Citicorp Trustee Company Ltd & Anor v Al-Sanea & Anor

The Claimants, Citicorp Trustee Company Ltd (“Citicorp”) and Golden Belt Sukuk Company B.S.C(c) (In Liquidation) (“Golden Belt”), have brought claims, by way of two separate actions instituted by Claim Forms issued on 12th October 2016, against Mr Maan Abdulwahed Al-Sanea (“Mr Al-Sanea”) and Saad Trading, Contracting and Financial Services Company (“Saad”), for very substantial sums.

The Claimants make three applications in these proceedings, namely for: (1) permission to lift the stay which automatically took effect six months after the end of the period for the filing of defences pursuant to CPR rule 15.11; (2) permission to apply for summary judgment pursuant to CPR rule 24.4(1) given that Mr Al-Sanea and Saad have not filed an acknowledgement of service or a defence; and (3) summary judgment pursuant to CPR rule 24.2.

The claims and the applications are made in respect of a financing transaction which is based on the payment by investors of sums amounting to US$650,000,000 in exchange for which Golden Belt issued Certificates to those investors (the “Certificateholders”). The Certificates are known in Arabic as “Sukuk”. A Sukuk transaction is a type of Islamic finance transaction. The US$650,000,000 was then used as consideration to be paid by Golden Belt under a Head Lease with Mr Al-Sanea, which Mr Al-Sanea instructed be paid directly to Saad. The Head Lease related to land in the Kingdom of Saudi Arabia (“KSA”) and was for a period of 25 years. At the same time as the Head Lease was entered into, Golden Belt entered into a Sub-Lease of the same land with Saad for a five year period. Under the Sub-Lease, Saad was obliged to pay, by way of consideration, US$650,000,000 (“Deferred Rental Amounts”) and additional rent (“Payable Rental Amount”). The Certificates issued by Golden Belt to the Certificateholders operated similarly to bonds in that they were to pay a periodic return and were to be repaid on maturity, in this case after five years. The periodic returns and the redemption amounts are generated by the underlying assets, in this case the Head Lease and Sub-Lease.

By a Declaration of Trust and Agency dated 15th May 2007 executed by Golden Belt, Citicorp and Saad (“the Declaration of Trust”), Golden Belt agreed to apply the sums paid by the Certificateholders for the purchase of Certificates issued by Golden Belt towards the acquisition of defined “Trust Assets”, which included Golden Belt’s rights under the Head Lease, Sub-Lease and Promissory Note referred to below. Under the Declaration of Trust, Golden Belt agreed to act as trustee in respect of the Trust Assets and as agent for the Certificateholders. In addition, Golden Belt delegated to Citicorp the exercise of its rights, powers and discretions granted pursuant to (among other things) the Declaration of Trust.

By its Articles of Association, Golden Belt, a Bahraini company, was to have a duration of seven years from the date of incorporation in May 2007, unless extended by resolution of the shareholders and approval of the Central Bank of Bahrain. There was no such extension. Therefore, according to the first witness statement dated 4th September 2017 of Mr Michael Godden, a partner in the firm of Norton Rose Fulbright LLP, the Claimants’ solicitors, Golden Belt is “now in a type of liquidation” (para. 9). I did not understand, however, that Golden Belt ceased to exist. In fact, Mr Godden stated in his first witness statement (at para. 51) that Golden Belt “retains its legal personality and has validly appointed Executive Managers”, who have assumed control of the company and issued a power of attorney dated 6th May 2014 authorising Citicorp to conduct future legal proceedings by Golden Belt, including these proceedings. Golden Belt has also delegated authority to Citicorp (as Delegate) in accordance with clause 5.1.1 of the Declaration of Trust.

Mr Al-Sanea is a businessman who resides in Al Khobar in the KSA. Saad is a company incorporated in the KSA, being a limited partnership company. Mr Al-Sanea is the General Partner of Saad and therefore has unlimited liability for the debts of Saad under Saudi Arabian law, although the Claimants’ claims are not made on that basis in these proceedings. Indeed, this liability is referred to by Saad in the Offering Circular dated 14th May 2007 issued by Saad in respect of the transaction which is the subject of these proceedings.

The claims made by the Claimants against the Defendants arise out of a financing transaction represented by (1) a Head Lease of certain parcels of land in the KSA dated 15th May 2007 between Mr Al-Sanea as Head Lessor and Golden Belt as Head Lessee (“the Head Lease”), (2) a Sub-Lease of the same land dated 15th May 2007 between Golden Belt as Sub-Lessor and Saad as Sub-Lessee (“the Sub-Lease”), and (3) a promissory note dated 15th May 2007 issued by Saad to Golden Belt (“the Promissory Note”).

On 15th May 2007, Golden Belt issued Certificates (Sukuk) to the Certificateholders to the value of US$650,000,000; Golden Belt entered into the Head Lease of the land in the KSA with Mr Al-Sanea for 25 years in return for an “Advance Rental Payment” of US$650,000,000; and Golden Belt sub-leased the land under the Sub-Lease for a period of five years to Saad in return for the payment of rent, namely (a) the “Payable Rental Amount”, on each “Payable Rental Payment Date” and (b) the “Deferred Rental Amounts” of US$130,000,000 each year from 2008 to 2012 (inclusive). The Payable Rental Amounts are calculated in accordance with a formula set out in Schedule 2, Part 2 of the Sub-Lease, being the product of the Base Amount (US$650,000,000), the relevant 6 month US dollar LIBOR rate as at two Business Days prior to the start of the relevant Payable Rental Payment Period plus 0.85% per annum, and the number of days in the relevant Payable Rental Payment Period, divided by 360. The payment of the Deferred Rental Amounts were deferred until the earlier of a “Termination Event” or the expiry of the Sub-Lease on 15th May 2012.

It is worth concentrating on the terms of the Head Lease and the Sub-Lease, because they are the agreements under which the Claimants’ claims against the Defendants, Mr Al-Sanea and Saad, are made.

The Head Lease was executed by Mr Al-Sanea as “Head Lessor” and Golden Belt as “Head Lessee”. By the Head Lease, Mr Al-Sanea leased specified “Land Parcels” to Golden Belt for 25 years, subject to earlier termination. The risk of loss of or damage to the Land Parcels was agreed to be borne by Mr Al-Sanea (clause 2). The consideration for the Head Lease was the payment by Golden Belt of the Advance Rental Amount of US$650,000,000 (clause 4). The Head Lease contained the following provisions:

“1 Definitions and Interpretation

1.1

Definitions

In this Agreement the following words and expressions have the following meanings unless inconsistent with the context: …

“Claims” means any and all claims, liabilities (including, any environmental or third party liabilities), losses, demands, penalties, fines, injuries, damages, costs (including legal fees), expenses, payments, actions, suits, judgments, orders and sanctions …

“Finance Documents” means:

(a)

this Agreement and any notices issued hereunder;

(b)

the Sub-Lease Agreement and any notices issued thereunder …

(d)

the Promissory Note …

8 Representations and Warranties

…

8.3

Powers, Authority and Legal Validity

The Head Lessor has the power to enter into and perform his obligations under this Agreement and the Finance Documents and this Agreement and the Finance Documents constitute his legal, valid and binding obligations in accordance with their terms and will constitute legal valid and binding obligations of his estate and are binding on his heirs and executors and successors in accordance with their terms to the extent of his interests in his estate …

13 Indemnities

13.1

Indemnities

The Head Lessor will indemnify and save harmless the Head Lessee from and against any and all Claims suffered, incurred or made by the Head Lessee as a result of the Head Lessee entering into this Agreement.

13.2

Payment on Indemnities

Moneys becoming due by the Head Lessor under the indemnities contained in this Agreement shall be paid immediately on demand made by the Head Lessee.

13.3

Survival

The obligations on the part of the Head Lessor in this clause 13 shall survive the expiration or termination of this Agreement for any reason whatsoever …

20 Notices

20.1

Communications in writing

Any communication to be made under or in connection with this Agreement or any other Finance Document shall be made in writing and, unless otherwise stated, may be made by letter.

20.2

Addresses

The address … of each party for any communication or document to be made or delivered under or in connection with this Agreement or any other Finance Document are those shown on the execution page of this Agreement …

22 Governing Law

This Agreement is governed by and shall be construed in accordance with English law.

23 Jurisdiction and Enforcement

23.1

Jurisdiction

23.1.1

The Head Lessor irrevocably agrees for the benefit of the Head Lessee that the courts of England shall have non-exclusive jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the non-exclusive jurisdiction of such courts …

23.1.3

The submission to the non-exclusive jurisdiction of the Courts of England … shall not (and shall not be construed so as to) limit the right of the Head Lessee to take proceedings against the Head Lessor in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdictions, whether concurrently or not …

23.3

Service of Process

Without prejudice to any other mode of service allowed under any relevant law, the Head Lessor irrevocably appoints LA Investments Limited of 16B Curzon Street, London W1J 5HP, United Kingdom, as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement and agrees that failure by a process agent to notify the Head Lessor of the process will not invalidate the proceedings concerned.

23.4

Replacement Agent for Service

If for any reason the agent named in clause 23.3 no longer serves as agent of the Head Lessor for this purpose, then the Head Lessor shall promptly appoint a successor agent in England to accept service of process on its behalf in England and shall promptly notify the Head Lessee thereof, and, failing such appointment within fifteen (15) days, the Head Lessee shall be entitled to appoint such a person by notice to the Head Lessor. Until the Head Lessee receives such notification it shall be entitled to treat the agent named above (or its said successor) as the agent of the Head Lessor …”

The Sub-Lease, also executed on 15th May 2007 by Golden Belt as “Sub-Lessor” and Saad as “Sub-Lessee”, provided for the sub-lease of the Land Parcels by Golden Belt to Saad for five years, subject to earlier termination. The risk of loss of or damage to the Land Parcels was agreed to be borne by Saad (clause 2). The consideration for the Sub-Lease was the payment of the Payable Rental Amount, calculated in accordance with the formula referred to above, every six months, and the payment of the Deferred Rental Amount each year on 15th May, but the latter payment was deferred until the earlier of a “Termination Event” and the “Sub-Lease Expiry Date” (being a period of five years) (clauses 4.1 and 4.2). The Sub-Lease contained the following provisions:

“1 Definitions and Interpretation

1.1

Definitions

In this Agreement the following words and expressions have the following meanings unless inconsistent with the context: …

“Base Amount” means six hundred and fifty million Dollars (US$650,000,000) …

“Claims” means any and all claims, liabilities (including, any environmental or third party liabilities), losses, demands, penalties, fines, injuries, damages, costs (including legal fees), expenses, payments, actions, suits, judgments, orders and sanctions …

“Event of Default” means an event or occurrence set out in clause 13.1 …

“Finance Documents” means:

(a)

this Agreement and any notices issued hereunder;

(b)

the Head Lease Agreement and any notices issued thereunder …

(d)

the Promissory Note …

“Outstanding Base Amount” means, at the relevant time, the Base Amount less the aggregate amount of Deferred Rental Amounts …

“Termination Event” means an Event of Default or a Change of Circumstances Event.

“Termination Sum” means the aggregate of:

(a)

all accrued Payable Rental Amounts and any Payable Rental Amount which is due for the Payable Rental Payment Period in which the Termination Event occurs;

(b)

the aggregate of all Deferred Rental Amounts as at the date of the Termination Event;

(c)

the Outstanding Base Amount; and

(d)

all other payments and any other amounts due and payable by the Sub-Lessee to the Sub-Lessor pursuant to the terms of this Agreement and the Finance Documents as at the Payable Rental Payment Date falling immediately after the date on which the Termination Event occurs …

4 Payments

…

4.8

Promissory Note

The Sub-Lessee shall, on the Sub-Lease Commencement Date, issue the Promissory Note to the Sub-Lessor in an amount equal to the Base Amount …

9 Representations and Warranties

…

9.4

Legal Validity

This Agreement and all other Finance Documents to which the Sub-Lessee is or will be a party constitute (or when executed will constitute) its legal, valid and binding obligations in accordance with their terms …

10 General Information and Notice Undertakings

…

10.6

Other Notification …

10.6.2

The Sub-Lessee shall:

…

(b)

promptly disclose to the Sub-Lessor, and correct, any defect or error that may be discovered in any such information, exhibits or reports or in any Finance Document or in their execution, acknowledgement or recording …

13 Termination Events

13.1

Events of Default

The events listed in this clause 13.1 are Events of Default:

13.1.1

Non-Payment

The Sub-Lessee does not pay within seven (7) days of its due date any Payable Rental Amount payable pursuant to this Agreement or any other payment due under any Finance Document in the manner required …

13.3

Rights and Remedies of the Sub-Lessor upon a Termination Event

13.3.1

Upon the occurrence of a Termination Event, the Sub-Lessor may terminate this Agreement by the Sub-Lessor providing the Sub-Lessee with notice to this effect in writing.

13.3.2

Upon the delivery of the notice referred to in clause 13.3.1, on the date of termination shown in such notice:

(a)

this Agreement shall terminate; and …

(c)

the Sub-Lessor may enforce its rights under the Promissory Note; and

(d)

the aggregate amount of the Termination Sum and other amounts due from the Sub-Lessee to the Sub-Lessor under this Agreement or any other Finance Document outstanding at the date of termination shall become immediately payable by the Sub-Lessee to the Sub-Lessor along with any additional amounts representing any costs, charges, fees expenses (including lawyers fees and expenses) incurred by the Sub-Lessor as a result of the Termination Event …

14 Indemnities

…

14.3

Further Indemnities

The Sub-Lessee will indemnify and save harmless the Sub-Lessor from and against any and all Claims suffered, incurred or made by the Sub-Lessor:

(a)

in the preservation or enforcement of any of the Sub-Lessor’s rights under this Agreement or any other Finance Document or including all costs, charges and expenses of any proceedings arising as a result of a third party impugning this Agreement or any other Finance Document …

(c)

arising on a failure by the Sub-Lessee to pay any amount due under this Agreement or any other Finance Document on its due date. …

22 Notices

22.1

Communications in writing

Any communication to be made under or in connection with this Agreement or any other Finance Document shall be made in writing and, unless otherwise stated, may be made by letter.

22.2

Addresses

The address … of each party for any communication or document to be made or delivered under or in connection with this Agreement or any other Finance Document are those shown on the execution page of this Agreement …

24 Governing Law

This Agreement is governed by and shall be construed in accordance with English law.

25 Jurisdiction and Enforcement

25.1

Jurisdiction

25.1.1

The Sub-Lessee irrevocably agrees for the benefit of the Sub-Lessor that the courts of England shall have non-exclusive jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the non-exclusive jurisdiction of such courts …

25.1.4

The submission to the non-exclusive jurisdiction of the Courts of England … or the Committee for the Settlement of Negotiable Instruments shall not (and shall not be construed so as to) limit the right of the Sub-Lessor to take proceedings against the Sub-Lessee in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdictions, whether concurrently or not …

25.3

Service of Process

Without prejudice to any other mode of service allowed under any relevant law, the Sub-Lessee irrevocably appoints LA Investments Limited, of 16B Curzon Street, London W1J 5HP, United Kingdom, as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement and agrees that failure by a process agent to notify the Sub-Lessee of the process will not invalidate the proceedings concerned.

25.4

Replacement Agent for Service

If for any reason the agent named in clause 25.3 no longer serves as agent of the Sub-Lessee for this purpose, then the Sub-Lessee shall promptly appoint a successor agent in England to accept service of process on its behalf in England and shall promptly notify the Sub-Lessor thereof, and, failing such appointment within fifteen (15) days, the Sub-Lessor shall be entitled to appoint such a person by notice to the Sub-Lessee. Until the Sub-Lessor receives such notification it shall be entitled to treat the agent named above (or its said successor) as the agent of the Sub-Lessee …”

On 15th May 2007, Golden Belt, Mr Al-Sanea and Saad entered into a payment instruction letter agreement by which Mr Al-Sanea consented to the payment of the Advance Rental Payment of US$650,000,000 by Golden Belt directly to Saad, instead of to Mr Al-Sanea. That sum (minus transaction costs) was paid by Golden Belt to Saad on 15th May 2007, as evidenced by a receipt signed by Saad.

On the same day, Saad issued a Promissory Note to Golden Belt in the sum of US$650,000,000, which stated (in translation) that Saad “conclusively and irrevocably undertake to pay on demand without restriction or condition to Golden Belt … the sum of six hundred and fifty million US dollars. The value has been received”. The Promissory Note was purportedly signed by Mr Al-Sanea as the authorised representative of Saad and Mr Al-Sanea’s signature was purportedly witnessed by two witnesses. The Promissory Note was issued in the KSA and identified the place of payment as Al Khobar, Kingdom of Saudi Arabia. It is the Claimants’ case that the Promissory Note was not valid and enforceable, as I will explain below.

In addition, on 15th May 2007, Saad executed a “Costs Undertaking” by which Saad, amongst other things, undertook to and for the benefit of Citicorp that it will “pay on behalf of the Issuer [Golden Belt], as and when they fall due, all outstanding fees and expenses due to the Delegate [Citicorp] pursuant to the Declaration of Trust and Agency” (clause 2.1.3(a)). This Costs Undertaking was expressed to be governed by English law (clause 6.1), included a non-exclusive English jurisdiction agreement (clause 6.2) and included a provision which stated “Saad appoints LA Investments Limited at its address currently at 16B Curzon Street, London W1J 5HP, United Kingdom as its agent for service of process” and further provided that if the Process Agent ceased to act, Saad would appoint another agent (clause 6.3).

The capacity of Saad to enter into these transactions is supported by the legal opinion dated 15th May 2007 issued by the law firm of Adli Hammad, Mohammed Al-Mehdar & Co, who acted as Saudi Arabian counsel to BNP Paribas as Arranger in connection with the Offering Circular and the agreements relating to the Trust Certificates. The capacity of Golden Belt to enter into these transactions is supported by the legal opinion dated 15th May 2007 of the law firm of Hatim S Zu’bi & Partners, who were the legal advisers in Bahrain for BNP Paribas as lead manager in connection with the issuance of the Certificates. These legal opinions were addressed to Golden Belt (as Trustee) and Citibank NA (as Trustee Delegate) in addition to BNP Paribas.

The Claimants claim that they are entitled to the recovery of (1) US$588,651,324.60 (or its sterling equivalent at the time of payment) plus £465,554.15 from Mr Al-Sanea and (2) US$668,271,643.19 (or its sterling equivalent at the time of payment) plus £465,554.15 from Saad. I understand that these claims are not cumulative. Further, Citicorp makes a further claim in respect of additional costs and expenses.

The circumstances in which the Claimants allege that these claims arise are as follows. Until May 2009, Saad honoured its obligations under the Sub-Lease by paying to Golden Belt the first, second, third and fourth Payable Rental Amounts, namely (a) US$20,676,847.22 on 14th November 2007, (b) US$18,361,145.83 on 15th May 2008, (c) US$12,400,270.83 on 17th November 2008, and (d) US$11,184,048.61 on 14th May 2009.

However, in mid-2009, Saad experienced serious financial difficulties and its credit rating was downgraded by rating agencies before being withdrawn altogether. Mr Godden in his first witness statement, at para. 34-35, referred to these matters and stated that they constituted an Event of Default under clause 13.1.4(a) of the Sub-Lease (Cross-Default) and a Termination Event, because there had been “Financial Indebtedness” (as defined by the Sub-Lease). However, no additional evidence was adduced to demonstrate such media reports and credit rating downgrades or withdrawal, other than notices dated 5th June 2009 and 12th June 2009 issued by Citicorp to the Certificateholders referring to “recent reports in the media regarding the financial position of the … Saad Group. The media reports noted that a standstill arrangement has been entered into between the Saad Group and certain of its creditors, as well as a regulatory freeze on certain bank accounts of the Saad Group and Mr Al-Sanea having been imposed by Saudi authorities” and noting that Saad is one of the companies in the Saad Group, and to “the withdrawal of the ratings of the Saad Group by both Standard & Poor’s Rating Services … and Moody’s Investors Service Limited on 2 June 2009”.

By a letter dated 29th September 2009 addressed to Saad, with a copy to the Directors of Golden Belt, Citicorp stated that:

“… Recent press reports have reported, amongst other things, that:

 Saad Group has agreed to repay approximately 9.7 billion riyals (US$2.6 billion) to Saudi creditors, with an agreement pending on a small remaining amount to Saudi creditors;

 on Wednesday 16 September 2009, Mr Al-Sanea sold at least 2.8 percent of the shares in Samba Financial Group, which was worth at least 1.17 billion riyals (US$311 million) based on the closing price for such shares on such date; and

 Grant Thornton has been appointed as liquidator of Saad Investments Company Limited.

We hereby request Saad to confirm whether these reports are accurate, and, if so, to provide further information to the Delegate on these, as well as an update on the financial condition of Saad and the Saad Group, in view of the fact that the next Periodic Distribution Date is 15 November 2009 …”

By letters dated 15th November 2009 addressed to the Director of the Bahrain Stock Exchange and Citibank NA (being notice to Citicorp, according to Mr Godden’s first statement at para. 39), bearing the heading “Golden Belt … (“the Issuer”) USD 650 Million Certificates due 2012 (“the Sukuk”)”, Saad stated that:

“As you are aware a periodic distribution amount for the Sukuk was scheduled to be paid today. Due to matters beyond its control, it is currently impossible for the Issuer to perform its payment obligations under the Sukuk. In particular, freezing orders in Saudi Arabia and other jurisdictions have rendered impossible the ability of Saad Trading, Contracting & Financial Services Co. to perform its payment obligations under the lease agreement and hence making it impossible for the Issuer to pay the certificate holders. The Saad Group continues to exert every effort through the relevant legal processes to resolve these issues to be able to perform its obligations towards its creditors, including to the Issuer and the certificate holders. In the meantime, we invite the certificate holders to refrain from proceeding with any legal action …”

According to Mr Godden’s first witness statement, at para. 39-40, Saad failed to pay the Payable Rental Amounts due in November 2009 and May 2010 and each failure constituted an Event of Default (Non-Payment) under clause 13.1.1 of the Sub-Lease and a Termination Event under the Sub-Lease. Further, as a result of these Termination Events, the third Deferred Rental Amount of US$130,000,000 ceased to be deferred and became payable on 15th May 2010, but was not paid (para. 41).

By a letter dated 7th October 2010 addressed to Saad, with a copy to the Directors of Golden Belt, Citicorp gave notice to Saad that, by reason of the occurrence of a Termination Event, the Sub-Lease would be terminated on 14th October 2010 pursuant to clause 13.3.1 of the Sub-Lease and that Golden Belt was entitled to enforce its rights under the Promissory Note and the aggregate amount of the Termination Sum and other amounts due from Saad under the Sub-Lease or any other Finance Document, including the Promissory Note, became immediately due and payable by Saad to Golden Belt.

As at the Termination Date of the Sub-Lease (14th October 2010), the Termination Sum due amounted to US$666,998,006.10, which included:

By another letter dated 7th October 2010 addressed to Saad, with a copy to the Directors of Golden Belt, Citicorp identified a number of invoices issued by Citicorp which fell within the Costs Undertaking, in the amount of US$39,000 and £854,848.55, and requested that Saad immediately settle the invoices. According to Mr Godden’s first witness statement, at para. 45, these invoices remain unpaid.

By a letter dated 6th January 2011 addressed to Saad, with a copy to the Directors of Golden Belt, Citicorp made a formal demand under the Promissory Note in accordance with a direction given by the Certificateholders holding more than 25% of the Certificates. According to Mr Godden’s first witness statement, at para. 46, no payment has been made by Saad under the Promissory Note.

I have seen no evidence to contradict Mr Godden’s evidence. That evidence is supported by Saad’s letters dated 15th November 2009. In these circumstances, I am satisfied that Saad has defaulted under the Sub-Lease in the manner alleged by the Claimants.

In these proceedings, the Claimants claim from Saad the Termination Sum due under the Sub-Lease, as well as the costs and expenses incurred in the proceedings instituted in the KSA referred to below. In addition, the Claimants claim compensation or an indemnity in respect of these losses from Mr Al-Sanea under the Head Lease. The Claimants also claim payment of the invoices referred to above in accordance with the Costs Undertaking. According to para. 45, 46 and 57 of Mr Godden’s first witness statements, no payment has been received in respect of these claimed sums.

The current proceedings before the Court were instituted by the issue of two Claim Forms on 12th October 2016, which I note were issued before the expiry of the limitation period prescribed by the Limitation Act 1980 in respect of the causes of action which accrued on 14th October 2010 (the Termination Date).

Before these proceedings, the Claimants had instituted other proceedings in the KSA, in particular:

According to para. 59 of Mr Godden’s first witness statement, the Claimants have incurred costs in the Saudi Arabian proceedings in the total sum of US$1,273,637.09 and £465,554.15, comprising:

By a letter dated 24th July 2017, Citicorp served a written demand on Saad for the payment of these costs pursuant to the Costs Undertaking. This claim remains unpaid (para. 52 of the Particulars of Claim against Saad, which was supported by a statement of truth signed by Ms Viola Japaul on behalf of the Claimants).

Mr Al-Sanea and Saad have not demonstrated any interest to participate in these proceedings. Having reviewed the evidence of Mr Godden in both of his witness statements, I am satisfied that the Claim Forms were served on each of Mr Al-Sanea and Saad respectively. The Claimants have taken various steps to serve the proceedings and the applications on the Defendants and to bring them to the attention of the Defendants.

First, each of the Head Lease (clause 23.3) and Sub-Lease (clause 25.3) contained a provision by which Mr Al-Sanea and Saad, respectively, appointed “LA Investments Limited of 16B Curzon Street, London W1J 5HP, United Kingdom, as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement”. Service on LA Investments Limited would therefore be a contractually permitted method of service within the meaning of CPR rule 6.11. However, service on LA Investments Limited posed its own challenges for two reasons:

In my judgment, LA Investments Limited remained the relevant entity authorised or apparently authorised to accept service. I do not consider that service at the address of LA Investments Ltd referred to in the service of process clause was critical, because that clause identified the agent for service - LA Investments Limited - and used the address as part of that identification. It did not provide that the process must be served at that address. Therefore, I do not consider that service of the proceedings at the Curzon Street/Chesterfield Street premises, which were no longer occupied by LA Investments Limited and were then occupied by Microtel plc, constitutes service on LA Investments Limited.

According to para. 72 of Mr Godden’s first witness statement, on 18th January 2017, Norton Rose Fulbright LLP also effected service at the offices of Grant Thornton, the liquidators of LA Investments Limited. In my judgment, this was duly effected service on LA Investments Limited, as they are the representatives of LA Investments Limited for this purpose, and therefore service was duly effected on each of the Defendants in accordance with contractually agreed method of service.

There was a similar service of process provision in the Costs Undertaking (clause 6.3). For the reasons given above, I consider that service was also validly effected on each of the Defendants for the purposes of the Costs Undertaking.

Second, if for some reason LA Investments Limited ceased to be the service agent, clause 23.4 of the Head Lease and clause 25.4 of the Sub-Lease provided that Mr Al-Sanea and Saad, respectively, “shall promptly appoint a successor agent in England to accept service of process on its behalf in England and shall promptly notify” Golden Belt of that appointment. The clause goes on to say that failing such appointment within 15 days, Golden Belt shall be entitled to appoint a replacement agent for service by notice to Mr Al-Sanea and Saad, respectively, and that it will be entitled to treat the replacement agent as the agent of Mr Al-Sanea and Saad, respectively, until they themselves effect a substitute appointment.

Mr Godden stated, at para. 77 of his first witness statement, that if LA Investments Limited ceased to act as a service agent on behalf of Mr Al-Sanea and Saad, the Defendants had 15 days in which to appoint a replacement agent, but the Claimants received no notification of such an appointment. Accordingly, without prejudice to the validity of the service effected upon LA Investments Limited on behalf of Mr Al-Sanea and Saad, the Claimants appointed NCR National Corporate Research (UK) Limited (“NCR”) as “Agent for Service of Process in England and Wales on behalf of each of the Defendants”, namely Saad and Mr Al-Sanea, for the purposes of the Sub-Lease and Head Lease respectively. This appointment was evidenced by an appointment agreement between Citicorp as Delegate of Golden Belt and NCR dated 23rd January 2017 and a Notice of Appointment sent by Citicorp, as Delegate, and addressed to NCR dated 6th February 2017. That Notice of Appointment was acknowledged by NCR by email dated 6th February 2017.

On 6th February 2017, Citicorp, as Delegate, sent a letter to Mr Al-Sanea and Saad by courier informing them of the appointment of NCR as their service agent in accordance with clause 23.4 of the Head Lease and clause 25.4 of the Sub-Lease. These letters were sent to the addresses identified in the execution page of both agreements in accordance with the Notice provision in clause 20 of the Head Lease and clause 22 of the Sub-Lease.

Accordingly, service was duly effected by this method under the Head Lease and Sub-Lease, if service on LA Investments Limited was not effective (but I have held that it was effective). This method of service, however, was not permitted under the Costs Undertaking.

Third, for good measure, the Claimants took steps to bring these proceedings to the attention of Mr Al-Sanea and Saad by other means, in particular: (1) by courier to Mr Al-Sanea and Saad at the addresses referred to in the Head Lease and Sub-Lease on 18th January 2017, 10th February 2017, 13th February 2017 and 8th March 2017, but on each occasion shipment was refused; (2) by email to Saad on 23rd January 2017 and 13th February 2017 and to both Mr Al-Sanea and Saad on 2nd March 2017, but no response was received to those emails and, in answer to the first email, an “out of office” reply from Saad was received; (3) by fax to Saad on 23rd January 2017, but fax transmission was not possible, and (4) by courier on 14th March 2017 to Mr Jamal Mozain who was understood by the Claimants to have represented Mr Al-Sanea and Saad from time to time in legal proceedings in the KSA and who accepted delivery.

Mr Godden, at para. 81-83 of his first witness statement, attested to each of these attempts to bring the claims to the attention of Mr Al-Sanea and Saad. In addition, at para. 84, Mr Godden referred to the fact that Grant Thornton had sent the proceedings by email to Saad’s address without receiving a response and NCR had attempted to courier the proceedings to Mr Al-Sanea and Saad, but delivery was refused or it was told that the addresses were incorrect.

In these circumstances, I have no hesitation in holding that the Claimants have done all that was reasonably required to bring the proceedings to the attention of Mr Al-Sanea and Saad.

The application notices issued by the Claimants, and with which the current hearing is concerned, were issued on 4th September 2017. According to Mr Godden’s second witness statement and/or the Certificates of Service, the documents relating to the application - the application notices, the supporting witness statement and exhibits thereto - have likewise been served or provided by the Claimants as follows: (1) Mr Thomas Widdows, a trainee solicitor with Norton Rose Fulbright LLP, served the application documents by hand at what is now 15 Chesterfield Street on 4th September 2017; (2) Miss Katie Lockwood, another trainee solicitor with Norton Rose Fulbright LLP, served the application documents by hand at Grant Thornton’s offices on 4th September 2017; and (3) Norton Rose Fulbright LLP served the application documents on NCR by courier and email on 4th September 2017; (4) the Claimants have sent “courtesy copies” of the application documents by courier to Mr Al-Sanea and Saad at the addresses as set out in the execution pages of the Head Lease and Sub-Lease, to the email addresses previously used by Saad, and by registered courier to Mr Jamal Mozain. I understand that the couriered copies to Mr Al-Sanea and Saad were not accepted, but the emails did not bounce back as not sent (although they have not been answered) and the courier copy to Mr Mozain was accepted. In addition, NCR attempted to courier the application documents to the Defendants, but was told that the addresses were incorrect.

The hearing of the applications was originally scheduled to take place on 1st December 2017, but because of the improved availability of the Claimants’ counsel, Mr Stephen Robins, the hearing was re-fixed to take place on 3rd November 2017. According to para. 18 and 19 of Mr Godden’s second witness statement, Norton Rose Fulbright LLP informed the Defendants of the new hearing date by couriered letter at the same addresses identified in the Head Lease and the Sub-Lease and by email, although the couriered letters were refused at the Defendants’ addresses, and a couriered letter was also sent to Mr Mozain. These communications were dated 18th September 2017, more than six weeks before the new hearing date, well in excess of the notice period required under CPR rule 24.4(3) and the time allowed for the service of evidence by a respondent to such an application (Commercial Court Guide, para. F5.3). On 23rd October 2017, Norton Rose Fulbright LLP sent letters to the Defendants and Mr Mozain offering to provide hearing bundles to the Defendants, but this invitation was not answered.

In the circumstances, I am satisfied that:

There has been no response by Mr Al-Sanea and Saad to the proceedings and the applications and there has been no attempt by them to participate in these proceedings or even to explain their position in answer to the Claimants’ claims.

I have concluded that the proceedings have been validly served on Mr Al-Sanea and Saad. No objection has been taken to the jurisdiction of the Court by the Defendants.

Indeed, no such objection could realistically be taken, given the non-exclusive English jurisdiction agreements in clause 23.1.1 of the Head Lease, clause 25.1.1 of the Sub-Lease and clause 6.2 of the Costs Undertaking. These jurisdiction agreements are to be given mandatory effect pursuant to article 25 of the Brussels Recast Regulation (Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)), which provides that:

“If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. The agreement conferring jurisdiction shall be either: (a) in writing or evidenced in writing …”

Article 25 contemplates that a jurisdiction agreement to be given effect under that provision may be exclusive or non-exclusive. In this case, the jurisdiction agreement provided for the non-exclusive jurisdiction of the English Courts.

I was momentarily concerned by the fact that there were extant proceedings instituted by the Claimants in the KSA (in particular before the General Court of Al Khobar). However, I do not regard this as a bar to the Court assuming jurisdiction for two reasons. First, article 25 requires the Court to assume jurisdiction given the existence of a prescribed English jurisdiction agreement. Article 33 of the Brussels Recast Regulation allows the Court to stay the proceedings where jurisdiction is based on articles, 4, 7, 8 or 9 of the Regulation, but there is no similar provision in respect of jurisdiction assumed under article 25. In this case, the Court must assume jurisdiction in accordance with article 25. It is mandatory (Joseph, Jurisdiction and Arbitration Agreements and their Enforcement, (3rd ed., 2015), para. 10.80).

Second, clause 23.1.3 of the Head Lease, clause 25.1.4 of the Sub-Lease and clause 6.5 of the Costs Undertaking provided that “The submission to the non-exclusive jurisdiction of the Courts of England … shall not (and shall not be construed so as to) limit the right of [Golden Belt] to take proceedings against [Mr Al-Sanea and Saad, as the case may be] in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdictions, whether concurrently or not”. Accordingly, the parties clearly contemplated and could reasonably foresee the possibility that there may well be parallel proceedings before the Courts of England and the Courts of the KSA (see Deutsche Bank AG v Highland Crusader Offshore Partners LP [2009] EWCA Civ 725; [2010] 1 WLR 1023; Briggs, Civil Jurisdiction and Judgments, (6th ed., 2015), para. 4.51).

That long introduction brings me to the Claimants’ applications. The first application is for an order for the lifting of the automatic stay of the proceedings pursuant to CPR rule 15.11. Sub-paragraph (1) of that rule provides that:

“Where –

(a)

at least 6 months have expired since the end of the period for filing a defence specified in rule 15.4;

(b)

no defendant has served or filed an admission or filed a defence or counterclaim; and

(c)

the claimant has not entered or applied for judgment under Part 12 (default judgment), or Part 24 (summary judgment),

the claim shall be stayed”

In this case, the proceedings, in my judgment, were validly served on or soon after 20th January 2017 (calculated in accordance with CPR rule 6.14). The period for filing a defence would expire 14 days later on or soon after 3rd February 2017. Accordingly, the Claimants’ claims were stayed on or soon after 3rd August 2017.

CPR rule 15.11(2) permits the Court to lift the stay. In Football Association Premier League Ltd v O’Donovan [2017] EWHC 152 (Ch); [2017] FSR 31, Chief Master Marsh said, at para. 11, in respect of this rule:

“The purpose served by CPR 15.11 is not immediately obvious other than, perhaps, it encourages claimants to make a decision about what steps to take to pursue a claim and renders inactive claims that might otherwise lie merely somnolent on the court file. It might also, perhaps more in theory than in reality, provide comfort to a defendant that no further action in the claim can be taken save with the court’s permission. However, it seems to me that the rule is not intended to place an especially heavy burden on the claimant to discharge before the court will agree to the stay being lifted. In the usual way, the court must weigh the competing interests of the parties in the balance. Here, there is an adequate explanation of the delay and the claimant has a claim with real prospects of success … So far as the merits are concerned, having already dealt with a considerable number of similar claims, I am aware that most other similar claims have not been contested. In any event, the amended claim demonstrates a claim based upon reasonable grounds. Added to that, there has been an almost complete lack of engagement by the first defendant and part of the delay has been caused by the defendant himself. On the other side of the balance, there is no obvious prejudice to the defendant caused by the delay of six months and I note that steps were taken to revive the claim within that period. In all the circumstances I am satisfied that it is appropriate to lift the stay.”

Mr Robins on behalf of the Claimants submitted that the stay should be lifted because (a) the delay in issuing the application after the stay was short, (b) the delay is reasonably explicable, (c) there would be no prejudice to the Defendants, and (d) the Claimants’ claims plainly have a good prospect of success.

I have no hesitation in ordering that the stay be lifted. The delay in issuing the application after the imposition of the stay was short. Mr Robins suggested it was a delay of less than a month. The current applications were issued on 4th September 2017, one month after the stay took effect. The delay leading to the imposition of the stay, such as it was, was explained by Mr Godden in his first witness statement, at para. 87, where he stated that the interim period was taken up by the steps taken to serve the proceedings on the Defendants and to bring them to the attention of the Defendants, by consultations with the Certificateholders, who had the real economic interest in the transaction, and by taking legal advice with respect to the interaction between the English proceedings and the proceedings in the KSA.

In addition, I cannot see that there is any prejudice to the Defendants. By contrast, there would be considerable prejudice to the Claimants if the stay were not lifted, especially as, as I decide below, the Claimants have valid claims against each of the Defendants.

Given that the Defendants have not filed an acknowledgement of service or a defence, the Claimants require the Court’s permission to make an application for summary judgment (CPR rule 24.4(1)). This provision is designed to ensure that no application for summary judgment may be made before a defendant has an opportunity to participate in the proceedings. However, where that opportunity has not been taken up, there is no reason why the Court should stand in the way of a claimant who has a legitimate and reasonable claim making an application for summary judgment. In the present case, the Defendants have been served with the proceedings and the applications in accordance with the methods prescribed by the Head Lease, the Sub-Lease and the Costs Undertaking and the Claimants have taken all reasonable steps to bring the proceedings and the applications to the Defendants’ attention. The Defendants have shown no signs of any interest in actively participating in these proceedings. In these circumstances, the Claimants are permitted to make the application for summary judgment (see Phillips v Avena [2005] EWHC 3333 (Ch), para. 23).

That leaves the substantive application for summary judgment itself. The Claimants are entitled to summary judgment, pursuant to CPR rule 24.2, if the Court is satisfied that the Defendants have no real prospect of successfully defending the Claimants’ claim and there is no other compelling reason why the case should be disposed of at a trial.

I will consider the positions of Golden Belt and Citicorp separately and the positions of Mr Al-Saena and Saad separately.

Based on the evidence that I have reviewed, in my judgment, Golden Belt is entitled to summary judgment against Saad for the following reasons:

Further, Golden Belt is entitled to summary judgment against Mr Al-Sanea pursuant to clause 13.1 of the Head Lease, which provides that “The Head Lessor will indemnify and save harmless the Head Lessee from and against any and all Claims suffered, incurred or made by the Head Lessee as a result of the Head Lessee entering into this Agreement”. The Head Lease defines “Claims” to embrace both first party losses and third party liabilities, namely “any and all claims, liabilities (including, any environmental or third party liabilities), losses, demands, penalties, fines, injuries, damages, costs (including legal fees), expenses, payments, actions, suits, judgments, orders and sanctions”.

The losses which are indemnifiable under clause 13.1 of the Head Lease include the losses suffered by Golden Belt arising as a result of Golden Belt entering into the Head Lease. In his written skeleton argument, at para. 48(2), Mr Robins explained that “Golden Belt has plainly suffered losses as a result of the transaction. It paid out the Advance Rental Payment under the Head Lease to Saad (at the instruction of Mr Al-Sanea) in the sum of US$650 million and yet has received back only four Periodic Rental Payments totalling approximately US$62.62 million. The difference between those figures represents its net loss”. At para. 63(b) of his first witness statement, Mr Godden stated that the amount claimed under this indemnity is “effectively the losses suffered by Golden Belt as a result of entering into the Transaction (including the Head Lease) and Saad’s subsequent default under the Sub-Lease”.

In considering the application of this right of indemnity under clause 13.1 of the Head Lease, it is noteworthy that it is not limited to losses suffered under the Head Lease. If it were so limited, it would not be immediately clear what losses would be indemnifiable, given that in exchange for the Advance Rental Payment made by Golden Belt, it received a lease of specified parcels of land in the KSA for 25 years, which I assume had some real value. Nor is it clear to me that the Head Lease is no longer in force. However, the right of indemnity under clause 13.1 is broader, as one would expect in a transaction of this type. The losses which are indemnifiable are those which were suffered “as a result of [Golden Belt] entering into this Agreement”. To my mind, this contemplates that the losses which are suffered by Golden Belt in respect of the transaction as a whole, of which the Head Lease (as well as the Sub-Lease) is an integral element, would be indemnifiable under clause 13.1. This includes losses suffered by Golden Belt under the Sub-Lease. The inter-connectedness of the Head Lease and the Sub-Lease is demonstrated by the fact that the principal loss is the failure of Saad to pay the US$650,000,000 (being the aggregate of all Deferred Rental Amounts due and the Outstanding Base Amount), which sum, as the Advance Rental Payment, had been initially paid by Golden Belt to Saad in accordance with the payment instruction letter agreement on 15th May 2007 concluded with Mr Al-Sanea. Had the Head Lease not been entered into by Golden Belt, it would not have entered into the Sub-Lease and would not have suffered the losses as a result of Saad’s default. Accordingly, such losses were suffered by Golden Belt as a result of its entering into the Head Lease.

As the Head Lease was part and parcel of the Sukuk transaction together with the Sub-Lease, in my judgment, the losses suffered by Golden Belt under and in connection with the Sub-Lease are indemnifiable by Mr Al-Sanea under clause 13.1 of the Head Lease. I also consider that the costs and expenses incurred by Golden Belt in enforcing its rights against both Saad and Mr Al-Sanea are recoverable under the indemnity in clause 13.1.

The sums owing by Mr Al-Sanea under the Head Lease remain unpaid (see para. 57 of Mr Godden’s first witness statement and para. 60 of the Particulars of Claim against Mr Al-Sanea, which is supported by a statement of truth signed by Ms Viola Japaul on behalf of the Claimants).

Mr Al-Sanea has not defended these proceedings and has offered no indication of what defence he might have. I am not aware of any arguments which have been advanced by Mr Al-Sanea disputing his liability under the Head Lease. For similar reasons to the claim against Saad, there is no compelling reason to try Golden Belt’s claim against Mr Al-Sanea. At para. 24 of his second witness statement, Mr Godden has referred to a press report that Mr Al-Sanea had been arrested by the Saudi Arabian authorities in Al Khobar on 18th October 2017 “in respect of claims for large sums of money”. However, Mr Godden has stated that the Claimants have not been able to confirm this report. In any event, given that these proceedings were issued and served in January 2017 and that Mr Al-Sanea has had ample opportunity to participate in and defend the action against him, I do not see that this as a reason to defer judgment on a claim which Mr Al-Sanea has no real prospect of defending.

Accordingly, in my judgment, Golden Belt is entitled to summary judgment against Mr Al-Sanea in the sum of US$588,651,324.60 plus £465,554.15. These sums represent (a) the sum of US$650,000,000 paid to Saad, in accordance with the instruction given by Mr Al-Sanea, less the US$62,622,312.49 received by Golden Belt under the Sub-Lease, totalling US$587,377,687.51, and (b) the costs and expenses incurred of US$1,273,637.09 and £465,554.15. I should make it clear that these sums and the sums claimed against Saad are not cumulative.

I should add that Golden Belt also pleaded and relied on a claim against both Saad and Mr Al-Sanea for breach of warranty and/or misrepresentation based on the warranties and representations in clauses 4.8, 9.4 and 10.6.2(b) of the Sub-Lease and clause 8.3 of the Head Lease that the Promissory Note was legal, valid and binding. Both the Claimants and Saad appear to accept that the signature of Mr Al-Sanea, on behalf of Saad, on the Promissory Note was a laser-printed or laser-photocopied signature and not written in “wet ink”. However, there was insufficient evidence before the Court as to the effect of such a signature on the validity of the Promissory Note under Saudi Arabian law. Accordingly, I do not consider that I am able to give summary judgment on this independent basis.

That leaves the claim brought by Citicorp. Although the claims under the Head Lease and the Sub-Lease were brought compendiously by the Claimants, it seems to me that Golden Belt, and not Citicorp, was a party to those contracts. Although Citicorp had been delegated with the authority and responsibility to exercise Golden Belt’s rights, powers and discretions under the relevant agreements, this was merely as an agent and it did not, in my judgment, constitute an assignment or other transfer of Golden Belt’s rights to Citicorp. In those circumstances, I do not consider that Citicorp is entitled to compensation or an indemnity under the Head Lease or the Sub-Lease. Indeed, I understand that the Citicorp does not persist in its claims under the Head Lease and the Sub-Lease.

By contrast, the Costs Undertaking executed by Saad on 15th May 2007 was expressly in favour of and for the benefit of Citicorp and represented a contractual promise by Saad that it will “pay on behalf of the Issuer [Golden Belt], as and when they fall due, all outstanding fees and expenses due to the Delegate [Citicorp] pursuant to the Declaration of Trust and Agency”. In those circumstances, in my judgment, Citicorp is entitled to enforce that promise in respect of the costs and expenses in the sum of US$1,273,637.09 and £465,554.15 incurred by Citicorp on behalf of Saad, and in respect of the additional costs and expenses in the sums of US$39,000 and £854,848.55 (see para. 45 of Mr Godden’s first witness statement). No defence has been put forward or suggested by Saad in answer to this claim. For the reasons given above, there is no reason why the determination of this claim should await a trial. In those circumstances, Citicorp is entitled to summary judgment against Saad in these sums. The sums of US$1,273,637.09 and £465,554.15 and the like sums claimed against Saad and Mr Al-Sanea are not cumulative, but the sums of US$39,000 and £854,848.55 are recoverable independently of these sums.

For the reasons given above, I allow the Claimants’ application for summary judgment and direct that judgment be entered as follows:

I await to hear from the Claimants’ counsel as to the orders to be made.