Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC (a Bahraini corporation) and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Flaux,The Hon Mr Justice Flaux |
| Judgment Date | 06 December 2013 |
| Neutral Citation | [2013] EWHC 3781 (Comm) |
| Docket Number | Case No: 2010 Folio 1157 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 December 2013 |
[2013] EWHC 3781 (Comm)
The Honourable Mr Justice Flaux
Case No: 2010 Folio 1157
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
Robert Anderson QC and William Edwards (instructed by Hogan Lovells LLP) for the Claimant
Max Mallin (instructed by Archerfield Partners LLP) for the First and Second Defendants
David Mills (with the permission of the Court) represented the Third Defendant
Hearing dates: 8–10, 14–16, 21, 23 and 24 October 2013
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 and background
The claimant (to which I will refer as "the Bank") provides banking and financial services in accordance with Islamic law, including short term trade finance or receivables financing. The Bank's claim against the second to fourth defendants is a claim in debt for some US$432 million (after giving credit for recoveries) arising under a Restructuring Agreement ("the RSA") dated 19 August 2007, which was entered into after the Bank discovered it had been a victim of a long standing fraud.
In broad terms the Bank's case is that events of default occurred under the RSA which led to the acceleration by the Bank of repayment of sums due, with the result that the second to fourth defendants, who were all Guarantors under the RSA, are jointly and severally liable to the Bank for the outstanding amount due under the RSA. The fifth defendant is one of the companies through which the fraud was perpetrated and the principal counterparty to the RSA and judgment in default was obtained against it on 12 January 2011. The first defendant ("PSI") is a Bahraini company beneficially owned by the second defendant. The Bank claims that it is entitled to trace monies applied in breach of fiduciary duty into shares in Afren plc ("the Afren shares"), owned by PSI and asserts a proprietary interest in those shares.
The only active defendants to the proceedings and at trial have been the first to third defendants. The fourth defendant gave evidence by videolink from Turkey but has taken no part in the proceedings, he said because he had no funds to defend the claim. The second and third defendants are currently in prison in Dubai, having been arrested in May 2008 and subsequently convicted by the criminal courts there of defrauding the Bank and paying bribes to employees of the Bank. The first and second defendants were represented in the proceedings and at trial by solicitors and counsel, Mr Max Mallin. The third defendant did not have legal representation as such, but his Defence was drafted and signed by Miss Lindsay Boswell QC. By permission of Popplewell J, he was represented at trial on a pro bono basis by Mr David Mills. Mr Mills is a former member of the Bar and solicitor and, although he has not practised advocacy for some years, he presented the third defendant's case with considerable skill and charm.
Because the second and third defendants remain in jail in Dubai (and it did not prove possible to obtain the permission of the Dubai authorities for them to give their evidence by video link from prison) they did not give live evidence at trial but their statements were admitted under the Civil Evidence Act. However, much of the content of their statements is comment or supposition or argument or bare assertion, so that those statements have not been of great assistance in determining the issues at the trial. So far as the witnesses who did give evidence at trial both for the Bank and the defendants are concerned, I will set out below at appropriate points in the chronology my assessment of those witnesses.
However, it is necessary at the outset of this judgment to say something about the status of the witness statement of Mr Fitzwilliam dated 31 July 2011 provided to Mr Mills in support of the third defendant's opposition to a summary judgment application made by the Bank against the second and third defendants which was dismissed by Hamblen J in his judgment of 24 October 2011. Mr Fitzwilliam is a business associate of the second and third defendants and, as set out in more detail hereafter, they were all shareholders in Plantation Holdings (FZ) LLC ("Plantation") a special purpose vehicle which was developing a polo and equestrian centre, hotel and villas in Dubai. Monies misappropriated from the Bank pursuant to the fraud were paid to Plantation and the lease of the land held by Plantation was the principal security provided to the Bank under the RSA. Mr Fitzwilliam was arrested and imprisoned by the authorities in Dubai on 6 June 2008 and charged with the fraud on the Bank. However, in 2011 he was acquitted and released from prison. As I have said, he provided a witness statement on behalf of the third defendant and, at least until shortly before the trial, it appeared he would be attending to give evidence.
On 13 September 2013, less than a month before the trial was due to begin, I heard an application by Plantation and Mr Fitzwilliam for proceedings commenced by them against the Bank claiming damages for wrongful enforcement by the Bank against the Plantation security to be joined to the present proceedings and the two actions tried together at the present trial. That application was resisted by the Bank and by the second and third defendants. I dismissed it, principally on the grounds of its lateness and because it would be impossible to try the cases together without an adjournment of the present trial, which has already been adjourned once. An urgent appeal to the Court of Appeal was dismissed on 29 September 2013 with judgment being handed down during the trial on 15 October 2013.
At a pre-trial hearing on 1 October 2013 I was informed that it was unclear whether Mr Fitzwilliam would be giving evidence and in view of the tightness of the trial timetable, I asked for his solicitors to be notified to attend that afternoon to inform the Court and the parties whether or not he would be giving evidence. That afternoon, his counsel attended and informed the Court, that in all probability he would not be giving evidence. Mr Fitzwilliam also stated through his counsel in the Court of Appeal, that he resiles from the lengthy statement he had provided, saying that much of it does not reflect his actual evidence, although he has not condescended to detail as to which passages he wishes to resile from. In those circumstances, Mr Mills very properly indicated that he could no longer rely upon the statement. Mr Mallin reserved his position as to whether there were aspects of Mr Fitzwilliam's evidence which could still be relied upon.
In his closing submissions, Mr Mallin relied upon passages in the witness statement which were consistent with the draft Particulars of Claim exhibited to the witness statement Mr Fitzwilliam produced in support of the joinder application. However, the difficulty with that approach is that that pleading is in draft, is not signed with a statement of truth and has not been served on the Bank, so that it would be inappropriate to rely upon it as representing Mr Fitzwilliam's evidence. In my judgment, the safer course is to disregard the witness statement provided by Mr Fitzwilliam in its entirety, and that is the course I have adopted. I should add that, even if I had had regard to his evidence I would not have accepted it to the extent that it conflicted with the evidence before the Court at the trial.
By the conclusion of the trial, the matters in dispute had narrowed somewhat. Various defences raised had been abandoned along the way, including an argument that the RSA was void or unenforceable as having been entered by the Bank ultra vires. Furthermore, by a judgment given during the trial on 23 October 2013, I ruled that the defence that the debt had been extinguished as a matter of UAE/Dubai law because of steps taken by the Bank to enforce against the principal security under the RSA had no real prospect of success, as all questions of recoverability of the debt were governed by English law, the governing law of the RSA. Accordingly I held that expert evidence of UAE/Dubai law was inadmissible.
The defences live at the end of the trial and thus the issues in dispute in relation to which the court needs to make findings and reach conclusions can be summarised as follows:
(1) The second and third defendants formally still deny the underlying fraud. For reasons which are set out at the end of the next section of the judgment, to the extent that that defence is persisted in, it is not open to the second and third defendants.
(2) The second and third defendants deny that there was an Event of Default under the RSA entitling the Bank to accelerate the debt.
(3) The second and third defendants contend that any default was engineered wrongfully by the Bank, which procured the arrest of those defendants and of Mr Fitzwilliam (whose significance in this context appears hereafter) and then served notices of default on the second and third defendants and Plantation, knowing that the default could not be cured as they were all in prison. It is contended that the Bank is disentitled from relying upon the default.
(4) It is contended by the second defendant (but not the third defendant) that the Bank was in repudiatory breach of the RSA in failing to provide a Standby Loan Facility to Plantation and/or in taking steps to enforce its security over the lease owned by Plantation of...
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