KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Fetter Lane, London, WC4A 1NL |
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B e f o r e :
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Credit Suisse AG |
Claimants |
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- and - |
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(1) Burgundy Sea Ltd (2) Premium Big Continental Inc (3) HRH Prince Fahad bin Sultan bin Abdulaziz al Saud |
Defendants |
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The Defendants did not appear
Hearing dates: 31 March 2023
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Crown Copyright ©
Mr Justice Bright:
Introduction
i) A loan agreement between CSAG and the First Defendant (" Burgundy") dated 3 February 2020 (the "Yacht Loan") in connection with the financing of the m.y. "SARAFSA" (the "Yacht"). In this respect, Burgundy is a special purpose vehicle concerned with the ownership and use of the Yacht and is ultimately beneficially owned by the Third Defendant ("Prince Al Saud").
ii) A personal guarantee given by Prince Al Saud to guarantee Burgundy's obligations under the Yacht Loan ("the Guarantee").
"Grounds for summary judgment
24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if
(a) it considers that
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
"15. As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
Background and the parties' respective positions
(i) The Yacht Loan and the Guarantee
i) By an agreement dated 3 February 2020, CSAG agreed to provide the Yacht Loan to Burgundy for various purposes, including refinancing existing debts. This was admitted by Burgundy and by Prince Al Saud, in their respective Defences.
ii) By a Deed of Guarantee also dated 3 February 2020, Prince Al Saud guaranteed Burgundy's obligations under the Yacht Loan pursuant to the terms of the Guarantee. This was admitted by Burgundy and by Prince Al Saud, in their respective Defences.
iii) The total Loan Amount was 48 million, and it was drawn down in its entirety by Burgundy on 3 February 2020 by a Drawdown Notice served by Burgundy on CSAG. This was admitted by Burgundy and by Prince Al Saud, in their respective Defences.
(ii) Payment of Interest under the Yacht Loan
i) Clause 4.2.2 required Burgundy to "pay interest on the amount of the Loan outstanding during each Fixing Period at the rate of interest calculated in accordance with Clause 4.2.4. Such interest shall be payable in arrears on the last day of each Fixing Period, except in the case of a Fixing Period longer than 3 months where Interest shall be paid in arrears every 3 months during that fixing Period and on the last day of that Fixing Period".
ii) Pursuant to Clause 4.2.3, the Fixing Period was a period of 3, 6, 9 or 12 months, as specified by Burgundy.
iii) By virtue of Clause 4.2.4, the interest rate for each Fixing Period was the aggregate of (i) CSAG's Costs of Funds, and (ii) the applicable 'Margin', which was defined as 2% per annum.
(iii) Evidencing Prince Al Saud's portfolio
i) procure that, from 3 February 2021 and for the remainder of the term of the Yacht Loan, Prince Al Saud held directly or indirectly, a bankable, liquid and diversified portfolio of assets free from encumbrances, with a value of not less than US$25 million; and
ii) provide evidence on 3 February 2021 and quarterly thereafter, that Prince Al Saud held directly or indirectly, a bankable, liquid and diversified portfolio of assets free from encumbrances, with a value of not less than US$25 million.
(iv) Payment of legal fees and expenses
The Clause 10.2 Notice
i) Clause 10.1 of the Yacht Loan stipulates what constitutes an "Event of Default", which includes where:
"10.1.1 any Obligor defaults in the making of any payment which has become due and payable under this Agreement or any other Transaction Document on the due date for such payment in the currency and in the manner therein specified or, if payable on demand, within three (3) Business Days of a demand by the Lender for such payment;
10.1.2 The Borrower does not comply with the provisions of any of Clause 5.3, Clause 6.1, Clause 9.10.1(B) or Clause 9.13; "
ii) Clause 10.2 of the Yacht Loan sets out CSAG's rights in the event of an Event of Default, providing as follows:
"Upon the occurrence of an Event of Default which is continuing, in addition and without prejudice to any other rights of the Lender under the Transaction Documents or under applicable law, the Lender may by written notice to the Borrower:
10.2.1 cancel its obligation to make the Loan or any further advance available in accordance with the Agreement if the Loan has not yet been advanced in full and declare the Loan and all other Outstanding Indebtedness to be immediately due and payable, whereupon the Loan shall become due and payable together with unpaid interest accrued thereon, any Funding Break Costs arising out of such repayment, all other Outstanding Indebtedness and together with:
(A) (following an Event of Default of any kind whatsoever which results in the Lender arresting or repossessing the Yacht ) the present value of the amount which is the sum of all scheduled payments of interest to the extent representing the Margin which would have fallen to be paid by the Borrower under this Agreement but for the acceleration of the Loan pursuant to this Clause from the date on which the Loan becomes due and payable by reason of such acceleration to the Final Repayment Date., discounted from the dates upon which such the scheduled payments of interest would have fallen due to the date on which the Loan becomes due and payable by reason of such acceleration at the Discount Rate: and/or
(B) (following any other Event of Default) the applicable Early Repayment Fee (unless waived in writing by the Lender, in its absolute discretion); and/or
10.2.2 declare the Loan and all other Outstanding Indebtedness to be due and payable on demand of the Lender, in which event the Loan and all other Outstanding Indebtedness shall, upon any subsequent demand of the Lender, become immediately due and payable together with all of the other amounts specified in Clause 10.2.1.
Regardless of whether the Lender shall have served notice pursuant to this Clause 10.2 declaring the Loan and all Outstanding Indebtedness to be immediately due and payable or due and payable on demand, and notwithstanding any other provision of this Agreement, following the occurrence of an Event of Default which is continuing interest shall, upon the Lender notifying the Borrower of such accrual, accrue on the entire Outstanding Indebtedness at the Default Rate."
i) Burgundy's failure to pay interest, which constituted an Event of Default within the scope of Clause 10.1.1.
ii) Burgundy's failure to evidence Prince Al Saud's portfolio with a value of at least US$25,000,000, which constituted an Event of Default within the scope of Clause 10.1.4.
iii) Burgundy's failure to pay and indemnify CSAG for the legal fees, which constituted an Event of Default within the scope of Clause 10.1.1.
i) Burgundy's failure to pay the Margin Call as required by the Early Amortization Invoice, which was alleged to constitute an Event of Default within the scope of Clause 10.1.1 and/or 10.1.2.
ii) Burgundy's appointment of a crew manager which was not a Manager, which was alleged to constitute an Event of Default within the scope of Clause 10.1.15.
i) They denied, without explanation, that the matters set out in the Notice of Acceleration constituted breaches of the Yacht Loan or Events of Default.
ii) On the basis of the bare denial of the existence of any Events of Default, they contended that CSAG was not entitled to serve the Notice of Acceleration and as a result, that the Notice of Acceleration had no valid effect.
The Call under the Guarantee
"In consideration of the Lender agreeing to make the loan available to the Borrower pursuant to the Loan Agreement (which consideration the Guarantor acknowledges is a good and valuable consideration for the Guarantor accepting the Guarantor's obligations under this Deed) the Guarantor, as principal obligor and not merely as surety and as a continuing obligation, hereby unconditionally and irrevocably:
2.1.1 guarantees to the Lender the full and punctual payment and performance of the Guaranteed Obligations in accordance with the terms of the Transaction Documents;
2.1.2 undertake (by way of separate obligation and not merely as surety) to pay to the Lender forthwith on demand by the Lender any Guaranteed Obligations which are not fully and punctually paid in accordance with the terms of the Transaction Documents;
2.1.3 undertakes to procure the performance forthwith on demand by the Lender of any Guaranteed Obligations which are not fully and punctually performed in accordance with the terms of the Transaction Documents; and
2.1.4 agrees to indemnify and to keep indemnified the Lender forthwith on demand by the Lender against any Loss incurred by the Lender as a result of any of the Guaranteed Obligations not being fully and punctually paid and/or performed in accordance with the terms of the Transaction Documents or being or becoming, in whole or in part, void voidable or unenforceable for any reason whatsoever whether or not known to the Lender."
i) The letter informed Prince Al Saud of Burgundy's non-compliance with the Yacht Loan, that CSAG had exercised its right to accelerate the loan, and that, accordingly, he was in breach of the Clause 2.1.1 of the guarantee.
ii) It demanded that:
a) Pursuant to Clauses 2.1.2 and 2.1.3 of the Guarantee, he should pay CSAG forthwith Burgundy's outstanding indebtedness of 37,298,762.37, US$7,367.57, and £128,860.18.
b) Pursuant to Clause 2.1.4 of the Guarantee, he should indemnify CSAG against any Loss incurred by CSAG as a result of any Guaranteed Obligations not being fully and punctually performed, and
c) Pursuant to Clause 5.1 of the Guarantee, he should pay interest on the sums demanded at the Default Rate.
CSAG's Claims
i) 37,298,762.37, US$7,367.57, and £128,860.18, being Burgundy's accelerated overall indebtedness as of 10 November 2021.
ii) Compound interest on the outstanding sums at the contractual rate of 4% with daily rests pursuant to Clause 12.9 of the Yacht Loan and/or Clause 5.1 of the Guarantee; alternatively, interest on the outstanding sums pursuant to section 35A of the Senior Courts Act 1981 at such rate and for such period as the Court thinks appropriate.
iii) Such further sums that continue to accrue, to be assessed.
Analysis