(1) Amira C Foods International DMCC (2) Karan A Chanana v IDBI Bank Limited [2021] DIFC CA 004 (24 August 2021)

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Cite as: [2021] DIFC CA 004

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(1) Amira C Foods International DMCC (2) Karan A Chanana v IDBI Bank Limited [2021] DIFC CA 004

August 24, 2021 Court of Appeal - Judgments

Claim No. CA 004/2021

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE COURT OF APPEAL

BEFORE CHIEF JUSTICE ZAKI AZMI, H.E JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE LORD ANGUS GLENNIE

BETWEEN

(1) AMIRA C FOODS INTERNATIONAL DMCC
(2) KARAN A CHANANA

Appellants/Defendants

and

IDBI BANK LIMITED

Respondent/Claimant


JUDGMENT


Hearing :3 June 2021
Counsel :Tom Montagu-Smith QC instructed by Clyde & Co on behalf of the Appellants/Defendants
Roger Masefield QC instructed by Allen & Overy on behalf of the Respondent/Claimant
Judgment :24 August 2021

ORDER

UPONthe Respondent’s Part 8 Claim for USD 6,421,224.71 advanced to the First Defendant under a Facilities Agreement dated 11 August 2014

AND UPONconsidering the Appellants’ Appeal Notice filed on 24 December 2020

AND UPONreading the Skeleton Arguments for the Appellants and for the Respondent

AND UPONhearing counsel for the Appellants and counsel for the Respondent at a hearing on 3 June 2021

IT IS HEREBY ORDERED THAT

1. The Appeal is dismissed.

2. The Appellants shall pay the Respondent’s costs of the appeal, such costs to be assessed by the Registrar if not agreed.

Issued by:
Nour Hineidi
Registrar
Date of issue: 24 August 2021
At: 3pm

JUDGMENT

CHIEF JUSTICE ZAKI AZMI, H.E JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE LORD ANGUS GLENNIE IN AGREEMENT:

Introduction

1. This is the judgment of the court.

2. This is an appeal by the Appellants/ Defendants (to whom we shall refer respectively as“Amira”and“Mr Chanana”and, together, as the“Defendants”) against the Judgment and Order of Justice Sir Richard Field dated 30 November 2020 (in Claim No. CFI-022-2020), in terms of which he gave judgment for the Claimant, IDBI Bank Limited (the“Bank”) for US$ 6,421,224.71 plus contractual interest in a sum to be agreed or, in the absence of agreement, to be determined by the Court.

3. In giving judgment for Claimant/Respondent (the“Bank”), the judge dismissed the Defendants’ application to strike out the Bank’s claim on the basis that it was an abuse of process for the Bank to bring the claim in the instant proceedings when it could and should have raised the claim in prior proceedings between the same parties, viz. action CFI-027-2018 (“The Abuse Of Process Defence”). The Abuse Of Process Defence was and remains the only defence advanced by the Defendants in answer to the Bank’s claim in this action, so that the rejection of the application to strike out the Bank’s claim led inexorably, without the necessity of further argument, to the award of judgment for the Bank on its claim. It is a striking feature of this litigation that it has never been suggested that the Defendants have any substantive defence to the claim or that they do not owe the Bank the sum sued for.

4. This appeal is brought with leave of the judge granted on 7 March 2021. The Defendants seek to persuade this court that the judge was wrong to reject the Abuse Of Process Defence and, accordingly, that he was wrong to dismiss the Defendant’s application to strike out the Bank’s claim. They argue in particular: (a) that the Bank both could and should have brought this claim in previous proceedings between the parties, and the judge was wrong to hold otherwise; and (b) that, in any event, the prospect of the Bank bringing this claim in a separate action should have been made clear to the court in the previous proceedings and the failure to make the court aware of it was, of itself, an abuse of process which justified striking out the present claim.

5. The First argument raises once again a well-known line of authority stretching back toHenderson v Henderson(1843) 3 Hare 100, re-stated in Johnson v Gore Wood [2002] 2 AC 1 and recently reviewed by this court in Al Khorafi v Bank Sarasin Alpen (ME) Limited [2018] DIFC CA 010. The Second (and related) argument, concerning the Bank’s failure to make it clear to the court in the first action that a connected claim would be advanced in separate proceedings, brings into play the decision of the Court of Appeal in England inAldi Stores Ltd. v WSP Group plc [2008] 1 WLR 748 at paras [29]-[31] and subsequent cases.

Abuse of process – the rule inHenderson v Henderson

6. It is convenient at this stage to set out the leading authorities and the principles that emerge from them so far as is relevant to this Appeal.

7. It is not in dispute that the Court may strike out a claim or any part thereof if it appears that the claim or the part in question amounts to an abuse of process: RDC Rule 4.16(2). The term “abuse of process” covers a wide range of circumstances, but in the present case the term is used to refer to the concept (similar in many respects tores judicata, cause of action estoppel and issue estoppel, but distinct from them) described inHenderson v Hendersonas elucidated by the House of Lords in Johnson v Gore Wood. The conventional starting point for a discussion of this topic is the judgment of Sir James Wigram inHenderson v Henderson(at p.114-5):

“The plea of a res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. Where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward the whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belongs to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time.”

In Johnson v Gore Wood this principle was described by Lord Bingham as “Henderson v. Hendersonabuse of process”. He explained that the principle, though separate and distinct from cause of action estoppel and issue estoppel, had much in common with them. He continued (at p.31):

“...Henderson v. Hendersonabuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus, while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances, a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether abuse is justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part play in protecting the interests of justice.”

In the same case Lord Millett said this (at pp 59-60):

“It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. InBrisbane City Council v Attorney General for Queensland [1979] AC 411, 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule inHenderson v Henderson… is abuse of process and observed that it ‘ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation’. There is, therefore, only one question to be considered in the present case: whether it was oppressive or otherwise an abuse of process of the court for Mr Johnson to bring his own proceedings against the firm when he could have brought them as part of or at the same time as the company’s action. … There is, of course, no doubt that Mr Johnson could have brought his action as part of or at the same time as the company’s action. But it does not at all follow that he should have done so or that his failure to do so renders the present action oppressive to the firm or an abuse of process of the court. As May LJ observed inManson v Vooght [1999] BPIR 376, 387, it may in a particular case be sensible to advance claims separately. In so far as the so-called rule inHenderson v Hendersonsuggests that there is a presumption against the bring[ing] of successive actions, I consider that it is a distortion of the true position. The burden should always rest upon the defendant to establish that it is oppressive or an abuse of process for him to be subjected to the second action.”

8. Two points require emphasis. First, this form of abuse of process arises only when the matters raised in the second action not only could have been raised in the first butshouldhave been raised there. As has been stated in a number of cases, the emphasis is on the word “should”: see for exampleHenley v Bloom [2010] EWCA Civ 202 per Lord Neuberger MR at para [25]. Secondly, the focus must be on the unjust vexation, harassment or oppression of the other party. Lord Bingham’s observation to the effect that there will rarely be a finding of abuse unless the second set of proceedings involves what the court regards as unjust harassment or oppression has been repeated in a large number of later cases: see e.g.Dexter Ltd. v Vlieland-Boddy [2003] EWCA Civ 14 per Clarke LJ at para 49, cited with approval inClutterbuck v Cleghorn2017 WL 01032024 (2017) per Kitchin LJ at para 69 and inOtkritie Capital International Ltd v Threadneedle Asset Management Ltd [2017] EWCA Civ 274 per Arden LJ at para 39(vi). Expressing the same point in different words, “it is a question of assessing whether, comparing the respective claims, and considering the circumstances including the conduct of the relevant parties, it is ‘manifestly unfair’ … to the defendant that the later proceedings should be brought against him after the earlier proceedings have been brought and disposed of”:Stuart v Goldberg Linde [2008] 1 WLR 823 per Lloyd LJ at para 66.

9. InAl Khorafi, a decision of this court on appeal from Deputy Chief Justice Sir David Steel, Justice Sir Jeremy Cooke, giving the judgment of the court, cited with apparent approval the passages in Lord Bingham’s speech in Johnson v Gore Wood and said this (at para 31):

“It is to be noted that the essential question is whether or not the claim or defence, as the case may be, should properly have been raised in the earlier proceedings if it is to be raised at all, and it matters not whether it is not raised by reason of negligence, inadvertence or accident. The court should embark on a broad, merits-based judgment taking into account both the interests of the parties and the public interest in the process of litigation and the interests of justice”.

He identified (in para 32) three questions which Sir David had said that the court should ask in light of the authorities cited to him, namely: could the new claims have been brought in the earlier proceedings? was it unreasonable not to bring the new claims in the earlier proceedings? and does the bringing of the new claim unjustly harass the Bank? In Sir David’s view a positive answer to the first two questions would not necessarily have led to the resolution of the third (fundamental) question. Justice Sir Jeremy Cooke disagreed. He said this (at para 33):

“The third question does not constitute a separate requirement as such but is part and parcel of the process of deciding whether the claim should have been brought in the earlier proceedings. Lord Bingham regarded the fact that it should have been raised in the earlier proceedings as capable of amounting to harassment in itself, without any additional element. A party should not be vexed twice in respect of the same cause of action and all matters which should properly be part of that action should be raised with it. As Lord Millett, in the same case stated, there is ultimately only one question, namely whether it is oppressive or otherwise an abuse of the process of the court for proceedings to be brought which should have been brought as part of, or at the same time as, the previous litigation.”

10. That passage echoes what Lord Bingham said inJohnson v Gore Wood: “While the result may often be the same, it is in my view preferable to ask whether in all the circumstances, a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether abuse is justified by special circumstances.” However, in argument before this Court, the Defendants refer to that passage fromAl Khorafias authority for the proposition that “there is no separate requirement that the claim ‘unjustly harass’ the defendant to the second action”, and that “if the claim should in all the circumstances have been brought in the first action, the second action is abusive without more”: the quote is from the Defendants’ Skeleton Argument para 28. Understood in one way, and it may be that this was not intended, such a formulation appears to negate the importance attached by Lord Bingham, Lord Millett and others to the need for there to be unjust vexation, harassment or oppression of the other party before the second proceedings can be said to be an abuse of process. If that is what is intended, we cannot agree. It is not the case that every claim brought in a second action which could have been brought in a previous action will be struck out as abusive. Nor is it the case that every claim brought in a second action which as a matter of pleading, evidence or expense should have been brought in the previous action will be struck out. The key lies in understanding what is encompassed by the expression “in all the circumstances” when judging whether a claim should have been brought in prior proceedings. In our opinion “all the circumstances” include a consideration of whether failing to include all claims in the one action and bringing one or more related claims in a separate action is vexatious or oppressive. To justify striking out the second claim it must be shown not only that that same claim could have been brought in the first action but also that it should have been; and “should have been” means not only because it would conveniently have fitted into the first action, raising the same issues or turning on similar facts and circumstances etc, but also – and this is an important part of the “circumstances” referred to above – because to bring it as a separate claim subsequently would be unfair, abusive, vexatious and/or oppressive to the other party. This is what Lord Bingham was meaning in the passage referred to and what the Court of Appeal meant in the passage cited fromAl Khorafi.

11. It is of interest to note that the “extended principle” inHenderson v Hendersonis applied in Australia under the sobriquet“Anshun estoppel”(a reference to the decision inPort of Melbourne Authority v Anshun Pty Ltd(1981) 147 CLR 589): seeTresize v National Australian Bank Ltd [2020] FCA 902 at [71]-[72]. As summarised in those paragraphs, the principle appears to be that the raising of a claim or issue in a second action is not permitted if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding. It may be that the (Australian) doctrine of abuse of process in like circumstances overlaps with this doctrine:Tresizeat para 73. Although the Australian position was referred to in the Skeleton Arguments, we were not taken to it in any detail. It is sufficient to note that it was not suggested, for present purposes at least, that there was any material distinction between the position in Australia and the principles which we have summarised from the English and DIFC cases.

12. We were referred to a number of other authorities on this aspect of the case but we do not think it necessary to refer to them all. It is sufficient in our view simply to mention a number of miscellaneous points from the case law which have some bearing on the issue presently before the Court.

13. The decided cases “include many reminders that a party is not lightly to be shut out from bringing before the court a genuine cause of action”:Stuart v Goldberg Lindeper Lloyd LJ at para 65. This is clear and well established. The burden lies firmly on the Defendant to show that the second set of proceedings amount to an abuse of process and should not be allowed to proceed.

14. In some cases the question arises as to whether any and, if so, what regard is to be had to the merits of the case, in the sense of the prospects of success in the second proceedings. This was considered by the Court of Appeal inStuart v Goldberg Linde. The leading judgment was given by Lloyd LJ. He dealt with the “merits question” in the context of Lord Bingham's emphasis in Johnson v Gore Wood on the need for the court to make a “broad, merits-based judgment” on the question whether the second proceedings amounted to an abuse of process. Lloyd LJ said this (at para 57):

“… it seems to me that it would at most only be in an extreme case (either way) that the merits, in the sense of prospects of success, of the second proceedings can be relevant to deciding whether bringing them separately is an abuse of process. If the case can be shown to be cast-iron, so that judgment could be obtained for the claimant under CPR Pt 24 [equivalent to RDC Part 24], this might perhaps outweigh factors suggesting that the case ought to have been brought as part of the earlier proceedings. If, on the other hand, the case is hopeless, then it may be capable of being struck out for that reason in any event. But if, as here, the prospects of success are uncertain but the case is not suitable for summary judgment for either party under CPR Pt 24, then it seems to me that it is inappropriate to attempt to weigh the prospects of success in the balance in deciding whether it is an abuse of process to bring the claim in later proceedings, rather than as part of earlier proceedings. In my judgment, when Lord Bingham spoke of a “broad, merits-based” approach, the merits he had in mind were not the substantive merits or otherwise of the actual claim, but those relevant to the question whether the claimant could or should have brought his claim as part of the earlier proceedings. A defendant may feel harassed by having brought against him what appears to be a weak claim, but that factor should not count in this context. Whether the claim appears to be weak or strong, it is the fact of it being brought as the second claim, where the issue could have been raised as part of or together with the first claim, that may constitute the abuse.”

Sedley LJ and Sir Anthony Clarke MR both gave judgments substantially in agreement with Lloyd LJ on this and other points.

15. We respectfully agree with these observations. We would simply note the converse proposition, which is implicit in what was said in that case, namely, that the merits of the underlying dispute may well be highly relevant or even determinative in a case where the claim raised in the second action is so strong as to justify an application for summary judgment under CPR Pt 24 (equivalent in the DIFC to immediate judgment under Part 24 of the RDC). This makes obvious sense. In a case where there is absolutely no defence to the new claim on its merits, it will be difficult for the defendant to show that the claim is in any way abusive or vexatious. Insofar as any court proceedings have to proceed, they will be short and inexpensive; and any expense or “vexation” caused to the defendant in the second proceedings will have been caused by his own failure to meet a liability to which he had no defence and which he should have met without the need for court proceedings to have been commenced against him.

TheAldiprinciple

16. We were referred in argument to the remarks of Thomas LJ, as he then was, inAldi Stores Ltd v WSP Group plc [2008] 1 WLR 748 at paras 30-31 to the effect that in complex commercial multi-party litigation a party intending to reserve a claim or issue to subsequent proceedings was obliged to raise that intention with the court in the first action so as to allow that court “to express its view as to the proper use of its resources and on the efficient and economical conduct of the litigation”. Such a course would not only be in the interests of the parties but it would also be in the public interest and in the interests of the efficient use of resources that this was done. He warned that “there can be no excuse for failure to do so in the future.”

17. InAl Khorafiat paras 34-35, the Court of Appeal confirmed that the“Aldi principle”, as it has come to be known, applies “in its full rigour” in the DIFC. The court noted it had been endorsed by at least five English Court of Appeal decisions “stating that there can be no excuse and no exceptions to that principle”. After referring to the judgment of Arden LJ (as she then was) inOtkritie Capital International Ltd v Threadneedle Asset Management Ltd [2017] EWCA Civ 274, the court concluded (at para 34):

“A party who fails to take this course runs the risk of the later proceedings being struck out because of such failure. Even though the Aldi principle is not a “hard- edged rule of law”, it represents an important facet of the broad, merits-based assessment of whether a second action constitutes an abuse of the process of the court.”

18. We were addressed on the Aldi point almost as though it were a discrete point separate from the mainstream “abuse of process” line of authority derived fromHenderson v HendersonandJohnson v Gore Wood. The argument for the Defendants seemed to be that even if the second action in this case survived on a proper application of theJohnson v Gore Woodtest, it should nonetheless be struck out as an abuse of process on Aldi grounds, on the basis that the Bank had failed, without proper or indeed any excuse, to raise with the judge in the first action their intention to bring a second action for recovery of the amount outstanding under the Facilities Agreement. We consider that this approach is somewhat artificial. The better course, in our view, is to consider the Aldi point as part and parcel of the overall “abuse of process” argument, a factor to be taken into account in deciding whether or not the second action is an abuse of process. This, we think, is how the matter has been dealt both inAl Khorafiand in the English Court of Appeal decisions to which reference has been made: see e.g.Otkritie Capitalat para 49 andStuart v Goldberg Lindeat para 70.

19. Against this review of the authorities we turn to summarise the nature of the Bank’s claim and the procedural history of the matter. We shall then consider the arguments raised in this Appeal in light of the authorities to which we have referred.

The Facilities Agreement and the Guarantee

20. The Bank’s claims arise out of a Facilities Agreement and a Guarantee both date 11 August 2014. The Facilities Agreement was entered into between, on the one hand, the Bank and, on the other, Amira (as Borrower) and Mr Chanana (as Personal Guarantor). In terms of that Agreement the Bank agreed to make credit facilities available to the Borrower (Amira) in a variety of ways – Letter of Credit/ Buyer’s Credit Facility, Bill Discount Facility and Overdraft Facility. Buyer’s credits – a form of revolving credit – had a term of 90 days. The effective term of the Facilities Agreement, through its “Final Maturity Date”, was 12 months or the maturity date of the last letter of credit or buyer’s credit. However, as noted by Justice Roger Giles in paras 12-16 (and following) of his judgment in the first action, the credit facilities appear to have continued without formality after 11 August 2015; some formality returned with a second sanction letter in March 2016 offering an increased facility (as before, Buyers Credits were to be for a maximum of 90 days) and the effective term of the credit facilities was up to 28 February 2017; there was then some further informal extension until July 2017 and then 31 December 2017; and a further informal extension up until the provision of a Letter of Credit on 11 February 2018. The precise details do not matter, except to note that it is not suggested that the credit facilities were extended beyond 2018.

21. Given the limited nature of the issues in this Appeal, it is unnecessary to set out the provisions of the Facilities Agreement in any detail. It is sufficient to note that Clause 14.1 set out a list of events constituting Events of Default, among which was: (a) failure by Amira to pay any sums due under any of the finance documents issued under the Facilities Agreement; and (d) failure by Amira to perform or comply with any term or condition of the finance documents (and if such failure was capable of remedy, failure to remedy that failure within 15 days after written notice given by the Bank). Clause 14.2 set out what the Bank was entitled to do upon the occurrence of an Event of Default, including: (b) declaring the outstanding amount under each advance to be immediately due and payable; and (c) declaring any unutilised portion of the Facilities to be cancelled.

22. On the same date, 11 August 2014, Mr Chanana also executed a Guarantee in favour of the Bank in terms of which he guaranteed that Amira would “duly and punctually” repay the sums advanced to it under the Facilities Agreement and that in the event of default on the part of Amira he would, upon demand, forthwith pay to the Bank all the amounts payable by Amira under the Facilities Agreement. Since no separate point is taken in respect of the Guarantee we do not propose to go into its terms in any more detail.

23. The Facilities Agreement was renewed from time to time and sums were advanced by the Bank to Amira. There is no dispute that the sum of US$ 6,421,224.71 was advanced to Amira under the Facilities Agreement in the form of an Overdraft Facility and/or Buyers Credits. The precise details appear from the summary of the claim below.

The first action – CFI-027-2018 – claim and counterclaim

24. Action CFI-027-2018 arose as a result of the Bank failing to honour its commitments under the Facilities Agreement, thereby causing serious and substantial loss to Amira.

25. The action was commenced by Amira, claiming substantial damages. The Bank lodged a Counterclaim in that action seeking to recover sums outstanding from Amira under the Facilities Agreement. The position is succinctly set out by Justice Sir Richard Field in the judgment under appeal at paras. 13-23 which we quote below and gratefully adopt. It was not suggested that this summary account of the claim and counterclaim in action CFI-027-2018 is inaccurate or incomplete in any material way:

“13. The first time the Bank claimed repayment of the advances sought to be recovered in the present proceedings was in a counterclaim raised in Claim CFI-027-2018 brought by Amira against the Bank for failing, in breach of contract, to pay Amira’s principal supplier of rice, AK Global Business FZE (“AK Global”), USD 4,134,000 pursuant to an irrevocable letter of undertaking which was provided on 11 February 2018, at Amira’s request, by which the Bank undertook to remit funds to AK Global on receipt of funds from Kuwait Flour Mills & Bakeries Co (together, "Kuwait Flour"), one of Amira’s main purchasers of rice supplied by AK Global.

14. On 14 February 2018, the Bank received USD 4,194,000 from Kuwait Flour, as payment for shipments of rice purchased from Amira and Amira sent remittance instructions and appropriate documents to the Bank, requiring it to pay USD 4,134,000 to AK Global in accordance with the terms of the irrevocable letter. However, for reasons that are not altogether clear, the Bank did not do so.

15. In its claim against the Bank, Amira sought large damages to compensate it for the loss that resulted from the Bank’s failure to honour the irrevocable letter of undertaking. Having not received the USD 4,130,000 due it, AK Global ceased to supply rice to Amira which very seriously disrupted Amira’s rice business.

16. The CFI-027-2018 proceedings were tried by Justice Roger Giles. The Bank’s counterclaim was first filed on 10 June 2018 and was amended on 18 September 2018 in order to plead that the sum claimed from Amira was also recoverable against Mr Chanana under the Guarantee.

17. By its counterclaim, the Bank claimed USD 6,421,224.71 plus interest from 1 February 2018 (the “Debt"). It was averred that the Debt was comprised of the following: (i) USD 2,590,000 being the amount due on 26 February 2018 in respect of buyers credits (the “26 February Buyers Credits”) less USD 1,931,695.56 otherwise recovered; and (ii) two amounts due under the overdraft extended to Amira consisting of: (a) USD 4,134,000 being the amount paid by the Bank to AK Global pursuant to an order made by Justice Sir Jeremy Cooke on 16 May 2018 enforcing the irrevocable letter, which sum had been “devolved” to Amira’s overdraft; and (b) USD 1,628,920.27.

18. Clause 14 of the Facilities Agreement provided, inter alia, that on the occurrence of an Event of Default the Bank may by notice in writing to Amira: (a) require the Bank to provide an amount equal to the face of each Letter of Credit and/or Buyer's Credit to be deposited in the Cash Collateral Account; (b) declare each outstanding amount under each advance to be immediately due and payable whereupon each such outstanding amount(s) shall become so payable together with accrued interest thereon and any other sums owed to the Bank under the Agreement.

19. Amira did not contest the amount claimed. Its primary defence was that the Debt was not payable as at 18 September 2018 when the counterclaim was amended because: (a) notice of an Event of Default under the Facilities Agreement was necessary for the whole Debt to become payable; (b) the only Event of Default on which the Bank could rely, on the evidence and on the pleading of the counterclaim, was failure to pay the 26 February Buyers Credits; (c) that failure was caused by the Bank's breach in respect of the irrevocable letter; (d) the Bank could not rely on a failure caused by its own breach; (e) therefore, the Debt had not become payable.

20. In paragraph 180 of his judgment, Justice Giles remarked:

”This might be thought a technical defence. The Debt remained unpaid, and if the defence were upheld it could be made payable and recovered by the Bank in fresh proceedings. However, the defence was taken, which I must rule on according to law, there may be other defences available if fresh proceedings are brought”.

21. In the view of Justice Giles, a notice of default had to identify the default in question and the only notice of default served by the Bank that satisfied this requirement was a notice dated 6 June 2018 from the Bank's lawyers to Amira's lawyers which identified the event of default as being the failure to pay the 26 February Buyers Credits. The earlier communications relied on by the Bank, namely, the letters dated 27 February, 22 April and 1 May 2018, as well as a number of letters from its lawyers to Amira's lawyers, were not notices that satisfied the requirement of identifying the Event of Default relied on. Further, in the opinion of Justice Giles, the only Event of Default that had been pleaded by the Bank was the failure to pay the 26 February Buyers Credits.

22. Justice Giles went on to hold that the Bank could not rely on the notice dated 6 June 2018 because Amira’s default in paying the 26 February Buyers Credits was caused by the Bank’s prior breach in failing to pay AK Global under the irrevocable letter of undertaking, and the Bank was not entitled to rely on its own wrongful breach of contract. The Bank’s counterclaim was accordingly dismissed by Justice Giles.

23. The Bank challenged the dismissal of its counterclaim in the Court of Appeal, arguing that it had made demands that gave rise to an entitlement to be paid the entire amount outstanding independent of any Event of Default and that this case had been pleaded and was advanced at the trial. The Court of Appeal gave short shrift to this argument, holding that the only pleaded entitlement to payment of the entire amount was founded on an Event of Default – the failure to pay the 26 February Buyers Credits -- and no case founded on entitlement from a mere demand for payment was advanced at trial.”

26. In rejecting the Bank’s case that it should be allowed to argue that the whole sum outstanding under the Facilities Agreement was due and payable notwithstanding that it had no pleading to that effect and had limited its case at trial to one based upon a specific Event of Default in respect of a failure to pay an amount due on 26th February 2018, the Court of Appeal considered the obstacles which the Bank would have faced had it sought to amend to plead such a case. Amongst those obstacles was the fact that an amendment at the appeal stage, if allowed, would result Amira having been prevented from leading evidence in those proceedings to the effect that its inability to meet even that more general demand was also caused by the Bank’s breach of its obligations under the Letter of Credit (para 202); and an unresolved argument as to whether the provisions of the Facilities Agreement should be construed as empowering the Bank to demand repayment at any time, entirely at its discretion, a point upon which evidence might well have been relevant and admissible (para 204). Neither of these obstacles, nor indeed any of the difficulties mentioned by the Court of Appeal at paras 201-208, arises at this stage, in this action, where the relevant demands for repayment of the sums advanced under the Facilities Agreement were made well after the expiry of the allowed period of credit and there is therefore no doubt that the sums claimed in this action are now due.

The second action – CFI-022-2020

27. Justice Roger Giles gave judgment in the first action on 7 October 2019. Judgment in the Court of Appeal in that action was given on 6 July 2020. The present action by the Bank (the second between the parties) was commenced on 1 March 2020, before the judgment of the Court of Appeal but no doubt in anticipation of its appeal against the dismissal of its counterclaim being unsuccessful. The claim in the present action relies on fresh demands and a fresh notice of an event of default all served in February 2020.

28. The Bank’s claim in this (second) action was brought under Part 8 of the Rules of DIFC Courts. The sum sued for is US$ 6,421,224.71, together with contractual interest and costs. The Particulars of Claim recite the Facilities Agreement and the Guarantee and notes that the Facilities Agreement was renewed from time to time under sanction letters. In para 7 it states that Amira has drawn down a total of US$ 6,421,224.71 from facilities, viz. Overdraft Facilities and Buyer’s Credits, provided under the Facilities Agreement. It refers in para 9 to contractual interest having accrued in the sum of US$ 1,265,479.58 (calculated up to 31 January 2020) and states that such interest continues to accrue. In para 10 it refers to clauses 4.12, 5.5 and 5.6 of the Facilities Agreement in terms of which Amira is required to repay immediately upon the Claimant’s demand sums drawn under the Facilities Agreement.

29. The Particulars of Claim then go on in paras 12-18 to set out the basis of the claim in the following way:

“12. Without prejudice to the Claimant’s previous demands for payment [a reference to the demands for payment which were relied on in the previous action between the parties], further and final demands for payment were made against the First Defendant and the Second Defendant on 13 February 2020 …

13. On 17 February 2020, the Defendants’ legal representatives acknowledged receipt of the Claimant’s demands for payment …

14. On 23 February 2020, the Claimant issued a further demand against the Second Defendant under clause 3 of the Personal Guarantee …

15. Despite lawful demand, in breach of the Facilities Agreement and Personal Guarantee, the Defendants have failed to pay [the sum claimed in the action] or any part of that sum on the date of demand or at all.

16. Without prejudice to the Claimant’s claims at paragraph 10-15 above, in the alternative, the Defendant’s failure to comply with the Claimant’s payment demands under the Facilities Agreement as demanded in letters to the Defendants on 13 February 2020, constituted an Event of Default pursuant to Clause 14.1 of the facilities agreement.

17. On 23 February 2020, the Claimant issued notices of default to the First and Second Defendants … in which the Claimant provided notice to the First and Second Defendants that:

(a) non- payment of the Amounts Drawn and accrued interest constituted an Event of Default pursuant to clause 14.1 of the Facilities Agreement; and

(b) in accordance with clause 14.2 of the Facilities Agreement, the Claimant:

(i) declared all Outstanding Amounts (i.e. the Amounts Drawn) to be immediately due and payable together with accrued interest and all other sums owed to it under the Facilities Agreement;

(ii) declared all unutilised portions of the Facilities to be cancelled and the relevant Facility Amounts to be reduced to zero; and

(iii) reserved its rights to invoke all legal remedies available to it without further notice.

18. Despite being immediately due and payable upon the issuance of notice of an Event of Default, in breach of the Facilities Agreement and Personal Guarantee, the Defendants have failed to pay [the sum sued for] or any part of that sum.”

30. We have set out the Bank’s claim in some detail simply to illustrate how simple and straightforward the claim is and how it differs from the counterclaim in the first action. The outstanding sums are payable on demand. Payment has been demanded and the sums are therefore now due. Further – and probably unnecessarily – failure to pay those sums once demand for payment has been made constitutes an Event of Default, rendering all outstanding amounts immediately due and payable. The sums claimed are therefore now due on this basis too. As already pointed out, it is not suggested that there is any defence to this claim apart from the procedural “abuse of process” argument. There is no dispute of fact. It is entirely appropriate that the claim has been brought under Part 8 of the DIFC Rules of Courts.

The strike out application - Judgment of Justice Sir Richard Field dated 30 November 2020

31. The Bank’s claim came before Justice Sir Richard Field on an application for judgment. The Defendants raised no substantive defence but applied to strike out the claim in the present (second) action on the basis that it was an abuse of process for the Bank to bring the claim in these proceedings when it could and should have raised the claim in the first action between the same parties, viz. action CFI-027-2018. In his judgment delivered on 30 November 2020 the judge refused the strike out application and went on to give judgment for the Bank on its claim. This followed as a matter of course from the fact that, as the judge noted in para 5 of his judgment, the Defendants “do not dispute that the principal sum was advanced to Amira under the Facilities Agreement and, but for the procedural defence referred to herein below, is due to be repaid in accordance with the Facilities Agreement and the Guarantee.” The “procedural defence” is, of course, a reference to the Defendants’ strike out application on grounds of abuse of process.

32. The Defendants’ argument before the judge on their strike out application was that, from the outset, the Bank could and should have pleaded that – with the exception of the sum of US$ 4,134,000 paid to AK Global on 16 May 2018 pursuant to the order of Justice Sir Jeremy Cooke after the counterclaim had been issued (see above) – each of the sums making up the debt claimed by the Bank was repayable on demand without the need to rely on any event of default; and in respect of the US$ 4,134,000 paid to AK Global on 16 May 2018, the Bank could have applied to amend its counterclaim to include a claim for this sum, either on the ground that it had been “devolved” to (i.e. had become part of) the overdraft or because it had become due on 18 August 2018, 90 days after the payment, on the basis that it was an extension of Buyers Credit and therefore fell due at that time in the ordinary course of things. Since this could all have been pleaded in the first action, it followed that the present proceedings, the second action, was an abuse of process in accordance with the line of authority illustrated by Henderson v Henderson (1843) 3 Hare 100 andJohnson v Gore Wood [2002] 2 AC 1 and applied by this court inAl Khorafi v Bank Sarasin Alpen (ME) Limited. Amira’s pleaded defence in the first action was a defence only to the claim as presented by the Bank in that action, namely a claim based upon a single event of default, viz. non-payment of the instalment due on 26 February 2018 – it was not a defence to a claim by the Bank on the basis that the individual sums making up the debt were due and payable regardless of any event of default (i.e. the claim as presented in the second action). The fact that counsel for the Bank sought unsuccessfully to argue before Justice Roger Giles and before the Court of Appeal that the sums claimed were due on this straightforward basis showed that the Bank appreciated that it had a good, albeit unpleaded, case that the whole of the debt was payable on demand. Even if it had not appreciated at an early stage that it had this claim, it could have amended its counterclaim during the course of the proceedings to put his case on this basis.

33. In addition, it was argued on behalf of the Defendants that the second action was an abuse of process on the basis set out in the Aldi case. The Bank should have raised with the Court in the first action the possibility that it might wish to bring a separate action to recover these sums as soon as it became aware of the possibility that it might wish to do so. Failure to mention this to the Court meant that the Bank in effect decided unilaterally for itself in which order issues would be tried, thereby depriving the Court of the ability to case manage the proceedings in an orderly fashion to ensure the disposal in an orderly and efficient manner.

34. Justice Sir Richard Field’s reasons for rejecting these arguments can be summarised shortly. It was “reasonable and unexceptional” for the Bank to rely in its original pleaded case on the Event of Default based on Amira's failure to pay the sum due on 26 February 2018. It was likely that when the Bank first served its counterclaim in the first action it had not anticipated the defence advanced by Amira to its Event of Default case. Further, when Amira raised this argument in its Reply and Defence to Counterclaim, correspondence between the parties’ lawyers suggested that the same argument would be raised to a claim by the Bank for repayment on whatever basis that claim was put. The Bank’s decision not to seek to amend its counterclaim to plead an entitlement to recover all the component parts of the debt on the basis of demands independent of its Event of Default case was therefore a reasonable decision which it was entitled to take. An application for permission to plead such an amendment would almost certainly have been strongly resisted by Amira; and in any event there was a real risk that, even if such an amendment had been permitted, the amended claim would have failed in that action on the grounds that the Bank was the cause of Amira’s inability to pay, in addition to the argument which Amira would have raised that the Bank was not free to issue and rely on demands for payment whenever it wanted in its absolute discretion.

35. In those circumstances the judge held that the present (second) proceedings were not an abuse of process for essentially six reasons (see paras 62-67 of his judgment):

(i) because the Defendants had failed to establish that the Bank should have brought these claims in the previous proceedings (para 62);

(ii) because the judgment in the first action did not give rise to any wider cause of action or issue estoppel against the Bank (para 63);

(iii) because, in bringing the second action, the Bank was not seeking to contradict or attack the findings of Justice Roger Giles in the first action, but was relying on new demands and notices of Events of Default issued in February 2020 (para 64);

(iv) because there were good reasons for the Bank to bring the second action, viz. to give the Defendants sufficient time and opportunity to repay the sums due before making further demands for payment in February 2020, with the result that the Defendants could no longer seek to argue that those further demands were premature or that their inability to repay was caused by the Bank’s prior breach (para 65);

(v) because the present (second) proceedings were never going to involve a lengthy hearing, since the issues raised in the present proceedings concern relatively straight forward questions of law (para 66); and

(vi) because the Aldi guidelines did not apply to these proceedings, which are not “complex commercial multi-party litigation” of the type identified by Thomas LJ as being subject to the guidelines – but even if the Bank was in breach of the guidelines that did not inevitably mean that the present proceedings were abusive (para 67).

The present appeal - submissions and discussion

36. Before considering the arguments in any detail, we remind ourselves of the correct approach for this Court to take in considering an appeal from the judge in a case such as this. It is by now well established that, in deciding whether or not the second action amounts to an abuse of process, the judge has to make an evaluation - he is not exercising a discretion. Either the proceedings are an abuse of process or they are not. In making such an evaluation the judge has to balance a number of factors. An appeal court will be reluctant to interfere with decision of the judge in making such an evaluation; and it will generally only interfere if the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was impermissible or clearly not open to him so that his decision is obviously wrong. Accordingly, although conceptually the two are and remain distinct, the line between the approach of an appellate court in reviewing the exercise of a discretion and its role in reviewing an evaluation of this kind is very narrow:Al Khorafiat para 3, citingAldiandStuart v Goldberg Linde.

37. This is subject to one additional point. If the judge concludes, as a matter of evaluation, that the second proceedings amount to an abuse of process, he still has to decide what order to make. This will involve the exercise of his discretion. It may be, though we would not wish to be dogmatic on this point, that in cases where the abuse is on classicHenderson v HendersonandJohnson v Gore Woodlines, in other words where it is clear that the claims in the second action could and should have been included within the first action and that the bringing of the second action amounts to unjust harassment or oppression of the other party, the judge will have little option but to strike out the second action. But where the abuse consists of a failure to comply with the Aldi guidelines the answer may not be so clear. The judge’s decision as to what order to make in such circumstances will be made by him in the exercise of his discretion and will be challengeable on appeal, if leave to appeal is granted, on the well-known grounds for challenging a discretionary decision.

38. The Defendants advance this appeal essentially on two grounds. They contend: First, that Justice Sir Richard Field erred in his assessment of whether the present claim should have been brought in the first action; and, Second, that the judge erred in his assessment of the Aldi guidelines and their impact in this case. Had he properly assessed these two factors, they say, he should have gone on to find that these (second) proceedings were an abuse of process and should be struck out.

39. The first ground of appeal brings under review points (i)–(v) of the judge’s reasons as summarised in para [35] above (taken from paras 62-66 of the judgment). The Defendants make a number of factual criticisms of the judge’s reasoning. They submit that there was no basis for the judge to conclude that the Defendants’ defence to its counterclaim (based upon the 26 February 2018 Event of Default) probably came as a surprise to the Bank – the Bank had notice of such a defence in correspondence from the Defendants’ lawyers over two weeks before it filed its counterclaim in the first action. Even if the Bank was surprised by this line of defence, it should not have been. They go on to argue that the judge failed to take into account the fact that the Bank’s case in the current (second) proceedings was an essential element of its case in the first action. The claims were similar and based on the same underlying contractual entitlement. The judge should have held that there was no explanation for the Bank’s failure to plead alternative claims in the first action, whether originally or by amendment. The judge was wrong to conclude that the defence to counterclaim advanced by the Defendants in the first action would have been raised as a defence to the Bank’s present claim had that claim also been advanced in those proceedings. That defence, if raised in that action, would have failed; but in any event that would not have been a good reason for failing to advance that claim at that time – the prospect of there being a good defence to a claim does not justify the failure to raise it. The Defendants made further submissions about the Bank’s failure to seek to amend its counterclaim in the first proceedings to include the present claim after it had served further demands for payment, but that raises the same broad arguments as are summarised above and we need not go into the details of that submission. In summary the Defendants contended that the judge erred in the following ways (see para 66 of their Skeleton Argument): (1) in relying on his unfounded view that the Bank was surprised by the nature of the Defendants’ defence to counterclaim; (2) by failing to take into account that the present claims should have been pleaded from the outset; (3) by relying on certain correspondence from the Defendants’ lawyers when in fact that correspondence emphasised that the present claim should have been brought; (4) by holding that the defence advanced by the Defendants could or would have defeated the present claim had it been brought in the first proceedings, and by taking that matter into account at all; and (5) by wrongly concluding that the Bank would not have been allowed to amend to advance its present claim in the previous action.

40. There is some force in the submission that there was no evidential basis for the judge to conclude that the Defendants’ defence to the counterclaim in the first action probably came as a surprise to the Bank. But this is a small point and does not detract from the judge’s overall conclusion expressed in his judgment. As noted above, this Court will only interfere with an evaluation of this kind if the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was clearly and obviously wrong. Nothing of this sort is made out in the present case. There is no significance in the observation by the judge that the defence advanced against its counterclaim in the first action would have come as a surprise to the Bank; and we do not consider that this particular point played any significant part in the judge’s reasoning. It may have been put in by the judge to explain how it was that the Bank found itself very much on the back foot in the first litigation. But it did not materially advance the abuse of process argument one way or the other; and it is not the case that an error of this type on a peripheral matter is sufficient to undermine his overall assessment that the second action was not vexatious or abusive.

41. There is no force in any of the other criticisms advanced by the Defendants on this aspect of the Appeal. The essence of the judge’s reasoning was that if the Bank had introduced its current claim in the first action – or one like it, based upon the outstanding amounts being repayable on demand, regardless of any particular Event of Default – whether originally or by amendment of its counterclaim, it would have been met by the same defence as was raised in answer to the counterclaim it did in fact lodge, namely that Amira’s failure to pay the outstanding amounts was caused by the Bank’s own breach of the Facilities Agreement. That was not an unreasonable concern. The Court of Appeal in the first action referred to this as a real possibility. The idea that the Defendants would not lodge a defence to such a claim is fanciful - why would the Defendants insist so vigorously on their defence to the Bank’s counterclaim based on the Event of Default unless they were also going to defend, as best they could, a demand for repayment of the outstanding amounts presented on a simple demand basis? Whether that defence would have succeeded is neither here nor there; and there was a real risk that it would have been advanced and a real risk that it would have succeeded. Had that defence succeeded it would not, of course, have prevented the Bank raising the claim again in new proceedings, such as the present proceedings, based on new demands. But it might have given rise to an argument on issue estoppel – unlikely to have succeeded but best avoided. In those circumstances it is difficult to characterise the Bank’s failure to advance this claim in the first action as unreasonable.

42. There is no serious challenge to the points made by the judge summarised at (ii) and (iii) of our summary (at para [35]) of his conclusions on this part of the case: no cause of action or issue estoppel (para 63 of his judgment); no direct or collateral attack on the judgment of Justice Roger Giles in the first action (para 64). These points are obviously correct but are in no way decisive.

43. Nor was there any challenge to the points made by the judge at (iv) and (v) of his reasons summarised in para [35] above: giving the Defendants time to pay and waiting until there was no longer any possibility of the Defendants raising the same defence to the claim as had been raised in the first proceedings (para 65 of his judgment); and that the present proceedings were never going to involve a lengthy hearing (para 66).

44. These points are of the highest importance. The Bank was entitled to assume that although the Defendants had advanced a defence to its claim based upon the particular Event of Default, it did not follow that they would for all time seek to renege on their obligations to repay sums borrowed under the Facilities Agreement as and when they fell due. It was not unreasonable for the Bank to give the Defendants time and opportunity to repay the sums outstanding before making further demands for payment. It might reasonably be thought that the Defendants would pay the outstanding sums on demand, without the need for further proceedings. But if a fresh action was necessary, in that action it would be difficult for the Defendants to argue that those further demands were premature or that their inability to repay was caused by the Bank’s prior breach. The correctness of that view is shown by the present proceedings, where the Defendants have advanced no substantive defence to the present claim and, subject to their procedural abuse of process argument, appear to accept that the outstanding sums are now due and payable to the Bank.

45. Further, as the judge observed, if it were necessary for the Bank to commence proceedings against the Defendants to recover sums due under the Facilities Agreement, such proceedings were never going to be lengthy – had the proceedings been defended on the merits of the claim, the issues likely to have been raised would have concerned straight forward questions of law, viz. construction of the Facilities Agreement. In the absence of any arguable defence, the claim would have been brought (as this claim was) under RDC Part 8 and judgment would have been obtained at minimal cost and expense. This claim is even clearer than that, since no defence on the merits, good, bad or indifferent, has been advanced at all. It is only because the Defendants have taken the procedural abuse of process point, seeking to avoid meeting a liability which they recognise exists, that these (second) proceedings have had to be brought and have resulted in expense and use of court time. In our view this cannot properly be categorised as abusive or vexatious. It is precisely this situation that was contemplated by Lloyd LJ inStuart v Goldberg Lindewhere he spoke of a claim raised in the second proceedings which was “cast iron”, bound to succeed on an application for summary or immediate judgment without the need for any protracted proceedings. We find it difficult to conceive of a clearer illustration of that situation than this case, where the Bank’s claim is so patently justified that no defence on the merits is raised at all. In those circumstances there can be no abuse or vexation in the bringing of the claim in separate proceedings.

46. As to the second ground of appeal, the judge held (para 67) that the Aldi guidelines did not apply since the proceedings were not “complex commercial multi-party litigation”; but that, if they did apply, breach of the guidelines did not inevitably mean that the second set of proceedings was an abuse of process. The Defendants dispute this reasoning. They say that the guidelines should be applied across the board as part of the “cards on the table” approach encouraged by the court as necessary for effective case management. In addition, they say that the failure to raise with the court (before or during the trial of the first action) the possibility that they might wish to raise a separate action to recover the sums outstanding under the Facilities Agreement caused them significant prejudice. About two months before the commencement of the trial in the first action, the Defendants applied to the judge for leave to introduce additional factual and expert evidence in support of their damages claim. The application was refused in part at least because permitting the introduction of new evidence would jeopardise the trial date. This, it is said, ultimately caused difficulties for the Defendants, since the Court of Appeal in that action severely cut the amount of damages awarded by the judge because of the lack of evidence to support that figure. It is argued that, if the judge hearing the application to adduce new evidence had been aware of the fact that the Bank was keeping open the possibility of bringing fresh proceeding to recover the outstanding indebtedness, he might well have taken a different view: what was the imperative to keep the trial date if that was not to be the end of the litigation between the parties?

47. We do not accept these submissions.

48. In setting out what have become known as the Aldi guidelines, Thomas LJ obviously had in mind the type of case he was dealing with. It was in that context that he used the expression “complex commercial multi-party litigation” to describe the sort of case to which his remarks were directed. But his words should not be read as a statute. For one thing they are insufficiently precise for that. The present litigation has, technically, three parties (the Bank and two Defendants), but both Defendants have the same interest and have conducted this action through the same legal representatives. Is this multi-party litigation or simply adversarial litigation between two competing sides? Similarly, there were complexities in the first set of proceedings, but the only complexity in this second action arises out of the procedural defence taken by the Defendants. In those circumstances can this case be said to be “complex commercial multi-party litigation”? Probably not, but that does not matter. The point is that the definition is insufficiently precise to be applied as though it were the words of a statute. Similarly, it is argued on one side that in cases where the Aldi guidelines apply any failure to raise with the court in the first proceedings the possibility that there might be another action in the offing should mean that the subsequent action is always liable to be struck out as an abuse of process. But the case law shows that that is not always done. The importance of disclosure and the seriousness of the failure to disclose are often taken into account, and the better sanction may lie in the court’s discretion as to expenses rather than the blunt instrument of striking out. So when the courts say, as they have, that the Aldi guidelines apply in their “full rigour” and that there can be “no exceptions to that principle”, that has to be understood in the context of there being no “hard- edged rule of law”, and that the guidelines simply represent a facet, albeit an important facet, of the broad, merits-based assessment of whether a second action constitutes an abuse of the process of the Court.

49. In our view, thus understood, the Aldi guidelines requiring disclosure of the possibility of there being a new action waiting in the wings should apply to all litigation, not just complex multi-party commercial litigation. But the sanction for breach will depend upon the seriousness of the problems caused by a failure to disclose. Such a failure might in an extreme case lead to the second action being struck out as an abuse; or in a less extreme case it might tip the balance in favour of an action being struck out as an abuse; or in different circumstances it might simply result in an adverse order for costs or even be disregarded entirely. All will depend on the circumstances. In the present case, while it might have been helpful if the Bank had mentioned to the Court that it might commence a separate action to recover the debt if it failed in the first action, we cannot think that this would have affected the conduct of the first action for reasons set out in the next paragraph.

50. We do not accept the argument that, if the judge had been aware of the possibility of a new action to recover the outstanding sums, he would have taken a different view of the prospect of losing the trial date for the first action and would have allowed the new evidence to be admitted. That is simply speculation and without any proper basis. The possibility of the claim being re-presented in subsequent proceedings does not in any way impinge on the desirability of maintaining the trial date already fixed for the resolution of the existing action. In any event, the prospect of a new action to recover such sums was apparent to the judge, as is clear from his own comments at para 180 of his judgment in the first action, which bears repetition in this context:

“This [i.e. the defendants’ defence to the counterclaim] might be thought a technical defence. The Debt remained unpaid, and if the defence were upheld it could be made payable and recovered by the Bank in fresh proceedings. However, the defence was taken, which I must rule on according to law, there may be other defences available if fresh proceedings are brought.” [emphasis added]

He was aware that there might well be a fresh action to recover the outstanding indebtedness if the Defendants’ “technical” defence to the Bank’s Event of Default claim succeeded in the first action. It did not take him by surprise. Indeed, as the court ventured to suggest in the course of argument, the possibility of a new claim to recover the outstanding indebtedness was blindingly obvious. It would surely have been obvious to the judge at the time of hearing argument on the Defendant’s application to adduce further evidence on quantum.

Disposal

51. For all these reasons the appeal is refused. The Defendants must pay the Bank’s costs of the appeal, to be assessed if not agreed.


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