Privacy Settings

Claim No: CFI 054/2018

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BETWEEN

SBM BANK (MAURITIUS) LTD

Respondent/Claimant

and

(1) RENISH PETROCHEM FZE
(2) MR HITESHKUMAR CHINUBHAI MEHTA

Applicants/First and Second Defendants

(3) PRIME ENERGY FZE

Third Defendant

JUDGMENT OF JUSTICE LORD ANGUS GLENNIE

UPON reading the Judgment and Order of HE Justice Ali Al Madhani dated 27 September 2020 in terms of which he granted immediate judgment against the First and Second Defendants

AND UPON the First and Second Defendants having applied in terms of RDC 24.22 to set aside said immediate judgment

AND UPON reading the documents filed with the Court

AND UPON hearing Mr Peter Duckworth for the First and Second Defendants and Mr Rupert Reed QC for the Claimant

IT IS HEREBY ORDERED THAT:

1. The application to set aside the immediate judgment is granted.

2. The immediate judgment granted by the Judgment and Order of HE Justice Ali Al Madhani dated 27 September 2020 is set aside.

3. Of new, for the reasons set out in this judgment, there be judgment for the Claimant against the First Defendant and the Second Defendant who are jointly and severally liable for USD 31,245,932.94 (as at 9 September 2020), with interest continuing to accrue from that date.

4. The First Defendant and the Second Defendant shall pay the Claimant its costs of the immediate judgment application before HE Justice Ali Al Madhani on the indemnity basis, to be assessed by a registrar if not agreed.

5. Each party shall bear its own costs of and occasioned by the application to set aside the immediate judgment.

Issued by:
Nour Hineidi
Registrar
Date of issue: 31 May 2021
At: 12pm

Judgment

Introduction

1. This is an application by the First and Second Defendants (individually “Renish” and “Mr Mehta”, collectively the “Applicants”) to set aside the immediate judgment entered against them on 27 September 2020 for payment to the Claimant (the “Bank”) of US$ 31,245,932.94 plus interest accruing thereon plus costs. Mr Peter Duckworth appeared for the applicants. Mr Rupert Reed QC, who also appeared for it on the immediate judgment application, appeared for the Bank. I am grateful to them both for their helpful submissions.

2. The grounds for the application are: (i) that neither of the applicants was present at the hearing on 9 September 2020; (ii) that the applicants both have a good defence to the claim; and (iii) that the way in which the case was presented to the Court was seriously misleading, so that the applicants are each entitled to have the judgment set aside ex debito justitiae.

3. The claim and the circumstances in which immediate judgment was granted are set out in more detail below.

The claim advanced by the Bank in its Particulars of Claim

4. The claim as presented by the Bank is comprised of three parts, which overlap considerably but are conceptually distinct. There is a claim in unjust enrichment, which need not be explored for present purposes, save to note that it provides an alternative basis of liability if any defence of illegality were to prevent recovery of the sums due under the contractual documents (see paragraph 47 below). The other two parts, which are directly relevant here, are what have been referred to as the “contractual claim” and the “fraud claim”. Unless otherwise indicated, references to paragraphs in what follows are references to paragraphs of the Bank’s Particulars of Claim.

5. The Particulars of Claim identify the relevant parties to the events giving rise to the claim. The Bank is a bank registered in Mauritius (paragraph 1). Renish is a company registered in the Free Zone of Hamriyah and at the material times “purported to carry on a business importing, exporting and trading in petroleum products” (paragraph 2). Mr Mehta is an Indian national and the sole shareholder in Renish (paragraph 3). There are also allegations made against the Third Defendant (“Prime”) which, it is said (in paragraph 4), “purported (and purports) to carry on a business importing, exporting and trading petroleum products” (my emphasis). Prime was not party to the immediate judgment application; nor is it a party to this set-aside application. The repeated use in the Bank’s pleading of the expression “purported to” and variants of it show (as is confirmed later in the pleading) that the Bank’s fraud claim is premised on the assertion that the business ostensibly being carried out by Renish, Mr Mehta and Prime was not a genuine business at all, but was a sham, set up as a means of perpetrating a fraud on the Bank.

The Bank’s contractual claim

6. The Bank avers (paragraph 7) that Renish approached it in February 2017 (having had no prior business relationship with it) in order to obtain trade finance banking facilities for the purposes of its purported business activities. Following discussions (paragraph 7), the Bank agreed to provide banking facilities in the form of a Facility Agreement (paragraph 8), with Renish’s re-payment obligations being supported by a Personal Guarantee from Mr Mehta (paragraph 10). The Facility Agreement had an upper limit of US$ 30 million. In light of the limited scope of the submissions presented on behalf of the applicants at the hearing before me, it is unnecessary to set out in any detail the terms of the Facility Agreement or the Personal Guarantee, which were both in fairly standard form. It is sufficient to note that, in terms of clause 17.1(a) of the Facility Agreement, non-payment was identified as an Event of Default; and that, under clause 17.1(s), upon the occurrence of an Event of Default, the Bank was entitled, among other things, to serve an Acceleration Notice making all amounts then outstanding under the Facility Agreement immediately due and payable. Both the Facility Agreement and the Personal Guarantee contained a clause conferring jurisdiction on the courts of the DIFC; and there is no challenge to the jurisdiction of this court.

7. Renish made six requests for funds to be transferred by the Bank to Prime pursuant to the Facility Agreement between January and June 2018 (paragraph 12). Pursuant to those requests the Bank made payments into Prime’s bank account with the National Bank of Kuwait of the following amounts (set out in paragraph 13), viz.: (a) on 19 March 2018, the sum of US$ 10,445,168.25 (described in the Particulars of Claim as the “First Payment”); (b) on 24 April 2018, the sum of US$ 8,844,660.00 (the “Second Payment”); (c) on 22 May 2018, the sum of US$ 13,751,100.00 (the “Third Payment”); and (d) on 6 June 2018, the sum of 7,439,719.50 (the “Fourth Payment”), of which it is said that a very substantial part represented a loan granted by the Bank to Renish. The Fourth Payment virtually exhausted Renish’s credit limit under the Facility Agreement of US$ 30 million. The repayment dates for these advances were: (a) First Payment, 15 May 2018; (b) Second Payment, 20 June 2018; (c) Third Payment, 5 August 2018; and (d) Fourth Payment, 29 August 2018. Interest was also due on the sums outstanding at the rate of 2.25% above LIBOR, applied at 3-month intervals.

8. The Bank avers that Renish made a number of repayments (see paras 16-18): (a) on 21 May 2018 it repaid the Bank US$ 10,522,244.89, which the Bank credited against the First Payment, leaving an unpaid balance of the First Payment, inclusive of interest as at 30 June 2018, of US$ 3,853.83; (b) on 2 May and 22 June 2018 it made two payments of US$ 6,794.51 and US$ 68,443.25, which the Bank credited against the Second Payment, leaving an unpaid balance of the Second Payment, inclusive of interest as at 22 June 2018, of US$ 8,836,236.07; (c) on 31 May 2018 it paid US$ 15,742.88, which the Bank credited against the Third Payment, leaving an unpaid balance of the Third Payment, inclusive of interest as at 31 May 2018, of US$ 13,751,100.00. Renish has not repaid any part of the Fourth Payment (paragraph 19). These sums remain outstanding and Renish is thereby in breach (paragraph 20).

9. The Bank contacted Mr Mehta on 27 June 2018. Despite an initial promise to pay, Mr Mehta made no further contact with the Bank and no further payments were made (paras 21-24). Accordingly, the Bank served an Acceleration Notice under clause 17.1(s) of the Facility Agreement, as a result of which the balance of the Third Payment and the Fourth Payment, which were not otherwise due to be repaid until dates in August 2018, became immediately due and payable. The total sum due and outstanding under the Facility Agreement as at 1 August 2018 amounted in aggregate to US$ 30,218,917.59. Interest on that sum is then calculated in paras 25-27 of the Particulars of Claim. Against this the Bank has exercised a right of set-off against some US$ 3,090,217.30 held by Renish in term deposits and a savings account (paragraph 29). Taking account of interest payments as set out in a schedule to the Bank’s skeleton argument at the hearing of its application for Immediate Judgment on 9 September 2020, Renish’s indebtedness to the Bank as at that date was US$ 31,245,932.94. No issue was taken with the calculations of principal and interest, so I need say no more about them.

10. Paras 30-34 then set out the claim against Mr Mehta under the Personal Guarantee. No submissions were made to suggest that liability under the Personal Guarantee did not follow automatically (in this case at least) from any liability of Renish under the Facility Agreement. The claim under the Personal Guarantee therefore requires no elaboration.

The Bank’s fraud claims against Renish, Mr Mehta and Prime – “conspiracy to defraud and/or deceit”

11. I have already identified some of the component parts of the fraud claim, such as the repeated reference in paras 3, 4 and 7 of the Particulars of Claim to Renish and Prime purporting to carry on business (see paras 5 and 6 above).

12. In paragraph 6 of the Particulars of Claim the Bank summarises its fraud claim in this way:

“6. For the reasons set out herein, [the Bank] has incurred losses of over US$ 30 million as the principal victim of a substantial trade finance fraud, in which each of [Renish, Mr Mehta and Prime] were knowing and active participants.”

13. The Bank makes the following allegation in paragraph 9 of the Particulars of Claim:

14. In paragraph 12 of the Particulars of Claim, to which I have already referred (in paragraph 7 above), the Bank avers that, in making the requests for funds under the Facility Agreement, Mr Mehta and another, acting on behalf of Renish, made an express or implied representation (the “Payment Representation”) that payments were required pursuant to a genuine bona fide sale/purchase arrangement in terms of which: (a) Renish had concluded a sale agreement with Lanka (a buyer based in Sri Lanka) for the supply of petroleum products, which Renish intended to fulfil; (b) Renish had concluded a sale agreement with Prime for the purchase of petroleum products, which both Renish and Prime intended to fulfil; (c) Renish was to make advance payment to Prime in consideration for the delivery of a consignment of oil to the Khor Fakkan Port, Sharjah; (d) Renish was then to ship that consignment of oil to Lanka; and (e) Lanka would then pay Renish in its account at the Bank pursuant to notices of assignment and acknowledgement of assignment. The represented arrangements at (a) to (e) above are referred to collectively as the “Purported Sale”. In paragraph 13 the Bank avers that it was “induced by the Payment Representation” to make the First, Second, Third and Fourth Payments (all as described in paragraph 7 above).

15. Against this background, and expressly without prejudice to its claims under the Facility Agreement and the Personal Guarantee, the Bank sets out its fraud claim at paragraph 40 of the Particulars of Claim. It alleges: (a) that the Purported Sale was a sham; (b) that neither Renish nor Mr Mehta nor Prime had any intention of performing its terms or those of the Facility Letter or Personal Guarantee; (c) that each of those parties knew and understood that the Purported Sale was “a device intended to deceive [the Bank] and defraud it of the sums advanced by [the Bank] under the Facility Agreement”; (d) that each of those parties “knew and intended fraudulently to induce [the Bank] to enter the Facility Agreement and the Personal Guarantee and/or advance sums under the Facility Agreement by the Facility Agreement Representations and/or the Payment Representation knowing such representations to be false”; (e) that each of those parties, “with intent to defraud and injure [the Bank]”, conspired and combined together to defraud [the Bank] by unlawful means (as at (d)); and (f) that each of those parties knew and intended that the Bank would not be repaid the sums advanced under the Facility Agreement.

16. In short, although dressed up in different ways, the Bank’s fraud case is straightforward: Renish’s purported business, and the sale arrangements purportedly entered into between Renish and Prime for the sale and purchase of oil, were all a sham, a device designed to deceive the Bank into entering into the Facility Letter and advancing money thereunder to Renish or Prime which there was never any intention to repay.

17. In the following paragraphs (paras 42-50) the Bank sets out a large number of circumstances from which, so they say, the inference can be drawn in support of that case. It is not necessary to set them out in detail. They consist largely of the non-payment by Renish of sums due under the Facility Agreement and the lack of any response from Renish or any “honest” explanation of its failure to pay. In paragraph 48 the Bank explains that it sent an email to the shipping and chartering manager at Prime seeking confirmation that the consignment had been delivered to Lanka pursuant to the Purported Sale, which email was ignored; and in paragraph 49 it avers that, if Prime had had an honest explanation for its failure to deliver, that explanation would have been provided in response to that email. (Subsequently Prime stated that it never intended or agreed to supply oil to Lanka, and it is said by the Bank that this too confirms the inference that Renish and Mr Mehta committed a fraud on the Bank). Similar inferences are sought to be drawn from the conduct of Mr Mehta (see paragraph 50(c)) who, it was said, appeared to have abandoned his residential address in Dubai “because he knew he had committed a fraud against [the Bank] and sought to evade criminal/civil liability for the same.” In paras 51-54 reliance is placed on the fact that the Bank obtained a Freezing Order from the DIFC Courts and served it on Renish, Mr Mehta and Prime, but there was no attempt on their part to contact or engage with the Bank, as they would have done had they had any honest explanation for the sums outstanding not having been repaid, nor was there any attempt to comply with that part of the Order which required them to make full disclosure of their assets. It is to be inferred from this conduct that they acted in this way because each of them knew that they had committed a fraud and had no honest explanation for why the outstanding sums had not been repaid.

18. Finally, for present purposes, I should note that in paras 55-59 the Bank make a case that upon receipt of the First, Second, Third and Fourth payments into its account, Prime dissipated the monies within a very short period (1-3 days), “including through the payment of round-figure sums”. A schedule is given in paras 58. In paragraph 59 it is averred that “there was no legitimate commercial purpose behind [those payments]. Rather [they] constituted a means of dissipating monies to persons controlling Renish and/or Prime and/or Mr Mehta pursuant to the fraud against [the Bank].”

The application for immediate judgment

19. The Bank issued proceedings against Renish and Mr Mehta (as well as Prime and another Defendant who is no longer party to the proceedings). A Worldwide Freezing Order (“WWFO”) was granted without notice on 2 August 2018 against Renish, Mr Mehta and Prime and was continued on 7 August without appearance by any Defendant. The Claim form was served in September 2018. Renish and Mr Mehta did not acknowledge service; Prime did acknowledge service, though late. Rather than apply for default judgment under RDC 13.4, which might have given rise to difficulties of enforcement against Mr Mehta in India, the Bank applied (with the permission of the court under RDC 24.4) for immediate judgment against Renish and Mr Mehta under RDC Part 24.1 so as to obtain what it considered was likely to be a more readily enforceable judgment “on the merits”.

20. Initially the immediate judgment application was directed also against Prime; but once Prime had acknowledged service in this action, albeit late, this part of the application was not proceeded with, with the consequence that the claim against Prime remains live and has been set down for trial later this year.

21. The application came on for hearing before Justice Ali Al Madhani on 9 September 2020. The Defendants were unrepresented. In support of its application, the Bank lodged a skeleton argument and relied upon the evidence it had placed before the court in support of its application for the WWFO, viz Affidavits of Matthew Showler (a lawyer in Dentons & Co, acting on behalf of the Bank), and, in addition, relied upon a witness statement of Dipesh Jhowry (the Head of Legal and Corporate Affairs at the Bank). Those Affidavits/ Witness Statements spoke to the matters set out above and to the conduct of Renish and Mr Mehta after July 2018 and their failures to respond to the WWFO made against them in August 2018.

22. In granting immediate judgment against Renish and Mr Mehta on 27 September 2020, Justice Ali Al Madhani set out and accepted seven propositions advanced by the Bank in support of its claim under the Facility Agreement and the Personal Guarantee. They were:

In the circumstances neither Renish nor Mr Mehta had any realistic prospect of defending the claims against them under the Facility Agreement and the Personal Guarantee respectively.

23. Proposition (8) was directed to the fraud claim. It was that “Renish and Mr Mehta conspired to defraud [the Bank].” The importance to the Bank of such a finding, according to the Bank, was that it would assist the Bank in pursuing enforcement procedures against Renish and Mr Mehta – a foreign court was likely to be more receptive to an application for post-judgment injunctive relief in circumstances where a finding of fraud or dishonesty had been made. The judge accepted that a case in fraud will almost always depend on inferences drawn from primary facts, but he was satisfied that “on the undisputed evidence before the Court in this case, the inference of fraud against Renish and Mr Mehta [was] overwhelming.” (My emphasis: the evidence was, of course, undisputed because it was presented by the Bank and neither Renish nor Mr Mehta appeared at the hearing to contradict it.) He noted seven points which drove him to this conclusion:

For all of those reasons the judge had no hesitation in finding that Renish and Mr Mehta had conspired to defraud the Bank.

24. It should be noted, and this is a point to which I shall come back to consider later, that only the first, second and seventh points relate to conduct on the part of Mr Mehta and Renish at or about the time of the alleged fraud, as opposed to their later conduct in failing to communicate with the Bank after their failure to repay the advances and/or to engage with the court process after proceedings were commenced against them and the court had issued the WWFO.

The Defendants’ application to set aside the immediate judgment

25. In November 2020 Renish and Mr Mehta made an application for leave to appeal the immediate judgment. This was refused on the ground that the appeal would have no reasonable prospect of success and there was no other compelling reason why the appeal should be heard. The application to set aside the immediate judgement was filed in February 2021. As noted above, the application was made on the basis (i) that the applicants were not present at the hearing on 9 September 2020; (ii) that the applicants have a good defence to the claim; and (iii) that the way in which the case was presented to the Court was seriously misleading. The application itself sets out in some detail the circumstances in which Renish and Mr Mehta were not present at the hearing, summarises the defence to the claim which the applicants wish to advance, and then explains why it is contended that the way in which the case was presented to the court was seriously misleading. I shall take each of these briefly in turn.

26. So far as concerns the reasons for the applicants not being present at the hearing, paras 5-12 of the set-aside application explain that Renish and Mr Mehta were in the oil trade and carrying on business in a prosperous way before the circumstances giving rise to this claim. Renish’s suppliers included Prime; and its customers included oil majors and national oil corporations. In about June/July 2018, Renish fell victim to a campaign of disinformation orchestrated by business rivals who appear to have been in league with some of the senior staff at Renish. On 9 July 2018, while Mr Mehta was out of the country at a wedding, an unknown third party styling himself only as “Truth of Renish” circulated a malicious email falsely accusing Renish of illegal trading and fake accounting, with the intention of inflicting harm to Renish’s reputation and causing its demise. That email was circulated to a large number of Renish’s bankers and colleagues, some of whom were publicly identified and others who were blind copied into the email. As a result, a number of banks (including the Claimant Bank) reacted with concern. One bank in particular went to the length of recalling Renish’s credit line in his entirety, with immediate effect. Worse, it presented a number of undated cheques – which had been drawn on Renish and signed by Mr Mehta and held by that bank as security for its credit line, to the face value of AED 85m – for immediate encashment, resulting in them being dishonoured. That bank also filed a police case against Mr Mehta. The combined effect of this was to put Mr Mehta’s liberty in jeopardy were he to set foot in the UAE again. In those circumstances he had little option but to remain in India against his will “until the dust settled” and he could re-open discussions with his creditors with a view to reaching an accommodation with them and allowing his business to continue. The immediate upshot, however, was that the business was no longer solvent and Mr Mehta could not undertake its closure in an orderly fashion. Rather, the business disintegrated before his eyes, and in the process many records were lost and others may well have been stolen. These events left a deep scar on Mr Mehta and caused him mental agony and sleepless nights. Until recently he could not face the thought of resurfacing to sort out his business affairs. That is why neither he nor Renish knew of the existence of these proceedings against them until a chance Internet search in mid-October 2020 which revealed the existence of the immediate judgment. They promptly sought legal advice and raised funding for the legal expenses of challenging the judgment and the WWTO.

27. So far as concerns the proposed defence, this can be taken both from a draft defence attached to the set aside application and from the skeleton argument lodged on behalf of Renish and Mr Mehta in support of the application to set aside the judgment. As to the contractual claim, no admissions are made as to the precise sums outstanding under the Facility Agreement, and therefore due also under the Personal Guarantee, but save as noted in paragraph 46 below no positive case is put forward in answer to the very detailed case on sums advanced and not repaid as set out in the Particulars of Claim.

28. However the Bank’s fraud claim, the claim that Renish and Mr Mehta (and Prime) sought to defraud the Bank, is strenuously denied. All of the oil trades for which finance was requested from the Bank were genuine. The Bank’s pleading identified four payments made by the Bank under the Facility Agreement, all linked to contracts between Renish and Prime and Renish and Lanka. There were in fact six such payments, the payments identified by the Bank in its pleading being in reality not the First to Fourth Payments (as the Bank described them) but the third to sixth payments. The first three payments by the Bank were used to perform a contract with Lanka (the first Lanka contract), in terms of which Renish agreed to supply a quantity of about 72,000 metric tonnes to Lanka in three parcels of about 24,000 metric tonnes each. Those parcels were delivered to Lanka in February, March and May 2018. The oil was sourced from Prime, who were paid for each parcel using the Facility Agreement. The third such parcel was paid for by the payment from the Bank to Prime (under the Facility Agreement) of US$ 10,445,168.25. That was the third payment under the Facility, not “the First Payment” as it was misleadingly described in the Particulars of Claim. That first Lanka contract was a genuine trade and was fully performed, and the Bank was repaid the sums advanced (except for a small amount of interest on the third payment, which the Bank quantifies at under US$ 4,000.00 – see paragraph 8 above). The use of the epithet “purported” to describe the business carried on by Renish – see paragraph 11 above – and the failure to mention that the first three payments under the Facility Agreement were paid in respect of a genuine transaction and were repaid almost in full, therefore gives a wholly misleading impression. In March 2018 Renish entered into a second contract to supply oil to Lanka (the second Lanka contract), again in three parcels. To fulfil this order, Renish again agreed to purchase oil from Prime and drew down on the Facility Agreement with the Bank. However, problems arose with this contract, initially because the first of these further parcels was not up to specification, and later because Prime did not provide a replacement cargo for that one and simply did not supply the remaining two cargoes.

29. The draft Defence goes on to deal with other matters, for example the allegation that the pattern of payments following the transfers from the Bank into Prime’s account were indicative of fraud, but it is unnecessary to go into any detail on these matters at this stage.

The legal approach to determining the application to set-aside the immediate judgment

The test for granting immediate judgment

30. Although the application before the court is an application to set aside the immediate judgment, and not an appeal against that judgment, it is useful in addressing the application to set it aside to consider first the basis upon which the court will grant immediate judgment against a defendant.

31. The court’s power to grant immediate judgment is set out in RDC Part 24.1. So far as is material to this application, the Rule provides that the court may give immediate judgment against a defendant on the whole of a claim, part of a claim or on a particular issue if (1) it considers that “(b) that defendant has no real prospect of successfully defending the claim or issue” and (2) “there is no other compelling reason why the case or issue should be disposed of at a trial”.

32. In considering the application before him, Justice Ali Al Madhani (at paragraph 27) referred to the principles set out in the judgment of Justice Roger Giles in GFH Capital Ltd v Haigh [2014] DIFC CFI 020 (10 November 2016) at paras 9-13, quoting from paragraph [15] of the judgment of Simon J in JSC VTB Bank v Skurikhin [2014] EWHC 271. Although the actual decision in that case was reversed in the DIFC Court of Appeal, that summary of the relevant principles was not challenged; and it was approved by the DIFC Court of Appeal in IGPL v Standard Chartered Bank [2018] DIFC CA 002 (17 July 2018) at paragraph 57. As the judge noted in this case, the question is “whether a defendant has a ‘realistic’ prospect of success, being one that ‘carries some degree of conviction’ in being more than merely arguable.” That is the correct test; and that is the test the judge applied in this case, though he was obviously handicapped by the fact that, since neither Renish nor Mr Mehta had served a Defence and neither of them was present at the hearing, he had no means of knowing what parts of the Bank’s case were likely to be challenged and on what grounds.

33. The judge went on to say, under reference to IGPL at paras 58-59, that “while an applicant for immediate judgment has the legal burden of proof, the respondent has the evidential burden of proving that it has a real prospect of successfully defending the claim.” In argument on this application some reliance was placed on this statement by Mr Reed QC for the Bank. I note that the editors of the DIFC Courts Practice at paragraph 24.1.5 suggest that the English Court of Appeal authority upon which this proposition was based is in fact only authority for a much narrower proposition, namely that if a respondent to an application for summary or immediate judgement wishes to rely upon the likelihood that further evidence will be available at trial, then “it must substantiate that assertion by describing, at least in general terms, the nature of the evidence, its source and its relevance to the issues before the court”, and it has the evidential burden only to this extent. I have some sympathy with that view, but the point does not directly arise in this case and is certainly not decisive of the outcome of this application. I merely observe that I am, of course, bound by the decision of the DIFC Court of Appeal in the cases mentioned; if that statement of principle is to be challenged, as it might be, it must be challenged in that court.

34. Certain other points in the judgment of Justice Roger Giles in GFH Capital are of some relevance to the present application. On an application for immediate judgment the court must avoid conducting a mini trial without disclosure and oral evidence, where that might be relevant; it must avoid being drawn into an attempt to resolve conflicts of fact which are normally resolved by a trial process with oral evidence and cross-examination. But this does not mean that the court must always take everything said at face value and without analysis. Allegations of fraud may pose particular problems in summary disposal, since they often depend not simply on proof of particular facts, which may be hotly contested, but also on inferences to be drawn from those facts; and they also require a view to be taken of the state of mind of the participants at particular times.

35. Allegations of fraud also raise other issues. While the standard of proof in any civil litigation remains the balance of probabilities, the seriousness of the allegations is, or may be, a factor in deciding whether proof to that standard has been achieved. The maxim that the more serious and untoward the conduct alleged, the less likely it is to have happened and therefore the greater the need for compelling evidence to support the allegation, has not escaped criticism; but the seriousness of the allegation will nevertheless be one factor amongst many to take into account. Further, where fraud is alleged the court may permit the proceedings to go to trial to give the defendant the opportunity of clearing his name, notwithstanding the apparent strength of the claim against him and the unlikelihood of a successful defence. But all depends on the circumstances. It is now well established that immediate judgment may be given in cases alleging fraud or other aspects of dishonesty; but particular caution should be exercised in such cases: see Allied Fort Insurance v Creation Consumer Finance [2015] EWCA Civ 841 at paras 79 – 81 and the cases there cited.

Appeals against the grant of immediate judgment

36. An appeal lies to the Court of Appeal against the grant of immediate judgment: see RDC 44.117. The Court of Appeal will allow an appeal from a decision of the Court of First Instance where the decision of the lower court was either “(1) wrong or (2) unjust because of a serious procedural or other irregularity in the proceedings in the lower court.” “Wrong” in this context includes errors of fact as well as errors of law. It would include an error in assessing whether a defendant has a realistic prospect of success. As noted earlier, leave to appeal was sought in this case but refused by Justice Ali Al Madhani on the ground that the appeal would have no reasonable prospect of success and there was no other compelling reason why the appeal should be heard. In coming to that decision he did not have the benefit of much of the information placed before me on the application to set aside the judgment. It was not suggested that his decision to refuse leave to appeal was wrong or that it had any bearing on the present application to set aside the judgment.

Setting aside an order for immediate judgment

37. Setting aside an order for immediate judgment proceeds on different grounds from an appeal. The relevant Rules of Court are RDC 24.22 and 24.23 which provide as follows:

It is also relevant to note the terms of RDC 23.85 – 23.87. These Rules make it clear that, where a party fails to attend the hearing of an application, the court may proceed in his absence; that where in such a case the court makes an order at that hearing, the court may, either on application or even of its own initiative, re-list the application to be heard again; and that the power to re-list the application is in addition to any other powers of the court with regard to the order, including setting aside that order.

38. My attention was drawn by Mr Reed QC for the Bank to RDC 35.16 and 35.18. RDC 35.16 provides that where a party does not attend a trial and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside. Such an application must be supported by evidence, giving reasons for the failure to attend court and stating when the applicant found out about the order against him: RDC 35.17. It goes on to state in RDC 35.18 that where an application is made under Rule 35.16 by a party who failed to attend the trial, the court will only grant the application if the applicant (1) acted promptly when he found out that the court had exercised its powers to enter judgment against him; (2) had a good reason for not attending the trial; and (3) had a reasonable prospect of success at trial. It was submitted about the expression “reasonable prospect of success at trial” equated with the test for immediate judgment (“realistic prospect of success”). That must be right. The significant point, however, is that these rules specifically provided for two additional hurdles to be overcome and required the applicant to show that he acted promptly when he found out about the order made against him in his absence and had a good reason for not attending the trial. I was referred to Zuckerman on Civil Procedure: Principles of Practice 4th ed at paragraph 9.57 where it is suggested that, under the comparable English Rules, this approach would be applied also to applications to set aside summary judgment granted in absence of the defendant.

39. I find this submission difficult to accept. The passages quoted from RDC 24.22 and 24.23 do not set out any preconditions to be satisfied by the person applying to set aside his judgment against him. Nor do the comparable provisions in RDC 23.85 – 23.87. Yet RDC 35.16 and 35.18 appear to require two specific hurdles to be overcome before an application to set aside a judgment can be successful. The explanation is that while Rule 35 contains miscellaneous provisions relating to hearings, a term which includes a trial (see RDC 35.1), sub-rules 35.14 – 35.18 with which reliance was placed are concerned only with judgments given at trial. Not every hearing is a trial. A hearing of an application for immediate judgment is not a trial. There are good reasons for having a stricter regime governing applications to set aside a judgment made at a trial in the absence of a party. Proceedings will have progressed to an end date. There will have been procedural hearings and other opportunities for parties to be involved and to be aware of the progress of the case. The trial date will have been fixed some time in advance. All necessary preparations will have been made. Costs will have been incurred arranging for witnesses to attend and give evidence. And all this in addition to the legal costs incurred by the active party, and the impact on court resources in the event of an abortive trial. Considerations such as these justify a strict approach to any application by the losing party to set aside the judgment. In addition to showing that he would have had a reasonable prospect of success at trial, he must also show that he had a good reason for not having attended trial and that he acted promptly when he found out that the court had exercised its powers to enter judgment against him (RDC 35.18). These are preconditions to the exercise of the power to set aside the judgment given at trial in his absence. They do not apply in terms to a case where judgment is entered against him in his absence at some earlier stage, for example in default of appearance or on an application for immediate judgment.

40. At the other end of the scale, it was submitted by Mr Duckworth on behalf of Renish and Mr Mehta that the mere fact that the judgment was entered against them in their absence was sufficient to entitle them to have it set aside. He relied upon the maxim audi alteram partem. I reject that submission both as a matter of principle and on the plain meaning of the Rules of Court. Rule 24.22 entitles a respondent who does not appear at a hearing to apply to the court to have the order set aside or varied – but it does not entitle him as of right to succeed on that application. Rule 24.23 provides that on the hearing of such an application the court may make “such order as it thinks just”. That plainly gives the court discretion, which must be exercised judicially having regard to all relevant factors. Those factors are not spelled out in the Rules. But they will obviously include the matters discussed above in relation to an application to set aside a judgment given at or after trial in the absence of a party, not as preconditions but simply as matters to take into account and weigh in the balance. The court will want to consider:

It is unnecessary to elaborate on these matters in the abstract. I turn now to consider the application to set aside the judgment taking these various factors into account

Application of those principles to the present case

(a) Explanation for not attending the hearing

41. I deal first with the explanation given as to why neither of the applicants was present at the hearing. I have already (in paragraph 26) summarised the circumstances on which Renish and Mr Mehta rely. In brief they are that in July 2018 Renish fell victim to a campaign of disinformation orchestrated by business rivals. Mr Mehta was out of the country at a wedding on 9 July 2018 when an unknown third party circulated an email to a large number of Renish’s bankers and colleagues making serious allegations about Renish. Banks reacted with concern. One bank recalled Renish’s credit line in his entirety, with immediate effect; and it presented a number of undated cheques – which had been drawn on Renish and signed by Mr Mehta and held by that bank as security for its credit line, to the face value of AED 85m – for immediate encashment, resulting in them being dishonoured. A police case was filed against Mr Mehta (to bounce a cheque in the UAE is a serious misdemeanour which can result in imprisonment). The effect of this was to put Mr Mehta in jeopardy were he to set foot in the UAE again. In those circumstances he had little option but to remain in India against his will “until the dust settled” and he could re-open discussions with his creditors with a view to reaching an accommodation with them and allowing his business to continue. The immediate upshot, however, was that the business was no longer solvent and Mr Mehta could not undertake its closure in an orderly fashion. The business collapsed and many records were lost. He did not have access to his email or that of Renish. The Bank had attempted to serve proceedings on him and Renish using expired email links and postal addresses in the UAE which were no longer relevant. There had been no attempt to serve at Mr Mehta’s residential address in Gujerat, an address which was known to the Bank. Neither he nor Renish knew of the fact that proceedings had been launched in August 2018 or that a WWFO had been made. It was a chance internet search in mid-October 2020 which revealed the existence of the immediate judgment against them. They promptly sought legal advice and raised funding for legal expenses in challenging the judgment and the WWTO. In November 2020 they applied for leave to appeal the grant of the immediate judgment. Leave to appeal was refused. In light of that refusal of leave to appeal, this application was made to set aside the judgment. There was no delay after they became aware of the existence of the judgment. Prime, too, contend that they did not discover the existence of these proceedings until October 2019, though this is disputed by the Bank.

42. The Bank does not accept this explanation. It says that Renish and Mr Mehta would obviously have had access to their email accounts.It suggests there is an inconsistency in Mr Mehta’s account of how he came to learn of the judgment against him (was he told by another or was it a chance internet search). It suggests too that the timing of Renish’s and Mr Mehta’s sudden awareness of the judgment is suspicious, coinciding as it did with the publicity given to the Declaration of the Indian Ministry of Law and Justice of 17 January 2020 (the “Indian Declaration”) in terms of which the UAE was held to be a reciprocating territory for the enforcement of foreign judgments under the Indian Civil Procedure Code – the suggestion is that Mr Mehta thought it safe to ignore the proceedings in the DIFC courts when it would be difficult to enforce a DIFC judgment against him in India, but this all changed with the announcement of the Indian Declaration. But in any event, if Renish and Mr Mehta were indeed unaware of the proceedings and of the application for judgment, this was their own fault – they deliberately shut themselves off from communications with the Bank (and, no doubt, others) at a time when they knew that the Bank would be chasing them for payment of the sums outstanding under the Facility Agreement and the Personal Guarantee, and they would have expected the Bank to commence legal proceedings for the recovery of the outstanding debt. It was their own fault if they were unaware of the proceedings and failed to take part – and the court ought not to be sympathetic to an attempt to set aside the judgment entered against them in their absence when they could easily have attended the hearing and presented their arguments at that time.

43. It is not possible on this application to form a view as the veracity of Mr Mehta’s account that he was unaware of the proceedings against him until after immediate judgment was granted. The court cannot simply disbelieve the case advanced on his behalf unless it is wholly incredible, which in my view it is not. The alleged inconsistency in his account of how he eventually came to hear of the proceedings and the judgment does not compel me to disbelieve his account. And the inference sought to be obtained from the suggested co-incidence of his new-found desire to defend the proceedings with the issue of the Indian Declaration – an inference that Mr Mehta was content to let the proceedings go unanswered while he thought that there was no possibility of any judgment being enforced against him in India – simply invites the court to speculate, which it will not do. The Bank’s alternative argument is more persuasive. If a person deliberately cuts himself off from communication with his creditors, at a time when he must know that those creditors, in this case the Bank, are likely to commence proceedings for recovery of the sums due to them, then how can he be heard to say that he was unaware of the proceedings and of the application for judgment, so as to entitle him to enter proceedings after judgment has been granted with a view to setting aside that judgment.

44. There is considerable force in this, and had the Bank done no more than sue for the sums outstanding under the Facility Agreement and the Personal Guarantee I might well have come to the view that, whether or not he actually knew that proceedings had been commenced against him and Renish, Mr Mehta ought to have known that this was likely to happen and had deliberately avoided taking part in the proceedings commenced by the Bank in the knowledge that this would lead to judgment being entered against them. The problem is, however, that the Bank did not limit its claim to a contractual claim for the sums outstanding under the agreements. It chose to add a claim for fraud. I make no criticism of this decision – there may have been good reasons for it – but in my view it was not a claim which either Renish or Mr Mehta could have been expected to anticipate. Whatever criticism can properly be levelled at him for turning a blind eye to the likelihood of the Bank pursuing a contractual claim against him, that same criticism cannot be made when it comes to the Bank’s claim that he, Renish and Prime acted together to commit a fraud on the Bank. A finding of fraud is a very different thing from a finding of contractual indebtedness – and may have very different consequences for the individual or company against whom the finding is made. I cannot speculate as to what action he would or would not have taken if he had had reason to anticipate that the Bank would claim damages for fraud; but I cannot simply assume that in such circumstances he would have ignored the proceedings and shut himself off in the way he did.

(b) Delay in applying to the court to have the judgment set aside

45. On their case, the applicants discovered the existence of the immediate judgment against them in October 2020. On 18 October 2020 they lodged with the court an application for permission to appeal that judgment. Grounds of appeal in support of the application were lodged on 7 November 2020. This application for permission to appeal was refused on 9 February 2021. The set aside application was lodged on 25 February 2021, just over two weeks later. I do not consider that this brief time-table shows any culpable delay on the part of the applicants after they became aware of the judgment.

(c) The merits of the application – do Renish and Mr Mehta have a realistic prospect of success if the matter proceeds to trial?

The contractual claims

46. I deal first with the contractual claims under the Facility Agreement and under the Personal Guarantee. The draft Defence lodged on behalf of Renish and Mr Mehta simply makes no admissions as to these claims (see paragraph 13). Paragraph 58 of the skeleton argument lodged on behalf of Renish and Mr Mehta hints – I use the word advisedly, since the points are not elaborated on – at four possible lines of defence to the contractual claims. These are as follows:

47. In my view none of these points raises even an arguable defence to the Bank’s contractual claims. I deal with them briefly. The contributory negligence defence fails on at least two grounds: there is no proper basis put forward to support the bald assertion that the Bank failed to carry out full due diligence at any material time, no particulars of what it should have done, why it should have been on notice, etc; and in any event contributory negligence is not available as a defence to a claim for payment due under a contract. The point about the Bank’s regulatory status also fails, again for at least two reasons: both because nothing was placed before the Court to show that the Bank (a Mauritius entity) was or would be regarded as conducting financial activities in the UAE; and because an illegality defence would not prevent the Bank recovering the sums advanced in restitution or unjust enrichment (Patel v Mirza [2017] AC 467). The illegality defence based on alleged illegal trading with Iran was not supported by reference to any relevant legislation; and in any event fails both for want of any suggestion that the Bank knew or ought to have known of the origin of the oil, and also because any illegality would not prevent recovery of the sums advanced in restitution or unjust enrichment. Finally, the “jumping the queue” argument does not give rise to any defence to the contractual claims: it might go to the question of enforcement of any judgment against Renish, not to the question of whether judgment should be entered; and it would only arise for consideration on an application of some sort by the liquidator of Renish (in the event that Renish was put into liquidation).

48. It follows that there is no arguable defence to the Bank’s claims for repayment of the sums advanced under the Facility Agreement, whether put on the basis of contract or unjust enrichment. Were these the only ways in which the Bank advanced its claims, that would be the end of the matter. I would have refused the application to set aside the immediate judgment. But the Bank also advances a fraud claim, which the judge accepted as “overwhelming”. This, to my mind, changes the picture completely. I consider the fraud claim below.

The fraud claim

49. The Bank’s fraud claim raises different considerations. Having had the benefit of seeing rather more evidence in the case than was before the judge, and having had the advantage of detailed oral and written submissions on behalf of Renish and Mr Mehta as well as on behalf of the Bank, I have formed the clear view that the inference of fraud against Renish and Mr Mehta is far from overwhelming. Had this been the only head of claim advanced by the Bank at the immediate judgment application, had it come before me, I would have refused the application for immediate judgment and granted leave to defend the claim. Since the matter may yet be ventilated at trial, I consider it better that I should not attempt to set out in detail my reasons for arriving at this conclusion. I shall instead simply indicate the main difficulties I have in accepting the Bank’s case without full disclosure and without full examination and cross-examination of witnesses. I shall do so by reference to the judge’s reasoning in his judgment, summarised in the seven bullet points listed at paragraph 23 above.

50. In the third to sixth bullet points the judge refers to the conduct of Mr Mehta after things went wrong: his ceasing all communication with the Bank; the “abandonment” of his offices; his apparent “flight” to India; and his failure to respond in any way to the WWFO and related order for the disclosure of assets. The judge compendiously refers to these matters as indicative of Mr Mehta’s bad faith and dishonesty. I can accept that assessment. But, with respect to the judge, they do not of themselves touch upon the question of whether the Bank was induced by fraud to enter into the Finance Agreement and to advance the sums to Renish thereunder. The dishonest conduct described by the judge comes at a later stage. If, of course, there was some other evidence, whether direct or circumstantial, from which the commission of the fraud at that earlier stage could be inferred, subsequent dishonest conduct might well corroborate or support that inference. This is what I suspect the judge had in mind in dealing with these points in the way that he did and I have no criticism of that. But taken by themselves they are simply damning of Mr Mehta’s integrity, and not probative of anything more than that.

51. The first bullet point requires to be addressed with greater attention. It is useful to repeat it in full. The judge says this:

“… It is common ground between Prime and the Bank that the purported transaction for which at least a substantial part of the sums advanced by [the Bank] to Prime – the purported supply of oil by Prime to Lanka – was never intended or agreed by Prime. Accordingly, the irresistible inference is that Mr Mehta and Mr Ahmed [the CEO of Renish] knowingly deceived [the Bank] when it was represented to [the Bank] that monies were required pursuant to a contract with Lanka. It can similarly be inferred that trade documents provided to [the Bank], including the relevant back to back contracts made by Renish with each of Prime as supplier and Lanka as end purchaser on the relevant headed paper were forged.”

This reflects the arguments presented to him on behalf of the Bank. But there are real problems with this line of reasoning. Again, I intend no criticism of the judge, since it is obvious that he had to decide on the basis of the material and (inevitably one-sided) submissions presented to him. Much weight appears to have been placed before the judge, as it was before me, on the fact that Prime never intended to supply Lanka. But this tells one nothing about the genuineness of the transaction or transactions for which the Facility Agreement was entered into. No one has suggested that Prime was going to sell oil to Lanka. The transaction contemplated by the Facility Agreement comprised a series of sale and purchase agreements (a) between Renish and Lanka and (b) between Renish and Prime. They were, in essence, back to back contracts in terms of which Renish bought oil from Prime and sold oil to Lanka. There is nothing in the material shown to me – and I emphasise that I am not deciding on the merits of the fraud claim, but only on the question of whether the Bank’s case is so strong that Renish and Mr Mehta have no realistic prospect of defending the claim against them – to suggest that genuine back to back contracts were not put in place, consistently with what the Bank describe in their pleadings as the Facility Agreement Representation and the Payment Representation (see paras 13 and 14 above). Further, on the explanation given to me by Mr Duckworth on this application, one of the two contracts of sale between Lanka and Renish (the first Lanka contract) was performed using oil purchased by Renish from Prime. That fits in well with the now admitted position that three payments by the Bank under the Facility Agreement were re-paid to the Bank almost in full. Against this background, which was not put before the judge, it is difficult to see the basis for any inference that Renish’s business was not a genuine business or that trade documents provided to the Bank including the back to back contracts between Renish and Lanka and Renish and Prime were forged.

52. In the second bullet point the judge accepts that it can be inferred, having regard to all the facts presented to him,that Renish’s partial repayment of the “first payment” was calculated to induce the Bank to release further sums under the Facility Agreement. This, of course, follows the submission and evidence presented on behalf of the Bank in referring to four payments only, ignoring the first and second payments (which were repaid in full), and re-numbering the third payment as the first payment. I can appreciate that the Bank sought to draw attention principally to the advances made by it which were defaulted on in whole or in (a very small) part. But the problem is that it gave a misleading impression that only one advance had been repaid, from which it is possible to seek to draw the inference that this repayment was designed simply to encourage the Bank to advance further sums. Once it is accepted, as I understood Mr Reed QC to accept (since he characterised the Bank’s numbering of the payments as “confusing”), that three advances, not just one, were repaid in full (except for the small shortfall on the third payment), the potential for any inference that First/third repayment was made simply to induce the Bank to advance more just disappears. And that is even without taking account of the fact, which is averred by Renish and Mr Mehta and may now be accepted by the Bank, that the first three payments were used to finance the provision of oil under the first Lanka contract. Had the judge had the full picture presented to him that was presented to me, I cannot think that he would have drawn this inference.

53. Finally, in his seventh bullet point the judge refers to the pattern of payments following the transfers from the Bank to Prime, and concludes, as was submitted to him, that they bear a number of hallmarks of a sophisticated fraud. There may or may not be some truth in this; that is not for me to say at this stage. But it is worth pointing out that some of the payments were internal to Prima, transferring money from one account to another, and it is difficult to see how this bolsters a case against Renish and Mr Mehta unless it is first established that they were party with Prime to the alleged fraud, which is the very question at issue in this case.

54. For these reasons, which I do not go into in greater detail in case something said may affect the trial of these matters (if they get to trial), I consider that if the judge on the hearing of the application for immediate judgment had had the benefit of evidence and submissions from Renish and Mr Mehta, he would have concluded that they had at the least a realistically arguable defence to the fraud claim.

(d) Considerations of fairness

55. Since I have concluded, in accordance with the judgment on the immediate judgment application, that Renish and Mr Mehta have no defence to the contract claims under the Facility Agreement and the Personal Guarantee, it might seem that there is nothing to be gained by setting aside the judgment. Liability is for the same amount, whether the claim be in contract or as damages for fraud – and the operative part of the judgment sought to be set aside is supported by the reasoning on the contract claims regardless of my concerns about the allegations of fraud. But I am conscious that a judgment for fraud is a serious matter to be hanging over someone seeking to carry on business, whether in the Middle East or elsewhere. The Bank’s determination to hold onto the fraud findings in the immediate judgment is testament to the advantage which it considers it will gain by such a finding and, conversely, Renish and Mr Mehta will lose. The Bank will not be any worse off in terms of the amount of the judgment if I remove the fraud finding. In those circumstances I propose to make an order which maintains the judgment on the contractual claims but removes the findings of fraud.

Disposal

56. It was suggested by Mr Reed QC for the Bank that, if I came to this view on the merits of the argument, I could simply leave the Order in place and any court reading that judgment alongside this one would be aware that there was now no finding of fraud so far as the immediate judgment is concerned. I do not think that that is a satisfactory way of proceeding. It would tend to cause confusion. Another court dealing with the matter might be unaware of this judgment or of its effect when read together with that pronounced on 27 September 2020. Mr Duckworth, on the other hand, insisted that if I was persuaded that there was a realistically arguable defence to the fraud claim I should simply set aside the Order, the Bank being in effect the author of its own misfortune by insisting on an unwarranted and unnecessary claim for fraud. I do not think that this is satisfactory either, since the Bank clearly has a contractual claim to which there is no defence and should be allowed to enforce it if it chooses to do so.

57. To my mind the best way of achieving justice in this case is to make an Order setting aside the judgment of Justice Ali Al Madhani dated 27 September 2020 and, in its place, making, of new, an Order in the same terms as the first two paragraphs thereof, prefacing it in the recitals with a reference to the application to set aside the immediate judgment, the hearing before me, and this judgment.

58. On the question of costs, I see no reason to disturb the order made by Justice Ali Al Madhani in respect of the matters before him. As I have said, the applicants must have foreseen that there would be court proceedings and an application for judgment and they simply shut their eyes to it. They are the authors of their own misfortune in this regard. As to the costs on the application to set aside the default judgments, the applicant have achieved a measure of success in removing, for the time being at least, a finding against them of fraud; but the Bank have kept the monetary judgment. In those circumstances I consider that the appropriate order is that each party bear its own costs of the application to set aside the immediate judgment. That is the order that I make.