Claim No: CFI 015/2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai 

IN THE COURT OF FIRST INSTANCE

BEFORE JUSTICE ROGER GILES

BETWEEN

ASIF HAKIM ADIL 

                                                                                                                            Claimant

and

FRONTLINE DEVELOPMENT PARTNERS LIMITED

Defendant

Hearing:            19-21 May 2015

Counsel:           Bushra Ahmed (KBH Kaanuun) for the Claimant.

Zeeshan Dhar (Al Tamimi & Co) for the Defendant.

Judgment:        30 March 2016

JUDGMENT OF JUSTICE ROGER GILES

Summary of Judgment

 This summary is not part of the Judgment and should not be cited as such

INDEX

1. Introduction and Statement of Result

1.The Claimant, Mr Asif Adil, was employed by the Defendant, Frontline Development Partners Ltd (“Frontline”), as its Managing Director under an employment contract dated 20 August 2011 (“the Contract”).

2. In the Particulars of Claim Mr Adil alleged that from 1 July 2013 Frontline failed to pay his salary or provide his other employment benefits, whereupon on 28 November 2013 he gave notice of his resignation effective on 3 March 2014; but that Frontline did not “activate” the resignation letter and “implicitly indicted to the continuous of the Employment relationship between the Parties [sic]”, and on 27 April 2014 itself terminated the employment effective immediately. He claimed unpaid salary and the money value of other employment benefits, including for a six months notice period; a statutory penalty for non-payment of salary; an end of service gratuity; reimbursement of out of pocket expenses; and “Abusive Dismissal Compensation”: all on the basis of employment until wrongful termination by Frontline on 27 April 2014.  The total claim was in the order of USD 1.77 million plus an ongoing statutory penalty at USD 1,666 per day.

3. In the Amended Defence and Counterclaim Frontline alleged that it had lawfully terminated the employment without notice on 30 June 2013, for “numerous and serious breaches” of the Contract by Mr Adil which enlivened a contractual right of termination for cause; alternatively, that there was termination with immediate effect “through mutual recognition and agreement of the parties on around 30 June 2013”; alternatively again, that there was termination by Mr Adil’s resignation “which took effect immediately and without notice through his abandonment of his usual place of work… on 1 July 2013 and his failure to attend thereafter”. Frontline denied that Mr Adil was entitled to any salary or other employment benefits, even if the termination had been by the resignation effective on 3 March 2014, on the ground that he had been absent from his normal workplace and did not perform any duties for it after 30 June 2013.  It counterclaimed for damages for the breaches of the Contract and of fiduciary duty, and for relief to protect confidential information and intellectual property and to restrain Mr Adil in other employment or engagement.  The money content of the counterclaim was not fully quantified, but so far as it was quantified was in the order of USD 2.9 million.

4. Some of the claims fell away, and in a number of respects the course of events as revealed in the evidence departed from the pleaded cases. On the cases of the parties as ultimately presented, Mr Adil principally contended that a purported termination of his employment on 30 June 2013 was ineffective and he remained employed until his resignation on 28November 2013, and Frontline principally contended that the employment was terminated for cause on 30 June 2013.  It will be necessary to describe what happened, and the parties’ contentions, in some detail.

5. For the reasons which follow, in my opinion –

(a) the employment was terminated on 30 June 2013;

(b) the termination was not for cause, but pursuant to a contractual right to terminate without notice on payment in lieu of the notice entitlement;

(c) Mr Adil is entitled to a total recovery of USD 359,411.12 in AED equivalent and a penalty amount calculated at USD 1,643.84 from and including 15 July 2013.

(d) the breaches of contract and of fiduciary duty are not made out;
and

(e) Frontline is not entitled to the other relief claimed in the counterclaim.

6. The delivery of these reasons has taken longer than I would have wished. Settlement negotiations displaced time for oral submissions on the allotted hearing days.  The happy event of marriage of one Counsel intervened in the exchange of written submissions. I then requested further submissions, including orally, which were arranged for the next occasion of my coming to Dubai.  These circumstances explain the delay, which is nonetheless regrettable.

2. The Parties

7. Mr Adil obtained the degrees of Bachelor of Arts (Political Science) and Bachelor of Laws from Mumbai University, and Master of Business Administration from Cornell University. He gained qualification as a Certified Practicing Accountant.  From 1980 he held positions with entities concerned with retail businesses, particularly involving alcoholic beverages.

8. In mid-2010 he and his son Samir established a partnership, Adil Global & Sons (“AGS”), principally to carry on the business of exporting alcoholic products from India to African markets such as Benin, Kenya and Ghana. Samir was the majority partner, and Mr Adil’s role was limited to establishing relationships and contacts and providing strategic input.  AGS plays a limited part in the events to be described.

9. Frontline is a company ultimately controlled by Mr Suresh Chaturvedi, an Indian national resident and based in Mumbai. Other companies controlled by Mr Chaturvedi (at least de facto), which also play parts in the events to be described, include Overseas Infrastructure Alliance (India) Pvt Ltd (“OIA”), an Indian company, and Project Development & Engineering Ltd (“PDEL”), a Mauritian company.  Mr Chaturvedi appears to have had many years of business experience, but any formal qualifications and his business history were not detailed in the evidence.

10. Mr Adil and Mr Chaturvedi became acquainted in about 2002. In about August 2010 Mr Adil began to provide consultancy services to OIA, through AGS, in particular in developing a strategy for growth and diversification.  The consultative discussions included, but were not limited to, establishing a business in Dubai to provide advice and financial services in support of infrastructure project development; according to the minutes of a meeting on 18 September 2010, to “enable OIA to be an early mover in the financial services in select sub-Saharan African countries”.

11. In the result, on 28 June 2011 Frontline was incorporated in the DIFC, to provide “government consultancy and project advisory services”. It was licensed as a non-regulated entity, and could not conduct investment activities.  The shareholders were companies ultimately controlled by Mr Chaturvedi.

3. The Contract

12. Mr Chaturvedi became the Chairman of Frontline. He invited Mr Adil to become its Managing Director.  After discussions, to some of which I will return, Mr Adil agreed to relocate from India to Dubai and take up that position.

13. Mr Chaturvedi asked Mr Adil to provide one of his old employment contracts. Mr Adil sent him a copy of the contract under which, from 2006 to 2009, he had been Managing Director South Asia of Diageo Plc (“the Diageo contract”).  At about the end of July 2011 Mr Chaturvedi sent Mr Adil a draft employment contract largely based on the Diageo contract.

14. In early August 2011 the two men met and discussed the draft; again, I will return to some of the discussions. The Contract, in the form of the draft, was signed on 20 August 2011.

15. The Contract began –

“The following Contract of Employment (“Agreement”) sets out the terms and conditions of your employment with Frontline Development Partners Limited (hereinafter called “the Company”).

Any changes to the terms and conditions stated below will be notified to you in writing and as such will constitute final variations to your contract of employment.  The company is at its discretion entitled to change any of the terms and conditions stated below and any such change/s will become part of this contract of service as if incorporated herein on the company notifying you the change.

In this statement [sic] “Group” mean those companies, which comprise the Frontline Development Partners Limited Group of companies, as constituted from time to time.”

16. Boxes then recorded employment as Managing Director commencing on 1 September 2011, at a “gross salary” of USD 600,000 per annum payable in equivalent AED monthly in arrears and with annual leave in accordance with DIFC Employment Law No 4 of 2005 including amendments thereto.

17. Clause 1 provided –

“1.  APPOINTMENT AND POSITION

You are employed by the Company in the position of Managing Director.  We recognize your employment with the Company from 1st September, 2011.  You shall be in exclusive employment with the Company for a period of five (5) English calendar years on a full time basis and on such terms and conditions as contained herein, unless its earlier determination/termination in accordance with this Agreement and the requirements of applicable British laws.

You shall be located at the Corporate Office of the Company in Dubai.  However, your services can be transferred to any place within the country or abroad at any time depending on the business exigencies or other requirements of work.  You will be given notice in writing of any such transfer and, with effect from the date specified in such notice; you will become employed by the Transferee.  Your continuity of employment and your terms and conditions of employment (including this term), will, of course, be preserved.

As Managing Director, you should be available for the work of the company at any part of the day, 365 days a year basis and the compensation package stipulated by this contract is all inclusive including the abnormal hours of work, working on holidays, if any that you may be required to put in having regard to level of appointment, needs of the company, and the demands of the work situation though the Company’s business hours are normally 9.30 A M to 5.30 P M and the company works on 5 day week schedule.”

18. Clause 2 provided –

“2.  YOUR DUTIES

You must:

(a) perform to the best of your abilities and knowledge the duties assigned to you;

(b) act in the Company’s best interests;

(c) comply with all policies of the Company in place from time to time;

(d) comply with all law applicable to your position and the duties assigned to     you; and

(e) report to the person or persons nominated by the Company from time to      time.”

19. By Clause 4, Mr Adil was “entitled to a fully maintained company car” up to a stated purchase value.

20. Clause 3, under the heading “YOUR SALARY”, provided that Mr Adil –

“…will receive a gross basic salary of USD 600,000 (US Dollars Six Hundred Thousand only) per annum equivalent in United Arab Emirates Dirham (AED) which will be paid in 12 equal monthly instalments”.

There was then provision for review of the salary.  So far as appears, it was never reviewed pursuant to this provision.

21. Clauses 5, 6 and 7 provided –

“5.  GRATUITY

Gratuity payments will be in accordance with the Company scheme.

6. FRONTLINE DEVELOPMENT PARTNERS LIMITED EXECUTIVE INCENTIVE PLAN (EIP)

This is an annual incentive plan based on the Company’s achievement of Operating Profit targets and your individual performance.  Any bonus will be calculated on a pro-rata basis for completed months during the current financial   year.

      The plan is applicable to employees who have at least one complete calendar month’s service.

Each year your declared bonus will be determined based on your individual performance against objectives and leadership capabilities.

Payments under this scheme are made once the annual results have been audited and are subject to normal deductions of income tax and other Applicable taxes, if any.

Further explanation of the plan mechanics can be found in the EIP plan summary available from your local HR team.  Details of business performance targets for the 2011 (F11) plan year will also be provided under separate cover.

Any payments made under this plan are at the complete discretion of the Chief   Executive of Frontline Development Partners Limited Business Solutions.

7. EQUITY GRANT

You will be granted Equity Grant of total value of USD 500,000 (US Dollars Five Hundred Thousand only) per annum equivalent in United Arab Emirates Dirhams (AED) in various Companies of the Group”

22. By Clause 11, the Claimant was “eligible for corporate membership of one club in Dubai”.

23. Clause 12 provided –

“12. DRIVER

You will be eligible for a company provided driver with a cost up to maximum of $5,000 (US Dollars Five Thousand only) equivalent in United Arab Emirates Dirham (AED) per annum.  This is inclusive of all expenses related to driver.”

24. Clause 19 provided –

“19. NO SIMULTANEOUS EMPLOYMENT

While in the employment of this Company you will not, under any circumstances, be permitted to work for any other firm of persons, either whole time or part-time, nor in any way be associated with any firm of persons as Advisor, Director, Partner, whether paid or not for your services, without the prior written permission of the Company.  In case this condition is contravened, your employment will be deemed to have ceased in terms of this appointment as a result of misconduct and a breach of your obligations under this letter of appointment.”

25. Clauses 21 and 22 made extensive provision in relation to confidential information and intellectual property. I do not set them out or further describe them; as later indicated, Frontline did not seriously seek to make out a case for relief to protect confidential information or intellectual property.

26. Clauses 23 and 24 provided –

“23. OBLIGATIONS DURING YOUR EMPLOYMENT

During your employment you will be expected to:

• Well and faithfully serve the Company and use all proper means in-your power to maintain, improve and extend the business of the Company, and any company in the Frontline Development Partners Limited group and to protect and further the reputation and interests of the Company, and any company in the Frontline Development Partners Limited group.
• Perform and observe such instructions as may reasonably be assigned or communicated to you by your manager.
• Devote the whole of your time and attention during business hours to your duties as an employee. You will not at any time, without the written consent of your line manager be directly engaged, concerned or interested in or connected with any other company, business or concern (except as the holder of shares, stock, debenture stock in any other company quoted or dealt on any recognized stock exchange).24. TERMINATION

Save for in circumstances where dismissal without notice is justified, your employment may be terminated at any time by you giving the Company 3 months written notice or by the Company giving you 6 months written notice or by paying you an amount equal to your base salary in lieu of notice for that period.

The Company reserves the following rights:

(a) to terminate your employment without notice and to pay you a sum of lieu of your           notice entitlement or the balance of it (as the case may be) being a sum equivalent to your gross basic salary (after the deduction of any income tax or other social security contributions as required) which shall be taken to adequately compensate you in respect of salary and contractual benefit entitlements during the period for which you are being paid in lieu;

(b) to continue to pay you normally during your period of notice but to provide you with       alternative duties commensurate with your status;

(c) to specify that you will be required not to carry out your duties and not to provide you with any duties during all or part of your notice period (hereinafter referred to as “Garden Leave”).  The Company may also exclude you from any premises of the Company or any company in the Frontline Development Partners Limited group.  You shall continue to receive your full salary and all other contractual benefits during Garden Leave.  However, during Garden Leave, you will continue to be required to hold yourself available to assist with answering any questions or dealing with any other matters relating to your work and you will remain an employee of the Company and will not be in a position to take up new employment until such time as your period of employment with the Company terminates.  You may also be subject to such other conditions during Garden Leave as your manager considers appropriate.

 (d) Terminate your employment at any time without notice if you:

(i) disobey a lawful direction of the Company;

(ii) are guilty of other serious misconduct;

(iii) behave contrary to Company expectations of responsible behaviour; or

(iv) breach any other material provision of this Agreement including paragraphs 2, 20, 21, 22, 23 and the Frontline Development Partners Limited Code of conduct.
(collectively, “Gross Misconduct”)”

27. Clause 26 provided for restraint on Mr Adil’s activities after termination. Again, I do not set it out or further describe it, because Frontline did not seriously seek to make out a case to restrain Mr Adil in post-termination employment or engagement.

28. Clause 29 provided that the Contract was governed by the laws applicable in the United Kingdom, and for the exclusive jurisdiction “of the courts of London of this Agreement”.

29. Clause 32 of the Contract included –

“The terms and conditions of employment set out in this Agreement supersede any prior oral or written agreements with you.  This Agreement may only be altered in writing signed by both parties.”

30. The Diageo contract was not in evidence, but it is clear enough that its adoption as the basis for the Contract was not particularly appropriate. For example, there was no evidence of, or even that Frontline had, a scheme for gratuity payments (cl 5), and it did not have an executive incentive plan (cl 6).  Clauses 16 and 24 (d) (iv) referred to compliance with an attached Code of Conduct, but none was attached.  Whether the provision for an equity grant (cl 7), which was of some importance in the proceedings, was taken from the Diageo contract is not clear.

31. Neither party invoked the governing law and exclusive jurisdiction clause (cl 29) in the proceedings.

4. The Fronteira Connection

32. It is convenient to introduce at this point the Mozambican company Fronteira, LDA (“Fronteira”).

33. According to Mr Adil, in February 2011 he was in Mozambique making a presentation to the Government in the course of his consultancy for OIA. The sale of alcoholic beverages being of interest to him, he noted an opportunity for AGS to produce such beverages in Mozambique.  Over the next months he investigated further as his consultancy took him there, and in late June 2011 he reached a handshake agreement with two local partners for a 51/49 percent shared company producing and selling alcoholic beverages in Mozambique.  The AGS contribution was to be USD 600,000, alcohol production technology, and the services of Samir full time and Mr Adil for “strategic input”.

34. Still according to Mr Adil, Mr Chaturvedi had accompanied him on some of his visits to Mozambique, and prior to reaching an agreement with the local partners Mr Adil told Mr Chaturvedi that alcohol manufacturing in Mozambique was a good business proposition; whereupon Mr Chaturvedi “said something along the lines of: ‘Asif, because I introduced you to Mozambique, if you do any liquor venture or other venture in Mozambique, I want right of first refusal’”.

35. Mr Adil said that when he was asked to become Managing Director of Frontline, Mr Chaturvedi expressed interest in investing with him in what AGS was doing in Mozambique. Mr Adil took this to mean invest personally, since Frontline’s business was not alcohol manufacturing and alcohol-related business was prohibited in the UAE without a special licence.  In their further discussions Mr Adil told Mr Chaturvedi of his handshake agreement, and Mr Chaturvedi said he wanted to co-invest; that is, he would contribute USD 300,000 and Mr Adil (or AGS) would contribute USD 300,000.

36. On Mr Adil’s evidence, the co-investment became linked with the terms of his employment. Mr Adil had told Mr Chaturvedi that he wanted at least the same remuneration as in his earlier employment, being USD 1.1 million per annum.  The discussion of co-investment continued, still according to Mr Adil –

“93.  SC [Mr Chaturvedi] told me that FDPL [Frontline] would pay me a basic salary of USD 50,000 per month.  SC explained that the differential between the yearly basic salary FDPL would pay me and the salary I had asked for (i.e. USD 500,000) would be paid to me as balance compensation or an incentive payment, which I was to invest in ventures like Fronteira.  He then would then match the payment with his own funds and provide it to me to invest in Fronteira.

94. So for example, if I was paid USD 500,000 as balance compensation/incentive payment and I invested that in Fronteira, SC would then also invest USD 500,000 in Fronteira.  As SC would be matching my balance compensation/incentive payment, it would result in a situation whereby SC and I would be partners in joint ventures like Fronteira.  The idea was that SC wanted to partner with me in a number of businesses.”

37. Later, when they were discussing the draft Contract –

“101. Given I was satisfied with my basic remuneration, I went on to discuss the balance compensation / incentive payment.  Clause 7 of the Employment Contract referred to the discussion we had had about the balance compensation /incentive payment.  However, it did not properly reflect our discussion in             that it characterised the payment as an “Equity Grant”, and furthermore said         that I would be granted equity in “various companies of the Group”.  I did not know what that meant and so I asked SC.  He told me that because he was investing in Fronteira, that would then become a group company.

a. As far as a corporate structure is concerned there is no “Group”, but SC used the            word to characterise the companies that he had an interest in.  For example, there was OIA and FDPL, which were completely separate entities albeit owned     by the same person in some shape or form.  I told him I did not agree with his          interpretation that Fronteira would become a “Group” company, but was willing to       go along with it.

103. He also said to me that clause 7 would allow us to partner with each other in other suitable ventures as we had discussed.

104. I asked him when the balance compensation/incentive payment would be paid.  He said it would be paid at the end of each quarter.

105. At this point he informed me that he was likely to match my balance compensation through a company called PDEL, which was in Mauritius….
…

111. In approximately December 2011, SC confirmed that he would be matching my balance compensation/incentive payment/Equity Grant through PDEL, which would mean that Fronteira would become a joint venture between SC and myself pursuant to clause 7 of my Employment Contract. I asked him who PDEL was.  SC told me that PDEL was a trust company beneficially owned by him but managed by FITCO [First Island Trust Company] in Mauritius and by PP Shah and Associates in India”….

38. Mr Chaturvedi gave a different account of the Fronteira connection. According to him, between 1 September 2011 and February 2012 when setting up Frontline, Mr Adil “identified several projects amongst which one particular project was a liquor project in Mozambique on which the Claimant commenced working on behalf of the Defendant”.  He said that Mr Adil “was entrusted with setting up and growing the venture’s operations”, that he (Mr Chaturvedi) directed Mr Adil to set up the joint venture company, and that “Fronteira” was a play on “Frontline”.  He said that it was agreed that Mr Adil would be given an equity stake in the new venture, which would be funded by PDEL: PDEL would provide USD 600,000 being USD 300,000 for its own share and USD 300,000 as the cost of Mr Adil’s equity share.  Mr Adil was to draft a Shareholders Agreement under which PDEL and he would each hold 25.5 percent of the share capital of the company and two third parties would hold the remaining 49 percent.

39. Other than by this different account, Mr Chaturvedi did not deny Mr Adil’s account of their discussions about the equity grant. In his witness statement he asserted that an equity grant was a grant of shares and could not be a payment of money, like a deal of his witness statement effectively a submission, and said that Mr Adil had attempted to mix the concepts of equity grant and incentives and had tried to portray them as synonymous “whereas this was never the understanding”.  In cross-examination he said, in answer to a question that he agreed to pay USD 500,000 by way of balance compensation to invest in joint venture companies, that “The way it has been put is not right”, and then denied a similar question; but he agreed that he said that “money would be provided through PDEL, contribution will be provided through PDEL”.

40. In his witness statement in reply Mr Adil specifically denied that the Mozambique liquor project was at Mr Chaturvedi’s direction, and affirmed that it was commenced before he became employed at Frontline and that Mr Chaturvedi asked to be involved. He said that the name “Fronteira” was chosen by the local partners, and meant “border” in Portuguese and was not a play on “Frontline”.  He also specifically denied Mr Chaturvedi’s evidence concerning PDEL providing USD 300,000 as the cost of his equity share; he affirmed that he was to contribute and pay for his equity share from his balance compensation/incentive money, and said that it was a matter for Mr Chaturvedi that his (Mr Chaturvedi’s) money came from PDEL.

41. On either account, there was to be co-investment and PDEL was to invest USD 300,000 in Fronteira on its own account. As will be seen, this happened.

5. The Fronteira Shareholders Agreement

42. The local partners set up Fronteira as the vehicle for the venture. It was incorporated in November 2011, with Mr Adil and the two local partners as shareholders.

43. Between February and July 2012 PDEL paid approximately USD 325,000 to suppliers of machinery and equipment for the Fronteira production facility, some in February and some in June/July. I have stated an approximate figure because the figures in evidence differed, probably because of the use of different exchange rates in converting the underlying Indian National Rupees; nothing turns on arriving at precise figures.  Mr Adil also made a number of advance payments to various suppliers.  He said that he asked about his balance compensation/incentive payments and was told funds were short; he made the payments himself and assumed there would be later reconciliation.

44. In March 2012, after the first PDEL payments, Mr Adil was told by Mr Paresh Shah of PP Shah and Associates that PDEL would not provide more money until a shareholders agreement had been executed. According to Mr Adil, it was agreed jointly to instruct a lawyer but that shares would be assigned to an individual when all his contribution had been paid.

45. A draft shareholders agreement was provided on or about 18 May 2012, prepared by lawyers jointly instructed by OIA and Fronteira.

46. According to Mr Chaturvedi, but denied by Mr Asif, on about 28 May 2012 there was a discussion “during which it was confirmed that a transfer of shares to PDEL would take place wherein 25.5% shares would be transferred from [Mr Adil] to PDEL”.

47. On 28 or 29 May 2012 a FITCO representative emailed Mr Adil asking for “a copy of shareholder’s [sic] agreement, share transfer form, share certificate or similar confirming the transfer of shares to PDEL”. Mr Adil replied –

“We have prepared the Share Transfer and Shareholders Agreement which are attached with this email. These will be executed during my current trip to Mozambique beginning May 30th, 2012.  In the meanwhile, I ask you to immediately release the sums of money that have been discussed with Mr Paresh Shah as this is most critical.”

The attachments to the email were not in evidence.  No form of share transfer at all was in evidence, but there were forms of shareholders agreement.

48. On 30 May 2012 Mr Adil obtained the execution of the local partners and himself executed the shareholders agreement. The version so executed differed in some respects from an unsigned version in evidence, possibly an earlier draft but the evidence does not permit a finding.  Early in June 2012 he provided an executed copy to Mr Purshottam Maheshwari of OIA, effectively Mr Chaturvedi’s Chief Accountant, for execution by PDEL.

49. The shareholders agreement as so executed was expressed to be between PDEL, Mr Adil, the two local partners and Fronteira. It recorded the current “shareholding pattern”, being 510 shares for PDEL and Mr Adil and the balance for the local partners.  Equity and loan contributions were to be in proportion to shareholdings:  nothing else was said about current contributions.  In the unsigned version just mentioned it was said that “[c]ontributions of USD 300,000 each have been received by the Company from all the shareholders”.  As part of the provisions for the operation of Fronteira Mr Adil was designated as Managing Director, with power of delegation.

50. The shareholders agreement was not executed by PDEL. On 26 June 2012 Mr Shah emailed Mr Adil asking for a number of changes.  His email began –

“PDEL is awaiting share certificate and as discussed in Mumbai the amended shareholder’s [sic] [agreement incorporating the following issues –

1. a) Mr Asif Adil can sell his shares with the consent of PDEL and PDEL investment of USD 600,000 is recovered

…”.

51. Mr Adil’s reply on the same day commented on the changes, and included as to a) above, “Only to extent of USD 300,000 as the balance is compensation – please draw agreement between the two parties as previously explained”. It also included –

“Share certificate as previously explained can only come when pdel representation [sic] comes to maputo with other shareholder to registrar of companies.  You are supposed to give dates of visit.”

52. There was no explicit evidence of any previous explanation, but Mr Adil gave evidence, apparently referring to the occasion when it was agreed to jointly instruct a lawyer, that “PDEL was also informed that in order to register the shares it required the personal attendance of PDEL at the Ministry of Justice Maputo”.

53. The shareholders agreement remained unexecuted by PDEL. PDEL nonetheless made the June/July 2012 payments to suppliers of machinery and equipment.

54. In circumstances not explained in the evidence, on 12 July 2013 Mr Shah sent to Mr Adil an amended shareholders agreement “with minimum correction and in a most conventional form”. The amended agreement was not in evidence.

55. The evidence was then silent as to the form of the shareholders agreement until, on 14 January 2014, Mr Adil sent to Mr Chaturvedi “the final adjunct agreement as per our discussion on Saturday 11th January 2014 in Dubai”. The agreement said that it was an adjunct to “the Fronteira Shareholder Agreement signed in May 2012”, was expressed to be between PDEL and Mr Adil, and recited that they were the shareholders and between them held 51 percent of the equity of Fronteira.  It said nothing about Mr Adil selling his shares and recovery of PDEL’s investment.  There was no evidence explaining the arriving at the adjunct agreement, and it is not clear that it was executed.

6. The Fronteira Consultancy Agreement

56. A Consultancy Agreement dated 30 May 2012 was also entered into between PDEL, Mr Adil and Fronteira. Fronteira was a party “only as a confirming party”.  It was recited that the parties were “in the process of entering into Shareholder Agreement recording their mutual rights and obligations”, and that they had decided to enter into the Consultancy Agreement “to give effect to the agreement and the binding arrangement which the Consultant has entered into in the said Shareholder Agreement”.

57. By the operative clauses of the Consultancy Agreement, PDEL appointed Mr Adil as consultant for a period of ten years commencing from 1 April 2012. The description of his consultancy services was in the terms that he would conduct the business of Fronteira and “constitute [its] operating team”.  This was more than a consultancy, but as later appears on either account of its origin it was not truth a consultancy agreement.

58. By clauses 6 and 7 –

“6.  As determined by the Company [PDEL], the Consultant shall be entitled to the total consideration agreed, which shall be paid during the first year of service and thereafter Consultant is bound to render services without any further fees during the currency of this agreement.  Total consideration payable to the Consultant for such services shall be USD 300,000.

Out of the above stated remuneration, the Company has already paid a remuneration of USD 84,000 to the Consultant and is arranging for another payment of USD 116,000 during 1st week of June 2012.

Balance payment of USD 100,000 shall be paid as and when agreed between the parties.

7. It is agreed that the amount of consideration paid herein shall be invested by the Consultant in the JV Company [Fronteira].”

59. Clause 14 provided that “[d]uring the currency of this Agreement” the consultant would not without written consent of PDEL, “except as otherwise contemplated in terms of this agreement”, be directly or indirectly “engaged in or be financially interested in, nor will support or advise, for consideration or otherwise, any activity or enterprise which competes with the activities of the JV Company”. Nothing in the Consultancy Agreement gave content to the otherwise contemplation.

60. According to Mr Adil, the Consultancy Agreement was entered into at PDEL’s request (Mr Shah and Mr Maheshwari) in order to lock him in with a non-compete clause; and when he was told that “it would be useful” if the USD 300,00 was invested back into Fronteira, he agreed because it was a good idea and Fronteira was his investment also. Mr Adil said that the USD 300,000 was separate from any balance compensation/incentive payment.

61. According to Mr Chaturvedi, the Consultancy Agreement was entered into as a basis for giving Mr Adil his equity share in Fronteira; the USD 300,000 was to be invested in exchange for 25.5 percent of the shares. Still according to Mr Chaturvedi, PDEL paid USD 260,400 to Mr Adil pursuant to the Consultancy Agreement, and an excess payment to the suppliers of machinery and equipment and the shortfall in payment under the Consultancy Agreement “were adjusted against each other to effectively reflect the position that PDEL had made its own contribution of USD 300,000 and had contributed an equivalent amount on behalf of Asif Adil”.

62. Mr Adil said that the $84,000 had not been paid as recorded; it was put to him that he was paid that sum in cash, which he denied. There was no evidence of such a payment from Mr Chaturvedi or anyone else in Frontline’s case.

63. In June 2012 Mr Adil was paid USD 200,000 by PDEL. He said that it was not payment under the Consultancy Agreement, that he held it on trust for PDEL “but has nothing to do with FDPL”.  This enigmatic statement was left unexplored in the evidence.  Mr Adil said elsewhere that the money was given by PDEL “towards Fronteira”.  It was put to him that he was wrongly withholding USD 200,000 of a payment made by PDEL towards its [Frontiera’s ?] share capital, which he denied, and the matter was not effectively taken further.

64. I will return to the question of payment under the Consultancy Agreement in connection with underpayment or overpayment in respect of the equity grant.

65. In August 2012 Mr Adil paid USD 23,600 to PDEL. He said this was a refund of part of its payments to the suppliers of machinery and equipment, to bring its contribution to USD 300,000.  The figure was correct on Mr Adil’s calculation of the payments; but as I have said the evidence contained differing figures.  Again, nothing turns on this:  there was adjustment with a view to bringing the PDEL contribution to USD 300,000.  Perhaps obscurely, it was common ground that USD 300,000 of the February and June-July payments by PDEL to the suppliers of machinery and equipment were its investment of USD 300,000 on its own account; because Mr Chaturvedi said that the payment as the cost Mr Adil’s equity share was through the Consultancy Agreement together with adjustment.

7. The 30 June 2013 Meeting

66. At this point I go straight to a meeting between Mr Adil and Mr Chaturvedi on 30 June 2013. I will return to events prior to that date when considering cause for termination.

67. Frontline was fully operative by about the middle of 2012. It is not necessary to describe its activities in any detail.  It is sufficient to note that they included developing a cosmetics business in Ethiopia which was handed over to one of Mr Chaturvedi’s companies without fee; a cosmetics business in Mozambique which was brought to readiness for execution with investors; and a Tanzanian alcohol business, Wild Bull Beverages, which was “accepted” by a third party, Jambro Plastics, to implement and take forward and for which Frontline earned a development fee.

68. But Frontline was not yet profitable. As at 30 June 2013 it was in the red to the tune of approximately USD 3 million.

69. At Mr Chaturvedi’s request, he and Mr Adil met at Frontline’s premises in the DIFC on 30 June 2013. According to Mr Adil, Mr Chaturvedi said that the meeting would be about his salary.  Mr Chaturvedi did not specifically deny this, or give evidence of telling Mr Adil why he wanted the meeting:  he said in his witness statement, expressing his own state of mind, that he wanted to discuss “all the matters which I had discovered”.

70. In his witness statement Mr Chaturvedi said that Mr Adil had been avoiding him, but had finally agreed to meet on 30 June 2013, and –

“33.  During the meeting, I asked the Claimant what the plan was for the year 2013 to 2014. I proceeded to ask him about the performance of 2012 to 2013 and as to why targets had not been achieved. I mentioned to him   that it seemed inappropriate for him to be paid for working on hings that were not related to the Defendant. I also asked him what was happening in relation to the Tanzania liquor project. I asked him about    what had become of all the money that he had taken from the    Defendant. I finally asked him why PDEL had not been allotted its shares and why there had been delays on account of one reason or the  other.  He started acting in an erratic manner and began said [sic] “Why don’t you trust me” and “You have no trust in me”.

34.was at this time that he remarked that “Then should I say that I have      been terminated?” to which I said “yes”.  He had no answer to any of   the questions.”

71.According to Mr Chaturvedi, Mr Adil then said, “My lawyers will reply to you now and I shall send you what I am entitled to”, and –

“36. When I asked why he thought he was entitled to be paid in light of his     conduct and the way he had treated my requests for information, he stated that as I had terminated his employment he was entitled to various    benefits which he would notify me of the next day.  I told him that I was very unhappy at the way he had handled matters and that PDEL had not   received their shares despite payments that had been made.  I was very   frustrated by his stance and attitude.”

72. In his witness statement Mr Adil gave a different account of the meeting –

“167.During the meeting, SC told me that he needed to reduce my salary because FDPL was not making any money.  I responded to him saying that we had agreed that it was unlikely that any money would be made in the first year.  I also said we were half way through the second year of business and that all the development work that had been completed would bear fruit.  It was now a matter of executing the development projects that we had undertaken.

168. I also told him I had taken a significant cut in compensation when I agreed to be employed, and that I was not prepared to take a further cut.  I told him that if he felt he needed to reduce my compensation, then I would not agree and therefore the best solution for both of us would be for him to terminate my employment in accordance with the Employment Contract.  The reason why I said that was because in my experience when issues are raised about salary, the relationship can deteriorate and I did not want that to happen given our joint business interests.

169. SC responded by saying something along the lines of:

“Asif, if you don’t agree to a reduction then I may have no other choice but to terminate your employment.  Let’s meet again on 1 July 2012 at 4pm.  You work out what is due to you and you present it to me tomorrow”.

170. From this meeting I understood that my employment had been orally terminated. However, I deny that during the 30 June 2013 meeting SC orally terminated my employment for cause.

171. At no point during the meeting was there any discussion whatsoever of my failure to perform, nor was there any discussion about an alleged failure to provide information regarding the transfer of shares to PDEL. I was not asked to explain any losses sustained by FDPL.  Nor was there any request for information apart from a computation of the post termination payment.”

73. Mr Adil said that he took his personal files and belongings from his office on the evening of 30 June 2013.

74. In cross examination, Mr Adil said there was discussion by way of “update on the various projects that were going on”, and when he had occasion to repeat the words of termination they changed a little from “I may have no other choice but to terminate you employment” to “In that case [non-acceptance of reduction in salary] I will terminate you”. The cross-examiner sought to have him accept, and he did accept, that he left the meeting believing that his employment had been orally terminated with immediate effect and that that had been the outcome of the meeting. Although the cross examination then went on to whether there had been cause for termination, it did not include that Mr Chaturvedi had questioned Mr Adil about his performance, or about any cause for termination at all.

75. Mr Chaturvedi’s cross examination cast doubt on the account of the meeting in his witness statement. He agreed that he terminated Mr Adil’s employment.  He was asked what his reasons were, and with some difficulty gave five reasons.  The reasons were different in a number of respects from the matters on which he said he had questioned Mr Adil; of course, he may not have raised all his reasons with Mr Adil, but one would expect him to have done so, particularly the first of the items in the following summary –

76. It is convenient to go to the evidence concerning Mr Adil clearing out his office.

77.  Mr Chaturvedi said in his witness statement that he was “aware that before this meeting, [Mr Adil] had cleared out his entire office”. The way this was put indicated current awareness rather than awareness at the time.  It was not part of what he said he raised with Mr Adil at the 30 June 2013 meeting.  In a witness statement bearing the same date as that of Mr Chaturvedi, Mr Loy D’Souza  said that on 29 June 2013, a Saturday, he saw Mr Adil’s files and personal possessions being moved from Mr Adil’s office and that at the end of the day it was completely empty.  Then in the cross-examination of Mr Chaturvedi, prior clearing out of the office was give as one of his reasons for termination for cause; he said that he saw it for himself on 29 or 30 June 2013.

78. Mr Adil specifically denied that he cleared out his office prior to 30 June 2013, although he said he took some metal bar stools and two or three personal paintings home for a gathering at his house on 29 June 2013. It was not put to Mr Adil in cross-examination that he had cleared out his office prior to the evening of 30 June 2013.

79. I will later deal with the credit of Messrs Adil and Chaturvedi. Anticipating the views there expressed, I do not accept Mr Chaturvedi’s evidence so far as he said that he saw that the office had been cleared out prior to the meeting.  Apart from my views aforesaid, in an email to Mr Adil on 21 September 2013 Mr Chaturvedi noted, speaking of post – 30 June 2013 events, that Mr Adil had said “that [he had] cleared [his] personal belongings and vacated the office on June 30th which the Company was not aware of…”  Further, in my opinion it is highly improbable that Mr Adil would have acted so as to suggest abandonment of his position; he is a man reasonably astute in his own interests, and even if it be assumed that he foresaw that Mr Chaturvedi would express discontent with his performance as Managing Director, he would not have prejudiced his position in that way.

80. Mr D’Souza was copied into the email of 21 September 2013. It was put to him that he had not corrected Mr Chaturvedi, to whom he was Executive Assistant.  He said that the email had already been sent and he did not read it fully.  There the matter was left.  The reference to vacating the office may not have been something Mr D’Souza would be expected to have noticed and corrected, but nonetheless in my opinion Mr D’Souza’s recollection of 29 June 2013 is not reliable; he may have seen the few items being removed, but that is all.

81. In order better to explain my findings as to the 30 June 2013 meeting, I should first describe subsequent events.

8. Events after the 30 June 2013 Meeting

8.1  Describing why

82. It is necessary to canvass subsequent events first, because an understanding of them assists in deciding whose version of the 30 June 2013 meeting should be accepted, and secondly, because Mr Adil relied on subsequent events for the contention that the purported termination on 30 June 2013 was ineffective. The following account, in which the evidence was at times incomplete, will be supplemented in some respects when I address Frontline’s submissions in support of termination for cause.

8.2  Events from 30 June 2013 to late July 2013

83. There was no evidence that lawyers for Mr Adil became involved at this time; the clear inference is that they did not.

84. On 1 July 2013 Mr Adil gave Mr Chaturvedi a note relevantly as follows –

“CONTRACTUAL AMOUNT DUE TO ASIF ADIL

PER EMPLOYMENT CONTRACT IN LINE WITH UAE LAW

July 1^st 2013 – December 31^st 2013

85. In addition, the note recorded that Mr Adil should be immediately removed as a DIFC authorised signatory and his name should be removed from the Frontline website and other communications, and that his employment visa should be cancelled.

86. According to Mr Adil, when he gave Mr Chaturvedi the note they debated items 3 and 4 (club membership and car), and there was a quick discussion about the remaining items but none was disputed. Mr Chaturvedi said something along the lines of, “That’s fine.  I’ll make sure you get paid”.

87. Mr Adil emailed Mr Chaturvedi at 11.17am on 2 July 2013 –

“We met at 3pm on 30th June 2013 where you informed me that I was terminated as Managing Director of Frontline Development Partners effective immediately.

I told you that I accepted your termination but it had to be in accordance with the employment contract and there would be a termination payment due.  I also told you that this would mean that our association in all other proposed ventures would end which you accepted.  You asked me to give you the amount due on 4 pm July 1, 2013.

We met again on July 1, 2013 where I handed you the attached one sheet stating that an amount of USD 687,333.00 was due to me.  I now ask that this amount be paid immediately after which we can settle any accounts due to either of us from any of the proposed ventures.  I also request that beginning today – July 2nd that my signature or name not to be used in any banking, government or business situation without my prior written consent.”

88. Mr Chaturvedi responded at 12.53pm on 2 July 2013. He said that he was “surprised to received [Mr Adil’s] update”, and –

“I do not think that the Company/FDP has sent any written communication to you (as per point no.24 on Termination in the Employment Contract dated 20.8.2011).

In your email you have mentioned several points of action to be taken by the Company/FDP, so shall we treat this email as notice from your side to the Company/FDP for discontinuing your service?

Please let me know how you want to take this ahead, so that appropriate steps can be taken.”

89. The response was understandably not satisfactory to Mr Adil, and brought a series of emails from him to Mr Chaturvedi in which he asserted that the email was “only camouflaging your actions to mitigate the termination amount due to me” and asked whether, if his employment had not been terminated, he was required to serve out the entire term of the employment. Only on 8 July 2013 did Mr Chaturvedi respond, saying that he had been unable to reply due to “other pressing matters” and, if anything had to be added to his response of 2 July 2013, he would reply on 10 July 2013.

90. The reply on 10 July 2013 was –

“I refer to my earlier email on the subject and would submit as under, [sic]

I understand that there are claims and the counter claims by us and you such as your absence from the office, avoiding documentation, entering in to transaction without any notice so on and so forth…[sic]

However I thought that communicating on emails is not the right manner to resolve the dispute of every kind as they are so interlinked with each other.

I therefore invite you for a personal meeting to resolve the claims and the counterclaims once and for all,

Let me have your convenient time so that matter can be put to rest,”

91. There were then further exchanges of emails, some of which should be mentioned.

92. Mr Adil replied on 13 July 2013, accusing Mr Chaturvedi of again avoiding answering his earlier questions and saying that “your silence and not answering the questions explains my absence from the office and prevents you from claiming that you and the company have not been fully informed”. A follow-up email accused Mr Chaturvedi of “mala fide intentions”, and said that if he persisted in not answering, Mr Adil would inform the DIFC authorities of “the firm’s behaviour, antecedents and financial situation”.

93. Mr Chaturvedi asked Mr Adil to arrange a visit to the Mozambique liquor plant. Mr Adil saw this as a good leverage point (his words in his witness statement), and replied that the termination payment had first to be resolved.  Mr Chaturvedi protested, and Mr Adil replied at length that he was still awaiting answers to his questions and (somewhat inconsistently with leverage) that a visit to the liquor plant “is in no way linked to Frontline”.

94. This brought the reply from Mr Chaturvedi, on 21 July 2013 –

“Your email I have made my position very clear in the first email itself.  I’m not able to understand your intention behind writing email. During my inquiry in office, there are several issue pending and you left office without any information. The company is going through all detail and will reply you accordingly. For your absence from office you have taken decision which must be known to you only.  I do not understand why you are threatening me every time”

95. In fact, soon after Mr Chaturvedi travelled to Maputo and had access to the liquor plant.

96. Mr Adil was persistent. On 22 July 2013 he emailed –

“Please refer to your first reply email where you state that the company has not issued any written termination to me and asks whether I am resigning.  My reply to this states that I have not resigned and you are using the excuse of a written termination as a way to lessen the termination payment due to me – the computation of which on your request was given to you on July 1 2013.

Since then I have repeatedly asked you two simple and straightforward questions which you even now refuse to answer after nine emails :

1 did you orally terminate my services on June 30th 2013?

2 in case your reply to question 1 is NO, then are you prepared to honor the signed employment contract in full between the company and me?

Suresh, the remainder of your email regarding details etc are all after thoughts intended to justify your actions and lessen your financial obligations due under the employment contract.

Finally, my absence from the office is solely due to your continued refusal to answer the two questions listed above and the company is liable to either make the termination payment or pay the compensation due on the dates under the employment contract.

I await your answer to the 2 questions listed above.”

97. At an internal Frontline meeting during July, Mr Chaturvedi told Frontline’s senior employees that Mr Adil was still the Managing Director, and any disagreement was “like a fight between husband and wife and children should stay out of this.’ Mr Adil was not told of this, he found out indirectly.  Until late in September 2013, however, he did not attend Frontline’s premises in Dubai.

8.3 The without prejudice negotiations objection

98. Frontline objected to some of the evidence led by Mr Adil of events in the period from late July 2013 to January 2014, on the ground that the evidence was of or recorded without prejudice settlement discussions. Mr Adil took issue with that characterisation, and for other reasons also pressed for the admission of the evidence.  My descriptions of the events for this period include rulings on the objection to the evidence.

99. The objection was initially taken by a pre-trial application that specified paragraphs in Mr Adil’s witness statement “be removed from evidence or redacted”, that specified documents referred to the witness statement “be excluded from evidence”, and that “there be no reference to any settlement discussion between the parties in evidence at trial”. The application was not brought on for hearing prior to the trial.  At the commencement of the trial I ruled, for reasons given on 31 May 2015, that the evidence in question should be received subject to objection and its admissibility decided as part of the trial hearing and decision.

100. Mr Adil’s submissions included that it was not open to Frontline to take the objection, as it had earlier been determined against it. Mr Adil had requested production of signed copies of the minutes of meetings of 3 October 2013 and 20 January 2014.  The minutes were two of the documents to which objection was taken.  Frontline had opposed production on the ground that the minutes were subject to without prejudice privilege.  On 27 January 2015 HE Justice Ali Al Madhani ordered production of the minutes.  Mr Adil submitted that the status of the material to which objection was taken, initially it seems meaning all the material and not just the minutes, but later only the minutes, had been decided against Frontline and was res judicata.

101. I do not accept the submission, as to the minutes and a fortiori so far as it was wider. Production and admissibility are distinct.  While production of privileged documents may be refused because they are inadmissible, ordering production does not mean that a document is admissible.  His Excellency gave no reasons when ordering production of the minutes, and there was not a final judicial decision on their status.

102. Some Principles in connection with the objection are as follows.

103. The without prejudice rule, also described as a privilege, is a rule by which evidence of communications made in genuine negotiations to settle a dispute is not admissible. It rests in part on the public policy –

“…that parties should be encouraged so far as possible to settle their dispute without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations…may be used to their prejudice in the course of the proceedings” (Cutts v Head (1984) Ch 290 at 306 per Oliver LJ).

104. More recent cases have rested it in part also on an implied or express agreement of the parties that their communications will be kept confidential (see for example Ofulve v Bossert (2009) UKHL16; (2009) AC 990): but that is not a complete basis in the case of, for example, the opening communication in settlement negotiations or invocation of the privilege against a third party.

105. Although the underlying rationale is the exclusion of evidence of an admission, the privilege generally extends to all matters disclosed or discussed in the negotiations: Unilever Plc v Proctor and Gamble Co (1999) EWCA Civ 3027; (2000) 1 WLR 2436.

106. Often the communications are made expressly without prejudice, although such a statement does not conclusively or automatically give rise to the privilege. The protection of the privilege can arise if it be otherwise found, from the communications themselves and the circumstances in which they took place, that they were made in genuine settlement negotiations (see for example Rush & Tompkins Ltd v Greater London Council (1988) UKHL 7; (1989) AC 1280 at 1299; Dixons Stores Group Ltd v Thames Television Plc (1993) 1 All ER 349 at 356).

107. But the rule is not absolute. The privilege may be waived, for example if a party relies on communications in its case without objection from the other party (see generally Somatra v Sinclair Roche and Temperley (2000) EWCA Civ 229; (2000) 1 WLR 2453).  As an extension of that principle, if there is reliance on part of the communications without objection, the privilege may be lost as to the balance because –

“[f]airness requires that where a party deploys…without prejudice material as part of its case at trial the other party should be entitled…to rely upon the other without prejudice material which came into existence as part of the same without prejudice process” (Somatra v Sinclair Roche and Temperley at [30]).

108. And there are exceptions to the rule, many of which are collected by Robert Walker LJ in Unilever Plc v Proctor and Gamble Co at 2444-5. They include that when the issue is whether without prejudice communications have resulted in a concluded settlement, those communications are admissible (see also Walker v Wilshire (1889) 23 QBD 335).  A fortiori, if the settlement to which the parties have come is relevant, evidence may be given of the settlement agreement (the paradigm case being where a party sues on the settlement agreement).

8.4       Events from late July 2013 to 3 October 2013

109. The starting-point is Mr Chaturvedi’s email of 10 July 2013, in which he referred generally to claims and counterclaims and suggested a meeting “to resolve the claims and counterclaims once and for all”. Nothing came of this at the time.  But at some time in the period 22 to 29 July 2013 Mr Adil and Mr Chaturvedi met in Maputo in Mozambique.  They had a discussion, and according to Mr Adil after the meeting “the tension between [them] appeared diffused”.  Mr Adil’s email of 29 July 2013 to Mr Chaturvedi said that it was “productive and good” that they met, and –

“We agreed that we would meet with Shishir Dalal as a mediator to seek a resolution. To have a productive meeting, please inform me of suitable dates in Mumbai and also give me a written proposal so that we reach speedy conclusion”

110. Mr Dalal was known to both men; he was a consultant to OAI, and in October 2013 became a director of Frontline.

111. The date of 31 July was suggested by Mr Chaturvedi, but was not suitable for Mr Adil. The tension returned.  There were more contentious emails.  Mr Jomy Jose of Frontline’s accounting staff emailed Mr Adil that he would be paid seven days salary for July, bringing an email from Mr Adil dated 1 August 2013 (to which I will again refer) in which he said that in the absence of reply to the two questions, the full month’s salary plus incentive payment should be paid.  Mr Adil also complained about removal of his profile from the Frontline website, which he said shocked him.

112. Nothing was done about July salary, more emails passed with escalating allegations and repeated demands from Mr Adil and with the customary unhelpful replies, if replies at all, from Mr Chaturvedi. The emails included, from Mr Adil, that in the absence of the salary or an answer to the two questions, “The only part I can go by is your action of removal of my name from the website which goes to confirm that you have terminated my services”.

113. On 6 September 2013 Mr Adil emailed to Mr Chaturvedi –

“Since you have chosen to take the legal route, I will also refer this to my lawyers to respond to you.

The evidence of your behaviour and actions over the last several months speaks for itself.  However, you do owe me my salary and answers to questions that I have asked you in several emails which you have.”

The reference to a legal route was to a letter sent to Mr Adil and the local partners by PDEL threatening court proceedings in Mozambique.

114. This email was followed by an email on 8 September 2013 from Mr Adil –

“Without prejudice to our legal position I am in Mumbai this week and can meet you individually or jointly with Shishir Dalal to find a solution as we had discussed in Mozambique.”

115. Times and places were suggested. The discussion in Mozambique was the meeting in Maputo in the latter part of July 2013.  Mr Adil suggested in his evidence that the “without prejudice to our legal position” referred only to the threatened Mozambique proceedings, but I do not think that is correct; the Maputo discussion preceded those proceedings, and brought the involvement of Mr Dalal.

116. Mr Adil had not been attending Frontline’s premises in Dubai; it seems he spent some time in Mozambique on Fronteira affairs. On about 18 September 2013 he returned to the Dubai premises, saying (without objection) that this was “in accordance with the agreement reached in the Maputo meeting that once production had started I would return to Dubai”.  He appears to have carried out normal duties from this time on, or at least as normal as the continued dissension permitted, and on 22 September 2013 a Frontline employee issued a letter for the purposes of him obtaining a visa stating that he was a current employee of Frontline.

117. On 21 September 2013 Mr Chaturvedi sent a long email to Mr Adil. It is a remarkable document, a flow of consciousness larded with vituperation.  Unless against Frontline’s interests, it should be viewed with suspicion.

118. The email was said to respond to an email of 9 September 2013, which was not in evidence, and included –

“A.  Despite the Company being in continuous communication with you on emails, it has never terminated your services either orally or otherwise; however you have abandoned your post and stayed away from the office whilst writing harassing and aggressive emails.  If you had not gone out of the office on your own, under standard practices and in accordance with your employment contract, you would be attending the office regularly.  After abandoning the office you had realized that it will be better to now mis-state the facts of termination of your employment by the Company so that you may claim the termination benefits.  You have known this and hence repeatedly you had through various emails requested us to terminate your employment or to respond if we have in fact terminated your employment.  This is spite of the fact that the Company specifically responded to you stating that your employment was never terminated and you should in fact be attending office and discharging your duties.  Despite this response by the Company, you continued to write several emails raising the same issue again and again with an intent to avoid your duty and obligations under the employment contract and to distract the attention of the Company with frivolous statements and queries, to which the Company saw no merit in responding as many times.  In fact, by your own email you state that you have cleared your personal belongings and vacated the office on June 30th which the Company was not aware of but you appear to have done that deliberately and with an intent to abandon the services of the Company, knowing fully well that your services were not terminated and thereafter you have sent several harassing emails (20 as stated in your email) seeking a response whether your services were in fact terminated or not).  Knowing this you have written emails questioning the Company which we find devious and inappropriate on your part.  In view of the above, there is no question of negotiating any termination amount with you as you appear to have wrongly derived from our discussions since we have clearly demonstrated by our email how you have defaulted on various covenants of your employment contract, to which you have provided no justifiable explanation.

…

As already indicated, the Company has not terminated your services although it remains fully entitled to do so for the grounds stated in the employment contract and therefore your staying away from the office is abandonment of [illegible] contract and duty towards the Company under the employment contract, for which the Company is fully [illegible] to take action against you.  We may also point out that the various issues raised by the Company, yet remain unanswered and it appears that these issues are valid for which you have no answer.  We await a response from you on all the questions raised in our earlier email, and in particular, the following as also the issues as have been reproduced in this email at the relevant place for ready reference.

(a)  As raised in Paragraph (d) of our earlier email, (i) you are yet to provide us with a valid and rational explanation and statement of accounts on the sum of USD   777,778 that you have withdrawn as advances for projects.  We also need you to clarify where these sum of money have been invested for the Company’s projects; (ii) please provide full disclosure of work in relation to proposed liquor projects in Tanzania including written or other documents, memoranda and/or statements. Please also provide details of the various agreements between   yourself and Global Fortune and the line of business of Global Fortune.

If the Company does not receive a response to all these valid queries and concerns, we will assume that you have no rational and valid explanation to provide in which case, we will consider ourselves free to proceed against you.”

119. The contrast with Mr Chaturvedi’s evidence that he terminated Mr Adil’s employment for cause on 30 June 2013 is stark. His explanation was that he “wrote with caution”, wanting to “bring [Mr Adil] to the table”.  His dealing with the proposition that he lied could only be described as prevaricating.

120. This email brought an immediate response, on the same day, from Mr Adil –

“Am I to understand from your note that you have terminated my services and do not want me to attend the head office in Dubai.

Please clarify as I will be attending office and there has never been any question of abandonment as you claim.

In fact, I request you to pay my past due salary of July and August 2013.”

121. A more full response followed later on the same day. Mr Adil asked that Mr Chaturvedi either formally terminate his services or accept their continuation:  “If you do not want me to attend, please put it in writing as then it will be clear that you have terminated me.”

122. Eventually a meeting was held in Mumbai on 3 October 2013. How it came about is unclear, but from the presence of Mr Dalal and the minutes next referred to it must have been, at last, a meeting involving Mr Dalal to seek a resolution.

123. Minutes of the meeting were produced, and were signed by Mr Chaturvedi and Mr Adil. Despite their length, substantial parts should be reproduced –

“Minutes of the Meeting held on 3rd October 2013 in Mumbai.

Sub : Terms of settlement between Mr: Asif Adil and FDP (and its group companies)

Present :

1. Mr. Suresh Chaturvedi
2. Mr. Asif Adil
3. Mr. Shishir Dalal
4. Mr. P. Maheshwari

Basic Salary Payments:

The Employment Contract will be amended as below:

1. It was decided after deliberation that Mr. Asif would be paid basic salary of USD 50,000 per month for a period from 1st July, 2013 to 30th September, 2013 (3 months, amount USD 150,000).
2. In addition to this, Mr. Asif shall be paid a monthly salary of USD 40,000 for a period beginning 1st October, 2013 to 31st December, 2013 (i.e USD 40,000 X 3 = USD 120,000).
3. Mr. Asif would also be paid a monthly salary of USD 30,000 for a period beginning 1st January, 2014 to 30th April, 2014 (i.e. USD 30,000 x 4 = USD 120,000).
4. The Lexus car at cost price of USD 50,000 will be purchased from Mr. Asif (As per original purchase price of car) The club Membership will be provided to Mr. .Asif as per Employment Contract.

All other terms and conditions of Employment Contract dated 20.08.2011 shall remain the same.

Equity Grant:

1. After discussion it was agreed that for the period beginning lst April 2013 till the date Mr. Asif’s contract ends on 30th April, 2014, he would be granted an equity grant of USD 250,000. This would be full and final payment toward Equity Grant. PDEL will match dollar for dollar the total equity grant made upto the amount USD 1.042 million as its contribution as and when required for the project. Out of this PDEL has already paid USD 600,000 hence balance USD 442,000 is required. The necessary documentation like issue of shares, signing of SHA has to be signed immediately.
2. The Balance due on the Equity Grant till 31.03.2013 will be paid separately to Mr. Asif.

Expenses on various projects:

1. It was agreed that from 1st October, 2013 all expenses relating to projects undertaken by FDP and its group companies viz .Mozambique Venture, Kaya Venture and Tanzania Venture and any other Venture undertaken in future would be reimbursed to FDP by the respective ventures.

General Terms:

…

Mr. Asif assured that the equity shares in the Mozambique ventures would be issued to FDP group companies as soon as PDEL Director is ready to travel to Maputo and the time taken in the regulatory process in Mozambique. Mr. Asif shall keep the Board of FDP fully briefed on the ongoing performance in various ventures where the FDP group has invested,

The Shareholder Agreement mutually acceptable to both the parties shall be finalized and signed in 15 days from the date of signing this settlement.

The basic premise of the settlement is subject to verification of all expenses by an Independent Chartered Accountant and both the parties confirm that except in circumstances beyond control all the terms of settlement would be adhered to in word and spirit. Any amendments to the terms of settlement shall require consent of both parties in writing.

All payments related as mentioned in the terms of settlement will be released as per schedule attached and subject to signing of Shareholder Agreement and Audit of accounts. as mentioned above.

…

These terms of settlement are final and binding on both the parties namely: Mr. Asif Adil and FDP group companies.”

124. Attached to the minutes was a schedule which included that the July – September 2013 salary would be paid “On signing of shareholder Agreement and Audit of accounts as Mentioned in General terms”.

125. A further page was said by Mr Chaturvedi to have been part of the minutes. It was not.  It was dated 9 October 2013, and included references to the minutes dated 3 October 2013.  It was signed by Mr Chaturvedi and Mr Adil at a later date, and was an “Action Plan and Time Schedule” for various acts (for example, signing the shareholder agreement) and payments (including “Balance of Equity Grant up to 31.3.203”, “Equity Grant from 01.4.13 to 30.4.14” and “PDEL Equity as progress of projects”).  It included that payment of salary for July – September 2013 and “Balance of Equity Grant up to 31.3.2013” was “subject to compliance of above schedule”, and also recorded “Equity Grant” of USD 250,000 from 1 April 2013 to 30 April 2014 “as progress of projects”, and it concluded –

“Note:  (Schedule of payment is subject to completion of all above mentioned  documents and action)”

126. Mr Adil gave evidence, which was not objected to on without prejudice grounds, that at the meeting Mr Maheshwari produced a document (“Ex 31”) –

127. Neither Mr Chaturvedi nor Mr Maheshwari contested this in his evidence, or offered an explanation for Ex 31.

128. I go to the objection on without prejudice grounds. As later revised, the paragraphs and document relating to the period to 3 October 2013 to which objection was taken were paras 204 from “including” to “projects”, 205 to 210, 211 from “including” to “Tanzania”, 212 to 214, 218 and 219 of Mr Adil’s witness statement, and signed and unsigned minutes of meeting dated 3 October 2013.

129. The specified paragraphs of Mr Adil’s witness statement up to and including para 214 are largely accounts of or a statement of what had happened at the meeting in Maputo to which Mr Adil’s email of 29 July 2013 referred. There was then dispute, at the least, over Mr Adil’s claim to a termination pay-out or alternatively reinstatement and also, notwithstanding the generality with which it was expressed, Mr Chaturvedi’s assertion of counterclaims in his email of 10 July 2013.  At the meeting it was agreed that Mr Dalal should assist as mediator in settling a range of issues, not just the matter of a termination payment; it is sufficient to instance the transfer of shares in Fronteira.

130. The communications at the meeting, although prior to any involvement of Mr Dalal, were the commencement of a settlement process. The settlement process continued, although with interludes of contention; it was suggested that it be taken up in the email of 8 September 2013, and it came to fruition in the meeting of 3 October 2013.  The minutes sub-described themselves as terms of settlement, and from their content they were meant to bring a resolution to many matters between Mr Adil and Mr Chaturvedi and his companies.

131. Mr Adil submitted that the communications were no more than commercial discussions, a renegotiation of his employment contract, but it is plain from the Maputo meeting and from the eventual 3 October 2013 agreement that, even if that is a correct partial description, they were much more than that. He also submitted that there was no longer a dispute when Mr Chaturvedi’s email of 21 September 2013 said that his employment had not been terminated, and put that matter to rest.  It is plain, however, that dispute remained, which was resolved by the October agreement; Mr Adil certainly did not accept that position in his emails replying to the email of 21 September 2013.

131. In my view, there were negotiations to settle a dispute attracting the privilege. With the exception of para 212 from “and in time” and para 213, which are not evidence of communications, and subject to Mr Adil’s submissions on waiver,  the paragraphs up to and including para 214 are not admissible.

132. Paragraph 218 is a state of mind of Mr Adil, referring to something said by Mr Chaturvedi at the Maputo The state of mind is not relevant, and the reference is privileged; again subject to waiver, the paragraph is not admissible.

133. Paragraph 219 refers to and sets out an extract from an email dated 1 August 2013 from Mr Adil to Mr Chaturvedi. The email contains a reference apparently to something said at the Maputo  But it was not sent as part of the settlement process; it was provoked by Mr Jose’s advice that seven days July salary would be paid and (as earlier mentioned) complained that in the absence of reply to the two questions, the full month’s salary plus incentive payment should be paid.  Mr Chaturvedi did not object to the email.  The objection to the paragraph is therefore pointless, and the email provides evidence (for whatever significance it may have) that at the Maputo meeting Mr Chaturvedi “made an oral proposal regarding salary reduction”.

134. The minutes of the 3 October 2013 meeting, however, are admissible. They record a settlement agreement then made, expressed to be final and binding although arguably conditional upon an audit of expenses.  It is relevant in the proceedings as a restatement if the legal relationship on which the parties then acted, at least for Mr Adil’s contention that the Contract survived a purported termination on 30 June 2013, and also as subsequent conduct of the parties to which regard may be had in interpreting the Contract (DIFC Contract Law, Law No 6 of 2004 (“the Contract Law”), Article 51(c)).

135. In this connection, Frontline submitted that without prejudice privilege attaches to a concluded settlement agreement. A moment’s contemplation of suing on the settlement agreement defies that bold proposition; indeed, evidence of the negotiations is admissible in aid of construction of the settlement agreement (Oceanbulk Shipping & Trading SA v TMT Asia Ltd (2010) UKSC 44; (2011) 1 AC 662).

136. In support of the submission Frontline cited first, an observation of Lord Griffiths in Rush & Tompkins Ltd v Greater London Council at 1300 rejecting “that if the negotiations succeed and a settlement is concluded the privilege goes, having served its purpose”. But his Lordship was addressing the communications in the negotiations and not the settlement agreement; this does not assist Frontline.

137. Secondly, Frontline cited the decision of the Court of Appeal for British Columbia in BC Children’s Hospital v Air Products Canada Ltd [2003] BCCA 177; (2003) 11 BCLR (4th) 281; (2003) 224 DLR (4th) 23. One party in a multi-party case sought production of a settlement agreement between other parties with a view to proving an amount payable to one of the other parties, apparently in order to argue it that would go to reducing that party’s claim against it.  The majority (Hall and Ryan JJ) upheld the trial judge’s decision “that the settlement agreement should not be produced because its relevance had not been demonstrated” (at [34]), which appears to have underlain their discussion of its status and the observation that it was “shielded from production because of privilege”  (ibid).

138. I do not think that this assists Frontline either. Where relevance is demonstrated, disclosure of settlement agreements has been ordered in British Columbia as an exception where the interests of justice override the public interest in encouraging settlement (eg Dos Santos v Sun Life Assurance Co of Canada (2005) BCCA 4; (2005) 249 DLR (4th) 416).  This balancing of interests is not the approach in English Law, where disclosure of or of parts of a settlement agreement if relevant is ordered in England (eg Gnitrow Ltd v Cape Plc (2000) 1 WLR 2327; Cadogan Petroleum Plc v Tolley (2009) EWHC (Ch) 3291; (2010) EWHC (Ch) 1107).  BC Children’s Hospital v Air Products Canada Ltd was a discovery case, not an admissibility case, in connection with production to a third party.  The treatment of the settlement agreement as privileged does not go beyond declining discovery to a third party in the absence of relevance.  In my view, it does not support the proposition advanced by Frontline.

139. Mr Adil submitted that any privilege had been waived “by referring to the communications in [Frontline’s] Amended Defence and Counterclaim and other communications”. As developed, the submission was directed only to the 3 October 2013 minutes.  Since the minutes are admissible in any event, it is not necessary to deal with the submission; but the minutes are not identified to in the Amended Defence and Counterclaim which refers, without significant detail, to entry into “lengthy discussions and protracted correspondence, with a view to resolving the Claimants’ alleged entitlements arising out of the termination of [the Contract]”.  Mr Adil also submitted that any privilege attached to the minutes had been waived by a reference to them in a letter from Frontline’s lawyers.  It is sufficient to say that this is without substance.

140 .I add the following.

141. First, Mr Adil gave the evidence of Ex 31, and in paras 246-252 of his witness statement (which were not objected to) gave a summary of agreements at the meeting and referred to the preparation of and agreement on the minutes. There was also a deal of cross-examination in wider areas of the evidence to which objection was taken, without objection or preservation of the objection as the case may be.  There may well have been wholesale waiver, as to the minutes or more widely.  Mr Adil did not rely on these matters, and for that reason I do not take them further.

142. Secondly, and distinct from wholesale waiver, Mr Chaturvedi was cross-examined extensively on the meeting in Maputo. No objection was taken to the cross-examination.  From it can be taken that according to Mr Adil, Mr Chaturvedi said that he did not want to terminate the employment and was upset with Mr Adil, and “Why don’t you come back to [Frontline]”; while according to Mr Chaturvedi he said, “That contract is terminated.  Let’s discuss new way.  Let’s start new way…”.  Even if there was not wholesale waiver, I do not think that the without prejudice privilege attaches to this, and it provides some context to what followed up to the 3 October 2013 agreement.

143. My account of the events for this period seeks to abide by these rulings.

8.5 Events from 3 October 2013 to 20 January 2014

144. Following the 3 October 2013 meeting, Mr Adil devoted time to the procurement and development of projects for Frontline. Again, he appears to have carried out normal duties.  They included authorising payroll cheques and signing other cheques, and Frontline paid some travel and telephone expenses.

145. Mr Adil had discussions with Mr Chaturvedi about an additional USD 200,000 in capital needed for Fronteira; Mr Chaturvedi agreed to contribute a further USD 100,000, but PDEL did not do so and Mr Adil provided the full amount. No money was paid as his past or new salary, or as equity grant.

146. Then came an email of 27 November 2013 concerning recording of money paid to Mr Adil as advance or incentive, see later in these reasons in relation to misappropriation of funds as a cause for termination. Mr Adil said that he regarded this as “the final straw”.  On 28 November 2013 he wrote to Mr Chaturvedi –

“In accordance with the signed employment contract, I am hereby submitting my resignation as the Managing Director of Frontline Development Partners effective Tuesday 3rd December 2013.

As approved by you, I have been working out of Maputo, Mozambique since July 4th 2013 and request that all my past dues including salary and incentive payments from July 2013 be made to me.

I await your instructions on the 3 months notice period as per the employment contract.  Lastly, I request that my DIFC employment visa be cancelled expeditiously on payment of all arrears due.

It has been a pleasure working with you and I wish you the very best in your endeavors.”

147. The statement in the second sentence of this letter, that Mr Adil had been working out of Maputo since 4 July 2013 as approved by Mr Chaturvedi, was not correct. Mr Adil may have been in Maputo for much of the time from 4 July 2013, but his assertions (more than once) of absence from the office until he received answers to the two questions, and Mr Chaturvedi’s stonewalling replies, belie it.  While Mr Adil was taxed in cross examination with the last sentence, it is clear that it was no more than a formal expression of good will.  The dealings between Mr Adil and Mr Chaturvedi revealed in the evidence are quite to the contrary.

148. So far as the evidence showed, there was no response from Mr Chaturvedi or Frontline to the resignation letter. But shortly thereafter Mr Adil “bumped into” Mr Chaturvedi at Dubai  According to Mr Adil, Mr Chaturvedi “said that we both should [be?] given another chance to a reconciliation on what had been agreed previously”, and that Mr Jaswinder Sohail, a new PDEL director, “would come to Maputo and get everything sorted out, and that payment would be made to me pursuant to the Minutes of Meeting dated 3 October 2013”.

150. There followed communications between Mr Adil, Mr Sohail, Mr Dalal and Mr Chaturvedi, sometimes contentious. They included, according to Mr Adil, him making “a final attempt to settle matters amicably” by letting Mr Chaturvedi know that he would be in Mumbai on a particular date, he thinking they might be able to meet face to face “to resolve the dispute between us”.

151. In a telephone discussion on 8 January 2014 a number of matters were agreed, and on 10 January 2014 Mr Adil emailed Mr Chaturvedi suggesting a deadline to “bring to a close this protracted negotiation”. Some more matters were agreed at a meeting on 10 January 2014.  As earlier noted, a draft adjunct agreement was prepared in relation to the Fronteira shareholders agreement.

152. Mr Adil and Mr Chaturvedi then met in Mumbai on 20 January 2014. Minutes of their meeting were prepared.  The minutes recorded that a number of “points” were “discussed and agreed to”; they concerned expenses incurred for a number of projects and included that there would be an audit of capital expenses and a further meeting on 30 January or 1 February 2014.

153. Again as later revised, the paragraphs and documents relating to this period to which objection was taken were paras 280 to 282, 285 to 287, 289, 291, 293, 295, 296, 298, 300 and 301 of Mr Adil’s witness statement, the minutes of meeting dated 20 January 2014, and the emails Adil to Chaturvedi 15 December 2013; Chaturvedi to Adil 22 December 2013 and reply 22 December 2013; Chaturvedi to Adil 29 December 2013; Adil to Chaturvedi undated; Chaturvedi to Dalal 2 January 2014; Adil to Chaturvedi 2 January 2014; Adil to Chaturvedi 8 January 2014; Adil to Chaturvedi 10 January 2014; and Adil to Chaturvedi 12 January 2014.

154. It is abundantly clear from their communications over this period that the parties were again in dispute, and were negotiating in an endeavour to settle their disputes; they included dispute over honouring the 3 October 2013 agreement. The without prejudice rule is attracted.  Translating this to Frontline’s objections, and subject to Mr Adil’s submissions on waiver –

• paragraphs 281, 282, 285 to 287, 291, 293, 295, 296, 298, 300 and 301 of Mr Adil’s witness statement are inadmissible;
• paragraph 280 is the evidence of “bumping into” at Dubai airport, and para 289 is nothing to do with settlement negotiations; both are not privileged and are admissible;
• of the emails, those of 15 December, 22 December, Adil to Chaturvedi; and 29 December 2013 and 2 January, 8 January, 10 January and 12 January 2014 are inadmissible, but that of 22   December 2012 Chaturvedi to Adil is admissible because it was the subject of para 284 of Mr Adil’s witness statement to which objection  was not taken.
• what were said to be agreements on 8 and 10 January 2014 were steps in the negotiations, not themselves final, and the meeting of 20 January 2014 was the same; there was not a settlement, and the minutes are also inadmissible.

155. Mr Adil submitted that there had been waiver in relation to the minutes of the 20 January 2014 meeting because they were disclosed without objection in Frontline’s production of documents. To repeat, production of documents and admissibility are distinct.  Production between the parties to the minutes was not a waiver.

156. Again, my account of the events for this period seeks to abide by these rulings.

8.6       Final events

157. Frontline’s objection extended to some evidence relating to this period, being paras 302, 304 and 306 of Mr Adil’s witness statement and emails Dalal to Chaturvedi and others and attachment dated 27 January 2014 and Adil to Chaturvedi dated 27 January 2014.

158. The audit process envisaged as at 20 January 2014, in which Mr Dalal was involved, brought an email from him dated 27 January 2014 with comments for Mr Adil’s response. Mr Adil replied on the same day.  These were continuation of the negotiations, and para 302 of the witness statement and the two emails are not admissible.

159. On 27 January 2014 Mr Adil wrote to Mr Chaturvedi and Mr Dalal saying that there were “logical and straight forward answers”, but expressing discomfort with continuing as there was a lack of trust between he and Mr Chaturvedi, and –

“I suggest we amicably disengage from each other – pay each other what is fair and due and move on where we can both be happy and at least see other straight in the eye when we meet.  I also ask you accept my resignation from Frontline which was given to you on November 30th 2013.”

160. This was not fruitful. The next email from Mr Chaturvedi dated 29 January 2014 was distinctly antagonistic, and included that Mr Adil should attend to the audit process and should return to work in Dubai.  It also included, “I think you should appreciate that I have given you equity in my group company, as per the clause in your appointment letter”.  This could only refer to Fronteira and cl 7 of the Contract.

161. At the end of January 2014 Mr Adil and Mr Chaturvedi had a telephone conversation in which, according to Mr Adil, they “agreed to meet in the second half of February in Dubai to explore a resolution”. An email from Mr Adil to Mr Chaturvedi on 1 February 2014 recorded that agreement.  Something else said in the conversation was the subject of para 304 of the witness statement; there was continuation of negotiations, and para 304 is not admissible.

162. Plainly, matters then deteriorated. So far as the evidence went, the next event was that on 4 March 2014 Mr Adil’s assistant told him that she had been instructed no longer to report to him.  Then on 10 March 2014, Mr Chaturvedi and Mr Dalal as directors of Frontline –

“Resolved unaminously that

• Asif Adil’s name shall be removed as Authorised Signatory from HSBC Bank as he has resigned from the position of Director of the company via letter dated 28th Nov 13 [sic].
• Asif Adil’s resignation be informed to DIFC and his name shall be removed from the position of Director as well as Authorised Signatory from DIFC records.”

163. There is again an evidentiary gap until on 27 April 2014 Al Tamimi & Co, lawyers for Frontline, wrote to Hamdan Alhami & Associates, lawyers for Mr Adil –

“We refer to our letter to your client, Mr. Asif Adil, dated 18 March 2014, to your response to this letter sent to us by fax on 19 March 2014, and to the minutes of the meeting held on 3 October 2013 in Mumbai setting out the “terms of settlement” between our respective clients.

Due to the persistent material breach of these terms of settlement by your client, our client hereby gives notice of their termination with immediate effect.

We trust you will bring this termination notice to your client’s immediate attention.

Our client’s rights are reserved.”

164. Identification of this letter was the sole subject of para 306 of Mr Adil’s witness statement. No objection was taken to the letter, and for that reason and also because it is not part of the process of negotiation the paragraph is admissible.

165. The letters of 18 and 19 March 2014 were not in evidence, although in evidence in support of the without prejudice objection the former was described as a letter “detailing [Mr Adil’s] lack of compliance with his obligations and asking him to comply with those obligations without delay”. When and specifically why lawyers became involved is not clear.

9. The credit of Messrs Adil and Chaturvedi

166. Mr Adil was the only witness in his case. Called in Frontline’s case were Mr Chaturvedi, Mr D’Souza, Mr Maheshwari and Mr Al Debri.  I have already considered Mr D’Souza’s evidence.  There is no need to comment on the rather peripheral evidence of Messrs Maheshwari and Al Debri.

167. Mr Adil was detailed in his evidence, rather combative under cross-examination and exact sometimes to the point of pedantry. He was not above the leverage earlier mentioned, or departing from accuracy as in the resignation letter in relation to working out of Maputo.  In his evidence he was concerned to convey his position on the issues in the case and, for example, to characterise the negotiations towards or at the 3 October 2013 meeting, favourably to his case, as no more than renegotiation of his employment contract.  As later appears, his evidence concerning payments of his balance compensation/incentive was rather inconsistent, and in these areas in particular his evidence must be assessed against objective facts and the probabilities with particular care.  I am nonetheless satisfied that he had a good recollection and that as a historian of events, of who said what to whom and who did what, his evidence is generally reliable.

168. The same cannot be said of Mr Chaturvedi. The many occasions on which he did not remember in the witness box would cause one to doubt any professed remembrance, but added to that are his extraordinary responses to Mr Adil’s requests for clarification of his position, and what might charitably be called a flexible attitude to proprieties and keeping his word.  He could only be described as evasive in many of his answers in cross examination.  In my view, he was prepared to say anything at the time of his dealings with Mr Adil in order to achieve his purposes, and the same as a witness, without regard to truth or accuracy.  I would not accept his evidence unless supported by objective facts or high probability, and generally prefer the factual evidence of Mr Adil where there is conflict between them.

10. There Was Termination on 30 June 2013, Not For Cause

169. At least at trial, it was common ground that Mr Adil’s employment was orally terminated on 30 June 2013; that is, that what was said was to that effect. As I have noted, Mr Adil agreed to that in cross-examination, and Mr Chaturvedi also said explicitly, “I terminated his employment”.

170. I accept the evidence of Mr Adil as to what occurred at the meeting of 30 June 2013 in preference to that of Mr Chaturvedi. For a long time thereafter it was not once said that Mr Adil’s employment had been terminated for cause, which could easily have been said, if it were correct, as an answer to his claim for a large sum of money on the basis of termination on notice.  In the email at 12.53 on 2 July 2013 Mr Chaturvedi seemed content that the employment should be terminated; why did he not then say that he had terminated it for cause?  Thereafter Mr Chaturvedi’s stance was indeterminate until in the email of 21 September 2013 it was said that Frontline had not terminated the employment “although it remains fully entitled to do so”, again not consistent with earlier termination for cause.  One may speculate that Mr Chaturvedi meant to keep Mr Adil dangling on a string, perhaps to retain his services at a lesser salary (as to an extent he did) or the better to get in the Fronteira shareholding, but that is speculation and the same could have been done by confirming termination for cause but offering to relent.

171. Mr Adil’s understanding that his employment had been orally terminated is not determinative, but is a correct understanding of what was conveyed at the meeting; that his employment was terminated effective immediately. The acceptance of termination is made clear by his provision of a calculation of a termination payment and request for other action.  The submissions on his behalf included that this was only provision of what would be payable if his employment was terminated, a submission made without the benefit of evidence which I do not accept.

172. What was the contractual basis for the termination?

173. Mr Adil told Mr Chaturvedi that any termination had to be in accordance with the Contract, as he repeated in his email of 2 July 2013 with the addition that there would be a termination payment. Mr Chaturvedi invited a statement of what was due to Mr Adil, and must be taken to have acceded to this.  Clause 24 of the Contract provided for termination by Frontline (i) on six months written notice, (ii) without notice but with payment of a sum in lieu of notice; or (iii) without notice for cause.  In the absence of written (or any) notice or reference to cause for termination, the basis (and the only basis) was (ii).

174. Frontline’s submissions included, in connection with Article 59A of the DIFC Employment Law, Law No 4 of 2005 (“the Employment Law”), that the Article “permits consideration of facts discovered post-termination per Boston Deep Sea Fishing and Ice Company v Ansell (1888) 39 Ch D 339”. As later explained, it is not open to Frontline to rely on the Article.  But if a wider appeal to the principle was intended, it should be said that the common law principle that an employee’s dismissal may be justified on grounds on which the employer did not act and of which it was unaware at the time of dismissal is not of present assistance to Frontline.  If it be correct that it exercised the contractual right to terminate without notice but with payment in lieu of the notice period, it can not now justify the termination as the exercise at the time of the right to dismiss for cause.  The exercise of the contractual right creates rights and obligations, specifically the debt of the payment in lieu of the notice period, which can not be retrospectively undone by later showing a different basis for termination:  see Cavenagh v Williams Evans Ltd (2013) 1 WLR 238 at [36] – [42].

11. The Termination was Effective

11.1     The asserted defects

175. Mr Adil contended that the oral termination was ineffective because –

• Frontline failed to follow the proper mechanism for giving notice under cl 24 of the Contract;
• Mr Adil did not accept the termination; and
• the parties’ conduct after the termination was “such that it rendered the termination ineffective and evinced an intention to keep the contract alive”.

11.2     Failure to follow the proper mechanism

176. Mr Adil at first submitted that the mechanism provided by cl 24 was written notice, no written notice was given, and so the termination was ineffective. The premise is incorrect.  There could be termination by Mr Adil on three months written notice.  But there could be termination by Frontline without the six months written notice, but with payment in lieu for the notice period.  Notice in the sense of informing Mr Adil was no doubt necessary, and that is what happened at the meeting of 30 June 2013, but no written notice was required.

177. When the course of termination without notice but payment of a sum in lieu of notice was drawn to counsel’s attention, Mr Adil submitted that the oral notice was ineffective because not accompanied by payment of the sum in lieu – indeed, because payment of any sum was denied. I do not think that is a correct understanding of cl 24 of the Contract.  There is some support for the submission in the early words “or by paying your…”, but that is fleshed out in the reservation of the right to terminate without notice “and to pay your…”.  Reading the clause as a whole, termination without notice attracts liability to pay the sum in lieu, but immediate payment is not a necessary element in effective exercise of the right.

11.3     Acceptance of termination

178. Mr Adil submitted that he did not accept the termination, but continuously sent “emails preserving the status quo”; and that the minutes of the 3 October 2013 meeting recorded amendment to the Contract “which demonstrates that [Mr Adil] was in continuous employment as opposed to new employment”.

179. The submission is odd. If Frontline exercised a right to terminate Mr Adil’s employment, there was no question of acceptance by him; the employment was terminated like it or not.  It is also not well founded, in that Mr Adil thereafter acted on the basis that his employment had been terminated by clearing out his office and, more important, by claiming a large sum of money and requiring other action in consequence of the termination.  It should be recalled that in his email of 2 July 2013 Mr Adil said that he told Mr Chaturvedi “that I accepted the termination but it had to be in accordance with the employment contract and there would be a termination payment due”.

180. So far as Mr Adil relied for this submission on subsequent emails and the minutes of the 3 October 2013 meeting, his submission more properly was not one of non-acceptance but came within the matters next considered.

11.4     Keeping the Contract alive

181. Mr Adil submitted that the parties’ conduct after the purported oral termination demonstrated that the employment had not in truth terminated. Thus, he said –

• Frontline did not carry out proper termination procedures; did not pay the claimed termination amount; did not tell Frontline personnel that he was no longer the Managing Director but rather said that he was still Managing Director; did not remove him as a DIFC authorised signatory until March 2014 and later; did not remove him as an authorised bank signatory until March 2014; and did not pass a board resolution acknowledging that the employment had been terminated until March 2014.
• Rather, Mr Chaturvedi said in his email of 21 September 2013 that Frontline “has never terminated [Mr Adil’s] service either orally or otherwise”; Frontline issued the letter of 22 September 2013 for visa purposes stating that Mr Adil was a current employee; Mr Adil authorised payroll cheques for October staff salaries and signed Frontline cheques; and after the 3 October 2013 meeting Mr Adil was engaged in Frontline’s business, and Frontline paid for his travel to Mozambique in November 2013 and paid telephone bills for his work mobile.

182. To this may be added the earlier submission that Mr Adil sent “emails preserving the status quo” and the 3 October 2013 minutes recorded amendment to the Contract; and, although it was not part of his submissions, that he purported to resign on 30 November 2013 with apparent reference to the Contract.

183. The basis in law for these matters rendering the termination ineffective was not made clear. At trial Frontline foreshadowed a basis in waiver, but it must have recognized that this was unsound because the only submission as to waiver (apart from as to without prejudice privilege) was ascribed to the different matter of reliance on breaches of the Contract.  If Mr Adil’s employment under the Contract was duly terminated, the parties’ subsequent conduct may have given rise to a new contract of employment; but that would not negate the termination.  The submission required some sort of retrospective validation of employment under the Contract as if the termination on 30 June 2013 had not occurred, but how that could be was not explained.

184. In any event, when the matters on which Frontline relied are placed in context they do not make out continuation of employment under the Contract.

185. The submission as to proper termination procedures referred to written notice, and as earlier explained written notice was not necessary. Many other matters on which Mr Adil relied were unilateral acts of or failures to act by Frontline, and in particular a board resolution was not essential (and does not seem to have been valued in Mr Chaturvedi’s corporate governance).  It is necessary to take a wider view.

186. At the beginning Mr Adil asserted termination, and he continued to do so while also questioning whether Frontline wanted him to serve out the term of his employment – and Mr Chaturvedi did not say that he wanted it. Frontline’s internal treatment of Mr Adil as Managing Director, at least until October 2013, was by no means consistent; in August 2013 his name and profile were removed from the website, and in an email to Mr Chaturvedi dated 15 August 2013 he recorded that staff had been instructed not to “attend” to him.  The assertion of non-termination in the 21 September 2013 email was wrong (on Mr Chaturvedi’s stance in these proceedings a bare-faced lie), not to be taken at face value, and Mr Adil did not take it as such; he questioned the position.  His request for payment for July and August 2013 may have been provoked by the email, but payment was not made.

187. While Mr Asif did return to the Dubai office, that was after the Maputo meeting and it is tolerably clear that it was an interim measure in the hope of salary. When Mr Adil asked for salary for the full month of July, he asked in vain, and he told Mr Chaturvedi that removal of his name from the website “goes to confirm that you have terminated my services”.

188. The 21 September 2013 letter was no doubt a catalyst to the meeting on 3 October 2013 (and was intended as such), but the so-called amendment of the Contract so far as it was effective was in reality as well as in law the making of a new contract of employment. The commencement of the process which ended with the 3 October 2013 agreement was, on either version of what was said at the meeting in Maputo, a fresh start; coming back to Frontline on new terms.  The salary was progressively less until 30 April 2014.  The equity grant for the year to 30 April 2014 was a quarter of that in the Contract, and the employment apparently ended on 30 April 2014 (the five year term of the Contract would have expired on 31 August 2016).  And the new contract was conditional upon, at the least, an audit, and perhaps on other matters as noted in the schedule of payments.  Mr Adil’s activities on behalf of Frontline thereafter are attributable to that source of his employment, as is his resignation of 30 November 2013.

189. Mr Chaturvedi’s purposes can not be found with any certainty, but probably were to bring Mr Adil to the bargaining table with a view to regaining his services at a reduced cost and dealing with the complication of their co-investment. That happened.  So far as Mr Adil and Frontline conducted themselves from about the end of July 2013 as if Mr Adil was still Managing Director, their conduct is best seen as ad hoc co-existence as they jockeyed for advantage, until a new employment relationship was created at the 3 October 2013 meeting.  I do not think there was continuation of the Contract.  At best, there came about a new contract of employment: but Mr Adil did not sue on a new contract.

12. No Amendment to Sue on a New Contract

190. In that connection, Mr Adil submitted that if the Court held that the termination on 30 June 2013 was effective, he should be awarded his salary for the period he worked thereafter. He submitted that this should be done –

(a) because Mr Chaturvedi said in evidence, “by the time [Mr Adil] comes through the office he should be paid and that’s written there in the minutes of the meeting of 3 October”; Mr Adil said that this could be done pursuant to the prayer for further or other relief in the Particulars of Claim and the Court’s powers under of Rule 4 of the Rules (case management) and Article 32 (f) of the DIFC Court Law, Law No 10 of 2004 (orders made in the interests of justice); or

(b) by amendment of the Particulars of Claim to include the allegation –

“… that by virtue of Mr Asif [sic] attending for work on 18 September 2013 there was a verbal agreement between the parties pursuant to which it was agreed that Mr Asif [sic] would be employed by FDPL as a Managing Director”.

191. The submission is manifestly untenable.

192. Ordering payment of salary is not case management, nor does a power to make orders in the interests of justice warrant an order for payment on a basis not pleaded or otherwise in issue in the proceedings. That is particularly so when Mr Chaturvedi’s statement came back to the 3 October 2013 agreement, which Frontline had purported to terminate by the Al Tamimi and Co letter of 27 April 2014.  It is far too late to amend to add a claim on a subsequent verbal (more correctly oral) agreement, quite apart from the deficiencies in the allegation itself (for example, how can attending for work constitute a verbal agreement, and what were its terms?)  The issues in the case did not encompass any such agreement, and Frontline could not properly be required to answer the claim on the existing evidence.

193. The submission was supplemented by the further submission that, if the Court were not minded to accede to one of its limbs, Mr Adil “should be awarded the losses he claims for the six month period from 30 June 2013 to 30 December 2013 pursuant to clause 24”. Clause 24 of the Contract does not provide for compensation for losses.  It provides, in applicable circumstances, for payment of salary and other employment benefits for a notice period or payment of an amount in lieu of notice.  The further submission is equally untenable.  It disregards both what cl 24 says and what it does not say.

191. No Cause For Termination

13.1  Frontline’s case on cause

194. In case I am wrong in holding that there was termination but not for cause, I should make findings on whether there was cause for termination; and also because in part Frontline relied for its counterclaim on the conduct said to provide cause for termination.

195. In closing submissions Frontline relied on conduct in four respects as providing cause for termination of Mr Adil’s employment on 30 June 2014. The conduct related to the:
(a) allotment and issue of shares in Fronteira to PDEL;
(b) misappropriation of funds;
(c) provision of accounts; and
(d) a Wild Bull Beverages loan application.

196. Before going to the conduct in these respects, Frontline’s pleaded case should be noted. In the rather prolix Amended Defence and Counterclaim, Frontline alleged a raft of conduct on Mr Adil’s part said to amount to serious misconduct justifying termination for cause pursuant to cl 24 of the Contract.  In summary, the conduct was:

(a) failure to create viable commercial opportunity for Frontline or generate revenue, in breach of cl 2 (a) and (b) of the Contract;

(b) failure to “confirm the status of” the Fronteira shareholders agreement, in breach of Frontline’s instructions;

(c)  failure to transfer shares in Fronteira to PDEL, in breach of Frontline’s instructions and his fiduciary duty;

(d) instead, transferring 25.5 percent of the share capital “pertaining to PDEL” to himself, being conduct “tantamount to fraud”;

(e) registering Fronteira’s intellectual property rights in his own name, in breach of the Contract and his fiduciary duty, being conduct “amount[ing] to theft of the Defendant’s property”;

(f) supplying services to Fronteira through AGS, in breach of cll 19 and 23 of the Contract and Frontline’s Code of Conduct;

(g) placing a proposal/business plan for his own venture, Wild Bull Beverages, to the United Bank of Africa for the purpose of securing a loan for the venture, in breach of cl 23 of the Contract and his fiduciary duty;

(h) misappropriating USD 777,778, withdrawn from Frontline’s bank account purportedly to pay for development and costs incurred in the setting up of various projects including Fronteira, in breach of the Contract and his fiduciary duty;

(i) constantly failing to meet Mr Chaturvedi or answer his queries, in breach of cl 2(a) and (b) of the Contract; and

(j)  on 30 June 2013, refusing to acknowledge his lack of performance, to provide information concerning the transfer of shares to PDEL, to submit an amount of the USD 777 778, to explain Frontline’s heavy losses, or “to cooperate in any way with the reasonable requests for information made by [Mr Chaturvedi] regarding the conduct and performance of [Mr Adil]”, amounting to fundamental breach of cl 23 of the Contract.

197. The pleader did not hold back. He or she included the general allegation that “[s]ince the commencement of his employment, [Mr Adil] sought to deceive and exploit [Frontline] and its associated companies in order to improperly and unlawfully retain ownership and profits from various ventures for himself”.

198. The allegations were wide-ranging, and ill-thought at least to the extent of alleging breach of a non-existent Code of Conduct. Frontline now rests only upon conduct in the four respects earlier noted, and other pleaded allegation to have been abandoned.  Within the case now made by Frontline, there is some departure from such of the broadly equivalent pleaded conduct as is maintained.  Mr Adil did not object to any such departure, and I will address that case.

199. Frontline’s closing submissions included that the conduct on which it relied was in breach of an implied obligation of good faith and fair dealing, and also referred to Article 59A of the Employment Law apparently as a source of its ability to terminate the employment. The Article and cases on its construction were referred to as relevant law, and although when making submissions on the conduct Frontline did not specifically advert to the Article, it used the language of warranting termination found in it.  Article 59A provides –

“59A An employer or an employee may terminate an employee’s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment”.

200. Breach of an implied obligation of good faith and fair dealing was not pleaded. It adds nothing, since the Contract provided that Mr Adil should “well and faithfully serve” Frontline (cl 23).  But Mr Adil objected to any reliance on Article 59A on the ground that it had not been pleaded, and that the counterclaim had not been defended (this must mean that the defence had not been resisted) on the basis that his conduct warranted termination for cause pursuant to the Article.

201. This objection should be upheld. The concept of conduct warranting termination in the Article appeals to a standard other than breach of contract or of fiduciary duty, one which may possibly be wider than either but in any event can involve a different investigation.  Further, the Article adds the integer that a reasonable employer would have terminated the employment, as construed meaning a reasonable employer in the circumstances of Frontline (McDuff v KBH Kaanuun, CA 003/2014, 14 October 2014).  In neither of these respects was there an issue at trial, and I accept that Mr Adil’s conduct of his case may have been different if Article 59A had been in play.  On the findings later recorded it is unlikely that it would have availed Frontline, but I will not deal with the Article as a source of ability to terminate the employment.

202. As I have earlier noted, Frontline’s submissions included that Article 59A permitted consideration of facts discovered post-termination, with reference to Boston Deep Sea Fishing & Ice Company v Ansell. I will assume that, apart from Article 59A, the common law principle would apply to termination for cause pursuant to cl 24 of the Contract.  But the principle does not permit consideration of post-termination conduct as distinct from pre-termination conduct discovered post-termination.  To the extent that Frontline relied on acts or omissions after termination, which was not entirely clear since its submissions sometimes lacked detail, that conduct is not available.

13.2     Allotment and issue of shares in Fronteira to PDEL

203. To recall, Mr Chaturvedi said that at the 30 June 2013 meeting he asked Mr Adil “why PDEL had not been allotted its shares and why there had been delays on account of one reason or the other.” I have not accepted this, but there had been communications about PDEL’s shareholding in Fronteira.  Frontline submitted that Mr Adil failed “to allot, issue and/or record the ownership of shares of PDEL in Fronteira”, in breach of cl 23 of the Contract and of his fiduciary obligations.  It said that PDEL had contributed its USD 300,000, and that Mr Adil had recognised that it was entitled to 25.5 percent of the Fronteira shares; but that Mr Adil “kept 51% of the shared [sic] capital of Fronteira”, that he “stalled” any transfer of share with excuses, and that he used his authority to issue shares in Fronteira as a lever to secure further funding from PDEL or Frontline.

204. I have dealt with the evidence relating to Fronteira and its shareholding earlier in these reasons. I accept Mr Adil’s account of the origin of the Fronteira venture and the agreement upon co-investment in preference to that of Mr Chaturvedi (including, as later discussed, funding to Mr Adil through cl 7 of the Contract).  I accept also that it was agreed that shares would be assigned to an individual when all his contribution had been paid; relevantly, that shares would be transferred to PDEL only after it had paid its contribution.

205. Mr Adil held 51 percent of the shares upon incorporation of Fronteira, and these could be no valid complaint of failure to allot shares to PDEL at that time because in November 2011 Mr Chaturvedi’s co-investment had not progressed to nomination of PDEL as the vehicle for it.

206. Mr Adil did not deny that PDEL was entitled to 25.5 percent of the shares in Fronteira, half of the 51 percent he held. It was clear from the shareholders agreement he signed.  The question is then one of transfer of shares to PDEL.

207. Mr Adil submitted that so far as an instruction to transfer the shares was given prior to 30 June 2013, the instruction was given by PDEL and not Frontline; therefore, he said, failure to transfer the shares could not be a reason for Frontline terminating his employment. What appears to have lain behind this, although not well articulated, was that if Mr Adil’s evidence of the origin of the Fronteira venture were accepted, the co-investment through Fronteira was a matter between Mr Asif and Mr Chaturvedi, for the latter as a personal investment through PDEL, and did not involve Frontline.  Whatever obligation Mr Adil had to see to the transfer of shares, it was owed to PDEL or Mr Chaturvedi; Frontline was not a putative shareholder and could not complain of or rely on failure in the obligation.

208. I have accepted Mr Adil’s evidence of the origin of the Fronteira venture, and the submission is sound up to a point. But it does not recognise Frontline’s reliance on failure to transfer the shares as breach of cl 23 of the Contract.  Also not well articulated, it argued that failure to transfer the shares was not only a breach of the obligation to well and faithfully serve Frontline and further its interests (which should not be accepted, because Frontline had no stake in the Fronteira venture), but also of the obligation to further the interests of “any company in the [Frontline] group”.

209. For this argument, it was necessary that PDEL be a company in the Frontline group. “Group” was defined in the Contract, but the definition was in terms of the companies “which comprise the [Frontline] Group of companies, as constituted from time to time”, and took matters no further.

210. So far as the evidence showed, Mr Chaturvedi was the connecting element between Frontline and PDEL. The connection was obscure, through shareholder companies in Frontline in which he had unexplained interests and as “beneficial owner” of PDEL, described as a trust company.  However, it will be recalled that in pre-contract discussions between Mr Adil and Mr Chaturvedi, “group” was used to mean companies in which Mr Chaturvedi had an interest; Mr Adil went along with that usage whereby Fronteira would be a group company within cl 7 of the Contract.  Regard may be had to the Contract Law, Article 51(a).  The parties agreed on their own dictionary for the Contract, and if Mr Chaturvedi had an interest in Fronteira he had an interest in PDEL through which he had that interest.  Thus I do not accept Mr Adil’s submission.

211. However, I am not satisfied that prior to or as at 30 June 2013 there was failure to further the interests of PDEL through failure to transfer shares. If there were repeated requests by Mr Chaturvedi, they were met by Mr Adil’s advice that attendance by PDEL in Maputo was necessary.

212. From the earlier account relating to the Fronteira shareholding, in May 2012 Mr Adil sent a “share transfer” to FITCO and in June 2012 he told Mr Shah that “share certificate can only come” when a PDEL representative attended the Registrar of Companies in Maputo. The evidence was otherwise silent as to the “share transfer”, presumably a transfer form.  So far as appears, it was accepted at the time that the shares could not be transferred unless a PDEL representative went to Maputo Mr Adil was legally trained, was frequently in Maputo, there was no evidence to the contrary of what he said was Mozambican law or practice, and I see no reason why I should not also accept that position

213. There was no specific evidence of further requests in the period to 30 June 2013 that Mr Adil see to the transfer of shares in Fronteira. There was no evidence that a PDEL representative went to Maputo, or that Mr Adil was asked to assist in a visit for the purpose of attending the Registrar of Companies.

214. Mr Chaturvedi said generally that between May 2012 and June 2013 he made “repeated requests” for and “repeatedly contacted” Mr Adil about transferring shares to PDEL, but that Mr Adil failed to do so.  No email or other document was in evidence in which he did so.  For his part, Mr Adil said that –

“Further, I repeatedly advised PDEL and SC that in order to register the shares in             PDEL’s name, the capital contribution needed to be satisfied and that a PDEL representative would need to attend the Ministry of Justice in Mozambique…PDEL did not send a representative, and so the shares were never registered in   PDEL’s name”.

215. It may be noted that the minutes of the 3 October 2013 meeting record Mr Adil’s assurance “that the equity shares in the Mozambique ventures [sic] would be issued to FDP group companies as soon as PDEL Director is ready to travel to Maputo…”

216. In my view, on the evidence to 30 June 2013 there was no more than that PDEL asked Mr Adil to transfer the shares to it, he said that a PDEL representative had to come to Maputo, and there it was left. In these circumstances, I do not think it correct to say that there was a failure on Mr Adil’s part.

217. Mr Adil gave as a second prerequisite to transferring the shares that “the capital contribution needed to be satisfied”; that is, that the shares did not have to be transferred because PDEL had not paid its contribution. That is more doubtful.

218. The original agreement was that Mr Chaturvedi would invest USD 300,000 in the Fronteira venture, matching Mr Asif’s USD 300,000: for the present, the question of the source of Mr Asif’s contribution does not matter.  By a date in July 2012 PDEL did contribute USD 300,000, by the payments for machinery and equivalent as later adjusted by Mr Adil’s refund.  Mr Adil recognised this contribution, in part in anticipation, in his email to Mr Shah on 26 June 2012, “Only to extent of USD 300,000…”.

219. However, the Fronteira venture needed more capital. The evidence was not clear; it seems that by December 2012 the required capital contributions had doubled, and that PDEL did not (at least prior to 30 June 2013) contribute what was required of it.

220. It may be that Mr Adil also was not obliged to transfer the shares because the contribution required of Mr Chaturvedi had increased and the increased contribution had not been paid. The evidence was uncertain, and Mr Adil’s assertions to that effect do not sit well with his apparent acceptance that all that was needed was a PDEL representative in Maputo; see also the minutes of the 3 October 2013 meeting recording that the shares would be “issued” as soon as that happened.  I will not take further time on an unnecessary exercise.

13.3     Misappropriation of funds

221. A total of USD 777,778 was paid by Frontline to Mr Adil by cheque or bank transfer between 25 December 2012 and 30 April 2013. Mr Adil contended at trial, as he had when dispute arose when he was still engaged with Frontline, that the payments were on account of his entitlement to what he called balance compensation/incentive payment pursuant to cl 7 of the Contract, and were used as his contribution to the Fronteira venture.  Frontline contended that Mr Adil had no entitlement to the money pursuant to cl 7 of the Contract, and that he misappropriated (sometimes reduced to misused) the money.

222. It will be seen that there was nothing clandestine about Mr Adil’s dealing with the money. That he received it was known, and he maintained throughout that he received it as an entitlement pursuant to cl 7 of the Contract.  As will appear, in my opinion that is correct.

223. The first payment was made on 25 December 2012, by bank transfer from Frontline’s account to Mr Adil’s account of AED 733,798 (equivalent to USD 200,000). The bank form asked for the purpose of the payment “for regulatory purposes”, and the box was completed “Advance”.  The form was signed by Mr Adil and by Mr Anathasankaran, one of Frontline’s accountants.  Mr Adil said that he used to sign such documents, and cheques, in blank before going on a business trip or on leave; the evidence included a cheque signed in blank.

224. There was no evidence of Mr Adil requesting that the payment be made, other than from an email from Mr Raghuram, another member of the accounting staff, to Mr Chaturvedi on 24 December 2012. Mr Raghuram said that “Mr Asif wants in his personal account the money USD 200,000 (separate account to be opened shortly)”, but that Mr Maheshwari had reservations and “said that we should not give in Fronteira – in company name instead of personal account”.  (This is unfortunately worded, but the intent is clear enough).  He said that Mr Maheshwari wanted it checked with Mr Chaturvedi before payment was made.

225. Mr Chaturvedi responded at 3.59pm on 25 December 2012, “Tell Adil to speak to me”. There was no evidence of the two men speaking, and probably they did not because at 4.03pm Mr Chaturvedi emailed Mr Adil, copied to Mr Raghuram –

“Dear Asif, fund are ready you are instructing fund to be transferred in your personal [sic] name I will do that but this money will be adhoc in your name because for MZ project you have to give me detail.”

226. At 4.31pm Mr Adil emailed Mr Chaturvedi in return –

“All payments for Fronteira for purchase of equipment (USD 900000) have so far been routed through myself.  Mr Kamlesh [one of the local partners] has also sent me USD 300000 of his own money which has been then used for purchase of various items.  Only local payments of USD 200000 have been made in Mozambique customs duties, freight clearing civil works etc.  All accounting is readily available.

The reason for this is the following:

1) We would incur an exchange differential on the remittance in and payment out if mozambique of 10 percent which is the spread on exchange rates in addition, there are bank charges etc amounting to a total of 12 to 15 percent.  So on a 1 million dollar investment, we would have lost USD 120000 to USD 1500000.

2) Also, there are fees for size of equity contributions which we have avoided incurring

3) Since I am controlling the payment, we have gotten favorable terms and pricing from the suppliers who personally know of me.

Now, instead of equity being contributed by cash, we are contributing to equity by kind which results in the same outcome but saves us a substantial amoun[t] of money.

Once, we have our initial funding done and we get into a business cycle, we will get into a normal cycle.

Please send this as I am already late.”

227. The chain ended with Mr Chaturvedi replying that he had already instructed Mr Raghuram to send the money and “We should discuss detail on this project”.

228. Mr Adil said in his witness statement that this was “a part payment for 16 months from 1 September 2011 to end of December 2012 for my balance compensation/incentive payment (Equity Grant) under my Employment Contract”. He said that he was entitled to USD 666,667 for the 16 months and that he and Mr Chaturvedi met two days later, on 27 December 2012, and “discussed why the money was being routed through my account and…how much balance compensation/incentive payment/Equity Grant had been paid to me up until that point in time, and what was still to be paid”.  I will shortly refer to that meeting in more detail.

229. The second and third payments were made on 27 January 2012, by two cheques drawn on Frontline’s account in favour of Mr Adil for AED 734,000 (USD 200,000) and AED 978,668 (USD 266,667) respectively. There was no evidence of accompanying paperwork such as a cheque requisition form.  The cheques were signed by Mr Adil and Mr Raghuram.

230. According to Mr Adil, these payments followed from meetings with Mr Chaturvedi on 27 December 2012 and 7 January 2013 in which they discussed joint ventures between them “outside of Frontline”.

231. There were two sets of minutes of the meetings in evidence. Mr Chaturvedi prepared minutes and sent them to Mr Adil for review and comment.  Mr Adil sent back revised minutes.  Mr Chaturvedi made no comment on the revised minutes, apparently accepting them.  The minutes referred to current ventures of two kinds, liquor (Fronteira) and cosmetics.  Other non-current ventures were referred to, not consistently between the minutes.

232. Looking only at Mr Chaturvedi’s minutes, they bear out that the ventures were between Mr Adil, Mr Chaturvedi and outside partners – indeed, it is noted that Frontline should be paid a development fee for its “time, money and effort spent for the project”, indicating that Frontline had no entitlement. The liquor venture, that is, Fronteira, was said to have the “size” of USD 1.6 million; that is, by this time the capital requirements have increased from the initial USD 600,000.

233. Mr Adil’s revised minutes are much more full. They include, in relation to the current ventures –

“Both parties then went on to discuss the Fund Requirements of the current businesses.  Based on attachment A, it was agreed between both parties that [Mr Chaturvedi] has given USD 200,000 to date.  He would give an additional USD 200,000 in 2013 – of which USD 100,000 would be given on behalf of [Mr Adil].  (See attachment A for details).  This subscription would bring closure to [Mr Adil’s] 2012 compensation.”

234. They later included, in relation to “Funds Requirements and Contribution” and apparently having in mind also the businesses other than the current businesses –

“..The key parameters to consider are;

• The investment requirement of each business
• The percentage contribution being made by all partners
• Asif Adil’s compensation agreement with Mr. Suresh Chaturvedi which is;
  1. USD 600 thousand annual cash compensation
  2. USD 500 thousand to be given as an annual equity contribution by Mr. Suresh Chaturvedi on behalf of Mr. Asif Adil in various businesses      agreed between them.
  3. Any further equity contribution beyond the annual USD 500 thousand is to be made by Mr. Asif Adil in his personal capacity.

Keeping this in mind, the fund requirements and contribution are shown in attachment A.

In summary:

1)   A total of USD 800 thousand has been contributed by Mr. Suresh Chaturvedi of which USD 400 thousand is for his own account and 400 thousand is on behalf of    Mr. Asif Adil.

2)   A total of USD 1.2 million is to be contributed by Mr Suresh Chaturvedi in 2013 of which USD 600 thousand is for his own account and USD 600 thousand is on behalf of Mr. Asif Adil. This includes the USD 100 thousand shortfall in          contribution against compensation in 2012.

3)   A total of USD 2. 1. million is to be contributed in 2014.This amount will come from a contribution of USD 1,550 thousand from Mr. Suresh Chaturvedi of which USD 1,050 thousand is for his own account and USD 500 thousand is on behalf of Mr. Asif Adil.  Mr. Asif Adil will also contribute USD 550 thousand from his own resources.”

235. Attachment A was not in evidence.

236. According to Mr Adil, at the end of the 7 January 2013 meeting it was agreed that Mr Chaturvedi would fund USD 400,000 by 15 January 2013, being “the payment owed to me by [Frontline] under clause 7 of the Employment Contract”. Mr Chaturvedi gave no evidence to the contrary.

237. On 24 January 2013 Mr Swamy, another member of Frontline’s accounting staff, emailed Mr Adil asking how he wanted “this amount” to be transferred to his account, that is, in USD or AED, giving the “details” –

“In USD 466,667                                    In AED 1,712,668

Banking 150,000                                    550,000

Cosmetic 50,000                                   183,500

Incentive 266,667                                   978,888”

238. The two cheques followed. They brought a total payment to Mr Adil of USD 666,667, said to correspond to an amount of USD 500,000 per annum to which Mr Adil said he was entitled to the end of December 2012.  It will be noted that USD 266,667 is described as “Incentive”; Mr Adil said that all three amounts should have been described in that way.  No questions were asked with a view to showing some other purpose for the USD 200,000 and USD 266,667.

239. The last payment was made on or about 30 April 2013, by bank transfer from Frontline’s account to Mr Adil’s account of the equivalent in AED of USD 111,111. This brought a total payment of USD 777,778.  There was no evidence of accompanying paperwork.  Mr Adil said that this was his “second year employment incentive”, and that it meant that he was paid what was due under cl 7 of the Contract up to 1 April 2013.  Mathematically that is not correct, but it was not questioned.

240. Mr Adil said that the payments were made in relation to three specific projects, liquor (Fronteira), cosmetics and banking; but because he was obliged to invest in ventures in which Mr Chaturvedi had an interest and the latter two were put on hold by Mr Chaturvedi, he put all the money into Fronteira.

241. In June 2013 Mr Maheshwari reviewed Frontline’s accounts and noted that these payments were classified as incentives. He did not think this was right, as Frontline had not become profitable (although so far as appears he was not aware of the discussions between Mr Adil and Mr Chaturvedi concerning additional compensation via cl 7 of the Contract).  He enquired of Mr Chaturvedi, who told him to reclassify them as expenses paid in advance for projects undertaken by Mr Adil on Frontline’s behalf.

242. It is relevant briefly to notice events after 30 June 2013.

243. On 27 November 2013 Mr Adil was asked by Mr Jose to sign Frontline’s balance sheet. He saw that an amount of USD 666,667 or thereabouts in AED equivalent was classified as loan/advance to him.  He told Mr Jose, as recorded in an email dated 29 November 2013 copied to Mr Chaturvedi, that this was wrong “as it was not an advance but the incentive payment and should be shown as such an expense”.

244. On 29 November 2013 Mr Swamy emailed Mr Adil –

“The amount which was paid as an incentive was shown under the head incentive initially i.e. before June 2013, Mr. Maheshwari reviewed when he visited our office in June month, and said not make any changes till he gives final instruction.  Till that point of the period it was under the incentive.

Mr. Maheshwari again visited our office during the month of August when I was on annual leave.  In that period, the same entries were reviewed again and had instruction to joy [sic: Jomy] to show under advance.

The amount which was actually paid in Dirhams was shown exactly the same amount was converted in 3.67 which is shown as USD666,617.  It is only an exchange difference it shows.

Jomy has changed the entries on Mr. Maheshwari’s Instruction and not on our own.

I will check with Jomyextactly [sic] what was instruction came from Mr. Maheshwari….”

245. Mr Adil replied on the same day, saying that the amount “is an incentive and expense and should be shown as such” and that Mr Swamy should “go back to the auditor and make the necessary changes”.

246. Nothing was done to change the accounting. In December 2013 Mr Adil was told, in answer to his enquiry, that “It was well informed to the concerned, we are still waiting for their decision”.  Thereafter the evidence is silent as to a decision.

247. There are two questions, although they merge. Was Mr Adil entitled to money as what he called balance compensation/incentive payment, at the trial variously equity contribution, compensation and incentive, pursuant to cl 7 of the Contract? If so, were the payments totalling USD 777,778 made in satisfaction of that entitlement?

248. For convenience, I repeat cl 7 of the Contract –

“7 EQUITY GRANT

You will be granted Equity Grant of total value USD 500,000 (US Dollars Five  Hundred Thousand only) per annum equivalent in United Arab Emirates Dirham (AED) in various companies of the group”.

249. In his evidence Mr Chaturvedi was dismissive of this provision, saying that an equity grant was a grant of shares and the clause did not provide for payment of money. This was playing with words, and did not assist his credit.  The submissions on Frontline’s behalf took the same point, and also played with words in saying that Mr Adil could not be entitled to what he at times called an incentive payment when Frontline was losing money; Mr Adil was accused of dissembling in his description of balance compensation/incentive payment.

250. However, it is abundantly clear that cl 7 of the Contract was intended to, and did, underpin the payment of money to or on behalf of Mr Adil as an addition to his basic salary. Frontline’s submissions went some way towards recognising that Mr Adil was entitled to the payment of money, although contesting that the three payments (or at least the first of them) were in satisfaction of that entitlement.

251. The first question does not need extensive discussion. I accept Mr Adil’s evidence of pre-contract discussions concerning co-investment in Fronteira and payment of an additional USD 500,000 to be invested in ventures like Fronteira, including that cl 7 of the Contract was intended to provide for the payment as additional remuneration.  My preference for the evidence of Mr Adil to that of Mr Chaturvedi is directly supported by, amongst other matters –

• Mr Adil’s minutes of the December 2012/January 2013 meetings, on which Mr Chaturvedi made no comment, with their reference to equity contribution;
• The minutes of the 3 October 2013 meeting and the schedule of payments document, which clearly recognised entitlement to additional payment of money as an equity grant;
• The Ex31 calculation of incentives due to Mr Adil; and
• Mr Chaturvedi’s email of 29 January 2014 stating that he had “given [Mr Adil] equity in my group company, as per the clause in your appointment letter”.

252. The email of 21 September 2013 also referred to “the arrangement with Fronteira LDA” as part of Mr Adil’s “overall compensation package”, but it is not easy to make sense of what was also said about it. These materials, and they are not exhaustive, show also that the parties conducted themselves on the basis that Mr Adil was entitled to the payment of money, at the time sometimes called compensation or incentive, which could only be in satisfaction of the equity grant provision.

253. At trial Frontline foreshadowed a submission that regard could not be had to the pre-contract discussions because cl 32 of the Contract provided that its terms and conditions superseded any prior oral or written agreements. It is not clear that the submission was eventually made.  The pre-contract negotiations and post-contract conduct may both be taken into account in the interpretation of the Contract (Contract Law, Article 51 (a), (c)), and cl 32 does not impede doing so.

254. The parties’ intention can readily come within the language of cl 7. “Equity Grant” is not a term of art. And while “equity” ordinary denotes shareholding, the shareholding can be granted otherwise than by a straightforward issue of shares.  It could again be said that the parties wrote their own dictionary in their discussion of how cl 7 would operate; but even without that, a procedure by which A gave money to B which B invested in C, receiving shares in C, came within cl 7 of the Contract.  The fact that the money of A (Frontline) went to satisfy an arrangement between B (Mr Adil) and D (Mr Chaturvedi/PDEL) for B’s investment in C (Fronteira) is a reflection on Mr Chaturvedi’s corporate governance, but does not bring down the operation of this clause.

255. Frontline submitted that because shares in Fronteira were never transferred to PDEL, Fronteira never became a group company within cl 7. It was not essential that the company whose shares were to be received be a group company at the time of the payment, so long as it was to become a group company.  PDEL’s entitlement to the shareholding was never in doubt, although the achievement was subject to procedural steps (and perhaps payment of more by way of contribution), and it was regarded as a group company by Mr Chaturvedi, with the acceptance of Mr Adil, from the beginning.  There is nothing in this submission.

256. In contesting that the payments were in satisfaction of Mr Adil’s entitlement, as to the December 2012 payment of USD 200,000 Frontline relied on the reference to “advance” and Mr Chaturvedi’s statement that the money “will be adhoc in your name because for MZ project you have to give me detail”. It relied further on Mr Adil’s email of 25 December 2012 referring to routing of all Fronteira payments through himself, submitting that it did not describe the payment as equity contribution, balance compensation and so on.

257. However, this payment must be seen together with the later payments. The meetings in December 2012 / January 2013 sufficiently show that Mr Chaturvedi accepted the payment as part of the equity grant entitlement; that is, Mr Adil did “give [Mr Chaturvedi] detail”, and the money was left in his name (at least until June 2013).  The email was rather obscure, but dealt with payments other than an equity grant payment and does not, as was suggested, imply that the purpose of the USD 200,000 was the purchase of equipment for Frontiera to Frontline/PDEL’s account and not that of Mr Adil.

258. The position is even clearer as to the later payments, which followed the discussion of funding requirements for ventures between Mr Chaturvedi and Mr Adil. With customary prevarication, Mr Chaturvedi eventually agreed in cross-examination that he authorised the payment of the USD 466,667 after the meetings of 27 December 2012 and 7 January 2013, himself describing them as “equity contribution” to group companies, although he later sought to resile from that acceptance.  He later agreed that the money was paid “for the equity grant”.

259. More detail is not warranted. I return to Ex 31, produced by Frontline for the meeting on 3 October 2013.  It showed all the payments presently in question, as past payments, and described them as incentives; that is, equity grant payments. I accept that the payments of the amounts totalling USD 777,778 were pursuant to Mr Adil’s entitlement under cl 7 of the Contract, and answer the second question in the affirmative.

260. Two further matters may be noted. First,  Mr Chaturvedi said that on 30 June 2013 he “asked [Mr Adil] about what had become of all the money that he had taken from the Defendant”, and gave as one of his reasons for termination that Mr Adil had caused the payments to him to be shown as an incentive.  I have not accepted this.  So far as the evidence shows, not until the email of 21 September 2013, or apparently an earlier email not in evidence, was there complaint that Mr Adil had not accounted for USD 777,778 “that you have withdrawn as advances for projects”.  Secondly, when Mr Maheshwari inquired of Mr Chaturvedi in June 2013, all Mr Chaturvedi did was direct a reclassification of the first two payments as expenses paid in advance.  If the Managing Director had misappropriated or misused a sum in the order of USD 666,000, it called for prompt and decisive action against him.  But that did not happen; in due course, it was left to Mr Jose to ask Mr Adil to sign Frontline’s balance sheet.  The absence of such action speaks strongly against any misappropriation or misuse of money.

261. I do not accept that, as at 30 June 2013 or at all, there was misappropriation or misuse of the USD 777,778. I add that I would be of the same view even if the minutes of the meeting of 3 October 2013 had been excluded from evidence.  It is difficult to see how this allegation of cause for termination could responsibly have been maintained.

13.4     Provision of accounts

262. Frontline submitted that from the commencement of his employment, and in particular during the early part of 2013, Mr Adil had –

“…consistently failed to provide any detail of how the monies, that had been paid to him in order to cover the project costs and expenses associated with Fronteira and/or the Banking and Cosmetics ventures, had been spent.”

263. The premise is that Frontline had paid money on its own account and was entitled to have an accounting. The submission did not explain what money paid to Mr Adil were its subject, but from the cross-examination of Mr Adil it appears to have been the USD 777,778.  If it be correct that the USD 777,778 was for Mr Adil’s equity grant, the premise would appear to be unsound.  Mr Chaturvedi/PDEL may have been entitled to an accounting as co-venturer, but not Frontline.  However, this was not the subject of submissions and I do no more than note it.

264. Frontline relied on what it said was Mr Chaturvedi’s evidence of repeated requests for such information, and on an email from Mr Chaturvedi to Mr Adil on 29 January 2014 which it said corroborated that evidence and confirmed that Mr Adil had failed to provide any or any sufficient account of the money he had received from Frontline for Fronteira. It submitted that Mr Adil’s failure was a breach of cl 23 of the Contract so far as it obliged him to follow management instructions, and of his duty of good faith and fiduciary duty.

265. The evidence of repeated requests for which Frontline gave a reference was scarcely that; just the statement that Mr Adil “simply failed to provide any information as to how these sums of money had been utilised”. In cross-examination Mr Chaturvedi said globally that whenever anyone went to Mr Adil he did not give information, and referred to “numerous correspondence between him and my people to get the accounts”.  There was no email or other document in evidence in which Mr Chaturvedi’s “people” asked for information, and I regard this evidence as worthless.

265. The email of 29 January 2014 relevantly read –

“I have spoken. to Mr P Maheshwari and Mr Shishir Dalal and understand that the proper accounts and supportings are not yet submitted to Mr. Shishir  for audit.

You will appreciate that for the last six months, you are not attending office as the accounts are not settled, but FDP is paying the salary for your absence. As per MOU dated 3.10.2013, this was discussed and agreed in principle and needs to be honored. As per best practices, one would assume that a professional of your standing must have kept the accounts upto date [sic].

…

You were supposed to give the accounts and Mr. Shishir to complete the audit within 01 (one) month froth the MOU and you made me to understand that Mr Shishir Dalal is not ready; but this is not the case; as the accounts/papers are being kept at different places and organizing them at one place is taking more time.

This matter should be resolved as early as possible and if you think it will take longer time, then it would be best, if you attend office and the exercise of settling the accounts can be done simultaneously.”

267. This does not support failure to provide accounts or information as to money paid to Mr Adil as cause for termination on 30 June 2013. The email was almost seven months later.  The accounting to which it referred was the particular exercise agreed at the 3 October 2013 meeting, see its references to verification of expenses and audit of accounts.  There is the assertion that for the last six months Mr Adil is “not attending office as the accounts are not settled”, but that is valueless (and in fact, Mr Adil was back at work for Frontline).

268. There was some evidence, to which Frontline’s submission did not refer, of earlier requests to Mr Adil. Mr Adil agreed in cross-examination that “in the months leading to the termination of [his] employment” he was “asked by Mr Chaturvedi to account for all the sums, the $277,000 that had been transferred to you…”.  But he firmly said that he told Mr Chaturvedi that the books of account were in Maputo, and that Mr Chaturvedi could have someone examine them at any time; and further, that Mr Chaturvedi was “fully knowledgeable and in agreement with that was done” as a result of discussion in the meetings on 27 December 2012 and 7 January 2013 and he gave him “as broad information as I had available with me”.  It is to be noted that only in Mr Chaturvedi’s email of 21 September 2013, or the earlier email to which it referred of which there was no evidence, is there first mention of accounting for how the USD 777,778 has been spent.

269. The postulated request for detail of how the money had been spent was not easily answered; it would be necessary to look at the books of account. Mr Chaturvedi was not a details man, nor would Mr Adil be expected to have the details at his fingertips.  A response that Mr Chaturvedi could have someone look at the books of account was reasonable; so far as appears, he did not take any steps to have that done until the exercise after the 3 October 2013 meeting.

270. As the evidence was left, breach of cl 23 of the Contract as at 30 June 2013, or of a duty of good faith or fiduciary duty, has not been established.

13.5     Wild Bull Beverages loan application

271. In March 2013 Mr Adil prepared and provided to United Bank of Africa an application for a loan of USD 9.5 million to fund an alcoholic beverage business in Tanzania (“the application”). The venture company was Wild Bull Beverages Ltd.  The application stated that it was “promoted by two leading luminaries with significant business experience and expertise in alcoholic beverages and the Tanzanian consumer market”, identified as Mr Adil and Oragan Capital Ltd (“Oragan”), a Mauritian company.  It was said that Mr Adil and Oragan held equity stakes of 51 percent and 49 percent respectively, and that “a comprehensive shareholder agreement has been drawn between the two parties.”

272. Mr Chaturvedi said in his witness statement that he became aware of the application when reviewing the work of one of Frontline’s “financial associates”, who told him that he had been creating a proposal for a liquor business in Tanzania and provided a copy of the application. It is not clear when this took place.  As earlier noted, Mr Chaturvedi said that on 30 June 2013 he asked Mr Adil what was happening in relation to the Tanzania liquor project, but his evidence did not include that he asked about the application.

273. Mr Adil said in his first witness statement that he prepared the application for Frontline on behalf of a Mrs Suchak of Jambro Plastics, and that Oragan was owned by Jambro Plastics. He said that he did so with the knowledge and consent of Mr Chaturvedi.  In his witness statement in reply he said that the application was prepared “to ascertain financial institution lending criteria and appetite”, and that he told Mr Chaturvedi of it in March 2013 and Mr Chaturvedi said “that he did not want his name included on the proposal and that he just wanted to be kept updated on major developments”.  Mr Adil was not cross-examined on this, and Mr Chaturvedi gave no evidence contesting it.

274. The evidence included a similar application dated 20 June 2013, relevantly with the same features as the March 2013 application save that the co-promoter was not Oragan but Global Fortune Ltd. Frontline’s submissions were directed only to the March 2013 application.

275. Frontline submitted that the application “effectively excludes [it] from having any role to play in the business and any equity stake in it’s [sic] name.” It said that Mr Adil breached cll 19 and 23 of the Contract so far as they prohibited involvement with a business other than Frontline, and by failure “to include [Frontline] within the business of Wild Bull Beverages Ltd” also breached his duty of good faith and his fiduciary duty to act in the best interests of Frontline.

276. It is not clear that Frontline’s arrangement with Mrs Suchak involved it having an equity stake in the liquor business. It matters not.  Although not made explicit, on Mr Adil’s evidence (which I accept), the application was to test the financial waters, and was not a true assertion of an Adil shareholding or involvement; and there was not a jot of evidence other than the applications that he had an involvement in the intended business.  Mr Chaturvedi knew this.  If Frontline was to have an equity in the business, the application does not make out that Mr Adil failed to “include [it] within the business”.  Perhaps that is why even on his account of the 30 June 2013 meeting Mr Chaturvedi did not tax Mr Adil with the application, but “asked what was happening in relation to the Tanzania liquor project”.  Again, as the evidence was left breach of cll 19 and 23 of the Contract as at 30 June 2013, or of a duty of good faith or fiduciary duty, has not been established.

14. The Counterclaim

14.1     The two parts of the counterclaim

277. The counterclaim fell into two parts, a claim to damages for breaches of the Contract and of fiduciary duty and a claim for other relief.

14.2     The claim to damages

278. In final submissions the only matter taken up by Frontline was misappropriation of funds, with the submission that Mr Adil was in breach of cl 23 of the Contract, that Frontline had lost USD 777,778, and that that sum was claimed by way of damages.

279. I have not accepted that the USD 777,778 was misappropriated or misused, and the counterclaim in relation to damages fails so far as it was maintained.

280. Something further should be said of the claim to damages in the counterclaim.

281. The pleading of the claim to damages was by incorporation –

“58. The Defendant repeats herein the various breaches set out in the preceding paragraphs and counterclaims for damages to be assessed unless specified, for:

• poor performance and failing to achieve the budgeted revenue (paragraphs 23-24);
• failure to comply with the Defendant’s direction to transfer 25.5% of the share capital in Fronteira to PDEL (paragraphs 25-29);
• misuse of the Defendant’s intellectual property (paragraph 30);
• related party transactions and losses arising out of any conflict of interest (paragraph 32 and 33)
• misappropriation of 777,778 USD (paragraph 34)”

282. No case at all was run of failure in performance.

283. Although failure to transfer shares in Fronteira was maintained as a cause for termination, it was not taken up in Frontline’s submissions on the counterclaim. I have not accepted that there was the necessary breach, but no attempt was made to prove the value of the shareholding or otherwise any loss suffered by Frontline; it is not easy to see how Frontline suffered a loss from failure to transfer shares to PDEL.  Perhaps the failure to take this up was recognition that it was hopeless.

284. While there was some passing mention of trade marks in the evidence, no case was run of misuse of intellectual property.

285. From the cross-referenced paragraphs, the related party transactions and conflict of interest were firstly, Mr Adil providing services to Fronteira through AGS and secondly, the Wild Bull Beverages application, in the defence said to be Mr Adil’s own venture (although as Frontline’s case was conducted it was a Frontline venture). From the extent and manner in which these matters were touched on at trial, I think it fair to say that no case was run on the counterclaim.  In any event, there was no evidence of loss suffered by Frontline from any breach.

14.3     The claim to other relief

286. In the pleading of the claim to other relief it was alleged –

• that Mr Adil had taken confidential information from Frontline’s premises on 30 June 2013 and used the information for his own purposes; and
• that, if he remained employed by Frontline after 30 June 2013, he breached cll 23 and 26 of the Contract by working for Fronteira “which was incorporated and setup [sic] for the sole benefit of himself”.

287. On neither matter did Frontline maintain a case against Mr Adil. The second matter is totally contrary to Frontline’s case in other respects.

14.4     A comment on the pleaded case

288. In the majority of its allegations, the counterclaim was abandoned. It is not uncommon for pleaded allegations to be abandoned, although the proper practice is openly to announce the abandonment.  I have earlier noted the raft of conduct alleged by Frontline as conduct justifying termination for cause, a deal of which was not part of Frontline’s case at trial.  It is of the utmost importance that practitioners plead only that which can reasonably be supported.  The extent of the discrepancy between Frontline’s pleaded defence and counterclaim and the case it maintained may serve as a reminder of that professional obligation.

15. Overpayment in Relation to the Equity Grant?

15.1     The issue

289. Mr Adil said that he had been entitled to USD 666,667 as at 31 December 2012, and that with the payment of USD 111,111 on 30 April 2013 bringing a total payment of USD 777,778 he was paid his entitlement up to 1 April 2013. Mathematically that is not correct.  The annual amount was USD 500,000; from 1 September 2011 to 31 December 2012 the amount was USD 625,000; and to 30 March 2013 the amount was USD 750,000.  More correctly on his case, Mr Adil had received part payment of USD 27,778 towards the April – June 2013 quarter.  This can be seen in Ex 31, with a balance payable for the three quarters from 1 September 2013 reflecting overpayment in the payments attributed to the year to 31 August 2013.  Perhaps strangely, Frontline did not take up the discrepancy with Mr Adil.

290. On Mr Adil’s corrected case, as at 30 June 2013 he had been underpaid in relation to the equity grant to the extent of USD 97,222.

291. Frontline submitted, assuming against itself that Mr Adil was entitled to money as his balance compensation / incentive payment, that he had been overpaid as at 30 June 2013.

292. I have accepted that the USD 777,778 was paid pursuant to Mr Adil’s entitlement under cl 7 of the Contract. That does not necessarily exclude that he had received other such payments, and so been overpaid, although regard to Ex 31 stands against it.  It is necessary to address this issue for two reasons.  First, the amount outstanding should be ascertained as a step in determining Mr Adil’s recovery in these proceedings.  Secondly, Frontline’s submissions included that if Mr Adil was entitled to equity grant money of USD 500,000 per annum, he had received more than his entitlement and should be ordered to repay the overpayment plus interest.  The counterclaim had not included any such claim, and the question also arises whether a claim to recover any overpayment should be entertained.

15.2     No overpayment

293. In written submissions Frontline asserted overpayment because, as well as the USD 777,778, Mr Adil had received (a) USD 284, 000 under the Consultancy Agreement and (b) “51 per cent of the equity in Frontiera of which 25.5 per cent was paid by PDEL in the sum of [the money paid to suppliers of plant and machinery].”

294. The second of these can be shortly disposed of. While Mr Adil held 51 per cent of the Frontiera shares, PDEL’s ultimate entitlement to half of that shareholding was not denied.  Mr Adil did not relevantly receive the value of the shareholding, let alone receive it in satisfaction of his entitlement under cl 7 of the Contract.  Moreover, if Mr Adil be regarded as having the benefit of PDEL’s shareholding, no evidence at all was led of the value of that shareholding; it was not measured by PDEL’s USD 300,000 or such other contribution it had made.

295. The source of the USD 284,000 was not explained, but appears to be the USD 200,000 paid to Mr Adil in June 2012 and the USD 84,000 recorded as paid in the Consultancy Agreement.

296. Mr Adil denied receiving the USD 84,000, and there was no evidence to support that, as was put to him, he had been paid in cash. Although Mr Adil signed the Consultancy Agreement, careful documentation was not the parties’ strong point and I do not regard its reference to payment of USD 84,000 as reliable.  Mr Adil denied that the USD 200,000 was payment under the Consultancy Agreement or to do with PDEL, and there was no evidence from Mr Chaturvedi or anyone else explaining the payment; it did not correspond to the USD 116,000 said in the Consultancy Agreement to have been arranged.  Mr Chaturvedi’s assertion that USD 260,400 was paid pursuant to the Consultancy Agreement fitted none of these figures, and if the figure was a mistake for USD 284,000 it was no more than an assertion providing no further support.  I add to this preference for the evidence of Mr Adil that the USD 300,000 payable under the Consultancy Agreement was consideration for being locked in with a non-complete clause and separate from any balance compensation / incentive payment; it maybe noted that cl 7 of the Consultancy Agreement recorded agreement to invest the money in Frontiera, which would have been unnecessary if cl 7 of the Contract were in play.  I am not satisfied that USD 284,000 was paid to Mr Adil as equity grant money.

297. In oral submissions, Frontline asserted overpayment on different grounds; as I understand the submissions, on two different grounds.

298. The first different ground was a variant on the written submissions. It was said that as well as the USD 777,778 Mr Adil had received (a) USD 284,000 under the Consultancy Agreement and (b) USD 300,000 being the payments made by PDEL to suppliers of plant and equipment (I use a round figure).  As I have said, I am not satisfied that the USD 284,000 was paid as equity grant money.  The PDEL payments were not payments of equity grant money.  They were payments by PDEL, not Frontline, and as Mr Chaturvedi’s investment of USD 300,000 to match that of Mr Adil in Frontiera.  Hence, amongst other things, Mr Adil’s “only to the extent of USD 300,000…” in his email of 26 June 2012 to Mr Shah, that being the contribution to come (and partly made) by PDEL.

299. I recognise, although Frontline’s submissions made no mention of it, that Mr Adil’s evidence was at times at odds with this view of PDEL’s payments. He said at times that PDEL had paid only USD 200,000 of its investment contribution (he seems to have meant the USD 200,000 paid in June 2012, although this is not consistent with him saying he held the money on trust for PDEL and like much else was left unclear), and (to add to the confusion) he sometimes said that PDEL made the payments to suppliers of plant and equipment as his contribution.  But that is not consistent with evidence that Mr Chaturvedi was to match Mr Adil’s equity grant contribution through PDEL, with the course of events, with Mr Adil’s explicit description of the USD 777,778 as his balance compensation and with Ex 31.  In these respects I do not accept Mr Adil’s characterisation of the payments, made for reasons which are not clear to me.  Objectively, and supported by their absence from Ex 31, they were made at the time as Mr Chaturvedi’s matching contribution through PDEL.

300. For the second different ground, although presented in an amalgam with the first, it was suggested that Mr Adil’s minutes of the meetings of 25 December 2012 and 7 February 2013 said that Mr Adil would receive USD 100,000 to “bring closure to [his] 2012 compensation”; that he received USD 100,000 on 27 January 2013 as half the USD 200,000 paid on that date, the balance being a Chaturvedi contribution; and that he also received USD 266,667 on 27 January 2013 and USD 111,111 on 20 April 2013, a total of USD 377,778, which took his equity grant payment (on Frontline’s case, assuming he was entitled to it) beyond 30 June 2013 – an overpayment of USD 127,778.

301. The submission was Counsel’s construct, in effect as a supplementary submission. The construct had not been put to Mr Adil in cross-examination or otherwise made known as an issue: the important procedural fairness of the rule in Browne v Dunn (1893) 6 R 67 was not respected, and it must be questioned whether Frontline can be permitted to rely on it.

302. In any event, I do not accept the submission. It suffers from the unexplained absence of ExA to the minutes, which apparently gave details of the payments and requirements between Mr Chaturvedi and Mr Adil.  Taking the minutes at face value, they do not refer to equity grant payments for the last quarter of 2011; they say that USD 400,000 has been contributed by Mr Chaturvedi on behalf of Mr Adil, the further USD 100,000 apparently making up the annual USD 500,000.  Important to the calculation is that the minutes accurately recorded that USD 400,000 had been paid on behalf of Mr Adil as compensation, which is not supported by anything else in evidence and is not consistent with Mr Adil’s other evidence.  Perhaps Mr Adil was writing in round figures; perhaps he was wrong.  (I have earlier noted that he was not above departing from accuracy in his dealings with Mr Chaturvedi).  On the evidence as a whole, I do not think the figures in the minutes can be taken as definitive; Ex 31 is a considerable difficulty for the submission, to which may be added that the minutes of the 3 October 2013 meeting record future equity grant payment from 1 April 2013, which is inconsistent with any overpayment.

15.3     Entertaining a claim to recover any overpayment

303. Recovery of an overpayment does not arise. However, I should say that if there had been overpayment, entertaining a claim to recover it is considerably problematic.  No application to amend the counterclaim was made.  If it had been made, it would have faced the difficulty that no issue was raised of how the overpayment came about: was there fraud, was there payment by mistake, and if the latter did the circumstances provide a basis in law for recovery or a defence to recovery? Without final decision on an unnecessary matter, leave to amend may well have been refused.

16. Quantum

16.1     The claim

304. On the basis of termination of employment by resignation on 30 November 2013, Mr Adil claimed –

(a) unpaid salary and payment for the three month notice period;

(b) unpaid balance compensation / incentive payment;

(c) gratuity payment pursuant to Article 62 of the Employment Law;

(d) payment in respect of driver’s charges;

(e) out of pocket expenses; and

(f) penalty payment pursuant to Article 18 of the Employment Law.

305. These heads of claim, with the exception of unpaid salary because salary was paid up to date, were adopted in the event of termination on 30 June 2013. Nothing was said of “Abusive Dismissal Compensation”.

16.2     Payment in lieu of notice

306. On the basis of termination without notice with payment in lieu of notice, Mr Adil is entitled to the amount of his base salary for six months; that is, USD 300,000, payable in the AED equivalent.

16.3     Balance compensation / incentive payment

307. As the parties had conducted themselves by payment of money, USD 97,222 (USD 125,000 less USD 27,778) was outstanding as at 30 June 2013.

308. However, Mr Adil is not entitled to recover that sum as a money payment. His entitlement under cl 7 of the Contract was to equity in group companies.  It had been provided by the payment of money which Mr Adil invested in Frontiera, and his investment should have been matched by PDEL; but the money was received under the obligation to invest it and thereby obtain equity.  Mr Adil’s loss is not USD 97,222, but the value to him of the equity he would have obtained upon the investment of that sum in Frontiera or another group company.  No attempt was made to prove that value.  Mr Adil is not entitled to any amount under this head.

16.4     Gratuity

309. Article 62 of the Employment Law relevantly provides –

“62.    End of service gratuity

(1) Subject to Article 62(5) and (6), an employee who completes continuous employment of one (1) year or more is entitled to a gratuity payment at the termination of the employee’s employment.

(2) The gratuity payment shall be calculated as follows:

(a) twenty one (21) days’ basic wage for each year of the first five (5) years of service.

(b) thirty (30) days’ basic wage for each additional year of service, provided that the total of the gratuity shall not exceed the wages of two (2) years of service.

The daily rate for the employee’s basic wage shall be calculated based on the number of days in the year.  The employer may deduct from the gratuity any amounts owed to the employer by the employee.

(3) Where the termination occurs prior to the end of any full year of employment, the gratuity payment shall be calculated on a proportionate basis.

(4) An employee is not entitled to a gratuity payment where the employee has been terminated for cause as defined in Article 59(4)”.

310. Articles 62(5) and (6) are concerned with election between the gratuity and participation in a pension scheme. It will be recalled that cl 5 of the Contract referred to gratuity payments “in accordance with the Company scheme”, but there was no evidence of or that Frontline had a scheme.  It was not suggested by Frontline that the entitlement to a gratuity was displaced by election in favour of a pension scheme.

311. “Wages” is defined to mean “all payments made to an employee in return for work done or services provided under the contract of employment”, and “basic wage” is defined so as to exclude allowances of all kinds. The basic wage in Mr Adil’s case was USD 600,000, calculated to a daily rate according to calendar days in a year of USD 1643.84.  He is entitled to recover a gratuity of USD 59411.12 payable in AED equivalent.

16.5     Driver’s charges

312. Mr Adil claimed at a monthly rate based on the USD 5000 in cl 12 of the Contract. For two independent reasons, he is not entitled to anything.  First, cl 24 of the Contract provides that the payment of base salary “shall be taken to adequately compensate… in respect of…. contractual benefit entitlements” during the six months; so the contractual benefit of a company provided driver could not bring further payment.  Secondly, Mr Asif was not entitled to money, but to a company provided driver up to a monetary ceiling.  If he was not provided with the driver for a period, he could claim damages for any loss suffered through himself paying for a driver; but there was no evidence of loss.

16.6     Out of pocket expenses

313. The Contract makes no provision for payment of out of pocket expenses. In submissions it was said that the claim was founded on the minutes of the 3 October 2013 meeting so far as they provided for reimbursement under “Expenses on various projects”, treating that provision as part of an amended Contract.

314. The submission is remarkably astray. The relevant part of the minutes provides for reimbursement “to FDP [Frontline] by the respective ventures”, and has nothing to do with reimbursement of out of pocket expenses to Mr Adil by Frontline.  It is unnecessary to say, but should also be said, that Mr Adil did not sue on an amended Contract.

16.7     Statutory penalty

315. Article 18 of the Employment Law provides –

“18 Payment where the employment is terminated

• An employer shall pay all wages and any other amount owing to an employee within fourteen (14) days after the employer or employee terminates the employment.
• If an employer fails to pay wages or any other amount owing to an employee in accordance with Article 18 (1), the employer shall pay the employee a penalty equivalent to the last daily wage for each day the employer is in arrears.”

316. “Daily wage” is defined to mean “the compensation received by an employee as wages for services performed during a working day”, and is to be calculated “taking into consideration the total amount of working days in a year”. As earlier noted, “wages” is defined to mean “all payments made to an employee in return for work done or services provided under the contract of employment”.

317. Article 18 (2) came into the Employment Law by DIFC Employment Law Amendment Law, No 3 of 2012 (“the Amending Law”), which also included “and any other amount owing to an employee” in Article 18 (1).

318. It was accepted that Mr Adil’s daily wage was USD 1,643.84. He submitted that he was entitled to that amount for each day from fourteen days after whatever termination date was found; here from 15 July 2013.  This became the big ticket item, a claimed penalty in the order of USD 1.5 million.

319. Frontline did not contest that payment of a penalty had been triggered, accepting that at least the gratuity payment was within “any other amount owing to an employee” in the Article. Implicit in this was that the provision was not limited to amounts owing prior to termination, and included amounts which became owing at the moment of and by virtue of the termination. In the absent of a submission and argument to the contrary, I will proceed accordingly.

320. Frontline accepted that Article 18 (2) was cast in mandatory terms. It submitted, however, that a literal application of the Article as a mandatory stipulation would lead to absurd results.  A large penalty could become payable if there were failure to pay a small amount, and even if the failure was due to honest mistake.  An employee would profit from delaying claiming wages or litigating a disputed claim, and dispute resolution would be compromised by the incentive not to settle a disputed claim.  An employer could end up financially penalised in an amount far in excess of any payment for a notice period.  In its written submissions Frontline invited the Court to “modify the language of the legislation” to avoid the absurdity, by “imply[ing] a judicial discretion into Article 18 as to whether a penalty should be ordered on the facts of a particular case, and/or the amount of any such penalty”.  In oral submissions this was modified to a discretion to mitigate the penalty: it was said that the Court should have a discretion to reduce the prima facie penalty.

321. Frontline cited Lord Wensleydale in Grey v Pearson (1857) 6 HLC 61 at 106; 10 ER 1216 at 1251 –

“… in construing… statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity and inconsistency, but no further”.

322.To go further and modify the words of Article 18, it referred also to the observations of Lord Reid, dissenting in the result, in Federal Steam Navigation Co Ltd v Department of Trade and Industry (1974) 1 WLR 505 at 509 –

“Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as far as I am aware be grouped under three heads:  where without such substitution the provision is unintelligible or absurd or totally unreasonable; where it is unworkable; and where it is totally irreconcilable with the plain intention shown by the rest of the deed or statute.  I do not say that in all such case it is proper to strike out a work and substitute another.  What I do say is that I cannot discover or recall any case outside these three classes where such substitution would be permissible”.

323. Frontline referred to a number of cases said to illustrate construing “shall” as directory or permissive, and submitted that “shall” in Article 18 (2) should be read as “may” so as to make payment of the penalty discretionary.

324. For his part, Mr Adil submitted that the language of Article 18 was mandatory and it was deliberately penal in nature, and (citing R v City of London Court Judge (1892) 1 Q B 273 at 290 per Lord Esher MR and R v Skeen and Freeman (1859) 28 LJMC 91 at 94 per Lord Cambell CJ) that the clear words had to be applied even through the result might appear absurd or mischievous.  But, he said, there was nothing absurd or mischievous in the clearly intended deterrent effect of Article 18 (2), giving teeth to the mandatory “shall” in Article 18 (1) by an equally mandatory “shall” in Article 18 (2).

325. Each of Frontline and Mr Adil sought support from the purpose stated in Article 3 of the Employment Law, namely –

“(a) provide minimum employment standards to employees based within, or who ordinarily work within or from the DIFC;

• promote the fair treatment of employees and employers; and
• foster employment practices that will contribute to the prosperity of the DIFC.”

326. Frontline submitted that fair treatment of employers called for implying a discretion, and that a discretion which freed employers from harsh operation of the Article would encourage employment and contribute to prosperity within the DIFC; it also suggested that a non-discretionary penalty exceeded minimum employment standards. Mr Adil submitted that a strict reading of Article 18 (2) was consistent with fair treatment in the form of protection of employees, which was also the evident purpose of Article 18 (1).

327. I do not find Article 3 of great assistance. Article 18 stipulates the fairness between employer and employee and the employment standard in the circumstances to which it applies, and detrimental effect on prosperity one way or the other is speculative.

328. As earlier noted, Article 18 was introduced into the Employment Law by the Amending Law in 2012. Prior to that, Article 16 of the unamended Employment Law simply provided that an employer shall pay all wages owing to an employee within seven days after the employer or employee terminates the employment.

329. The Amending Law was preceded by Consultation Paper No 4 dated December 2011, but the paper made no mention of the future Article 18. The researches of Counsel, for which I am most grateful, found no other travaux preparatoires to assist in the construction of Article 18.  It is evident, however, that the new Article 18 was deliberately much more stringent than the earlier Article 16; it added “or other amounts” and an explicitly described penalty.

330. Nor did the researches of Counsel find comparable legislation in other common law jurisdictions. In England, there is no relevant penalty provision.  In other jurisdictions failure to pay what is due to an employee can attract a penalty, for example in Hong Kong a criminal penalty of a fine of HKD 350,000 and imprisonment for wilfully and without reasonable excuse failing to pay wages and in Australia a pecuniary penalty currently of approximately AED 28,000.  These penalties do not go to the employee.  The closest comparable found, and it is not very close, is California, where it is provided that “the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced “(Labor Code, s 203), but with a cap of 30 days.

331. Article 18 must be construed on its own terms, as a unique provision, and as part of the Employment Law. So far as reference to other jurisdictions may assist, it suggests that the strong terms of the Article were deliberately chosen.  They are indeed strong terms: a strict time limit is stated (Article 18 (1)), and failure means that the employer “shall” pay what is described as a penalty.  There is no alleviation by regard to wilfulness or reasonable excuse, in Article 18 or elsewhere in the Employment Law.

332. This is the first case in this Court in which Article 18 has called for detailed consideration. Counsel helpfully referred to ABC v XYZ (SCT, HE Justice Shamlan Al Sawalehi, 9 July 2014) for the observations (at [31]) that its purpose is “to deter employers from causing undue delay in the dues owed to its employees” and that it promoted fair treatment of employees and fostered a practice that would contribute to the prosperity of the DIFC.  While his Excellency said (at [34]) that both parties need to show good faith, the penalty in that case for less than the days of default appears to have been due to the maximum claim jurisdiction of the Tribunal.

333. There is some force in Frontline’s instances of possible harsh consequences in the application of the Article, for example if there be genuine dispute over liability to pay the wages or other amount which is ultimately determined against the employer. But I do not think that the invitation to import a discretion into Article 18 (2) should be accepted.

334. Frontline’s submissions failed to recognize the structure and operation of the Article. It does not give the Court the function of imposing a penalty.  The penalty falls upon the employer by force of the Article; the Court then may be called on to exercise its ordinary function of ordering payment of the debt thereby created, as with any other debt.

335. Substituting “may” for “shall” in Article 18 (2) would not be at all satisfactory. The Article would then read that “the employer may pay…”, a wording which says nothing of a discretion if a Court is asked to order payment of the penalty; and it could not be thought that the employer had a discretion.  More radical surgery is required, such as deletion of the reference to the employer paying a penalty and provision that “the Court may order that the employer pay a penalty equivalent to…”.  Even that would have the difficulty that the Court would have an all or nothing discretion, to order the whole penalty or none of it; so additional words would be needed such as, “the Court may order that the employer pay a penalty up to the amount equivalent to…”.

336. This would not be construction of the Article, but rewriting of it. While words may in some circumstances be added to or modified in legislation, the task of the Court remains one of construction:  see the observations of Lord Diplock in Wentworth Securities v Jones (1980) AC 74 at 105-6 –

“My Lords, I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purpose of the act.  But in doing so the task on which a court of justice is engaged remains one of construction; even where this involves reading into the Act words which are not expressly included in it”.

337. His Lordship went on to express the conditions for reading words in, the third being that it must be possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament, and said (at 107) –

“Unless this third condition is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed.  Such as attempt crosses the boundary between construction and legislation.  It becomes a usurpation of a function which under the constitution of this country is vested in the legislation to the exclusion of the courts”.

338. These observations equally apply to the functions of the Ruler as law maker and the Court as interpreter of the laws.

339. Many of Frontline’s cases in which “shall” was said to be directory are better understood as stating the consequences of failing to follow the mandatory language, for example Secretary of State for Trade and Industry v Langridge (1991) Ch 402. None is helpful where, as here, the “shall” is directed to the employer.  The employer comes under an obligation to pay to the employee an amount calculated as specified in the Article, specifically described as a penalty and with no room for a lesser amount.  If the employer does not pay the amount and the employee sues to recover it, there is no basis for a discretion in the Court to say that only part of the amount must be paid; the Court does not have a discretion to say that only part of a debt must be paid.

340. Frontline submitted that the discretion should be exercised by not awarding any penalty or awarding only a nominal penalty. (As just explained, it is not a case of the Court awarding a penalty, but I pass on).  It said that the penalty should be nominal “so as to reflect [Mr Adil’s] misconduct”, and otherwise said that the full penalty amount would be disproportionate (to what, was not stated) and unjust.  Nothing else was, said in support of discretionary alleviation of the penalty amount.  Presumably the suggested misconduct was the asserted occasions for termination for cause, which I have not accepted.  Frontline’s failure to pay the termination payment and the gratuity was quite unjustified.  If there were a discretion, the case for its exercise in Frontline’s favour is not attractive; but the submissions were sketchy, and I do not come to an unnecessary decision.

17. Other Matters

17.1 Currency

341. Mr Adil is entitled to USD 300,000 and USD 59,411.12 in AED equivalent. Since these amounts were payable on 1 July 2013, my present view is that the exchange rate should be the rate as at that date.  There may be a conversion back to USD at the current exchange rate for the purposes of RDC 36 14.  Also as a present view, although the penalty accrues daily the final amount is known only when the Court orders payment and the AED equivalent should be at the then exchange rate; if there is then conversion back to USD, the two conversions cancel each other out and need not be undertaken.

17.2     Interest

342. Mr Adil is entitled to interest on these amounts. As at present advised I see no reason why interest should not be calculated from 1 July 2013 at the rate in PD 1/2009, in the case of the penalty for half the period in order to reflect its daily accrual.

17.3     Costs

343. Although not on all heads of claim, Mr Adil has been dominantly successful in the proceedings. Subject to any further submissions, if made, my present view is that Frontline should pay Mr Adil’s costs of the proceedings (including of the without prejudice privilege application, which should be formally dismissed).

344. If either party wishes to submit that a different course should be taken as to currency, interest or costs, the directions next made allow for that to be done.

18. Directions

345. I direct –

346. Subject to direction 2, that the parties file agreed draft orders confirming these reasons, or if draft orders cannot be agreed his or its draft orders,          within 14 days.

347. In the event of disagreement –

• if the disagreement is over currency, interest or costs, that the respective draft orders be accompanied by a statement of the reasons for the order(s) sought in that respect not exceeding three pages in length, the opposite party to file a responsive statement not exceeding the same length within a further 14 days;
• if the disagreement is over some other matter, that the respective draft orders be accompanied by a statement of the reasons for the order(s) sought.

348. Unless otherwise directed, any disagreement will be decided on the papers.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 30 March 2016

At: 1pm

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Claim No: XXXX

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE ALI AL MADHANI 

BETWEEN

GAVIN

Claimant

and

GAYNOR

Defendant 

Hearing:            22 October 2015

Counsel:           XXXX  for the Claimant

XXXX for the Defendant

Judgment:        3 April 2016

JUDGMENT OF H.E. JUSTICE ALI AL MADHANI

JUDGMENT

 UPON hearing Counsel for the Appellant and Counsel for the Respondent on 22 October 2015

AND UPON reading the submissions and evidence filed and recorded on the Court file

IT IS HEREBY ORDERED THAT:

1. The Defendant’s application is granted on the grounds of Abuse of Process and the Claimant’s claim is therefore stayed pending the decision of the Court of Appeal for Ninth Circuit on whether the arbitration between the parties in California, USA should proceed.
2. No order as to costs.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 3 April 2016

At: 12pm 

REASONING

Introduction

1.On 4 June 2015, the Claimant, Gavin, filed an Amended Claim Form seeking an order pursuant to DIFC Law No. 1 of 2008, Section 17(3)(b) (the “DIFC Arbitration Law”) appointing an arbitrator under the Arbitration Agreement contained in Clause 13.5 of the 20 May 2007 Stored Value Card Processing, Service and Marketing Agreement (the “SVC Agreement”) made with the Defendant, Gaynor On 28 July 2015, the Defendant indicated an intention to contest the jurisdiction of the DIFC Courts in its Amended Acknowledgement of Service.

2. The SVC Agreement at issue requires the Defendant to provide store value card services to the Claimant for use by customers in the UAE. The Defendant is managed by and affiliated with Gaynor, a California based company that develops and operates technology platforms around the world. In May 2009, the parties began disputing claims relevant to the SVC Agreement. Importantly, Gaynor US and the Defendant brought two suits against the Claimant in the United States District Court for the Central District of California (“California Court”) as detailed below.

3. The SVC Agreement includes several clauses relevant to the current dispute. Clause 13.2 identifies that “[t]he validity, construction and interpretation of [the SVC Agreement] and the rights and duties of the parties hereto shall be governed by the internal laws of the UAE.” Clause 13.3 states that the parties agree to “submit to the jurisdiction of the courts in Dubai, the UAE.” Clause 13.4 identifies an informal dispute resolution procedure while Clause 13.5 states that “[a]ny controversy arising out of, or relating to this [SVC] Agreement, or the breach thereof, which cannot be resolved pursuant to Section 13.4 above, shall be submitted to arbitration per the law of the United Arab Emirates.”

Procedural history 

4. In July 2011, Gaynor US and the Defendant filed a suit against the Claimant in the California Court. This case, Gaynor v. Gavin, Central District of California, No. 11-1062 (“California I”) included both tort and contract claims against the Claimant. Eventually, the Defendant voluntarily dismissed its contract claims without prejudice, effectively exiting the litigation. What remains of the California I proceedings is a tort dispute between Gaynor US and the Claimant.

5. In November 2014, the Claimant amended its pleadings in the California I proceedings to include a mandatory, equitable counterclaim against Gaynor US. When the California Court ordered on 5 January 2015 that the counterclaim was required to be heard via arbitration, the Claimant dismissed the counterclaim from the suit without prejudice.

6. Concurrently, in October 2014, Gaynor US filed another suit against the Claimant in the California Court. This case, Gaynor, Inc. & Gaynor (Gulf), Inc. v. Gavin , Central District of California No. 14-01679 (“California II”), was initiated by Gaynor US to seek an order compelling arbitration of a claim for declaratory relief regarding the counterclaims that had been previously dismissed from the California I proceedings. The Defendant subsequently joined the California II proceedings as a plaintiff also asking the court to compel arbitration in California.

7. On 8 June 2015, one day after filing its Amended Claim Form in the DIFC Courts, the Claimant filed a renewed motion to dismiss in the California II proceedings claiming that the California Court should dismiss or alternatively stay the California II proceedings in favour of the DIFC proceedings, making reference to an “ongoing Dubai Arbitration” in the DIFC. In September 2015, the California Court granted an order compelling arbitration of the claims in California. The Claimant indicated its intent to appeal this order at the earliest possibility.

8. On 28 June 2015, the Defendant filed its Amended Acknowledgement of Service indicating its intention to contest jurisdiction in the DIFC Courts. Both the Defendant and the Claimant filed their arguments with regard to the jurisdiction application, which is now before the Court and at issue in this opinion.

9. Additionally, on 13 August 2015, in the DIFC Courts proceedings, the Claimant submitted to the Defendant a Request to Produce seeking certain documents allegedly demonstrating the Defendant’s business activity within the DIFC. The Defendant refused to produce and on 6 October 2015, the Claimant submitted an application for a Document Production Order compelling the Defendant to produce the requested documents. Both parties address this pending document request in their submissions regarding jurisdiction.

The Defendant’s submissions

10. The Defendant raises three arguments in support of the claim that the DIFC Courts do not have or should not exercise jurisdiction to appoint an arbitrator in this case. First, they claim that Clause 13.5 of the SVC Agreement is not a valid Arbitration Agreement and thus there is no jurisdiction for the DIFC Courts to appoint a tribunal under the Clause. Second, the Defendant argues that even if Clause 13.5 is a valid Arbitration Agreement, the DIFC Courts do not have jurisdiction to appoint a tribunal under Article 17(3)(b) of the DIFC Arbitration Law. Third, the Defendant argues that if the DIFC Courts find that there is jurisdiction, the Court should choose not to exercise jurisdiction over this claim because the Claimant’s application to appoint an arbitrator is an abuse of process. Additionally, the Defendant argues that the Claimant’s document requests are irrelevant and that the Court should grant costs on an indemnity basis.

11. The Defendant first claims that Clause 13.5 of the SVC Agreement is not a valid Arbitration Agreement and thus the DIFC Courts have no jurisdiction to appoint a tribunal under this Clause. The Defendant submits that the validity of the Arbitration Agreement is to be determined under UAE Law as the SVC Agreement identifies “the internal laws of the UAE” in Clause 13.2 and “the laws of the United Arab Emirates” in Clause 13.5. The Defendant claims that this interpretation of the contract is consistent with both DIFC and UAE Law.

12. Thus, the Defendant states, the validity of Clause 13.5 of the SVC Agreement must be determined by reference to the UAE Civil Procedure Code, Federal Law No. 11 of 1992. The requirements under UAE Law that a valid Arbitration Agreement be made in writing and with the intention to submit disputes to arbitration are not at issue in this case. Rather, the Defendant continues, the query concerns what Clause 13.5 actually requires.

13. The Defendant points out that Clause 13.5 does not identify a Seat of Arbitration or a set of rules under which arbitration should be conducted. The Defendant claims that these are basic, requisite, provisions and the Arbitration Agreement cannot be concluded without these mandatory elements as required by Article 141(1) of the UAE Civil Procedure Code. The Defendant additionally notes that while the California Court did give effect to Clause 13.5 as a valid Arbitration Agreement, that decision cannot effect the outcome under UAE Law.

14. The Defendant further argues that Clause 13.5 is incapable of performance as there is no guidance on how to establish an Arbitration Tribunal and no direction on a body of arbitration rules to follow. Failure to specify the number of arbitrators is fatal, the Defendant argues, under Article 203(1) of the UAE Civil Procedure Code.

15. Additionally, the Defendant alleges that Clause 13.5 of the SVC Agreement has been cancelled under Article 203(5) of the UAE Civil Procedure Code by way of the Claimant’s counterclaims filed in the California Court. The Defendant claims that filing these counterclaims amounted to a waiver of the Arbitration Clause under UAE Law.

16. Based on these arguments, the Defendant concludes that Clause 13.5 is not a valid Arbitration Agreement and thus there is no jurisdiction for the DIFC Courts to appoint an Arbitral Tribunal under this Clause.

17. The Defendant’s second argument alleges that, even if Clause 13.5 of the SVC Agreement is a valid Arbitration Agreement, the DIFC Courts do not have jurisdiction to appoint a tribunal under Article 17(3)(b) of the DIFC Arbitration Law. In support, the Defendant first points out that the DIFC is not provided in the SVC Agreement as the Seat of Arbitration.

18. The Defendant then challenges the Claimant’s assumption that the DIFC Courts have jurisdiction over the substantive contract as it is included in the phrase “the courts of Dubai.” The Defendant points out that the Claimant relies on Article 5 of the Judicial Authority Law No. 12 of 2004 (“Judicial Authority Law”) to find DIFC Jurisdiction over the Arbitration Agreement alleging that the contract will be performed wholly or partly in the DIFC. The Defendant contends that this is irrelevant as the Arbitration Agreement is to be performed in the Seat of Arbitration, rather than the substantive place of performance relevant to the rest of the contract. Therefore, the Defendant argues, the appropriate inquiry is whether the DIFC Courts have jurisdiction over the Arbitration Agreement specifically, rather than the substantive contract.

19. The Defendant continues that there is no indication that the DIFC is the Seat of Arbitration. Rather, the Seat may be Dubai or UAE outside of the DIFC. Furthermore, the California Court determined the Seat to be California by its 28 September 2015 Order. The Defendant argues that this should amount to res judicata and become binding on the Claimant, alleging that the Order applies to claims made by both the Claimant and the Defendant.

20. The Defendant points out that Article 17(3)(b) of the DIFC Arbitration Law allows jurisdiction by the DIFC Courts only where the DIFC Courts are the courts of the Seat of Arbitration. Article 7 provides that the DIFC Arbitration Law applies only where the Seat of Arbitration is the DIFC, subject to certain specific exceptions. The Defendant contends that Article 17 is not one of the exceptions that may apply if the Seat of Arbitration is not the DIFC. Thus, the Defendant concludes, the DIFC Courts do not have jurisdiction under Article 17(3)(b) of the DIFC Arbitration Law and cannot appoint an arbitrator in this case.

21. Alternatively, the Defendant argues that the DIFC Courts should not exercise jurisdiction over the claim because the Claimant’s application is an abuse of process.

22. The Defendant first alleges that the Claimant has not brought this claim for any bona fide reason. The Defendant supports this with reference to the Claimant’s previous representation that it would not bring its counterclaims in any proceedings other than the California I proceedings. Furthermore, the Defendant points out that immediately upon filing the Amended Claim Form in these proceedings, the Claimant made allegedly false assertions that there was already an arbitration pending in Dubai.

23. Additionally, the Defendant draws attention to the California proceedings, where the California Court has ordered arbitration to proceed in California on allegedly the same issues that the Claimant seeks to pursue in this claim before the DIFC Courts. The Defendant argues that these proceedings are creating the risk of two conflicting decisions.

24. The Defendant argues that as a common law court, the DIFC Courts have jurisdiction to prevent their procedures from being used for abusive purposes and in violation of lis alibi pendens. In support of this contention, the Defendant points to two cases from the UK which deal with instances where the same claim was being heard before courts in two different jurisdictions. In the Abidin Daver case ([1984] AC 398, 411-412), the court found that the plaintiff must establish objectively by cogent evidence that there is some personal or juridical advantage available only in the second forum and it is of such importance as to cause injustice to deprive him of the second proceedings. In Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd ([1989] 3 All ER 65, 70), the court found that the plaintiff is required to elect which set of proceedings it wishes to pursue. The remaining action must be dismissed, not stayed.

25. The Defendant alleges that the Claimant is in the same position as a plaintiff bringing two actions in two jurisdictions. The Defendant argues that the Claimant cannot avoid this conflict by discontinuing its counterclaims in the California proceedings and seeking to arbitrate the same counterclaim in the DIFC. The Defendant contends that the California II proceedings relate to the same claims and counterclaims as the DIFC claim and the California Court has compelled arbitration in California, creating analogous, conflicting proceedings. The Defendant thus implores the DIFC Courts to dismiss the Claimant’s case to avoid “a recipe for confusion and injustice.”

26. The Claimant has sought document production to determine that the underlying transaction and parties have links with the DIFC. The Defendant argues that the DIFC Courts do not have jurisdiction as argued above and thus the documents are irrelevant to the present proceedings. The Defendant claims that the document production request must fail.

27. Finally, the Defendant claims that, because the Claimant’s entire claim is an abuse of process, the DIFC Court should make an order for costs on an indemnity basis pursuant to DIFC Courts Practice Direction 5 of 2014 on DIFC Courts’ Costs Regime.

The Claimant’s response and submissions

28. The Claimant maintains the position that the DIFC Courts have jurisdiction over the current claim. The Claimant asks that the DIFC Courts confirm jurisdiction over the matter and proceed to appoint an arbitrator under Article 17(3)(b) of the DIFC Arbitration Law. Alternatively, the Claimant asks that the Court determine that it has no jurisdiction and direct parties to the court of competent jurisdiction in Dubai. The Claimant also seeks other relief as appropriate, including costs.

29. The Claimant makes a number of assertions in support of its position. First, the Claimant argues that the DIFC Courts have jurisdiction to appoint a tribunal under the Judicial Authority Law and DIFC Court Law No. 10 of 2004 (“DIFC Court Law”). Second, the Claimant argues that the Arbitration Agreement is valid and that a UAE arbitral remedy is appropriate. Third, the Claimant argues that its counterclaims in the California I proceedings do not amount to a waiver of the right to arbitrate claims under the SVC Agreement. Additionally, the Claimant seeks to rebut the Defendant’s assertions claiming that the arguments of lis alibi pendens and abuse of process are without merit. Finally, the Claimant alleges that the Defendant’s application contesting jurisdiction is procedurally defective.

30. First, the Claimant alleges that it is clear that the contract claims under the SVC Agreement must be arbitrated and that the DIFC Courts have jurisdiction to appoint a tribunal in this case under the Judicial Authority Law and DIFC Court Law.

31. In support of this argument, the Claimant points out that the parties expressly agreed to “submit to the jurisdiction of the courts in Dubai, the UAE,” as stated in Section 13.3 of the SVC Agreement. According to the Claimant, the DIFC Courts are constitutionally part of the Dubai judicial system. Furthermore, the Claimant alleges that some dealings took place in the DIFC: the Defendant sought to incorporate in the DIFC, sought to raise capital and establish relationships in the DIFC and the Defendant had an address in the DIFC. The Claimant highlights that the Defendant has not contested these claims.

32. With regard to the allegation that there is jurisdiction due to activity within the DIFC, the Claimant seeks to provide further proof by way of its document request. The Defendant has not complied with the Claimant’s document request and, the Claimant argues, the Defendant has not properly responded but rather has only claimed that the documents requested are not relevant to the proceedings before the DIFC. The Claimant argues that this failure to comply properly invites the inference that the requested documents would be adverse to the interests of the Defendant.

33. The Claimant notes that the Defendant only argues for the first time in this application that there is no jurisdiction under Article 17(3)(b) of the DIFC Arbitration Law. The Claimant argues that the Defendant ignores Article 27 of the DIFC Arbitration Law which states that “the parties are free to agree on the Seat of Arbitration. In the absence of such agreement, where any dispute is governed by DIFC law, the Seat of Arbitration shall be the DIFC.” Furthermore, the Claimant states that the DIFC Courts derive jurisdiction not from the DIFC Arbitration Law, but rather from the Judicial Authority Law. The Claimant asserts that the law governing this dispute is DIFC law and thus Article 27 applies. This is because the DIFC Court Law allows application of such law and also because the parties have agreed to subject their dispute to the laws of the UAE, which includes DIFC law.

34. In sum, the Claimant argues that the DIFC Courts do have jurisdiction to appoint an arbitrator in this case, pursuant to the Judicial Authority Law and the DIFC Court Law. This is because the parties expressly agreed to “submit to the jurisdiction of the courts in Dubai, the UAE” and the DIFC Courts are constitutionally part of the Dubai judicial system. Further, some of the parties’ dealings took place in the DIFC, including the Defendant seeking to incorporate in the DIFC, raise capital in the DIFC and use an address in the DIFC.

35. The Claimant secondly argues that the SVC Agreement is a valid Arbitration Agreement and that the Claimant does not lack a UAE arbitral remedy. The Claimant points out that the Defendant argues for the first time in this application that the Arbitration Agreement is not valid. The Defendant’s argument regarding the validity of the Arbitration Agreement has changed depending on the proceedings. In the California I proceedings, the Defendant allegedly claimed the Arbitration Agreement was unenforceable but in the California II proceedings, the Defendant allegedly sought to compel arbitration of its contractual claims on the basis of the Arbitration Agreement. The Claimant contends that the same estoppel theory offered by the Defendant should estop them from this new position.

36. Furthermore, the Claimant argues that, in the UAE, the only requirement for a valid Arbitration Agreement is that it be in writing, regardless of whether UAE or DIFC law is applicable. Thus, the Claimant asserts, the Arbitration Agreement is valid.

37. In response to the Defendant’s argument that the Claimant has waived its right to arbitration by filing counterclaims in the California I proceedings, the Claimant asserts that this action does not amount to a waiver of the Claimant’s right to arbitrate claims under the SVC Agreement. The counterclaims in the California I proceedings were made against Gaynor US and not the Defendant. Furthermore, the Claimant alleges that the counterclaims are different claims than those pending in the ongoing DIFC Arbitration. The Claimant highlights that it was compelled to advance the counterclaims at the risk of losing the right to introduce them against Gaynor US, as required under US Law. Furthermore, the Claimant dismissed the counterclaims without prejudice.

38. The Claimant goes on to rebut the Defendant’s claims of lis pendens and abuse of process, stating that these arguments are without merit. The Defendant argues that the California proceedings preclude the DIFC Courts from taking jurisdiction over this matter. However, the Claimant states, the Defendant is not a party to the California I proceedings and the Claimant voluntarily dismissed its claims in those proceedings. Furthermore, the Claimant alleges that it has always preserved its right to assert claims against the Defendant in Dubai.

39. The Claimant explains that neither of the California proceedings contain the same claims made by the Claimant in the DIFC Arbitration. In the Demand for Arbitration filed in the DIFC Courts, the Claimant puts forward a breach of contract claim against the Defendant, a claim for declaration of no breach by the Claimant, a claim for declaration of no further obligation by the Claimant and a claim for indemnification. In the California II proceedings, the Defendant sought to compel arbitration in California for claims of breach of contract and breach of the implied covenant of good faith and fair dealing against the Claimant. The Claimant’s previous counterclaims are equitable in nature, were brought against Gaynor US in the California I proceedings and were thereafter dismissed by the Claimant without prejudice. These claims were for breach of the SVC Agreement by Gaynor US under an alter ego theory, imposition of a constructive trust over Gaynor US, unjust enrichment of Gaynor US and conversion of funds fraudulently paid. Thus, the Claimant argues, the claims in the DIFC Arbitration are fundamentally different from the claims that the Defendant and Gaynor US are seeking to arbitrate in California. The Claimant concludes that it therefore has a right to assert these claims in the UAE.

40. Additionally, the California Order of 28 September 2015 shows that neither the Defendant nor Gaynor US has obtained relief with respect to the claims asserted in this DIFC Arbitration. The Claimant goes on to state that the California Order is incorrect as it is based on the assumption that the Claimant waived its jurisdiction defences by asserting mandatory counterclaims in the California I proceedings. The Claimant asserts its intention to appeal this Order promptly and its expectation that the United States Court of Appeals for the Ninth Circuit will overturn the order, leaving only the DIFC Arbitration as pending. The Claimant points out that neither of the California proceedings have ruled on the validity of the DIFC proceedings.

41. The Claimant finally argues that the Defendant’s application contesting jurisdiction is procedurally defective. First, the Claimant points out that the application lacks proper form because the reasoning is set forth in the First Witness Statement of David Zifkin rather than the application itself. Second, the Claimant alleges that the Defendant’s Rejoinder dated 27 August 2015 is authored by a law firm not registered before the DIFC. Furthermore, the Claimant argues that the Defendant’s skeleton argument asserts entirely new arguments and the Claimant had to respond to these arguments in a very short time. Finally, the Claimant alleges that the Defendant failed to comply with Rule 12.10 of the DIFC Courts Rules (“RDC”) by failing to serve its evidence with the application notice.

Discussion

42. The Defendant raises their three arguments in support of the claim that the DIFC Courts do not have or should not exercise jurisdiction to appoint an arbitrator in this case in the following order:

a) The validity of the Arbitration Agreement.

b) The availability of jurisdiction in the DIFC Courts.

c) The discretionary rule of abuse of process as a secondary defence.

43. This Court is not bound by the Defendant’s presentation of arguments and will proceed to deal with the case starting with the question of whether this Court has jurisdiction to adjudicate the claim. In order to resolve any ambiguity or uncertainty regarding the arbitration clause relevant to this case, the parties must first be before a court of competent jurisdiction.

44. I have summarized the Defendant’s arguments above in regards to their jurisdiction claims. They assert that the DIFC Courts have no jurisdiction over the Arbitration Agreement in the SVC Agreement because, as suggested in Article 7 of the DIFC Arbitration Law, Article 17(3)(b) of that same law cannot be applied if the Seat of Arbitration is not the DIFC.

45. The Defendant also contends that the substantive contract is not subject to the jurisdiction of the DIFC Courts because none of the gateways provided in Article 5 of the Judicial Authority Law apply in these circumstances.

46. In order to define the jurisdiction of the DIFC Courts one must first look to the jurisdiction gateways provided in Article 5 of the Judicial Authority Law (Law No. 12 of 2004, as amended by Law No. 16 of 2011):

“The Court of First Instance:

1) The Court of First Instance shall have exclusive jurisdiction to hear and determine:

(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;

(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;

(c) Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;

(d) Appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals;

(3) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.

2)The Court of First Instance may hear and determine any civil or commercial claims or actions where the parties agree in writing to file such claim or action with it whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions.

3) The Court of First Instance may hear and determine any civil or commercial claims or actions falling within its jurisdiction if the parties agree in writing to submit to the jurisdiction of another court over the claim or action but such court dismisses such claim or action for lack of jurisdiction.

4) Notwithstanding Clause (2) of Paragraph (A) of this Article, the Court of First Instance may not hear or determine any civil or commercial claim or action in respect of which a final judgment is rendered by another court.”

47. In my view, the only way for the Claimant to properly use the gateways of the Judicial Authority Law to compel this Court to accept their application and appoint the Arbitral Panel is for the Claimant to establish one of the following facts with reference to the Article 5 gateways cited above:

a) That one of the parties is a DIFC Establishment or Licensed DIFC Establishment.

b) The action arises out of or relates to a contract or promised contract which is partly or wholly concluded, finalised or performed within the DIFC or will be performed or is supposed to be performed within the DIFC.

c) The action arises out of or relates to any incident or transaction which has been wholly or partly performed within the DIFC and is related to DIFC activities.

d) The DIFC Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations as prescribed by the DIFC Arbitration Law.

48. I shall start with the last point regarding whether the DIFC Arbitration Law confers jurisdiction to this Court to adjudicate the Claimant’s case as this is one of the Claimant’s fundamental arguments.

49. Article 7 of the DIFC Arbitration Law, DIFC Law No. 1 of 2008 (Scope of application of Law) provides the following:

“(1)    Subject to paragraphs (2) and (3) of this Article, this Law shall apply where the Seat of the Arbitration is the DIFC.

(2)     Articles 13 14, 15, Part 4 and the Schedule of this Law shall apply where the Seat of Arbitration is one other than the DIFC.

(3) Article 13 shall also apply where no Seat has been designated or determined.”

50. This means that all the provisions of the DIFC Arbitration Law, except for Articles 13, 14, 15, Part 4 and the Schedule to the Law, must be applied only when the Seat of Arbitration is the DIFC.

51. The Claimant is requesting that this Court appoint an Arbitral Panel in accordance with Article 17(3)(b) of the DIFC Arbitration Law which requires them, according to Article 7, to first establish that the Seat of Arbitration is the DIFC. The Arbitration Clause (13.5) in the SVC Agreement reads as follows: ”Any controversy arising out of, or, relating to this agreement, or the breach thereof, which cannot be resolved pursuant to section13.4 above shall be submitted to arbitration per the laws of United Arab Gavin.”

52. In my view, the Arbitration Clause (13.5) alone does not clearly nominate the DIFC to be the Seat of Arbitration and nothing in the entire SVC Agreement refers specifically to the DIFC. Therefore the DIFC Arbitration Law is not sufficient to confer jurisdiction to the DIFC Courts in this case.

53. If the Claimant cannot rely on the DIFC Arbitration Law to confer jurisdiction to the DIFC Courts seeing as the Arbitration Clause in the SVC Agreement is ambiguous and uncertain, then reliance falls on the general rules of jurisdiction provided by Article 5(1) of the Judicial Authority Law. Importantly, it must be determined whether the parties intended to refer their disputes to the DIFC Courts or to the non-DIFC Dubai Courts. Thus, both Clauses (13.3) and (13.5) should be interpreted with this inquiry in mind.

54. That leaves the question of whether, under the provisions of Article 5(A)(1) of the Judicial Authority Law, as amended, this Court has jurisdiction over the substantive dispute in this case in the absence of an Arbitration Clause.

55. Again in order to answer this question the burden of proof requires the Claimant to demonstrate the link between the case and the DIFC in a manner sufficient to establish the facts mentioned above at paragraph 47 (a), (b) or (c).

56. When discussing the Judicial Authority Law’s jurisdictional gateways, particularly with regard to the existence of a DIFC Establishment, the Claimant sought to show this Court that the Defendant intended to incorporate in the DIFC and was organising its corporate structure to comply with DIFC rules. In support, the Claimant points to the Confidential Information Memorandum of Gaynor Gulf, the Defendant, specifically at page 12, where it is stated under the subtitle “Migration” that “the Core Founder will propose within 1 year of Gaynor Gulf incorporation, Gaynor Gulf be ‘migrated’ into the (‘DIFC’). It is intended that such ‘migration’ will take place within 3 years following the Closing Date.” The Claimant made reference to Article 7.1 of the same document regarding corporate structure to show this same intention of the Defendant.

57. Additionally, the Claimant refers to the letter dated 18 May 2006 (Gaynor Gulf Limited Private Placement) which shows that the address of the Defendant is listed as the Exchange Building 5 in the DIFC.

58. The Defendant’s position is that they are incorporated in Cayman Islands and not in the DIFC. Incorporation in the DIFC was not more than a plan which the Defendant did not end up following. They also argued that the letter of 18 May 2006 was sent almost a year before the signing of the SVC Agreement.

59. The evidence presented by the Claimant might indicate that the Defendant intended to be a DIFC Establishment at some time after 2006 but there is no evidence, such as a trade license or lease agreement, that they became a DIFC Establishment within the meaning of Article 5 and therefore, the Claimant’s argument in this regard must fail.

60. The Court now turns to the question of whether the action referred to by the Claimant arises out of or relates to a contract or promised contract that was partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within the DIFC.

61. The SVC Agreement is completely silent in this regard. Furthermore, the Claimant’s argument that the Defendant attempted to raise capital and establish key relations in the DIFC in connection with its venture with Gavin under the SVC Agreement is not reflected in the SVC Agreement itself. Instead, it is mentioned in the letter of 4 May 2009 which shall be discussed in Paragraphs 63 to 65 below.

62. Next, I move to discuss the third jurisdiction gateway under the Judicial Authority Law, which requires an action arising out of or relating to any incident or transaction, wholly or partly performed within the DIFC and that the action is related to DIFC activities.

63. To support their argument, the Claimant provides the letter of 4 May 2009 with the subject line: “Gavin  – Gaynor Stored Value Card Program.” The letter discusses meeting arrangements in the DIFC to occur the next day. Additionally, in this letter, the Deputy CEO of Gaynor Private Limited (Pakistan) was inquiring about the 2^nd Addendum to the Gavin – Gaynor Agreement, which was signed by him on 21 January 2009.

64. This letter is quite clear evidence that the transaction between the parties took place, at least in part, within the DIFC, which means that the parties transacted business in the geographical territory of the DIFC and therefore must be governed by DIFC Laws including being subject to the jurisdiction of the DIFC Courts pursuant to Article 5 of the Judicial Authority Law.

65. The only criticism the Defendant can provide against this evidence is that the letter was sent by an independent company, Gaynor Pakistan. In my view this criticism lacks rationale. Although the letter was sent by Gaynor Pakistan, the subject matter and the content of the letter indicate that the referenced meeting is about executing the SVC Agreement in the DIFC or that a transaction related to the same contract came through the DIFC. In my view, this is sufficient to link the transaction to the jurisdiction of this Court as required by Article 5(1)(b) and (c) of the Judicial Authority Law.

66. Thus, having said that this Court’s interpretation of the wording “the courts in Dubai, the UAE” of Article (13.3) of the SVC Agreement must mean the DIFC Courts and since the parties executed their contract and transacted in this jurisdiction, the DIFC Courts are the Courts of natural jurisdiction in the absence of an Arbitration Clause.

67. Since this Court has found that the contract or the transaction has crossed the line and become subject to the jurisdiction of the DIFC Courts, any reference to UAE Law must be a reference to UAE Laws applicable within the DIFC. Accordingly the reference to UAE Laws in the Arbitration Clause (13.5) of the SVC Agreement must be the DIFC Arbitration Law and procedure and not the applicable law as to the merits or substance of the claim, considering that the applicable law was referred to in Clause (13.2) and would not likely be referred to twice.

The Validity of the Arbitration Clause

68. The Defendant’s next defence in support of the Court rejecting the Claimant’s application to appoint Arbitrators is to challenge the validity of the Arbitration Clause (13.5) of the SVC Agreement.

69. This is a very risky argument, especially considering that a jurisdictional link with the DIFC Courts has been established. The risk lies in two situations. First, if this Court finds that the Arbitration Clause is invalid or unenforceable, the only remaining venue available to resolve the dispute between the parties, as relates to the SVC Agreement, would be the DIFC Courts.

70. Second, if the Defendant continues with this argument, it may result in an interpretation that there should be no arbitration at all, even in the US, or that the Defendant has waived its right to arbitrate.

71. However, the parties’ intent with regard to Arbitration is clear, both want to arbitrate the claims. The controversy remains over the Seat of Arbitration as the Defendant seeks to arbitrate in the US while the Claimant seeks arbitration in Dubai, UAE.

72. Furthermore, the Defendant’s arguments against the Arbitration Clause are based on the UAE Civil Procedure Code which is not the applicable law in the current case, as the Court has found previously above. Since the Defendant did not submit that the Arbitration Clause is invalid under the laws of the DIFC, the Arbitration Clause is therefore a valid Jurisdiction Agreement.

73. Nothing in the DIFC Arbitration Law or in other rules governing arbitration in the DIFC provides that an Arbitration Clause would become unenforceable for failure to nominate a Seat of Arbitration. I see no reason why the Seat of Arbitration cannot be determined by reference to an implied choice, giving consideration to the Seat with the most connection with the Agreement, the parties, the transaction or any other relevant consideration.

74. In my view, the SVC Agreement contains an implied agreement that the Seat of Arbitration is to be Dubai (DIFC) and not the US or any other place. Nothing in the Defendant’s submissions suggests the contrary. In fact, reference to Dubai, UAE Law as the applicable substantive and procedural law, and reference to the Dubai, UAE Courts, which this Court earlier interpreted to be both DIFC Laws and Courts, give ample support to an implied Seat of Arbitration in Dubai (DIFC).

75. In response to the Defendant’s argument that the Claimant has waived its right to arbitration by filing counterclaims in the California I proceedings, this Court finds that these actions do not amount to a waiver of the Claimant’s right to arbitrate claims under the SVC Agreement. The Order of the California Court dated 27 March 2015 has made it clear that the Claimant is consistent in its position that arbitration must take place in Dubai, UAE as the Claimant applied for a stay of the proceedings before the California Court.

76. In summary, this Court’s interpretation of the SVC Agreement as it relates to arbitration leads to the conclusion that arbitration must be conducted in the DIFC and in accordance with the DIFC rules and regulations governing arbitration.

Abuse of Process

77. The Defendant, when making its abuse of process argument, draws attention to the California proceedings, where the California Court has ordered arbitration to proceed in California on allegedly the same issues that the Claimant seeks to pursue in its claim before this Court. The Defendant argues that the DIFC case is creating the risk of two conflicting decisions, and that the DIFC Courts, as a common law Court, should not exercise jurisdiction over the claim as the Claimant’s application is an abuse of process.

78. It is evident that the California Court initially ordered the parties to arbitrate their contract claims in California and that the Claimant sought to appeal this Order and lost. This means that if this Court grants the Claimant’s application to appoint arbitrators and the parties proceed to arbitrate in the DIFC, such a decision would create the possibility of two conflicting decisions of two different Arbitral Tribunals.

79. The Claimant’s defence to this point is that the subject matter in the two cases is not the same. The Claimant asserts that the claims before the DIFC Courts against Gaynor Gulf are the dismissed counterclaims before the California Court, which include the following:

a) Breach of the SVC Agreement by Gaynor US based on an alter ego theory;

b) Imposition of a constructive trust over funds paid by Gavin Bank fraudulently to Gaynor Gulf that eventually went to Gaynor US;

c) Unjust enrichment of Gaynor US; and

d) Conversion of funds fraudulently paid.

The case before the California Arbitration allegedly includes the following claims;

a) Breach of contract against Gavin Bank, and

b) Breach of an implied covenant of good faith and fair dealing.

80. In my view, the subject matters in both proceedings are strongly connected and hard to separate, especially the element of causation in claims (a) and (b) in the DIFC Courts as compared with both claims in the California Arbitration, as they all stem from performance of the same agreement. Further, allowing two different forums to adjudicate these claims separately shall lead to extensive and duplicative costs in addition to the possibility of conflicting decisions regarding the same facts. Accordingly, it seems that the correct decision is to dismiss the Claimant’s case based on an abuse of process.

81. However, since the Claimant indicated that the California Court Order is not final until the appointment of Arbitrators, this Court will order a stay of the Claimant’s claims instead, pending the appeal of the Order before the United States Court of Appeals for the Ninth Circuit.

82. If the United States Court of Appeals for the Ninth Circuit or the appointed Arbitral Tribunal proceed to overturn the ruling regarding jurisdiction in favour of the Claimant, the DIFC Arbitration shall proceed.

83. Although the Defendant has won in the final outcome of this case, since it has lost two thirds of the principal arguments, it is the view of this Court that no costs shall be ordered in favour of either party.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue:  3 April 2016

At: 12pm

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Claim No. CFI 037/2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

WILLIAM DANIEL MILLIGAN

     Claimant

and

AL MOJIL INVESTMENT LIMITED

First Defendant

MOHAMMED AL-MOJIL GROUP

                                                                          Second Defendant

CONSENT ORDER

UPON the Claimant and the First and Second Defendant (together the “Parties”) having agreed to stay proceedings on 14 March 2016 and subsequently on 26 March 2016 in order for mediation to be arranged and for settlement to be achieved, if possible

IT IS HEREBY ORDERED BY CONSENT THAT:

1.The Court proceedings shall be stayed from 29 March 2016 until 29 May 2016 to enable mediation to occur.

2. The Parties shall update the Court by no later than 4pm on 29 March 2016 as to the progress of the mediation.

3. In the event that the mediation is unsuccessful, the Case Management Conference that has been listed to be held on Monday, 20 June 2016 will proceed in relation to the First Defendant.

4. Notwithstanding the above, if the mediation is unsuccessful, the Second Defendant is to file its application to contest jurisdiction ( the “Second Defendant’s Application”) by no later than 4pm on Sunday, 5 June 2016.

5. The Claimant’s evidence in answer to the Second Defendant’s Application is to be filed by no later than 4pm on Sunday, 26 June 2016.

6. The Second Defendant’s evidence in reply, if any, is to be filed by no later than 4pm on Sunday, 3 July 2016.

7. The hearing on the Second Defendant’s application will take place in July 2016.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 6 April 2016
At: 1pm

The post CFI 037/2015 William Daniel Milligan v Al Mojil Investment Limited & Mohammed Al-Mojil Group appeared first on DIFC Courts.

Claim No: CFI-036-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF APPEAL

BETWEEN

VANNIN CAPITAL PCC PLC

for and on behalf of protected cell – Project Ramsey

                                                                                          Claimant

and

(1) MR RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) MRS AMRAH ALI ABDEL LATIF AL HAMAD

(3) MRS ALIA MOHAMED SULAIMAN AL RIFAI

(4) KBH KAANUUN LIMITED

(5) BANK SARASIN-ALPEN (ME) LIMITED

(6) BANK J. SAFRA SARASIN LTD (FORMERLY BANK SARASIN & CO LIMITED)

Defendants

ORDER OF JUSTICE SIR RICHARD FIELD

UPON reviewing the application of the First Three Defendants for permission to appeal against the Order of H.E. Justice Ali Al Madhani dated 28 January 2016 and the Points of Appeal dated 11 February 2016 and the skeleton argument dated 25 February 2016 filed in support thereof.

AND UPON reviewing the Order and Reasons of H.E. Justice Ali Al Madhani dated 28 January, the written submissions and evidence relied on by the parties at the hearing on 29 July 2015 of the applications issued by the First Three Defendants on 9 June 2015 and the application issued by the Claimant issued on 11 June 2015.

AND UPON reviewing the transcript of the said hearing on 29 July 2015

AND UPON reviewing the Orders and Reasons of H.E. Justice Omar Al Muhairi dated 10 November 2014 and 18 February 2015, the skeleton arguments and evidence relied on by the parties in respect of the Claimant’s application issued on 3 November 2014 and the application of the First Three Defendants issued on 4 November 2014.

AND UPON reviewing the transcript of the hearing on 6 November 2014 of the said application of the Claimant issued on 3 November 2014.

AND IN ACCORDANCE WITH Part 44 of the Rules of the DIFC Courts.

IT IS HEREBY ORDERED THAT:

The First Three Defendants’ application for permission to appeal the order of H.E. Justice Ali Al Madhani be dismissed.

Issued by:

Maha Almehairi

Deputy Registrar

Date of Issue: 11 April 2016

At: 4pm

SCHEDULE OF REASONS

Introduction

1.The First Three Defendants (“the Khorafis”) apply for permission to appeal the decision of H.E. Justice Ali Al Madhani given on 28 January 2016 dismissing three applications respectively for: (i) an order that USD 945,593.00 paid into court as part of a larger sum pursuant to an order of H.E. Justice Omar Al Muhairi dated 10 November 2014 be paid out of court to the Khorafis and their lawyers Hamdan Al Shamsi (“HAS”); and (ii) orders staying arbitration proceedings brought against the Khorafis by the Claimant (“Vannin”) (DIFC/LCIA D-L-14043).

 The background to the application

Vannin’s successful application for the grant of interim relief

2. E. Justice Omar Al Muhairi’s order dated 10 November 2014 was preceded by an order he made at the end of a hearing on 6 November 2014 ordering that the sums awarded to the Khorafis by DCJ Chadwick on 28 October 2014 in CFI No. 026/2009 should be paid into court within 14 days. These sums totaled USD 11,445, 049 (“the awarded sum”).

3. E. Justice Omar Al Muhairi’s orders of 6 and 10 November 2014 were made on the application of the Claimant (“Vannin”) by way of a Part 8 Claim Form issued on 3 November 2014 (CFI 036/2014).

4. Vannin is party to a Restated Litigation Funding Agreement made on 21 April 2013 (“the RLFA”) which provided in Clause 10.1 thereof that the Khorafis had to pay Vannin two sums – the “Distributed Fund” and the “Funding Premium” — immediately on the event of their winning their claim or any part of it against the 5^th and 6^th defendants, Bank Sarasin-Alpen (ME) Limited and Bank J Safra Sarasin Ltd (formerly Bank Sarasin & Co Limited (“the Sarasin parties”) in CFI No. 026/2009 (“the main action”). The sums due in respect of the Distributed Fund and Funding Premium following DCJ Chadwick’s order of 28 October 2014 were USD 2,843,349.80 and USD 7,108,374 respectively.

5. By virtue of Clause 31.1 of the RLFA, the sums due under clause 10.1 were to be held in a designated account opened by the Khorafis’ then solicitors (“KBH”) on which fund Vannin was granted a right of first and third call. And under Clause 31.2 and 31.3, the Khorafis’ solicitors and any other person who comes into possession of thereof hold the Recovered Costs and Recovered Damages on trust for Vannin.

6. The evidence put before the judge by Vannin disclosed that: (i) following DCJ Chadwick’s order of 28 October 2014, Vannin had a good arguable case that it had a secured contractual right to be paid under clause 10.1; and (ii) the Khorafis were evincing an intention not to pay the awarded sum to Vannin at all or at least were dragging their feet over paying the awarded sum into a designated account and thereby protect Vannin’s right of first call.

7. On 28 August 2014, just seven days after DCJ Chadwick’s judgment in favour of the Khorafis on liability was handed down, the Khorafis had terminated KBH’s retainer and appointed in their place HAS. Under separate contractual arrangements, KBH also had a right to be paid in respect of their “basic costs” and a “success fee” following DCJ Chadwick’s order of 28 August 2014. How the recovered sums were to be distributed as between Vannin and KBH was governed by a waterfall provision contained in Clause 7 of the RLFA. The awarded sum was sufficient to meet both Vannin’s entitlement to be paid the “Distributed Fund” and KBH’s right to paid their “protected basic costs”, but it was not enough to cover Vannin’s right to the “Funding Premium” and KBH’s “success fee” in full and thus the balance was due to be shared ratably between Vannin and KBH under Clause 7.

8. Faced with the termination of KBH’s retainer, Vannin’s solicitors, Messrs Clyde & Co, had proposed that the awarded sums be paid into an account held by them that would operate as an escrow account but HAS did not agree to this proposal. Indeed, at one point, Mr Al Shamsi of HAS told Clyde & Co (“Clydes”), that the money should be paid out to those who needed it most and his firm and the Khorafis Counsel were a priority.

9. In resisting Vannin’s application, the Khorafis relied on a witness statement made by Ms Gayle Hanlon, a partner in HAS, on 4 November 2014. In this statement Ms Hanlon submitted that the court lacked jurisdiction to hear Vannin’s application on the basis that: (i) the RLFA contained an English jurisdiction clause; (ii) Vannin’s recourse, if any, was arbitration proceedings pursuant to an arbitration agreement contained in Clause 17.1 of the RLFA and no such proceedings had been initiated; and (iii) in any event, no arbitration proceedings could be started by Vannin since the parties had not considered mediation which, under Clause 17.1.3 of the RLFA, was a pre-condition to the right to bring such proceedings.

10. Clauses 17.1 and 17.3 of the RLFA provide:

“17.1 If there is a dispute between the Parties as to how this [Amended LFA] should be applied, then subject to the right of any person to ask the court to resolve the matter, the following procedure will apply:

17.1.2 ….

17.1.3 Quantum or principle (final): If the dispute relates solely to amounts payable under this [Amended LFA] which are final payments, then the parties are required to consider mediation. If that does not work, then the parties will be at liberty to have the matter decided by arbitration pursuant to the DIFC-LCIA Arbitration rules. The arbitrator’s decision shall be final and legally binding and judgment may be entered thereon.”

11. KBH also applied to the court for a protective order. The return date for both applications was 6 November 2006. On 4 November 2014, the Khorafis issued a cross-application supported by the aforesaid witness statement made by Ms Hanlon seeking an order that the court had no jurisdiction to determine Vannin’s application. The following day, 5 November 2014, Vannin initiated arbitration proceedings (D-L-14045) claiming an entitlement to be paid the sums due under Clause 10.1 of the RLFA and enforcement of its right to security under Clause 31.

12. At the hearing on 6 November 2014, Mr Reed QC for Vannin argued that it had a good arguable case that it was entitled to immediate payment of the sums due in respect of the Distributed Fund and the Funding Premium out of the recovered sums and that there was a real risk that those sums would be dissipated by the Khorafis.

13. Ms Hanlon for the Khorafis told the judge that her clients had had insufficient time to mount a substantive defence and were not even ready to proceed with their jurisdiction challenge. She sought to reserve the right to serve further evidence and submitted that the Khorafis had not threatened to breach the RLFA. On the contrary, she stressed that her clients did not challenge the validity of the RLFA. All they insisted on was the opportunity to scrutinize KBH’s costs before making any payment to that firm. She also told the court that HAS objected to the awarded sums being paid into an account held by a Western law firm because of a risk of co-mingling of monies. HAS had tried to negotiate the establishment of an escrow account with Emirates NBD but these attempts had failed. Her clients would not object to the awarded sums being held by a DFSA financial institution.

14. At the conclusion of submissions, H.E. Justice Omar Al Muhairi observed before rising for 10 minutes that there was a miscommunication between the parties and wondered if there was any hope of agreement before the court issued an order. During the ensuing adjournment the parties (including KBH) agreed that the awarded sums should be paid into court but there was no agreement as to the costs of Vannin’s application nor to the final wording of the order. Faced with continuing differences as to costs and the wording of the order, H.E. Justice Al Muhairi proceeded to order that: (i) the time for service would be abridged; (ii) the awarded sums should be paid into court; (iii) the parties should submit written submissions on all outstanding matters which would be dealt with on paper.

15. In his formal order issued on 10 November 2014, H.E. Justice Omar Al Muhairi ordered that the awarded sums should be paid into court by 11 November 2014 “to be held until further Order of the Court as to whom and in what amount payments shall be made, such an order to be in the form of an order made by consent of [Vannin, the Khorafis and KBH] as parties to an Amended Restated Litigation Funding Agreement dated 21 April 2013 and/or (in so far as it relates to the respective entitlements of [Vannin, the Khorafis and KBH] pursuant to an order of any competent court and/or an arbitration award.”

16. E. Justice Omar Al Muhairi also ordered that the Khorafis were to file their evidence in support of their jurisdiction challenge by 13 November 2014. In purported compliance with this direction, the Khorafis served on that date a Statement of Defence to Vannin’s Part 8 Claim together with a second witness statement of Ms Hanlon that not only dealt with the jurisdiction challenge but also responded on the merits of Vannin’s claim. When this approach to the evidence was challenged by Clydes, Ms Hanlon maintained that it was clear from the transcript of the 6 November 2014 hearing that the judge had intended to allow the Khorafis to serve further evidence of the substantive merits of Vannin’s claim. However, in a judgment dated 18 February 2015, H.E. Justice Omar Al Muhairi dismissed the Khorafis’ jurisdiction challenge and in so doing made no reference to Ms Hanlon’s evidence or the Statement of Defence. The irresistible inference must be that H.E. Justice Omar Al Muhairi thought that this part of Ms Hanlon’s evidence and submissions was inadmissible both to the question of jurisdiction and as to the appropriateness of his order dated 10 November 2014.

The Khorafi/KBH consent order made on 9 February 2015

17. On 27 October 2014, the Khorafis started an action (CFI-035-2014) against KBH for production of the files maintained by KBH in the main action and for a declaration that a lien KBH were exercising over the files pending payment of overdue fees was invalid.

18. On 9 February 2015, KBH and the Khorafis were parties to a consent order under which: (1) the Khorafis accepted that they were liable to pay KBH USD 4,000,000 by way of fees, USD 948,593 by way of third party disbursements and USD 60,114 by of KBH’s disbursements; and (2) USD 2,000,000 out of the USD 4,000,000, plus the USD 948,593 disbursements were to be paid out of the awarded sums held by the court.

19. It is to be noted that under the consent order KBH was to receive more from the awarded sum than it is entitled to pursuant to the waterfall clause (Clause7) in the RLFA.

The orders made by Justice Roger Giles on 3 February and 5 April 2015.

20. On 3 February 2015, Justice Roger Giles sitting as a single member of the Court of Appeal gave the Sarasin parties permission to appeal DCJ Chadwick’s judgment of 21 August, subject to determination of whether the grant of permission should be conditional on payment intoCourt of any judgment sum(s) and costs ordered to be paid at first instance.

21. On 5 April 2015, Justice Roger Giles ordered Bank Sarasin & Co Ltd to pay intoCourt any further sums ordered to be paid by it by way of compensation to the Claimants or as costs under the judgment or judgments in the main action currently under appeal or subsequently appealed pending final determination of such appeals subject to credit for any sums paid by the First Defendant in respect of the same liability.

The first Khorafi application issued on 9 June 2015 and heard by H.E. Justice Ali Al Madhani on 29 July 2015.

22. The first Khorafi application heard by H.E. Justice Ali Al Madhani (hereinafter “the judge”) on 29 July 2015 was for an order varying the order made on 10 December 2014 so that: (i) USD 9,455,930.00 out of the total sum of USD 11,445,049 paid into Court under the earlier order be now paid out to the Khorafis and their lawyers, HAS; (ii) USD 2,000,000.00 be held in Court (at the discretion of the Court) representing the first tranche payment due to KBH under the consent order dated 9 February 2015; and (iii) only insofar as any further damages are awarded against and paid by Bank Sarasin should such further sums be held in Court as security for the claims of Vannin and KBH.

23. The application was supported by a witness statement made by Mr Mohammed Nour Abdullah Mohammed Nour who is employed by the first applicant (“Mr Khorafi”) as an Office Manager and Advisor.

24. The Khorafis argued that they were making an interim application to which RDC 25.6 and 25.7 applied and that it was in the interests of justice that the order sought should be granted. Even assuming that the RLFA was valid and binding (an assumption the Khorafis disputed in a later part of their argument, see below) it was submitted that it was in the interests of justice that the application be granted because Mr Khorafi had incurred unpaid debts totaling USD 2,414,767.00 in pursuing the claims in the main action and was unable to fund resisting the Sarasin parties’ upcoming appeal out of the cash flow available to him. In particular, the Khorafis were unable to pay the fees agreed with counsel for the appeal (USD 425,835) without jeopardizing the cash-flow arrangements Mr. Al Khorafi had in place to allow him to continue making payments in the long term. If the first application were not granted, the appeal on liability then due to be heard in late September 2015 would have to be adjourned. In the meantime, the Khorafis’ counsel were insisting on being paid the fees due to them before they resumed work on preparing for the liability appeal.

25. The Khorafis also contended that the reason lying behind the interim payment of their costs ordered by DCJ Chadwick – to reduce the time a party awarded costs is kept out of his money – applied equally to the awarded sums held in court. Further, there was no need for the Khorafis to give a cross-undertaking in damages because if the Khorafis lost the liability appeal, Vannin would have no entitlement to any payment under the RLFA and if they won the appeal far more money by way of damages and costs would be awarded after the quantum hearings than would be needed to pay Vannin the USD 9.9 million to which they were laying claim.

26. In the alternative, the Khorafis submitted that: (1) the original Legal Funding Agreement dated 12 January 2012 (“the LFA”) had been wrongfully repudiated by Vannin by a notice dated 27 March 2013, which repudiatory breach was accepted by the Khorafis; and (2) they were entitled to rescind the RLFA or otherwise set it aside on the grounds that:

 (a) The wrongful repudiation of the LFA, and subsequent conduct of Vannin was intended to force the Khorafis to enter into the RLFA in circumstances of economic duress;

(b) The consent of the Khorafis to the RLFA was not informed consent;

(c) Essential terms of the RLFA are unlawful and evidence deceit, or other unlawful conduct by Vannin;

(d) Vannin has not acted in good faith in the performance of the RLFA.

(e) No Independent Legal Advice had been provided in respect of the RLFA.

27. These alternative submissions were made by reference principally to a Draft Statement of Case (“the DSoC”) intended to be filed in accordance with RDC 25.7 (3) and also, to a lesser extent, by reference to Mr Noor’s witness statement. In other words, the Khorafis were intending to exercise the option conferred by Clause 17 (1) of the RLFA of having the court decide its claim that the RLFA was void and unenforceable rather than simply referring this claim to arbitration, notwithstanding that they also intended to plead the averments and contentions made in the DSoC in the arbitration by way of a Defence and Counterclaim.

28. In their submissions the Khorafis noted that Vannin was entitled to terminate the original Legal Funding Agreement dated 12 January 2012 (“the LFA”) on 14 days’ notice pursuant to Clause 27.3.1 thereof if there had been a material change in circumstances such that there was a significant change in merits of the Claim as determined by a written legal opinion from an independent Queen’s Counsel stating the prospects of success of the liability Claim to be less than 50%.

29. In the DSoC it was alleged that on 6 March 2013 Vannin confirmed the budget allocation down to trial in the amount of USD 3,902,900.00, but from about 11 March 2013 Vannin refused to pay sums due under the budget plan. And it was on that date that Vannin instructed Mr. Jeremy Cousins QC to provide an opinion as to the prospects of success of the Khorafis’ claim.

30. Cousins’s opinion was produced on or about 20 March 2013 to which he added a Further Note dated 22 March 2013. In Mr. Cousins’s view, the Khorafis case on misrepresentations had no more than a 35% chance of success and their claim on the balance of the liability issues had no more than a 40% chance.

31. On 27 March 2013 Vannin gave formal notice of termination of the LFA.

32. On 4 April 2013 negotiations for an amended LFA began between Vannin, the Khorafis and KBH which culminated in the execution of the RLFA on 24 April 2013. Under that agreement, Vannin was to continue funding the litigation but was free to reduce its ongoing contribution from USD 1,659,550.20 to USD 600,000; and if it contributed further funds or the Khorafis failed to pay on the due date their agreed contributions (including USD 350,000 in two instalments), Vannin was entitled to a 500% uplift.

33. The Khorafis alleged in the DSoC that Mr. Cousins’s opinion was not such as to confer a right on Vannin to terminate the LFA for a number of reasons including: (i) Mr. Cousins was not independent of Vannin but had a close personal, professional and financial relationship with a Mr. Rowles Davies who was employed by Vannin; (ii) Mr. Cousins took direction from Mr. Rowles Davies as to the scope of what he was to do; (iii) Mr. Cousins’s opinion was wrong in fact and in Law, irrational, unreasonable and reckless and took into account irrelevant considerations.

34. The Khorafis further contended in the DSoC that: (i) Vannin’s refusal to pay invoices from 6 March 2013 was unlawful, arbitrary and capricious and constituted illegitimate pressure at a critical time in the proceeding in that at the same time (4 April 2013) as Vannin was proposing revised terms for the LFA under which it would continue to provide funds, Vannin was continuing to refuse to pay sums due under the LFA which left the Khorafis with no other practical choice than to accept the restated terms provided by Vannin in the RLFA; (ii) the terms of the RLFA were capricious, unconscionable, unfair and punitive and reflected the unequal bargaining power between the parties; (iii) Clause 3.38 of the RLFA (which provided for the “protected success fee”) breached the terms of the English Conditional Fee Agreements Order 2013 and was otherwise unlawful; (iv) between 4 and 21 April 2013 Vannin made material misrepresentations, the dominant purpose of which was to induce the Khorafis to enter into the RLFA; (v) the overall effect of the RLFA, and the Conditional Fee Agreement made between the Khorafis and KBH dated 4 April 2010 was that, for every USD 1.00 spent, the Khorafis were required to repay USD 5.00, plus a margin of USD 1,750,000.00 in undisclosed fees to KBH, yet the Khorafis received no independent advice on these agreements as Vannin knew or ought to have known.

35. The Khorafis further “pleaded” in the DSoC that they had the following causes of action in contract against Vannin: (i) breach of the obligation of good faith; (ii) repudiatory breach of the LFA in seeking an opinion from a QC as to the prospects of success in the main action when there had been no material change in circumstances; (iii) breach of the LFA in failing to ensure that the QC sought to provide an opinion on the prospects of success in the main claim was independent; (iv) breach of the LFA in that Mr Cousins’ opinion was misdirected, wrong in fact and in law, irrational and unreasonable and Vannin’s instructions to him and its use of his opinion was dishonest; (v) breach by Vannin of an essential term of the LFA by refusing to pay all accounts approved under the Budget Plan, or otherwise as reasonable when they fell due; (vi) rescission of the RLFA on the ground that it was executed by the Khorafis under economic duress caused by the actions of Vannin which were deliberate, contumelious and egregious; (vii) Vannin acted in breach of the LFA in that it encouraged, suggested, persuaded, aided, assisted, or abetted KBH to insert Clauses 3.37 and 3.38 into the RLFA and to enter into a contingency fee which is not allowed under the DIFC Mandatory Code of Practice; (viii) a claim for rescission and damages for misrepresentation of the nature and effect of the RFLA; (ix) a claim for rescission of the RFLA by reason of Vannin’s failure to require the Khorafis to obtain proper, independent advice as to that agreement.

The second and third Khorafi applications issued on 9 June 2015 and heard by the judge on 29 July 2015.

36. By their second and third applications, the Khorafis sought a stay of the arbitration proceedings begun by Vannin on 5 November 2014 or a declaration that the arbitral tribunal lacked jurisdiction to determine the reference served by Vannin on the grounds respectively that the right to have the dispute as to payment out of the awarded sums determined by arbitration had not accrued at the date Vannin served its Request for Arbitration.

37. Under Clause 10.1 of the RLFA, on the Khorafis “winning”, Vannin was entitled to the immediate payment of the “Distributed Fund” and the “Funding Premium”. Under Clause 3.48, a Win is defined as:

“A Win will mean that any part of the claim is Concluded in the [Khorafis’] favour in that the [Khorafis] are … able to recover damages from the Opponents, or the [Khorafis are] … awarded any other remedy which is of value; if it is sufficiently significant, an award of Costs may be regarded as a Win.”

38. “Concluded” is defined as:

“Concluded” means the Claim (or relevant part of it) has been won or Lost, and that: if the Claim (or where appropriate, part of it) has been Won, the Opponent …Has Lost any appeal.”

39. In the second application, the Khorafis submitted that a Claim has not been Won until the Opponent has Lost an Appeal and thus Vannin had no accrued entitlement to use the Clause 17 arbitration machinery when it served its Request for Arbitration. That Request was therefore premature and accordingly the tribunal had no jurisdiction to decide Vannin’s reference.

40. In the third application, it was submitted that the pre-condition in Clause 17.3 that the parties had considered mediation and this had not worked had not been satisfied and thus, for this reason too, Vannin’s Request for Arbitration was premature and the tribunal had no jurisdiction to determine Vannin’s reference.

Vannin’s cross-application issued on 11 June 2015

41. On 11 June 2015, Vannin issued a cross-application seeking: (i) service of the Khorafis’ first application in redacted form on the Sarasin parties; and (ii) dismissal of the Khorafis’ second and third applications on the ground that the court did not have jurisdiction to grant the relief sought.

42. This cross-application was heard by the judge on 29 July 2015 at the same time as he heard the Khorafis’ applications.

Vannin’s case resisting the Khorafi applications

43. Briefly put, Vannin’s case in answer to the first application was that properly analysed it was an application based on financial need, in particular the need to pay debts already incurred in prosecuting the main action especially Counsels’ fees. It was incumbent on the applicants to show that there had been a significant change in circumstances since the order made on 10 November 2014, and this they had failed to establish. Financial need had featured in the application heard on 6 November 2014 when the future legal costs were all too predictable. Moreover, there was no evidence that the Khorafis lacked the resources to pay the debts they faced. On the contrary, Mr Nour made it plain in his witness statement that Mr Khorafi had the means to pay the debts even if the Khorafis lost the liability appeal. The only subsequent developments were the orders of Justice Giles giving the Khorafis permission to appeal and making that permission conditional on payment into court of all future recoveries, both of which were highly likely events when Vannin’s preservation application was heard on 6 November 2014.

44. The contentions made in the DSoC that the RLFA agreement was void and/or rescindable were available to the Khorafis first time round, at least in the sense that they could have applied for an adjournment to consider the enforceability of the RLFA and to contend thereafter that no debt at all was owed to Vannin under the RLFA. Further, it would only be if the court were to uphold the contentions in the DSoC that the Khorafis would establish an entitlement to have paid to them all the monies in court and it was inconceivable that the court could try those contentions in the context of the first application. At their highest, the contentions could only be regarded as arguable, and that was not enough for the first application to succeed. In any event, the Khorafis ought not to be allowed to deploy the DSoC what with it being unsigned and lacking a statement of truth. This was not a case where the urgency of the situation justified reference to a draft pleading: the applicants had had plenty of time to produce and serve a Statement of Case in proper form.

45. As to the second and third applications, Vannin submitted that the court lacked jurisdiction to determine the same. Arbitration proceedings were under way following Vannin’s Request for Arbitration dated 5 November 2014 and, under the law of the DIFC, it was for the arbitral tribunal alone to determine whether it had jurisdiction to determine the reference.

H.E. Justice Ali Al Madhani’s decision dated 28 January 2016

The first Khorafi application

46. In paragraph 16 of his judgment, the judge found that the DSoC was not relevant to the first application. It was unsigned and contained no statement of truth. Why it was being submitted was not clear to anyone; it did not deal with the application at hand and had no reference to it; nor did it put forth any grounds or reasoning as to why the Khorafis were entitled to the remedy they were seeking in the first application.

47. Relying on RDC 2.10 (3), the judge adopted in paragraph 43 of his judgment the approach of the CPR and the English Courts to applications to vary interim orders. Thus he observed that the rule in Henderson v Henderson [1843] 3 Hare 100; 67 ER 313 applies so that a party cannot make repeated successive applications where the grounds relied upon in the later applications existed and were available at the time of the application, and still less when those grounds were relied upon, but were rejected by the court.

48. The judge also: (i) adopted in paragraph 44 the view of the English High Court in Lloyds Investment (Scandinavia) v Ager-Hanssen [2003] 3 All ER (D) 258 that the Court’s general jurisdiction under CPR 3.1(7) should not be used to vary its orders for the purpose of enabling a party to re-argue any application, relying on submissions and evidence available to them at the time of the earlier hearing; and (ii) in paragraph 45 quoted with approval the following well-known passage from the judgment of Buckley LJ in Chanel v Woolworth & Co [1981] 1 WLR 485 at 492H-493A:

“Even in interlocutory matters, a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.”

49. In paragraphs 46 and 47, the judge said:

“46. One cannot imagine that parties may be allowed to continue fighting over the same issues surrounding an order without end. The judicial orders must provide stability and some sort of finality to the issues between the parties even if the issue is not on the merits of the case.

47. Deciding otherwise could lead to endless appeals on the varying of orders where the losing party would drag the application before a court for long periods that would defeat the court’s objectives to deal with cases justly, fairly and in a reasonable period.”

50. The judge then considered whether there had indeed been a material change of circumstances since the order of 10 November 2014 and concluded that the answer to this question was no. The updated financial information supplied in Mr. Nour’s witness statement was not a new material circumstance since the expense of the litigation and its ongoing cost were a matter available at the hearing on 6 November 2014. The only change was that permission to appeal had been granted but this and the costs associated therewith had been anticipated at the earlier hearing.

51. In paragraph 50, the judge concluded:

“Having established that the Khorafis have put forward no material change of circumstances or events since the Preservation Order was granted, this Court sees no ground on which it can revisit the Order.”

The second Khorafi application.

52. The judge held that the court had no jurisdiction to determine whether the claim referred by Vannin to arbitration was in respect of a “final” payment and therefore within the reach of Clause 17.3 of the RLFA. In reaching this conclusion, the judge cited Articles 10 (1) and 23 (1) of the DIFC Arbitration Law:

10 (1) In matters governed by this Law, no DIFC Court shall intervene except to the extent so provided in this Law.

13 (1) If an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperative or incapable of being performed.

13(2) Where an action referred to in paragraph (1) of this Article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the DIFC Court.

23 (1) The Arbitral Tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the Arbitration Agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the Arbitral Tribunal that the contract is null and void shall not by itself determine the invalidity of the arbitration clause.

53. In paragraph 94, the judge found that since the Khorafis had not sought to establish that Clause 17.3 was null and void, inoperative or incapable of being performed, the second and third applications must fail.

54. In paragraphs 95, 96 and 97 he said:

95. The further question in the Second Application is whether Vannin’s immediate right to payment arises under Clause 10.1 of the Agreement.

96. It is beyond doubt that what the Khorafis are trying to do in their Second Application is to ask this Court to step on the selected Arbitral Trinbunal’s toes by looking at the merits of the case referred to arbitration and interpreting the agreement, then to conclude that the arbitral tribunal has no jurisdiction.

97. Even if the Khorafis manage to establish before this Court that there is still no “win” to justify Vannin’s claim, which has nothing to do with the Arbitration Clause in any event, the request put forward still must be seen as requiring the Court to cross the jurisdiction of another selected forum. The Court is restrained from doing so by Article 13 (1) of the DIFC Arbitration Law, and this request is denied.

The third application

55. As recorded in paragraph 53 above, the judge decided in paragraph 94 of his judgment that the third application must fail as well as the second application because in neither were the Khorafis seeking to establish that Clause 17.3 was null and void, inoperative or incapable of being performed.

56. In paragraph 99, the judge said that he could see that mediation as a pre-condition is something to do with the validity of the Arbitration Clause itself, unlike the argument in the second application that related to the meaning of the word “win” in the body of the RLFA. However, relying on paragraphs 18.13 and 18.14 in Joseph Jurisdiction and Arbitration Agreements and their Enforcement,[1] he went to hold that the Court must not construe an ADR or mediation provision in an arbitration clause but should instead ask if there is in existence an arbitration agreement within the meaning of the relevant legislation.

57. In the view of the judge, the decision of Mr. Justice Colman in Cable & Wireless PLC v IBM UK Ltd [2003] 1 BLR 89 cited by the Khorafis was distinguishable because it was not there suggested that the English court lacked jurisdiction to determine the effect the ADR provision in question. (I would add that the English court had jurisdiction because the ADR provision was not contained in an arbitration clause but was part of a scheme identifying what steps the parties had to take before judicial proceedings could be started).

58. The judge also criticised the Khorafis’ reliance on paragraph 18.03[2] of Joseph’s work without drawing the Court’s attention to paragraphs 18.13 and 18.14.

59. The judge then went on to agree with Vannin’s submission that the effect of the mediation provision could be left over to be dealt with if the winning party sought recognition of the award under Article 44.1.a (iii) of the DIFC Arbitration Law.

The substance of the Khorafis’ proposed grounds of appeal.

The first application

Ground 1.

60. The judge erred in holding that RDC 4.7 and CPR 3.1(7) restricted the Court’s discretion in respect of the first application. Instead, the judge should have treated the first application as if it were pursuant to a “liberty to apply” under the 6 November 2014 order and should have found that it was in the interests of justice to amend the original order as sought with Vannin still having a protected right on the basis that the Khorafis had a good arguable case and a pressing need.

Ground 2.

61. RDC 4.7 and CPR 3.1(7) only apply to subsequent or successive applications seeking the same or substantially the same relief and the Khorafis had not sought the same relief as requested in the first application dated 9 June 2015 on any previous occasion. The judge did not, in fact, identify any previous application made by the Khorafis, but only arguments which were “available to them to put forth” at 6 November 2014.

Ground 3.

62. The judge wrongly considered that assertions made outside of court proceedings in correspondence and a file note(s) in respect of a further funding agreement constituted “a previous application” or should be considered as such. The right of the Khorafis to use the Fund in the manner set out in the Application dated 9 June 2015 was not adjudicated on by the 6 November 2014 Order.

Ground 4.

63. Even if RDC 4.7 and CPR 3.1(7) governed the first application, the proper application of those Rules should nevertheless had led to the finding that the Court did have jurisdiction to consider the first application, as it involved material changes in circumstance. In any event, it was appropriate to consider the first application, as the circumstances of the 6 November 2014 hearing did not allow the Khorafis to present their arguments properly, or at all.

Ground 5.

64. The judge erred in failing to consider evidence of a good arguable case. The Khorafis’ application was ancillary in nature and required a substantive claim to be produced, even if in draft. RDC 25.6(1), RDC 25.7(2)(b) and RDC 25.7(3) [para 17] provide for the use of a draft document. The use of a DSoC was appropriate, and in accordance with the DIFC Courts’ overriding objectives, where there were arbitration proceedings afoot and the judge ought to have considered both it and the witness statement of Mohammed Nour dated 9 June 2015. In particular, the judge should have found that the Khorafis had a good arguable case in the (intended) substantive claim on the basis of the matters and contentions pleaded in the DSoC.

Ground 6.

65. The order dated 6 November 2014 ought now be set aside in its entirety (albeit with a provision that provides security for Vannin’s claim and payments sought in the first application) as the order was an injunction, or in the nature of an injunction, which was granted in the absence of any undertaking for damages being given by Vannin due to default by Vannin who were obliged to furnish an undertaking. The fact that this is a new point not taken either on 6 November 2014 or 29 July 2015 should not prevent it being taken since it is a “knock out” point and arises out of a procedural default on the part of Vannin at the 6 November 2014 hearing.

The second and third applications.

Ground 7.

66. The judge wrongly held that the court had no jurisdiction to grant the relief sought in the second and third applications. Instead, the judge should have held that the court had jurisdiction pursuant to Article 5 of Dubai Law No.12 of 2004 (as amended by Dubai Law No. 16 of 2011) which confers on the DIFC Courts the unlimited powers of a Court of Higher Record necessary for the administration of justice and to prevent abuses of process. Article 13 of the DIFC Arbitration law deals with the “usual” position where court proceedings are sought to be stayed in favour of an arbitration. The second and third applications were not in breach of any underlying commitment to arbitrate but rather, were supportive of the commitment to arbitrate in seeking to prevent an arbitration commenced in breach of Clause 17.1.3 of the RLFA. Any reference to arbitration which pre‐empts essential contractual pre‐conditions is a matter for the courts to determine, not by arbitration.

Ground 8.

67. The judge erred in refusing to consider whether there was a dispute over a “final” payment within the meaning of Clause 17.3. As a matter of fact and law, Vannin’s claim for payment was not “concluded” at the time of the making of the Arbitration Claim on 5 November 2014 and thus Vannin had no right to refer its “claim” to arbitration under Clause 17.3.

Ground 9.

68. The judge erred in not finding that the court did not have jurisdiction to determine whether the mediation pre-condition in Clause 17.3 had been complied with. Art 44.1(a)(iii) of the DIFC Arbitration Law 1998 cannot later resolve any complaint that the Khorafis had as to Vannin’s failure to satisfy the pre-condition.

69. What the judge should have done was to find that the court did have jurisdiction to decide this issue and then gone on to find that: (i) the pre-condition required a joint temporal consideration of mediation which “[did] not work”; and (ii) there had been no so such joint temporal consideration of mediation so that the pre-condition had not been satisfied. Misleading information had been given by Vannin to the Acting Registrar of the DIFC‐LCIA by letter dated 20 on the question of mediation.

All three applications

Ground 10.

70. The lead-up to the hearing on 29 July 2015; the hearing itself; and the delay in delivering the judgment, were all characterized by procedural unfairness to such a degree that the outcome of the case was prejudicially affected. The case attracted a multiplicity of issues which could have been resolved by the Court prior to the hearing: viz (i) whether service had been effected; (ii) the appropriate allocation of hearing time; (iii) the involvement of the Sarasin parties and their attempts to obtain a de‐facto stay; (iv) the extent to which the substantive issues in the draft DSoC needed to be considered; (v) applicable law; (vi) privacy of the Arbitral Provisions; and (vii) redaction of documents ordered to be served on Sarasin parties.

71. Despite being directed to file a Defence by 8 July 2015, Vannin did not plead a substantive Defence, other than as to the meaning of “Final Payment” and to rely generally on the DIFC Arbitration Law 2008. In particular, Vannin did not plead the point that they succeeded on in respect of the first application (see Grounds 1‐4 above) until the filing of its Skeleton at 2.08 p.m. on 28 July 2015, the day before the hearing.

Discussion and decision

72. Pursuant to RDC 44.8, permission to appeal may be given only where:

(1) the Court considers that the appeal would have a real prospect of success; or

(2) there is some other compelling reason why the appeal should be heard.

73. A “real prospect of success” means a “realistic” as opposed to a “fanciful” prospect of success, see Swain v Hillman [2001] 1 All ER 91, followed and applied in Khorafi et al v Bank Sarasin-Alpen (ME) Limited (CFI-026-2009) and DNB Bank ASA v (1) Gulf Eyadah Corporation; and (2) Gulf Navigation Holding PJSC (9 September 2015) CFI-043-2014.

Grounds 1-5

74. In my judgment none of these grounds has a real prospect of success on appeal. The judge’s adoption of the hostile approach found in the CPR and decisions of the English High Court and Court of Appeal such as Chanel v Woolworth & Co (above); Lloyds Investment (Scandinavia) v Ager-Hanssen; Tibbles v SIG plc [2012] 1 WLR 2591) to interlocutory applications seeking to vary or discharge interim orders on the basis of matters or evidence that were raised or adverted to or could have been raised or adverted to at earlier hearings is unassailable. Further, this approach clearly applies whenever the applicant seeking a variation or discharge of the earlier order was a party to the proceeding in which the earlier order was made and however the later application is made, whether by a free-standing application within the original proceeding, or under a liberty to apply, or, as in the instant case, under a free-standing application made ancillary to a substantive claim.

75. Leaving aside for the moment his approach to the DSoC, I am also of the view that the judge’s finding that the first application did not rest on any material change of circumstances or contention that had not been available within the hearing held on 6 November 2014 is beyond successful challenge. True it is that the Khorafis’ liabilities for costs in the main action had increased in the period 6 November 2014 to 29 July 2015 and that at this later date the Khorafis’ counsel were refusing to prepare for the liability appeal unless they were paid the fees due to them, but financial difficulties due to shortage of cash flow rather than lack of assets had figured in the earlier hearing and it was plainly envisaged that further costs would be incurred for the quantum hearings and if there were an appeal on liability. Moreover, the evidence at the first hearing and at the later hearing was that Mr Khorafi owned valuable assets and was in a position to pay the legal fees incurred in the main action and the sums payable under the RFLA, even if the Khorafis lost the liability appeal. And the fact that some of this evidence may have emerged from the negotiations on further funding following the termination of the LFA is nothing to the point (Ground 3).

76. Further, as found by the judge, the subsequent grant of permission to appeal to the Sarasin parties by Justice Roger Giles was not a material change of circumstance since there was at the time of the first hearing a strong likelihood that the Sarasin parties would be granted permission to appeal Chadwick DCJ’s liability findings. As for the order made by Justice Giles on 5 April 2015 ordering the Sarasin parties to pay into court pending the determination of their appeals any further sums awarded by the Court of First Instance, that was not a material change of circumstance as is borne out by the fact that the order sought by the Khorafis expressly provided that it was to be “read together with, and in any event subject to, the Order of Justice Roger Giles made in CFI-026-2015 and dated 5 April 2015.”

77. Turning to the judge’s approach to the DSoC, I think that it is reasonably arguable that he ought not to have dismissed this document out of hand as he did in paragraph 16 of his judgment. All or almost all of the many causes of action pleaded in it were based on serious allegations of improper conduct on the part of Vannin, allegations that ought only to have been made in a pleading endorsed with a statement of truth and signed by the pleader after having concluded that there was a proper basis for making the allegations. At the end of the DSoC appeared the electronic signature of the Khorafis’ counsel, Mr. Roger Bowden, who told the judge it was he who drafted the pleading. The pleading was not endorsed with a statement of truth as it ought to have been and there appeared to be no justification for not having filed and served the pleading prior to the hearing. However, Mr. Noor had quite a lot to say in paragraphs 28 – 50 of his witness statement about the allegations the DSoC contained.

“28. As stated, I was involved with this case from the beginning and was the only point of contact between Mr. Al Khorafi and Vannin and KBH during the time period of the renegotiation of the Litigation Funding Agreement which I would term as being between 11 March 2013 and 25 April 2013 when we paid the second payment of USD 225,000.00 to KBH.

29. I have been involved in the preparation of the Affirmative Defence and Counterclaim in D-L-14045 which sets out in detail the allegations that the Al Khorafi parties make, and which forms the basis of the draft Statement of Case. Indeed, the material which informs the claim came principally from me.

30. I have had substantial telephone and email correspondence with HAS over the last month as the document was prepared, as well as a three hour meeting in May 2015, together with a further three hour final attendance on Thursday 4 June 2015 where I went through the document in considerable detail. In addition, Mr. Al Khorafi met with HAS staff for three hours to discuss the arbitration defence and this intended application. I attended that meeting as well. To the best of my knowledge, the statements contained in the Statement of Case, are correct and reflect what actually happened.

31. Annexed to this witness statement and marked with the letter “A” is a number of emails which were exchanged, variously between KBH, Vannin and myself. The first emails date from 3 January 2012 but the bulk emanate from March and April 2013.

32. It is obvious from the emails that there were a number of discussions directly between KBH and Vannin, to which I was not a party, and which are not included in Annexure “A”.”

33. The first email annexed is from 3 January 2012 and dealt with the consequences of entering into the LFA dated 12 January 2012. I accept that we were given appropriate legal advice at that time although it does need to be said that the legal advice was received from lawyers who stood to benefit from the Agreement.

34. Later emails in from October 2012 to January 2013 deal with Eversheds LLP requests for payment after their retainer was terminated. We believed that it was a matter for KBH and Eversheds to resolve in terms of the fee sharing agreement which they had. In any event it was not a matter of such moment that it should have affected the operation of the LFA and certainly did not affect the prospects of success for the Claim.

35. The simple point was that Vannin was only required to pay for items set out in the budget, or which were otherwise reasonable, and Eversheds account was not in the budget.

36. I do not believe that we were initially advised of the review by Mr. Cousins QC. The first notification we had of it was Tuesday 26 March 2013 followed by formal notification on 27 March 2013. The fact that the Vannin were withdrawing funding came as a total shock. I spoke to the late Mr. Kaashif Basit about it. I specifically asked if we had lost the 13 January 2013 Pre Trial Case Management Conference. Mr. Basit said that we had not and seemed as surprised as we were.

37. Following the Notice of Termination, matters moved at a very fast pace. Mr. Basit attempted to make Vannin pay outstanding accounts but Vannin refused. Accounts which had already been delayed for months, became urgent. Our Counsels’ retainer was cancelled. Vannin terminated the LFA and the KBH terminated their retainer as well.

38. We were not kept well informed and there was very little that we could do. By 4 April 2013, it seemed that all was lost.

39. Almost as quickly, the case was back on again.

40. Whereas before Vannin had indicated that there was little chance of success, they were next enthusiastically telling us that we could all share in the damages.

41. New conditions were proposed, but the effect of the new terms was not explained to us.

42. KBH never explained the agreement to us. KBH, in fact became very difficult and uncommunicative. Mr. Basit was ill at the time with an illness that led to his unfortunate passing. I was, however, in frequent contact with him at the time and the proposed RLFA was the topic of conversation. The conversations were not about how the RLFA would affect us, but what we could do to comply with Vannin’s demands, or what we could do if they did not comply with the terms of the RLFA. We had to ask for the RLFA ourselves and only received it on 21 April 2013. That is despite the fact that KBH had received it from Vannin on 9 April 2013. We read it ourselves and in circumstances of great urgency. It is not an easy document to read at any time.

43. The urgency was brought about by the requirement to make 2 payments:

(a) The first installment of USD 125,000.00 was required to be paid, on 2 days’ notice, and prior to the RLFA even being agreed (we simply paid in faith); and

(b) The second installment was required to be paid by 25 April 2013 which was one day after the RLFA was signed by KBH. This payment date was progressively moved from 5 May 2013, to 30 April 2013 and then to 25 April 2013, again with very little notice.

44. In addition, we were informed of a new provision, that if we did not pay the monies exactly on time we would face a 500% uplift or 6 times Vannin’s investment.

45. Not set out in the RLFA, was an additional requirement that we pay Counsel USD 130,000.00 so they could keep working. I now know that these charges were occasioned by Vannin’s delay. We achieved all of this but it took all our time and severely strained Mr. Al Khorafi’s resources at a time when he was being aggressively pursued by Bank Sarasin and ABK Bank.

46. We did, around 16-17 April 2013, approach HSBC in London for funding through an additional mortgage on Mr. Al Khorafi’s home. They made promising noises but wanted to have lawyers review the proceeding. We had exactly one month to trial at that time and no room for even a few days delay. In the event, there simply was not time to set up an alternative funding mechanism. We advised the parties that we were looking at alternate funding on 17 April 2013, just to get things moving. The reality was we, had no chance. We took the RLFA, firstly, because we had no idea how bad it was (what we did know was bad enough), and secondly, because whatever it did cost, our losses were going to be so much worse if we did not go to Trial.

47. Throughout this process, the only advice that we received on the RLFA was from Vannin. They told us that KBH were making an investment and they we would all share in the repayment of that investment. I had no idea that the KBH “investment” was in fact a book entry and that they were not making any investment at all, not even a reduction in fees. We had no idea until we saw the explanation of Mr. Singh from KBH in his First Witness Statement in this proceeding and the KBH Revised Statement of Account, as to what the fees were.

48. Even during the preparation of this affidavit, I confess that I have had to seek additional explanation for the USD 500,000.00 investment and the USD 1,250,000.00 margin which was applied to it. I was unable to believe it before I saw each piece of paper for myself. I can categorically state that neither Vannin nor KBH explained anything of the sort. Annexed hereto and marked with the letter “B” is a copy of the 5 November 2014 KBH Statement of Account which sets out the margin to be applied.

49. Vannin also advised, on 17 April 2013, that all the steps taken by Vannin were legitimate. As this advice came from Mr. Rowles-Davies, whom we knew to be an experienced and prominent lawyer, and, as we had no other advice, we were minded to accept it.

50. As stated, I have briefly mentioned, in the context of an application for interim orders, some of the matters which I have personal knowledge of, and which I experienced. I certainly believe, based upon my extensive knowledge of the affairs of Mr. Al Khorafi, my being involved at the time, and a detailed review of the relevant documents, that all of the other allegations in the draft Statement of Case are entirely correct.

78. I also think that it is arguable that the case pleaded out in the DSoC was not a case that was “available” at the hearing on 6 November 2014. At that hearing the Khorafis were at pains to assure the Court that they regarded the RLFA to be a binding agreement under which Vannin was entitled to be paid the sums it was claiming were due to it. They advanced this position before they and their legal team had had an opportunity to consider the legal implications of the manner in which the LFA was terminated and the RLFA put in its place. In this connection, it is notable that Mr. Reed QC for Vannin did not argue that the Khorafis could have advanced the contentions made in the DSoC at the 6 November 2014 hearing. Instead, he submitted that these contentions were “available” to the Khorafis first time round in the sense that they could have applied for an adjournment to consider the enforceability of the RLFA and then have contend thereafter that no debt at all was owed to Vannin. In my judgment, it is reasonably arguable that the Khorafis failure to apply for an adjournment at or shortly after the hearing to consider their legal position quoad Vannin and the fact that they only served the DSoC on 9 June 2015 ought not to mean that they should have been disbarred from advancing the case made in the DSoC at the 29 July 2015 hearing.

79. I also think that it is reasonably arguable that the judge should have found that the Khorafis had a good arguable case based on the contentions pleaded in the DSoC.

80. I must now turn to the final and crucial question that has to be considered, namely whether, if the Khorafis have a good arguable case based on the DSoC, is it arguable that they therefore should be granted their application to amend the original order.

81. In my judgment, the contention that the Khorafis are entitled to have the original order amended because they have a good arguable case that the RLFA is invalid would have virtually no prospect of success in the Court of Appeal. In short, I am entirely satisfied that the Khorafis do not have a real prospect of persuading the Court of Appeal to grant their 9 June 2015 application on the ground that they have a good arguable case that the RLFA is invalid. I say this because I consider it unimaginable that the Court of Appeal would conclude on the available material and without oral evidence that the Khorafis’ case was so strong that Vannin should lose the protection afforded by the original order to their prima contractual right to payment under Clause 10.1. On the contrary, it is virtually certain in my view that the Court of Appeal would conclude that justice requires that all the money now in court should remain there until further order.

82. I would add that, even if it were arguable that the judge erred in holding that the updated financial position of the Khorafis as at 9 July 2015 and their difficulty in paying the fees due to their Counsel constituted a material change of circumstances, I would not grant leave to appeal on this point for the same reason I decline to grant permission to argue that the judge erred in failing to conclude that the Khorafis had a good arguable case that the RLFA was invalid. As I have said, at the end of the day, the Court of Appeal would almost certainly uphold the original order.

83. Accordingly, I conclude that all of Grounds 1 – 5 have no prospect of success in the Court of Appeal; nor is there some other compelling reason why there should be an appeal based on these grounds. Accordingly, I decline to grant the Khorafis permission to advance these grounds on appeal.

Ground 6

84. In my opinion, this ground of appeal would be bound to fail and there is no compelling reason why it should be argued before the Court of Appeal.

85. The hearing on 6 November 2014 was not an ex parte but an inter partes hearing at which the Khorafis were represented by Ms Hanlon who addressed the court at some length. This being the case, it was not for Vannin to raise the question of a cross-undertaking in damages. Rather, if the point was going to be taken, it should have been taken by Ms Hanlon either during the hearing itself or in response to Justice Al Muhairi’s direction at the end of the hearing that submissions on the form of the order should be sent to him in writing. And, given that the point was not taken at the hearing on 29 July 2015, even though the Khorafis addressed the question in their own skeleton argument whether they should give a cross-undertaking in damages, it is now far too late for this ground of appeal to be advanced.

Grounds 7 – 9

86. None of these grounds of appeal has a real prospect of success. As the judge noted, Article 10 of the DIFC Arbitration Law provides explicitly that “[i]n matters governed by this Law, no DIFC Court shall intervene except to the extent provided in this Law.” The DIFC Court’s power to intervene in arbitrations governed by the Arbitration Law are then set out in Article 11 of that Law by reference to Articles 19 (3), 24 (2), 34, 41, 42, 43, 44, 14, 17 (3), 20 (1), 21 (1), 23 (3) and 39 (5). None of those powers permits the DIFC Court to stay any arbitration proceedings or make declarations as to an arbitral tribunal’s lack of jurisdiction in advance of the arbitral tribunal itself determining that issue. Further, as Justice Williams said in International Electromechanical Services LLC v Al Fattan Engineering LLC (14 October 2012) CFI 004/2012, the DIFC Courts’ inherent jurisdiction exists “only in so far as necessary to enforce existing rules and to prevent abuse of those rules and of the processes of the Courts.”

87. It follows, in my opinion, that the judge’s decision that the Court did not have jurisdiction to grant the second and third applications was undoubtedly correct and there is no real prospect of this decision being overturned on appeal; nor is there a compelling reason for Grounds 7, 8 and 9 to be argued in an appeal.

88. Even if the Court did have power to stay the arbitration proceedings or grant a declaration that the arbitral tribunal lacked jurisdiction, that power would be a discretionary one, and given that Article 23.1 of the Arbitration Law confers on an arbitral tribunal the power to determine its own jurisdiction, the Court of Appeal would inevitably in this case refuse to grant a stay or make a declaration of no jurisdiction in favour of the appointed tribunal deciding whether Vannin had an accrued right to refer its claim for payment to arbitration under Clause 17.3 of the RLFA.

Ground 10

89. In paragraph 107 of the Khorafis’ skeleton argument in support of their application for permission to appeal it is stated that the remedy sought under this ground of appeal “is simply that the Court of Appeal approach the hearing with these factors in mind and adopt a remedial approach under re-hearing principles.” I find this statement makes it unclear whether Ground 10 is intended to be a free-standing ground whose success is intended to lead to the setting aside of the order of Justice Ali Al Madhani and the Court of Appeal deciding for itself whether the original order should be amended; or whether this ground is intended to be no more than a plea to the Court of Appeal to bear in mind the difficulties that are claimed to have confronted the Khorafis when they made their application on 29 July 2015. If the former intention is meant, I say at once that this ground of appeal too has no real prospect of success. The time allowed for the Khorafis to present their case was not so short as to be unfair. Their skeleton argument having been served in advance of the hearing, there was enough time for the main points to be articulated orally and questions from the Bench answered. Indeed, it is clear from the judge’s summary of the Khorafis’ case in his judgment that he understood what that case was. As for the late service of Vannin’s skeleton argument, although this was no doubt annoyingly inconvenient, it was not in my opinion productive of injustice. The points taken therein were all predictable, including the contention that the Khorafis could not show that there had been a material change or circumstance since 6 November 2014. And as for the delay in giving judgment, whilst it is regrettable that it took as long as 5 ½ months for judgment to be handed down, I am quite satisfied that this was not productive of such unfairness or prejudice as would require the setting aside of the judge’s judgment. I say this because the judge had available detailed skeleton arguments and a verbatim transcript of the hearing and it is plain that he fully understood each party’s submissions and did not overlook any of the material points relied on.

90. There is also no compelling reason why there should be an appeal on this Ground 10.

91. If the intention behind Ground 10 is that the Court of Appeal should take into account the pleaded difficulties alleged to have been faced by the Khorafis, I can say that in considering this application for permission to appeal I have borne these matters in mind but they have not persuaded me to grant the permission sought.

Conclusion

92. For the reasons given above, this application for permission to appeal the order of H.E. Justice Ali Al Madhani is refused.

Issued by:

Maha Almehairi

Registrar

Date of Issue: 11 April 2016

At: 4pm

The post CFI 036/2014 Vannin Capital Pcc Plc v (1) Mr Rafed Abdel Mohsen Bader Al Khorafi (2) Mrs Amrah Ali Abdel Latif Al Hamad (3) Mrs Alia Mohamed Sulaiman Al Rifai (4) KBH Kaanuun Limited (5) Bank Sarasin-Alpen (ME) Limited (6) Bank j. Safra Sarasin Ltd (Formerly Bank Sarasin & Co Limited) appeared first on DIFC Courts.

Claim No: CA-003-2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF APPEAL

BETWEEN

(1) RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) AMRAH ALI ABDEL LATIF AL HAMAD

(3) ALIA MOHAMED SULAIMAN AL RIFAI

                                                                                                  Claimants/Respondents

and

(1) BANK SARASIN-ALPEN (ME) LIMITED

(2) BANK SARASIN & CO. LTD

Defendants/Appellants

   ORDER OF THE COURT OF APPEAL

UPON the Judgment of the Court of Appeal dated 3 March 2016

AND UPON reviewing the parties’ submissions on costs dated 17 March 2016

IT IS HEREBY ORDERED THAT:

1.The Respondents are entitled to recover their costs of the appeal, the amount of which is to be assessed by the Registrar on a standard basis, if not agreed.

2. The Appellants shall be jointly and severally liable for 80% of Respondents’ costs of the appeal.

3. The Second Appellant shall be liable for the 20% balance of the Respondents’ costs.

4. Interest at 3 month EIBOR + 1% is recoverable on the costs, as assessed or agreed from 30 April 2016.

5. Both Appellants shall be jointly and severally liable for a payment on account of costs in the sum of USD 450,000, payable by 30 April 2016.

Issued by:

Maha Almehairi

Judicial Officer

Date of issue: 12 April 2015

Time: 4pm

The post CA 003/2015 (1) Rafed Abdel Mohsen Bader Al Khorafi (2) Amrah Ali Abdel Latif Al Hamad (3) Alia Mohamed Sulaiman Al Rifai v (1) Bank Sarasin-Alpen (ME) Limited (2) Bank Sarasin & Co. Ltd appeared first on DIFC Courts.

Claim No: CFI 030/2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

EMIRATES REIT (CEIC) LIMITED

   Claimant

and

(1) INDEX TOWER RESIDENTIAL BODY CORPORATE

First Defendant

(2) ASSOCIA MENA OWNERS ASSOCIATION SERVICES

                   Second Defendant

ORDER OF JUSTICE SIR DAVID STEEL

UPON hearing Counsel for the Claimant and Counsel for the Second Defendant at a hearing on 27 October 2015

AND UPON reviewing the Second Defendant’s submissions on costs dated 10 March 2016 and the Claimant’s submissions in response dated 31 March 2016

AND UPON reading the evidence recorded on the Court file

IT IS HEREBY ORDERED THAT:

The Second Defendant shall pay the Claimant’s costs of their application for an injunction.

Issued by:

Maha Almehairi

Judicial Officer

Date of Issue: 12 April 2016

At: 4pm

SCHEDULE OF REASONS

1.The Second Defendants apply to submit further evidence on the issue of costs. I refuse that application. It is not appropriate to assess its merits, a portion by reference to the outcome of the Annual General Meeting (the “AGM”) as eventually held.

2. In my judgment, it is appropriate to make an order for costs against the Second Defendants by reason of their unreasonable conduct:

(a) They were informed of the Claimant’s objection to the AGM due on 27 October 2015 by letter dated 22 October 2015. An undertaking was sought fully which it was explained that an injunction would be sought together with costs.

(b) They were also informed by that letter that the DIFC Registrar of Real Property has convened a meeting for 25 October 2015. However, they refused to attend or otherwise participate in that meeting.

(c) That application was duly served on 25 October 2015. Only when the parties attended at Courts and notice was recieved of the Registrar’s decision to postpone the AGM was the undertaking furnished.

(d) The costs of the application could and should have been avoided by reason of reasonable and proportionate attitude on their part.

The post CFI 030/2015 Emirates Reit (CEIC) Limited v (1) Index Tower Residential Body Corporate (2) Associa Mena Owners Association Services appeared first on DIFC Courts.

Claim No: CFI-036-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF APPEAL

BETWEEN

VANNIN CAPITAL PCC PLC

for and on behalf of protected cell – Project Ramsey

                                                                                          Claimant

and

(1) MR RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) MRS AMRAH ALI ABDEL LATIF AL HAMAD

(3) MRS ALIA MOHAMED SULAIMAN AL RIFAI

(4) KBH KAANUUN LIMITED

(5) BANK SARASIN-ALPEN (ME) LIMITED

(6) BANK J. SAFRA SARASIN LTD (FORMERLY BANK SARASIN & CO LIMITED)

Defendants

AMENDED ORDER OF JUSTICE SIR RICHARD FIELD

UPON reviewing the application of the First Three Defendants for permission to appeal against the Order of H.E. Justice Ali Al Madhani dated 28 January 2016 and the Points of Appeal dated 11 February 2016 and the skeleton argument dated 25 February 2016 filed in support thereof.

AND UPON reviewing the Order and Reasons of H.E. Justice Ali Al Madhani dated 28 January, the written submissions and evidence relied on by the parties at the hearing on 29 July 2015 of the applications issued by the First Three Defendants on 9 June 2015 and the application issued by the Claimant issued on 11 June 2015.

AND UPON reviewing the transcript of the said hearing on 29 July 2015

AND UPON reviewing the Orders and Reasons of H.E. Justice Omar Al Muhairi dated 10 November 2014 and 18 February 2015, the skeleton arguments and evidence relied on by the parties in respect of the Claimant’s application issued on 3 November 2014 and the application of the First Three Defendants issued on 4 November 2014.

AND UPON reviewing the transcript of the hearing on 6 November 2014 of the said application of the Claimant issued on 3 November 2014.

AND IN ACCORDANCE WITH Part 44 of the Rules of the DIFC Courts.

PURSUANT TO Rule 36.40 of the Rules of the DIFC Courts, paragraph 82 of this Order is amended as reflected by the strikethrough and the underline

IT IS HEREBY ORDERED THAT:

The First Three Defendants’ application for permission to appeal the order of H.E. Justice Ali Al Madhani be dismissed.

Issued by:

Maha Almehairi

Judicial Officer

Date of Issue: 11 April 2016

Date of re-issue: 18 April 2016

At: 4pm

SCHEDULE OF REASONS

Introduction

1. The First Three Defendants (“the Khorafis”) apply for permission to appeal the decision of H.E. Justice Ali Al Madhani given on 28 January 2016 dismissing three applications respectively for: (i) an order that USD 945,593.00 paid into court as part of a larger sum pursuant to an order of H.E. Justice Omar Al Muhairi dated 10 November 2014 be paid out of court to the Khorafis and their lawyers Hamdan Al Shamsi (“HAS”); and (ii) orders staying arbitration proceedings brought against the Khorafis by the Claimant (“Vannin”) (DIFC/LCIA D-L-14043).

 The background to the application

Vannin’s successful application for the grant of interim relief

2. E. Justice Omar Al Muhairi’s order dated 10 November 2014 was preceded by an order he made at the end of a hearing on 6 November 2014 ordering that the sums awarded to the Khorafis by DCJ Chadwick on 28 October 2014 in CFI No. 026/2009 should be paid into court within 14 days. These sums totaled USD 11,445, 049 (“the awarded sum”).

3. E. Justice Omar Al Muhairi’s orders of 6 and 10 November 2014 were made on the application of the Claimant (“Vannin”) by way of a Part 8 Claim Form issued on 3 November 2014 (CFI 036/2014).

4. Vannin is party to a Restated Litigation Funding Agreement made on 21 April 2013 (“the RLFA”) which provided in Clause 10.1 thereof that the Khorafis had to pay Vannin two sums – the “Distributed Fund” and the “Funding Premium” — immediately on the event of their winning their claim or any part of it against the 5^th and 6^th defendants, Bank Sarasin-Alpen (ME) Limited and Bank J Safra Sarasin Ltd (formerly Bank Sarasin & Co Limited (“the Sarasin parties”) in CFI No. 026/2009 (“the main action”). The sums due in respect of the Distributed Fund and Funding Premium following DCJ Chadwick’s order of 28 October 2014 were USD 2,843,349.80 and USD 7,108,374 respectively.

5.By virtue of Clause 31.1 of the RLFA, the sums due under clause 10.1 were to be held in a designated account opened by the Khorafis’ then solicitors (“KBH”) on which fund Vannin was granted a right of first and third call. And under Clause 31.2 and 31.3, the Khorafis’ solicitors and any other person who comes into possession of thereof hold the Recovered Costs and Recovered Damages on trust for Vannin.

6. The evidence put before the judge by Vannin disclosed that: (i) following DCJ Chadwick’s order of 28 October 2014, Vannin had a good arguable case that it had a secured contractual right to be paid under clause 10.1; and (ii) the Khorafis were evincing an intention not to pay the awarded sum to Vannin at all or at least were dragging their feet over paying the awarded sum into a designated account and thereby protect Vannin’s right of first call.

7. On 28 August 2014, just seven days after DCJ Chadwick’s judgment in favour of the Khorafis on liability was handed down, the Khorafis had terminated KBH’s retainer and appointed in their place HAS. Under separate contractual arrangements, KBH also had a right to be paid in respect of their “basic costs” and a “success fee” following DCJ Chadwick’s order of 28 August 2014. How the recovered sums were to be distributed as between Vannin and KBH was governed by a waterfall provision contained in Clause 7 of the RLFA. The awarded sum was sufficient to meet both Vannin’s entitlement to be paid the “Distributed Fund” and KBH’s right to paid their “protected basic costs”, but it was not enough to cover Vannin’s right to the “Funding Premium” and KBH’s “success fee” in full and thus the balance was due to be shared ratably between Vannin and KBH under Clause 7.

8. Faced with the termination of KBH’s retainer, Vannin’s solicitors, Messrs Clyde & Co, had proposed that the awarded sums be paid into an account held by them that would operate as an escrow account but HAS did not agree to this proposal. Indeed, at one point, Mr Al Shamsi of HAS told Clyde & Co (“Clydes”), that the money should be paid out to those who needed it most and his firm and the Khorafis Counsel were a priority.

9. In resisting Vannin’s application, the Khorafis relied on a witness statement made by Ms Gayle Hanlon, a partner in HAS, on 4 November 2014. In this statement Ms Hanlon submitted that the court lacked jurisdiction to hear Vannin’s application on the basis that: (i) the RLFA contained an English jurisdiction clause; (ii) Vannin’s recourse, if any, was arbitration proceedings pursuant to an arbitration agreement contained in Clause 17.1 of the RLFA and no such proceedings had been initiated; and (iii) in any event, no arbitration proceedings could be started by Vannin since the parties had not considered mediation which, under Clause 17.1.3 of the RLFA, was a pre-condition to the right to bring such proceedings.

10. Clauses 17.1 and 17.3 of the RLFA provide:

“17.1 If there is a dispute between the Parties as to how this [Amended LFA] should be applied, then subject to the right of any person to ask the court to resolve the matter, the following procedure will apply:

17.1.2 ….

17.1.3 Quantum or principle (final): If the dispute relates solely to amounts payable under this [Amended LFA] which are final payments, then the parties are required to consider mediation. If that does not work, then the parties will be at liberty to have the matter decided by arbitration pursuant to the DIFC-LCIA Arbitration rules. The arbitrator’s decision shall be final and legally binding and judgment may be entered thereon.”

11. KBH also applied to the court for a protective order. The return date for both applications was 6 November 2006. On 4 November 2014, the Khorafis issued a cross-application supported by the aforesaid witness statement made by Ms Hanlon seeking an order that the court had no jurisdiction to determine Vannin’s application. The following day, 5 November 2014, Vannin initiated arbitration proceedings (D-L-14045) claiming an entitlement to be paid the sums due under Clause 10.1 of the RLFA and enforcement of its right to security under Clause 31.

12. At the hearing on 6 November 2014, Mr Reed QC for Vannin argued that it had a good arguable case that it was entitled to immediate payment of the sums due in respect of the Distributed Fund and the Funding Premium out of the recovered sums and that there was a real risk that those sums would be dissipated by the Khorafis.

13. Ms Hanlon for the Khorafis told the judge that her clients had had insufficient time to mount a substantive defence and were not even ready to proceed with their jurisdiction challenge. She sought to reserve the right to serve further evidence and submitted that the Khorafis had not threatened to breach the RLFA. On the contrary, she stressed that her clients did not challenge the validity of the RLFA. All they insisted on was the opportunity to scrutinize KBH’s costs before making any payment to that firm. She also told the court that HAS objected to the awarded sums being paid into an account held by a Western law firm because of a risk of co-mingling of monies. HAS had tried to negotiate the establishment of an escrow account with Emirates NBD but these attempts had failed. Her clients would not object to the awarded sums being held by a DFSA financial institution.

14. At the conclusion of submissions, H.E. Justice Omar Al Muhairi observed before rising for 10 minutes that there was a miscommunication between the parties and wondered if there was any hope of agreement before the court issued an order. During the ensuing adjournment the parties (including KBH) agreed that the awarded sums should be paid into court but there was no agreement as to the costs of Vannin’s application nor to the final wording of the order. Faced with continuing differences as to costs and the wording of the order, H.E. Justice Al Muhairi proceeded to order that: (i) the time for service would be abridged; (ii) the awarded sums should be paid into court; (iii) the parties should submit written submissions on all outstanding matters which would be dealt with on paper.

15. In his formal order issued on 10 November 2014, H.E. Justice Omar Al Muhairi ordered that the awarded sums should be paid into court by 11 November 2014 “to be held until further Order of the Court as to whom and in what amount payments shall be made, such an order to be in the form of an order made by consent of [Vannin, the Khorafis and KBH] as parties to an Amended Restated Litigation Funding Agreement dated 21 April 2013 and/or (in so far as it relates to the respective entitlements of [Vannin, the Khorafis and KBH] pursuant to an order of any competent court and/or an arbitration award.”

16. H.E. Justice Omar Al Muhairi also ordered that the Khorafis were to file their evidence in support of their jurisdiction challenge by 13 November 2014. In purported compliance with this direction, the Khorafis served on that date a Statement of Defence to Vannin’s Part 8 Claim together with a second witness statement of Ms Hanlon that not only dealt with the jurisdiction challenge but also responded on the merits of Vannin’s claim. When this approach to the evidence was challenged by Clydes, Ms Hanlon maintained that it was clear from the transcript of the 6 November 2014 hearing that the judge had intended to allow the Khorafis to serve further evidence of the substantive merits of Vannin’s claim. However, in a judgment dated 18 February 2015, H.E. Justice Omar Al Muhairi dismissed the Khorafis’ jurisdiction challenge and in so doing made no reference to Ms Hanlon’s evidence or the Statement of Defence. The irresistible inference must be that H.E. Justice Omar Al Muhairi thought that this part of Ms Hanlon’s evidence and submissions was inadmissible both to the question of jurisdiction and as to the appropriateness of his order dated 10 November 2014.

The Khorafi/KBH consent order made on 9 February 2015

17. On 27 October 2014, the Khorafis started an action (CFI-035-2014) against KBH for production of the files maintained by KBH in the main action and for a declaration that a lien KBH were exercising over the files pending payment of overdue fees was invalid.

18. On 9 February 2015, KBH and the Khorafis were parties to a consent order under which: (1) the Khorafis accepted that they were liable to pay KBH USD 4,000,000 by way of fees, USD 948,593 by way of third party disbursements and USD 60,114 by of KBH’s disbursements; and (2) USD 2,000,000 out of the USD 4,000,000, plus the USD 948,593 disbursements were to be paid out of the awarded sums held by the court.

19. It is to be noted that under the consent order KBH was to receive more from the awarded sum than it is entitled to pursuant to the waterfall clause (Clause7) in the RLFA.

The orders made by Justice Roger Giles on 3 February and 5 April 2015.

20. On 3 February 2015, Justice Roger Giles sitting as a single member of the Court of Appeal gave the Sarasin parties permission to appeal DCJ Chadwick’s judgment of 21 August, subject to determination of whether the grant of permission should be conditional on payment intoCourt of any judgment sum(s) and costs ordered to be paid at first instance.

21. On 5 April 2015, Justice Roger Giles ordered Bank Sarasin & Co Ltd to pay intoCourt any further sums ordered to be paid by it by way of compensation to the Claimants or as costs under the judgment or judgments in the main action currently under appeal or subsequently appealed pending final determination of such appeals subject to credit for any sums paid by the First Defendant in respect of the same liability.

The first Khorafi application issued on 9 June 2015 and heard by H.E. Justice Ali Al Madhani on 29 July 2015.

22. The first Khorafi application heard by H.E. Justice Ali Al Madhani (hereinafter “the judge”) on 29 July 2015 was for an order varying the order made on 10 December 2014 so that: (i) USD 9,455,930.00 out of the total sum of USD 11,445,049 paid into Court under the earlier order be now paid out to the Khorafis and their lawyers, HAS; (ii) USD 2,000,000.00 be held in Court (at the discretion of the Court) representing the first tranche payment due to KBH under the consent order dated 9 February 2015; and (iii) only insofar as any further damages are awarded against and paid by Bank Sarasin should such further sums be held in Court as security for the claims of Vannin and KBH.

23. The application was supported by a witness statement made by Mr Mohammed Nour Abdullah Mohammed Nour who is employed by the first applicant (“Mr Khorafi”) as an Office Manager and Advisor.

24. The Khorafis argued that they were making an interim application to which RDC 25.6 and 25.7 applied and that it was in the interests of justice that the order sought should be granted. Even assuming that the RLFA was valid and binding (an assumption the Khorafis disputed in a later part of their argument, see below) it was submitted that it was in the interests of justice that the application be granted because Mr Khorafi had incurred unpaid debts totaling USD 2,414,767.00 in pursuing the claims in the main action and was unable to fund resisting the Sarasin parties’ upcoming appeal out of the cash flow available to him. In particular, the Khorafis were unable to pay the fees agreed with counsel for the appeal (USD 425,835) without jeopardizing the cash-flow arrangements Mr. Al Khorafi had in place to allow him to continue making payments in the long term. If the first application were not granted, the appeal on liability then due to be heard in late September 2015 would have to be adjourned. In the meantime, the Khorafis’ counsel were insisting on being paid the fees due to them before they resumed work on preparing for the liability appeal.

25. The Khorafis also contended that the reason lying behind the interim payment of their costs ordered by DCJ Chadwick – to reduce the time a party awarded costs is kept out of his money – applied equally to the awarded sums held in court. Further, there was no need for the Khorafis to give a cross-undertaking in damages because if the Khorafis lost the liability appeal, Vannin would have no entitlement to any payment under the RLFA and if they won the appeal far more money by way of damages and costs would be awarded after the quantum hearings than would be needed to pay Vannin the USD 9.9 million to which they were laying claim.

26. In the alternative, the Khorafis submitted that: (1) the original Legal Funding Agreement dated 12 January 2012 (“the LFA”) had been wrongfully repudiated by Vannin by a notice dated 27 March 2013, which repudiatory breach was accepted by the Khorafis; and (2) they were entitled to rescind the RLFA or otherwise set it aside on the grounds that:

 (a) The wrongful repudiation of the LFA, and subsequent conduct of Vannin was intended to force the Khorafis to enter into the RLFA in circumstances of economic duress;

(b) The consent of the Khorafis to the RLFA was not informed consent;

(c) Essential terms of the RLFA are unlawful and evidence deceit, or other unlawful conduct by Vannin;

(d) Vannin has not acted in good faith in the performance of the RLFA.

(e) No Independent Legal Advice had been provided in respect of the RLFA.

27. These alternative submissions were made by reference principally to a Draft Statement of Case (“the DSoC”) intended to be filed in accordance with RDC 25.7 (3) and also, to a lesser extent, by reference to Mr Noor’s witness statement. In other words, the Khorafis were intending to exercise the option conferred by Clause 17 (1) of the RLFA of having the court decide its claim that the RLFA was void and unenforceable rather than simply referring this claim to arbitration, notwithstanding that they also intended to plead the averments and contentions made in the DSoC in the arbitration by way of a Defence and Counterclaim.

28. In their submissions the Khorafis noted that Vannin was entitled to terminate the original Legal Funding Agreement dated 12 January 2012 (“the LFA”) on 14 days’ notice pursuant to Clause 27.3.1 thereof if there had been a material change in circumstances such that there was a significant change in merits of the Claim as determined by a written legal opinion from an independent Queen’s Counsel stating the prospects of success of the liability Claim to be less than 50%.

29. In the DSoC it was alleged that on 6 March 2013 Vannin confirmed the budget allocation down to trial in the amount of USD 3,902,900.00, but from about 11 March 2013 Vannin refused to pay sums due under the budget plan. And it was on that date that Vannin instructed Mr. Jeremy Cousins QC to provide an opinion as to the prospects of success of the Khorafis’ claim.

30. Cousins’s opinion was produced on or about 20 March 2013 to which he added a Further Note dated 22 March 2013. In Mr. Cousins’s view, the Khorafis case on misrepresentations had no more than a 35% chance of success and their claim on the balance of the liability issues had no more than a 40% chance.

31. On 27 March 2013 Vannin gave formal notice of termination of the LFA.

32. On 4 April 2013 negotiations for an amended LFA began between Vannin, the Khorafis and KBH which culminated in the execution of the RLFA on 24 April 2013. Under that agreement, Vannin was to continue funding the litigation but was free to reduce its ongoing contribution from USD 1,659,550.20 to USD 600,000; and if it contributed further funds or the Khorafis failed to pay on the due date their agreed contributions (including USD 350,000 in two instalments), Vannin was entitled to a 500% uplift.

33. The Khorafis alleged in the DSoC that Mr. Cousins’s opinion was not such as to confer a right on Vannin to terminate the LFA for a number of reasons including: (i) Mr. Cousins was not independent of Vannin but had a close personal, professional and financial relationship with a Mr. Rowles Davies who was employed by Vannin; (ii) Mr. Cousins took direction from Mr. Rowles Davies as to the scope of what he was to do; (iii) Mr. Cousins’s opinion was wrong in fact and in Law, irrational, unreasonable and reckless and took into account irrelevant considerations.

34. The Khorafis further contended in the DSoC that: (i) Vannin’s refusal to pay invoices from 6 March 2013 was unlawful, arbitrary and capricious and constituted illegitimate pressure at a critical time in the proceeding in that at the same time (4 April 2013) as Vannin was proposing revised terms for the LFA under which it would continue to provide funds, Vannin was continuing to refuse to pay sums due under the LFA which left the Khorafis with no other practical choice than to accept the restated terms provided by Vannin in the RLFA; (ii) the terms of the RLFA were capricious, unconscionable, unfair and punitive and reflected the unequal bargaining power between the parties; (iii) Clause 3.38 of the RLFA (which provided for the “protected success fee”) breached the terms of the English Conditional Fee Agreements Order 2013 and was otherwise unlawful; (iv) between 4 and 21 April 2013 Vannin made material misrepresentations, the dominant purpose of which was to induce the Khorafis to enter into the RLFA; (v) the overall effect of the RLFA, and the Conditional Fee Agreement made between the Khorafis and KBH dated 4 April 2010 was that, for every USD 1.00 spent, the Khorafis were required to repay USD 5.00, plus a margin of USD 1,750,000.00 in undisclosed fees to KBH, yet the Khorafis received no independent advice on these agreements as Vannin knew or ought to have known.

35. The Khorafis further “pleaded” in the DSoC that they had the following causes of action in contract against Vannin: (i) breach of the obligation of good faith; (ii) repudiatory breach of the LFA in seeking an opinion from a QC as to the prospects of success in the main action when there had been no material change in circumstances; (iii) breach of the LFA in failing to ensure that the QC sought to provide an opinion on the prospects of success in the main claim was independent; (iv) breach of the LFA in that Mr Cousins’ opinion was misdirected, wrong in fact and in law, irrational and unreasonable and Vannin’s instructions to him and its use of his opinion was dishonest; (v) breach by Vannin of an essential term of the LFA by refusing to pay all accounts approved under the Budget Plan, or otherwise as reasonable when they fell due; (vi) rescission of the RLFA on the ground that it was executed by the Khorafis under economic duress caused by the actions of Vannin which were deliberate, contumelious and egregious; (vii) Vannin acted in breach of the LFA in that it encouraged, suggested, persuaded, aided, assisted, or abetted KBH to insert Clauses 3.37 and 3.38 into the RLFA and to enter into a contingency fee which is not allowed under the DIFC Mandatory Code of Practice; (viii) a claim for rescission and damages for misrepresentation of the nature and effect of the RFLA; (ix) a claim for rescission of the RFLA by reason of Vannin’s failure to require the Khorafis to obtain proper, independent advice as to that agreement.

The second and third Khorafi applications issued on 9 June 2015 and heard by the judge on 29 July 2015.

36. By their second and third applications, the Khorafis sought a stay of the arbitration proceedings begun by Vannin on 5 November 2014 or a declaration that the arbitral tribunal lacked jurisdiction to determine the reference served by Vannin on the grounds respectively that the right to have the dispute as to payment out of the awarded sums determined by arbitration had not accrued at the date Vannin served its Request for Arbitration.

37. Under Clause 10.1 of the RLFA, on the Khorafis “winning”, Vannin was entitled to the immediate payment of the “Distributed Fund” and the “Funding Premium”. Under Clause 3.48, a Win is defined as:

“A Win will mean that any part of the claim is Concluded in the [Khorafis’] favour in that the [Khorafis] are … able to recover damages from the Opponents, or the [Khorafis are] … awarded any other remedy which is of value; if it is sufficiently significant, an award of Costs may be regarded as a Win.”

38. “Concluded” is defined as:

“Concluded” means the Claim (or relevant part of it) has been won or Lost, and that: if the Claim (or where appropriate, part of it) has been Won, the Opponent …Has Lost any appeal.”

39. In the second application, the Khorafis submitted that a Claim has not been Won until the Opponent has Lost an Appeal and thus Vannin had no accrued entitlement to use the Clause 17 arbitration machinery when it served its Request for Arbitration. That Request was therefore premature and accordingly the tribunal had no jurisdiction to decide Vannin’s reference.

40. In the third application, it was submitted that the pre-condition in Clause 17.3 that the parties had considered mediation and this had not worked had not been satisfied and thus, for this reason too, Vannin’s Request for Arbitration was premature and the tribunal had no jurisdiction to determine Vannin’s reference.

Vannin’s cross-application issued on 11 June 2015

41. On 11 June 2015, Vannin issued a cross-application seeking: (i) service of the Khorafis’ first application in redacted form on the Sarasin parties; and (ii) dismissal of the Khorafis’ second and third applications on the ground that the court did not have jurisdiction to grant the relief sought.

42. This cross-application was heard by the judge on 29 July 2015 at the same time as he heard the Khorafis’ applications.

Vannin’s case resisting the Khorafi applications

43. Briefly put, Vannin’s case in answer to the first application was that properly analysed it was an application based on financial need, in particular the need to pay debts already incurred in prosecuting the main action especially Counsels’ fees. It was incumbent on the applicants to show that there had been a significant change in circumstances since the order made on 10 November 2014, and this they had failed to establish. Financial need had featured in the application heard on 6 November 2014 when the future legal costs were all too predictable. Moreover, there was no evidence that the Khorafis lacked the resources to pay the debts they faced. On the contrary, Mr Nour made it plain in his witness statement that Mr Khorafi had the means to pay the debts even if the Khorafis lost the liability appeal. The only subsequent developments were the orders of Justice Giles giving the Khorafis permission to appeal and making that permission conditional on payment into court of all future recoveries, both of which were highly likely events when Vannin’s preservation application was heard on 6 November 2014.

44. The contentions made in the DSoC that the RLFA agreement was void and/or rescindable were available to the Khorafis first time round, at least in the sense that they could have applied for an adjournment to consider the enforceability of the RLFA and to contend thereafter that no debt at all was owed to Vannin under the RLFA. Further, it would only be if the court were to uphold the contentions in the DSoC that the Khorafis would establish an entitlement to have paid to them all the monies in court and it was inconceivable that the court could try those contentions in the context of the first application. At their highest, the contentions could only be regarded as arguable, and that was not enough for the first application to succeed. In any event, the Khorafis ought not to be allowed to deploy the DSoC what with it being unsigned and lacking a statement of truth. This was not a case where the urgency of the situation justified reference to a draft pleading: the applicants had had plenty of time to produce and serve a Statement of Case in proper form.

45. As to the second and third applications, Vannin submitted that the court lacked jurisdiction to determine the same. Arbitration proceedings were under way following Vannin’s Request for Arbitration dated 5 November 2014 and, under the law of the DIFC, it was for the arbitral tribunal alone to determine whether it had jurisdiction to determine the reference.

H.E. Justice Ali Al Madhani’s decision dated 28 January 2016

The first Khorafi application

46. In paragraph 16 of his judgment, the judge found that the DSoC was not relevant to the first application. It was unsigned and contained no statement of truth. Why it was being submitted was not clear to anyone; it did not deal with the application at hand and had no reference to it; nor did it put forth any grounds or reasoning as to why the Khorafis were entitled to the remedy they were seeking in the first application.

47. Relying on RDC 2.10 (3), the judge adopted in paragraph 43 of his judgment the approach of the CPR and the English Courts to applications to vary interim orders. Thus he observed that the rule in Henderson v Henderson [1843] 3 Hare 100; 67 ER 313 applies so that a party cannot make repeated successive applications where the grounds relied upon in the later applications existed and were available at the time of the application, and still less when those grounds were relied upon, but were rejected by the court.

48. The judge also: (i) adopted in paragraph 44 the view of the English High Court in Lloyds Investment (Scandinavia) v Ager-Hanssen [2003] 3 All ER (D) 258 that the Court’s general jurisdiction under CPR 3.1(7) should not be used to vary its orders for the purpose of enabling a party to re-argue any application, relying on submissions and evidence available to them at the time of the earlier hearing; and (ii) in paragraph 45 quoted with approval the following well-known passage from the judgment of Buckley LJ in Chanel v Woolworth & Co [1981] 1 WLR 485 at 492H-493A:

“Even in interlocutory matters, a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.”

49. In paragraphs 46 and 47, the judge said:

“46. One cannot imagine that parties may be allowed to continue fighting over the same issues surrounding an order without end. The judicial orders must provide stability and some sort of finality to the issues between the parties even if the issue is not on the merits of the case.

47. Deciding otherwise could lead to endless appeals on the varying of orders where the losing party would drag the application before a court for long periods that would defeat the court’s objectives to deal with cases justly, fairly and in a reasonable period.”

50. The judge then considered whether there had indeed been a material change of circumstances since the order of 10 November 2014 and concluded that the answer to this question was no. The updated financial information supplied in Mr. Nour’s witness statement was not a new material circumstance since the expense of the litigation and its ongoing cost were a matter available at the hearing on 6 November 2014. The only change was that permission to appeal had been granted but this and the costs associated therewith had been anticipated at the earlier hearing.

51. In paragraph 50, the judge concluded:

“Having established that the Khorafis have put forward no material change of circumstances or events since the Preservation Order was granted, this Court sees no ground on which it can revisit the Order.”

The second Khorafi application.

52. The judge held that the court had no jurisdiction to determine whether the claim referred by Vannin to arbitration was in respect of a “final” payment and therefore within the reach of Clause 17.3 of the RLFA. In reaching this conclusion, the judge cited Articles 10 (1) and 23 (1) of the DIFC Arbitration Law:

10 (1) In matters governed by this Law, no DIFC Court shall intervene except to the extent so provided in this Law.

13 (1) If an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperative or incapable of being performed.

13(2) Where an action referred to in paragraph (1) of this Article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the DIFC Court.

23 (1) The Arbitral Tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the Arbitration Agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the Arbitral Tribunal that the contract is null and void shall not by itself determine the invalidity of the arbitration clause.

53. In paragraph 94, the judge found that since the Khorafis had not sought to establish that Clause 17.3 was null and void, inoperative or incapable of being performed, the second and third applications must fail.

54. In paragraphs 95, 96 and 97 he said:

95. The further question in the Second Application is whether Vannin’s immediate right to payment arises under Clause 10.1 of the Agreement.

96. It is beyond doubt that what the Khorafis are trying to do in their Second Application is to ask this Court to step on the selected Arbitral Trinbunal’s toes by looking at the merits of the case referred to arbitration and interpreting the agreement, then to conclude that the arbitral tribunal has no jurisdiction.

97. Even if the Khorafis manage to establish before this Court that there is still no “win” to justify Vannin’s claim, which has nothing to do with the Arbitration Clause in any event, the request put forward still must be seen as requiring the Court to cross the jurisdiction of another selected forum. The Court is restrained from doing so by Article 13 (1) of the DIFC Arbitration Law, and this request is denied.

The third application

55. As recorded in paragraph 53 above, the judge decided in paragraph 94 of his judgment that the third application must fail as well as the second application because in neither were the Khorafis seeking to establish that Clause 17.3 was null and void, inoperative or incapable of being performed.

56. In paragraph 99, the judge said that he could see that mediation as a pre-condition is something to do with the validity of the Arbitration Clause itself, unlike the argument in the second application that related to the meaning of the word “win” in the body of the RLFA. However, relying on paragraphs 18.13 and 18.14 in Joseph Jurisdiction and Arbitration Agreements and their Enforcement,[1] he went to hold that the Court must not construe an ADR or mediation provision in an arbitration clause but should instead ask if there is in existence an arbitration agreement within the meaning of the relevant legislation.

57. In the view of the judge, the decision of Mr. Justice Colman in Cable & Wireless PLC v IBM UK Ltd [2003] 1 BLR 89 cited by the Khorafis was distinguishable because it was not there suggested that the English court lacked jurisdiction to determine the effect the ADR provision in question. (I would add that the English court had jurisdiction because the ADR provision was not contained in an arbitration clause but was part of a scheme identifying what steps the parties had to take before judicial proceedings could be started).

58. The judge also criticised the Khorafis’ reliance on paragraph 18.03[2] of Joseph’s work without drawing the Court’s attention to paragraphs 18.13 and 18.14.

59. The judge then went on to agree with Vannin’s submission that the effect of the mediation provision could be left over to be dealt with if the winning party sought recognition of the award under Article 44.1.a (iii) of the DIFC Arbitration Law.

The substance of the Khorafis’ proposed grounds of appeal.

The first application

Ground 1.

60. The judge erred in holding that RDC 4.7 and CPR 3.1(7) restricted the Court’s discretion in respect of the first application. Instead, the judge should have treated the first application as if it were pursuant to a “liberty to apply” under the 6 November 2014 order and should have found that it was in the interests of justice to amend the original order as sought with Vannin still having a protected right on the basis that the Khorafis had a good arguable case and a pressing need.

Ground 2.

61. RDC 4.7 and CPR 3.1(7) only apply to subsequent or successive applications seeking the same or substantially the same relief and the Khorafis had not sought the same relief as requested in the first application dated 9 June 2015 on any previous occasion. The judge did not, in fact, identify any previous application made by the Khorafis, but only arguments which were “available to them to put forth” at 6 November 2014.

Ground 3.

62. The judge wrongly considered that assertions made outside of court proceedings in correspondence and a file note(s) in respect of a further funding agreement constituted “a previous application” or should be considered as such. The right of the Khorafis to use the Fund in the manner set out in the Application dated 9 June 2015 was not adjudicated on by the 6 November 2014 Order.

Ground 4.

63. Even if RDC 4.7 and CPR 3.1(7) governed the first application, the proper application of those Rules should nevertheless had led to the finding that the Court did have jurisdiction to consider the first application, as it involved material changes in circumstance. In any event, it was appropriate to consider the first application, as the circumstances of the 6 November 2014 hearing did not allow the Khorafis to present their arguments properly, or at all.

Ground 5.

64. The judge erred in failing to consider evidence of a good arguable case. The Khorafis’ application was ancillary in nature and required a substantive claim to be produced, even if in draft. RDC 25.6(1), RDC 25.7(2)(b) and RDC 25.7(3) [para 17] provide for the use of a draft document. The use of a DSoC was appropriate, and in accordance with the DIFC Courts’ overriding objectives, where there were arbitration proceedings afoot and the judge ought to have considered both it and the witness statement of Mohammed Nour dated 9 June 2015. In particular, the judge should have found that the Khorafis had a good arguable case in the (intended) substantive claim on the basis of the matters and contentions pleaded in the DSoC.

Ground 6.

65. The order dated 6 November 2014 ought now be set aside in its entirety (albeit with a provision that provides security for Vannin’s claim and payments sought in the first application) as the order was an injunction, or in the nature of an injunction, which was granted in the absence of any undertaking for damages being given by Vannin due to default by Vannin who were obliged to furnish an undertaking. The fact that this is a new point not taken either on 6 November 2014 or 29 July 2015 should not prevent it being taken since it is a “knock out” point and arises out of a procedural default on the part of Vannin at the 6 November 2014 hearing.

The second and third applications.

Ground 7.

66. The judge wrongly held that the court had no jurisdiction to grant the relief sought in the second and third applications. Instead, the judge should have held that the court had jurisdiction pursuant to Article 5 of Dubai Law No.12 of 2004 (as amended by Dubai Law No. 16 of 2011) which confers on the DIFC Courts the unlimited powers of a Court of Higher Record necessary for the administration of justice and to prevent abuses of process. Article 13 of the DIFC Arbitration law deals with the “usual” position where court proceedings are sought to be stayed in favour of an arbitration. The second and third applications were not in breach of any underlying commitment to arbitrate but rather, were supportive of the commitment to arbitrate in seeking to prevent an arbitration commenced in breach of Clause 17.1.3 of the RLFA. Any reference to arbitration which pre‐empts essential contractual pre‐conditions is a matter for the courts to determine, not by arbitration.

Ground 8.

67. The judge erred in refusing to consider whether there was a dispute over a “final” payment within the meaning of Clause 17.3. As a matter of fact and law, Vannin’s claim for payment was not “concluded” at the time of the making of the Arbitration Claim on 5 November 2014 and thus Vannin had no right to refer its “claim” to arbitration under Clause 17.3.

Ground 9.

68. The judge erred in not finding that the court did not have jurisdiction to determine whether the mediation pre-condition in Clause 17.3 had been complied with. Art 44.1(a)(iii) of the DIFC Arbitration Law 1998 cannot later resolve any complaint that the Khorafis had as to Vannin’s failure to satisfy the pre-condition.

69. What the judge should have done was to find that the court did have jurisdiction to decide this issue and then gone on to find that: (i) the pre-condition required a joint temporal consideration of mediation which “[did] not work”; and (ii) there had been no so such joint temporal consideration of mediation so that the pre-condition had not been satisfied. Misleading information had been given by Vannin to the Acting Registrar of the DIFC‐LCIA by letter dated 20 on the question of mediation.

All three applications

Ground 10.

70. The lead-up to the hearing on 29 July 2015; the hearing itself; and the delay in delivering the judgment, were all characterized by procedural unfairness to such a degree that the outcome of the case was prejudicially affected. The case attracted a multiplicity of issues which could have been resolved by the Court prior to the hearing: viz (i) whether service had been effected; (ii) the appropriate allocation of hearing time; (iii) the involvement of the Sarasin parties and their attempts to obtain a de‐facto stay; (iv) the extent to which the substantive issues in the draft DSoC needed to be considered; (v) applicable law; (vi) privacy of the Arbitral Provisions; and (vii) redaction of documents ordered to be served on Sarasin parties.

71. Despite being directed to file a Defence by 8 July 2015, Vannin did not plead a substantive Defence, other than as to the meaning of “Final Payment” and to rely generally on the DIFC Arbitration Law 2008. In particular, Vannin did not plead the point that they succeeded on in respect of the first application (see Grounds 1‐4 above) until the filing of its Skeleton at 2.08 p.m. on 28 July 2015, the day before the hearing.

Discussion and decision

72. Pursuant to RDC 44.8, permission to appeal may be given only where:

(1) the Court considers that the appeal would have a real prospect of success; or

(2) there is some other compelling reason why the appeal should be heard.

73. A “real prospect of success” means a “realistic” as opposed to a “fanciful” prospect of success, see Swain v Hillman [2001] 1 All ER 91, followed and applied in Khorafi et al v Bank Sarasin-Alpen (ME) Limited (CFI-026-2009) and DNB Bank ASA v (1) Gulf Eyadah Corporation; and (2) Gulf Navigation Holding PJSC (9 September 2015) CFI-043-2014.

Grounds 1-5

74. In my judgment none of these grounds has a real prospect of success on appeal. The judge’s adoption of the hostile approach found in the CPR and decisions of the English High Court and Court of Appeal such as Chanel v Woolworth & Co (above); Lloyds Investment (Scandinavia) v Ager-Hanssen; Tibbles v SIG plc [2012] 1 WLR 2591) to interlocutory applications seeking to vary or discharge interim orders on the basis of matters or evidence that were raised or adverted to or could have been raised or adverted to at earlier hearings is unassailable. Further, this approach clearly applies whenever the applicant seeking a variation or discharge of the earlier order was a party to the proceeding in which the earlier order was made and however the later application is made, whether by a free-standing application within the original proceeding, or under a liberty to apply, or, as in the instant case, under a free-standing application made ancillary to a substantive claim.

75. Leaving aside for the moment his approach to the DSoC, I am also of the view that the judge’s finding that the first application did not rest on any material change of circumstances or contention that had not been available within the hearing held on 6 November 2014 is beyond successful challenge. True it is that the Khorafis’ liabilities for costs in the main action had increased in the period 6 November 2014 to 29 July 2015 and that at this later date the Khorafis’ counsel were refusing to prepare for the liability appeal unless they were paid the fees due to them, but financial difficulties due to shortage of cash flow rather than lack of assets had figured in the earlier hearing and it was plainly envisaged that further costs would be incurred for the quantum hearings and if there were an appeal on liability. Moreover, the evidence at the first hearing and at the later hearing was that Mr Khorafi owned valuable assets and was in a position to pay the legal fees incurred in the main action and the sums payable under the RFLA, even if the Khorafis lost the liability appeal. And the fact that some of this evidence may have emerged from the negotiations on further funding following the termination of the LFA is nothing to the point (Ground 3).

76. Further, as found by the judge, the subsequent grant of permission to appeal to the Sarasin parties by Justice Roger Giles was not a material change of circumstance since there was at the time of the first hearing a strong likelihood that the Sarasin parties would be granted permission to appeal Chadwick DCJ’s liability findings. As for the order made by Justice Giles on 5 April 2015 ordering the Sarasin parties to pay into court pending the determination of their appeals any further sums awarded by the Court of First Instance, that was not a material change of circumstance as is borne out by the fact that the order sought by the Khorafis expressly provided that it was to be “read together with, and in any event subject to, the Order of Justice Roger Giles made in CFI-026-2015 and dated 5 April 2015.”

77. Turning to the judge’s approach to the DSoC, I think that it is reasonably arguable that he ought not to have dismissed this document out of hand as he did in paragraph 16 of his judgment. All or almost all of the many causes of action pleaded in it were based on serious allegations of improper conduct on the part of Vannin, allegations that ought only to have been made in a pleading endorsed with a statement of truth and signed by the pleader after having concluded that there was a proper basis for making the allegations. At the end of the DSoC appeared the electronic signature of the Khorafis’ counsel, Mr. Roger Bowden, who told the judge it was he who drafted the pleading. The pleading was not endorsed with a statement of truth as it ought to have been and there appeared to be no justification for not having filed and served the pleading prior to the hearing. However, Mr. Noor had quite a lot to say in paragraphs 28 – 50 of his witness statement about the allegations the DSoC contained.

“28. As stated, I was involved with this case from the beginning and was the only point of contact between Mr. Al Khorafi and Vannin and KBH during the time period of the renegotiation of the Litigation Funding Agreement which I would term as being between 11 March 2013 and 25 April 2013 when we paid the second payment of USD 225,000.00 to KBH.

29. I have been involved in the preparation of the Affirmative Defence and Counterclaim in D-L-14045 which sets out in detail the allegations that the Al Khorafi parties make, and which forms the basis of the draft Statement of Case. Indeed, the material which informs the claim came principally from me.

30. I have had substantial telephone and email correspondence with HAS over the last month as the document was prepared, as well as a three hour meeting in May 2015, together with a further three hour final attendance on Thursday 4 June 2015 where I went through the document in considerable detail. In addition, Mr. Al Khorafi met with HAS staff for three hours to discuss the arbitration defence and this intended application. I attended that meeting as well. To the best of my knowledge, the statements contained in the Statement of Case, are correct and reflect what actually happened.

31. Annexed to this witness statement and marked with the letter “A” is a number of emails which were exchanged, variously between KBH, Vannin and myself. The first emails date from 3 January 2012 but the bulk emanate from March and April 2013.

32. It is obvious from the emails that there were a number of discussions directly between KBH and Vannin, to which I was not a party, and which are not included in Annexure “A”.”

33. The first email annexed is from 3 January 2012 and dealt with the consequences of entering into the LFA dated 12 January 2012. I accept that we were given appropriate legal advice at that time although it does need to be said that the legal advice was received from lawyers who stood to benefit from the Agreement.

34. Later emails in from October 2012 to January 2013 deal with Eversheds LLP requests for payment after their retainer was terminated. We believed that it was a matter for KBH and Eversheds to resolve in terms of the fee sharing agreement which they had. In any event it was not a matter of such moment that it should have affected the operation of the LFA and certainly did not affect the prospects of success for the Claim.

35. The simple point was that Vannin was only required to pay for items set out in the budget, or which were otherwise reasonable, and Eversheds account was not in the budget.

36. I do not believe that we were initially advised of the review by Mr. Cousins QC. The first notification we had of it was Tuesday 26 March 2013 followed by formal notification on 27 March 2013. The fact that the Vannin were withdrawing funding came as a total shock. I spoke to the late Mr. Kaashif Basit about it. I specifically asked if we had lost the 13 January 2013 Pre Trial Case Management Conference. Mr. Basit said that we had not and seemed as surprised as we were.

37. Following the Notice of Termination, matters moved at a very fast pace. Mr. Basit attempted to make Vannin pay outstanding accounts but Vannin refused. Accounts which had already been delayed for months, became urgent. Our Counsels’ retainer was cancelled. Vannin terminated the LFA and the KBH terminated their retainer as well.

38. We were not kept well informed and there was very little that we could do. By 4 April 2013, it seemed that all was lost.

39. Almost as quickly, the case was back on again.

40. Whereas before Vannin had indicated that there was little chance of success, they were next enthusiastically telling us that we could all share in the damages.

41. New conditions were proposed, but the effect of the new terms was not explained to us.

42. KBH never explained the agreement to us. KBH, in fact became very difficult and uncommunicative. Mr. Basit was ill at the time with an illness that led to his unfortunate passing. I was, however, in frequent contact with him at the time and the proposed RLFA was the topic of conversation. The conversations were not about how the RLFA would affect us, but what we could do to comply with Vannin’s demands, or what we could do if they did not comply with the terms of the RLFA. We had to ask for the RLFA ourselves and only received it on 21 April 2013. That is despite the fact that KBH had received it from Vannin on 9 April 2013. We read it ourselves and in circumstances of great urgency. It is not an easy document to read at any time.

43. The urgency was brought about by the requirement to make 2 payments:

a. The first installment of USD 125,000.00 was required to be paid, on 2 days’ notice, and prior to the RLFA even being agreed (we simply paid in faith); and

b. The second installment was required to be paid by 25 April 2013 which was one day after the RLFA was signed by KBH. This payment date was progressively moved from 5 May 2013, to 30 April 2013 and then to 25 April 2013, again with very little notice.

44. In addition, we were informed of a new provision, that if we did not pay the monies exactly on time we would face a 500% uplift or 6 times Vannin’s investment.

45. Not set out in the RLFA, was an additional requirement that we pay Counsel USD 130,000.00 so they could keep working. I now know that these charges were occasioned by Vannin’s delay. We achieved all of this but it took all our time and severely strained Mr. Al Khorafi’s resources at a time when he was being aggressively pursued by Bank Sarasin and ABK Bank.

46. We did, around 16-17 April 2013, approach HSBC in London for funding through an additional mortgage on Mr. Al Khorafi’s home. They made promising noises but wanted to have lawyers review the proceeding. We had exactly one month to trial at that time and no room for even a few days delay. In the event, there simply was not time to set up an alternative funding mechanism. We advised the parties that we were looking at alternate funding on 17 April 2013, just to get things moving. The reality was we, had no chance. We took the RLFA, firstly, because we had no idea how bad it was (what we did know was bad enough), and secondly, because whatever it did cost, our losses were going to be so much worse if we did not go to Trial.

47. Throughout this process, the only advice that we received on the RLFA was from Vannin. They told us that KBH were making an investment and they we would all share in the repayment of that investment. I had no idea that the KBH “investment” was in fact a book entry and that they were not making any investment at all, not even a reduction in fees. We had no idea until we saw the explanation of Mr. Singh from KBH in his First Witness Statement in this proceeding and the KBH Revised Statement of Account, as to what the fees were.

48. Even during the preparation of this affidavit, I confess that I have had to seek additional explanation for the USD 500,000.00 investment and the USD 1,250,000.00 margin which was applied to it. I was unable to believe it before I saw each piece of paper for myself. I can categorically state that neither Vannin nor KBH explained anything of the sort. Annexed hereto and marked with the letter “B” is a copy of the 5 November 2014 KBH Statement of Account which sets out the margin to be applied.

49. Vannin also advised, on 17 April 2013, that all the steps taken by Vannin were legitimate. As this advice came from Mr. Rowles-Davies, whom we knew to be an experienced and prominent lawyer, and, as we had no other advice, we were minded to accept it.

50. As stated, I have briefly mentioned, in the context of an application for interim orders, some of the matters which I have personal knowledge of, and which I experienced. I certainly believe, based upon my extensive knowledge of the affairs of Mr. Al Khorafi, my being involved at the time, and a detailed review of the relevant documents, that all of the other allegations in the draft Statement of Case are entirely correct.

78. I also think that it is arguable that the case pleaded out in the DSoC was not a case that was “available” at the hearing on 6 November 2014. At that hearing the Khorafis were at pains to assure the Court that they regarded the RLFA to be a binding agreement under which Vannin was entitled to be paid the sums it was claiming were due to it. They advanced this position before they and their legal team had had an opportunity to consider the legal implications of the manner in which the LFA was terminated and the RLFA put in its place. In this connection, it is notable that Mr. Reed QC for Vannin did not argue that the Khorafis could have advanced the contentions made in the DSoC at the 6 November 2014 hearing. Instead, he submitted that these contentions were “available” to the Khorafis first time round in the sense that they could have applied for an adjournment to consider the enforceability of the RLFA and then have contend thereafter that no debt at all was owed to Vannin. In my judgment, it is reasonably arguable that the Khorafis failure to apply for an adjournment at or shortly after the hearing to consider their legal position quoad Vannin and the fact that they only served the DSoC on 9 June 2015 ought not to mean that they should have been disbarred from advancing the case made in the DSoC at the 29 July 2015 hearing.

79. I also think that it is reasonably arguable that the judge should have found that the Khorafis had a good arguable case based on the contentions pleaded in the DSoC.

80. I must now turn to the final and crucial question that has to be considered, namely whether, if the Khorafis have a good arguable case based on the DSoC, is it arguable that they therefore should be granted their application to amend the original order.

81. In my judgment, the contention that the Khorafis are entitled to have the original order amended because they have a good arguable case that the RLFA is invalid would have virtually no prospect of success in the Court of Appeal. In short, I am entirely satisfied that the Khorafis do not have a real prospect of persuading the Court of Appeal to grant their 9 June 2015 application on the ground that they have a good arguable case that the RLFA is invalid. I say this because I consider it unimaginable that the Court of Appeal would conclude on the available material and without oral evidence that the Khorafis’ case was so strong that Vannin should lose the protection afforded by the original order to their prima contractual right to payment under Clause 10.1. On the contrary, it is virtually certain in my view that the Court of Appeal would conclude that justice requires that all the money now in court should remain there until further order.

82. I would add that, even if it were arguable that the judge erred in holding that the updated financial position of the Khorafis as at 9 July 2015 and their difficulty in paying the fees due to their Counsel constituted did not constitute a material change of circumstances, I would not grant leave to appeal on this point for the same reason I decline to grant permission to argue that the judge erred in failing to conclude that the Khorafis had a good arguable case that the RLFA was invalid. As I have said, at the end of the day, the Court of Appeal would almost certainly uphold the original order.

83. Accordingly, I conclude that all of Grounds 1 – 5 have no prospect of success in the Court of Appeal; nor is there some other compelling reason why there should be an appeal based on these grounds. Accordingly, I decline to grant the Khorafis permission to advance these grounds on appeal.

Ground 6

84. In my opinion, this ground of appeal would be bound to fail and there is no compelling reason why it should be argued before the Court of Appeal.

85. The hearing on 6 November 2014 was not an ex parte but an inter partes hearing at which the Khorafis were represented by Ms Hanlon who addressed the court at some length. This being the case, it was not for Vannin to raise the question of a cross-undertaking in damages. Rather, if the point was going to be taken, it should have been taken by Ms Hanlon either during the hearing itself or in response to Justice Al Muhairi’s direction at the end of the hearing that submissions on the form of the order should be sent to him in writing. And, given that the point was not taken at the hearing on 29 July 2015, even though the Khorafis addressed the question in their own skeleton argument whether they should give a cross-undertaking in damages, it is now far too late for this ground of appeal to be advanced.

Grounds 7 – 9

86. None of these grounds of appeal has a real prospect of success. As the judge noted, Article 10 of the DIFC Arbitration Law provides explicitly that “[i]n matters governed by this Law, no DIFC Court shall intervene except to the extent provided in this Law.” The DIFC Court’s power to intervene in arbitrations governed by the Arbitration Law are then set out in Article 11 of that Law by reference to Articles 19 (3), 24 (2), 34, 41, 42, 43, 44, 14, 17 (3), 20 (1), 21 (1), 23 (3) and 39 (5). None of those powers permits the DIFC Court to stay any arbitration proceedings or make declarations as to an arbitral tribunal’s lack of jurisdiction in advance of the arbitral tribunal itself determining that issue. Further, as Justice Williams said in International Electromechanical Services LLC v Al Fattan Engineering LLC (14 October 2012) CFI 004/2012, the DIFC Courts’ inherent jurisdiction exists “only in so far as necessary to enforce existing rules and to prevent abuse of those rules and of the processes of the Courts.”

87. It follows, in my opinion, that the judge’s decision that the Court did not have jurisdiction to grant the second and third applications was undoubtedly correct and there is no real prospect of this decision being overturned on appeal; nor is there a compelling reason for Grounds 7, 8 and 9 to be argued in an appeal.

88. Even if the Court did have power to stay the arbitration proceedings or grant a declaration that the arbitral tribunal lacked jurisdiction, that power would be a discretionary one, and given that Article 23.1 of the Arbitration Law confers on an arbitral tribunal the power to determine its own jurisdiction, the Court of Appeal would inevitably in this case refuse to grant a stay or make a declaration of no jurisdiction in favour of the appointed tribunal deciding whether Vannin had an accrued right to refer its claim for payment to arbitration under Clause 17.3 of the RLFA.

Ground 10

89. In paragraph 107 of the Khorafis’ skeleton argument in support of their application for permission to appeal it is stated that the remedy sought under this ground of appeal “is simply that the Court of Appeal approach the hearing with these factors in mind and adopt a remedial approach under re-hearing principles.” I find this statement makes it unclear whether Ground 10 is intended to be a free-standing ground whose success is intended to lead to the setting aside of the order of Justice Ali Al Madhani and the Court of Appeal deciding for itself whether the original order should be amended; or whether this ground is intended to be no more than a plea to the Court of Appeal to bear in mind the difficulties that are claimed to have confronted the Khorafis when they made their application on 29 July 2015. If the former intention is meant, I say at once that this ground of appeal too has no real prospect of success. The time allowed for the Khorafis to present their case was not so short as to be unfair. Their skeleton argument having been served in advance of the hearing, there was enough time for the main points to be articulated orally and questions from the Bench answered. Indeed, it is clear from the judge’s summary of the Khorafis’ case in his judgment that he understood what that case was. As for the late service of Vannin’s skeleton argument, although this was no doubt annoyingly inconvenient, it was not in my opinion productive of injustice. The points taken therein were all predictable, including the contention that the Khorafis could not show that there had been a material change or circumstance since 6 November 2014. And as for the delay in giving judgment, whilst it is regrettable that it took as long as 5 ½ months for judgment to be handed down, I am quite satisfied that this was not productive of such unfairness or prejudice as would require the setting aside of the judge’s judgment. I say this because the judge had available detailed skeleton arguments and a verbatim transcript of the hearing and it is plain that he fully understood each party’s submissions and did not overlook any of the material points relied on.

90. There is also no compelling reason why there should be an appeal on this Ground 10.

91. If the intention behind Ground 10 is that the Court of Appeal should take into account the pleaded difficulties alleged to have been faced by the Khorafis, I can say that in considering this application for permission to appeal I have borne these matters in mind but they have not persuaded me to grant the permission sought.

Conclusion

92. For the reasons given above, this application for permission to appeal the order of H.E. Justice Ali Al Madhani is refused.

Issued by:

Maha Almehairi

Judicial Officer

Date of Issue: 11 April 2016

Date of re-issue: 18 April 2016

At: 4pm

The post CFI 036/2014 Vannin Capital Pcc Plc v (1) Mr Rafed Abdel Mohsen Bader Al Khorafi (2) Mrs Amrah Ali Abdel Latif Al Hamad (3) Mrs Alia Mohamed Sulaiman Al Rifai (4) KBH Kaanuun Limited (5) Bank Sarasin-Alpen (ME) Limited (6) Bank J. Safra Sarasin Ltd (Formerly Bank Sarasin & Co Limited) appeared first on DIFC Courts.

DIFC Courts Order No. 1 of 2016

In respect of

The DIFC Courts Small Claims Tribunal  – Additional Members of the SCT

I, Michael Hwang, Chief Justice of the Dubai International Financial Centre Courts,

Having reviewed—

Dubai Law No. 9 of 2004 in respect of the establishment of the DIFC;
Dubai Law No. 12 Of 2004 in respect of the Judicial Authority at the DIFC;
DIFC Law No. 10 of 2004 in respect of the DIFC Courts (“DIFC Court Law”);

DIFC Courts Order No. 2 of 2007 establishing the Small Claims Tribunal (“SCT”);

DIFC Courts Order No. 1 of 2010 – Limits of Jurisdiction;

DIFC Courts Order No. 1 of 2014 – Members of the SCT

Practice Direction No. 2 of 2010 – SCT Judge; and

Part 53 of the Rules of the DIFC Courts

And Whereas – 

(A)    The DIFC Court Law authorises the Chief Justice of the DIFC Courts, where he considers it appropriate, to set up and administer Tribunals of the DIFC Courts, and to authorise rules for their administration, which shall be set out in the Rules of Court (Article 14(3)).

(B)    The SCT was established pursuant to DIFC Courts Order No. 2 of 2007 issued by the then Chief Justice, Sir Anthony Evans.

(C)    The Rules of the DIFC Courts (the “RDC”) have been enacted by His Highness The Ruler of Dubai pursuant to Article 31(1) of the Court Law and contain at Part 53 the rules relating to the SCT; and

(D)    The SCT is recognised as a mechanism for the prompt and cost-efficient hearing and determination of smaller claims within the jurisdiction of the DIFC Courts.

Now I hereby order and direct as follows –

• Ayesha Bin Kalban and Ms. Mahika Hart shall be appointed as members of the SCT. Where the RDC refers to a “SCT Judge” this shall include the Court of First Instance Judges and Registrar and all other persons named in this Order and DIFC Courts Order 1 of 2010 (Limits of Jurisdiction) as members of the SCT.

• This Order shall take effect from the date of signature. Order No. 2 of 2007 shall remain in full force and effect save as amended by this Order. This Order shall be known as The DIFC Small Claims Tribunal – Additional Members of the SCT Order No. 1 of 2016.

Chief Justice Michael Hwang

Dated:  14 April 2016

The post DIFC Courts Order No. 1 of 2016 – The DIFC Courts Small Claims Tribunal – Additional Members of the SCT appeared first on DIFC Courts.

Claim No: CFI 005/2016

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE H.E.  JUSTICE OMAR AL MUHAIRI

BETWEEN

(1) MR RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) MRS AMRAH ALI ABDEL LATIF AL HAMAD

(3) MRS ALIA MOHAMED SULAIMAN AL RIFAI

Petitioners

and

BANK SARASIN-ALPEN (ME) LIMITED

Respondent

ORDER WITH REASONS OF H.E. JUSTICE OMAR AL MUHAIRI

UPON the petition of Mr Rafed Abdel Mohsen Bader Al Khorafi, Mrs Amrah Ali Abdel Latif Al Hamad and Mrs Alia Mohamed Sulaiman Al Rifai (“the Petitioners”) presented to the Court on 7 February 2014 (“the Petition”);

AND UPON hearing Richard Hill QC for the Petitioners and David Allison QC for the Respondent opposing the petition;

AND UPON reading the Petition, Skeleton Arguments, supporting documents and evidence recorded on the Court file;

IT IS HEREBY ORDERED THAT:

1. Bank Sarasin-Alpen (ME) Limited registered in the DIFC under registration number 0029, with a registered office at Precinct Building 5, Level 4, DIFC, P.O.Box 121806, Dubai is wound up under the DIFC Insolvency Law No 3 of 2009.
2. Pursuant to Article 58(1) of the Insolvency Law, Mr Shahab Haider of Sajjad Haider Chartered Accountants LLP be appointed liquidator (“the Liquidator”) of Bank Sarasin-Alpen (ME) Limited.
3. Permission is granted for the Liquidator to apply to the Court for the fixing of their remuneration.
4. The costs of the winding-up petition and of the application for the appointment of the Liquidator are paid as an expense of the liquidation.
5. There be no order as to costs in relation to the adjourned hearing before me on 14 March 2016.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 2 May 2016

At: 4pm 

SCHEDULE OF REASONS

Background

1. On 7 February 2016 the Petitioners filed Claim Form CFI-005-2016, petitioning for a winding up order with respect to Bank Sarasin-Alpen (ME) Limited (“the Respondent”). The Petitioners claim the Respondent is indebted to them in the sum of USD 35,028,474 pursuant to the Order of Deputy Chief Justice Sir John Chadwick (“DCJ Chadwick”) dated 3 November 2015 in CFI 026/2009 (the “Quantum Order”).
2. The Quantum Order represents part of the result of years of litigation originating from a 2009 case brought by the Petitioners against the Respondent in relation to investments structured by the Respondent and sold to the Petitioners. The Respondent was found guilty of mis-selling the investments to the Petitioners and the Respondent’s appeal of the Liability Judgment (the “Liability Appeal”) was recently dismissed by the Court of Appeal in a Judgment dated 3 March 2016.
3. In the Quantum Order the Respondent and Bank Sarasin & Co. Ltd (the “Second Defendant”) were ordered to jointly and severally pay further damages to the Petitioners in the sum of USD 24,583,425 and the Respondent was ordered to pay additional damages of USD 35,028,474 (the “Additional Damages”/”Judgment Debt”). The Respondent was granted permission to appeal the Quantum Order on 9 November 2015 by Chief Justice Michael Hwang (“CJ Hwang”) and this appeal is currently pending (the “Quantum Appeal”). The Respondent’s application for a stay of the Quantum Order was dismissed by me on 18 January 2016 [re-issued on 21 January 2016] and the Respondent ordered to pay the Additional Damages into Court within 14 days (“My Order”), this was not complied with.
4. The Petitioners claim that the Respondent is insolvent and unable to pay its debts and requests that the Respondent be wound up pursuant to Regulation 5.2 of the DIFC Insolvency Regulations and Articles 50 (b) and 50 (e) of the DIFC Insolvency Law No. 3 of 2009, which states:

“50. Circumstances in which Company may be wound up by the Court

A Company may be wound up by the Court if:

(a)        the Company has resolved that the Company be wound up by the Court;

(b)        the Company is unable to pay its debts;

(c)        at the time at which a moratorium for the Company under Article 9 comes to an end, no voluntary arrangement approved under Part 2 has effect in relation to the Company;

(d)        the Court may make such an order pursuant to any provision of or under DIFC Law; or

(e)        the Court is of the opinion that it is just and equitable that the Company should be wound up.”

Respondent’s opposition to the Petition

5. The Respondent seeks the dismissal of the Petition, or alternatively, seeks an adjournment of the Petition until the determination of the Quantum Appeal on the following grounds:

• The Additional Damages sum awarded in the Quantum Order is subject to a genuine and substantial dispute as permission to appeal it has been granted by CJ Hwang on the basis that it has a real prospect of success;
• The Additional Damages are not due and payable to the Petitioners as the Court ordered that it be paid into Court. Accordingly, it is wrong to contend that the Additional Damages sum is a judgment debt due and payable to the Petitioners;
• It is not just and equitable for the Respondent to be wound up;
• The Petition represents an abuse of process, pursued for the purpose of stifling an appeal and extracting direct payment from the Respondent in an attempt to circumvent the Court’s Order of 18 January 2016 for payment of the Additional Damages into Court;
• The Court should, in all the circumstances, exercise its discretion against making a winding up order.

Discussion

6. The Petitioners seek to establish that the Respondent is unable to pay its debts and it is just and equitable for the Respondent to be wound up despite the grounds of opposition raised.
7. The Respondent’s witness statement of Rita Catherine Jaballah (“Jaballah”) confirms its licence to carry on financial services in or from the DIFC has been withdrawn by the Dubai Financial Services Authority (the “DFSA”) upon the Respondent’s request. Jaballah also accepts that the Respondent has ceased to conduct business generally and is unable to satisfy the Additional Damages payment.
8. In Amalgamated Properties of Rhodesia (1913) Ltd [1917] 2 Ch 115, Sargant J established in similar circumstances, that there is a prima facie entitlement to a winding up order notwithstanding the existence of a pending appeal:

‘the petitioners, as judgment creditors for this very large sum, are prima facie entitled ex debito justitiae to a winding up order, and it seems impossible to displace that prima facie position without the very strongest proof that the petition is being improperly made use of for some ulterior motive’

9. The Respondent disputes that the Petitioners qualify as Judgment Creditors and submits that as it was ordered for the Additional Damages to be paid into Court, this sum is not due and payable to the Petitioners. My Order was made in the following terms, at paragraphs 10 and 11:

“The main issues cited in favour of a stay were the risk that the Claimants may be unwilling or unable to repay the damages paid by the First Defendant, as well as the argument that there is a very strong appeal against the Liability Judgment.

As explained by the Claimants’ Skeleton Argument, the Claimants have stated the First Defendant may pay the money due under the Quantum Order into the Court’s escrow account.”

10. To clarify, as the determination of the Liability Appeal was still pending and the Petitioners/Claimants were agreeable, the Respondent/First Defendant was ordered to pay the Additional Damages into Court rather than directly to the Petitioners, but there is no doubt that the Petitioners were to be the ultimate beneficiaries of that sum and remain the Judgment Creditors now.
11. Sargant J required the ‘very strongest proof that the petition is being made use of for some ulterior motive’ before displacing the prima facie position of entitlement to a winding up order. As mentioned above, the Petitioners are the Judgment Creditors and as such there is no need for them to attempt to ‘circumvent’ My Order as alleged in the Respondent’s Skeleton Argument. The Respondent’s submissions in this regard highlight its non-compliance with My Order in failing to pay the Additional Damages into Court and I am not satisfied that there is proof of the Petitioners having any motive behind the Petition other than to obtain payment of the Additional Damages sum.
12. Sargant J also addressed the implications of winding up when there is an appeal pending:

‘I am not frightened by the suggestion that the effect of a winding up order would be to deprive the respondents in any real sense of any legitimate opportunity of appealing’

13. A winding up order would not deprive the Respondent of the opportunity of appealing the Quantum Order. A stifling argument has been forwarded by the Respondent, however, it has failed to put before the Court full and frank evidence as to its means, as required by Burnton LJ in Mahan Air v Blue Sky One Limited [2011] EWCA Civ 544 and, therefore, the Respondent’s argument that its appeal would be stifled must also fail.
14. Neuberger J provided guidance on winding up in cases where an appeal is pending in James v Silver Fund Investment Company Ltd (unreported 15 Nov 2001):

“In a case where a petitioner is seeking to wind up a company on the basis of a debt arising from a judgment of a court or tribunal which is under appeal, it seems to me that the Companies Court should be strongly influenced by the question of whether or not a stay has been granted, by the tribunal, or by the appellant tribunal concerned, on the execution of the judgment…

If a stay has been applied for and refused, then it would seem to me that there was a powerful argument for taking one of two courses, either allowing the petition to proceed or taking the course the Court of Appeal thought appropriate in Amalgamated Properties [1917] 2Ch 1115, namely, to stay the petition on condition that the company concerned either pays the total amount in question into court, or provides security for the amount involved…”

15. In the present case, the Respondent’s application for a stay of execution of the Quantum Order was dismissed on terms that the Additional Sums be paid into Court within 14 days, which the Respondent failed to do. Therefore, it would seem that the options for this Court are either to allow the petition to proceed or provide the Respondent with another opportunity to pay the Additional Sums into Court as security for a stay of the Petition.
16. Neuberger J goes on to state that:

“to stay or dismiss a petition on terms which require security or payment into court is normally inappropriate. That is because the normal issue on a contested petition based on a debt is whether or not there is a bona fide dispute as to the existence of the debt. The Companies Court has to take a view. Either there is no bona fide ground for contesting, in which case the petition can proceed, or there is a bona fide dispute, in which case the petition is inappropriate and should be dismissed…

Of course, what course the court takes in a particular case in relation to a petition, where a stay has been granted or refused, must depend on the precise facts of the particular case.”

17. Accordingly, to stay or dismiss the petition on terms requiring security is normally inappropriate and this Court should take a view as to whether there is a bona fide dispute as to the existence of the debt. The precise facts of this particular case are that liability has been fully established and all appeals in relation to liability exhausted by the Respondent. It is only the Quantum Appeal that remains pending; therefore, I am not of the opinion that there can be a bona fide dispute as to the existence of the debt, only the value of it. On this basis I am inclined to allow the Petition to proceed.
18. In re A & BC Chewing Gum [1975] 1 WLR 579, Plowman J confirmed that as a matter of practice, a stay is never granted and stated:

“If the business is being carried on at a profit, creditors of the business, after the date of the winding up order, would be paid in priority to the unsecured creditors at the date of the order as part of the expenses of the winding up. Then, if the appeal is allowed, the business is handed back as a going concern, it has not suffered any loss. Of course, if the business can only be carried on at a loss- it should not be carried on at all…

Those, I think, are really the reasons why, in practice, a stay is not granted – a profitable business can be carried on as it was before and handed back as a going concern if the appeal is allowed. If it is not allowed then, of course, cadit quaestio.”

19. In the present case the Respondent has ceased trading and accepted that it is unable to satisfy the Judgment Debt. Therefore, the Respondent is unable to pay its debts as they fall due and on this ground alone, the Court would be justified in making a winding up order. Plowman J took the view that if the business can only be carried on at a loss, it should not be carried on at all, I agree that these are the circumstances in which winding up is appropriate. He also determined that even if the appeal was allowed following winding up of the company, the business could be ‘handed back’ after the creditors had been paid. Although the Respondent in the present case is not carrying on a profitable business, the same principle can apply, in that, if the value of the debt decreases following determination of the Quantum Appeal, the difference could simply be ‘handed back’ to the Respondent.
20. I am satisfied that it is just and equitable to make a winding up order both in the public interest and perhaps more particularly in the interest of the DIFC. In reality, it is impossible for the Respondent to continue in business as its licence has been withdrawn by the DFSA and it is unable to meet the Judgment debt owed to the Petitioners, even if it claims to be able to satisfy its debts owed to ‘all other creditors’. The purpose of appointing liquidators is to recover the assets under the management of the Respondent and this should also be a source of comfort to these other creditors too.
21. To my mind there are no countervailing considerations which would call for the refusal of the application for a winding up order and to grant a stay of the Petition pending the outcome of the Quantum Appeal is inappropriate in the circumstances, as discussed above.
22. In my judgment, the making of the winding up order will not in any way prejudice claims for recovery and distribution of the Respondent’s assets. To the contrary it is much in the interest of all creditors. So for the above mentioned reasons I grant the winding up order in relation to the Respondent.

Costs                                                                                                                                                 

23. I have considered the submissions from both parties on the costs of the adjourned hearing before me on 14 March 2016. The Court permitted the Petitioners to appear via video link for the hearing which, due to technical difficulty with the video conference system was unsuccessful. Attempts were made to have an audio conference but this was very unclear and I did not have confidence in this method to hear all submissions in full, accordingly the hearing was adjourned to 31 March 2016. The reason for the adjournment was not related to any of the parties and I am satisfied that the technical difficulties with the video link on 14 March 2016 were beyond the Petitioners’ control. Therefore, there shall be no order regarding costs in relation to this particular hearing. All other costs of the winding up petition shall be paid as an expense of the liquidation.

The post CFI 005/2016 (1) Mr Rafed Abdel Mohsen Bader Al Khorafi (2) Mrs Amrah Ali Abdel Latif Al Hamad (3) Mrs Alia Mohamed Sulaiman Al Rifai v Bank Sarasin-Alpen (ME) Limited appeared first on DIFC Courts.

Claim No: CFI 006/2016

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

GHAZALA ABBAS

                                                                                          Appellant

and

STANDARD CHARTERED BANK

Respondent

  CONSENT ORDER

UPON the Claimant and Defendant having entered into settlement discussions

AND UPON the parties agreeing the terms of the Consent Order as set out below

IT IS HEREBY ORDERED BY CONSENT THAT:

1. The hearing listed for 10am on 4 May 2016 be adjourned and re-listed to take place at 10am on Tuesday 17 May 2016.
2. Costs reserved.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 3 May 2016

At: 4pm

The post CFI 006/2016 Ghazala Abbas v Standard Chartered Bank appeared first on DIFC Courts.

Claim No: CFI 021/2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE ALI AL MADHANI

BETWEEN

THERON ENTERTAINMENT LLC

                                                                                          Claimant

and

MAG FINANCIAL SERVICES LLC

Defendant

  ORDER OF H.E. JUSTICE ALI AL MADHANI

UPON reviewing the Defendant’s Application No. CFI-021-2015/7 seeking permission to amend its Defence and Counterclaim and the Defendant’s Application No. CFI-021-2015/8 seeking security over costs (the “Applications”)

AND UPON the Claimant’s Application No. CFI-021-2015/9 seeking permission for the Claimant’s Witness Igor Krayushkin to give evidence at trial by video link.

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant in the Pre-trial Review and hearing of the Applications on 25 April 2016

IT IS HEREBY ORDERED THAT

1. The Claimant shall take all reasonable steps to procure that Igor Krayushkin provide his evidence in person at the trial.
2. Igor Krayushkin be permitted to present evidence at trial by video link in the event that he is unable to enter the UAE by the time of the trial for visa issues, after taking all reasonable steps to do so in accordance with the above order.
3. The Defendant has permission to amend its Defence and Counterclaim in the form agreed between the parties at the hearing.
4. The Claimant has liberty to reply to the Defendant’s Amended Defence and Counterclaim in its skeleton argument for trial and in closing submissions.
5. The Claimant provide security for the Defendant’s costs in the amount of AED300,000, after having agreed to do so, by way of payment into Court within 5 days.
6. The trial timetable is approved in the form attached, annexed hereto as Schedule A.
7. The Defendant shall file and serve its skeleton argument on the Claimant by 4pm on 5 May 2016.
8. Costs be in the case.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 4 May 2016

At: 3pm

The post CFI 021/2015 Theron Entertainment llc v MAG Financial Services LLC appeared first on DIFC Courts.

NOTES FOR PARTY SUBMITTING FORM 53/02

These guidelines are pursuant to Parts 44.53-44.70 of the Rules of the DIFC Courts.  They are not to be used as an exhaustive resource, but will guide you in how to complete your form. Additional information may be obtained from the DIFC Courts’ Registry website at www.difccourts.ae.

Timing Requirements

Pursuant to Rule 53.74, your appellant’s notice regarding an appeal to the Court of First Instance must be filed within 14 days after the date of the decision which you wish to appeal.

Attached Documents

Please Note: Your application will not be processed without the following documents and your appeal bundle.

Two additional copies of the appellant’s notice for the Court of First Instance

One copy of the appellant’s notice for each of the respondents

One copy of your skeleton argument for each copy of the appellant’s notice that is filed

The following documents must be filed with your appeal bundle:  

A sealed copy of the appellant’s notice

A sealed copy of the order being appealed

A copy of any order giving or refusing permission to appeal, together with a copy of the Judge’s reasons for                           allowing or refusing permission to appeal

Any affidavit or witness statement filed in support of any application included in the appellant’s notice.

A copy of your skeleton argument

The claim form and statements of case (where relevant to the subject of the appeal)

Any application notice (or case management documentation) relevant to the subject of the appeal

Any other documents which the appellant reasonably considers necessary to enable the appeal Court to reach                     its decision on the hearing of the application or appeal

RULE 44.55: All documents that are extraneous to the issues to be considered on the application or the appeal MUST be excluded.  The appeal bundle may include affidavits, witness statements, summaries, experts’ reports and exhibits but only where these are directly relevant to the subject matter of appeal.

A certificate signed by the appellant’s legal representatives to the effect that they have read and understood the statement above (Rule 44.55) and that the composition of the appeal bundle complies with it

RULE 44.57: Where it is not possible to file all the above documents, the appellant must indicate which documents have not yet been filed and the reasons why they are not currently available.  The appellant must then provide a reasonable estimate or when the missing document or documents can be filed and file them as soon as reasonably practicable.

Format of Appellant’s Notice and Attached Documents

• Where possible the documents should be in A4 format.  Where a document has to be read across rather than down the page, it should be so placed in the bundle as to ensure that the text starts nearest the spine.
• Where any marking or writing on colour on the document is important, the document must be copied in colour or marked up correctly in colour.
• Documents which are not easily legible should be transcribed and the transcription marked and placed adjacent to the document transcribed.
• Documents in a language other than English should be translated and the translation marked and placed adjacent to the document translated.  The translation should be agreed or, if it cannot be agreed, each party’s proposed translation should be included.
• The size of any bundle should be tailored to its contents.  A large lever arch file should not be used for just a few pages nor should files be overloaded.
• Bundles must be paginated, each page being numbered individually and consecutively.  The pagination used at trial must also be indicated.  Letters and other documents should normally be included in chronological order.
• Page numbers should be inserted in bold figures at the bottom of the page and in a form that can be clearly distinguished from any other pagination on the document.
• An index must be included at the front of the bundle listing all the documents and providing page references for each.  In the case of documents such as letters, invoices or bank statements, they may be given a general description.
• Every bundle must be clearly identified, on the spine and on the front cover, with the name of the case and the Court’s reference.
• All staples, heavy metal clips etc, must be removed.
• Statements of case should be assembled in chapter form.

The post Appellant’s Notice appeared first on DIFC Courts.

Filing Your Claim in the Small Claims Tribunal

Step 1: Navigate to the DIFC Courts’ eRegistry Online

On the DIFC Courts’ Homepage (difccourts.ae), click on “eRegistry” in the upper right corner. Click the “Public Login” button on the following page. Next, click on “Forms” and select the second listed form, entitled “Small Claims Tribunal Claim Form (P53)”.

Step 2: Personal Details of Both Parties

Provide the contact details for both the Claimant and the Defendant. The Claimant is the person or company filing the claim. The Defendant is the person or company against whom the claim is filed. If there is more than one Claimant or Defendant, please click the “Add New” option in the relevant section. Please make sure to provide full and correct names, addresses and accurate email addresses. An email address for the Defendant is required, as the SCT Registry serves the documents via email.

Step 3:  Nature of Claim

Please indicate whether your claim is an Employment related claim. If it is not an Employment claim, please select the “Other” option.

Step 4: Particulars of the claim

In this section please provide full details of your case. You can provide a narrative of what happened in the case. It is often helpful to answer such questions as:

When did the claim arise?                                                       What was provided?

When did you buy goods/ services?                                       What went wrong?    

Step 5: Remedy sought

Please indicate what you are seeking in the case. For example many claims will list the total amount of money they are seeking from the Defendant. You must list out all of the remedies you are seeking from the Court in order to be eligible to receive them.

Step 6: Claim value

Please indicate the exact amount of money you are seeking. Please note that the claim value must be listed in US Dollars. If converting from AED, please use the conversion rate of 3.675 AED to 1 USD.

Step 7: Statement of Truth

Once you have completed the SCT form, you must fill out a statement of truth. Please be aware that anyone signing this statement of truth must believe that all facts stated are accurate and true, to the best of their belief and knowledge.  If you sign the form whilst knowing that part of the facts are untrue, you maybe be held in contempt of Court or be subjected to a fine.

The post Filing Your Claim in the Small Claims Tribunal appeared first on DIFC Courts.

Fact sheet 2016

The post Fact Sheet 2016 appeared first on DIFC Courts.

NEWS LETTER Q1 of 2016

The post Newsletter – Quarter 1 of 2016 appeared first on DIFC Courts.

Claim No: CFI-039-2015

          THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE  H.E. JUSTICE SHAMLAN AL SAWALEHI

BETWEEN

MR TOFIQ ASLAM

Claimant

and

BSA AHMED BIN HEZEEM & ASSOCIATES, LLP

                                                                                                                                                                                                                                     Defendant

CASE MANAGEMENT ORDER OF H. E. JUSTICE SHAMLAN AL SAWALEHI

UPON reviewing the Court file

AND UPON reading the Case Management Bundle

AND UPON hearing Counsel at the Case Management Conference held on 3 May 2016.

IT IS HEREBY ORDERED BY CONSENT THAT:

Production of Documents

1. Standard production of documents to be made by each party on or before 4pm on Wednesday, 25 May 2016.
2. Parties to file and serve any Request to Produce[1] on or before 4pm on Wednesday, 22 June 2016.
3. Objections to Requests to Produce (if any) shall be filed and served within 7 days thereafter and in any event not later than 4pm on Wednesday, 29 June 2016.
4. Where objections to any Requests to Produce[2] have been made, the Court will determine those objections and will make any disclosure order within the following 7 days and in any event not later than 4pm on Wednesday, 6 July 2016.
5. The parties shall comply with the terms of any disclosure order within 14 days thereafter and in any event not later than 4pm on Wednesday, 20 July 2016.
6. Where there are no objections to a particular Request contained in a Request to Produce, documents responsive to that request shall be produced within 14 days from the date of the Request to Produce, and in any event not later than 4pm on Wednesday, 3 August 2016.

Alternative Dispute Resolution

7. In default of the parties failing to agree the identity of one neutral individual to conduct alternative dispute resolution procedures, on or before 4pm on Tuesday, 24 May 2016 the parties shall exchange lists of 3 neutral individuals who are available to conduct alternative dispute resolution procedures in this case.
8. On or before Tuesday, 7 June 2016 the parties shall in good faith endeavour to agree one neutral individual from the lists so exchanged and provided.
9. The parties shall take such serious steps as they may be advised to resolve their disputes by alternative dispute resolution procedures before the neutral individual so chosen by no later than 4pm on Thursday, 8 September 2016.
10. If the case is not finally settled, the parties shall inform the Court by letter prior to exchange of witness statements what steps towards alternative dispute resolution have been taken and (without prejudice to matters of privilege ) why such steps have failed.

Witness Statements

11. Signed statements of witnesses of fact, witness summaries and hearsay notices to be exchanged 6 weeks following the close of the disclosure stage, and in any event not later than 4pm on Thursday, 6 October 2016.
12. Any Witness Statement evidence and Witness Summary in reply to be filed and served within 2 weeks thereafter and in any event not later than 4pm on Thursday, 20 October 2016.
13. Unless otherwise ordered, Witness Statements are to stand as evidence in chief of the witness at trial.

Pre-Trial Review

14. The Pre-Trial Review has been fixed for Tuesday, 6 November 2016.
15. Parties to send the Registrar (with copy to all other parties) a Pre-trial Checklist (at least 3 clear days before progress monitoring date).

Trial Bundles

16. Agreed trial bundles to be completed in accordance with Part 35 of the RDC and lodged by not later 4pm on Tuesday, 22 November 2016.

Reading List

17. A single reading list approved by all parties’ legal representatives for trial to be lodged with the Registry not later than 2 days before fixed trial date, together with an estimate of time required for reading.

Skeleton Argument, Opening Statements and Chronology

18. Skeleton Arguments and Written Opening Statements to be served on all other parties and lodged with the Court – two days before the start of trial for the Claimant and one day before the start of trial for the Defendant.
19. Parties to prepare a Chronology of significant events cross-referenced to significant documents, pleadings and witness statements to be agreed, insofar as possible, and to be filed 1 week before trial.

Trial

20. The trial of this matter is to take place on 6 December 2016, for two days.
21. Costs in the Case.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 17 May 2016

At: 3pm

The post CFI 039/2015 Mr Tofiq Aslam v BSA Ahmed Bin Hezeem & Associates LLP appeared first on DIFC Courts.

Claim No. CFI 007/2011

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

RICHARD WHEATLEY

Claimant

and

SIMMONS AND COMPANY INTERNATIONAL LIMITED

Defendant

  ORDER OF JUDICIAL OFFICER MAHA AL MEHAIRI

UPON reviewing Application Notice CFI-007-2011/11 (“the Application”) dated 10 May 2016 seeking the redaction of the parties’ names in all DIFC Courts Judgments relating to Claim No. CFI 007/2011 and CA 001/2013.

AND UPON reviewing the relevant documents in the case file

IT IS HEREBY ORDERED THAT:

1. The Application is granted.
2. All existing DIFC Courts Judgments relating to Claim No CFI 007/2011 and CA 001/2013 be redacted pursuant to Practice Direction No. 3 of 2016 in all copies, including those on the DIFC Courts website.

Issued by:

Maha Al Mehairi

Judicial Officer

Date of issue: 17 May 2016

At: 4pm

The post CFI 007/2011 Richard Wheatley v Simmons and Company International Limited appeared first on DIFC Courts.

Claim No: CFI-036-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

VANNIN CAPITAL PCC PLC

for and on behalf of protected cell – Project Ramsey

                                                                                          Claimant

and

(1) MR RAFED ABDEL MOHSEN BADER AL KHORAFI

(2) MRS AMRAH ALI ABDEL LATIF AL HAMAD

(3) MRS ALIA MOHAMED SULAIMAN AL RIFAI

(4)KBH KAANUUN LIMITED

(5) BANK SARASIN-ALPEN (ME) LIMITED

(6) BANK J. SAFRA SARASIN LTD (FORMERLY BANK SARASIN & CO LIMITED)

Defendants

CONSENT ORDER

UPON reviewing the Order of H.E. Justice Omar Al Muhairi re-issued on 13 November 2014 in these proceedings pursuant to which a sum of USD 11,445,049 was paid into Court by the defendants in CFI-026-2009 as interim damages and costs preserved in Court for the benefit of the Claimant

AND UPON the Claimant and the First, Second, Third and Fourth Defendants having agreed terms between them for the release and distribution of the sums held in Court pursuant to Paragraph 2 of the Order of H.E. Justice Omar Al Muhairi dated 13 November 2014

AND UPON the First, Second and Third Defendants having agreed to grant to the Claimant and the Fourth Defendant preservation rights over further sums held in the Court or which may be paid into the Court by one or more of the defendants in CFI-026-2009 or any related appeal

AND UPON reviewing the Consent Order issued by Judicial Officer Nassir Al Nasser on 9 February 2015 in proceedings between the First, Second and Third Defendants in CFI-035-2014 (“KBH Consent Order”)

AND UPON the Claimant having agreed to contribute USD 50,000 towards the Fourth Defendant’s Legal Costs of the DIFC-LCIA Arbitration No. D-L14045 (“Vannin’s Contribution”) and the First, Second and Third Defendants agreeing to contribute USD 50,000 towards the Fourth Defendant’s Legal Costs of the Arbitration (“the Al Khorafis’ Contribution”) (collectively “KBH’s Legal Costs”)

AND UPON the Claimant having completed a process of re-domiciliation from the Isle of Man to Jersey in August 2015 as a result of which it has changed its name

IT IS HEREBY ORDERED BY CONSENT THAT:

1.The Claimant’s name and address stated in the Claim Form dated 3 November 2014 is amended to “Vannin Capital PCC for and on behalf of protected cell – Project Ramsey” with its registered address at 13-14 Esplanade, St Helier, Jersey, JE1 1BD.

2. The sum of USD 11,445,049 preserved pursuant to the Order of H.E. Justice Omar Al Muhairi re-issued on 13 November 2014 in CFI-036-2014 shall now be distributed by the Court as follows:

(a) USD 3,815,016.33 paid to the Claimant;

(b) USD 2,948,593 paid to the Fourth Defendant; and

(c) USD 4,681,439.67 paid to the First, Second and Third Defendants.

3. The Claimant and the First, Second and Third Defendants shall pay their respective contributions towards KBH’s Legal Costs within five (5) UAE business days of the amounts distributed in paragraph 2 above.

4. An amount of USD 7,788,346.47 is hereby preserved for the benefit of the Claimant against the further amount of USD 24,583,425 paid into the Court by Bank J. Safra Sarasin & Co Ltd in CFI-026-2009 pursuant to the Order of DCJ Sir John Chadwick dated 3 November 2015, which funds remain held in the Court at the date of this Order, and any further sums in damages or costs or interest that are paid into the Court by one or more of the defendants in CFI-026-2009 or in any related appeal, in respect of the further sum in that amount agreed to be payable to the Claimant by the First, Second and Third Defendants.

5. An amount of USD 1,400,000 is hereby preserved for the benefit of the Fourth Defendant pursuant to paragraph (b) of the KBH Consent Order against the further amount of USD 24,583,425 paid into the Court by Bank J. Safra Sarasin & Co Ltd in CFI-026-2009 pursuant to the Order of DCJ Sir John Chadwick dated 3 November 2015, which funds remain held in the Court at the date of this Order, and any further sums in damages or costs or interest that are paid into the Court by one or more of the defendants in CFI-026-2009 or in any related appeal, in respect of the further sum in that amount agreed to be payable to the Fourth Defendant by the First, Second and Third Defendants.

6. In the event that either the Claimant and/or the First, Second and Third Defendants fail to pay KBH’s Legal Costs in accordance with paragraph 3 above, then by the written request of the Fourth Defendant, a further amount reflecting any unpaid KBH’s Legal Costs will be preserved for the benefit of the Fourth Defendant against the further amount of USD 24,583,425 paid into the Court by Bank J. Safra Sarasin & Co Ltd in CFI-026-2009 pursuant to the Order of DCJ Sir John Chadwick dated 3 November 2015, which funds remain held in the Court at the date of this Order, and any further sums in damages or costs or interest that are paid into the Court by one or more of the defendants in CFI-026-2009 or in any related appeal, in respect of the further sum in that amount agreed to be payable to the Fourth Defendant by the Claimant and/or First, Second and Third Defendants.

7. The First, Second and Third Defendants shall within two (2) days of the date of this Order issue irrevocable written instructions to the defendants in CFI-026-2009 that any further sums payable by those defendants to the First, Second and Third Defendants in CFI-026-2009 shall be paid into the Court and preserved subject to the terms of this Order until the sums payable to the Claimant and the Fourth Defendant by the First, Second and Third Defendants and/or (in respect of Vannin’s Contribution) by the Claimant referred to in paragraphs 4, 5 and 6 have been satisfied in full.

8. Upon the issue of an order or direction of the Court in CFI-026-2009 which has the effect that any amounts paid into the Court by one or more of the defendants in those proceedings may be released to the First, Second and Third Defendants (as claimants in those proceedings), in priority to any release or distribution of such funds to the First, Second and Third Defendants, the sums preserved for the benefit of the Claimant pursuant to paragraph 4 above and the sums preserved for the benefit of the Fourth Defendant pursuant to paragraphs 5 and 6 above shall be distributed by the Court directly to the Claimant in the amount of USD 7,788,346.47 and directly to the Fourth Respondent in the amount of USD 1,400,000 plus any unpaid amount of KBH’s Legal Costs.

9. If there are insufficient funds held in the Court to pay the Claimant and the Fourth Defendant the sums stated in paragraph 8 in full, any distribution of funds to the Claimant and the Fourth Defendant shall be made pari passu until all payments have been made in full.

10. Save for giving effect to the terms of Paragraphs 1 to 9 of this Order, these proceedings shall be stayed pending further Order of the Court.

11. There be no order as to costs.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 18 May 2016

At: 2pm

The post CFI 036/2014 Vannin Capital PCC PLC v (1) Mr Rafed Abdel Mohsen Bader Al Khorafi (2) Mrs Amrah Ali Abdel Latif Al Hamad (3) Mrs Alia Mohamed Sulaiman Al Rifai (4)KBH Kaanuun Limited (5) Bank Sarasin-Alpen (ME) Limited (6) Bank J. Safra Sarasin Ltd (Formerly Bank Sarasin & Co Limited) appeared first on DIFC Courts.