SBM BANK v RENISH PETROCHEM [2022] DIFC CFI 054 — Refusal to set aside judgment following trial non-attendance (13 May 2022)

What was the nature of the dispute between SBM Bank and Renish Petrochem that led to the US$21 million judgment?

The litigation arose from a complex trade finance dispute involving SBM Bank (Mauritius) Ltd and several defendants, including Renish Petrochem FZE and Mr Hiteshkumar Chinubhai Mehta. The Claimant sought recovery of funds disbursed under various credit facilities, alleging that the Defendants had engaged in fraudulent misrepresentation regarding the underlying trade transactions. The dispute centered on whether the documents presented for the drawdown of funds were genuine and whether the Defendants had made false representations to induce the Bank to release the capital.

Following the trial, which proceeded in the absence of the primary Defendants, the Court found in favor of SBM Bank, awarding judgment for over US$21 million. The Defendants subsequently sought to set aside this judgment, claiming that their non-attendance was justified and that they possessed a meritorious defense. The Court’s refusal to grant this relief underscores the finality of trial proceedings when a party chooses to abandon their defense mid-trial. As noted in the Court's reasoning:

The Defendants shall pay the Claimant’s costs of the Permission Application and the Set Aside Application, to be assessed by the Registrar on the standard basis if not agreed.

Further procedural history regarding the management of this case can be found in SBM BANK v RENISH PETROCHEM [2020] DIFC CFI 054 — Procedural consent order for pleadings (25 March 2020).

Which judge presided over the Set Aside Application in SBM Bank v Renish Petrochem?

The application was heard by Justice Lord Angus Glennie in the DIFC Court of First Instance. The hearing, which addressed both the Set Aside Application and the Permission Application, took place on 28 April 2022, with the final judgment and order issued on 13 May 2022.

What were the specific legal arguments advanced by the parties regarding the Defendants' non-attendance at trial?

The Defendants, Renish Petrochem and Mr Mehta, argued that they had a "good reason" for not attending the trial, contending that their withdrawal was a reaction to the Court's refusal to grant necessary adjournments. They sought to invoke RDC 35.16 to set aside the judgment, arguing that the Court should not have proceeded in their absence given the complexity of the fraud allegations. Their counsel emphasized that the circumstances surrounding their departure from the proceedings should be viewed as a procedural necessity rather than a voluntary abandonment of the case.

Conversely, SBM Bank argued that the Rules of the DIFC Courts (RDC) regarding non-attendance were strictly applicable. The Bank contended that the Defendants had been afforded ample opportunity to present their case and that their decision to withdraw was a tactical maneuver following the denial of their adjournment requests. The Bank maintained that the Defendants failed to meet the three-fold test under RDC 35.18, specifically failing to demonstrate a reasonable prospect of success or a valid justification for their absence.

What was the precise doctrinal issue the Court had to resolve regarding the application of RDC 35.16?

The Court was tasked with determining whether a party who attends the initial day of a trial but subsequently withdraws following an adverse procedural ruling (such as a refused adjournment) can still qualify for relief under RDC 35.16. The doctrinal question was whether such conduct constitutes "failure to attend" the trial, thereby triggering the protective mechanism of the rule, or whether it amounts to a waiver of the right to be heard. Furthermore, the Court had to decide if the Defendants met the cumulative requirements of acting promptly, providing a good reason for absence, and demonstrating a real prospect of success.

How did Justice Lord Angus Glennie apply the test for setting aside a judgment in the absence of a party?

Justice Glennie applied the criteria set out in RDC 35.18, which requires the applicant to prove they acted promptly, had a good reason for not attending, and possessed a reasonable prospect of success. The Court rejected the notion that the Defendants had "attended" the trial in any meaningful sense once they ceased participation. The Judge noted that the Defendants' withdrawal was a deliberate choice after their adjournment requests were denied. Regarding the merits of the underlying fraud claim, the Court found the evidence of suspicious fund transfers between related parties to be damning.

In the absence of such evidence an inference of fraud was, in my view, inevitable, even if such an inference should only be drawn where it is the only reasonable inference. 27.

The Court concluded that even if the procedural threshold for "non-attendance" were met, the Defendants failed to show any reasonable prospect of success, as they provided no credible explanation for the financial irregularities identified by the Bank.

Which RDC rules and statutory provisions were central to the Court's decision?

The Court relied heavily on RDC Part 35, specifically rules 35.14 through 35.18. Rule 35.14(3) was pivotal in establishing the Court's authority to proceed with a trial when a defendant fails to appear.

If a Defendant does not attend, the court may strike out his defence, but the Claimant may proceed to prove his claim at trial and obtain judgment on that claim: Rule 35.14(3).

Additionally, the Court referenced RDC 44.5 regarding the requirements for permission to appeal. The Court noted that the standard for granting such permission is stringent, requiring a real prospect of success or a compelling reason for the appeal to be heard.

How did the Court utilize English and DIFC precedents in its reasoning?

The Court cited Bank of Scotland v Pereira [2011] 1 WLR 2391 to establish the procedural hierarchy, noting that the Set Aside Application should be addressed before the Permission Application. Furthermore, the Court looked to Mohun-Smith v TBO Investments Ltd [2016] 1 WLR 2919 to illustrate how courts treat adjournment requests made on the eve of trial.

In Mohun-Smith v TBO Investments Ltd [2016] 1 WLR 2919 the Defendant applied in writing for an adjournment on the morning of the first day of the trial.

These authorities were used to reinforce the principle that parties cannot use adjournment requests as a mechanism to delay proceedings or to manufacture grounds for setting aside a judgment after they have voluntarily withdrawn from the courtroom.

What was the final outcome and the specific relief granted by the Court?

The Court refused both the Set Aside Application and the Permission Application. The judgment for over US$21 million remained in full force. The Court ordered the Defendants to pay the Claimant’s costs for both applications, to be assessed by the Registrar on the standard basis if the parties could not reach an agreement. This effectively concluded the Defendants' attempts to challenge the judgment through these specific procedural avenues.

What are the wider implications of this judgment for DIFC commercial litigation?

This case serves as a stern warning to litigants that the DIFC Courts will not tolerate tactical withdrawals from trial proceedings. Practitioners must anticipate that if a client chooses to abandon a trial following an adverse procedural ruling, the Court will likely treat that as a failure to attend under RDC 35.14, making it exceptionally difficult to set aside any subsequent judgment. The ruling also highlights the Court's readiness to draw adverse inferences in fraud cases where financial transactions remain unexplained. Litigants must ensure that all evidence, particularly concerning fund transfers in trade finance, is robustly defended during the trial itself, rather than attempting to introduce new arguments post-judgment.

Where can I read the full judgment in SBM Bank v Renish Petrochem [2018] DIFC CFI 054?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/sbm-bank-mauritius-ltd-v-1-renish-petrochem-fze-2-mr-hiteshkumar-chinubhai-mehta-3-prime-energy-fze-4-national-bank-2018-difc-cf or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-054-2018_20220513.txt.

Cases referred to in this judgment:

Legislation referenced:

• RDC 35.14
• RDC 35.16
• RDC 35.17
• RDC 35.18
• RDC 44.5