Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC & Ors

Summary judgment is appropriate only where the defendant has no realistic prospect of success. The court must avoid a mini-trial, while testing whether the evidence has real substance and considering evidence reasonably expected at trial. A fuller factual investigation may justify a trial even where the case presently appears straightforward.

A surety may have a realistic defence where the creditor caused or connived at the relevant default, acted in bad faith, or deliberately impaired the surety’s position. Similar issues may arise under an indemnity as matters of causation and construction. A shared pre-contractual understanding about the operation of security may also support estoppel by convention or rectification where the issue requires factual investigation.

The Bank sought summary judgment against three individual defendants for approximately US$440 million allegedly due under guarantee and indemnity obligations in a restructuring agreement arising from a receivables fraud. The defendants had not yet filed defences and advanced numerous arguments concerning the alleged default, the enforcement and retention of security over the Plantation lease, the Bank’s duties, estoppel by convention and rectification.

The central issues were whether the Bank had engineered or caused the relevant default and whether there was a shared understanding that, if the Plantation security was enforced but not sold within a reasonable time, the defendants would receive credit for its value at the date of assignment.

1. Summary judgment test. The principles summarised from The Federal Republic of Nigeria v Santolina Investment Corporation [2007] EWHC 437 (Ch) required the Bank to show that each defence was fanciful rather than realistic. The court was not to conduct a mini-trial, but could analyse whether factual assertions had real substance, including by reference to contemporaneous documents and evidence reasonably expected at trial. Allegations of fraud were a relevant factor. The court should hesitate to decide finally where fuller investigation might affect the outcome.
2. Engineered default. The authorities supported a realistic defence where a creditor caused or connived at the principal debtor’s default, acted in bad faith, or positively prejudiced the surety in an unfair way. On the defendants’ evidence, the Bank might have influenced or caused arrests and other events which prevented remedy of the alleged default and repayment. Those factual issues required trial. Even if the obligations included indemnities, it was arguable on construction and causation that an indemnity did not respond to a failure to recover the rescheduling amount caused by the Bank’s own deliberate acts.
3. Plantation security. The defendants had a realistic prospect of establishing that the agreements, alternatively an implied term or shared understanding, required an accounting for Plantation’s value at the date of assignment if the Bank retained rather than sold the lease. The evidence raised issues concerning construction, commercial purpose, estoppel by convention and rectification. The possibility that estoppel by convention could apply to pre-contractual matters was recognised in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101. The entire agreement clause did not make the defence fanciful.
4. Disposition. The Bank’s summary judgment application was dismissed. It was unnecessary to determine the remaining defences. The same conclusion applied to the Fourth Defendant, who had not participated, because the Bank accepted that the case was equally unsuitable for summary judgment against him.