Claim No. CFI-027-2018
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
1) AMIRA C FOODS INTERNATIONAL DMCC
2) A K GLOBAL BUSINESS FZE
Claimants
and
IDBI BANK LIMITED
KARAN A CHANANA
Third Party
ORDER WITH REASONS OF JUSTICE ROGER GILES
UPON Paragraph 7 of the Order of Justice Roger Giles dated 7 October 2019 requesting the parties to provide agreed directions for determination of the questions of the cheques, interest and costs.
AND UPON the parties providing the agreed timetable for submissions on 28 October 2019
AND UPON reviewing the submissions and all relevant materials on the case file
IT IS HEREBY ORDERED THAT:
1. Allen & Overy LLP shall continue to hold the cheques subject to the direction of the Court.
2. The judgment sum to include simple interest from 30 September 2018 to the date of judgment at the rate from time to time charged by the IDBI Bank Limited (the “Bank”) to commercial customers of good standing.
3. Liberty to apply in relation to ascertaining the rate of interest.
4. The Bank to pay 95% of the costs of the proceedings of Amira C Foods International DMCC and Mr. Karan A Chanana.
5. The costs ordered to be paid by Amira on 7 October 2019 to be set off against the costs payable pursuant to the order set out in paragraph 4 of this order (“Order 4”).
6. The Bank to pay USD 410,500 within 21 days on account of the costs payable pursuant to Order 4.
Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 22 January 2020
At:12pm
SCHEDULE OF REASONS
1. The substantive judgment was issued on 7 October 2019. A figure was to be agreed and added to the judgment sum, and there remained for determination the questions of the cheques, interest and costs. Written submissions on those matters were received, on a timetable agreed by the parties.
2. On the Bank’s application, permission to appeal was granted on 11 December 2019. The parties have agreed on a stay of the order for payment of the judgment sum.
The Agreed Figure
3. Amira accepts a figure of USD 14,443.61. That sum should be added to the judgment sum.
The Cheques
4. The cheques were held by the Bank as security for the credit facilities. In the Claim Form, Amira claimed an injunction restraining the Bank from presenting them on the basis that it was not in default and so the Bank was not entitled to present them. After receiving the Claim Form and with notice of the claim, the Bank presented the cheques. Unsurprisingly, the Judge ordered on an interlocutory basis that the cheques be held by the Bank’s lawyers to the direction of the Court.
5. It follows from the judgment that the Bank was not entitled to present the cheques.
6. Amira submitted that the cheques were its property, although in the Bank’s possession as security, and that in presenting them without entitlement the Bank “breached an essential term of the security interest” such that Amira could recover the cheques in conversion. I do not agree. The presentation of the cheques did not terminate the Facilities Agreement, or the relationship of debtor and creditor or the holding of security by the Bank. The wrongful presentation has been effectively negated, but if there be other default entitling the Bank to resort to its security, the cheques remain available to it.
7. For that reason also, I do not accept Amira’s fall-back submission that there should be a final injunction restraining presentation.
8. However, I do not accept the Bank’s submission that the cheques should now be returned to it. The presentation of the cheques with notice of Amira’s claim, together with the circumstances of the shabby treatment described in the judgment, make it appropriate that the cheques remain at the direction of the Court. On one outcome of the appeal, the Bank may be immediately entitled to present the cheques. Alternatively, the Bank may claim that subsequent default entitles it to present them. The cheques should remain under the Court’s control, and their fate should await the disposal of the appeal or prior application by the Bank.
Pre-judgment interest
9. Pursuant to Article 18 of the Law of Damages and Remedies, being DIFC Law No 7 of 2005 (the “Law”), interest runs from the date of the Bank’s breach. Article 17(2) of the Law specifies the rate applicable to a failure to pay a debt, but no rate is specified for damages.
10. Amira submitted that the debt rate should be applied by analogy, being “the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place of payment”. In the absence of a published prime rate in relation to USD in the DIFC, it took the prime rate for non-bank borrowers in New York. The Bank submitted that the rate should be EIBOR (3 month) + 1%, as had been taken in GFH Capital Ltd v Haigh [2014] DIFC CFI 020 (4 July 2018). In Al Khorafi v Bank Sarasin- Alpen (ME) Ltd [2009] DIFC CFI 026 (7 October 2015) (“Al Khorafi”) a different rate again was taken, being the rate from time to time charged by Bank Sarasin to commercial customers of good standing. In neither case was there discussion of arriving at the rate.
11. The purpose of pre-judgment interest is to compensate the successful claimant for loss of use of the amount awarded as damages. No one rate fits all occasions, although a conventional rate may be used if a rate is not found to fit the particular occasion.
12. There is no evidence of how Amira might have used the amount awarded to it. I do not think Amira’s proposal is appropriate to payment of damages in the DIFC. EIBOR is an inter-bank rate, and while EIBOR plus a factor can provide a suitable rate, in the present case a more measured rate is available. The Bank claims in the order of USD 7.3 million from Amira; that will include interest, and it can fairly be taken that Amira would have used the amount to pay down the Bank and avoid interest. The damages exceed the USD 7.3 million, making the Bank’s non-default rate in fact chargeable to Amira inappropriate across the board , and the better course in my view, emulating Justice Sir John Chadwick in Al Khorafi, is the rate from time to time charged by the Bank to commercial customers of good standing.
13. It should be recognised that Amira did not suffer its loss immediately, but over a period after the Bank’s breach. Rather than adjust the principal or the rate, interest will run from 30 September 2018. As did Sir John Chadwick, I will give liberty to apply in the event of difficulty in ascertaining the rate.
Post-judgment interest
14. PD 4 of 2017 provides for interest at 9%. As the Bank correctly submitted, the Court retains a discretion to order interest at a lesser rate (see Article 39 of the DIFC Court Law, being DIFC Law No. 10 of 2004). The Bank submitted that 9% “is excessive in the circumstances of this case” and that a lower rate should be ordered. It did not amplify or further support the submission. No reason has been shown to order a lower rate.
Costs
15. I go first to costs as between Amira and the Bank. Amira enjoyed substantial success. The Bank submitted, however, that it recovered significantly less than the amount claimed, and that costs should follow an issues-based approach. It said that Amira should pay the Bank’s costs of the issue of lost profit on a soybean meal transaction (on which Amira failed), and that there should be no order for costs of the issue as to loss of value of its business (on which it recovered much less than the claim).
16. I do not agree. The soybean meal transaction was insignificant in respect of costs, and Amira established significant loss from reputational damage although not in the amount claimed. Subject to the questions of Mr Chanana’s costs and the experts’ reports, see below, in my view Amira is entitled to all its costs even though it did not succeed on every point or to the full extent claimed.
17. I go then to costs as between Mr Chanana and the Bank. The Bank’s claim against Mr Chanana and Mr Chanana’s claim against the Bank both failed. The Bank’s claim against Mr Chanana followed the event of its claim against Amira and did not materially add to costs. Mr Chanana’s claim against the Bank was a substantial claim, but it did not add greatly to the conduct of the proceedings. Given the joint representation of Amira, and Mr Chanana, the failure of the claim is accommodated by a small discount applied to the joint costs of Amira and Mr Chanana.
18. The Bank sought a special order in relation to the evidence of Messrs Peters and Fritzsche. Amira applied for and obtained permission to call expert evidence. The Bank‘s then position was that expert evidence was unnecessary. It submitted that it had been vindicated, in that I considered that there was limited occasion for the expertise, and that Amira should be ordered to pay its costs incurred “in dealing with the expert evidence”.
19. I do not agree. The Bank chose to respond to the evidence of Mr Peters with the evidence of Mr Fritzsche: and more, through his evidence, it sought to make out a positive case of assessment of damages. The expert reports were not an idle exercise, enlightening the claim to damages via the fall in value of ANFI’s shares, and the limitation in resort to them lay in their dependence on factual findings, which once made left calculation. I do not think that a special order is warranted.
20. The Bank should pay 95% of the costs of Amira and Mr Chanana.
21. Two matters remain. First, Amira submitted that the costs of a pre-trial application payable by it to the Bank should be set off against the costs payable by the Bank. The Bank said nothing against this, and it should be so ordered. Secondly, Amira submitted that the Bank should be ordered to make a payment on account, pursuant to RDC 38.13, and provided a costs schedule in a total sum of USD 864,258.19. Again, the Bank said nothing against this, or as to the amount, and again it should be so ordered.
ORDERS
I make the following orders:
1. Allen & Overy LLP shall continue to hold the cheques subject to the direction of the Court.
2. The judgment sum to include simple interest from 30 September 2018 to the date of judgment at the rate from time to time charged by the Bank to commercial customers of good standing.
3. Liberty to apply in relation to ascertaining the rate of interest.
4. The Bank to pay 95% of the costs of the proceedings of Amira and Mr Chanana.
5. The costs ordered to be paid by Amira on 7 October 2019 to be set off against the costs payable pursuant to Order 4.
6. The Bank to pay USD 410,500 within 21 days on account of the costs payable pursuant to Order 4.