EMIRATES NBD BANK v ADVANCED FACILITIES MANAGEMENT [2022] DIFC CFI 065 — Immediate judgment granted for AED 1.9 billion syndicated debt (09 May 2022)

The DIFC Court of First Instance has affirmed the robustness of syndicated facility agreements, granting immediate judgment for approximately AED 1.9 billion in outstanding debt and rejecting complex counterclaims of duress and misrepresentation.

What were the specific grounds for the AED 1.9 billion claim brought by Emirates NBD Bank and the syndicate against Advanced Facilities Management?

The dispute centered on the failure of the borrower, Advanced Facilities Management, to meet its repayment obligations under a series of syndicated facility agreements executed on 27 December 2018. The syndicate, led by Emirates NBD Bank and including seven other financial institutions, provided both conventional and Islamic financing to the defendants. The core of the claim involved the borrower's default on payment dates in October 2019 and January 2020, which triggered a formal Notice of Acceleration in February 2020.

Beyond the monetary debt, the Claimants sought specific performance regarding the registration of a short-form mortgage over the "DIP 365 Camp" property. The Defendants failed to perfect this security, leading to the following summary of the breach:

It is common ground that Advanced Facilities failed to make payments on 31 October 2019 and 30 January 2020 in accordance with the CFA and the Islamic Facility (together the “Facility”), constituting Event of Defaults, leading to notices of default and a Notice of Acceleration on 3 February 2020 with subsequent demands under the guarantees. No payments have been made and Advanced Facilities has failed to register the short form mortgage and perfect the security referred to above.

Which judge presided over the immediate judgment application in CFI 065/2020 and when was the order issued?

Justice Sir Jeremy Cooke presided over the application for immediate judgment in the DIFC Court of First Instance. The hearing took place on 20 and 21 April 2022, with the final Order with Reasons issued on 9 May 2022.

How did the parties frame their arguments regarding the alleged collateral contract and agency relationship involving Noor Bank?

Tom Montagu-Smith QC, representing the Claimants, argued that the Facility documentation was clear and that the Defendants’ attempts to introduce collateral contracts or agency theories were merely tactical efforts to delay the inevitable enforcement of the debt. The Claimants maintained that Noor Bank acted strictly within its capacity as an arranger and that no representations made during a December 2018 meeting could override the express terms of the signed agreements.

Conversely, Orlando Fraser QC, for the Defendants, contended that the Facility was entered into under duress and based on misrepresentations. The Defendants alleged that Noor Bank had made specific promises regarding the provision of future working capital during a meeting on 16 December 2018. They argued that Noor Bank acted as an agent for the entire syndicate, thereby binding the other lenders to these alleged collateral promises. The Defendants further asserted that the failure to provide this working capital constituted a breach that vitiated the underlying loan agreements.

What was the precise doctrinal issue the Court had to resolve regarding the existence of a collateral contract and agency?

The Court was tasked with determining whether the Defendants had a "realistic prospect of success" in establishing that a binding collateral contract existed, or that an agency relationship existed between Noor Bank and the other syndicate members that would render the entire syndicate liable for Noor Bank’s alleged pre-contractual statements. The legal question was whether the evidence presented by the Defendants met the threshold required to defeat an application for immediate judgment under RDC Rule 24.1, or if the allegations were legally and factually unsustainable.

How did Justice Sir Jeremy Cooke apply the test for immediate judgment in rejecting the Defendants' claims of misrepresentation?

Justice Sir Jeremy Cooke applied the standard established in Swain v Hillman, assessing whether the Defendants had any realistic prospect of success. The Judge scrutinized the timeline of events, noting that the Defendants had continued to operate under the Facility without attempting to rescind the contract until the litigation commenced. The Court found the Defendants' narrative regarding the December 2018 meeting to be unsupported by the documentary evidence.

The Judge emphasized that the Defendants failed to demonstrate any legal basis for their claims of agency or collateral promises:

In my judgment, therefore, the Defendants have no realistic prospects of success in establishing that, at that meeting on 16 December 2018, any promise, statement, undertaking or guarantee was made on the part of Noor to provide working capital to the BBIH Group.

The Court further noted that the Defendants' own conduct—specifically the procurement of security from OBN Energy—demonstrated that the syndication was a commercial transaction, not one induced by the alleged misrepresentations.

Which specific statutes and RDC rules were central to the Court’s determination in CFI 065/2020?

The Court’s decision was primarily governed by the Rules of the DIFC Courts (RDC), specifically RDC Rule 24.1, which provides the framework for immediate judgment. The substantive dispute involved the interpretation of the Conventional Facility Agreement (CFA), the Master Murabaha Agreement (MMA), and the Investment Agency Agreement (IAA). The Court also addressed the application of English law, which governed the Facility documentation, and considered the relevance of AAOIFI Standards in the context of the Islamic Facility, ultimately concluding that the documentation did not incorporate these standards as binding contractual terms.

How did the Court utilize English case law to evaluate the Defendants' defences?

The Court relied on several English authorities to define the scope of summary judgment and the interpretation of contractual documents. Swain v Hillman [2001] 2 All ER 91 was the primary authority for the "realistic prospect of success" test. ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 was used to reinforce the principle that the court should not be deterred from granting summary judgment where the evidence is clear. Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550 and ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 were cited to address the limitations of collateral contracts and the interpretation of contractual recitals, with the Court noting:

The effect of these two Recitals is not, in my judgment to incorporate the AAOIFI Standards into the Loan Documentation but to recite the agreed position.

What was the final disposition and the specific orders made by Justice Sir Jeremy Cooke regarding the AED 1.9 billion debt?

The Court granted the Claimants' application for immediate judgment in its entirety. Justice Sir Jeremy Cooke ordered that the Claimants were entitled to judgment for the outstanding sums, to be calculated based on the Finance Documents. The Court directed the parties to liaise to fix a timetable for the submission of accurate figures and a draft order for specific performance regarding the registration of the short-form mortgage. The Court also indicated that the Claimants would be entitled to their reasonable costs, subject to the submission of a detailed schedule of costs.

What are the wider implications for DIFC practitioners regarding syndicated loan enforcement and the "realistic prospect of success" test?

This judgment serves as a significant precedent for the enforcement of syndicated loan agreements within the DIFC. It clarifies that defendants cannot easily avoid summary judgment by alleging collateral oral agreements or agency relationships without robust, contemporaneous evidence. Practitioners should note that the DIFC Courts will strictly interpret the "realistic prospect of success" test, particularly where the parties are sophisticated commercial entities. The ruling also underscores that the Court will not permit the introduction of external standards (such as AAOIFI) to override the express terms of the signed loan documentation unless explicitly incorporated.

Where can I read the full judgment in Emirates NBD Bank v Advanced Facilities Management [2022] DIFC CFI 065?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-065-2020-1-emirates-nbd-bank-pjsc-2-al-khaliji-france-s-3-hsbc-bank-middle-east-limited-4-united-arab-bank-pjsc-5-united-ban-4

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC), Rule 24.1
• Conventional Facility Agreement (CFA)
• Master Murabaha Agreement (MMA)
• Investment Agency Agreement (IAA)
• Common Terms Agreement (CTA)
• Accounts, Intercreditor and Security Agency Agreement