Standard Bank Plc v Al Jaber

The Claimant, for whom Ian Mill QC and Leona Powell have appeared, brings an application under Part 24 for summary judgment against the Defendant as guarantor of two Facility Agreements between the Claimant and companies in the Group (the MBI Group) of which the Defendant is the controlling shareholder, which companies I shall call JJW and AJWA.

The Agreements were entered into by the companies and the guarantees given by the Defendant between April and September 2008. There is no dispute as to the existence or validity of the Facility Agreements or the guarantees, or the demands thereunder, and it is accepted by the Defendant that some €121m and US$22m remain due and unpaid.

The resistance to the Claimant’s application has been presented by Catharine Otton-Goulder QC, leading Sarah Ford, with ingenuity and determination, by reference to an original Defence and Counterclaim prepared by previous Counsel, and three subsequent draft amendments, Version 2 being a draft Amended Defence (without a counterclaim) prepared just prior to the hearing, Version 3 being produced over the adjournment between the first hearing (fixed for half a day and adjourned part heard) and the restored hearing, and Version 4, produced at the outset of the adjourned hearing, both of the latter versions restoring a Counterclaim, although limited to a Counterclaim by the Defendant for “damages in the same quantum as his liability, if any, under the … guarantees”.

I shall summarise the matters which Ms Otton-Goulder submits show that the Defendant has a real prospect of successfully defending the claim, alternatively sufficient within Miles v Bull [1969] 1 QB 258 (supplemented by the adjusted requirement under CPR Part 24.2(b), by the addition of the word “compelling” to the pre-CPR jurisprudence) that there “ought for some other [compelling] reason to be a trial”. They are:

The circumstances can be shortly set out. By the middle of 2009, the Claimant Bank was beginning to be concerned about repayment of the loans under the Facility Agreements, and a number of discussions took place between the Claimant and the Defendant and his Group about a possible alternative method of securitisation of assets of the MBI Group by way of re-financing. This related to two residential housing compounds located in the Kingdom of Saudi Arabia (“the Jadawel Compounds”), belonging to a company in the MBI Group, and let to the Ministry of Defence and Aviation (“MODA”) of Saudi Arabia. The method of proposed securitisation was the issuance of a Sukuk, a form of financial instrument similar to a bond, but compliant with Sharia law. The proposed Sukuk transaction required a lead manager, and the Defendant was in discussion with another bank, BNP Paribas, about its becoming lead manager, which bank gave a powerpoint presentation on 8 March 2010, setting out a possible structure for a proposed transaction. The Claimant was also very keen to act as lead manager, but only on the basis of exclusivity: and what was eventually agreed on 17 March 2010 was the appointment of the Claimant as lead manager on the basis of such exclusivity, but for a limited period of 3½ months – to 30 June 2010 – during which time they would be able to see if they could put together the transaction.

Two agreements were entered into on 17 March 2010:

As to what happened thereafter:

The estoppel case, as put forward at the time of the issue of the Claimant’s application under Part 24, was as pleaded in Version 1 of the Defence, as follows:

“7.

… it is admitted that the Defendant … has previously supplied a personal guarantee … Notwithstanding this admission the Defendant will state that the Claimant is estopped from enforcing the terms of this breach against the Defendant in his capacity as guarantor in consequence of unequivocal assurances made to the Defendant by the Claimant representative agreeing to a complete standstill of these three facility loans pending the execution of a new ‘Sukuk’ refinancing proposal in which the Claimant was to act as lead manager. The terms of this Sukuk and of the associated assurances made to the Defendant in consenting to the standstill arrangement in relation to the three loans otherwise capable of recall are set out in the particulars of defence below.

...

22.

On 17 of March 2010 the parties … executed a signed mandate agreement in addition to a side letter which set out the terms of the financing and securitization …

...

24.

Throughout the course of this meeting [17 March 2010] David [McCaig] made unequivocal assertions to the Defendant confirming his commitment to successfully negotiating the terms of the Sukuk issue. In response to these assertions the Defendant agreed to the terms of the side letter which was duly executed in consequence.

…

27.

Following a meeting in or around April 2010 held at the Defendant’s Paris residence, Mr [McCaig] again issued unequivocal assurances to the Defendant that the Claimant Bank remained completely committed to the execution of the Sukuk issue and the associated bridging loan and underwriting pledge as set out in the side letter to be read in conjunction with the mandate document. During this meeting the Defendant was also assured in absolute terms that the existing loan facilities (which form the basis of this claim) would be placed on ‘standstill’ pending the execution of the Sukuk issue and the bridging finance which in turn would be applied to extinguish these loans.”

Then as to reliance and equity:

“29.

In direct response to the assurances personally made to the Defendant and reaffirmed in the email referred to in the previous paragraph to this defence, the Defendant was left in no doubt that the Claimant Bank remained committed at all material terms to the execution of the proposed Sukuk issue. In consequence to these unequivocal assurances the Defendant invested complete reliance upon the strength of these assurances and in doing so proceeded on the assumption at all material times that the Claimant would honour the terms of the refinancing proposal accordingly.

…

33.

Regardless of the Claimant’s inexplicable withdrawal [from] the terms of the Sukuk issue, the Defendant will state that in placing complete reliance on the former’s pledge to abide by the terms of the Sukuk issue … the Defendant has consequently suffered detriment in the following terms. The Defendant in placing complete reliance on the Claimant’s assurances has been deprived of the opportunity of pursuing the proposed Sukuk issue with [BNP Paribas].

34.

Accordingly, the Defendant will rely on the equitable relief that gives rise to a promissory estoppel. Namely the Claimant [is] estopped from enforcing the terms of the guarantee provided by the Defendant in respect of the three facility loan in consequence of their unequivocal assurances that the recall and repayment demand otherwise arising in respect of these facility agreements would be placed on ‘standstill’ pending the execution of the Sukuk issue and the associated bridge financing.”

The alleged representation was thus made after the Sukuk Mandate and the Side Letter were entered into – certainly not at the meeting of 17 March – and was inextricably tied up with an assurance or promise that the Claimant would proceed with the Sukuk transaction, which formed the basis of the counterclaim referred to above.

The estoppel now pleaded (in Versions 2, 3 and 4) is based upon a representation said to have been made at the meeting on 17 March 2010 when the Mandate and the Side Letter were signed. The pleading, which entirely supersedes Version 1, is as follows in paragraph 12:

“12.

At a meeting which took place on 17 March 2010 at the Paris offices of Clifford Chance LLP between the Claimant and the Defendant Mr David McCaigthe Claimant’s Head of Securitisation, following an hour long conference call with the Management of the Bank, made an unequivocal oral representation to the Defendant (“the Representation”) that if the Defendant appointed the Claimant as Lead Manager of the Sukuk Proposal and conferred upon the Claimant an exclusive mandate to arrange the contemplated financing, then the Claimant would:

(a)

Refrain from enforcing payment under either the Amended First Facility Agreement, the Second Facility Agreement, the Amended Third Facility Agreement or the First, Second and Third Personal Guarantees; and

(b)

Provide the Defendant bridging finance of up to US$150 million by no later than 15 April 2010, to be applied in part to repaying the Amended First Facility Agreement, the Second Facility Agreement and the Amended Third Facility Agreement and in part to support the ongoing business operations of MBI Group.”

Reliance and equity (said to amount to detriment) follow in paragraphs 13 and 16:

“13.

In reliance on the Representation, on 17 March 2010 the Defendant signed a mandate letter on behalf of Jadawel and MBI Group appointing the Claimant as Lead Manager in respect of the Sukuk Proposal and conferring upon the Claimant an exclusive mandate to arrange the contemplated financing (“the Sukuk Mandate”) and a side letter concerning the grant of US$150 million in bridging finance (“the Side Letter”).

…

16.

As a consequence of his reliance on the Representation, the Claimant has suffered detriment. Had the Defendant not signed the Sukuk Mandate in reliance on the Representation, he would have obtained the contemplated financing from BNP Paribas alternatively from another finance provider. That opportunity had been lost by the time discussions between the Claimant and the Defendant concerning the Sukuk Proposal broke down. Having engaged in lengthy and detailed negotiations with BNP Paribas but then ultimately granted the Sukuk Mandate to the Claimant, the Defendant’s commercial relations with BNP Paribas had been damaged and he could not revert to them and request that they reopen negotiations concerning the Sukuk Proposal. Further, by the time the discussions between the Claimant and the Defendant broke down, it had become public knowledge that MBI Group was experiencing financial difficulties which were directly caused by the failure of Standard Bank to deliver the bridging finance, and alternative financial providers were not prepared to enter into negotiations concerning the Sukuk Proposal. As a consequence of the absence of the contemplated financing, the financial difficulties of the MBI Group were materially aggravated and compounded.”

The evidence as to what is alleged to have been said on 17 March 2010, such as to amount to the pleaded representation, is at paragraphs 48 to 50 of the Defendant’s Fifth Affidavit:

“48.

Mr Khoury brought Standard Bank to my apartment in Paris on the 15^th March 2010 requesting me to sign the Sukuk Mandate. As I was busy that day we reconvened at the Paris office of Clifford Chance on the 17^th March. During this meeting Mr McCaig indicated to me that the demand letters were being sent because I had not agreed to sign the Bank’s mandate letter for the Sukuk proposal. He made a representation to me to the effect that “If you sign a mandate letter regarding the Sukuk, we will stop sending you the demand letters”. It was made very clear to me that if I signed the Sukuk Mandate then the Bank would not seek to enforce the Personal Guarantees.

49.

I insisted that $150 million Bridge Financing be provided by the end of March. The Bank’s representatives adjourned to discuss the matter and returned after an hour with news that they could provide the Bridge Financing by 15^th April. I was under the impression that approval had been obtained and that the Bridge Financing would be forthcoming.

50.

On the basis of their assurances and representations on 17 March 2010 I signed the mandate letter for the Sukuk and the side letter which confirmed US$150 million Bridge Financing (the “Side Letter”) … The financial security of the Group heavily relied on the $150M being made available to me within the timeframe assured by Standard Bank. There were caveats in the language of the Side Letter, but I had been assured in no uncertain terms by the Bank that if I signed the Sukuk Mandate, Standard Bank would fulfil its obligations to provide the Bridge Financing and thus it would not call on the Loan Facilities or respective Personal Guarantees. It was on these oral assurances I entered into the Sukuk Mandate.”

I shall return to the question of whether what is said to have been said can justify the pleaded representation, but the matter was not left there. In answer to the forceful case made by Mr Mill, on behalf of the Claimant, that it is wholly unlikely that a representation was made (if such be alleged) that the Claimant would not enforce the debt or the guarantee for an unlimited period in return for a conditional and short-lived period of exclusivity, Miss Otton-Goulder put forward a case which is not contained in any of the various versions of the Defence (and not deposed to by any witness for the Defendant); that the representation must be taken to have been as to not enforcing the loan and guarantees until 15 April (the date mentioned in the Side Letter), and that it is and was inequitable for the Claimant to enforce its rights even after that date without putting the Defendant into the position that he would have been in had the bridging finance and/or the Sukuk Transaction proceeded. I will return to this case.

Careful consideration was given before me to the communications which followed after the meeting of 17 March:

Mr Mill further submitted in his skeleton argument, by reference to paragraph 50 of Mr Richards’ first witness statement, and neither the Defendant nor Ms Otton-Goulder engaged with this, that: “The Defendant continued to make promises and proposals in respect of repayment of the underlying loans long after it became clear that the Claimant had suspended negotiations in relation to the Sukuk Transaction. This is completely inconsistent with a belief that there had been a complete standstill in relation to those obligations”. Continued promises of repayment were made by the Defendant and those on his behalf on 9 June, 23 June, 1 July, 7 July and 12 July 2010.

In the light of this, Mr Mill submits that there is not any realistic prospect of success for the alleged defence of estoppel, if necessary drawing comfort from a similar conclusion reached by Moore-Bick J (on an application to set aside a default judgment) in International Finance Corp v Utexafrica Sprl [2001] CLC 1361:

I find Mr Mill’s submissions, set out above, convincing, and the contemporaneous evidence (including that of Mr Lewis) overwhelmingly inconsistent with the existence of an alleged representation leading to an estoppel. But quite apart from the factual context, there is the need for Ms Otton-Goulder to be able to build upon such facts as could be found to establish an arguable estoppel. I refer to paragraph 14 above. I agree with Mr Mill that it is inconceivable that there could be, by implication or otherwise, spelt out of what occurred, a representation that the Bank would not enforce its right under the loans or guarantees, simply in return for the opportunity to have an exclusive period of 3½ months to try to put together the Sukuk Transaction, always subject to due diligence, which, in the event, proved impossible. It would effectively be ‘purchasing’ an option on the possibility of the Sukuk Transaction for 3½ months, in return for giving up their rights to the loans and guarantees. The impossibility of such a scenario was recognised by Ms Otton-Goulder in argument, and she formulated the case which, as I have pointed out, in paragraph 14 above, is still not pleaded, although it could have surfaced in either Version 3 or Version 4, both of which post-dated her new case.

Ms Otton-Goulder’s submission is that there should be implied, into the representation upon which she relies, the proposition that the Claimant would refrain from exercising its rights until 15 April 2010, being the date mentioned in the Side Letter, as the date by which the Claimant would commit (conditionally) to the Sukuk and provide a bridge facility (in an amount to be agreed) or MBI and JWIL would be entitled to terminate the exclusive appointment. She submits that the implied representation was that the Defendant would refrain until 15 April, and if, by that date, the bridge facility and/or Sukuk Transaction were not in place, then the Claimant would refrain from enforcing its rights until they were. For understandable reasons Ms Otton-Goulder concentrates primarily on the provision of the bridge facility, rather than the Sukuk Transaction, but it is plain that both were conditional, and in any event the bridge facility was “in an amount to be agreed”. Even assuming that there was any materiality in an implicit representation that there would be no enforcement of rights until that date, that would only be the starting point of Ms Otton-Goulder’s submissions, which would require an implied representation that the Claimant would not enforce its rights until 15 April, but that such otherwise short term estoppel would be implicitly extended beyond 15 April in certain eventualities. The way Ms Otton-Goulder puts it is that it would be inequitable for the Claimant to enforce its rights thereafter.

However:

Mr Mill also submitted that the evidence of reliance and what is called “detriment” (although strictly speaking no detriment is necessary in order to establish an estoppel, but only inequitability) is exiguous and inconsistent as between the original and amended pleadings and the evidence of the Defendant, and in particular there is no evidence of any efforts to find “another financial institution” (as proposed by the Defendant in his letter of 26 May), whether BNP Paribas or otherwise, not to speak of any evidence of failure of those efforts. The Defendant’s companies were entitled to terminate on 15 April in the terms of the Side Letter and to revert to BNP Paribas, but they did not, and gave no evidence at all in that regard. But as I am entirely satisfied that the defence of estoppel is not arguable by reference to the basic requirement for a material representation, I do not need to consider those issues further.

I turn then to the issue of Mr Khoury. In his Fifth Affidavit at paragraph 24, the Defendant states that Mr Salim Khoury began working for the MBI Group in April 2007, and that he represented the Group at the time of the proposed Sukuk Transaction. It was Mr Khoury who introduced the Defendant to Standard Bank. In Richards I, in support of the Claimant’s application for a freezing order against the Defendant, as part of the ‘full and frank disclosure’ incorporated in the Affidavit, Mr Richards referred to “allegations of conflict of interest” in paragraphs 209.13ff. He stated that Mr Khoury “acts as an independent (and non-exclusive) introducer of clients, and has had dealings with Standard Bank (and, presumably, numerous other financial institutions) in that capacity. He receives a commission in respect of introductions made and, accordingly, has received payments from Standard Bank in the past. It was in fact Mr Khoury who introduced Sheikh Mohamed to Standard Bank”. This statement was suggested by the Defendant (in paragraph 50 of his Second Affidavit) to be inconsistent with an earlier email by Ms Snaith of 24 June 2010, but that is plainly not so, as that email was a statement, made to a Mr Yussouf of the MBI Group, that “no payments were made to Salim Khoury from MBI or JJW accounts”.

Just prior to the hearing, after request by the Defendant’s solicitors, Mr Cooke of the Claimant produced a non-exclusive Introducing Agreement dated 30 June 2007, extended by letter of 3 June 2008 until 13 June 2009. He stated, after making relevant enquiries, that:

“Mr Khoury’s role as an introducer of clients to the Bank terminated at the end of that contractual extension (namely 13 June 2009). I have made enquiries with the members of the Bank securitisation team, including David McCaig and Michael Brunke, who were actively involved in the Sukuk Transaction, and they have confirmed to me that Mr Khoury did not receive any commission in relation to the Sukuk Proposal or the Sukuk Mandate from the Bank nor would he have stood to receive any commission had the transaction progressed, since his contractual relationship with the Bank had, by the time the Sukuk Mandate was entered into, come to an end.”

By reference to that agreement, Ms Otton-Goulder submits that Mr Khoury would have had an entitlement to commission in respect of the Sukuk Mandate, had it proceeded, even though his contract had terminated a year earlier, but this proposition is contested by Mr Mill (supported by his evidence), and no payment was in fact made.

The Defendant during the adjournment between hearings produced Mr Khoury’s contract with MBI International (the company right at the top left hand corner of the corporate organogram of the MBI Group of July 2011 exhibited by the Defendant to his fourth affidavit). The consultancy agreement between MBI International and Mr Khoury was dated 12 October 2007 (although it is recited that he had provided his services since 1 March 2007). It provided that, although his consultancy was non-exclusive, he should not place himself in a conflict of interest with the Company. It was terminated on 2 June 2010.

The Sukuk Proposal, signed on 17 March 2010, recited, at Clause 3.2, that “the Company shall be responsible for the payment of a fee in an amount equivalent to 0.4% of the final size of the Transaction to Mr Salim Khoury, financial advisor to the Company” – MBI and JWIL.

In Version 2 of the draft Defence, the following was pleaded under the heading “Mr Khoury’s fundamental conflict of interest”:

“18.

At all material times, Mr Khoury acted as primary negotiator on behalf of the Defendant in the discussions which took place between the Claimant and the Defendant concerning the Sukuk Proposal and thereafter the Sukuk Mandate. The Defendant placed a great deal of trust and confidence in Mr Khoury and relied heavily on his assistance.

19.

Unknown to the Defendant, Mr Khoury was also party to an arrangement with the Claimant whereby he acted as an independent, non-exclusive introducer of clients in respect of which he was paid commission for introductions made. It was Mr Khoury who initially introduced the Claimant and the Defendant. The Claimant failed at any material time to disclose the existence of its arrangement with Mr Khoury to the Defendant.

20.

Pending full and proper disclosure, the Defendant does not know the precise terms of Mr Khoury’s arrangement with the Claimant, whether Mr Khoury received payments from the Claimant in respect of business obtained by the Claimant from the Defendant, the amount of such payments, the frequency of any such payments, or the matters which triggered an entitlement to any such payments.

21.

In the premises, Mr Khoury was acting at all material times under a fundamental conflict of interest. The Defendant reserves the right to plead further to these matters on full and proper disclosure.”

This formed the basis of a submission by Ms Otton-Goulder by reference to Miles v Bull, namely that (to quote Megarry J (at 266D-F) [sitting, unusually, as a QB judge in the vacation], by reference to the then wording of RSC Order 14, “there ought for some other reason to be a trial; and the reason is that of justice … the case was “too near the bone for Order 14” … Order 14 is for the plain and straightforward, not for the devious and crafty. There is here a case for investigation, and so not for summary decision”.

In Version 3, a Defence was now pleaded, by reference to (paragraph 8A) an implied term of each of the facility agreements and guarantees, “such term to be implied on the grounds of business efficacy and/or on the basis that it was so obvious as goes without saying, that the Claimant would not enter into and/or maintain in force and effect, implement or enforce any agreement such as the Introducing Agreement dated 13 June 2007 … with an individual such as Mr Khoury who, to the Claimant’s knowledge as Head of Corporate Finance, Banking Relations and Personal Adviser to the Defendant held a senior and influential position within the MBI Group and/or in relation to the Defendant personally and had sole contact with the Claimant on behalf of the MBI Group and/or the Defendant, and who would thereby be subject to a fundamental conflict of interest”.

The breach and its consequence was then pleaded in paragraphs 18 to 24 of Version 3 as follows:

“18.

Wrongfully and in breach of the Implied Term, on 13 June 2007 the Claimant entered into an Introducing Agreement with Mr Khoury (“the Introducing Agreement”) pursuant to which Mr Khoury was entitled to the payment of commission in respect of each transaction concluded between the Claimant and an introduced client. The Defendant will refer to the Introducing Agreement as necessary for its full terms and effect.

19.

Mr Khoury introduced the Claimant and the Defendant, with the consequence that Mr Khoury was entitled to the payment of commission in respect of each transaction concluded between the Claimant and the Defendant.

20.

The Introducing Agreement placed Mr Khoury in a position of fundamental conflict of interest, in particular:

(a)

In relation to the Amended First Facility Agreement, the Second Facility Agreement and the Amended Third Facility Agreement, a conflict between his own personal financial interest in receiving commission in respect of such transactions and his fiduciary duties to MBI Group by virtue of his role as Head of Corporate Finance and Banking Relations; and

(b)

In relation to the Personal Guarantees and the FOREX trades carried out on the Defendant’s behalf, a conflict between his own personal financial interest in receiving commission in respect of such transactions and his fiduciary duties as the Defendant’s personal advisor.

21.

As a consequence of the Claimant’s breach of contract, the Defendant has suffered loss and damage.

Particulars of loss and damage

22.

By reason of the Introducing Agreement, Mr Khoury had a personal financial incentive to cause the Defendant to grant the Sukuk Mandate to the Claimant, since the Sukuk was a transaction in respect of which commission would have been payable to Mr Khoury pursuant to the Introducing Agreement. Mr Khoury therefore informed the Claimant of the Defendant’s plans to grant the Sukuk Mandate to BNP Paribas and exerted pressure on the Defendant to grant the Sukuk Mandate to the Claimant.

23.

Had Mr Khoury not so acted, the Defendant would have granted the Sukuk Mandate to BNP Paribas and would have thereby obtained financing with which to discharge the Amended First Facility Agreement, the Second Facility Agreement, the Amended Third Facility Agreement and the First, Second and Third Personal Guarantees.

24.

The Defendant is entitled to damages in the same quantum as his liability, if any, under the First, Second and Third Guarantees, and will set off such damages in diminution or extinction of the Claimant’s claim.”

This must be seen together with a case which emerged in Version 4 of the draft Defence, with which I shall deal separately below, about Forex transactions, which highlights concerns about the basis of these late defences:

The account opening form in respect of the account on which these losses are said to have been suffered was disclosed by the Claimant. It is with MBI International.

MBI 2 Partners (UK) Ltd, the subject of the pleading at paragraph 25 of Version 4, referred to in paragraph 31(i) above, was simply the “communication address”.

The only signatory according to the Corporate Signatory Authorisation and Authorisation to Trade Foreign Exchange was not Mr Khoury but the Defendant as “Chairman & CEO”.

MBI International is certainly not “a private company that has no income”, which “could not have possibly funded the Forex trading”. I have referred, in paragraph 25 above, to the corporate organogram. Its accounts are exhibited. Its total assets are US$4 billion, and, far from “no income”, it has net income of US$301m. This cast real doubt on the credibility of this avalanche of late evidence and draft pleading.

Against this background I consider the case made by reference to the implied term. It is noteworthy, as Mr Mill pointed out, that there is no assertion of procurement by the Claimant Bank of breach of any term of the contract between Mr Khoury and his employer, because the employer is, as set out above, MBI International, not a party to the action, and further such a tort would require proof of knowledge on the part of the Claimant or at least recklessness as to the terms of such contract.

The pleaded case is of an implied term in the 2008 Facility Agreement/Guarantees, entered into a year after the June 2007 Introducing Agreement, and a good six months after the execution of the Consultancy Agreement between the Defendant and MBI International. The Facility Agreements were in respect of, and resulted in, loans by the Claimant Bank to JJW, which have still not been repaid, and to guarantees of them by the Defendant. It seems to me impossible to argue that, by reference to such contracts, already entered into, there could be such an implied term – said to be so obvious that it “goes without saying” – as is pleaded in paragraph 8A of Versions 3 and 4.

In any event, the pleading of breach of that implied term is, in my judgment, impossible. As set out in paragraph 30 above, the plea in paragraph 18 of Versions 3 and 4 is that in June 2007 the Claimant entered into the Introducing Agreement in breach of the implied term of contracts which were not executed until ten months later. Further, the loss and damage is hopelessly speculative. It suggests that, as a result of such breach, the Defendant suffered loss and damage because “the Defendant would have granted the Sukuk Mandate to BNP Paribas and would have thereby obtained financing with which to discharge” the loans and guarantees. There is no evidence to support this at all, not least as referred to in paragraph 21 above, and certainly not in the light of the (unchallenged) difficulties which the Claimant faced by way of due diligence in trying to progress the Sukuk Transaction.

This is an even later afterthought, emerging only in Version 4. There are said to have been breaches of implied terms of the contract by which the Claimant Bank carried out or supervised the Forex trading, by reference primarily to exceeding of internal limits. The Forex losses resulting are said to have been in a net sum of €55m, and, by dint of a pleading in paragraphs 28 and 29 of Version 4, this is said to lead to the Claimant’s claims for more than twice that amount failing for circuity, although Ms Otton-Goulder did appear to concede in the course of argument that in fact it could only amount to a partial offset.

Whereas there were plainly Forex losses, and it may be that somebody may be able to bring an action against the Claimant Bank in respect of them, this claim is a really difficult one for Ms Otton-Goulder to attempt to set up by way of defence in these proceedings with any degree of reality. I have already referred, in paragraph 31(i) above, to the fact that the Bank’s Forex customer is said to have been “the Defendant and/or MBI 2 Partners (UK) Ltd”, when it was plainly not the latter and, if the Account Opening Form is correct, it was not the former. There also seems considerable doubt cast upon the suggestion that it was Mr Khoury who carried out the trades, when the Defendant was the only authorised signatory, although it may be that this case is put forward only in order to justify why it is that the Defendant himself should have so apparently little knowledge of the transactions that (if the Claimant be right) he himself caused to be carried out on MBI’s account.

In any event, Ms Otton-Goulder sought to make, at the adjourned hearing, an application for an order, by reference to CPR Rule 34.3(2)(b) and/or (c), for a Mr Nic Contomichalos to give evidence. He is an ex-employee of the Claimant Bank and is said to have relevant knowledge to give with regard to the Forex transactions, which he is or feels constrained from giving by obligations of confidentiality owed to the Claimant Bank.

This is a power which is obviously primarily relevant to witnesses for trial and not for applications like Part 24, where the evidence is conventionally by witness statements, but in Barratt v Shaw & Ashton [2001] EWCA Civ 137 Mance LJ obiter at paragraph 13 postulated as a classic example of such procedural course a situation in which a party wished to pursue or resist an application for summary judgment under CPR 24, and could not adduce the necessary evidence for that purpose without having the evidence taken on deposition of some witness. It seems to me clear that the position would be the same as the practice followed by Goff J in Grindlays Bank v Henson 17 July 1980 (Commercial Court) when disclosure was ordered against a claimant prior to an Order 14 hearing at the instance of a defendant who asserted that there were or might be documents in the possession of the claimants which would support his asserted defence.

But the issue here is to what defence would the evidence of Mr Contomichalos be relevant such as to justify such exceptional, or classic, course. His evidence might be relevant in order to speak to the fact that the Forex trading was (contrary to the assertions of the Claimant Bank, as stated in paragraph 209.11 of Richards I, which are not addressed by the Defendant), such as to render them liable for any losses. But the question here is who the account holder is who suffered those losses, when the only evidence before me from either side (notwithstanding the fact that bank statements must unquestionably have been supplied (and were supplied according to Ms Snaith’s email of 24 June 2010, referred to in paragraph 22 above)), is that the Account Opening Form is in the name of MBI International, and the Defendant was signatory as its Chief Executive.

It seems to me that, if I came to the conclusion that there is an arguable counterclaim by the Defendant (though it would, as discussed above, only partially offset the claim) then I could give leave to defend without the course of obtaining evidence from Mr Contomichalos. I would only take the unusual course at this interlocutory stage of adducing oral evidence from Mr Contomichalos if I were satisfied that there is a real prospect that he would unlock an arguable defence not otherwise sufficiently available, but of which there was at least a reasonable prospect.

I turn then to the way in which the case is put to see whether there could be such an arguable (partial) defence of off-set. In argument the possibility that MBI International was the alter ego of the Defendant was floated by Ms Otton-Goulder. No such case is pleaded, but it seems wholly unarguable in the light of the organogram and, particularly, the accounts referred to in paragraph 35 above.

What is pleaded is (in paragraph 28(a) of Version 4) that “the Defendant and/or the [wrong] Company has/have sustained [the net €55m losses]”. And then, in the balance of paragraph 28, as follows:

“(b)

That net liability was then covered by the Amended First Facility Agreement between JJW and the Bank, and the Defendant’s personal guarantee in respect of that facility;

(c)

The Bank’s claim herein is in respect of the Amended First Facility Agreement between JJW and the Bank, and the Defendant’s personal guarantee in respect of that facility, which would not have arisen but for the Bank’s breaches of contract set out above.

(d)

In the premises, the Defendant’s losses include all his liabilities (including all interest and costs in relation thereto).”

With the conclusory paragraph:

“29.

In the premises, the Bank’s claim in respect of the Amended First Facility Agreement between JJW and the Bank, and the Defendant’s personal guarantee in respect thereof fails for circularity.”

What the Defendant actually says, in paragraph 14 of his Seventh Affidavit, is “Following these losses, Mr Khoury arranged for the net liability (€55m) to be met by a Standard Bank loan. In particular, he arranged for the JJW loan of €55m (the amended First Facility Agreement) indirectly to be deployed to cover these Forex losses”.

The word “indirectly” is not there explained, but already raises questions as to what is meant in paragraph 28(b) by “that net liability was then covered by” the JJW loans. The circle is sought to be squared by Ms Otton-Goulder, who, in the course of argument, submitted, as she really had to, that JJW “effectively took an assignment” of any Forex claims: i.e. JJW agreed to pay off the loans, and in return MBI International (or the Defendant) assigned to JJW claims for those losses against the Claimant Bank. But there is no evidence of that at all. It is pure speculation and legal theorising.

I am entirely satisfied that there is no realistic prospect of success for the asserted defences of estoppel and set-off by way of counterclaim in respect of breaches of implied term.

Had I concluded that there was a defence that might be just about arguable or was bordering on the fanciful, I would have ordered payment into Court. The only evidence that was before me in this regard at the hearing was in the Seventh Affidavit of the Defendant, in which he states, at paragraph 21, that “if I was required to make a substantial payment into court I would need to take immediate steps to dispose of a number of assets … I do not realistically think I could raise more than $50m”. The principles that apply are well known, deriving from the House of Lords decision in Yorke Motors v Edwards [1982] 1 WLR 444, the principles in which are said to apply post-CPR by the Court of Appeal in the Anglo-Eastern Trust Ltd v Kermanshahchi [2002] EWCA Civ 198, namely that no order by way of conditional leave to defend should be made which might drive the defendant from the judgment seat or stifle his defence.

However, Yorke Motors also makes clear that the funds to which the court must look in so deciding are not limited to his own funds, but the ambit of enquiry will necessarily include what resources he might be able to access. In this regard, at paragraph 10 of his Fifth Affidavit, he states, having exhibited the organogram, to which I have referred above, that “the assets of the MBI Group have continued to perform well over the last financial year and the resulting global profit over the past three years would be close to US$300m”. This was sworn as recently as 23 September 2011, and I also take into account the information contained in the MBI International accounts, to which I have referred in paragraph 25 above. Of course, a conditional order would not necessarily mean payment into court, and it could be satisfied by provision of a bank guarantee. I would have taken a great deal of persuasion that, if I were to allow the Defendant not simply a day in court, but many days in court, at a trial to pursue a speculative or fanciful counterclaim and/or to raise a speculative or fanciful defence, not to conclude that it should only be done if the full amount of the claim were secured or a very substantial portion of it. As it happens, this decision does not arise because of the conclusion I have reached that the Defendant has no prospect of success.

I turn finally to the Miles v Bull question. It seems to me that this only arises if and when I have reached the conclusion that there is no arguable defence. It is at that stage that I must, if so invited, as I am, consider whether there is “no other compelling reason why the case or issue should be disposed of at a trial”. I referred above to the words of Megarry J. He thought that the transaction in that case between the defendant and the plaintiff, at the instance of the defendant’s husband, said by the plaintiff to have been a sham with the object of depriving her of her right as against the husband to occupy the property, was one which “in the interests of justice ought to be carefully scrutinised”. In this case, I am satisfied that the loans are undoubtedly repayable and the guarantees undoubtedly enforceable, and I am satisfied there is no defence of estoppel. If there is matter to investigate in relation to the role of Mr Khoury, it gives rise to neither of the alleged set-offs/counterclaims in this action, which have been painstakingly put together by Ms Otton-Goulder and her team. After careful consideration I am left with no uneasiness such as was Megarry J in his case, and I do not conclude that there is some other reason for trial, compelling or otherwise.

At the conclusion of the hearing on 20 October, I left the opportunity to Ms Otton-Goulder to put in expeditiously further evidence on the Yorke Motors v Edwards aspect of whether the Defendant could show that he was in no position to pay the amount of the debt into Court or otherwise secure it. That was all that was envisaged or mentioned, and, although the possibility of conditional leave had been raised at the first hearing (and no dispute raised by Ms Otton-Goulder at that stage to the suggestion that the Defendant would be able to raise the money), I permitted it. To my considerable surprise, instead of an affidavit so limited, there was served, without such permission, on 27 October a ninth affidavit of the Defendant and, extraordinarily, a Version 5 of the Defence. Mr Mill left it to me whether to read this new instalment, while pointing out that it went beyond what was foreshadowed at the hearing. I have considered, having read it, whether it makes any difference to what I have set out above:

Nothing in the 27 October package causes me to come to any different conclusion from that set out above. This has been followed by further submissions by Ms Otton-Goulder on 1 November, which I have also read. As I have concluded that I am not giving conditional leave to defend, her further submissions on Yorke Motors v Edwards do not arise. A yet further new argument by reference to bad faith and Dubai Islamic Bank PJSC v PSI Energy Holding Co BSC [2011] EWHC 2718 is unpersuasive. I am satisfied that there is no arguable case that the Claimant ‘reneged on an oral representation’, and the new case is unpleaded.

I accordingly give judgment for the Claimant and dismiss the Defendant’s application under CPR Rule 34.3. I will ask Counsel to agree an appropriate form of order.