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Claim No: CFI 061/2020

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

BARCLAYS BANK PLC

Claimant

and

BAVAGUTHU RAGHURAM SHETTY

Defendant

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JUDGMENT OF JUSTICE WAYNE MARTIN

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UPON the immediate judgment application filed by the Claimant on 26 October 2020 (the “Application”)

AND UPON the Defendant’s evidence in response filed on 7 December 2020

AND UPON hearing counsel for the Claimant and counsel for the Defendant at a hearing on 24 January 2021

AND UPON reviewing all relevant documents recorded on the Court file

IT IS HEREBY ORDERED THAT:

1. The Application is granted.

2. Judgment is entered for an amount to be determined by the Court, following provision of a statement of account by the Claimant in accordance with the reasons of the Court.

3. The Defendant has liberty to provide submissions in relation to the statement of account within 2 business days following the provision of the statement by the Claimant.

4. The Defendant is to pay the Claimant’s costs of the proceedings to be assessed by a Registrar of the Court on an indemnity basis unless agreed within 28 days of the orders.

5. The Defendant is to pay USD$400,000 on account of those costs within 14 days.

6. The freezing order remains in force, but without the terms exempting legal and living expenses from its operation.

7. The Defendant has liberty to apply for an order varying the terms of the freezing order.

Issued by:
Nour Hineidi
Registrar
Date of Issue: 22 April 2021
Time: 9am

SCHEDULE OF REASONS

1. The claimant, Barclays Bank PLC (“Barclays”) has applied for immediate judgment on its claim against Bavaguthu Raghuram Shetty (“Dr Shetty”). For the reasons which follow, I am satisfied that Dr Shetty has no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial and therefore immediate judgment should be entered.

The Claim

2. Barclays commenced proceedings on 28 July 2020, claiming monies due under an Unlimited Guarantee and Indemnity (the “Guarantee”) dated 7 January 2015, in which Dr Shetty agreed to guarantee and indemnify Barclays in relation to any debts owed to Barclays by UAE Exchange Centre LLC (“UAEEC”) or any losses incurred by reason of the failure of UAEEC to fulfil its obligations to Barclays.

3. Particulars of Claim were filed at the time the proceedings were commenced. In those Particulars, Barclays asserted that on 3 August 2012 it and UAEEC entered into an agreement (the “ISDA Agreement”) incorporating the International Swaps and Derivatives Association (“ISDA”) 2002 Master Agreement in respect of foreign exchange transactions that would be undertaken between Barclays and UAEEC. Barclays also gave particulars of the Guarantee executed by Dr Shetty on 7 January 2015, replacing an earlier guarantee given by Dr Shetty in 2012. I will consider the terms of each of the ISDA Agreement and the Guarantee in more detail in due course.

4. In the Particulars, Barclays asserted that between 10 and 13 March 2020, pursuant to the ISDA Agreement, Barclays paid out amounts with an equivalent value of approximately USD$129,019,386.28 in respect of foreign exchange transactions, but UAEEC failed to pay the monies due to Barclays in respect of those transactions. Barclays asserted that it first became aware of UAEEC’s failure to pay on 17 March 2020, although curiously Barclays also asserted that it ceased making payments pursuant to the ISDA Agreement on or around 16 March 2020 by reason of UAEEC’s default. Dr Shetty’s representatives have referred to this apparent anomaly, which I will consider in greater detail below.

5. Barclays gave particulars of the service of a Notice of Failure to Pay upon UAEEC on 24 March 2020 and of its service of a Notice of Early Termination of the ISDA Agreement on UAEEC on 26 March 2020, terminating the ISDA Agreement with effect from that day. In its Particulars, Barclays also asserted that on 1 April 2020 it sent a Statement to UAEEC in which it calculated the early termination amount payable under the ISDA Agreement in the amount of USD$129,543,839.27 (exclusive of interest). Barclays asserted that as UAEEC had failed to pay any of that amount, Dr Shetty was liable to pay that amount to Barclays pursuant to the terms of the Guarantee.

6. Barclays also gave particulars of service of a Notice of Demand upon Dr Shetty on 28 April 2020, claiming an amount of USD$129,807,261.93 (inclusive of interest accrued up to that date). Barclays asserted that Dr Shetty had failed to pay any amount in response to that demand. Barclays claimed USD$130,244,117, being the amount allegedly due at the date of commencement of the proceedings (inclusive of interest up to that date - namely 28 July 2020), plus ongoing interest plus costs pursuant to the Guarantee.

7. On 24 August 2020, Barclays filed an Amended Claim Form, including an additional address in India for Dr Shetty.

8. On 15 September 2020, Barclays applied for a worldwide freezing order restraining Dr Shetty from dealing with assets up to a value of USD$135,000,000 and for an order requiring Dr Shetty to provide information on affidavit in relation to his assets. On 17 September 2020, I made orders to that effect without notice to Dr Shetty, fixing a return date of 22 September 2020 upon which Dr Shetty could apply to set aside those orders. In the result, no such application was made and the orders remain in force.

9. On 26 October 2020, Barclays applied for immediate judgment. As Dr Shetty had not then filed a defence, pursuant to RDC 24.5 he was not required to file a defence until the immediate judgment application has been determined.

The evidence adduced by Barclays

10. The application for immediate judgment was supported by a witness statement provided by Mr Martin Homberger, who is a senior officer of Barclays working at its branch in the DIFC. The agreement entitled “Unlimited Guarantee and Indemnity” dated 7 January 2015 is exhibited to Mr Homberger’s statement.

The Guarantee

11. Clause 1 of the Guarantee provides:

12. Pursuant to the Schedule to the Guarantee, the “Customer” is UAEEC, and the “Guarantor” is Dr Shetty.

13. The expression “Banking Facilities” is defined under the Guarantee to mean:

…such facilities or other accommodation as Barclays may make or continue to make available to the Customer, including, without limitation, any derivative, risk management or hedging products, facilities or transactions entered into or to be entered into with the Customer.

14. Clause 2 of the Guarantee is in the following terms:

15. Further, clause 3 of the Guarantee provides, relevantly:

16. Further, clause 4 of the Guarantee provides:

17. Clause 16 of Guarantee provides:

18. Clause 19 of the Guarantee provides that it is to be governed and construed in accordance with English Law. Clause 20 of the Guarantee provides that the DIFC Courts have exclusive jurisdiction to settle any dispute arising from or connected with the Guarantee and further provides that both parties irrevocably submit to the jurisdiction of the DIFC Courts.

The ISDA Agreement

19. In his first witness statement Mr Homberger asserted that Barclays and UAEEC entered into an agreement dated 3 August 2012 comprising the ISDA Agreement, the Schedule thereto and the Credit Support Annex thereto¹. A number of documents said to comprise those agreements are exhibited to Mr Homberger’s statement. The first, described by Mr Homberger as the “FX Agreement” comprises the first page of an agreement entitled “ISDA-2002 Master Agreement” and a page numbered “28” which appears to be the last page of such agreement and which appears to bear the signatures of Mr Simon Bladon on behalf of Barclays, and of Mr Pradeep Kumar and Mr Ashwin Shetty on behalf of UAEEC. What appears to be Mr Kumar’s signature is accompanied by a stamp describing him as “Chief Financial Officer” and what appears to be Mr Shetty’s signature is accompanied by a stamp describing him as “Vice-President – Global Treasury” and what appears to be the corporate seal of UAEEC is also affixed to that page.

20. Mr Homberger’s witness statement provided no explanation for the missing pages. However, also exhibited to his statement is a pro forma version of the 2002 ISDA Master Agreement without any dates or details of parties inserted. The formatting of this version is obviously different to the version used in the document apparently signed by representatives of Barclays and UAEEC, as the signature page in the pro forma version of the Agreement contains significantly more text than the signature page in the executed version of the ISDA Agreement, although the text that is common to both pages is identical. Mr Homberger’s statement provides no explanation of these differences. As I will explain, after this point was taken by Dr Shetty, the issue was explored in considerable detail following the hearing of the application for immediate judgment. In the course of that process the unredacted version of the Agreement, part of which was exhibited to Mr Homberger’s first statement, was eventually put into evidence in its entirety.

21. In very general terms, the ISDA Agreement provides for foreign exchange transactions to take place between Barclays and UAEEC by reference to “Confirmations” recording the terms of each transaction - that is to say, the respective amounts of foreign currency to be exchanged, and the dates upon which payments in the respective currencies are to be made by the parties, such dates being described in the ISDA Agreement as “the due date for value”.

22. Clause 2 of the ISDA Agreement obliges each party to make payments in accordance with each “Confirmation” on the “due date for value”. However, clause 2(iii) provides that the obligation of each party is subject to:

23. The same clause makes provision for netting off amounts due on the same date in the same currency in respect of more than one transaction, if the parties elect to do so.

24. Clause 5 of the ISDA Agreement provides that failure by any party to make any payment when due is (amongst other things) an “Event of Default”. The same clause specifies a number of circumstances which give rise to a “Termination Event”.

25. Clause 6 of the ISDA Agreement provides that if an Event of Default has occurred and is continuing the other party may by written notice elect to bring the Agreement to an end on an Early Termination Date specified in that notice. The same clause makes provision for the calculation of the amounts due in the event of Early Termination – essentially by a process of netting off the amounts due from one party to the other in what the ISDA Agreement describes as the “Termination Currency Equivalent of the Unpaid Amounts”.

26. The Schedule to the ISDA Agreement executed by the parties to these proceedings provides that the agreement is to be governed by English law. The Schedule also provides that the “Termination Currency” is United States dollars.

27. In his first witness statement Mr Homberger stated that Dr Shetty is an Indian national and businessman best known as the founder of NMC Health PLC, which is a company formerly listed on the London Stock Exchange which went into administration on 9 April 2020 following the discovery of what appears to have been a massive fraud. However, as Mr Homberger pointed out, Barclays claim against Dr Shetty has nothing to do with events at NMC Health. Rather, as I have noted, the claim arises from dealings between Barclays and UAEEC, which as Mr Homberger observed in his statement, is part of Finablr Group. Dr Shetty founded Finablr PLC, which is a global foreign exchange business listed on the London Stock Exchange since May 2019. Dr Shetty was a director and co-chairman of Finablr until 17 August 2020 when he resigned. Finablr has also made public announcements with respect to the discovery of very substantial undisclosed debts.

The defaults by UAEEC

28. According to Mr Homberger, between 10 and 13 March 2020, Barclays paid out sums in respect of a series of foreign exchange transactions to the value of USD$129,019,386.28. UAEEC was obliged to pay to Barclays similar but not identical amounts (given the spreads imbedded in each transaction and foreign exchange rate fluctuations) in various currencies but failed to do so. Barclays made the last payment in respect of the foreign exchange transactions on 16 March 2020 and according to Mr Homberger, first became aware of the failed settlements on or around 17 March 2020. On that day the Central Bank of the UAE announced that it was taking over supervisory management of UAEEC.

29. Mr Homberger stated that on 24 March 2020, Barclays gave Notice to UAEEC of its failure to pay the amounts due under the foreign exchange transactions and requiring payment of all amounts due within one business day. The Notice further provided that unless payment was made within the time specified an Event of Default would occur which would entitle Barclays to issue a Notice designating an Early Termination Date pursuant to the ISDA Agreement.

30. Mr Homberger also stated that payment was not made within the time specified (or at all) and on 26 March 2020, Barclays gave Notice of Early Termination to UAEEC based on the Event of Default arising from the failure to pay the amount the subject of the Notice date 24 March 2020. The Notice of Early Termination specified that the Early Termination Date would be the date of the letter – namely 26 March 2020. The Notice foreshadowed that Barclays would serve a statement of the amount due upon Early Termination in accordance with clause 6 of the ISDA Agreement. That statement was dated 1 April 2020 and was sent to UAEEC on that date, specifying the net amount due as of the Early Termination Date to be USD$129,543,839.27. The calculation of that amount is shown in an annexure to the letter, setting out the calculations giving rise to the various amounts specified in clause 6 of the ISDA Agreement.

The demand upon Dr Shetty under the Guarantee

31. On 28 April 2020, Barclays served Notice of Demand on Dr Shetty under the terms of the Guarantee. That Notice referred to the ISDA Agreement, the failure of UAEEC to pay the amount due under its terms, the service of the statement of amount due dated 1 April 2020, and the failure of UAEEC to pay any of that amount or interest accruing on it, with the result that as at 27 April 2020, the outstanding amount owed by UAEEC totaled USD$129,807,261.93. The Notice asserted that pursuant to clause 17.4 of the Guarantee, the statement of the outstanding amount due in the Notice itself was to be considered as conclusive evidence that the amount was due and payable. The Notice further specified that interest would continue to accrue on the outstanding amount.

32. Mr Homberger’s first witness statement also dealt with a number of issues that had been raised in correspondence by lawyers acting on behalf of Dr Shetty. They included an assertion that Dr Shetty had no record of signing the Guarantee, and putting Barclays to proof that Dr Shetty signed the Guarantee. In response to that assertion, Mr Homberger exhibited to his witness statement a report from an expert handwriting examiner, Ms Ellen Radley, to the effect that there was “strong evidence to support the proposition that Dr Shetty wrote the signatures in his name on the Guarantee”². It is unnecessary to deal with issues raised in correspondence from Dr Shetty’s legal representatives, as a number of those issues have not been pursued in the skeleton arguments filed in opposition to the application for immediate judgment. For example, it is now accepted that Dr Shetty signed the Guarantee.

The first round of witness statements filed on behalf of Dr Shetty

33. A number of witness statements made by Mr Carlo Fedrigoli, a lawyer representing Dr Shetty, have been filed in opposition to the application for immediate judgment. The first of those statements is largely argumentative. The only references to evidence within the statement are to the evidence given by others. This is a highly undesirable practice which should be discouraged. Witness statements should be confined to evidence. Arguments should be advanced in skeleton arguments.

34. It is appropriate to regard Mr Fedrigoli’s first statement as a form of skeleton argument. It contains assertions to the effect that:

35. In his first statement Mr Fedrigoli referred to three reports prepared by others. The first is a report from Mr Hanif Virji, who is said to be a former trader and an expert in the field of financial markets. Mr Virji purports to analyse data provided by Barclays in respect of the foreign exchange trades which have resulted in the claim. According to his analysis, the volume of trades increased between 10 and 12 March 2020, before reducing significantly on 13 March 2020, notwithstanding the significant increase in the volume of failed transactions over that period. Mr Virji expresses the opinion that Barclays’ reaction to the non-payment of those transactions “appears very unusual and not in line with my experience of trading and risk management practices because they appear not to have taken timely action despite large defaults on multiple transactions over a number of days”⁴.

36. Mr Fedrigoli also referred in his first statement to a media report by Mr Tom Ashby of Ashbright, a communications agency, which analysed media coverage of NMC/Finablr between 17 December 2019 and 16 March 2020. That report summarises adverse media references to Finablr over that period, and the significant reduction in its share price over the same period, culminating in media reports on 16 March to the effect that Finablr was in danger of collapsing.

37. The third report to which Mr Fedrigoli referred in his first statement is a report from Professor Kern Alexander, who holds the chair in banking and financial market law at the University of Zurich, Faculty of Law. In his report Professor Alexander summarises the regulatory environment relating to banks in Europe and the United Kingdom. He makes particular reference to the regulatory standard which requires “sound and prudent management”, and to the capacity of banking regulators to impose administrative and penal sanctions for breach of that standard.

38. In that context Professor Alexander expresses the view that on the information available to him Barclays did not act prudently in managing its foreign exchange settlement risk exposure with UAEEC following revelation of possible fraud in relation to NMC, and its apparent disregard of the number of failed settlements that began accumulating on 10 March 2020, and by continuing to trade with UAEEC until 13 March 2020⁵.

39. In his first witness statement Mr Fedrigoli relied upon these reports, at least in part, to sustain an assertion that in permitting the failed settlements to accumulate, Barclays must have been either grossly incompetent, in that it did not have adequate systems and procedures in place to warn it of the escalating failed settlements, or a party to dishonest conduct because it either consciously refrained from taking any or any proper steps to confirm whether UAEEC’s trading facility was being misused or alternatively, Barclays knew but consciously ignored the fact that UAEEC’s trading facility was being misused, or because it was a party to a fraud⁶. I reiterate this is clearly argumentative assertion rather than evidence. I will return later to the question of whether there is any evidence to support these allegations, some of which are very serious.

40. Mr Fedrigoli apparently relied upon this process of reasoning to sustain the assertion that:

… Dr Shetty has a prima facie arguable case (which is more than fanciful) that the Claimant was party to dishonest conduct in one of the manners considered above, and I am concerned that the Claimant’s application for immediate judgment is motivated to prevent Dr Shetty (and the Court) from investigating how and why the Bank permitted such vast exposures to accrue⁷.

41. Mr Fedrigoli asserted that Dr Shetty needs the opportunity to carry out an analysis of how the failed trades came to accumulate between 10 and 13 March 2020 in the context of the systems and procedures used by Barclays to prevent the risk of such occurrences.

42. In his first statement Mr Fedrigoli also made various assertions in relation to the trading platforms utilised by Barclays, the senior personnel of Finablr and UAEEC, Barclays exposure to NMC, the adverse publicity relating to NMC’s financial position, the adverse publicity relating to Finablr’s financial position and its declining share price. Mr Fedrigoli also made assertions with respect to fraud involving senior employees of UAEEC, Finablr and NMC. None of these matters are within the personal knowledge of Mr Fedrigoli, and all are irrelevant to Barclays claim against Dr Shetty, for reasons which I will explain below. Accordingly, it is unnecessary to consider the various assertions made by Mr Fedrigoli in this respect in any detail.

43. Dr Shetty has also provided witness statements in opposition to the application for immediate judgment. In his first statement he asserted that although he was the chairman of the board of UAEEC from 2015, he had no managerial functions or day to day responsibilities in relation to the company. According to Dr Shetty, UAEEC was managed by its CEO, Mr Promoth Manghat.

44. Dr Shetty asserted in his first statement:

I recall that at the time of providing the Guarantee, I felt proud that a financial institution such as Barclays was happy to accept me as a guarantor. For me, Barclays was one of the world’s leading banks, and the Guarantee was a testimony to how far I had come in life⁸.

This assertion is obviously inconsistent with the assertion implicitly made by his former lawyers to the effect that he had no recollection of providing the Guarantee.

45. Dr Shetty also made various assertions with respect to his subjective state of mind at the time of providing the Guarantee, which are irrelevant to any issue in these proceedings, and therefore unnecessary to recount.

46. Dr Shetty stated that the first time he became aware of any of the foreign exchange transactions underlying the claim by Barclays was when he received the notice of demand from Barclays in early May 2020. Dr Shetty further stated that he had no involvement whatsoever in the foreign exchange transactions and neither had nor has any knowledge as to the destination of any sums paid out by Barclays pursuant to those transactions⁹.

47. Mr Fedrigoli provided a second witness statement prior to the hearing of the application for immediate judgment. He exhibited a copy of a document prepared and published by Barclays in relation to the regulations pertaining to its capital adequacy requirements under the heading “Pillar 3 Report” in 2019. Mr Fedrigoli also exhibited to his second statement guidelines published by the European Banking Authority relating to various matters including materiality and disclosure. Mr Fedrigoli also exhibited a final notice dated 26 November 2019 issued by the Prudential Regulatory Authority of the Bank of England against CitiGroup Global Markets Limited and others. That document relates to the imposition of a significant fine against CitiBank for serious breaches of its capital adequacy requirements. For reasons which I will explain, none of these matters are in any way relevant to the proceedings brought by Barclays against Dr Shetty, and it is not therefore necessary to refer to them in any detail.

48. Mr Fedrigoli filed a third witness statement prior to the application for immediate judgment. This statement was filed in support of an application for an order permitting the reports to which Mr Fedrigoli referred in his first statement into evidence and repeats, in summary form, a lot of what Mr Fedrigoli asserted in relation to those reports in his first statement.

Dr Shetty’s first skeleton argument

49. In the first skeleton argument served on behalf of Dr Shetty, it was asserted that:

50. The skeleton goes on to assert that a trial is necessary to ensure that Barclays produces the records relating to its foreign exchange trading and settlement activities and that a final determination of these proceedings in the absence of such records would amount to “summary injustice”¹¹.

51. The skeleton also asserts that there is an open issue as to whether “FX spot” transactions, which are simple exchanges of currencies, are covered by the Guarantee.

52. The skeleton repeats assertions previously made by Mr Fedrigoli to the effect that the risk management systems that must exist at Barclays must have either failed or been overridden. It is further asserted that the question of whether Barclays’ breaches of the requirements of prudential regulation call for a “judicial abstention” is not a matter to determined summarily.

53. The skeleton also asserts, without explanation or exposition, that “the failures at Barclays … may have the effect that UAEEX itself is not properly liable”¹².

Dr Shetty’s second skeleton

54. The second skeleton argument filed on behalf of Dr Shetty shortly before the hearing is almost double the length of the first. It raises a number of arguments for the first time.

55. Those arguments include the assertion that, having regard to the systems which Barclays should have had in place, it is unlikely that Barclays first became aware of the failed settlements on or around 17 March 2020.

56. Another argument raised for the first time is the proposition that by continuing to trade in the face of “Events of Default” there must have been a variation to or replacement of the trading relationship under the ISDA Agreement, which in turn raises possible issues with respect to what is described as “the doctrine of purview”.

57. It is further asserted that the terms of remuneration for those involved in foreign exchange at Barclays may have created an incentive for allowing UAEEC to trade further into default¹³.

58. The second skeleton also contains the curious assertion:

D does not defend the Application on the mere negligence of Barclays. However, even some types of negligence can impact the regulatory issues that are created as a result of events of 10-17 March 2020¹⁴

This conundrum is not explained anywhere in the skeleton.

59. Another argument put to the Court for the first time relates to the pages missing from the copy of the executed version of the ISDA Agreement put into evidence by Barclays.

60. This skeleton further asserts, for the first time, that Dr Shetty was entitled to notice as soon as Barclays continued trading with UAEEC after any default had occurred, because this constituted a change in the contractual arrangements between Barclays and UAEEC.

61. It is also contended in the second skeleton that the conclusive evidence clause in the Guarantee “will not bind where there is a mistake on the face of the certificate (or fraud)”, and that “public policy can be a basis of challenge to a contract with a ‘conclusive evidence’ clause”¹⁵.

62. In the second skeleton the cryptic reference to “judicial abstention” in the first skeleton is apparently explained by reference to the well-known principle of illegality – that is, that the Court will not enforce a claim arising from an illegal contract. That proposition is then said to have been expanded by the reference to “judicial abstention” by Sumption JSC in Les Laboratoires Servier and another v Apotex¹⁶.

The hearing of the application

63. During the hearing of the application for immediate judgment on 24 January 2021, counsel for Dr Shetty again referred to the 26 pages apparently missing from the executed copy of the ISDA Agreement produced in evidence. Counsel for Barclays made assertions with respect to the reasons for the redaction of the copy of the ISDA Agreement produced in evidence, but as I pointed out during argument, there was no evidence before the Court to substantiate those assertions. I suggested to Counsel for Barclays that, as the precise terms of the ISDA Agreement had been relied upon in the calculation of the amount claimed from UAEEC, and consequentially the amount claimed in these proceedings from Dr Shetty, it was unsatisfactory that there was no version of the ISDA Agreement executed by the parties in its full form before the court. As a result of those observations, counsel for Barclays sought an opportunity to place further evidence before the Court, and orders were made to that enable that to occur.

The second round of evidence

64. Following the hearing, on 31 January 2021, a second witness statement from Mr Homberger was filed. In that statement Mr Homberger asserted that it is clear from the redacted copy of the ISDA Agreement in evidence that the parties entered into a contract incorporating the terms of the ISDA Master Agreement 2002, which was a standard form document readily available on the internet. He further asserted that the Schedule to the document is far more important because it sets out the specific terms agreed by the parties in addition to, or by way of variation of the standard terms, and the Schedule to the Agreement executed by UAEEC and Barclays in 2012 had been placed before the Court.

65. Mr Homberger asserted in his second statement that following further review of the contemporaneous documents available to Barclays, he had located what he believed to be the full copy of the Agreement entered into between Barclays and UAEEC. A copy of that Agreement is exhibited to Mr Homberger’s second statement.

66. However, as Mr Homberger noted in his statement, the signatures contained in that copy of the ISDA Agreement are located in different places to the signatures contained in the redacted version exhibited to his first statement. Mr Homberger asserted that this suggests that there is more one signed version of the ISDA Agreement, and that it is common practice for Barclays to request a counter-party to sign multiple copies of the same agreement.

67. Regrettably this apparently innocuous statement precipitated an avalanche of further applications from Dr Shetty and his representatives.

68. On 3 February 2021, Dr Shetty applied for an order compelling Barclays to produce for inspection the original versions of the ISDA Agreements exhibited to Mr Homberger’s first and second statements. That application was supported by the fourth witness statement of Mr Fedrigoli. In that statement Mr Fedrigoli asserted that he had observed differences in the execution pages of the two documents including, with respect to the version exhibited to Mr Homberger’s second statement, what Mr Fedrigoli describes as “fuzziness” appearing around the signatures of those who executed on behalf of UAEEC, but which is not present around the handwritten date of the document. He asserts that these differences might be explained by the second version of the document being a scanned version of an earlier original, or possibly explicable by the fact that certain elements of the execution page had been inserted or imported electronically into the document at different times or by different parties. Mr Fedrigoli attached to his fourth statement what is described as a “preliminary review” by a handwriting expert, Dr Ahmed Obaid Al Bah. In that preliminary review, Dr Al Bah asserts that the version of the ISDA Agreement exhibited to the second statement of Mr Homberger is not a scan of an original document but rather an electronic document resulting from at least two or more manual scanning manipulation processes, and that the signatures of those purporting to sign on behalf of UAEEC have been inserted electronically after the text was typed.

69. Before Barclays had responded to this application, on 7 February 2021, the fifth witness statement of Mr Fedrigoli was filed. It exhibited a report from “Oakland Connecticut Information Security” following the inspection of the PDF files containing the two versions of the ISDA Agreement in evidence. Based on that review, the report asserts that the second version of the ISDA Agreement had been digitally altered to include images of signatures or text that were not originally in the document.

70. Also exhibited to Mr Fedrigoli’s fifth statement is a preliminary report from Mr Eric Semaan of Kroll, a division of Duff & Phelps, in which it is observed that the version of the ISDA Agreement exhibited to Mr Homberger’s second statement contains irregularities in content, although it is said that it is not possible to identify whether those irregularities were the consequence of the scanning device used, a later alteration of the document, or a defect in the source document.

71. On 9 February 2021, an application was lodged on behalf of Dr Shetty seeking orders permitting the receipt in evidence of the forensic reports to which I have referred.

72. On 11 February 2021, a further raft of additional evidence was filed on behalf of Dr Shetty, allegedly in response to the second witness statement of Mr Homberger. Amongst the evidence filed was a statement from Mr Ashwin Shetty. In that statement, Mr Shetty asserted that from his apparent review of the ISDA Agreement exhibited to the second statement of Mr Homberger, he believes that the signature attributed to his name on that document has been added electronically rather than by wet ink. However, Mr Shetty has no apparent qualifications which would enable him to form that opinion, and the reason for it is not explained other than by an assertion that the signature appears to have been inserted on the page together with various “printed” elements, although the basis for that assertion is not explained either.

73. In his statement Mr Shetty also asserted that he had no authority or power of attorney to execute the ISDA Agreement on behalf of UAEEC or to bind UAEEC into such a liability. He also asserted that he believes Barclays would have been aware of his lack of authority based on the scale of its corporate operations in the UAE and of the need to ensure that there was a documented power of attorney to sign or act on behalf of the relevant corporate entity. Mr Ashwin Shetty also asserted that during his time at UAEEC, in the event of defaults, Barclays would be in contact on the day following the default and would not continue trading until the unsettled trades were settled.

74. The additional evidence also included a statement from Mr Abdullah Yousuf Al Najjar, who is a lawyer in the UAE. His evidence related to the legal requirements for valid execution of documents under the law applicable in the UAE. He further asserted that the rule of law known as the “indoor management rule” under English law, has no application in the UAE. For reasons which will become clear, it is not necessary to consider Mr Al Najjar’s evidence in any detail.

75. The additional evidence included a second witness statement from Dr Shetty. In that statement Dr Shetty repeated arguments which had been put by his legal advisors and which it is unnecessary to recount. He also asserted that at the time of the purported execution of the ISDA Agreement, the only authorized signatures of UAEEC were himself and his then Emirati partner and 60% shareholder in UAEEC, H.E. Abdullah Al Mazroei. He further asserts that as a consequence, banks and any other parties entering into a contract with UAEEC required agreements to be signed by himself and H.E. Al Mazroei.

76. Included in the additional evidence filed at this time is the expert report of Jeffrey B. Golden, a London barrister. His evidence relates to the historical development of the ISDA Master Agreement, its status within the financial industry, and some of its apparent objectives.

77. A sixth witness statement from Mr Fedrigoli was also filed. The document exhibits previous correspondence between Mr Fredigoli and the lawyers representing Barclays and contains a number of argumentative assertions which it is unnecessary to recount.

78. The additional evidence was accompanied by applications for orders to enable the receipt of the expert evidence of Mr Golden and Mr Al Najjar. However, no application was made for an order permitting the receipt of the evidence of Mr Ashwin Shetty and Dr Shetty, which raised an entirely new issue without the permission of the Court. Another skeleton argument was filed on behalf of Dr Shetty containing arguments in support of the application for inspection, arguments with respect to the lack of authority of the apparent signatories of the ISDA Agreement on behalf of UAEEC and argument in support of the reception of Mr Golden’s expert evidence, which is said to be relevant to the likelihood of the standard form ISDA Agreement having been modified by parties generally, and therefore, presumably by inference, by Barclays and UAEEC.

79. Barclays responded to the various applications made on behalf of Dr Shetty on 21 February 2021. Included in the response was a further witness statement from Mr Homberger (his third). In that statement Mr Homberger asserted that Barclays had conducted a search of its off-site hard copy storage facility, and had retrieved from that facility an original paper copy of the full version of the signed ISDA Agreement which had been exhibited to his first witness statement in redacted form. A scanned copy of that full version of the Agreement is attached to Mr Homberger’s third statement.

80. Mr Homberger also exhibited to his third statement an email dated 14 January 2013 from UAEEC to Barclays, and a further email dated 20 January 2013 from the Barclays recipient of the earlier email to another officer of Barclays. Each of those emails attached full colour copies of the signed ISDA Agreement and Schedule, being the version attached to Mr Homberger’s first and third statements.

81. Mr Homberger also attached to his third statement a certificate which was attached to the email of 20 January 2013 signed by Dr Shetty and H.E. Al Mazroei, certifying, amongst other things, that:

82. A response was provided to the additional evidence from Barclays on behalf of Dr Shetty on 7 March 2021. That response included a second statement of Mr Ashwin Shetty in which he states that the version of the ISDA Agreement attached to the third statement of Mr Homberger bears a signature which he believes to be his. He also states that the Certificate of Authority exhibited to the third statement of Mr Homberger bears a signature which he believes to be his, and that when he made his first statement he did not recall that such a certificate existed.

83. A second statement from Mr Al Najjar has also been provided. In that statement Mr Al Najjar confirms that on the basis of the Certificate of Authority which he had been shown, the ISDA Agreement had been executed with full authority.

84. However, Mr Al Najjar goes on to assert that the Confirmations relating to each foreign exchange transaction should also have been executed by somebody with authority of UAEEC and he had not seen any material to that effect.

85. A second report from Mr Golden was also served on 7 March 2021. This report is said to go to the drafter’s intent when the 2002 ISDA Master Agreement was prepared, and to market practices that may be relevant to the counterparties Confirmation of transactions entered into under the ISDA Master Agreement 2002 and the market’s expectation as to the weight which should be given to such a Confirmation.

86. A seventh witness statement of Mr Fedrigoli was also filed on 7 March 2021. That witness statement is in support of yet another application lodged on behalf of Dr Shetty. That application is to inspect the Confirmations relating to each foreign exchange transaction which is said to have contributed to the debt due from UAEEC to Barclays. The evidence of Mr Al Najjar and Mr Golden relating to the Confirmations is also said to be relevant to this application, to which I will return.

The validity of the execution of the ISDA Agreement

87. The cavalcade of evidence tendered on behalf of Dr Shetty since the completion of the hearing of the application for immediate judgment is said to go to two issues relating to the execution of the ISDA Agreement, namely whether:

It is convenient to deal with those issues now, before returning to the other issues raised in opposition to the application for immediate judgment.

88. The first point which must be made in relation to these issues is that even if either or both propositions were made good, they would provide no arguable defence to Barclays’ claim against Dr Shetty. Irrespective of the manner in which the ISDA Agreement was executed, and irrespective of the authority of the signatories to that document, there is no dispute that for a period of eight years following the execution of that Agreement, Barclays continuously supplied foreign exchange facilities to UAEEC. In the course of providing those facilities, in March 2020 Barclays advanced approximately USD$130,000,000 in foreign exchange transactions which UAEEC failed to settle. In those circumstances it is difficult to see any basis upon which UAEEC could rely upon the assertions now made with respect to the execution of the ISDA Agreement eight years earlier in order to resist a claim from Barclays. But even if those matters could somehow give rise to a defence available to UAEEC, they do not give rise to any defence available to Dr Shetty in respect of Barclays claim against him. That is because under the Guarantee, Dr Shetty has not only guaranteed to satisfy any liabilities owed by UAEEC to Barclays, but he has also indemnified Barclays against any losses suffered by reason of UAEEC’s failure to fully and promptly perform all obligations “in connection with” the Banking Facilities provided by Barclays. It follows that even if, for some reason, UAEEC could rely upon the matters asserted to resist a claim from Barclays, Dr Shetty would nevertheless be liable under the Indemnity in respect of Barclays losses arising from the foreign exchange transactions which UAEEC failed to settle.

89. But in any event there is absolutely no substance in the assertions now made. It is significant that all of the contentions made with respect to the irregularity or inconsistencies with respect to the execution page of the ISDA Agreement relate only to the version of that Agreement exhibited to the second witness statement of Mr Homberger. No assertion of irregularity or inconsistency has been directed at the execution of the version of that Agreement exhibited to the first statement of Mr Homberger. Although that version was redacted, a complete copy of that version of the Agreement has now been produced and placed in evidence as an exhibit to the third statement of Mr Homberger. Although there is no suggestion that this version of the Agreement was irregularly executed in any way, any suggestion to that effect would in any case be dispelled by the annexure of full copies of the executed version of that Agreement to the emails which were sent in January 2013, shortly after its execution.

90. It should also be noted that Mr Ashwin Shetty does not deny signing a wet ink version of the ISDA Agreement – the highest his evidence goes is to say that he cannot now recall signing it, which is hardly surprising, after the passage of 9 years. Rather, his evidence is focused on a denial that an electronic version of his signature was ever affixed with his authority. But there is no suggestion that an electronic version of his signature was ever affixed to the version of the Agreement exhibited to the first and third statements of Mr Homberger - to the contrary Mr Shetty accepts that the signature on that document is his.

91. As a full and complete copy of that version of the ISDA Agreement is now in evidence, there is no remaining issue with respect to the integrity of the execution of the ISDA Agreement. The issues raised on behalf of Dr Shetty in relation to the integrity of the execution of the version of the Agreement exhibited to the second statement of Mr Homberger are simply irrelevant. But in any case, in the light of the unchallenged integrity of another version of that Agreement executed at the same time, the challenges to the integrity of the execution of that version of the Agreement, based upon preliminary forensic analysis, are utterly implausible. No motive for falsification of a version of the document has been suggested on behalf of Dr Shetty, nor can any be imagined. The overwhelming preponderance of probability is that the differences between the two versions of the Agreement in evidence are to be explained by the fact that more than one version of the document was executed, and different electronic copies have been made over time.

92. It also follows that the evidence of Mr Golden with respect to the propensity of parties to modify the terms of the ISDA Master Agreement is irrelevant, because it is clear from the full copy of the executed Agreement exhibited to the third statement of Mr Homberger, that in this case the parties did not in fact modify the standard terms of the Master Agreement. It further follows that the application to inspect the originals of the two signed Agreements must also be dismissed, as such an inspection could not provide any relevant information or evidence.

93. Turning now to the issue raised with respect to the authority of the UAEEC signatories to the ISDA Agreement, clearly this is a point which should have been raised well before the hearing of the application for immediate judgment. But in any case, the certificate of authority now in evidence establishes that the assertions made by each of Dr Shetty and Mr Ashwin Shetty to the effect that the signatories to the ISDA Agreement lacked the authority of the UAEEC are simply false. The certificate establishes that each signatory was in fact specifically authorized to sign the ISDA Agreement on behalf of UAEEC by Dr Shetty and H.E. Al Mazroei.

94. It follows that the evidence in the first statement of Mr Al Najjar is irrelevant, because he was not made aware of the existence of the express authority granted by Dr Shetty and H. E. Al Mazroei. In his second statement, after becoming aware of the express authority granted to the signatories, Mr Al Najjar confirmed that the signatories had the authority of UAEEC under UAE law. Further and in any event, as the ISDA Agreement is governed by English law, rather than UAE law, the asserted lack of principles of law relating to apparent authority under UAE law is irrelevant.

95. For these reasons the contentions raised with respect to the validity of the execution of the ISDA Agreement have been shown to be entirely without substance. They provide no plausible support whatsoever for the proposition that there should be a trial of the issues in this case.

The application for inspection of the Confirmations

96. Understandably, Barclays objected to the application made without prior notice on 7 March 2021 for inspection of each Confirmation relating to each and every foreign exchange trade. In response to that objection I directed the application would not be determined until the application for immediate judgment had been determined. I made that direction for three reasons:

97. The reasons for the latter conclusion will be evident from the history which I have narrated. In relation to the first point, there is not a scintilla of evidence to suggest that there is any irregularity in relation to the Confirmations pertaining to the foreign exchange transactions and no point has been taken in relation to those documents at any time prior to the lodgment of the application on 7 March 2021. I have no doubt that the application is nothing more than a fishing application undertaken for the purpose of delay and in the hope that something might possibly turn up.

98. But in any event, for the reasons I have already given, even if there were some irregularity in relation to the Confirmations, it would provide no arguable defence to Barclays’ claim against Dr Shetty. It is not disputed that the monies were advanced by Barclays and have not been paid by UAEEC. It is difficult to see how any possible irregularity in the Confirmations could give rise to any defence on the part of UAEEC to a claim from Barclays in those circumstances, but in any event, it clearly would give rise to no defence available to Dr Shetty, who has given an unlimited indemnity to Barclays in respect of any losses incurred in connection with UAEEC’s failure to perform its obligations to Barclays. The occurrence of those losses is not denied and the irregularity or otherwise of the paperwork pertaining to them is irrelevant to these proceedings.

99. For these reasons it is neither necessary nor appropriate to determine the latest application lodged on behalf of Dr Shetty before deciding Barclays’ application for immediate judgment.

Immediate judgment – legal principles

100. RDC 24.1 provides:

101. The principles governing the application of the Rule were enunciated by Giles J in GFH Limited v Haigh¹⁷. In an application by a claimant, the Court must consider whether the defendant has a “realistic” as opposed to a “fanciful” prospect of success. A realistic prospect of success is one that carries some degree of conviction and not one that is merely arguable¹⁸. These principles have been cited in a number of cases and were endorsed by the Court of Appeal in Saif Sulaiman Mohammad Al Mazrouei v Bankmed (SAL)¹⁹.

102. An applicant for immediate judgment carries the legal burden of proof, although if a claimant discharges that burden by adducing evidence which establishes an entitlement to judgment, the defendant carries the burden of adducing evidence to show that it has a real prospect of successfully defending the claim, or that there is some other compelling reason why the case or issue should be disposed of at a trial²⁰.

103. The Court of Appeal has observed that:

… the Court should not determine the application by conducting a mini trial. Where there were real disagreements on matters of fact the Court should not seek to dispose of the case by immediate judgment. However, the mere appearance of factual discrepancies would not of itself preclude the Court from giving judgment at an early stage if a surface level review revealed that a party’s case had been constructed on the basis of factual assertions which were likely to be false²¹.

104. Giles J further developed the applicable principles in the following passage in Nest Investments Holdings Lebanon SAL & Ors v Deloitte & Touche & Ors:²²

105. In Doncaster Pharmaceutical Group, to which Giles J referred, Mummery LJ observed:

106. It is necessary to apply these principles to the evidence adduced and the submissions advanced in this case.

The claimant’s case

107. I have no doubt that Barclays has adduced evidence which establishes a prima facie entitlement to judgment on its claim. Issues raised by Dr Shetty with respect to his execution of the Guarantee, the execution of the ISDA Agreement in its full terms and as to the authority of those who executed the ISDA Agreement on behalf of UAEEC have all been shown to be without substance.

108. By clause 1.1 of the Guarantee, Dr Shetty guaranteed to Barclays the punctual performance by UAEEC of each and every obligation and liability which UAEEC has to Barclays, and further undertook to Barclays that whenever UAEEC did not pay any amount when due Dr Shetty would immediately on demand pay that amount as if he was the primary obligor, irrespective of any invalidity of unenforceability of UAEEC’s obligations to Barclays. By clause 1.2 of the Guarantee, Dr Shetty also undertook to pay Barclays the amount of all interest, fees, charges and expenses, augmented by clause 16 of the Guarantee under which Dr Shetty undertook to pay to Barclays the amount of all costs and expenses which Barclays incurs in connection with the Guarantee, including in connection with the enforcement of the Guarantee.

109. Further, as I have noted, in addition to the obligations which Dr Shetty undertook as guarantor, by clause 2 of the Guarantee, he undertook to indemnify Barclays in full against all losses, costs and expenses suffered or incurred by Barclays in connection with UAEEC’s failure to fully and promptly perform its obligations.

110. By clause 3 of the Guarantee, Dr Shetty agreed that the obligations which he had undertaken were not be discharged, impaired or affected by any illegality, invalidity, unenforceability as between Barclays and UAEEC, or by reason of any amendment to or any variation, waiver or release of any of the terms of the agreement between Barclays and UAEEC or any other act, event or omission which might otherwise operate to discharge, impair or affect any of his obligations under the Guarantee. Obviously this clause is intended to avoid the application of the rule in Holme v Brunskill²³ and to ensure that Dr Shetty’s obligations as guarantor are not discharged by any variation in the terms of the obligations of the principal debtor.

111. Further, by clause 4 of the Guarantee, Dr Shetty expressly confirmed that it was his intention that the Guarantee should extend from time to time to any variation, increase, extension or addition to any of the Banking Facilities and any other variation or extension of the purposes for which the facilities were made available from time to time, including entry into any new, restructured, refinanced or amended derivatives, risk management or hedging products, facilities or transactions.

112. Further, by clause 17.4 of the Guarantee, Dr Shetty agreed that any certificate, demand or statement of Barclays as to any amount being payable by UAEEC shall, in the absence of manifest error, be conclusive evidence that such payment is then due.

113. The evidence establishes that UAEEC failed to discharge its obligations to Barclays in respect of the foreign exchange transactions particularized in the evidence.

114. Mr Virjji suggests in his report that Barclays may not have given full credit for payments it did not have to make in respect of transactions which were closed out early²⁴. That observation is apparently based upon the amount particularized in the Notice of Failure to Pay dated 24 March 2020. However, as that Notice expressly states, it does not contain a full list of all amounts due from UAEEC. Rather, the Statement of Payment on Early Termination dated 1 April 2020 is a comprehensive statement of account which shows that Barclays gave credit for all amounts due from it to UAEEC.

115. Further, the Notice of Demand dated 28 April 2020, which was served upon Dr Shetty, triggers the operation of clause 17.4 of the Guarantee. The report of Mr Virjji, which goes no further than to express suspicion in relation to a different statement of account, falls well short of any evidence capable of establishing “manifest error” which would avoid the conclusive effect of the service of the Notice of Demand pursuant to clause 17.

116. At differing points in the skeleton arguments provided on behalf of Dr Shetty, it is suggested that clause 17 of the Guarantee does not apply. The reasons for that assertion are obscure, apart from vague references to public policy, unsubstantiated by any reference to authority. In fact, the authorities are in direct conflict with the assertion that a conclusive evidence clause is somehow contrary to public policy. In Dobbs v National Bank of Australasia Ltd²⁵, the High Court of Australia rejected a submission that a conclusive evidence clause in an agreement was contrary to public policy because it excluded the jurisdiction of the Courts. That decision was followed by the English Court of Appeal in Bache and Co (London) Ltd v Banque Vernes et Commerciale de Paris SA²⁶. Further, Rajah J. drew attention to the desirability of holding parties who have agreed upon a conclusive evidence clause to their agreement in Standard Chartered Bank v Neocorp International Ltd²⁷ where he observed:

The real foundation for the legal efficacy of such a clause is contract. It can be cogently argued that if parties expressly agree on the modalities for determining a matter, such an agreement should be upheld in the absence of any relevant public policy considerations.

117. So, in summary, the evidence adduced by Barclays establishes that UAEEC has defaulted in its obligations under the ISDA Agreement and that Dr Shetty has failed to perform his obligations under the Guarantee. The amount of UAEEC’s indebtedness to Barclays at the time demand was made upon Dr Shetty was established conclusively by that demand. Unless Dr Shetty has adduced evidence which sustains the conclusion that there is a real prospect of him successfully defending the claim or there is some other compelling reason why the case should be disposed of at trial, immediate judgment should be entered in favour of Barclays.

Is there a real prospect of Dr Shetty successfully defending the claim or some other compelling reason why the case should go to trial?

118. None of the various skeleton arguments provided on behalf of Dr Shetty, nor the oral submissions of counsel appearing on his behalf, provide a specific or coherent enunciation of the defence or defences which have a realistic prospect of success or of the compelling reason or reasons why the case should go to trial. During the course of the hearing I endeavoured to enunciate the different contentions which I took to be advanced on behalf of Dr Shetty²⁸, and counsel did not disagree with my categorization. In the section which follows I will endeavor to deal with the arguments and contentions which I take to be advanced in the various skeleton arguments and oral submissions, noting that I have already dealt with the issues relating to the execution of the ISDA Agreement, the authority of the signatories to that agreement to bind UAEEC and the efficacy of the conclusive evidence provisions of clause 17 of the Guarantee.

Are the foreign exchange transactions undertaken pursuant to the ISDA Agreement “Banking Facilities” for the purposes of the Guarantee?

119. In the skeleton arguments it is asserted that “FX Spot” transactions are not transactions falling within the definition of “Banking Facilities” and that therefore liabilities of UAEEC arising from such transactions do not fall within the scope of Dr Shetty’s guarantee. The argument seems to be based upon the proposition that there is no express reference to foreign exchange “spot” transactions in the definition of “Banking Facilities”. This submission fails to engage with the breadth of the definition of that expression in the Guarantee. By the definition, the parties have agreed that the term means “such facilities or other accommodation as Barclays may make or continue to make available to … UAEEC”. The definition goes on to provide that it includes, without limiting the generality of the primary definition, “any derivative, risk management or hedging products, facilities or transactions entered into with …” UAEEC.

120. The agreement embodied in the ISDA Agreement, and the foreign exchange transactions undertaken pursuant to its terms, clearly involve the provision of facilities or other accommodation from Barclays to UAEEC. Under those arrangements, Barclays provided facilities and accommodation in the form of funds remitted in the foreign currencies requested by UAEEC in return for UAEEC’s promise to settle those transactions by remitting to Barclays an equivalent amount in a different currency.

121. Further, turning to the specific forms of facility and accommodation which are expressly said to be included within the definition, there is no reason to doubt that foreign exchange transactions undertaken pursuant to the ISDA Agreement are “derivatives”. Although the precise boundaries of the meaning of the word “derivative” appear to be fluid, as different forms of commercial transaction evolve, it is significant that the acronym “ISDA” stands for “International Swaps and Derivatives Association”, and therefore every reason to conclude that the Master Agreement produced by that Association refers to a “derivative”.

122. But in any case, the definition expressly includes within its bounds any “transaction” entered into by Barclays and UAEEC. Clearly the foreign exchange transactions which gave rise to UAEEC’s liability to Barclays fall within that aspect of the definition, and counsel for Dr Shetty expressly conceded as much during the hearing²⁹. If any further support is needed for the proposition that “foreign exchange transactions” fall within the definition of “banking facilities” it can be found in the decision of Bingham J in Bank of India v Patel³⁰.

123. The contention that the foreign exchange transactions which gave rise to UAEEC’s liability to Barclays were not liabilities arising under “Banking Facilities” and therefore fall outside the terms of the Guarantee is entirely without substance and provides no realistic prospect of a successful defence to Barclays’ claim.

Barclays’ failure to terminate the foreign exchange transactions earlier

124. On behalf of Dr Shetty much is made of Barclays failure to intervene sooner than it did after UAEEC failed to settle transactions due for settlement on 10 March 2020. It is submitted that in circumstances in which there had been public revelation of the insolvency of NMC, and disquiet expressed with respect to the solvency of Finablr, the parent of UAEEC, Barclays should have acted immediately to suspend all foreign exchange trading with UAEEC sooner than it did. The evidence establishes that UAEEC defaulted in settlement of transactions due on 10 March 2020, and that Barclays engaged in further foreign exchange transactions with UAEEC, in significant amounts, on 11 and 12 March 2020, and in much reduced amounts on 13 March 2020. Barclays’ Particulars of Claim assert that it first became aware of UAEEC’s default on 17 March 2020, and that trading ceased on 16 March 2020.

125. Dr Shetty’s representatives emphasise this apparent anomaly – that is, the cessation of trading before knowledge, and assert that a trial is necessary to investigate precisely when Barclays became aware of UAEEC’s defaults. However, for the reasons that follow, nothing turns upon that fact. The cessation of trading before knowledge is most likely explained by the use of automated systems and some delay in those systems bringing default to the notice of human beings supervising the systems. But in any event the evidence establishes that to all intents and purposes the transactions between Barclays and UAEEC ceased on 13 March, which is three days after the Event of Default, and there is no evidence whatever to suggest that anybody within Barclays was consciously aware of UAEEC’s default on or before 13 March 2020.

126. At different times those representing Dr Shetty have placed different characterisations upon the inferences arising from the period between the commencement of default and the cessation of trading. At times the length of that period is said to give rise to an inference of dishonest conduct by Barclays because it consciously refrained from taking any steps to confirm whether the trading facility was being misused or consciously ignored the fact that the trading facility was being misused, or because Barclays was “a party to a wider fraud”. When challenged with the obvious criticism that serious allegations of this kind were being made without a scintilla of evidence to sustain them and in breach of professional obligations, Dr Shetty’s representatives appear to have backed away from the allegation of fraud on the part of Barclays. However, notwithstanding the express disavowal of an allegation of fraud, submissions made on behalf of Dr Shetty continued to hint at such an assertion, by referring to the possibility of “bad actors” within Barclays, or to the possibility that Barclays personnel may have had a motive for turning a blind eye to the failed transactions because of the possibility of incentivised remuneration.

127. At other points in the submissions the delay is said to give rise to an inference of negligence on the part of Barclays, relying upon Mr Virji’s report, and at other points it is suggested that the delay constitutes a breach of banking regulations requiring sound and prudent management, relying upon the report of Professor Alexander. At other points it is even suggested that Barclays’ failure to take decisive action more quickly sustains an inference that it may have failed to meet its capital adequacy obligations in a manner analogous to a breach by Citibank which resulted in a very substantial regulatory penalty. On behalf of Dr Shetty is accepted that the evidence in support of these assertions is scant, but it is submitted that judgment should not be entered in order that Dr Shetty might use the interlocutory procedures of the Court to obtain evidence which might support these assertions.

128. There are two principal reasons why these various contentions fail to establish either a realistic prospect of successfully defending the claim, or a compelling reason why the case should go to trial.

129. First, the evidence in support of the allegations of fraud, dishonesty, improper motive or breach of capital adequacy requirements cannot be described as scant, it can only be described as completely and utterly non-existent. There is no evidence whatever to sustain any inference of dishonesty, fraud or improper motive on the part of any person, and the suggestion that there may have been a breach of Barclays’ capital adequacy requirements as a consequence of these transactions is patently ridiculous, given the size of Barclays’ enterprise. These assertions should never have been made. This is not one of those cases in which there is a prospect that detailed investigation might produce evidence which could shed light on contentious transactions. Rather, this is a case in which there is no evidence whatever to sustain a variety of serious allegations which have been improperly made and in which a trial is sought in the hope that a fishing expedition might produce something which might possibly sustain contentions which are entirely speculative in nature and which completely lack any evidentiary foundation.

130. Second, allegations to the effect that Barclays was negligent or in breach of a regulatory obligation of sound and prudent management in its dealings with UAEEC are incapable of giving rise to any arguable defence to the claim against Dr Shetty under the Guarantee.

131. Dealing firstly with the allegation of negligence, in Bank of India v Patel³¹ Bingham J observed:

… as a matter of principle I cannot accept … (the) submission that a surety is discharged if a creditor acts towards the principal debtor in a matter which is irregular and prejudicial to the interests of the surety. … I consider the true principle to be that while a surety is discharged if the creditor acts in bad faith towards him or is guilty of concealment amounting to misrepresentation or causes or connives at the default by the principal debtor in respect of which the guarantee is given or varies the terms of the contract between him and the principal debtor in a way which could prejudice the interests of the surety, other conduct on the part of the creditor, not having these features, even if irregular, and even if prejudicial to the interests of the surety in a general sense, does not discharge the surety³².

132. Of course, these general principles must be modified to accommodate the particular terms of the Guarantee in question, and as I have noted, in this case there is an express provision in the Guarantee preserving its continuing operation notwithstanding any variation in the terms of the contract between principal debtor and principal creditor and extending its operation to liabilities or losses arising any future agreements or transactions between principal creditor and principal debtor.

133. The significant point for present purposes is that in the absence of bad faith, misrepresentation or connivance in the principal debtor’s default, irregular, prejudicial or negligent management by the principal creditor of the relationship with the principal debtor does not discharge the surety. In this case, there is no evidence of bad faith, concealment amounting to misrepresentation or connivance in UAEEC’s default on the part of Barclays. It follows that, even if Barclays were found to have been negligent by failing to terminate its commercial relationship with UAEEC earlier than it did, such a finding would have no impact upon its claim against Dr Shetty. Dr Shetty’s representatives have not been able to point to any authority contrary to the decision in Patel, or to identify any known legal principle which would sustain the proposition that a failure by principal creditor to take reasonable care to protect its own financial interests somehow discharges the liability of a surety.

134. Similar considerations apply to the assertion that Barclays was in breach of its regulatory obligation of sound and prudent management. There is no reason in principle why such a breach, if established, should have any effect upon Dr Shetty’s obligations as guarantor or under the indemnity which he granted, and his representatives have not produced any authority or identified any principle of law to support the proposition that conduct by Barclays which might place it in breach of its obligations under a regime of prudential regulation somehow discharges either UAEEC’s liability to Barclays, or Dr Shetty’s liability as guarantor and indemnifier of loss.

135. Indeed, the proposition is inherently perverse. In substance, the proposition is to the effect that a breach of the regulatory obligation of sound and prudential management imposed to ensure the continuing financial stability of a financial institution should be construed as having the consequence that the liabilities of the relevant institution’s debtors and sureties are discharged, thereby weakening the solvency and stability of the institution. It is not surprising that no authority has been provided to support this extraordinary proposition.

136. In summary, as neither negligence nor breach of regulatory obligation would, if established, give rise to any defence to Barclays’ claim, there is no reason to order a trial in order that those issues could be explored. That is also why it doesn’t matter when Barclays first became aware of the defaults by UAEEC. Further, as there is no evidence whatever to support any assertion of dishonesty, fraud, impropriety, concealment or connivance in the defaults by Barclays, those assertions provide neither a realistic prospect of a defence to Barclays’ claim, nor any compelling reason to direct that the case go to trial.

Is UAEEC liable to Barclays?

137. At different points in the skeleton arguments it is suggested that Barclays’ failure to terminate its commercial dealings with UAEEC more promptly had the consequence that UAEEC is not liable to Barclays, and that Dr Shetty is also not liable to Barclays.

138. There are two answers to this proposition. First, even if Barclays should have terminated its dealings with UAEEC earlier than it did, that fact is incapable of discharging UAEEC’s liability to Barclays. No reason in law or logic has been advanced in support of the perverse proposition that UAEEC should not be obliged to repay Barclays for funds which it advanced on its behalf merely because Barclays could or perhaps should have refused to undertake those transactions and advance those funds, in the protection of its own interests. Of course the position might be different if Barclays had connived with fraudsters within UAEEC in order to perpetrate a fraud on that company, but there is absolutely no evidence to support any such wild speculation, nor any reason to suppose that Barclays would act contrary to its own interests in this way.

139. Second, even if UAEEC were not liable to the Bank for some reason, such as illegality, under clause 1 of the Guarantee Dr Shetty remains liable in any event. Further, the indemnity provided by Dr Shetty under clause 2 of the Guarantee would apply in respect of any losses incurred by the Bank in connection with its dealings with UAEEC, irrespective of any issue with respect to UAEEC’s legal liability to the Bank.

Should Barclays have given notice to Dr Shetty?

140. It has also been submitted that Barclays was in breach of an obligation to give notice to Dr Shetty as soon as UAEEC defaulted in settlement of the foreign exchange transactions. No source of that obligation has been identified, nor any authority provided in support of the proposition. There is no provision in the Guarantee capable of supporting this proposition, nor any general principle of law to this effect. Consistently with the principles enunciated in Patel, Dr Shetty’s obligations as surety would only be discharged by conduct amounting to bad faith, concealment or connivance in the default. This proposition is without substance and provides no realistic prospect of any defence to the claim.

Illegality and/or “judicial abstention”

141. It is submitted on behalf of Dr Shetty that the doctrine of illegality may provide a defence to Barclays’ claim. The submissions don’t specifically identify precisely what the illegality is said to be although it can be inferred that reliance is placed upon the alleged breach of the regulatory obligation of sound and prudential management as a consequence of Barclay’s failure to terminate its trading relationship with UAEEC sooner than it did.

142. The first difficulty with this submission is that it is extremely doubtful that a course of conduct which is said to give rise to a breach of regulatory obligations by a supervised financial institution can properly be characterized as “illegal” conduct for the purposes of dealings between that institution and any one of its customers, at least in respect of obligations which are not owed to specific or individual customers, but rather to the financial markets as a whole. The obligation of sound and prudential management is an obligation imposed for the purpose of ensuring the stability and solvency of the relevant institution for the purposes of all its customers and the financial markets as a whole. It is not an obligation imposed for the protection of any individual customer, such as UAEEC. No authority has been provided to sustain the proposition that breach of an obligation imposed for the benefit of the financial markets as a whole could have the consequence of discharging obligations undertaken between an institution and individual customers on the ground of illegality - a consequence which would be antithetical to the evident objective of the regulatory obligation, as I have already observed.

143. Second, this is not a case in which there can be any suggestion that the agreement between Barclays and UAEEC was illegal in any way. This is why one of the authorities relied upon by Dr Shetty – namely Mahmoud and Ispahani³³, is irrelevant, as in that case entry into the agreement itself constituted a breach of a prohibition on the sale of linseed oil without a license.

144. On behalf of Dr Shetty reliance is also placed upon the following passage from the judgment of Lord Sumption JSC in Les Laboratories Servier & Anor v Apotex HL³⁴:

In some contexts, notably the invalidity of contracts prohibited by law, the ex turpi causa principle can be analysed as part of the substantive law governing the parties rights. The contract is void, and any right derived from it is non - existent. But in general, although described as a defence, it is in reality a rule of judicial abstention. It means that rather than regulating the consequences of an illegal act (for example by restoring the parties to the status quo ante, in the same way as on the rescission of a contract) the courts withhold judicial remedies, leaving the loss to lie where it falls. This is so even in a contractual context, when the court is invited to determine the financial consequence of a contract’s avoidance for illegality. The ex turpi causa principle precludes the Judge from performing his ordinary adjudicative function in a case where that would lend the authority of the state to the enforcement of an illegal transaction or to the determination of the legal consequences of an illegal act.

145. Lord Sumption’s reference to “judicial abstention” has been seized upon by Dr Shetty’s representatives as an indication of some broader principle than that which underpins the traditional principles of illegality. However, that submission misreads the passage above. “Judicial abstention” explains the rationale for the doctrine – it does not suggest that there is some broad ranging discretion to be exercised by the Court when issues of illegality arise. It is always necessary to identify an illegal agreement or an illegal act, upon which the principle might operate, and none has been identified in this case.

146. Perhaps more significant are the observations by Lord Sumption in the same case as to the category of acts which will engage the illegality principle. He observed that the acts which engage the principle are those which are contrary to the public law of the State and engage the public interest and described the acts as either criminal or “quasi criminal.” There is nothing in his Lordship’s description of the range of conduct which might engage the principle to suggest that a breach of the obligation of prudential management imposed upon a supervised financial institution might engage its operation.

147. On behalf of Dr Shetty reliance is also placed upon the decision of the UK Supreme Court in Grondona v Stoffel³⁵ where reference is made to the “trio of necessary considerations” earlier identified by Lord Toulson JSC in Patel v Mirza³⁶ namely:

148. None of these considerations suggest that in the circumstances of this case that public interest would be enhanced by depriving Barclays of the benefit of the Guarantee provided by Dr Shetty. The underlying purpose of the obligation of sound and prudential management is to ensure financial stability, and that purpose would be undermined by denying Barclays access to its securities. There is no other relevant public policy, and a denial of Barclays’ claim would be an entirely disproportionate response to any regulatory breach, given that the obligation to determine the sanction to be imposed for any such breach is in the hands of the relevant regulator, not the Court.

149. In summary, neither the circumstances of this case nor any of the authorities to which reference has been made provide any support whatever for the proposition that the doctrine of illegality might provide a realistic prospect that Dr Shetty might successfully defend Barclays’ claim.

Were the transactions subsequent to the first default outside the terms of the ISDA Agreement

150. On behalf of Dr Shetty it is contended that at some point (which is not specified with any precision), following default by UAEEC in the performance of its payment obligations, all subsequent transactions were outside the terms of the ISDA Agreement and therefore outside the terms of Dr Shetty’s Guarantee. The argument relies upon clause 2 of the ISDA Agreement and the provision in that clause to the effect that a party’s obligation to pay under the Agreement is subject to the condition precedent that the other party has committed no Event of Default. It is submitted that once there was an Event of Default, the condition precedent was not satisfied, and any subsequent transactions must therefore have been pursuant to some other agreement, or perhaps pursuant to the varied terms of the ISDA Agreement.

151. There are a number of answers to this contention. The first is that the process of reasoning is fundamentally flawed. The condition precedent to which reference is made in clause 2 of the ISDA Agreement is clearly a condition included for the exclusive benefit of the innocent party not in default. Non-satisfaction of the condition precedent provides that party with the opportunity to decline to perform the obligations otherwise imposed by clause 2, should it choose to do so. However, because the condition is provided for the exclusive benefit of the innocent party, it may be waived by that party. That is precisely what occurred in this case. Barclays continued performance of the ISDA Agreement notwithstanding default by UAEEC constituted a waiver of its entitlement to rely upon non-satisfaction of the condition precedent specified in clause 2 of the ISDA Agreement.

152. At one point during the hearing, counsel for Dr Shetty appeared to accept the fundamental flaw in the reasoning process underpinning this proposition³⁷. However, notwithstanding that apparent concession, the argument was later reiterated and has not been abandoned. Nevertheless, for the reason I have given the argument is completely without substance. There is no basis whatever for the assertion that the course of events between 10 and 13 March somehow took the parties outside the ambit of the ISDA Agreement or involved any variation to its terms.

153. The second answer to this contention is that even if the contention is accepted, it provides no defence to Dr Shetty under the Guarantee. As I have noted, under the Guarantee the obligation of guarantor extends to all facilities and accommodation granted to UAEEC by Barclays, whether under the terms of the ISDA Agreement or any other arrangement. Further, by clauses 3 and 4 of the Guarantee, Dr Shetty agreed that the obligations he had assumed would extend to any variation in the terms of the ISDA Agreement between UAEEC and Barclays, and to all future arrangements between Barclays and UAEEC of whatsoever kind. Further, as I have already noted many times, the obligation of indemnity undertaken by Dr Shetty in clause 2 of the Guarantee applies irrespective of the characterization of the relationship between Barclays and UAEEC – it is sufficient if Barclays suffered loss by reason of UAEEC failing to fulfil its obligations.

154. For these reasons the assertion that the dealings between Barclays and UAEEC fell outside the terms of the ISDA Agreement is without substance and would not in any event provide Dr Shetty with any realistic prospect of defending the claim against him, or any other compelling reason for the case to go to trial.

The doctrine of purview

155. At different points in the skeleton arguments provided on behalf of Dr Shetty, reference is made to the doctrine of purview in somewhat oblique terms. The skeletons fail to identify how that doctrine has any application to the circumstances of this case, although during the course of argument counsel for Dr Shetty suggested that the basis of the contention is the assertion to the effect that the foreign exchange transactions were outside the scope of the ISDA Agreement, and therefore outside the scope of the Guarantee. If this contention is the basis for the invocation of the doctrine of purview, it must fail, for the reasons I have just given.

156. However, in case I have misunderstood the argument, I will say a little more about it. The “doctrine of purview” appears to derive from the speech of Lord Aitken in Trade Indemnity Co v Workington Harbour and Dock Board³⁸. It is similar to the rule in Holme v Brunskill, although perhaps not quite identical to it. Essentially the doctrine is that the liability of a surety is discharged by variations of the agreement guaranteed which are outside the “general purview” of the guarantee.

157. In this case the “general purview” of the Guarantee is extremely broad, as it applies to all facilities and accommodation provided by Barclays to UAEEC, even if the terms of those facilities are varied and it extends to any new facilities or accommodation granted during the term of the Guarantee. It is therefore inconceivable that the doctrine could have any application to the circumstances of this case.

Realistic defences or other compelling reasons for a trial - conclusion

158. For these reasons none of the matters raised on behalf of Dr Shetty provide any realistic prospect of a successful defence to Barclays’ claim against him, nor any other compelling reason why the case should go to trial. Each of the prospective defences suggested is entirely without substance and completely unarguable. Further, there is no reason whatever to suppose that interlocutory investigations might unearth some document or documents which might provide a defence to the claim. It follows that immediate judgment should be entered in favour of Barclays.

The quantum of the judgment

159. Shortly before the hearing in late January, Barclays provided an updated statement of the amount due under the Guarantee. However, no daily rate of interest accrual was provided, and some months have passed since that statement was provided, because of the matters to which I have referred. The Court therefore lacks the information to calculate the amount for which judgment should now be entered. I will therefore order that immediate judgment be entered in favour of Barclays in an amount to be determined by the Court following receipt of a further statement of account from Barclays. That statement of account should take as its starting point the amount of USD$129,807,261.93, being the amount due as at 27 April 2020 according to the demand coming within clause 17 of the Guarantee, and show the accrual of interest on that amount up to the date of publication of these reasons, together with a daily rate of accrual thereafter. I will provide Dr Shetty with two (2) business days in which to comment upon that statement following its provision to the Court and to his representatives. I make it clear that I will not countenance or consider any comments from Dr Shetty’s representatives upon anything other than the statement of account.

Costs

160. There are two sources of Barclays entitlement to the costs of these proceedings. First, as the successful party, Barclays is entitled to the exercise of the Court’s discretion with respect to costs in its favour. Second, under clauses 1 and 16 of the Guarantee, Barclays has a contractual entitlement to recover all costs incurred in connection with the enforcement of the Guarantee. That entitlement extends to costs assessed on an indemnity basis – that is to say, costs actually incurred which are reasonable in amount and which were reasonably incurred. However, as Senior Counsel for Barclays properly conceded, the fact that Barclays has a contractual entitlement to indemnity costs does not put the quantification of those costs beyond the purview of the Court.

161. Barclays filed a statement of its costs shortly before the hearing of the application for immediate judgment. However, there are two reasons why, in my view, Barclays costs should be assessed by the Court, applying the criteria to which I have referred. First, since Barclays provided that statement, a lot more work has been required responding to the various applications made on behalf of Dr Shetty following the conclusion of the hearing. Obviously those costs are not included within the statement provided prior to the hearing.

162. Second, the amount claimed by Barclays in respect of costs is very substantial – having regard to the fact that the case has been determined by immediate judgment, the claim is so substantial that it is appropriate for Barclays to justify the amounts claimed to the Court. I will therefore order that Dr Shetty is to pay Barclays’ costs of the proceedings to be assessed by a Registrar of the Court on the basis that Barclays has a contractual entitlement to indemnity costs, in the sense that I have described, unless those costs are agreed within 28 days of publication of these reasons.

163. Barclays does not offer substantial opposition to an order for assessment of its costs. However, it submits that Dr Shetty should be ordered to pay a significant amount in respect of the costs claimed. I accept that submission, which accords with the usual practice of this court and will order that Dr Shetty pay USD$400,000 on account of Barclays’ costs of the proceedings. That amount is a little under half of the amount claimed in Barclays’ statement of costs and is in the same region as the costs claimed in the statement of costs filed on behalf of Dr Shetty.

The freezing order

164. As I have noted, an interlocutory freezing order which I made pending judgment remains in force. Both parties accept that if judgment is entered against Dr Shetty, that order should remain in force until the judgment is satisfied. However, the parties disagree as to whether the exceptions to that order, which exclude from its operation a specified amount for weekly living expenses and reasonable legal expenses should be continued following judgment.

165. I accept Barclays’ submission that once judgment has been entered, different considerations apply to the maintenance of a freezing order. As the Court observed in Michael Wilson & Partners Ltd v John Forster Emmott³⁹, prior to judgment a freezing order serves the purpose of preventing dissipation of assets against the contingency the judgment might be entered. Following the entry of judgment, a freezing order prevents dissipation of assets in aid of execution of the judgment entered. In the former case liability is inchoate, whereas in the latter case liability has been established.

166. In my view once judgment has been entered, if the circumstances justifying the grant of a freezing order exist, the default position is that the order should provide security for the amount of the judgment without exception or qualification. However, consistently with the decision in Michael Wilson & Partners Ltd, I also accept that there is a discretion in the Court to allow exceptions to the freezing order in appropriate circumstances. However, before that discretion could be exercised in favour of the judgment debtor, there would have to be material before the Court to justify that course. There is no material before this Court with respect to Dr Shetty’s circumstances, or as to the assets available to him beyond the scope of those restrained by the freezing order. Without such material there is no basis upon which any discretion can be exercised in his favour.

167. I will therefore order that the freezing order will continue in force, modified to remove the exceptions for legal costs and reasonable living expenses. I will however reserve liberty to apply to vary the terms of that order. As any such application would relate to the enforcement of the judgment, it should be made to the judicial officer responsible for enforcement, as part of any enforcement proceedings.