High Court uses discretion to allow bank's application for summary judgment instead of default judgment in respect of debt claim against foreign borrower

In a recent decision, the High Court granted summary judgment in favour of a bank on its debt claim under a credit agreement, in circumstances where the foreign-domiciled borrower failed to file an acknowledgement of service or a defence. The court approved the bank's request for summary judgment, instead of the usual remedy in these circumstances of default judgment, on the basis that it would be more readily enforceable (particularly in other jurisdictions): Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden NV v Societe Bengaz SA & Anor [2024] EWHC 901 (Comm).

This decision will be of interest to financial institutions considering the international enforcement of an English judgment in cross-border disputes. The judgment highlights that there may be reasons why a financial institution may wish to apply for summary judgment instead of a default judgment in a debt claim; for example, because it may be more readily recognised and enforced by foreign courts compared to a default judgment (which is quicker and less costly).

In the present case, the foreign borrower had failed to file either an acknowledgement of service or a defence in response to the bank's debt claim. Usually, in such circumstances, the typical remedy is default judgment. However, in this case the bank applied for: (i) permission to apply for summary judgment (rather than default judgment); and (ii) summary judgment.

The central issue before the court was whether it should exercise its discretion under CPR 24.4(1) to allow the bank's request for summary judgment instead of default judgment. The court considered key principles relating to fairness, jurisdiction and enforceability before concluding that it was appropriate to grant the bank permission in the circumstances. It is notable that two important factors influencing the court's decision related to enforceability: (i) it might be necessary in this case for the claimant to enforce any judgment obtained overseas given the cross-border nature of the claims; and (ii) the foreign borrower failed to give any asset disclosure and therefore it was important for the bank to ensure it had the best possible chance of enforcing a judgment of the English Court in other jurisdictions (given it did not know the location of the borrower's assets).

We consider the decision in more detail below.

Background

The claimant bank, entered into a credit agreement and associated security documentation with the first defendant, a Benin SPV company (Bengaz). The purpose of the credit agreement was to finance Bengaz's investment in the second defendant, a Bermudan company (West African). Under the terms of the contractual documentation, funds received by or due to Bengaz in its capacity as a shareholder of West African (the Shareholder Payments) were to be paid to a specific bank account in London. The bank took security over this account.

Bengaz subsequently defaulted on its repayment obligations under the credit agreement and owed the bank approximately US$56 million (including interest). The bank discovered that the funds received from West African were not paid into the appropriate account as required under the relevant contractual documentation. Instead, the funds were paid into a bank account in Benin on the instructions of Bengaz.

The bank brought a debt claim against both Bengaz and West African. Bengaz did not file either an acknowledgement of service or a defence. The bank subsequently issued an application seeking: (i) permission to apply for summary judgment (rather than default) against Bengaz; and (ii) for summary judgment for the sum of US$56 million.

Decision

The High Court found in favour of the bank and allowed its application against Bengaz for the reasons set out below.

Permission to apply for summary judgment

The court said it was appropriate to grant the bank permission to apply for summary judgment (rather than judgment in default) against Bengaz in this case.

In its analysis, the court referred to the criteria set out in DVB Bank SE v Vega Marine Ltd [2020] EWHC 1494 (Comm) on the timing of an application for summary judgment.

First, as per CPR 24.4(1), a claimant may not apply for summary judgment until the defendant against whom the application is made has filed (a) an acknowledgement of service; or (b) a defence, unless – (i) the court gives permission; or (ii) a practice direction provides otherwise. There is no requirement for a party to obtain permission under CPR 24.4(1) before issuing a summary judgment application: both applications can be made in the same application notice.

Second, in exercising its discretion under CPR 24.4(1), the court should have regard to the following principles:

• Fairness: the purpose of the rule is to ensure that no application for summary judgment is made before a defendant has had an opportunity to participate in the proceedings and to protect a defendant who wishes to challenge the court's jurisdiction from having to engage on the merits pending such application.
• Jurisdiction: generally, permission should be granted only where the court is satisfied that the claim has been validly served and that the court has jurisdiction to hear it. Once those conditions are met there is generally no reason why the court should prevent a claimant with a legitimate claim from seeking summary judgment.
• Enforceability: the fact that a summary judgment may be more readily enforced in other jurisdictions than a default judgment is a proper reason for seeking permission under CPR 24.4(1). Also, it would be sufficient that the claimant has a reasonable belief that a summary judgment may be more readily enforced than a default judgment. There is no justification for the court subjecting any such belief to minute examination, when the permission the claimant is seeking is in reality no more than the opportunity to obtain a reasoned judgment on the merits of its claim.

The court concluded that these criteria were satisfied, in particular:

• The nature of the relief sought by the bank included declaratory and injunctive relief, and so default judgment would not be an appropriate or adequate remedy.
• It might be necessary to enforce any judgment obtained overseas given that the companies are incorporated in other jurisdictions, the cross-border nature of the claims and the fact of separate proceedings before the courts of Benin and Togo.
• Bengaz failed to give any asset disclosure and it was therefore important for the bank to ensure that it had the best possible chance of enforcing a judgment of the English Court in other jurisdictions (given it did not know the location of Bengaz's assets).

Summary judgment

The court said the bank was entitled to summary judgment against Bengaz.

In its reasoning, the court highlighted that when assessing whether there are grounds for summary judgment, as per CPR 24.3, it would need to conclude: (a) that a party has no real prospect of succeeding on the claim, defence or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.

The court considered well-known principles applicable to summary judgment applications summarised in Iiyama (UK) Ltd and others v Samsung Electronics Co Ltd and others [2018] EWCA Civ. Additionally, the court noted that if an applicant for summary judgment adduces credible evidence in support of the application, the respondent then comes under an evidential burden to prove some real prospect of success or other reason for having a trial (as per Sainsbury’s v Condek [2014] EWHC 2016 (TCC)). Finally, the court highlighted that a respondent to a summary judgment application who claims that further evidence will be available at trial must serve evidence substantiating that claim (as per Korea National Insurance Corporation v Allianz Global Corporate & Speciality AG [2007] EWCA Civ 1066).

The court concluded that it was satisfied that the bank was entitled to the sum sought, that there was no real prospect of Bengaz succeeding in any defence to the claim, and that there was no other compelling reason why the case should be disposed of at trial. The court considered that while Bengaz had engaged to a degree with the proceedings and had given general expressions of opposition to the bank's claim, it had not filed a defence, nor set out substantive grounds of defence, nor filed any evidence in opposition to the bank's claims and summary judgment application. Also, West African had stated that it did not oppose the summary judgment application and took a neutral stance.

Accordingly, for all the reasons above, the court found in favour of the bank and allowed its application against Bengaz. In addition, the court granted a number of declarations, mandatory and other relief, and disclosure sought by the bank.