Credit Suisse International v Ramot Plana OOD
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE HAMBLEN,Mr Justice Hamblen |
| Judgment Date | 02 November 2010 |
| Neutral Citation | [2010] EWHC 2759 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 FOLIO 1238 |
| Date | 02 November 2010 |
[2010] EWHC 2759 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: The Honourable Mr Justice Hamblen
Case No: 2009 FOLIO 1238
Simon Hattan (instructed by Clifford Chance LLP) for the Claimant
David Blayney (instructed by Asserson Law Offices) for the Defendant
Hearing dates: 26 th October 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application by the Claimant (“Credit Suisse”) for summary judgment:
(1) On its claim for repayment of €12 million (plus contractual interest and expenses) allegedly due to it under the terms of a loan agreement (“the Agreement”) with the Defendant (“Ramot Plana”) dated 13 April 2007; and
(2) Against Ramot Plana on its counterclaim.
Summary of Issues
Under the terms of the Agreement, in the event of a failure by Ramot Plana to satisfy the conditions precedent to the drawdown of the second of the two tranches of funding available under the agreement the full amount of the outstanding balance of the loan became repayable.
Ramot Plana admits that it failed to meet those conditions precedent by the relevant date. Despite demand being made by Credit Suisse according to the terms of the Agreement, Ramot Plana has failed to repay the outstanding amount of €12 million plus interest.
Ramot Plana's only pleaded defence is its assertion that it has a counterclaim which exceeds the value of Credit Suisse's claim for repayment. That counterclaim is based on an allegation that Credit Suisse wrongfully refused to agree to a refinancing of the loan unless that refinancing made provision for it to be paid not just the outstanding amount of the loan plus interest, but also an additional sum of almost €12 million referred to in the finance documents as the 'Make Whole Amount'. Ramot Plana asserts that Credit Suisse's alleged refusal to consent to refinancing unless it was paid the Make Whole Amount was a breach of duty, as a result of which Ramot Plana has suffered a loss greater than the value of Credit Suisse's claim for repayment of its loan.
Credit Suisse contends that Ramot Plana has no real prospect of defending the claim for repayment because:
(1) The foundation of the counterclaim (being the allegation that it rejected Ramot Plana's refinancing proposals because they failed to make provision for payment of the Make Whole Amount) is so plainly inconsistent with the evidence contained in the contemporaneous documents that the Court can, and should, reject it at this summary stage.
(2) Even if Ramot Plana did have a credible counterclaim, the terms of clause 28.6 of the Agreement (entitled 'No set-off by the Borrower') preclude Ramot Plana from seeking to set off any sums counterclaimed against payments to be made by it under the Agreement.
Factual Background
The proceedings arise out of the Agreement entered into between the parties on 13 April 2007, under which Credit Suisse agreed, subject to the satisfaction of certain conditions precedent, to advance a total of €20 million to Ramot Plana to provide financing for a property development project (“the Project”) which it was undertaking in an area approximately 30km from Sofia, Bulgaria.
At the time Credit Suisse became involved in 2007, Ramot Plana had already purchased the land, on which it was intended to build a number of residential units. The Agreement provided for the funding to be drawn down in two tranches. The first tranche (“the Facility A Loan”) was for €12 million and was intended to allow Ramot Plana to refinance the debt that it had incurred in purchasing the land and to provide it with working capital. The second tranche (“the Facility B Loan”) was intended to be used to fund the construction of the residential units.
The Agreement specified a number of conditions precedent to the drawdown of each of the Facility A Loan and the Facility B Loan.
The conditions precedent to drawdown of the Facility B Loan were set out in part B of schedule 2 to the Agreement. For present purposes it is not necessary to rehearse them in detail, but amongst other things Ramot Plana was required to obtain and/or supply to Credit Suisse signed construction contracts, a signed agreement appointing the construction supervisor and a document evidencing issue of the Final Building Permit. Under the terms of the Agreement, these Facility B Loan conditions precedent were required to be satisfied on or before 18 July 2007.
In the event that Ramot Plana failed to satisfy the conditions precedent by 18 July 2007, the Agreement provided that:
(1) Credit Suisse's obligation to advance the Facility B Loan fell away (clause 5.5(b)); and
(2) On notice being given by Credit Suisse, the Facility A Loan became immediately repayable, along with accrued interest and any sum due under the terms of a Prepayment and Arrangement Fee Letter (“the Fee Letter”) (clause 7.3).
Together with the Agreement, on the same date the parties entered into a number of other agreements, including:
(1) A Revenue Share Agreement (“the Revenue Share Agreement”), which set out the basis on which the parties had agreed that Credit Suisse would share in revenue generated from the Project, up to a maximum of €12 million; and
(2) The Fee Letter, which amongst other things set out the sums which would become payable by Ramot Plana in the event of early repayment of the Loan (“the Prepayment Fee”).
Under the terms of the Fee Letter, where early repayment resulted from a failure by Ramot Plana to satisfy the conditions precedent for drawdown of the Facility B Loan, the amount of the Prepayment Fee was to be:
(1) the 'Make Whole Amount', which was €12 million less any interest payments and payments under the Revenue Share Agreement already made by Ramot Plana (calculated in this case as approximately €11.88 million); unless
(2) Ramot Plana provided evidence that satisfied Credit Suisse that the failure to satisfy the conditions precedent could not be attributed to an act or omission on the part of Ramot Plana in which case it would be an amount calculated at 8% per annum on the outstanding amount of the Facility A Loan – referred to in the Fee Letter as the 'Annualised Amount'.
It is common ground that the conditions precedent for the Facility A Loan were satisfied on 18 April 2007 and that the Facility A Loan of €12 million was advanced by Credit Suisse on the same day. Accordingly, the final date for the satisfaction by Ramot Plana of the conditions precedent to the drawdown of the Facility B Loan was 18 July 2007.
It is also common ground that those conditions precedent were not in fact satisfied by the relevant date. There is some controversy about exactly what remained to be done at that date: Credit Suisse says that a significant number of the conditions set out in part B of schedule 2 remained outstanding, whilst Ramot Plana says that the most important condition (the issue by the Bulgarian authorities of a permission known as the 'PUP') was subject only to final sign off by the mayor and that the other outstanding conditions were subsidiary to the issue of the PUP. That controversy has no bearing on the present application.
After 18 July 2007 Credit Suisse notified Ramot Plana that, in view of its failure to satisfy the conditions precedent, the contractual Availability Period for utilisation of the Facility B Loan had expired and Credit Suisse was no longer obliged to advance the Facility B Loan. Credit Suisse refrained, however, from making an immediate demand for repayment of the outstanding Facility A Loan of €12 million (as it would have been entitled to do). Rather, there was a period of dialogue during which Credit Suisse considered whether to proceed with the Project financing.
On 3 October 2007 Credit Suisse notified Ramot Plana that the Facility B Commitment had been cancelled and that it would make no further advances under the Agreement. Even then, however, it did not demand immediate repayment of the outstanding Facility A Loan. Instead, it engaged in discussions with Ramot Plana about the possibility of the loan being refinanced.
Eventually, on 22 September 2009, Clifford Chance LLP (on behalf of Credit Suisse) issued a demand for repayment of the Facility A Loan, plus interest. In the same letter, demand was made for payment of the Make Whole Amount under the provisions of clauses 7.3 and 7.5 of the Agreement and the Fee Letter. It is as a result of Ramot Plana's failure to make any payment in response to this demand that these proceedings were issued on 22 October 2009.
The issues for determination
Credit Suisse's claim in the proceedings is for: (a) payment of the €12 million capital sum outstanding under the Facility A Loan; (b) interest thereon at the default rate prescribed in the Agreement; (c) all costs it has incurred in connection with enforcement of its rights under the Agreement; and (d) the Prepayment Fee of €11,880,000.
The present application is not concerned with payment of the Prepayment Fee and relates solely to the claim for repayment of the Facility A Loan (plus associated interest and certain costs specified in the Agreement) (“the Repayment Claim”).
Ramot Plana's defence to the Repayment Claim is based on its contention that it has a counterclaim that it is entitled to set-off against the sums which would otherwise be owing to Credit Suisse. The case made is that: (a) Credit Suisse rejected refinancing proposals put forward by Ramot Plana on the basis that those proposals did not...
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