Claim No. CFI 022/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
IDBI BANK LIMITED
Claimant
and
(1) AMIRA C FOODS INTERNATIONAL DMCC
(2) MR KARAN A CHANANA
Defendants
JUDGMENT OF JUSTICE SIR RICHARD FIELD
UPON the Claimant’s Part 8 Claim for the USD$ 6,421,224.71 advanced to the First Defendant under a Facilities Agreement dated 11 August 2014
AND UPON considering the first witness statement of the Second Defendant dated 1 April 2020 and the second witness statement of Mr Bayley dated 16 April 2020
AND UPON considering the judgment of Justice Giles in Claim No.CFI-027-2018 and the judgment of the Court of Appeal in the appeal from the said judgment of Justice Giles
AND UPON reading the Claimant’s skeleton argument dated 5 October 2020 and the Defendants’ skeleton argument dated 10 October 2020
NOW IT IS HEREBY ORDERED THAT:
1. There be judgment for the Claimant in the sum of USD 6,421,224.71.
2. Defendants are to pay the Claimant’s costs of the Part 8 Claim, including the cost of the strike-out application, with such costs to be assessed by the Registrar on the standard basis, if not agreed.
Issued by:
Nour Hineidi
Registrar
Date of issue: 30 November 2020
At: 12pm
Introduction
1. This is the Part 8 Claim of the Claimant (the “Bank”) for USD 6,421,224.71, plus interest in respect of advances to the First Defendant (“Amira”) under a written Facilities Agreement dated 11 August 2014 (the “Facilities Agreement”).
2. The principal sum claimed is in respect of the following advances:
(i) USD 1,628,920.27 due in respect of the Overdraft Facility;
(ii) USD 4,134,000.00 due in respect of the Overdraft Facility, alternatively due as an extension of “Buyers Credits”; and
(iii) USD 2,590,000.00 advanced in the form of Buyers Credits (less USD 1,931,695.56 recovered by way of cash collateral and set-off from the Borrower’s current account).
3. The Bank also claims contractual interest which, as at 31 January 2020 had accrued in the sum of USD 1,265,479.58, and which continues to accrue.
4. In addition to seeking judgment against Amira, the Bank seeks judgment in the like sum against the Second Defendant (“Mr Chanana”) under a Guarantee Agreement dated 11 August 2014 (the “Guarantee”).
5. Amira and Mr Chanana do not dispute that the principal sum was advanced to Amira under the Facilities Agreement and, but for the procedural defence referred to herein below, is due to be repaid in accordance with the Facilities Agreement and the Guarantee.
6. The procedural defence put forward by the Defendants takes the form of an application to strike out as an abuse of process on the ground that the present claim is the Bank’s second attempt to recover the sums advanced, the first attempt having failed in earlier proceedings.
7. This procedural defence is based on the so-called rule in Henderson v Henderson (1843) 3 Hare 100 which was approved with refinements by the House of Lords in Johnson v Gore Wood [2002] 2 AC 1. These two decisions were followed and applied by the DIFC Court of Appeal in Al Khorafi v Bank Sarasin Alpen (ME) (in liquidation) [2018] CA 010.
8. In Henderson v Henderson Sir James Wigram said:
“The plea of a res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time”.
9. Lord Bingham in Gore Wood stated the applicable rule as follows:
“The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus, while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances, a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether abuse is justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part play in protecting the interests of justice.”
(At p. 31)
10. Earlier in his judgment, Lord Bingham explained the raison d’être for rule as follows:
“… Henderson v. Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole”.
11. Lord Millett said this in Gore Wood at pp 59-60:
“It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. In Brisbane City Council v Attorney General for Queensland [1979] AC 411, 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule in Henderson v Henderson 3 Hare 100 is abuse of process and observed that it ‘ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation’. There is, therefore, only one question to be considered in the present case: whether it was oppressive or otherwise an abuse of process of the court for Mr Johnson to bring his own proceedings against the firm when he could have brought them as part of or at the same time as the company’s action. The question must be determined as at the time when Mr Johnson brought the present proceedings and in the light of everything that had then happened. There is, of course, no doubt that Mr Johnson could have brought his action as part of or at the same time as the company’s action. But it does not at all follow that he should have done so or that his failure to do so renders the present action oppressive to the firm or an abuse of process of the court. As May LJ observed in Manson v Vooght [1999] BPIR 376, 387, it may in a particular case be sensible to advance claims separately. In so far as the so-called rule in Henderson v Henderson suggests that there is a presumption against the bring[ing] of successive actions, I consider that it is a distortion of the true position. The burden should always rest upon the defendant to establish that it is oppressive or an abuse of process for him to be subjected to the second action.”
12. In Al Khorafi, in the course of giving the lead judgment in the Court of Appeal, Justice Sir Jeremy Cooke cited with approval the passages in Lord Bingham’s judgment in Gore Wood set out above in paragraphs 8 and 9.
13. The first time the Bank claimed repayment of the advances sought to be recovered in the present proceedings was in a counterclaim raised in Claim CFI-027-2018 brought by Amira against the Bank for failing, in breach of contract, to pay Amira’s principal supplier of rice, AK Global Business FZE (“AK Global”), USD 4,134,000 pursuant to an irrevocable letter of undertaking which was provided on 11 February 2018, at Amira’s request, by which the Bank undertook to remit funds to AK Global on receipt of funds from Kuwait Flour Mills & Bakeries Co (together, “Kuwait Flour”), one of Amira’s main purchasers of rice supplied by AK Global.
14. On 14 February 2018, the Bank received USD 4,194,000 from Kuwait Flour, as payment for shipments of rice purchased from Amira and Amira sent remittance instructions and appropriate documents to the Bank, requiring it to pay USD 4,134,000 to AK Global in accordance with the terms of the irrevocable letter. However, for reasons that are not altogether clear, the Bank did not do so.
15. In its claim against the Bank, Amira sought large damages to compensate it for the loss that resulted from the Bank’s failure to honour the irrevocable letter of undertaking. Having not received the USD 4,130,000 due it, AK Global ceased to supply rice to Amira which very seriously disrupted Amira’s rice business.
16. The CFI-027-2018 proceedings were tried by Justice Roger Giles. The Bank’s counterclaim was first filed on 10 June 2018 and was amended on 18 September 2018 in order to plead that the sum claimed from Amira was also recoverable against Mr Chanana under the Guarantee.
17. By its counterclaim, the Bank claimed USD 6,421,224.71 plus interest from 1 February 2018 (the “Debt“). It was averred that the Debt was comprised of the following: (i) USD 2,590,000 being the amount due on 26 February 2018 in respect of buyers credits (the “26 February Buyers Credits”) less USD 1,931,695.56 otherwise recovered; and (ii) two amounts due under the overdraft extended to Amira consisting of: (a) USD 4,134,000 being the amount paid by the Bank to AK Global pursuant to an order made by Justice Sir Jeremy Cooke on 16 May 2018 enforcing the irrevocable letter, which sum had been “devolved” to Amira’s overdraft; and (b) USD 1,628,920.27.
18. Clause 14 of the Facilities Agreement provided, inter alia, that on the occurrence of an Event of Default the Bank may by notice in writing to Amira: (a) require the Bank to provide an amount equal to the face of each Letter of Credit and/or Buyer’s Credit to be deposited in the Cash Collateral Account; (b) declare each outstanding amount under each advance to be immediately due and payable whereupon each such outstanding amount(s) shall become so payable together with accrued interest thereon and any other sums owed to the Bank under the Agreement.
19. Amira did not contest the amount claimed. Its primary defence was that the Debt was not payable as at 18 September 2018 when the counterclaim was amended because: (a) notice of an Event of Default under the Facilities Agreement was necessary for the whole Debt to become payable; (b) the only Event of Default on which the Bank could rely, on the evidence and on the pleading of the counterclaim, was failure to pay the 26 February Buyers Credits; (c) that failure was caused by the Bank’s breach in respect of the irrevocable letter; (d) the Bank could not rely on a failure caused by its own breach; (e) therefore, the Debt had not become payable.
20. In paragraph 180 of his judgment, Justice Giles remarked:
“This might be thought a technical defence. The Debt remained unpaid, and if the defence were upheld it could be made payable and recovered by the Bank in fresh proceedings. However, the defence was taken, which I must rule on according to law, there may be other defences available if fresh proceedings are brought”.
21. In the view of Justice Giles, a notice of default had to identify the default in question and the only notice of default served by the Bank that satisfied this requirement was a notice dated 6 June 2018 from the Bank’s lawyers to Amira’s lawyers which identified the event of default as being the failure to pay the 26 February Buyers Credits. The earlier communications relied on by the Bank, namely, the letters dated 27 February, 22 April and 1 May 2018, as well as a number of letters from its lawyers to Amira’s lawyers, were not notices that satisfied the requirement of identifying the Event of Default relied on. Further, in the opinion of Justice Giles, the only Event of Default that had been pleaded by the Bank was the failure to pay the 26 February Buyers Credits.
22. Justice Giles went on to hold that the Bank could not rely on the notice dated 6 June 2018 because Amira’s default in paying the 26 February Buyers Credits was caused by the Bank’s prior breach in failing to pay AK Global under the irrevocable letter of undertaking, and the Bank was not entitled to rely on its own wrongful breach of contract. The Bank’s counterclaim was accordingly dismissed by Justice Giles.
23. The Bank challenged the dismissal of its counterclaim in the Court of Appeal, arguing that it had made demands that gave rise to an entitlement to be paid the entire amount outstanding independent of any Event of Default and that this case had been pleaded and was advanced at the trial. The Court of Appeal gave short shrift to this argument, holding that the only pleaded entitlement to payment of the entire amount was founded on an Event of Default – the failure to pay the 26 February Buyers Credits — and no case founded on entitlement from a mere demand for payment was advanced at trial.
24. In anticipation that its appeal against the dismissal of its counterclaim might not succeed, on 1 March 2020 the Bank issued the Part 8 Claim now before the Court. In these proceedings, the Bank relies on the following fresh demands and notice of an Events of Default:
i. Demands for payment against Amira and Mr Chanana made on 13 February 2020.
ii. A further demand made on 23 February 2020 against Mr Chanana under Clause 3 of the Guarantee.
iii. Notices of Default issued on 23 February 2020 to Amira and Mr Chanana in which the Bank provided notice to them that the non-payment of the sums demanded and accrued interest constituted an Event of Default pursuant to Clause 14.1 of the Facilities Agreement.
The case advanced by the Defendants
25. The Defendants’ principal contention is that from the outset the Bank could and should have pleaded, save in respect of the USD 4,134,000 paid to AK Global on 16 May 2018 pursuant to the order of Justice Sir Jeremy Cooke1, that each of the other sums making up the Debt was re-payable on demand without the need to rely on an Event of Default; and in respect of the USD 4,134,000 paid to AK Global on 16 May 2018, the Bank could have successfully applied to amend its counterclaim to claim for this advance either on the ground that it had it had been “devolved” to the overdraft, or because it had become due on 18 August 2018, 90 days after the payment on the basis that it was an extension of Buyers Credit. It followed, submitted Mr Montagu-Smith QC, the Defendants’ leading counsel, that the present proceedings are an abuse of process in accordance with the decision of the Court of Appeal in Al Khorafi.
1. I.e. after the counterclaim had been issued.
26. Mr Montagu-Smith pointed out that, when faced with Amira’s pleaded defence in respect of the pleaded Event of Default claim that the non-payment was caused by the Bank’s prior breach of contract, counsel for the Bank submitted orally in closing at the trial that the components of the Debt claimed were all repayable on demand and the letters2 to Amira or its lawyers from the Bank or the Bank’s lawyers constituted valid demands for the sums advanced3. As we have seen, that submission was disallowed by Justice Giles because the Bank’s pleaded case rested solely on its Event of Default plea, but it showed, submitted Mr Montagu-Smith, that even at the trial, those representing the Bank appreciated that there they had a good, albeit unpleaded, case, that the whole of the Debt was payable on demand.
2. Dated: 27/5/18; 22/4/18/; 1/5/18; and 13/5/18.
3. In opening, this contention had been disavowed.
27. It was an important part of Mr Montagu-Smith’s submissions that Amira’s defence to the Bank’s Event of Default claim was a defence only to that claim, which was the one claim where a breach was alleged as distinct from a contractual right following a demand. The Bank could not rely on that breach because it had been caused by the Bank in failing to pay out on the irrevocable letter that had led in turn to the failure of a series of rice transactions which, had they eventuated, would have generated the necessary revenue to pay the 26 February Buyers Credits. It was Mr Montagu-Smith’s case that, as a matter of logic, the Bank’s actionable failure to pay out on the irrevocable letter of undertaking did not affect the question of whether the individual sums making up the Debt were due and payable discreetly on their own. The trigger for liability in respect of those individual sums was simply a date which had nothing to do with the Bank’s breach. He argued that it did not follow logically from the fact that a person had been caused to be unable to pay his debts that the debts are extinguished if they exist.
28. Mr Montagu-Smith further contended that if, as it should have done after having seen Amira’s defence served on 4 July 2018 to the Event of Default case, the Bank had applied after 18 August 2018 to amend its counterclaim to plead as an alternative to its Event of Default plea that each of the sums making up the Debt was repayable on demand, there was no good reason to think such an application would have failed. The CFI would have adopted the flexible approach taken by the EWCA in Hendry v Chartsearch Ltd [1998] CLC 1382 and Maridive & Oil Services (SAE) et al v CNA Insurance Company (Europe) Ltd [2002] EWCA Civ 369 that the Court had a general discretion to permit amendment to plead subsequent facts in accordance with the justice of the case. The Bank should not have sat back and waited to see what happened on its primary case and only then, if it lost, seek to advance its alternative case. And if the concluded view now is that an application to amend would have failed because all of the new claims sought to be pleaded arose after the counterclaim was first issued, the Bank’s position post trial and post appeal should not be better than if it had applied to amend and that application was refused.
29. Mr Montagu-Smith went on to contend that the new Part 8 Claim was also abusive according to the guidelines enunciated by the EWCA in Aldi Stores Ltd v WSP Group plc et al [2008] 1 WLR 740, a decision that was followed by the Court of Appeal in Al Khorafi, Justice Sir Jeremy Cooke, who gave the judgment of the Court, saying: “We make it clear that the Aldi principle applies in the DIFC Courts in its full rigour, as in England and Wales”.
30. The background to the Aldi decision is set out in the report of the case as follows:
“By a claim form dated 22 June 2001, the claimant, Aldi Stores Ltd (“Aldi”), brought an action against Holmes Building Ltd (“Holmes”), the main contractor in the building of retail premises at Dallow Road, Luton, for the claimant. Holmes brought Part 20 claims against WSP Group plc, WSP London Ltd and Aspinwall & Co Ltd. On 15 March 2002 judgment on liability was given for the claimant against Holmes, which had gone into administration on 5 February 2002. Interim payments were made to the claimant. At a final hearing of the quantum claim judgment was given for the claimant on 22 May 2003 for £3.31m. After credit was given for payments made, the claimant sought to recover the outstanding sum of £1.79m from the excess layer underwriters. A separate action was brought by B&Q plc in May 2002 against Holmes for damages of £26m for breaches of warranty and negligence in relation to similar damage sustained to their store adjacent to that of Aldi. Holmes issued Part 20 claims against, inter alia, WSP Group plc, WSP London Ltd and Aspinwall & Co Ltd making substantially similar allegations to those in the Aldi action. The B&Q action was eventually compromised in January 2004. By a claim form dated 18 October 2005 Aldi brought an action for damages for breaches of warranty and negligence against the defendants, WSP Group plc, WSP London Ltd and Aspinwall & Co Ltd. The pleaded claim was in similar terms to allegations made against those same parties by Holmes in the Part 20 claims in the earlier actions. The defendants applied to have the claim brought by the claimant on 18 October 2005 struck out. On 15 January 2007 Jackson J struck out the claim as an abuse of process, dismissed the action and refused permission to appeal.”
31. The lead judgment (with which the other members of the court agreed) was given by Thomas LJ (as he then was). In summary, the case made by WSP and Aspinwall that Aldi’s new proceedings were an abuse, was that the allegations in the instant proceedings were essentially the same as those made by Holmes against them in the original actions; there was nothing to prevent Aldi from pursuing those claims in its original action; instead it had pursued its own interests and proceeded against the excess layers insurers, and had delayed for almost two years from when it accepted advice that the claim against excess underwriters was unlikely to succeed when it served the claim form in the new action in February 2006.
32. In paragraph 17 of his judgment, Thomas LJ said:
“I approach the issue on the basis that the claims Aldi wish now to pursue against WSP and Aspinwall could have been brought by Aldi in the original action it brought against Holmes. However, as was made clear in Johnson v Gore Wood & Co [2002] 2 AC 1, the fact that a claim could have been raised in the original action does not mean it is necessarily abusive to raise it in a second action. It is necessary to consider whether in all the circumstances Aldi is abusing the process of the court by seeking to raise the issues it could have raised before.”
33. Thomas LJ then considered the relevant private interest factors in paragraphs 18 – 23 and in paragraphs 24-25 said:
“24. The factors which I have set out are largely the private interest factors. As was made clear in Johnson v Gore Wood & Co, the public interest extends not only to finality and preventing a party being vexed twice, but also to economy and efficiency in litigation. The judge considered that the decision of Aldi not to bring its claims against WSP and Aspinwall in the original action was an abuse or misuse of the process of the TCC. I do not see how the mere fact that this action may require a trial and hence take up judicial time (which could have been saved if Aldi had exercised its right to bring an action in a different way) can make the action impermissible. If an action can be properly brought, it is the duty of the state to provide the necessary resources; the litigant cannot be denied the right to bring a claim (for which he in any event pays under the system which operates in England and Wales) on the basis that he could have acted differently and so made more efficient use of the court’s resources.
25. Furthermore, there is a real public interest in allowing parties a measure of freedom to choose whom they sue in a complex commercial matter and not to give encouragement to bringing a single set of proceedings against a wide range of defendants or to complicate proceedings by cross-claims against parties to the proceedings. That freedom can and should be restricted by appropriate case management.”
34. Having considered the private considerations in play, Thomas LJ concluded in paragraph 27 that, weighing all the factors, the bringing of the subsequent action by Aldi was not a misuse or abuse of the process of the court.
35. It was in paragraphs 29 – 31 that Thomas LJ set out what are now called the “Aldi guidelines”:
“ 29. I also wish to add a word as to the approach that should be adopted if a similar problem arises in the future. In circumstances such as those that arose in this case, the proper course is to raise the issue with the court. Aldi did write to the court, as I have set out … , but not in terms that made it clear what the court was being invited to do. WSP and Aspinwall knew of Aldi’s position and were before the court on numerous occasions; they did nothing to raise it.
30. Parties are sometimes faced with the issue of wishing to pursue other proceedings whilst reserving a right in existing proceedings. Often, no problem arises; in this case, Aldi, WSP and Aspinwall each in truth knew at one time or another between August 2003 and the settlement of the original action in January 2004 that there was a potential problem, but it was never raised with the court. I have already expressed the view that it should have been. The court would, at the very least, have been able to express its view as to the proper use of its resources and on the efficient and economical conduct of the litigation. It may have seen if a way could have been found to determine the issues applicable to Aldi in a manner proportionate to the size of Aldi’s claim and without the very large expenditure that would have been necessary if Aldi had to participate in the trial of the actions. It may be that the court would have said that it was for Aldi to elect whether it wished to pursue its claim in the proceedings, but if it did not, that would be the end of the matter. It might have inquired whether the action against excess underwriters could have been expedited. Whatever might have happened in this case is a matter of speculation.
31. However, for the future, if a similar issue arises in complex commercial multi-party litigation, it must be referred to the court seised of the proceedings. It is plainly not only in the interest of the parties, but also in the public interest and in the interest of the efficient use of court resources that this is done. There can be no excuse for failure to do so in the future.’
36. Mr Montagu-Smith submitted that pursuant to the Aldi guidelines, before advancing the new claim, the Bank should have raised with the court the possibility of it bringing another, alternative claim, as soon as it was aware of that possibility, which should have happened at the outset in respect of the whole claim, save for the USD 4,134,000.00 paid to AK Global, which latter claim should have been raised after 18 August 2018. Otherwise the parties would be unilaterally deciding for themselves in which order issues will be tried, thereby depriving the court of the ability to case manage the proceedings properly.
37. Mr Montagu-Smith next made a point founded on the dismissal by Justice Giles of applications by Amira made a week before the trial date for permission to adduce extensive factual and expert evidence in support of its claim for damages. In Mr Montagu-Smith’s submission, if those applications had succeeded Amira may have had the evidence, the absence of which was the reason why the Court of Appeal reduced the damages of USD 10 million awarded by Justice Giles for damage to Amira’s business reputation to USD 500,000. It was submitted that a strict approach having been taken to Amira’s applications it would be doubly unfair to allow the Bank to go one better and not just introduce new evidence but start a whole new cause of action to establish its claims. The whole purpose of the Henderson v Henderson abuse principles was to extend the effects of res judicata to other claims which should have been brought. Just as Amira is not able to start a fresh action based on that evidence which it was not permitted to adduce because that is a matter of res judicata, so the Henderson principles extend to the Bank’s counterclaims and maintain a parity of position between the parties.
38. Finally, Mr Montagu-Smith argued that if the Bank had informed the Court that it would be bringing another claim if the present claim failed, as it should have done pursuant to the Aldi guidelines, that might have affected the way Justice Giles dealt with Amira’s late applications for permission to adduce further evidence since essentially the reasons the judge gave for refusing the applications were that everything had to be tried together and the trial should come on at the appointed time because expedition was essential.
The case advanced by the Bank
39. It was submitted on behalf of the Bank that: (i) if it had relied on the demands for payment of the sums constituting the Debt, whether on the basis of its original or Amended Counterclaim, or by applying for a yet further amendment, Amira’s defence would have been that its failure to meet those demands was due to the devastating consequences resulting from the Bank’s prior failure to pay out on the irrevocable letter and thus the Bank was entitled to wait until Amira had recovered from those consequences and then issue a new Part 8 Claim; (ii) the longer the Bank might have left it to amend its pleading, the greater was the risk that the Court would refuse the application because of the closeness to the start of the trial; and (iii) the Bank was not obliged to steer a narrow procedural course between the Scylla of seeking to amend too late, and the Charybdis of issuing further demands which would be said to be premature because Amira was continuing to be unable to pay the sums due on account of the negative impact on its business caused by the Bank’s prior breach of contract.
40. In support of submission (i) above, Mr Masefield drew my attention to: (a) a letter from Amira’s then solicitors, Taylor Wessing (“TW”) to the Bank’s solicitors, Allen & Overy (“A&O”), dated 24 May 2018; and (b) a number of averments made in Amira’s Amended Reply and Defence to Counterclaim served on 4 October 2018.
41. In the letter dated 24 May 2018, TW stated that Amira required the Bank to increase the Utilisation Limit and issue a fresh irrevocable undertaking letter to operate for 24 months to allow Amira to recover its ability to carrying on trading.
42. The points made by Mr Masefield on Amira’s Amended Reply and Defence to Counterclaim were:
(1) In paragraph 6 of the Amended Reply, Amira advanced an alternative plea that any debt or breach claimed by the Bank had been caused by the [Bank’s] breach of the Facilities Agreement and the Bank is not entitled to rely on it. [Emphasis supplied].
(2) In paragraphs 22 and 23 of the Amended Defence to Counterclaim it is pleaded that the Bank’s breaches of the Facilities Agreement have had a devastating effect and, as a result, Amira continues to be unable to pay the 26 February Buyers Credits and the USD 4,134,000 paid to AK Global on 16 May 2018.
43. Mr Masefield went on to submit that it was highly likely that if the Bank had chosen to proceed with a case based on demands independent of an Event of Default, Amira would have strongly resisted the presentation of such a case, whether it was sought to be made on the basis of the unamended counterclaim or by means of an application to amend. He pointed out that in its skeleton argument opposing the Bank’s appeal against the dismissal of the counterclaim, Amira contended that the Bank was not free to demand payment whenever it chose to do so. He also drew my intention to the following passages in the judgment of Justice Wayne Martin who gave the judgment of the Court of Appeal.
“204. The Bank asserts that the only issues raised by the case it wishes to present under the Counterclaim Grounds of appeal are simple issues of construction which turn only upon the terms of the Facilities Agreement. There are two answers to that proposition. First, there is a real question as to whether the provisions of the Facilities Agreement should be construed as empowering the Bank to demand repayment at any time, entirely at its discretion. As we have observed, the Buyer’s Credits are a form of revolving credit line. The benefit of Buyer’s Credits to a customer of the Bank, like Amira, is that they enable suppliers to supply in confidence that they will be paid out of moneys remitted to the Bank by Amira’s customers. This reduces the amount of working capital which Amira is obliged to invest in its trading operations. This advantage would be completely lost if the Bank were at liberty to demand repayment from Amira as soon as funds had been advanced under the line of credit. The facts of this case demonstrate the drastic commercial consequences to a customer if the Bank terminates the line of credit without notice and demands immediate repayment in full. There is a real question as to whether the Facilities Agreement should be construed as permitting the Bank to act in this way. If raised at trial, that question could have been amplified by evidence with respect to the commercial consequences of the construction for which the Bank contends.
205. Second, at common law the Facilities Agreement would be construed by reference to the objective intention attributed to the parties from the words they have used in their agreement. However, under either DIFC law or UAE law, the actual or subject intention of the parties has a greater role to play. So, assuming that DIFC law is the law governing the Facilities Agreement, in order to identify the intention of the parties the Court would be required to have regard to a number of matters including the preliminary negotiations between the parties, the prior dealings between the parties, the conduct of the parties subsequent to the contract, and the nature and purpose of the contract. None of these matters were specifically addressed by the evidence. It would be quite unfair to Amira to now construe the Agreement without Amira having had the opportunity to lead evidence with respect to these matters.
206. Further, if the case which the Bank now seeks to put had been advanced at trial, it would have been open to Amira to defend the claim on the basis that the Bank was not acting in accordance with the duty of good faith implied under both DIFC and UAE law. If that issue had been raised at trial, it is a matter that would no doubt have been explored with the Bank’s witness, Mr Kumar. Permitting the Bank to put a new case on appeal for the first time would deny Amira the opportunity of presenting evidence with respect to that defence.
207. Finally, Amira asserts that if the case which the Bank now wishes to put had been raised at trial, it would have advanced a defence by way of estoppel by convention. Obviously that defence would need to be supported by evidence. Permitting the Bank to present this case on appeal would deny Amira that opportunity.”
44. Relying on the decision of the EWCA in Maridive & Oil Services (SAE) et al v CNA Insurance Company (Europe) Ltd (above), Mr Masefield further submitted that there was no reason procedurally why the Bank could not have brought a re-formulated claim in a fresh action and accordingly it cannot be said that the Bank should have proceeded in the original proceedings with a claim based on demands rather than the pleaded Event of Default.
45. In Maridive, proceedings were begun to enforce a leasebond on a claim made on 4 May 1999 by a party who was not the true obligee under the bond. When this point was taken in the defence, another demand was sent on 13 March 2000, this time on behalf of the true obligee, and the following day the claimant amended its reply to plead this later demand. No application was made to amend the particulars of claim, but neither was any objection to that reply raised by the defendant. The matter then came before the judge who, with the consent of counsel, ordered on 25 September 2000 that the particulars of claim be amended to read that a demand for payment had been made on ‘14 May 1999 alternatively 13 March 2000’. The judge below then tried as a preliminary issue, inter alia, the question whether, if the only valid demand made under the bond was that of 13 March 2000, the claimants could rely upon it notwithstanding that it had been made subsequent to the commencement of the proceedings and the expiry of the contractual time limit. The judge found, inter alia, that only the demand of 13 March 2000 had been valid and that the claimants could not rely upon it as it was in effect time-barred.
46. In the course of his judgment allowing the appeal, Mance LJ (as he then was) said in paragraph 33:
“I consider that the appropriate course in the present case would have been for the plaintiffs, after the second demand, either to have started fresh proceedings upon the second demand, or to have applied to amend the statement of case to rely upon it.”
47. Mr Masefield referred to a number of English authorities decided after Gore Wood. He began by citing Stuart v Goldberg Linde [2008] 1 WLR 823. Here, the claimant had successfully sued one of the defendant solicitors for breach of an undertaking to pay him US$ 350,000 in connection with a proposed business venture in Mongolia. Later, but within the relevant limitation period, the claimant issued further proceedings against the defendants arising out of the same background facts, in which he claimed damages, inter alia, for misrepresentation and inducing breach of contract. The Master struck out the second claim as an abuse of the Henderson v Henderson type and this decision was upheld in the High Court. On appeal to the Court of Appeal, Lloyd LJ said there were three general points to be taken into account in considering whether a second claim is an abuse of the process, namely: (a) the prospects of success, or otherwise, of the second claim; (b) the promptness, or otherwise, with which the second claim has been brought; and if the claimant explains the failure to include the second claim in the first proceedings by reference to not having known relevant facts at the time of the first proceedings, is it relevant to consider (c) whether he might, with reasonable diligence, have found them out in time?
48. Mr Masefield cited the following passages from the judgment of Lloyd LJ on the following topics.
The merits of the second action.
“…it seems to me that it would at most only be in an extreme case (either way), that the merits, in the sense of prospects of success, of the second proceedings can be relevant to deciding whether bringing them separately is an abuse of process. If the case can be shown to be cast-iron, so that judgment could be obtained for the claimant under CPR Pt 24, this might perhaps outweigh factors suggesting that the case ought to have been brought as part of the earlier proceedings. If, on the other hand, the case is hopeless, then it may be capable of being struck out for that reason in any event. But if, as here, the prospects of success are uncertain but the case is not suitable for summary judgment for either party under CPR Pt 24, then it seems to me that it is inappropriate to attempt to weight the prospects of success in the balance in deciding whether it is an abuse of process to bring the claim in later proceedings, rather than as part of earlier proceedings.” (Para 57)
49. As pointed out by Mr Montagu-Smith these sentences were immediately followed by:
“In my judgment, when Lord Bingham spoke of a broad, merits-based approach, the merits he had in mind were not the substantive merits or otherwise of the actual claim, but those relevant to the question whether the claimant could or should have brought his claim as part of the earlier proceedings. A defendant may feel harassed by having brought against him what appears to be a weak claim, but that factor should not count in this context. Whether the claim appears to be weak or strong, it is the fact of it being brought as a second claim, where the issue could have been raised as part of or together with the first claim, that may constitute the abuse.”
Delay in bringing the second action.
“For similar reasons, I consider that delay of itself is not relevant to whether the second claim is an abuse of process. Delay may be met with a defence under the Limitation Act 1980, or an equitable defence such as laches. Absent any such factor, the mere fact that the claimant has brought his second claim late, but in time, is not relevant to the question whether bringing the new claim in a second set of proceedings is an abuse of process.” (Para 58)
Failure to use reasonable diligence to discover facts relevant to the possible second claim
“As for the relevance of a claimant’s failure to use what the court might consider to be reasonable diligence in finding out facts relevant to whether he has a possible claim, it may be that this could possibly be relevant to the inquiry described by Lord Bingham, depending on the circumstances. On the other hand, it does not seem to me that there can be a general principle that a potential claimant is under a duty to exercise reasonable diligence, not yet having brought proceedings asserting a particular claim, to find out the facts relevant to whether he has or may have such a claim. Moreover, I do not see how it can be relevant at all that the claimant may have failed to use due diligence in attending to his own interests at the time of the transaction or the events giving rise to the claims asserted. Unless, on the merits, that is a complete and inevitable defence to the claim, it seems to me to be entirely irrelevant to the inquiry which is necessary under Johnson v Gore Wood & Co [2002] 2 AC 1. Nothing in Wigram V-C’s observations in Henderson v Henderson 3 Hare 100 supports that.” (Para 59)
The need for caution
“The cases on this aspect of abuse of process include many reminders that a party is not lightly to be shut out from bringing before the court a genuine cause of action. That point is now underwritten by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms, but I do not think that this article changes English domestic law at all. It is consistent with the article to allow the court to strike out a claim which is an abuse of the process, but at common law it must be clearly shown to be an abuse before it can be struck out. The court must consider critically any suggestion that a particular cause of action should not be allowed to be asserted because of the bringing of other proceedings based on a different claim.”
50. As an illustration of the English Courts’ awareness of the need to keep the Henderson v Henderson rule within proper limits and the availability of less drastic sanctions where there is a second claim, Mr Masefield cited the following passages from the judgment of Lord Neuberger MR in Henley v Bloom [2010] EWCA Civ 202 where a landlord brought a second claim against his tenant for damages for disrepair after a prior claim for possession of the premises (a residential flat).
“[25] The District Judge was impressed by the fact that Mr Henley could have brought, or at least could have raised, the disrepair claim during the currency of the possession claim. But that is not enough to establish that the subsequent bringing of the disrepair claim constitutes an abuse. As is clear from the opinions of Lords Bingham and Millett in Johnson [2002] 2 AC 1, the central issue is not whether Mr Henley could, but whether he should, have raised the disrepair claim during the negotiations pursuant to which the possession claim was settled. However desirable it may be for a party to bring all his claims forward in one go, the abuse principle, as the judgments in Stuart [2008] 1 WLR 823 underline, does not bar a claim simply because someone fails to raise a claim when he could have done so. The facts must be such that the second action amounts to an abuse of process before it can be struck out.
[26] The importance of the general principle that every person with an arguable claim should be able to pursue it in court is enshrined in Article 6 of the European Convention. As Sir Anthony Clarke MR indicated in Stuart [2008] 1 WLR 823, paragraph 98, if the court is not satisfied that a claimant’s attempt to raise his claim is actually abusive in the light of his previous failure to raise it, the claim cannot be barred from proceeding however desirable it might have been for the claimant to have raised it earlier.
[35] If in due course, the court hearing the disrepair claim was satisfied that costs have been increased as a result of the claim being brought after the possession claim had been settled, rather than being raised by Mr Henley in the settlement negotiations that culminated in the consent order, then, as Smith LJ said in the course of argument, it may be appropriate to reflect that fact in an appropriate manner in any costs order made in the disrepair claim.”
51. Focusing on paragraph 31 of Thomas LJ’s judgment in Aldi, Mr Masefield submitted that the Aldi guidelines only applied in complex commercial multi-party litigation requiring a high level of case management and for that reason, the principle was not engaged in the instant case which was a straightforward debt recovery counterclaim responding to the Part 8 claim brought by Amira. If the Aldi guidelines were engaged, he relied on English Court of Appeal authority that breach of the guidelines by a claimant not drawing the possibility of the second set of proceedings to the attention of the Court in the first set of proceedings does not mean that the second set of proceedings are necessarily an abuse of process. In support of this submission, Mr Masefield cited Clutterbuck v Cleghorn [2017 EWCA Civ 137 and also Okritie v Threadneedle [2017] EWCA Civ 274, where Arden LJ, (with the agreement of the other members of the Court of Appeal), said at [49]:
“As to Mr Malek’s submission that, once the judge found that Otkritie had acted in breach of the Aldi guidelines in Action 1, Action 2 was an abuse of process and should be struck out, in my judgment, that approach is clearly not consistent with Johnson v Gore Wood and its adherence to a broad merits-based assessment of whether a second action was an abuse of the process of the court. In my judgment, it is clear that this Court in Aldi did not intend to depart from the decision in Johnson v Gore Wood. So there is no hard-edged rule of law that a claim, which a party could have raised in one set of proceedings, will be struck out if that party seeks to bring it in another set of proceedings. The Aldi guidelines are a facet of the principle of a “broad merits-based judgment” as to whether this is the just outcome, which was established in Johnson v Gore Wood.”
Discussion
52. The burden of establishing that this Part 8 Claim should be struck out pursuant to Henderson v Henderson principles is on the Defendants and I must decide their application by forming a broad merits-based judgment, taking account of the public and private interests involved, as to whether, in bringing the claim, the Bank is misusing or abusing the process of the Court.
53. A key issue to be decided is whether the Bank not only could have, but should have, advanced the claim it now brings in the present proceedings as part of its counterclaim in the proceedings brought by Amira for damages.
54. For the reasons that follow, I have decided this issue in the Bank’s favour.
55. In my view it was reasonable and unexceptional for the Bank to rely in its original pleaded case on the notice of an Event of Default given by the letter of 26 June 2018 based on Amira’s failure to pay the 26 February Buyers Credits as a means of enlivening its entitlement to payment of the entire amount outstanding. I suspect that Amira’s defence to the Event of Default plea based on the principle that a party to a contract cannot rely on its own breach of contract in support of a claim against the counterparty came as something of a surprise to the Bank. The Bank was also confronted by: (i) the letter dated 24 May 2018 from Amira’s solicitors stating that Amira required the Bank to increase the Utilisation Limit and issue a fresh irrevocable undertaking letter to operate for 24 months to allow Amira to recover its ability to carrying on trading; (ii) Amira’s averment in its Reply that any debt or breach claimed by the Bank had been caused by the Bank’s breach of the Facilities Agreement and the Bank was not entitled to rely on the same; and (iii) Amira’s averment in its defence that due to the devasting consequences of the Bank’s failure to pay under the irrevocable letter, it continued to be unable to pay the 26 February Buyers Credits and the USD 4,134,000 paid to AK Global on 16 May 2018.
56. In the light of these circumstances, I find that the Bank’s decision not to seek to amend the counterclaim to plead an entitlement to recover all the component parts of the Debt on the basis of demands independent of its Event of Default case was a reasonable decision it was entitled to take. If an application for permission to plead such an amendment had been made, I am satisfied that it would have been strongly resisted by Amira relying on grounds akin to those advanced in its skeleton argument for the appeal and those mentioned in the paragraphs of Justice Wayne Martin’s judgment in the appeal cited above, and probably would have failed. Further, and in any event, such an amendment would not have neutralised Amira’s general plea that the demands relied on were premature because Amira continued to be unable to meet the demands by reason of the Bank’s prior breach of contract. There was also a real risk that even if such an amendment were permitted, the amended claim would have failed on the grounds that the Bank was the cause of Amira’s inability to pay and also that the Bank was not free to issue and rely on demands for payment at any time in its discretion. Further, as Mr Masefield submitted, the longer the Bank waited to amend to avoid Amira’s prematurity defence, the greater was the risk that the amendment would not be permitted because of the shortage of time down to the start of the trial. In short, I agree that the Bank was not obliged to steer a path between the Scylla of seeking to amend too late and the Charybdis of issuing further demands which would be said to be premature.
57. For the avoidance of doubt I should make it plain that I do not accept Mr Montagu-Smith’s submission that the Bank could have relied on its originally pleaded case which particularised various demands for the individual components of the Debt. This submission, it will be recalled, was based on the proposition that, unlike the Event of Default claim, the trigger for liability in respect of these individual sums was simply a date which had nothing to do with the Bank’s breach. My reasons for this view are twofold. First, as Justice Giles held, the Bank had not pleaded that by virtue of those demands each of the component parts of the Debt became due; instead, the only plea that the whole of the Debt was due was the Event of Default plea. Second, the case founded on demands as distinct from the pleaded Event of Default was also vulnerable to Amira’s defence that its failure to pay in response to the demands was caused by the Bank’s prior breach of contract and to the proposition ventilated in the appeal that the Bank was not free to demand payment whenever it chose to do so.
58. Since the Bank proceeded with its original counterclaim I think the assistance it gains from the Maridive decision is limited because the options said in that case to be open to a party in debt collection proceedings who has pleaded an ineffective demand do not contemplate fresh proceedings after the claimant has gone to trial relying on the ineffective demand. However, the decision does evidence a flexible approach that avoids adherence to technicalities designed to allow a party to bring what is potentially a good debt claim notwithstanding an earlier reliance on an ineffective demand.
59. For the avoidance of doubt, I make it clear that I think that the fact that Maridive is not directly applicable to the instant case does not detract from my finding that Amira has failed to show that the Bank should have advanced the claims now made in the original proceedings.
60. I now turn to consider whether, notwithstanding my rejection of Amira’s contention that the Bank should have advanced the claims it now makes in the first set of proceedings, the bringing of the new claim is nonetheless abusive. And I do so bearing in mind the many reminders in the cases on Henderson v Henderson abuse that a party is not lightly to be shut out from bringing before the court a genuine cause of action4.
61. In my judgment, for the reasons that follow, the present proceedings are not an abuse of process.
62. First, the Defendants have failed to establish that the Bank should have brought the claims made in the instant proceedings in the previous proceedings.
63. Second, the judgment of Justice Giles in the first proceedings does not give rise to any wider cause of action or issue estoppel because he did not find that Amira was not indebted to the Bank; instead he simply found that the original demands and notices of Event of Default were defective.
64. Third, in bringing the instant Part 8 Claim, the Bank is not seeking to contradict or attack the findings of Justice Giles in the first action. Rather, the Bank relies on new demands and notices of Events of Default issued in February 2020.
65. Fourth, there were good reasons for the Bank to bring the subsequent claim, namely, to give the Defendants sufficient time and opportunity to repay the sums due before making the further demands for payment it made in February 2020, with the result that the Defendants could no longer seek to argue that those further demands were premature and that their inability to repay was caused by the Bank’s prior breach.
4. See the above cited passage in paragraph 65 of Lloyd LJ’s judgment in Stuart v Goldberg Linde.
66. Fifth, the instant Part 8 proceedings, regardless of the merits of the parties’ respective cases, were never going to involve a lengthy hearing because the issues raised therein all concern relatively straightforward questions of law.
67. Sixth, I do not think that the Aldi guidelines apply to the first instance proceedings – Amira’s Part 8 Claim for damages and the Bank’s original counterclaim — because those proceeding were not “complex commercial multi-party litigation,” this being the type of litigation identified by Thomas LJ as being subject to the guidelines he was setting out. If I am wrong about that and the Bank was in breach of the guidelines, I agree with the view taken by Arden LJ in Okritie that this does not inevitably mean that the present proceedings are abusive. On the contrary, for the reasons I have given above, I find that the Bank’s Part 8 claim is not an abuse of the process of the court even if there was a breach of the Aldi guidelines.
Conclusion
68. The Defendants’ application to strike out this Part 8 Claim fails and is dismissed.
69. The Bank is before the Court seeking judgment on its claim. No substantive defence to the Bank’s claim has been advanced by the Defendants and there is no doubt that the principal sum sued for was received by Amira and is due to be paid under the Facilities Agreement by Amira to the Bank in accordance with the pleaded demands and notices of an Event of Default served in February 2020. I accordingly find that the Bank is entitled to judgment against Amira for the principal sum of USD 6,421,224.71 and for contractual interest thereon at the contractual rate from 1 July 2018 to the date of this judgment, with such interest continuing to accrue on the judgment sum hereby awarded until payment. It has also not been disputed that Mr Chanana is liable under the Guarantee for whatever sum, if any, that is found to be due from Amira and I therefore find that the Bank is entitled to judgment against Mr Chanana for the same principal sum and the same contractual interest as I have awarded against Amira.
70. I direct that the quantification of the contractual interest for which I have given judgment should be agreed, failing which I shall determine the due sum on the basis of written submissions only.
71. The Defendants’ strike-out application having been dismissed and judgment having been awarded against each of them, the Defendants must pay the Bank’s costs of this Part 8 Claim, including the cost of the strike-out application, such costs to be assessed by the Registrar on the standard basis, if not agreed.
Issued by:
Nour Hineidi
Registrar
Date of issue: 30 November 2020
At: 12pm