Credit Suisse (Switzerland) Limited v (1) Ashok Kumar Goel (2) Sudhir Goyel (3) Manan Goel (4) Prerit Goel [2020] DIFC CA 008

Claim No: CA 008/2020

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 APPEAL

BEFORE CHIEF JUSTICE ZAKI AZMI, JUSTICE ROBERT FRENCH AND H.E JUSTICE SHAMLAN AL SAWALEHI

BETWEEN

CREDIT SUISSE (SWITZERLAND) LIMITED

Appellant/Claimant

and

(1) ASHOK KUMAR GOEL
(2) SUDHIR GOYEL
(3) MANAN GOEL
(4) PRERIT GOEL

Respondents/Defendants

JUDGMENT

ORDER

UPON the Appellant’s Appeal Notice filed on 2 September 2020 seeking permission to Appeal the Order of H.E Justice Ali Al Madhani issued on 31 August 2020 (the “Appeal”)

AND UPON the Appellant’s submissions filed on 8 September 2020

AND UPON hearing Counsel for the Appellant at the appeal hearing on 13 September 2020

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

IT IS HEREBY ORDERED THAT:

1. The appeal is allowed.

2. The decision of the Court of First Instance dismissing the Appellant’s application for a Worldwide Freezing Order is set aside.

3. The matter is remitted to the Court of First Instance to issue the Worldwide Freezing Order for a limited period to allow the Respondents to be heard against its renewal and on the question of jurisdiction.

4. Costs in the cause.

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 4 October 2020
Time: 2pm

SCHEDULE OF REASONS

Introduction

1. On 27 August 2020, the Appellant applied to the Court of First Instance for a Worldwide Freezing Order against each of the Respondents on an urgent basis pending the Appellant’s intended Part 7 claim against them. His Excellency Justice Ali Al Madhani heard the application ex parte by way of teleconference on 28 August 2020. His Excellency then ordered:

2. His Excellency concluded that the Appellant had a good arguable case that the Defendants were indebted to the Appellant under personal guarantees which they had executed on 31 May 2016 in favour of the Appellant. He also found that the Respondents had or may have assets that will be available to satisfy any judgment in favour of the Appellant, that there was a real risk that they would take steps to put their assets out of reach of a judgment and that in all the circumstances it would be just and convenient to make the order sought. However, His Excellency held that the DIFC Courts did not have jurisdiction under the terms of the personal guarantees to determine the matter or to make any orders therein. The application for a Worldwide Freezing Order therefore failed, as His Excellency put it, on a single ground namely the absence of jurisdiction. Had it not been for that finding His Excellency would have granted the application and issued the Worldwide Freezing Order in the form submitted by the Appellant. At the hearing, and upon counsel for the Appellant’s oral request, His Excellency granted permission to appeal against his decision. He provided brief reasons for finding that the Court did not have jurisdiction over the claim as well as for his decision to grant the appellant permission to appeal.

3. When the matter came on before the Court of Appeal and following discussion with counsel for the Appellant the Court made the following orders:

4. The Court said that it would provide brief reasons subsequently. These are those reasons.

5. The question of jurisdiction turns on the construction and application of Article 5(A)(2) of the Judicial Authority Law No 12 of 2004 which defines the relevant head of jurisdiction of the CFI in the following terms:

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.

6. The personal guarantees the subject of the Appellant’s claim provided in clauses 16 and 17 as follows:

7. The primary judge held that the words “Courts of Dubai” in clause 17.1 of the Personal Guarantees did not constitute a specific clear and express conferral of jurisdiction on the DIFC Courts for the purposes of Article 5(A)(2) of the Judicial Authority Law. However, at paragraph 15 of his reasons for judgment His Excellency held:

If the words “Courts of Dubai” have been held by the Court of Appeal to include the DIFC Courts, [a reference to the decision of the Court of the Appeal and IGPL v Standard Chartered Bank [2015] DIFC CA-004] it is arguable that these words will retain the same meaning in any context absent a reason to conclude otherwise and will amount to a specific, clear and express choice of the DIFC Courts as the court selected to enforce the Personal Guarantees. An appeal on this issue would, therefore, have a real prospect of success.

8. His Excellency added in paragraph 16:

16. Moreover, in my view, a determination by the Court of Appeal as to what is required by the words “specific, clear and express” in Article 5(A)(2) in opt-in cases, and particularly with reference to the decision in IGPL and also as applied to the example provided by [the appellant], constitutes a compelling reason why an appeal on the matter should be heard.

His Excellency referred to the alternative argument put by the Appellant that if jurisdiction was not effected by operation of clause 17.1 read with Article 5(A)(2), clause 17.2 had that effect. His Excellency held that competency in clause 17.2 of the Personal Guarantees could not be restricted to consideration of a claim’s subject matter only, on the one hand, and a court’s power to determine that claim on the other. For His Excellency competency in the first instance was to be determined by a court’s jurisdiction as defined by its laws and procedural rules. Unless jurisdiction can first be established in the usual ways – including but not limited to consideration of a claim’s subject-matter – a court would not be competent to hear and determine a claim under the Personal Guarantees.

9. It is apparent from what His Excellency said in his reasons that the question whether the CFI had jurisdiction was reasonably arguable. This Court agrees with that proposition.

10. The proceedings before His Excellency were ex parte as was the appeal before this Court. It would not be appropriate on appeal for this Court to determine a reasonably arguable question of jurisdiction ex parte. If it determined the question adversely to the Respondents, holding that there was jurisdiction, the Respondents would have had no opportunity to be heard and no avenue to challenge that decision.

11. Where the CFI is faced with an ex parte application for a freezing order and is satisfied that it does not have jurisdiction and that the contrary is not really arguable the Court must refuse the freezing order. However, where the CFI is of the view that the question of jurisdiction is reasonably arguable and that there are questions of fact and/or questions of law the preferable course is for the CFI to grant the interim relief and determine the question of jurisdiction after hearing argument from both the claimant and the Defendants. It must of course be satisfied, as it was in this case, that grounds for the grant of the interim relief have been made out on the merits.

12. The CFI has a preliminary jurisdiction to determine whether it has jurisdiction. As an incident of that preliminary jurisdiction it may, in an appropriate case, grant interim relief to preserve the status quo pending the determination of its jurisdiction. Where a freezing order has been made the CFI may make it for a limited time only requiring a renewal application by the claimant on notice to the Defendant. On the renewal application the Defendants can oppose renewal and the question of jurisdiction can be heard and determined. An alternative mechanism is to grant the freezing order with liberty to the Defendants to apply to discharge it on the ground that it should not have been granted and on the ground that the Court lacks jurisdiction to entertain the proceedings in which the freezing order is brought.

13. An example of this approach is seen in the decision of the High Court of Australia in R v Ross-Jones; ex parte Green (1984) 156 CLR 185. That concerned the powers of the Family Court of Australia. The court there held that a judge of the Family Court, before determining his jurisdiction, erroneously assumed the power to stay, by interlocutory order the enforcement by a third person of a judgment obtained in a State Supreme Court against a party to a matrimonial cause.

14. Notwithstanding that the court held the judge lacked the relevant jurisdiction and power it did reserve to the court the power to grant interim relief on a very short term basis pending the determination of the jurisdictional question. Gibbs CJ, with whom Mason J agreed said at 202:

There is, however, this practical difference, that while the Family Court is exercising its power to determine whether or not it has jurisdiction in a particular case, it may be right to keep matters in statu quo by the grant of an interlocutory injunction. That would be so only while the question whether it had jurisdiction remained in doubt and was being determined, and it goes without saying that if an interlocutory injunction were granted in those circumstances the questions of fact and law on which jurisdiction depended would have to be determined as a matter of the utmost urgency … and that once it appeared that jurisdiction was lacking, the injunction would have to be dissolved, however inconvenient that course might appear.

15. In the joint judgment of Wilson and Dawson JJ at 213 they referred to circumstances in which it might be necessary for a court to determine, though not conclusively, the existence or otherwise of facts upon which its jurisdiction depends. They said:

In such cases, there may be times when a court concludes on the material available and often upon an ex parte application that prima facie there is jurisdiction and that the circumstances point compellingly to a need to preserve the status quo as an interim measure pending a hearing to determine whether interlocutory relief should be granted. But even then an interim order, subject to the usual undertaking as to damages, should only be made against a third party, in respect of whom the court’s jurisdiction may be in question, for such limited time as is necessary to enable that question to be determined, even if it means an alteration in the court’s ordinary arrangements. It is only then that the granting of an interim injunction prior to the hearing and determination of the question of jurisdiction could be justified.

16. Brennan J at 220 observed that pending an examination of the relevant jurisdictional facts a judge of a superior federal court may assume jurisdiction to make an interim or interlocutory order.

17. It is not to be taken from these reasons that where a judge of the CFI is confronted with an ex parte application for a Worldwide Freezing Order he must make the order if the conditions for its grant are satisfied despite it being clear that the CFI lacks jurisdiction. Where it is clear that the CFI lacks jurisdiction and the primary judge so finds he is entitled to refuse the grant of a Worldwide Freezing Order on that basis. However where the question is reasonably arguable and the conditions for the grant of a Worldwide Freezing Order are satisfied then the judge may, in the exercise of his discretion, grant the order on an ex parte basis subject to the usual undertaking as to damages, provided that the earliest possible opportunity is accorded to the Defendant to apply to discharge the order or oppose its renewal on the basis that it should not have been made and/or the court lacks jurisdiction.

18. The Court of Appeal in this case was of the view, without determining the question, that there is a reasonable argument for holding that jurisdiction exists. Rather than deal with that question ex parte the better course is for the court to remit the matter to the CFI, to grant a short term freezing order and determine the question of jurisdiction on notice on the application for renewal or discharge of that order. Any appeal from the CFI decision will be on notice and the court can hear from all affected parties. In taking this approach the court seeks to minimise the extent to which the procedures of the CFI and this Court are invoked without notice to affected Defendants or Respondents

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 4 October 2020
Time: 2pm