Citicorp Trustee Company Ltd and Another v Mr Maan Abdulwahed Al-Sanea and Another
| Jurisdiction | England & Wales |
| Judge | Mr Peter MacDonald Eggers |
| Judgment Date | 10 November 2017 |
| Neutral Citation | [2017] EWHC 2845 (Comm) |
| Docket Number | Case No: CL-2016-000622 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 November 2017 |
and
[2017] EWHC 2845 (Comm)
Mr Peter MacDonald Eggers QC
(sitting as a Judge of the High Court)
Case No: CL-2016-000622
CL-2016-000623
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Robins (instructed by Norton Rose Fulbright LLP) for the Claimants
The Defendants were not represented
Hearing date: 3rd November 2017
Mr Peter MacDonald Eggers QC:
Introduction
The Claimants, Citicorp Trustee Company Ltd ("Citicorp") and Golden Belt Sukuk Company B.S.C(c) (In Liquidation) ("Golden Belt"), have brought claims, by way of two separate actions instituted by Claim Forms issued on 12th October 2016, against Mr Maan Abdulwahed Al-Sanea ("Mr Al-Sanea") and Saad Trading, Contracting and Financial Services Company ("Saad"), for very substantial sums.
The Claimants make three applications in these proceedings, namely for: (1) permission to lift the stay which automatically took effect six months after the end of the period for the filing of defences pursuant to CPR rule 15.11; (2) permission to apply for summary judgment pursuant to CPR rule 24.4(1) given that Mr Al-Sanea and Saad have not filed an acknowledgement of service or a defence; and (3) summary judgment pursuant to CPR rule 24.2.
The claims and the applications are made in respect of a financing transaction which is based on the payment by investors of sums amounting to US$650,000,000 in exchange for which Golden Belt issued Certificates to those investors (the " Certificateholders"). The Certificates are known in Arabic as " Sukuk". A Sukuk transaction is a type of Islamic finance transaction. The US$650,000,000 was then used as consideration to be paid by Golden Belt under a Head Lease with Mr Al-Sanea, which Mr Al-Sanea instructed be paid directly to Saad. The Head Lease related to land in the Kingdom of Saudi Arabia ("KSA") and was for a period of 25 years. At the same time as the Head Lease was entered into, Golden Belt entered into a Sub-Lease of the same land with Saad for a five year period. Under the Sub-Lease, Saad was obliged to pay, by way of consideration, US$650,000,000 (" Deferred Rental Amounts") and additional rent (" Payable Rental Amount"). The Certificates issued by Golden Belt to the Certificateholders operated similarly to bonds in that they were to pay a periodic return and were to be repaid on maturity, in this case after five years. The periodic returns and the redemption amounts are generated by the underlying assets, in this case the Head Lease and Sub-Lease.
By a Declaration of Trust and Agency dated 15th May 2007 executed by Golden Belt, Citicorp and Saad ("the Declaration of Trust"), Golden Belt agreed to apply the sums paid by the Certificateholders for the purchase of Certificates issued by Golden Belt towards the acquisition of defined " Trust Assets", which included Golden Belt's rights under the Head Lease, Sub-Lease and Promissory Note referred to below. Under the Declaration of Trust, Golden Belt agreed to act as trustee in respect of the Trust Assets and as agent for the Certificateholders. In addition, Golden Belt delegated to Citicorp the exercise of its rights, powers and discretions granted pursuant to (among other things) the Declaration of Trust.
By its Articles of Association, Golden Belt, a Bahraini company, was to have a duration of seven years from the date of incorporation in May 2007, unless extended by resolution of the shareholders and approval of the Central Bank of Bahrain. There was no such extension. Therefore, according to the first witness statement dated 4th September 2017 of Mr Michael Godden, a partner in the firm of Norton Rose Fulbright LLP, the Claimants' solicitors, Golden Belt is " now in a type of liquidation" (para. 9). I did not understand, however, that Golden Belt ceased to exist. In fact, Mr Godden stated in his first witness statement (at para. 51) that Golden Belt " retains its legal personality and has validly appointed Executive Managers", who have assumed control of the company and issued a power of attorney dated 6th May 2014 authorising Citicorp to conduct future legal proceedings by Golden Belt, including these proceedings. Golden Belt has also delegated authority to Citicorp (as Delegate) in accordance with clause 5.1.1 of the Declaration of Trust.
Mr Al-Sanea is a businessman who resides in Al Khobar in the KSA. Saad is a company incorporated in the KSA, being a limited partnership company. Mr Al-Sanea is the General Partner of Saad and therefore has unlimited liability for the debts of Saad under Saudi Arabian law, although the Claimants' claims are not made on that basis in these proceedings. Indeed, this liability is referred to by Saad in the Offering Circular dated 14th May 2007 issued by Saad in respect of the transaction which is the subject of these proceedings.
The transaction
The claims made by the Claimants against the Defendants arise out of a financing transaction represented by (1) a Head Lease of certain parcels of land in the KSA dated 15th May 2007 between Mr Al-Sanea as Head Lessor and Golden Belt as Head Lessee ("the Head Lease"), (2) a Sub-Lease of the same land dated 15th May 2007 between Golden Belt as Sub-Lessor and Saad as Sub-Lessee ("the Sub-Lease"), and (3) a promissory note dated 15th May 2007 issued by Saad to Golden Belt ("the Promissory Note").
On 15th May 2007, Golden Belt issued Certificates ( Sukuk) to the Certificateholders to the value of US$650,000,000; Golden Belt entered into the Head Lease of the land in the KSA with Mr Al-Sanea for 25 years in return for an " Advance Rental Payment" of US$650,000,000; and Golden Belt sub-leased the land under the Sub-Lease for a period of five years to Saad in return for the payment of rent, namely (a) the " Payable Rental Amount", on each " Payable Rental Payment Date" and (b) the " Deferred Rental Amounts" of US$130,000,000 each year from 2008 to 2012 (inclusive). The Payable Rental Amounts are calculated in accordance with a formula set out in Schedule 2, Part 2 of the Sub-Lease, being the product of the Base Amount (US$650,000,000), the relevant 6 month US dollar LIBOR rate as at two Business Days prior to the start of the relevant Payable Rental Payment Period plus 0.85% per annum, and the number of days in the relevant Payable Rental Payment Period, divided by 360. The payment of the Deferred Rental Amounts were deferred until the earlier of a " Termination Event" or the expiry of the Sub-Lease on 15th May 2012.
It is worth concentrating on the terms of the Head Lease and the Sub-Lease, because they are the agreements under which the Claimants' claims against the Defendants, Mr Al-Sanea and Saad, are made.
The Head Lease was executed by Mr Al-Sanea as " Head Lessor" and Golden Belt as " Head Lessee". By the Head Lease, Mr Al-Sanea leased specified " Land Parcels" to Golden Belt for 25 years, subject to earlier termination. The risk of loss of or damage to the Land Parcels was agreed to be borne by Mr Al-Sanea (clause 2). The consideration for the Head Lease was the payment by Golden Belt of the Advance Rental Amount of US$650,000,000 (clause 4). The Head Lease contained the following provisions:
" 1 Definitions and Interpretation
1.1 Definitions
In this Agreement the following words and expressions have the following meanings unless inconsistent with the context: …
" Claims" means any and all claims, liabilities (including, any environmental or third party liabilities), losses, demands, penalties, fines, injuries, damages, costs (including legal fees), expenses, payments, actions, suits, judgments, orders and sanctions …
" Finance Documents" means:
(a) this Agreement and any notices issued hereunder;
(b) the Sub-Lease Agreement and any notices issued thereunder …
(d) the Promissory Note …
8 Representations and Warranties
…
8.3 Powers, Authority and Legal Validity
The Head Lessor has the power to enter into and perform his obligations under this Agreement and the Finance Documents and this Agreement and the Finance Documents constitute his legal, valid and binding obligations in accordance with their terms and will constitute legal valid and binding obligations of his estate and are binding on his heirs and executors and successors in accordance with their terms to the extent of his interests in his estate …
13 Indemnities
13.1 Indemnities
The Head Lessor will indemnify and save harmless the Head Lessee from and against any and all Claims suffered, incurred or made by the Head Lessee as a result of the Head Lessee entering into this Agreement.
13.2 Payment on Indemnities
Moneys becoming due by the Head Lessor under the indemnities contained in this Agreement shall be paid immediately on demand made by the Head Lessee.
13.3 Survival
The obligations on the part of the Head Lessor in this clause 13 shall survive the expiration or termination of this Agreement for any reason whatsoever …
20 Notices
20.1 Communications in writing
Any communication to be made under or in connection with this Agreement or any other Finance Document shall be made in writing and, unless otherwise stated, may be made by letter.
20.2 Addresses
The address … of each party for any communication or document to be made or delivered under or in connection with this Agreement or any other Finance Document are those shown on the execution page of this Agreement …
22 Governing Law
This Agreement is governed by and shall be construed in accordance with English law.
23 Jurisdiction and Enforcement
23.1 Jurisdiction
23.1.1 The...
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