amounts to a repudiatory breach by the Claimants, which has been accepted by the Defendants. Damages are again claimed for the destruction of the value of the BBIH group and OBN. This is put alternatively as breach of a collateral contract.
8.4. Prevention Principle: alternatively, insofar as the Syndicate Facility Agreements have not been rescinded, the Defendants claim that by virtue of Noor’s failure to provide working capital in breach of the implied term referred to, they have caused the BBIH Group’s financial collapse and its inability to pay the sums due under the Facility with the result that the claimants are precluded from relying on such breaches to accelerate the BBIH Group’s obligations under those Agreements.
9. There is an unconnected defence which is raised in relation to the MMA. The Defendants’ case is that the contract should be construed as subject to the principles of Sharia as set out in the standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (the “AAOIFI Standards”). This is said to arise because, under Resolution No. 18/3/2018 of the Higher Sharia Authority of the Central Bank of the UAE, all licensed financial institutions in the UAE were required, from 1 September 2018, to comply with the AAOIFI Standards in providing Islamic finance. On a proper interpretation of those standards, the MMA is said to be a nullity.
10. The Claimants contend that the Defendants have no realistic prospect of success in showing:
10.1. That Noor’s employees made any statement about working capital because all the contemporary documents show otherwise.
10.2. That Noor was the agent of the Claimants at the meeting of 16 December 2018.
10.3. That the Facility was avoided or terminated for duress or breach of duty/contract or could now be avoided because the Defendants affirmed the Facility.
10.4. That any actionable misrepresentation was made, because there was no statement upon which they could reasonably rely or in fact did rely when entering into the Facility.
10.5. That there was any collateral contract or an implied term in the Facility for the provision of working capital.
10.6. That the Islamic Facility is a nullity. The Claimants contend that (inter-alia) the AAOIFI Standards were not incorporated into the Murabaha Contract, that there was a waiver of any failure to comply with Sharia and that there was in any event, no breach of such standards.
The Relevant Test for Immediate Judgment
11. There is no issue between the parties as to the principles to be applied by the Court when determining whether or not immediate judgment should be given against a defendant in accordance with RDC R.24.1. The burden lies on the Claimants to show that the Defendants have no realistic, as opposed to fanciful prospects of success on the defences which are raised and say that there are no other compelling reasons why the matter should go to trial. This means that the defences raised must have a degree of conviction, rather than be merely arguable. The Defendants relied on multiple statements by the English Courts to the effect that the summary jurisdiction of the court is not intended to be exercised by a minute and protracted examination of the documents and facts of the case and that conducting a mini-trial is inappropriate. Reliance was placed on the approach set out by Lewison J (as he then was) in Easyair v Opal Telecom Limited  EWHC 229 (Ch) at paragraph 15:
i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful prospect of success: Swain v Hillman  2 All ER 91;
ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel  EWCA Civ 472 at 
iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman  2 All ER 91
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at 
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it…If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725” (emphasis added)
12. The Defendants maintained that the determination of the issues in the action requires a minute and protracted examination of documents, prolonged and serious argument and disclosure and cross-examination of witnesses. The Defendants say that they are currently hampered by their inability to obtain assistance from ex-employees such as Mr Mustafa and Mr Vig, as the Chairman was only involved in key meetings and events and was not copied into all the email exchanges. Furthermore, the Defendants do not have all the documents which should have been available to them because some have been destroyed. Nonetheless, on the evidence that was adduced from the Chairman as to the meeting of 16 December 2018, there were serious issues to be tried and Mr Ali’s evidence, adduced by the Claimants was unreliable and should not be accepted as accurate. There was said to be a conflict of evidence that could only be resolved at trial and that there are reasonable grounds for believing that a fuller investigation into the facts in the case would add to or alter the evidence which would be available to a trial judge, although no details of that were provided, beyond the possibility that further witness evidence might be available from the Defendant’s ex- employees, and additional material might be garnered from disclosure and in cross- examination. At times, the Defendants Counsel stated that the Defendants were unable to say exactly what had happened but that the version of events pleaded by it gave rise to a real possibility of defences.
13. As is invariably the case on matters of this kind, the Claimants’ position was that the Defendants’ evidence and arguments merely sought to obfuscate and that the case put forward by the Defendants was incoherent and could not withstand serious analysis. Many of the defences put forward were untenable as a matter of law and the version of events advanced was contradicted by contemporaneous documents so that it could properly be said that there could be no substance in the factual assertions made by the Chairman or in the Defence and Counterclaim, or in the Defendants’ skeleton. Even if some points were capable of argument, there were many that were not and summary judgment could be given by reference thereto.
Several Liability and No Set- Off under the Facility Documents
14. There are a number of provisions in the CTA which are relevant in the context of the defences advanced. They speak for themselves in providing for the several liability of the Defendants to each of the Claimants and require all payments to be made by the Defendants under the Facility all without any set off or counterclaim
Clause 2.2 is entitled “Finance Parties’ rights and obligations” and includes the following:
“2.2.1. The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
2.2.2. The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with Clause 2.2.3 below. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of a Loan, Cost Price component of Deferred Sale Prices or any other amount owed by an Obligor which relates to a Finance Party’s participation in a Facility or its role under a Finance Document (including any such amount payable to an Agent on its behalf) is a debt owing to that Finance Party by that Obligor.
2.2.3 a Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.”
Clause 26.6 is entitled “no set-off by the Obligors”.
“26.6.1. All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.”
15. I have come to the clear conclusion that the Defendants have no real prospect of showing that Noor acted as agent for the other Claimants at the meeting on 16 December 2018 or that the other Claimants could be vicariously liable for anything said or done by Noor at that meeting. There is simply no basis for the allegation which is made by the Defendants. No facts are pleaded of any actual authority to act as agent and no holding out of any kind by the other Claimants is pleaded which could give rise to any ostensible authority. The bare assertion at paragraph 55 of the Defence and Counterclaim that Noor was acting for itself and as agent for the other Claimants at the meeting, without any relevant pleaded factual basis, is insupportable. An agency relationship only arises where a principal, by contract, or by conduct (express or implied) confers authority on an agent. Agency is a legal construct and absent a factual allegation from which the Court could conclude that there was an agency relationship, such an allegation can be struck out. The Chairman’s assertion that he believed that Noor was acting “as a representative for the syndicate banks” after it entered into the IMLA letter is nothing to the point in the absence of a contract of agency or any conduct or factual basis which could constitute that relationship.
16. The Defendants submit that, while actual authority is often given by way of a contract, the existence of a contractual relationship is not a necessary incident of agency and that it can arise as a result of an express conferral of authority, or impliedly where the principal places the agent in such a situation that, according to ordinary usage, that person would understand themselves to have the principal’s authority to act on the principal’s behalf or where the principal’s words or conduct, coming to the knowledge of the agent, are such as to lead to the reasonable inference that the principal is authorising the agent to act for the principal. Reliance was placed on Bowstead & Reynolds on Agency, 22nd edition at 2-028 -2-031. Further or alternatively, reliance was placed upon the concept of apparent authority where a principal confers such apparent authority by representing or manifesting to a third party that the ostensible agent has authority to act on its behalf. It was also said that where a person has not been cloaked with authority by a principal, he may nonetheless be authorised to communicate representations or commitments with the principal’s authority. None of this assists the Defendants in this case because there is no pleaded factual basis for any allegation of actual, usual or ostensible authority.
17. At the time of the meeting of 16 December 2018, Noor had been appointed by the BBIH Group, as the Initial Mandated Lead Arranger and Bookrunner under the IMLA Letter of 1 August 2018. The IMLA Letter provided, so far as relevant:
“We Noor Bank PJSC and/or any of its affiliates… appointed under the terms of this letter, as the Initial Mandated Lead Arranger (“IMLA”) and Bookrunner (“the Bookrunner”) are pleased to set out in this letter the terms and conditions on which we are willing to uses our best efforts to arrange and manage primary syndication of the facility amounting to AED 1.75 billion, (the “facility”) for the Obligor.
Nothing in this letter constitutes a commitment by the IMLA to provide any financing. …….
1.1 The Obligor appoints;
(a) the IMLA as exclusive arranger and global coordinator of the Facility;
(b) the Bookrunner as exclusive Bookrunner in connection with the Syndication;
(c) Noor as documentation agent and account bank (the “Documentation Agent” and “Account Bank” in relation to the Facility;
(d) Noor as investment agent (the “Investment Agent”) in relation to the Facility;
(e) Noor as publicity agent (“Publicity Agent”) in connection with the Facility; and
(f) Noor as security agent (“Security Agent”) in connection with the Facility.
3.1 The obligations of the Initial Mandated Lead Arranger and the Financiers under the Mandate Documents are several. A failure of a Financier to perform its obligations hereunder shall not prejudice the rights of the other Financiers.…
9.1 The Bookrunner shall, in consultation with the Obligor or, manage all aspects of syndication of the Facility, including timing, the selection of potential Financiers, the acceptance and allocation of commitments and the amount and distribution of fees to Financiers.”
18. It does not avail the Defendants to say, as they do, that the IMLA put Noor in the position where it negotiated the terms of the Term Sheet with the Defendants and was thereafter in direct contact with the other Claimants in relation to negotiation of the Facility in relation to the Facility Documents. These functions and the obtaining of commitment letters in October/November 2018 from some of the other Claimants was part and parcel of Noor’s responsibilities as the arranging bank under the IMLA. The Defendants are unable to point to anything which is capable of giving rise to an inference of actual, implied, usual or apparent authority.
19. At the time of the meeting on 16 December 2018, Noor could only have been acting in accordance with the terms of the IMLA Letter. No syndicate existed at that point. There is no logical basis upon which that Letter could amount to the appointment by the other Claimants of Noor as its agent, when it was acting as agent for the Defendants. The BBIH Group engaged Noor on the terms of the IMLA Letter to act on its behalf to use its best endeavours to arrange the syndication and manage primary syndication. An arranging bank ordinarily acts for the borrower and not the lenders (see McKnight & Zakrzewski on the Law of Loan Agreements and Syndicated Lending (2019) at paragraph 4.42) and the IMLA has that effect here. As arranging bank, Noor did not owe duties of care or fiduciary duties to the syndicate because it was acting as the arranging bank on behalf of the putative borrowers. Whilst the IMLA provided that Noor was not acting as a fiduciary for, or as an adviser to, the BBIH Group, it plainly was acting as its agent in seeking to put together a syndicated loan. In their case on duress, the Defendants allege that Noor owed duties to the proposed participants in the Syndicate as their “Document Agent”, “Investment Agent”, “Publicity Agent” and “Security Agent” but each of the terms used, which appear in the IMLA Letter, are part of the undertaking by the BBIH Group who agreed to Noor’s appointment to those offices once the Facility was in existence. No agency relationship can be created between Noor and a Syndicate which is not yet in being and in fact, contrary to the suggestion made by the Defendants, Noor never did become the Security Agent, a position which was, as seen in both the draft and final Facility documents, taken by the First Claimant.
20. The Defendants raise the possibility of ratification by the other Claimants of what was said and done by Noor at the meeting of 16 December 2018 and the taking of the security over OBN assets. There is however not the slightest evidence of this. It was the Chairman’s evidence, in his witness statement that, at a meeting in December 2019, the other Claimants were surprised to hear that Noor had that security. Not only is this evidence from the Chairman himself of the absence of any actual authority on the part of Noor to obtain such security in consideration of a guarantee of the provision of working capital, but also evidence of a lack of ratification of Noor’s actions at that stage. Despite the suggestion made in the Defendants’ skeleton argument that the other Syndicate Members might have benefited from the enforcement of the OBN security, there is no evidence of that and on instructions (later supported by witness statement) I was informed by the Claimants that enforcement of the security had been taken by a third party and part of the proceeds had been received by the Ninth Claimant which had taken over Noor’s rights but had applied the security to other indebtedness, as opposed to the amounts outstanding which were owed to Noor as a participant in the Syndicate. This meant that there was no obligation on the part of Noor (or the Ninth Claimant) to share the benefits of that security with the other Claimants. Under clause 25.1.1 of the CTA, any obligation on a lender under the Facility to share recoveries from the borrower is only applicable “if a Finance Party… receives or recovers any amount from an Obligor other than in accordance with Clause 26….. and applies that amount to a payment due under the Finance Documents”. Whilst criticism was advanced by the Defendants of the giving of such information on instructions and the witness statement which followed, there was no basis for such criticism, given that the point was first raised the day before the hearing by the Defendants and was no more than a speculative allegation.
21. What the Defendants would need to show in order to establish ratification is full knowledge on the part of the other Claimants of unlawful threats made by Noor and the promise/statement relating to the provision of a minimum of AED 100 million as working capital. There is no evidence of any such knowledge, any approval of such actions or ratification of any kind.
22. The plea of vicarious liability can fare no better and it was accepted in argument by the Defendant’s Counsel that it added nothing to the argument on agency. There is no basis put forward for any such plea other than the assertion of agency. It is not enough simply to plead vicariously liability and rely upon the two-stage test set out by Lord Philips in Various Claimants v Catholic Child Welfare Society 2 AC1 at . There is self-evidently no question of employment of Noor by the Syndicate members and no basis for an assertion that the relationship, as at 16 December 2018, was one that was capable of giving rise to vicarious liability, as between them. Nor is there sufficient connection between those Claimants and the tortious wrong complained of.
23. The significance of this point is that all the Defendants’ allegations of duress, misrepresentation and breach of contract on the part of the Claimants other than Noor have no prospect of success. No threat, representation or agreement made by Noor at the meeting could be binding in any way on any other member of the Syndicate. There could be no collateral contract between the Claimants (other than Noor) and the Defendants, nor any basis for the implication of a term relating to any such contract in the Facility, without some agency on the part of Noor. It is accepted by the Defendants that a contract cannot be avoided for duress or misrepresentation made by a third party unless the duress or misrepresentation was authorised by the contracting party. Nor could any case be made for a claim for damages in tort or contract against such Claimants for the same reason.
24. It is also the case that Noor is not a party to the CFA since it and the Seventh Claimant, as Islamic lenders, were party only to the MMA, the IIA, and the CTA. Nothing it said at the meeting could therefore give rise to any right to rescind the CFA, whether for duress or misrepresentation.
25. Moreover, as to the contracts to which Noor actually is a party, such as the Murabaha contracts, rescission is barred in any case where it would defeat third party rights which were acquired without notice of the circumstances entitling the innocent party to rescind. The Claimants rely upon the statement in Snell’s Equity (2020, 34th Edition) at paragraph 15 – 015 to the following effect:
“While there is no special difficulty in rescinding a multipartite contract where all of the other parties are implicated in the wrongdoing, there can be no rescission where only one of the parties whose rights would be destroyed is innocent”.
26. The contention that a term is to be implied into the Syndicated Facility Agreements in relation to performance of a statement/contract supposedly made by Noor prior to the syndication on 16 December 2018 is unsustainable. There is, self-evidently, no necessity for the implication of such a term into the Syndicated Facility Agreements and the standard tests for implication as set out in the Supreme Court decisions cannot be met. As was effectively accepted by Counsel for the Defendants, the implied term argument really amounts to no more than the allegation that there was a collateral contract standing outside the terms of the Facility Documents and in the absence of any agency on the part of Noor, such a collateral contract could only be binding on Noor and not on any other Claimant.
27. There are therefore multiple reasons why, regardless of what was said at the meeting of 16 December 2018, no defence or counterclaim based upon such statements run as against the other Claimants. The defences based on an entitlement to rescind or terminate the Facility must fail.
28. Furthermore, assuming, arguendo, that a claim could be made against Noor for what was said at that meeting, it could only operate as a counterclaim and not as a defence. By clause 26.6.1 of the CTA, the Defendants agreed that any payments under any “Finance Document” “shall be calculated and made without (and free and clear of any deduction for) set off or counterclaim.”
29. In the circumstances, there can be no defence to the claim on the Facility based on duress, misrepresentation or collateral contract and, if the Defendants’ case in relation to the meeting of 16 December 2018 is arguable, at most it gives rise to a potential cause of action against Noor.
30. Even if, contrary to the above, there were grounds for rescission or termination of the Facility by the Defendants, the Claimants submits that the Defendants affirmed the validity of the Facility and never questioned it in any way until the Defence and Counterclaim.
31. The submission that the Defendants had already rescinded the Facility for duress or misrepresentation or had terminated it for repudiatory breach of the collateral contract or implied term in the Syndicated Facility Agreements, prior to serving their Defence and Counterclaim is unsustainable. There is, quite simply, no communication from the Defendants prior to the service of the Defence and Counterclaim which purports to rescind or terminate. Rescission requires notice and an election to terminate must be the subject of communication by words or conduct. No document or communication is pleaded by the Defendants as having this effect and the Chairman’s witness statement contains no evidence on the point. Whilst repudiation can be accepted by conduct, in must be conduct which conveys that acceptance to the other party. There was none here. The failure to pay sums due under the Facility, explained on the basis of a shortage of working capital, could not constitute acceptance of repudiatory breach or rescission. At the hearing, the Defendants relied upon paragraph 53 of the Chairman’s witness statement where he said that matters came to a head at a meeting in Abu Dhabi in December 2019. There, he asked the Claimants to provide working capital and to come to a conclusion that was fair to everybody. “Otherwise, I would go to court and prove that it was Noor Bank and the syndicate that were the main element of AFM’s collapse. I told the banks’ representatives that it was either my way or the highway.” At no point does the Chairman say that the Facility was terminated or rescinded by him at that meeting. He does not even say that he accused the Claimants of a breach of a collateral contract or of any other misdeeds. He merely says that their failure to provide working capital, a subject with which he had been badgering them for some time was the cause of the collapse without alleging that the Claimants were obliged to provide it. This is not capable of amounting to a termination or rescission.
32. Any attempt to rescind or terminate in the Defence and Counterclaim is much too late because the notice of acceleration was given on 3 February 2020 with a crystallisation of the right to repayment of the sums loaned under the Facility at that point.
33. Furthermore, the Claimants submits that, even if there had been any right to rescind or terminate, there was affirmation by the Defendants in the full knowledge that the working capital had not been provided by the Syndicate or Noor. The Chairman’s evidence was that Noor guaranteed the provision of a minimum of AED 100 million as working capital by March 2019 at the latest, it being recognised that the setting up of any such facility would take some time (as indeed is obvious as terms would have to be agreed relating, for example, to the date of repayment, the rate of interest and the security for the loan with the necessary mechanisms for implementation).
34. The evidence shows that on 27 March 2019, the Defendants knew that no working capital would be forthcoming. On that date, Advanced Facilities wrote to the First Claimant as the appointed Global Agent for the Syndicate in the following terms:
“We refer to our facility agreement signed on 27 December 2018, we are extremely grateful for the participating banks for the successful closure of the syndicate. We would like to update you on the current situation and seek your assistance to support our on-going business.
As discussed, while closing the syndication we made a technical mistake by assigning all of our projects to syndicate instead of the agreed 70% of the project (only three projects remain outside syndication). On top of that we overlooked the working capital requirements of the project that are assigned to the Syndicate. As of now we are experiencing delays in the collection of receivables from the clients especially Government entities. Due to the lack of necessary working capital lines our syndication cash flows are under stress.
Based upon our internal analysis, we are requiring following immediate assistance from the major participating banks to ensure smooth operations:
Funded Facilities: AED 150m
Guarantees/LCs: AED 50m
We have discussed above requirements with all participating banks. We appreciate that everyone has understood requirement and have shown inclination to extend necessary immediate assistance for the mutual benefits of all parties concerned. We request you to put forward this Proposal to all syndicate banks for the arrangement of fresh working capital facility of AED 200 million. To securitise the WC lines, proceeds will be assigned through the collection bank in favour the bank who will discount the invoices.…..”
35. This is a highly significant letter. It raises no complaint about any failure to provide working capital in accordance with any prior statement, collateral agreement, representation, undertaking, promise or guarantee. This letter recognises the validity of the Syndicate Facility Agreements and expresses gratitude for the loans made thereunder, whilst seeking additional assistance above and beyond the terms of those agreements. The letter asserts the existence of the Facility and its conclusion on 27 December 2018 and was sent at a time when the Defendants knew that no working capital was forthcoming from either Noor or the Syndicate as a whole and therefore asked for additional assistance.
36. Furthermore, two further drawdowns under the MMA took place on 30 April 2019 and 30 July 2019 with associated quarterly repayments under the CFA and MMA in both of those months. The drawing on, and repaying sums under, a loan facility constitute affirmation (see Barclays Bank plc v Sviizera Holdings plc  EWHC 1020 (Comm) at ). As appears below, the way in which the Murabaha contracts worked was that separate quarterly Murabaha contracts were concluded under the framework agreement constituted by the MMA with payments flowing in both directions. In each quarter there was a fresh Murabaha contract repayable on the next quarter for an ever decreasing sum, with payments of “profit” for the past quarter representing, in conventional terms, a repayment of interest.
37. On a meeting on 14 May 2019, the Defendants requested the Claimants to provide AED 150 million for working capital. They gave a “status update” on the fulfilment of “condition subsequent”. The minutes of the meeting state that “all banks unanimously agreed to provide approval for an aggregate of AED 150M WC limits by May 31, 2019” but that this “will be released for utilisation once equity infusion of AED 25 M is routed through the account bank”. That equity infusion of AED 25 million was never forthcoming. It is clear that no suggestion was made of any obligation on the Claimants to provide this working capital and, more importantly in the context of the issue under discussion in this section of the Judgment, the Defendants affirmed the existence of the Facility.
38. On 25 July 2019, Advanced Facilities again wrote to the First Claimant as the Global Agent for the Syndicate in the following terms, under the heading “Facilities with yourselves”:
“Firstly, I would like to thank you for your continued support in regards to our ongoing banking relationship and the existing facilities that have been made available to the BBIH group and/or its subsidiaries. As you are aware, the current economic conditions have severely strained the liquidity of many companies in the region and the BBIH LLC group is no exception. A recent lack of working capital facilities being extended to our group companies at this crucial time which has had a spiralling impact on the operations of the company. Given the current issues facing the group, BBIH has very recently appointed Deloitte to support in the financial restructuring of the Group’s liabilities through the preparation of an independent business review as well as financial restructuring business plan for the group. This will provide restructuring options in regard to the existing facilities.
Given that the business plan is expected to be ready by end of September, we are committed to maintaining an open dialogue and keeping you informed of our progress and BBIH would like to thank you for your continued patience at this important time for the Group.”
39. Once again, the Defendants were recognising the validity of the Facility and expressing gratitude for it, not complaining about any failure to provide working capital and not in any way seeking to rescind or terminate the Syndicated Facility Agreements. What the Defendants were doing was to explain why they were in no position to make any repayment under the Facility. When Deloitte produced their report, it noted that whilst the BBIH Group had desired to raise working capital in the syndication, “no additional working capital was secured”. Contrary to the Defendant’s submission, that does not connote that any agreement was reached for such provision that was not forthcoming but that efforts had been made to obtain working capital without any agreement to that effect.
40. Despite the notices of default served on 10 October 2019 and 10 December 2019, the failure to pay sums due for the third quarter 2019 under the CFA or the MMA on 31 October 2019, and the notice of acceleration on 3 February 2020, at no point prior to the Defence and Counterclaim did the Defendants ever mention any question of termination or rescission or any grounds to do so, when they must, self-evidently, have been aware of the absence of provision of working capital by Noor or the Syndicate throughout the whole of that time.
41. The Defendants contended that these events did not amount to any affirmation because there is a need for an electing party to know of his legal right to choose between the alternatives open to him. At paragraph 4 of the Chairman’s witness statement, he says that he is “not familiar with legal concepts such as how rescission for duress or misrepresentation operate under English law”. What he does not say however is that he was unaware of any right to rescind or terminate on the ground of duress, misrepresentation or breach of contract, as opposed to how the concepts operated. Moreover, it is the knowledge of the Defendants which counts, not that of the Chairman as such. The idea that there was ignorance in the group of any right to rescind or terminate on the alleged grounds of complaint is, to my mind, fanciful, particularly given the ability to take legal advice and the presence of a General Counsel employed by the BBIH group, as referred to in paragraph 51 of the Chairman’s witness statement, who relayed to him what had occurred at a meeting in March 2019 with the Claimants. The notion that the Defendants, throughout the whole of the relevant period were unaware of their rights to terminate or rescind, where, on this hypothesis, they knew of the wrongdoing committed by Noor, strains credibility beyond all bounds.
42. The other explanation offered in the Defendants’ skeleton argument is that there was no express affirmation of the Facility and that throughout the relevant period the Claimants kept stringing the BBIH Group along with repeated promises of working capital which never eventuated. Reliance is placed upon the Chairman’s witness statement in this regard. He says that he was relayed accounts by his employees, including the BBIH Group’s general counsel, of promises made of working capital which was never forthcoming. The says that whenever he met with the banks, he would complain about the failure to provide working capital and the Claimants’ refusal to release operational funds from the revenue being routed through their collection account. None of this meets the point however. The reality is that the willingness of the Syndicate to provide further finance was always dependent upon the Chairman providing further equity as well, as is seen from the minutes of the meeting of 14 May 2019 and there is no evidence of any complaint at any time that the Claimants were in breach of any obligation of any sort. On the contrary, as appears from the material set out above, the Defendants positively affirmed the existence of the Syndicated Facility Agreements in the full knowledge that no working capital had ever been provided, by making payments thereunder, entering into fresh Murabaha Agreements and expressing gratitude for the patience extended by the Claimants in relation to the Facility.
43. Once again, assuming the truth of the Defendants’ case about the meeting of 16 December 2018, there are insuperable barriers for the Defendants in making good their case on duress. The first and most obvious is that there is a logical flaw in the case as put. The evidence of the Chairman is that, at the time of that meeting, the BBIH Group was under extreme financial pressure and he needed to do what it took to ensure it would survive. On his version of events, Noor was threatening to derail the syndication, by not participating in it and providing a loan, if it was not given security by OBN in place of the security on the Mojumaat labour camp which it then held in relation to the bridging loan which was to be superseded by the Facility. If Noor had to share that latter security with the other syndicate banks, its exposure would be too high. Furthermore, on his evidence, Noor was promising to provide AED 100m as the working capital that the business needed to survive if the OBN security was provided. “In those circumstances I had no choice but to accept the terms and agreed to provide them a mortgage over OBN.” It is not the Facility into which he says he was forced to enter, but the agreement to provide the OBN security.
44. It is accepted by the Defendants that, as the law now stands, in order to establish a case of duress, they must show an illegitimate unlawful threat. A threat not to enter into a contract is lawful because there can be no obligation to contract. The Defendants plead in paragraph 66 of their Defence and Counterclaim that Noor was in breach of its duty to other proposed lenders in seeking and obtaining security for itself, as opposed to the Syndicate. More significantly, it is also alleged that Noor was in breach of its obligation to the Defendants to use its best efforts to arrange and manage the proposed syndication. Both duties are said to arise under the IMLA Letter, but for the reasons already given, there could be no duties owed to the Syndicate which was not yet in existence at that time and Noor was engaged by the BBIH Group on the terms of that letter. The Letter itself provided that “nothing in this letter constitutes a commitment by the IMLA to provide any financing”. In such circumstances, where it had no obligation to provide financing at all, there could be no unlawfulness in requesting security as a condition of entering into a loan commitment. The notion that the obligation to use best endeavours to arrange and manage primary syndication of the proposed Facility required Noor to lend flies in the face of the express term in the Letter which immediately follows. Regardless of the debate as to whether a party which has contracted to use its best efforts is entitled to take account of its own legitimate interests, in this case it could not be said that Noor was bound to enter into a loan itself and therefore there could be nothing unlawful in imposing a condition for so doing.
45. The fact that Noor’s participation was needed as a lender to make the syndicate work, in order to raise the total AED 1.75 billion syndicated loan does not change that. Noor was entitled to insist on a bilateral security provision as a condition of lending which meant that the threat not to participate without such security was lawful.
46. As stated above, there is moreover a logical fallacy in the Defendants’ position. The Defendants, who always wanted to enter into the Syndicated Facility Agreements were, on their case, forced into giving security over the OBN assets. In paragraph 131 of the Defence and Counterclaim it is pleaded that, but for the threat, the Defendants would not have entered into the OBN security transaction but would have concluded the Syndicated Facility Agreements without having to give that security to Noor. They say that that if they had not entered into the Facility, they would have entered into “a syndicate facility agreement on similar terms without the obligation to procure that security be provided in relation to OBN”. In those circumstances, their case must necessarily be that they were duressed/ forced into the provision of the security over the OBN assets, not that they were compelled to conclude the Syndicated Facility Agreement, which was what they wished to do without granting the OBN mortgage. It is the provision of the security which is the subject of the duress, not the Syndicated Facility Agreements. Any true duress of the kind alleged would therefore have the effect of entitling them to rescind the security agreement but not the Syndicated Facility agreement: yet they contend that they are entitled to rescind the latter. Without the demand for security, the Defendants would have entered into the Facility in any event and been liable under its terms. This is not a case where the two transactions were so intimately connected that one cannot be rescinded without rescinding the other, unlike Marme Inversiones 2007 SL v Natwest Markets plc and others  EWHC 366 Comm, where it was a term of the loans that the swaps be concluded, so that one could not have existed without the other. They formed part of an overall single transaction so that partial rescission of one without the other was not possible. Here however the connection is different since it is alleged that Noor insisted on a separate security transaction for itself as a precondition of participating in the multipartite Syndicated Facility Agreements. The two were not a single transaction in circumstances where Noor wasacting as agent for the other Claimants in relation to the demand for the security.
Misrepresentation/ Collateral Contract.
47. The Chairman’s material evidence in relation to the meeting of 16 December 2018 is to be found at paragraphs 40 – 47 of his witness statement. He accepted that Noor had stated that it wanted to reduce its exposure and did not want to proceed with the syndication at the level proposed for it (AED 500 million) without additional security for itself, stating that it “would only proceed with the syndication if they were provided security over OBN”. The following then appears at paragraphs 42 – 43:
“42. Noor Bank stated that they would arrange for AED 350 million in working capital to be advanced to the BBIH Group by the syndicate after the syndication was closed, if we provided the syndicate security over OBN so that they could proceed. In response I asked for AED 450 million. Noor Bank said that they would try to arrange for up to AED 450 million, to be advanced by the syndicate banks. As set out above, they indicated the other banks would support this.
43. Crucially they also said that even if the full AED 450 m was not arranged they guaranteed to provide a minimum of AED 100m in working capital by March 2019 at the latest. It is important to emphasise that this was not something they stated they would merely consider, but something they said they would do. I would not have been satisfied with mortgaging OBN on a promise to consider something that could just fall through.”
48. In the Defence and Counterclaim, at paragraph 72, this is pleaded as a misrepresentation. It is said that the statement made by an unnamed representative of Noor that, in the event that security in respect of OBN was provided in favour of Noor, it guaranteed that it would provide working capital to the BBIH Group, carried with it an implied representation that Noor had reasonable grounds for making it. This is described as “the OBN Working Capital Representation”. I raised the question of this characterisation with Counsel. On the face of it, what the Chairman is saying in his witness statement is that a promise was made by the unnamed representative of Noor to provide a minimum of AED 100 million in working capital. There was no representation of fact or opinion or of any state of mind. It was a promise, said to be a “guarantee” of such provision. It was not a statement or prediction of something which would happen in the future but an undertaking to provide working capital which either bound or did not bind Noor. This is not a case where a party was saying that events would occur in the future over which it had no control but where it was providing assurance of something it would do. I do not find any assistance in the authorities cited to me on the subject and am unable to see exactly what statement of fact or future fact was the subject of any representation.
49. There is in truth, no room for a case in negligent misrepresentation on the alleged facts. Counsel for the Defendants accepted that the internal documents of Noor showed that they had no intention of advancing further sums to the Defendants but were intent upon reducing their exposure from AED 500 million to AED 250 million, as appears in the draft side letters to which reference is made in a later section of this judgment. The plea must therefore be, insofar as what was said can be characterised as a representation at all, one of fraud. That plea could not be made and was not made.
50. In Inntreprenneur Pub Company Limited v East at Crown Limited  2 Lloyd’s Rep 611 at 615, Lightman J summarised the principles upon which a collateral contract might be established. At paragraph 10 he set them out as follows:
“(1) a pre--contractual statement will only be treated as having contractual effect if the evidence shows that parties intended this to be the case. Intention is a question of fact be decided by looking at the totality of the evidence;
(2) the test is the ordinary objective test for the formation of a contract; what is relevant is not the subjective thought of one party but what a reasonable outside observer would infer from all the circumstances;
(3) in deciding the question of intention, one important consideration will be whether the statement is followed by further negotiations and a written contract not containing any term corresponding to the statement. In such a case, it will be harder to infer that the statement was intended to have contractual effect because the prima facie assumption will be that the written contract includes all the terms the parties wanted to be binding between them;
(4) a further important factor will be the lapse of time between the statement and the making of the formal contract.The longer the interval, the greater the presumption must be that the parties did not intend the statement to have contractual effect in relation to a subsequent deal;
(5) a representation of fact is much more likely to be intended to have contractual effect than a statement of future fact or a future forecast.”
51. As I have already decided that there is no room for the argument that Noor acted as agent for the other Claimants in saying whatever it did say at the 16 December 2018 meeting, any misrepresentation or contract could give rise to liability on its part alone. The fact that the Facility Documents make no provision at all for a loan of working capital militates further against the suggestion of any collateral contract with the Claimants other than Noor. The absence of any terms agreed in relation to the rate of interest, the period of the loan of working capital, the exact amount, the time when it would be provided and the security for it, other than the OBN security which the Chairman, in his witness statement said was to be provided to the syndicate, rather than to Noor, renders any promise on Noor’s part too uncertain to be enforceable as a contract.
52. A bare statement that AED 100 million would be provided as working capital, without more is too uncertain to constitute a binding and enforceable contract because there are no terms upon which such working capital is to be provided. Any proposal would necessarily be subject to negotiation of detailed terms relating to the period of loan, the interest rates applicable, the terms of repayment and security, insofar as that was not agreed in relation to the OBN assets. Notwithstanding the Chairman’s statements to the contrary in his witness statement, he must have understood that any agreement to make a loan, in accordance with all of his prior experience, including his dealings with Noor, had to be the subject of approval by a credit committee at the bank and a formal offer in writing. An in- principle agreement to advance such a sum could not be binding absent agreement on the detailed terms.
53. The Claimants said that, if any such statement had been made, which was capable of constituting a representation, “the underlying principle of the doctrine of misrepresentation is that the statement must be one on which the party to whom it was made must be entitled to rely”, citing authority to that effect. The proposition was accepted by Counsel for the Defendant. The same points arise here as in relation to the alternative argument raised by the Defendants that this did constitute a collateral contract. Without specificity of that kind, a statement that such a sum would be provided, if capable of amounting to a representation, could not be one upon which the recipient was entitled to rely, because of the need for agreement on the details.
54. The parties’ subsequent conduct is inconsistent with the conclusion of a binding collateral contract at the meeting on 16 December 2018 or of a representation for which Noor could be liable. The parties exchanged draft agreements and continued to negotiate, including draft side letters which made no mention of this point.
55. As to actual reliance, even on the Defendants’ case, the reliance consisted of providing the OBN security and not the entry into the Syndicated Facility Agreements.
The 16 December 2018 meeting
56. I have also come to the conclusion, after some hesitation, that, notwithstanding the Chairman’s witness statement and the warnings contained in the authorities about conducting a mini-trial on documents, I cannot accept at face value what the Chairman says about the meeting of 16 December 2018 because it is wholly inconsistent with all the contemporary documents. I do not accept that the evidence of Mr Ali is implausible, backed up as it is both by documents passing between Noor and the Defendants and internal documents at Noor. The inconsistencies and vagueness in the evidence of the Chairman when seen against the history of events both prior to and after the meeting mean that his evidence lacks all credibility.
57. It is not necessary for me to go through all the documents to which I was referred by the parties in the course of the hearing but the essential point which emerges is that the exchanges between the parties immediately following the meeting of 16 December 2018, stating what was agreed at that meeting tally with the evidence of Mr Ali and are inconsistent with the evidence of the Chairman. What the parties envisaged, as revealed by emails emanating both from Noor and the Defendants, was the execution of side letters recording the agreement reached at that meeting. No reference was made in those exchanges or draft side letters to any provision of working capital by Noor or the Claimants and documents which contain any reference to the Defendants obtaining working capital support the case made by the Claimants that this was left as a matter to be negotiated bilaterally by the Defendants with individual banks, both within and outside the Syndicate.
58. The evidence is that in early 2018, the BBIH Group approached Noor about the possibility of obtaining substantial finance for the purpose of refinancing existing indebtedness across the Group. On 3 May 2018 Mr Vig, the CFO of the BBIH Group emailed Mr Khan and Mr Naqvi of Noor, sending an information memorandum, a draft term sheet and a proposed financial model setting out proposals to restructure the existing indebtedness through new facilities. At that stage the BBIH Group was looking for AED 1.7 billion repayable over seven years and an AED 300 million working capital facility. There were exchanges about BBIH Group’s earnings and assets, including material from Deloitte and on 3 June 2018 Mr Khan emailed Mr Ejaz asking about the requirements for working capital and the type of working capital facilities sought.
59. Between June and August 2018, the Term Sheet for a syndicated loan was being negotiated. A credit application to Noor’s internal credit committee was made following a request from the BBIH Group for a bridging facility until such a Syndicated Loan could be obtained. The terms of the bridging facility for AED 500 million was the subject of negotiation, with security to be given over the Mojoumaat Camp. At that stage the syndicated loan under discussion was a AED 2 billion facility of which AED 300 million would take the form of revolving working capital facilities. Noor’s internal documents revealed the plan for the bridging loan to be repaid out of the projected syndicate loan in which Noor was to participate to the extent of the lesser sum of AED 250 million. In the event that insufficient syndicated lending could be raised, the bridging facility was to be repaid through a nine-year bilateral term facility granted by Noor, backed by the assignment of leasehold rights in the Mojoumaat Camp. There was a degree of confidence in Noor about achieving an AED 2 billion facility because of the absence of security or the limited security that had been made available to existing lenders who, it was thought, would readily sign up to a restructuring of the loan with the benefit of greater security.
60. On 1 August 2018, Noor offered terms for the bridging facility and the IMLA Letter, both of which were accepted by the BBIH Group on 3 August 2018. In the latter, the “Facility” was defined as “up to AED 1,750,000,000”. On 30 September 2018, the bridging facility documents were executed, security provided over the labour camp and on the same day NBB Establishment drew down AED 400 million.
61. The BBIH Group wanted to raise working capital in the syndicated loan but Noor did not agree to raise it. There were exchanges of a draft term sheet in which the BBIH group persistently sought to include working capital and Noor removed it. Noor’s position appears in an email from Mr Khan dated 9 September 2018 in which he pointed out that “the discussion we have heard earlier was for AED 1.7 bn Syndicate (Mainly for Term Exposure) while understanding that the WC limits would be continued by existing Banks or arranged by you on Bilateral Basis, following BBIH’s amendment of the draft term sheet with the suggestion that working capital and guarantee limit should be part of the syndication deal.” This was then agreed by Mr Ejaz for the BBIH Group but further efforts were made to include a provision for working capital, which Noor continued to resist. The final agreed Indicative Term Sheet referred to a figure of AED 1.85 million, the purpose of which was expressed to be the repayment of all amounts outstanding under existing facilities, the funding of the Facility Service Reserve Account and the payment of Facility related fees, costs and expenses. Working capital was not included and the only reference appeared in the financial covenants where BBIH Group agreed that working capital financing was not to exceed AED 500 million. It was this Term Sheet that was sent out to prospective participating banks. The documents put before the court showing offers from the First and Sixth Claimants do not make any offer of working capital but different approaches to the amount of working capital that could be raised outside the Syndicate Loan.
62. The Defendants placed reliance on an email exchange on 30 September 2018 in which Mr Ejaz of BBIH Group asked Mr Khan to “update us on working capital mechanism”. The email went on: “it’s must, otherwise the whole syndication effort will go useless”. The response from Mr Khan was: “let’s have that sorted tomorrow”. When seen in context this has nothing whatever to do with the provision of working capital by Noor as part of the Syndicated Loan. What it relates to is the debate about what total sums the BBIH Group were to be permitted, by the covenants in the Finance Documents, to raise by way of working capital outside the Syndicate Loan. Different limits had been discussed, including figures of AED 500 million and AED 350 million. By this stage it was abundantly from the agreed Term Sheet and the exchanges between Noor and the BBIH Group that there was to be no working capital facility within the Syndicate Loan.
63. On 10 and 13 December 2018, Noor internal documents show that Noor had obtained commitments from participants to an AED 1.749 billion syndicated loan. This included AED 500 million from Noor, which it wished to reduce to AED 250 million after the closure of the syndicate by sale in the secondary market with additional security, in the shape of OBN assets, for participation at the higher figure until that reduction could be achieved. What the documents also show is the expectation that other banks outside the Syndicate would maintain bilateral loans for working capital and that the Chairman had undertaken to inject AED 100 million equity, of which AED 40 million would be provided prior to the syndication and the balance by March 2019 in order to pay off these banks, whilst Noor had negotiated security for this undertaking in the shape of a pledge of shares in a company he owned called Gulfa.
64. It was in this context that the meeting took place on 16 December 2018 attended by Mr Ali with three other representatives on behalf of Noor and on behalf of the BBIH Group, its Chairman, CEO and CFO. OBN was not owned by BBIH and part of the group as such, being separately owned by the Chairman, whose statement revealed his annoyance at the CEO and CFO offering security over its assets as part of the proposed deal. That appears to have been the reason for the Chairman’s presence at the meeting which he travelled to attend. Mr Ali’s evidence was that the Noor representatives stated that Noor had to reduce its exposure from AED 500 million to AED 250 million and that the syndication process had not achieved the AED 1.85 billion target. If Noor only participated at AED 250 million, there would not be enough money to refinance BBIH Group’s existing term facilities, including the bridge facilities and that, in those circumstances, the syndication could not proceed. However, if security was given over the assets of OBN, Noor would be prepared to participate to the extent of AED 500 million and the syndication could proceed. The Chairman then agreed that OBN assets could be mortgaged to Noor until its exposure was reduced to the AED 250 million envisaged. Mr Ali’s evidence was that there was no discussion about working capital at this meeting and he understood the BBIH Group to be in discussion with other lenders for this who had provided existing working capital facilities. There was no contemplation that Noor would lend more money by way of working capital when its intention was to reduce its exposure and a fresh credit application and authorisation from the credit committee would have been required for that purpose. There was also discussion about the Chairman’s promise to inject AED 100 million in equity finance and a reminder given of his agreement to provide security over the shares in Gulfa until that happened.
65. I have already recited the main paragraphs in the evidence of the Chairman on the critical allegations made by the Defendants. The following should however be noted:
65.1. the Chairman does not identify the individual who made any of the alleged statements on behalf of Noor to which he refers. For a critical matter of this kind, it is inconceivable that he would not remember who had made such an important commitment and name that person in his witness statement, if a commitment of this kind had been made.
65.2. Whilst saying that he does not agree that any agreement to provide working capital in exchange for a mortgage over OBN could only have been reached in writing, he says that it is common for him to make deals by a handshake “although I would then expect my team to subsequently record them in writing”. His CEO and CFO were present and there is no subsequent record of any such agreement.
65.3. There is inconsistency in his evidence as to whether or not the security to be given over the OBN assets was to be given to Noor alone or the Syndicate as a whole. The logic of the deal which he suggests was made is that it should be provided to Noor only, but at paragraph 47 he says that he understood that he was giving them the mortgage in their capacity as lead bank of the syndication. By this time however the draft syndicate documentation shows that the First Claimant had taken over the position as lead bank from Noor.
65.4. He accepts that he was told that Noor wished to reduce its exposure and did not want to proceed with the syndication with a participation at AED 500 million and required security over OBN because of the release of the Labour camp security to the Syndicate.
66. Whatever was agreed at that meeting, it was inevitable, that it would be recorded in writing in one way or another in exchanges between Noor and the BBIH Group. Whilst high level in- principle deals may be made orally, there is no way in which an agreement to give a loan and the terms of it would not be put in writing. Without such terms, neither party could have any genuine commitment. On 17 December 2018, Mr Khan sent Mr Vig an email in which he recorded the agreement to the creation of a mortgage/lease assignment over OBN assets and the pledging of the Gulfa shares, whilst seeking documents and details for the implementation of that security. No mention is made of any possibility of a loan of working capital. On the same day Mr Vig agreed to their provision, whilst looking for closure of the Syndication Documents on 20 December 2018. On 24 December 2018, Mr Padihyar, copying in Mr Vig and Mr Mustafa, both of whom were present at the meeting sent an email which set out what he understood had been agreed.
“During your meeting with our Group CEO and Group CFO, we have agreed on the following:
1. to offer mortgage on our OBN facility in Hamriya Free Zone as an additional security to support Noor Bank existing loan exposure at Advanced Facilities Management. Noor bank will release the charge on the OBN Facility if it is able to sell down its partial exposure by 31 March 2019.
2. To pledge our shares in Gulfa, subject to bringing the fresh equity of AED 70m in the business by 31 March 2019. Noor Bank will release the pledge on shares immediately on satisfaction of the agreed equity infusion
Noor Bank to share the draft side agreement in line with above for our review. As agreed, we will proceed with above mortgage of assets and pledge of shares to enable facility documents signed off by tomorrow.
67. There were exchanges in December and January between Noor and BBIH Group of draft side letters to record these agreed matters, with a difference as to whether there was any time limit for the reduction in Noor’s exposure to AED 250 million. Those side letters were never executed but, subject to the attempt by the BBIH Group to set different limits on the release of the OBN security by increasing the level at which it was to be released to AED 350 million to be achieved by 31 March, when no time limit had been agreed for reduction to AED 250 million, they reflect the agreement which Mr Ali says was reached on 16 December 2018. The Defendants have no sensible explanation for these side letters nor for the exchanges immediately following the meeting to which I have just referred in which reference is made to all the matters which Mr Ali says were agreed and no mention is made of any agreement to provide working capital in any of the exchanges. It is inconceivable, in circumstances where side agreements were contemplated to enshrine what was agreed at the meeting, that, if any agreement was reached as to the provision of working capital, there was no attempt to record it on the part of either the BBIH Group or Noor.
68. The security documents for the OBN assets were signed on 25 December 2018 in favour of Noor alone and not as part of the syndicate security. As the Chairman did not inject the equity promised nor provide the pledge of the Gulfa shares and the OBN assets had been provided by way of security, neither party pressed for any further documentation of what had been agreed and recorded as agreed.
69. On 15 January 2019, the Facility was amended by an Amendment Letter, under which the conventional lending was increased. That Amendment Letter recorded an agreement by all the Defendants that the Facility remained “in full force and effect”. On 21 January 2019, Advanced Facilities drew down all the conventional lending under the CFA and concluded the First Murabaha contract under the MMA.
70. On 27 March 2019, Advanced Facilities wrote to the First Claimant as Global Facility Agent with its request to provide working capital, as set out earlier in this Judgment. It was in that letter that it said that it had made a mistake in not obtaining working capital during the syndication. On the day before the hearing, the Defendants produced further correspondence which related to a request made to the Fourth Claimant for a bilateral Working Capital Loan. In the email from the BBIH Group to the Fourth Claimant, Mr Ejaz made reference to overlooking the working capital requirements of the 70% projects that were assigned to the Syndicate, stating that cash flows were under stress and that the Group was currently in communication with majority Syndication banks for the arrangement of working capital lines for the 70% of projects that were assigned to the Syndicate. The Defendants relied upon an internal email from Mr Vig to Mr Ejaz, saying that “we did not overlook the working capital requirement, our understanding has always been to get working capital after the closure of the syndicate bilaterally. It was a mechanism that needed to be finalised. Borrowing agreement talks about Dh350ml of working capital lines which can’t be supported by 30% of the business”. This does not assist the Defendants since it supports the case of the Claimants that working capital was to be found outside the terms of the Facility by approaching banks for bilateral agreements, whether individual members of the Syndicate, the Syndicate as a whole or other banks. On the documents available, no approaches were made to Noor during this period until this letter.
71. As previously mentioned, there is no email or letter in which the Defendants complain to Noor, nor to the Syndicate, of any failure to provide working capital and, had there been an agreement of the kind suggested by the Defendants, they would have referred Noor and the Syndicate to it when seeking working capital, rather than simply coming cap in hand with bare requests as they actually did at the end of March.
72. All the documents speak with one voice, whether internal to Noor or crossing the line between Noor and the BBIH Group. They reveal that Mr Ali’s evidence is accurate as to what was agreed at the meeting of 16 December 2018 and that the Chairman’s witness statement is inaccurate and cannot be credited. In my judgment, therefore, the Defendants have no realistic prospects of success in establishing that, at that meeting on 16 December 2018, any promise, statement, undertaking or guarantee was made on the part of Noor to provide working capital to the BBIH Group.
73. In these circumstances, there is no reason to think that anything might “turn up” in disclosure which could alter the position at trial or that the Defendants could obtain evidence from its ex- employees to assist, when they have not been prepared to assist thus far. Those employees who were present at the meeting, the CEO and CFO were copied in to the correspondence from Mr Padihyar who could only have received his instructions as to what was agreed from one of them of the Chairman himself.
74. The effect of this is that the Defendants have no defence to the claims for immediate judgment made by the Claimants apart from the defences raised in relation to the Islamic Facility and the alleged non-compliance with Sharia.
The Sharia Defence
75. The Defendants submit that the MMA should be construed as incorporating the AAOIFI Sharia Standards, that the MMA does not comply with those standards and that it is therefore a nullity. The Defendants also submit that by reason of Registrar’s Direction No. 3 of 2017- Expert Evidence of Sharia Law in the DIFC Courts, this court cannot reach any decision about Sharia law without the benefit of expert evidence.
76. The Registrar’s Direction provides:
“Where the requirements of Sharia law are relevant to a matter before the DIFC Courts, these are to be established as a matter of expert evidence and RDC Part 31 applies to the parties who seek to place such evidence before the Court in any particular hearing.”
77. There was discussion as to the status of this Direction since there is DIFC Court of Appeal authority in Fidel v Felecia  DIFC CA 002 at  that the DIFC Courts are not restricted to applying only English common law or even DIFC law. The DIFC Courts are not bound to treat foreign law as a fact to be proved as such and the approach adopted in international courts and arbitration should be applied to questions of non-DIFC UAE law before the DIFC courts, with a discretion given to the judge (who in the DIFC might well be qualified in UAE law) to determine matters on the basis of the parties’ submissions or by reference to expert evidence.
78. I am satisfied that there is no bar on the DIFC Courts deciding issues of Sharia law by reason of the Registrar’s Direction. The Direction is not a Rule of Court or even a Practice Direction and the only reference to a registrar’s direction in the RDC appears at RDC 56.7 in relation to construction and technology cases. The context of the Direction, as appears from its terms, is the situation where the DIFC Courts are asked to give their opinion, advice and direction about whether or not any matter concerning a trust conforms to Sharia principles. The Court of Appeal decision is not superseded by the Registrar’s Direction.
79. I am satisfied that no difficult issues of Sharia law arise in this case where I would feel the need for expert evidence and the absence of any such evidence from either party has not placed me at any disadvantage in determining the issues which matter in relation to this defence.
80. The starting point must be that the MMA is governed by English law. That is the law which applies therefore to issues of construction of it and the first question which is raised by the defendants is, as is accepted, a question of construction, namely whether Sharia principles are incorporated into the MMA.
81. Recital C to the MMA states:
“Under the Islamic Facility the Investment Agent will purchase Commodities and sell them to the Purchaser at the cost price together with a profit element on a deferred payment basis, with title passing immediately to the purchaser, all in accordance with the Sharia.”
82. Recital D to the MMA states:
“Each Party has independently reviewed the Islamic Finance Documents for the purpose of ensuring their compliance with the Sharia, and is satisfied that they do so comply.”
83. The effect of these two Recitals is not, in my judgment to incorporate the AAOIFI Standards into the Loan Documentation but to recite the agreed position. The Standards regulate the issue of banking products by Islamic banks. Recital C recites what it is that is to be done under the MMA itself of by way of individual Murabaha contracts which are to be in accordance with the Sharia. Recital D provides that the Parties are satisfied that there is compliance with the Sharia and each is therefore estopped by that recital from contending otherwise.
84. Furthermore, clause 13 of the MMA provides:
“The Purchaser [Advanced Facilities] waives any defences he might otherwise have in any jurisdiction based on the non-compliance of the Islamic Finance Documents with the Sharia. This waiver applies irrespective of any provision of a Islamic Finance Documents to the contrary”.
85. Moreover, the CTA provided, at clause 17, that each of the guarantors, the 2nd to 9th Defendants, represented and warranted that:
“it does not have any objections, nor will it raise any objections, as to matters of Sharia compliance in respect of or otherwise in relation to any of the provisions of the Islamic Finance Documents.”
86. As a matter of English law which governs the MMA and CTA, such waivers are fully effective, consistent with Recital D of the MMA.
87. The MMA defines “Sharia” as “the rules, principles and parameters of Islamic law”. There is no reference anywhere in the MMA to the AAOIFI Standards and it cannot be said that they are therefore incorporated in it. The Defendants contend that UAE banks are required by the Central Bank Regulations to comply with those Standards but, regardless of that, that would not amount to incorporation of the Standards in the MMA as a matter of English law. The oddity about the Defendants’ contention is that, although the parties have agreed that the Finance Documents comply with Sharia and cannot therefore say otherwise, the effect of their submissions is that the Islamic Facility is a nullity. That is inherently uncommercial and no authority is in adduced to support the proposition that either a Finance Document which does not comply with the Standards is a nullity or that an agreement of the kind set out in the waiver clauses and recital D is a nullity, whether as a matter of public policy or otherwise in contractual documents governed by English law.
88. As a matter of English law, therefore, the defences based upon alleged breaches of Sharia cannot run.
89. Under Article 17 (1) of Decretal Federal Law No. 14 of 2018 Regarding the Central Bank (the 2018 Banking Law), the Higher Sharia Authority of the Central Bank was established to “determine the rules, standards and general principles applicable to Sharia-compliant businesses and Licensed Financial Activities and shall undertake supervision and oversight of the internal Sharia Supervisory committees of Licensed Financial Institutions, referred to in Article 79 of this decretal law.”
90. On 4 July 2018, the Higher Sharia Authority issued Resolution No. 18/3/2018; The HSA Resolution Regarding the Adoption of AAOIFI Sharia Standards. Article 1 of the Resolution states:
“The Sharia Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) shall be binding on the Internal Sharia Control Committees (ISCC) of the Financial Institutions that perform all or part of their activities in accordance with Islamic Sharia Rules (IFIs) from 1/9/2018 onwards.
These Sharia standards represent the minimum Sharia requirements for IFIs in all their activities and operations without exception. This is applicable for all existing AAOIFI Sharia standards and standards that will be amended or issued by AAOIFI.
The ISCCs must comply with these Sharia standards in all of their Fatwa issuance and adoption, approvals, and recommendations in any form”.
91. It is submitted by the Defendants that when a licensed financial institution in the UAE provides Islamic financing, it is bound through its ISCC to ensure that such financing complies with the AAOIFI Standards. This is essentially a regulatory standard. What the Defendants do not take into account is paragraph 2 of the Resolution which provides that the products, activities and services adopted and currently used by IFIs should be revised in accordance with the AAOIFI Standards by 31 December 2020. Nor do they take account of paragraph 3 which states that IFIs are required to submit details of their required revision plans to the Secretariat of HSA no later than 31 December 2018. It is thus impossible to say that the effect of the Resolution is to nullify Finance Documents which do not meet these Standards since the Resolution provides for a period of time in which to remedy products which have been issued contrary to those standards. Inevitably there will be documents in circulation which do not comply until they have been revised and there is no suggestion that the transactions effected thereby are a nullity. Moreover, it cannot be said that there is a breach of any obligation in concluding an agreement in December 2018 which is inconsistent with those standards because of the periods of grace provided by the Resolution itself for revision of products.
92. There is no difficulty in ascertaining the meaning of the AAOFI Standards pleaded and their application to the facts alleged at paragraphs 104 – 106 of the Defence and Counterclaim. In order to determine these points, I need only ascertain the facts by reference to the breaches as pleaded by the Defendants.
92.1. It is pleaded that, contrary to paragraph 61/2 of Standard 23, Noor purported to enter into the MMA as agent for itself. This is conceptually nonsense. It entered into the MMA as agent for the Seventh Claimant and as principal on its own behalf. The standard is obviously about preventing an Islamic bank from being on both sides of Islamic finance transactions, as is clear from the commentary on the relevant standard.
92.2. It is pleaded that, contrary to paragraph 3/2 of Standard 30, the Islamic Facility to be advanced under the MMA was to be used for the benefit of conventional banks to discharge liabilities owed to them pursuant to interest-based loans. This is factually incorrect. Funds were lent to Advanced Facilities which it used to discharge existing conventional lending on the restructuring of the BBIH Group indebtedness. What is prohibited by Standard 30 is Islamic banks providing Islamic finance directly to conventional banks who use that for interest-based lending. There can therefore be no breach of this Standard.
92.3. It is pleaded that, contrary to paragraphs 4/6 and 4/7 of Standard 8, which require that under a Murabaha contract, the price and the profits be fixed and known to both parties on the signature of the contract of sale, the MMA does not so provide. Paragraph 4/6 states that it is not permitted under any circumstances to subject the determination of the price or the profit to unknown variations or variations that are determinable in the future, such as by concluding the sale and making the profit dependent on the rate of LIBOR that will prevail in the future. Paragraph 4/7 requires that the profit must be known. The fallacy in the Defendant’ case is that the MMA is a framework contract and does not constitute the Murabaha Sale contract itself. The actual Murabaha Sales contracts are concluded quarterly under the framework of the MMA and each includes a specified price and fixed profit. The offer and acceptance document records these which is entirely consistent with the Standard. The fees do not form any part of any such contract, being associated with the MMA and the wider syndication and cannot therefore fall foul of any requirement of Islamic Finance.
93. in these circumstances and for these reasons none of the defences put forward by the Defendants have any realistic prospect of success. Nor do any of the counterclaims have any prospect of success. It was not argued that there was any other compelling reason for a trial, if these defences were found to be unarguable, as I find they are. The Defendants cannot stave off judgment in the hope that something might turn up to provide a defence when each of the defences put forward is not properly arguable. The Claimants are therefore entitled to judgment for sums to be calculated and submitted by the Claimants on the basis of the Finance Documents for a date sufficiently far ahead for any submissions to be made by both parties as to the accuracy of the figures put forward.
94. It appears inevitable that the Claimants will also be entitled to their reasonable costs of the action and a Schedule of Costs should be provided with submissions, to which the Defendants can reply. The Claimants should also provide a draft order in relation to the specific performance claimed as well as the sums of money, interest and costs claimed, so that a final judgment can be issued. The Parties should liaise with the Court to fix a short timetable for all such submissions to be made in writing so that the Court can enter judgment for sums that are agreed as a matter of mathematics on a given date and determine any outstanding issues in dispute.
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