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Claim No: CFI 079/2022

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

NAASHIR

Claimant/Respondent

and

(1) NAQID

First Defendant/Appellant

(2) NAAZIR

Second Defendant/Appellant

(3) NABHAN

Third Defendant

(4) NAWAF

Fourth Defendant

(5) NAJEEB

Fifth Defendant/Appellant

(6) NAMEER

Sixth Defendant/Appellant

(7) NASIM

Seventh Defendant/Appellant

(8) NUZHAT

Eighth Defendant/Appellant

ORDER WITH REASONS OF CHIEF JUSTICE WAYNE MARTIN

UPON the Claimant’s Part 7 Claim Form dated 8 November 2022 (the “Claim”)

AND UPON the Order with Reasons of H.E. Deputy Chief Justice Ali Al Madhani dated 7 May 2024 (which was subsequently amended and re-issued on 21 June 2024 to accurately reflect the owed amount) granting immediate judgment in favour of the Claimant against the First, Second, Fifth, Sixth, Seventh and Eighth Defendants with Costs (the “Order”)

AND UPON the First, Second, Fifth, Sixth and Seventh Defendants’ Appeal Notice dated 28 May 2024 seeking permission to appeal the Order (the “PTA Application”)

AND UPON the Order with Reasons of H.E. Deputy Chief Justice Ali Al Madhani dated 23 July 2024 dismissing the PTA Application

AND UPON the First, Second, Fifth, Sixth and Seventh Defendants’ Appeal Notice dated 28 May 2024 seeking renewed permission to appeal the Order (the “Renewed PTA Application”)

AND UPON reviewing the Court materials

AND PURSUANT TO the Rules of the DIFC Courts (the “RDC”)

IT IS HEREBY ORDERED THAT:

1. The Renewed PTA Application is dismissed.

2. The First, Second, Fifth, Sixth, and Seventh Defendants are to pay the Claimant’s costs of the Renewed PTA Application to be assessed by the Registrar pursuant to RDC Part 40 in the absence of agreement between the parties within 21 days of the date of this Order.

Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 3 October 2024
At: 11am

Summary

1. This is a Renewed Application for Permission to Appeal against orders granting immediate judgment against the First, Second, Fifth, Sixth and Seventh Defendants and default judgment against the Eighth Defendant (the “Renewed PTA Application”). A previous application for Permission to Appeal was dismissed by the Judge at first instance. For the reasons which follow, the Renewed PTA Application must also be dismissed.

Permission to appeal - principles

2. Rule 44.117 of the Rules of the DIFC Courts (the “RDC”) provides:

3. RDC 44.5 requires that an appellant obtain permission to appeal to the Court of Appeal except where the appeal is against a committal order.

4. RDC 44.19 provides:

5. In this case, the Applicants for permission do not contend that there is some other compelling reason why the appeal should be heard. Rather, they contend that the appeal would have a real prospect of success because the decision of the Judge at first instance was wrong.

6. It is established that “real” in the context of an assessment of the prospects of success of an appeal means realistic rather than fanciful, applying the same test as is applied in an application for immediate judgment.¹

7. It is also established that a real prospect of success does not mean a probability of success, but more than mere arguability.²

8. Accordingly, in order to obtain the grant of permission a prospective appellant needs to establish more than the proposition that the proposed appeal is reasonably arguable – rather, it must be established that there is a real prospect of success.³

9. Particular principles apply to applications for permission to appeal against case management decisions and multi factorial assessments undertaken by a Judge at first instance.

The claim

10. The claim is brought on behalf of a syndicate of lenders who advanced funds to Neville (the “Borrower”) pursuant to guarantees of the debt provided by the First, Second and Fifth-Eighth Defendants. The claim was for payment of the principal amount of the debt – USD 335 million plus accrued and default interest and fees.

Background

11. As noted, the Claimant is a Bank acting on behalf of a syndicate of lenders which lent funds to the Borrower.

12. The first two Defendants are Naqid, the founder of Nasrullah, and Naazir. The Fifth-Seventh Defendants are all companies related to the Borrower incorporated in the ADGM. They are controlled by Naqid and Naazir and hold share capital in the Borrower.

13. The Eighth Defendant, Nuzhat, is a company controlled by the Third and Fourth Defendants, Nabhan and Nawaf, and also held share capital in the Borrower.

14. On 25 March 2016, a Facility Agreement was entered into between the Borrower and a syndicate of lenders. On the same day, Naqid and Naazir entered into Guarantees in respect of the funds to be advanced under the terms of the Facility Agreement.

15. On 31 March 2016, the Borrower drew down USD 490 million under the Facility Agreement. Annual repayments of the debt were made in each of 2017, 2018 and 2019, but no further repayments were made since then, with the result that the outstanding amount of capital was USD 335 million. In addition, interest and fees accrued under the terms of the Facility Agreement.

16. Between January 2017 and March 2019, the Facility Agreement was amended eight times by the mutual agreement of the Borrower and the Claimant.

17. The most significant amendment, which is the basis of many of the grounds of defence, is the Amendment and Restatement Agreement 2019 (“ARA”), which followed a letter requesting amendment on 5 November 2018. The letter was sent to Naqid and Naazir as a result of a corporate reorganization to prepare for the potential public listing of Nasmi, which was to be a new holding company for the Group. Pursuant to the ARA, both the Facility Agreement and the Guarantees were amended simultaneously. The ARA was executed by the Borrower and the Claimant asserts the Borrower did so as the authorised agent of all Guarantors. That disputed contention lies at the heart of many of the proposed grounds of appeal.

18. On 9 April 2019, the Fifth-Eighth Defendants entered into Corporate Guarantees with the Claimant as required by the terms of the ARA. These Guarantees are in materially identical terms to the Guarantees given by Naqid and Naazir.

19. On 20 May 2019, Nasmi was admitted to trade on the London Stock Exchange, which, pursuant to the corporate reorganization, triggered the obligation of the Borrower to repay the outstanding balance plus interest and fees within five business days. The Borrower failed to repay the debt within that time, or within subsequent extensions of time granted by the Claimant, or at all.

20. During 2020 and 2022, the Claimant served Notices of Default on the Borrower.

Procedural history

21. These proceedings were commenced on 8 November 2022. Naqid and Naazir filed an Acknowledgement of Service on 15 May 2023. The Fifth, Sixth and Seventh Defendants filed an Acknowledgement of Service on 15 June 2023. The Eighth Defendant never filed an Acknowledgement of Service.

22. On 6 November 2023, the Claimant filed an application for Immediate Judgment which was granted by orders made on 7 May 2024 and amended on 21 June 2024.

23. An application for Permission to Appeal against the judgment was made on 28 May 2024 and dismissed by the Judge at first instance on 23 July 2024. The renewed PTA Application was filed on 13 August 2024.

The personal guarantees

24. The terms of the Personal Guarantees executed by Naqid and Naazir are central to many of the defences raised on behalf of those Defendants. Those Guarantees are in materially identical terms. In those guarantees the Borrower, Neville , is described as the “Borrower”.

25. The term “Obligors’ Agent” is defined to mean:

“The Borrower, appointed to act on behalf of the Guarantor in relation to the Finance Documents to which it is a party pursuant to clause 1.6.”

26. Clause 1.6 of each Personal Guarantees provides:

27. Clause 1.5 of each Personal Guarantee provides that the Guarantee is a Finance Document.

28. The term “Finance Document” is defined in the Facility Agreement to mean the Agreement, any guarantee and any other document designated as such. By virtue of clause 1.2 of the Personal Guarantees, a term defined in the Facility Agreement has the same meaning in the Guarantee unless expressly provided to the contrary in the Guarantee.

The grounds of appeal

29. The skeleton argument provided in support of the Renewed PTA Application refers to six grounds of appeal, although the sixth “ground” is essentially an assertion that the Defendants have real prospects of successfully defending the claim based on the five preceding grounds.

Ground 1

30. Ground 1 is somewhat cryptically expressed, but appears to incorporate two distinct propositions:

31. The first proposition is undoubtedly correct, as a matter of fact. However, it leads nowhere. There is no legal principle requiring guarantors to be parties to the transaction in respect of which the guarantee is given.

32. The second proposition is negated by the express and unequivocal terms of clause 1.6 of the Guarantee given by Mr Naazir, which is set out above. By the terms of that clause, Mr Naazir irrevocably appointed the Borrower to act on his behalf as his agent and irrevocably authorised the Borrower “to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by the Guarantor notwithstanding that they may affect the Guarantor, without further reference to or the consent of the Guarantor”.

33. The skeleton argument served in support of this ground does not identify any coherent or principled basis for not giving the clear and unequivocal terms of clause 1.6 of the Guarantee full force and effect. It seems that some emphasis is placed upon the word “relevant” as constraining the purposes for which the authority is given and therefore the circumstances in which the authority can be exercised. However, the authority extends to making “such agreements … capable of being … made … by the Guarantor” together with any “relevant amendments” to the Guarantee as a consequence of such agreements. The authority is thus unconstrained and extends to anything which could have been done by Mr Naazir personally. The authority which Naazir granted to the Borrower extends to all the amendments made to the Guarantee, including by the ARA.

34. For these reasons this ground has no prospect of success.

Ground 2

35. Ground 2 repeats the assertion made in ground 1 to the effect that the variations and amendments made to the Guarantee given by Mr Naazir discharges his liability, but on different grounds to those advanced in support of ground 1.

36. First, reliance is placed upon s 4 of the Statute of Frauds (1677) (UK) which relevantly provides:

“No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person unless the agreement upon which such action shall be brought or some memorandum thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.”

37. Reliance upon the Statute of Frauds is misplaced for at least four reasons. First, the Statute of Frauds does not apply in the DIFC. English law is not imported into DIFC law as a matter of course.⁴ Further, the Statute of Frauds is a procedural rule and is part of the law of the forum – that is, it only applies to proceedings in the UK.⁵

38. Second, the Statute specifically recognizes the execution of agreements by agents acting within the scope of their authority. As the variations to the Guarantee were executed by the Borrower acting as the agent of Mr Naazir, the requirements of the Statute would have been satisfied if it had applied.

39. Third, reliance is placed upon the principle enunciated in Holme v Brunskill⁶ to the effect that a guarantee will be discharged if there is a material variation to the terms of a guarantee obligation which is prejudicial to the guarantor unless the guarantor consents to the variation. The complete answer to this contention is that on each occasion the terms of the obligation between the Borrower and the Claimant were altered or amended, the Personal Guarantees were simultaneously altered and restated by the Borrower acting as the lawfully authorised agent of the Guarantor.

40. The Claimant contends that the amendments made to the terms of the agreement between it and the Borrower were not prejudicial to the Guarantors. However, as it is clear that the Guarantors, by their agent, consented to the amendment of the terms it is unnecessary to consider this contention, as reliance upon the principle in Holme v Brunskill must fail in any event.

41. Fourth, reliance is placed upon Article 3(2) of the Unfair Contract Terms Act 1977 and Article 38(2)(b)(i) of DIFC Law no. 6 of 2005⁷ which provide, in effect, that a contract cannot require a party to “render a contractual performance substantially different from that which was reasonably expected of him”.

42. It is contended that performance of the Guarantee by the Guarantors would be substantially different to that which was expected because of the variations to the terms of the Guarantee.

43. There are at least three reasons why this contention must fail. First, Article 3 of the DIFC Law only applies to contracts contained within a party’s written standard terms of business, whereas the relevant documents in this case were negotiated commercial agreements entered into on terms specific to these transactions.

44. Second, the terms implied by the DIFC Law only apply to contracts governed by the law of the DIFC and the governing law of the personal guarantees is English law.

45. Third, the amendments to the Guarantees were consented to by the Borrower acting as the agent of each Guarantor. It follows that there is no difference between the terms of the amended Guarantees and the performance expected of the Guarantors.

46. For these reasons ground 2 has no prospect of success.

Ground 3

47. Ground 3 contends that Mr Naazir would only be liable to guarantee the obligations of the Borrower as amended by the ARA if he had signed a separate Guarantee after the ARA had been entered into.

48. This is essentially a restatement of the proposition underpinning grounds 1 and 2. It ignores clause 1.6 of each Guarantee and its effect. Further, clause 6 of the ARA expressly provided that the Guarantees, including the Personal Guarantees provided by Naqid and Mr Naazir shall “continue in full force and effect” as amended. The ARA was executed by the Borrower as agent for the Guarantors. Clause 6 expressly negated the need for new Guarantees.

49. Ground 3 has no prospect of success.

Ground 4

50. Ground 4 is concerned only with the Guarantees granted by the Fifth, Sixth and Seventh Defendants. It is contended that the person who executed the Guarantees on their behalf, Mr Nazhif, was not duly authorised to execute the Guarantees on behalf of the relevant companies. It is contended that Mr Nazhif’s powers were constrained by shareholders’ resolutions passed by each company authorizing Mr Nazhif to sign documents relating to their incorporation. It is contended that these resolutions limit Mr Nazhif’s authority to sign documents of that class, which do not include the Guarantees.

51. This contention must fail for at least two reasons. First, the resolutions do not purport to constrain Mr Nazhif’s powers in any way – to the contrary, prior to the incorporation of the relevant companies they merely confirm that he was authorised to sign documents associated with their incorporation. Those authorities shed no light on the scope of Mr Nazhif’s authority after the companies were incorporated.

52. Second, the relevant companies are all incorporated in the ADGM. Accordingly, the scope of the authority of the directors of those companies is to be determined in accordance with ADGM law. Under that law, the source of a director’s authority is derived from the company’s Constitution.

53. The Articles of Association of each company mirror the model Articles found in the ADMG Companies (Model Articles) Rules 2015, Schedule 1. Article 3 provides that the directors are vested with the authority to exercise all the powers of the company, including its power to enter into contracts. Article 7 provides that where there is a sole director, and the Articles do not require more than one director, the director may take decisions on behalf of the company without regard to any prescribed decision-making process. These rules apply unless there is a special resolution of the shareholders instructing the director not to do something (Article 4).

54. The evidence establishes that Mr Nazhif was the sole director of each of the Fifth, Sixth and Seventh Defendants when the Corporate Guarantees were executed. It follows that in the absence of a special resolution directing Mr Nazhif not to execute the Corporate Guarantees, or perhaps guarantees in general, Mr Nazhif had authority to execute the Corporate Guarantees on behalf of those Defendants without reference to anyone else and without a resolution authorising him to do so. There is no evidence of a special resolution directing Mr Nazhif not to execute the Corporate Guarantees, or guarantees in general.

55. Further and in any event, there are three written ordinary resolutions of each of the Fifth, Sixth and Seventh Defendant companies dated 12 March 2019 expressly authorizing each of them to enter into the relevant Corporate Guarantee.

56. For these reasons ground 4 has no prospect of success.

Ground 5

57. Ground 5 challenges the calculation of the interest component of the claim in respect of which judgment was entered. It is contended that because the Facility Agreement prescribes the use of the London Inter-Bank Offered Rate (“LIBOR”) as a benchmark for the determination of the applicable interest rate, after LIBOR was discontinued with effect from 30 June 2023 interest has been calculated on an erroneous basis.

58. This contention overlooks the fact that LIBOR was not discontinued on 30 June 2023 - to the contrary, LIBOR, calculated on a “synthetic” basis continued to be published and used as an applicable rate of interest until 30 September 2024. This published rate falls within the definition of “LIBOR” used in the Facility Agreement.

59. In further support of this ground, it is contended that the Claimant has failed to comply with the requirement of the US Federal Reserve to transition away from LIBOR as soon as practicable. However, the relationship between the Claimant and regulators in the US is irrelevant, as the extent of the Guarantors’ obligations are determined by the terms of the Guarantees. Any announcements by regulatory authorities have no impact upon the legal obligations as between the Claimant and the Guarantors. In any case, the Claimant acts as agent on behalf of a syndicate of lenders, which may or may not include US regulated banks.

60. For these reasons ground 5 has no prospect of success.

Ground 6

61. As already noted, ground 6 is not, in substance, a separate ground of appeal. Rather, it is an assertion that the Defendants have real prospects of successfully defending the claim, supported in the skeleton by a series of rhetorical flourishes. As the ground assumes that at least one of the preceding five grounds has some prospect of success, it necessarily fails.

Summary and conclusion

62. For the reasons given, none of the grounds of appeal identified in support of the Renewed PTA Application has any prospect of success. It follows that permission to appeal must be refused, with appropriate consequential orders.