CFI 024/2015 Ziad Azzam v Deyaar Development PJSC

Claim No. CFI 024/2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE OMAR AL MUHAIRI

BETWEEN

ZIAD AZZAM

  Claimant

and

DEYAAR DEVELOPMENT PJSC

                                             Defendant

Hearing:            18 October 2015

Counsel:           Vernon Flynn QC assisted by Tom Montagu-Smith instructed by Hogan                                                       Lovells (Middle East) LLP for the Claimant

Tom Leech QC assisted by Stuart Patterson and Nathan Hooper  (Herbert Smith Freehills LLP) for the Defendant

Judgment:        9 December 2015

JUDGMENT OF H.E JUSTICE OMAR AL MUHAIRI

Summary of Judgment

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

JUDGMENT

UPON hearing Counsel for the Claimant and Counsel for the Defendant at a hearing on 18 October 2015

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

IT IS HEREBY ORDERED THAT:

1. The Claimant’s claim is dismissed.

2. There be no order as to costs. If not agreed, the parties shall furnish details of their costs together with short written submissions within 21 days of the date of this judgment.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 9 December 2015

At: 3pm

REASONING

1. Before the DIFC Court of First Instance is Claimant Ziad Azzam, the former CEO of Taaleem PJSC (“Taaleem”). The Defendant is Deyaar Development PJSC (“Deyaar”), a local and regional real estate developer and real estate services company located in Dubai.

2. On 24 August 2015 the Claimant filed an RDC Part 8 claim with the Court of First Instance seeking an injunction prohibiting the Defendant from pursuing a Dubai Court proceeding (“Dubai Court Claim”) against the Claimant as well as a declaration that the DIFC Courts have exclusive jurisdiction over the Dubai Court Claim. The Claimant also seeks a declaration that the said claim is an abuse of process.

Background

3. This claim stems from an underlying dispute adjudicated by the DIFC Courts in Taaleem PJSC v (1) National Bonds Corporation PJSC (2) Deyaar Developments PJSC [CFI-014-2010] (19 Feb 2014). In that judgment Justice Sir David Steel found that Taaleem sold an interest in the Sky Gardens Tower (a residential property development in the DIFC) to Deyaar (“the Transaction”). Deyaar denied a contract for sale was concluded and alleged that the transaction was concluded in breach of fiduciary duty and should be set aside. Justice Sir David Steel rejected both arguments and Deyaar was found liable to National Bonds Corporation (“NBC”), the party that provided the finance.

4. Subsequently the Court listed a hearing to settle the orders consequential to the Taaleem Judgment, and Deyaar raised a series of new points. Following a hearing, Justice Sir David Steel issued a further judgment dismissing Deyaar’s arguments. Deyaar then sought permission to appeal the second Taaleem judgment and permission was refused on 3 August 2015. An oral permission hearing took place on 7 September 2015, in which an Order dated 18 November 2015 granted permission to appeal.

5. In the meantime, on 30 June 2015, Deyaar commenced the Dubai Court Claim alleging that its officers (the first, second and fourth defendants in the Dubai Court Claim) made payments to Taaleem and third parties in respect of the Transaction without the authority of Deyaar and without any legal agreements to justify those payments, thus acting in breach of their duties to Deyaar.

6. As a result, the Claimant filed the RDC Part 8 claim with the DIFC Courts seeking an injunction prohibiting the Defendant from pursuing the Dubai Court Claim and seeking a declaration that the DIFC Courts have exclusive jurisdiction over the Dubai Court Claim and that the said claim is an abuse of process.

The Hearing

7. On 18 October 2015, an oral hearing took place before me which was attended by Mr Vernon Flynn with Mr Tom Montagu-Smith assisting for the Claimant, and Mr Tom Leech with Mr Stuart Paterson and Mr Nathan Hooper assisting for the Defendant. During the hearing, both parties presented their arguments in full.

Jurisdiction

8. The jurisdiction issue is two-pronged as the Defendant not only disputes the jurisdiction in the present Part 8 claim, but also disputes jurisdiction over the Dubai Court Claim against the Claimant. Although the two disputes are different the conclusion will be identical for both issues of jurisdiction.

9. The legal framework creating the DIFC and the DIFC Courts has previously been discussed in this Court in CA-005-2014, Meydan Group LLC v Banyan Tree Corporate Pte Ltd, but will be elucidated once more in the present case in light of the jurisdiction dispute. The legal framework begins with the UAE Constitution; in particular an amendment to Article 121 which deals with the division of powers between Federal and Emirati authorities and which allows the Federation to enact a Financial Free Zone Law. The relevant provisions of Article 121 state,

“Without prejudice to the provision of the previous article constitution, the Union shall have exclusive legislative jurisdiction in respect of… organization and method of establishing financial free zones and scope of excluding the same from the implementation of the Federal legislative provisions.”

10. In line with this, Federal Law No. 8 of 2004 was enacted concerning financial free zones which allow a financial free zone to be established in any Emirate of the UAE, by Federal Decree. Article 3(2) states,

“Further, these zones and Financial Activities are subject to all provisions of   Federal Law with the exception of the Federal civil and commercial laws.”

Article 7(3) states,

“Subject to the provisions of Article 3, for the purpose of establishing a Financial Free Zone, the relevant Emirate may issue regulations necessary for it to perform its activity.”

11. Subsequently, Federal Decree No. 35 of 2004 was enacted to specifically establish the DIFC as a financial free zone in the Emirate of Dubai and prescribe the specific geographical location of the DIFC in the heart of Dubai. Article 1 states,

“The establishment of financial free zone in the Emirate of Dubai to be named (Dubai International Financial Centre).”

12. Furthermore, Dubai Law No. 12 of 2004 as amended by Dubai Law No. 16 of 2011 (otherwise known as the “Judicial Authority Law”) was enacted to establish the DIFC Court of First Instance and Court of Appeal and the jurisdiction of the DIFC Courts. The applicable Article on Jurisdiction, otherwise known as the “Gateways” is Article 5(A), which states in full,

(A) 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, finalized 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;

(e) 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 of 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.”

13. Thereafter, DIFC Law No. 10 of 2004 was enacted to provide for the independent administration of justice in the DIFC in accordance with Dubai Law No. 12 of 2004. Among other items, the law sets out the jurisdiction of the DIFC Courts, including issues relating to the jurisdiction of the Courts and the Practice and Procedure that the Court will apply. Article 19(1) regarding Jurisdiction states, 

“19. Jurisdiction

(1) The DIFC Court of First Instance has original jurisdiction pursuant to Article 5(A) of the Judicial Authority Law to hear any of the following:

(a) civil or commercial cases and disputes involving the Centre or any of the Centre’s Bodies or any of the Centre’s Establishments;

(b) civil or commercial cases and disputes arising from or related to a contract concluded or a transaction concluded by any of the Centre’s Establishments or the Centre’s Bodies;

(c) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre; and

(d) any application over which the DIFC Court has jurisdiction in accordance with DIFC Laws and Regulations;”

14. The Claimant argues that the Dubai Court Claim is subject to the jurisdiction of the DIFC Courts for three reasons: the Transaction was concluded in the DIFC under Article 5 (A)(1)(b) (cited above), it involves an event that occurred in the DIFC under Article 5 (A)(1)(c) and the claim relates to a DIFC Trust in respect of property within the DIFC under DIFC Trust Law, Article 20 and Article 5(A)(1)(e) (cited above).

15. In response, the Defendant submits that the Dubai Courts Claim does not fall within exclusive jurisdiction of the DIFC Courts and that Article 5(A) “carves out” of the general jurisdiction of the Dubai Courts exclusive jurisdiction over civil or commercial claims which have a sufficient connection with the DIFC. Pursuant to this, the Defendant argues that Article 5(A) should be construed narrowly as the proceedings are not so closely connected with matters of DIFC contract law or the DIFC law of trusts that the proceedings should not be tried anywhere but in the DIFC Courts.

16. It is plain to me that the claim in this case and indeed the Dubai Courts Claim arises out of and relates to the same matters dealt with in the Taaleem judgments by Justice Sir David Steel.

17. According to the Defendant, the case against the Claimant in the Dubai Courts Claim is summarised by arguing that the Claimant signed an MOU which he knew to be false and misled Deyaar’s board as to the Transaction and is therefore liable under Articles 282 and 106 of the UAE Civil Code. (See paragraph 18 of Defendant’s Skeleton Argument, 14 Oct 2014)

18. The claim against the Claimant therefore arises out of and relates to the same agreement that was the subject of the Taaleem proceedings, the same Transaction that was concluded in part in the DIFC.

19. As a result, there is no material difference between the subject matter of the Taaleem proceedings and the subject matter of the Dubai Court Claim and by extension the present claim. Accordingly, the DIFC Court has jurisdiction over both the present claim and the Dubai Court Claim to the exclusion of the Dubai Courts. (The question of jurisdiction as to the Taaleem proceedings has been previously adjudicated in full with two judgments by Justice Sir John Chadwick as well as a Court of Appeal judgment upholding DIFC jurisdiction[1]).

20. It is noteworthy to add that in the course of the present proceedings, the Dubai Court of First Instance dismissed the Dubai Court Claim brought by Deyaar against the Claimant (and other defendants) for lack of jurisdiction on 28 October 2015, which further illustrates that the DIFC Courts undoubtedly have jurisdiction over these proceedings.

The Injunction and Abuse of Process

21. Due to the interrelated nature of the remedy and declarations sought by the Claimant, I will consider the issues of the interim injunction and abuse of process together.

22. In the present proceedings the Claimant seeks an injunction requiring Deyaar to withdraw the Dubai Court Claim against the Claimant in the interests of justice. The Claimant’s argument is that the Dubai Court Claim is vexatious and oppressive and constitutes an abuse of process.

23. As to the abuse of process argument, the Claimant’s position is that the Dubai Courts Claim is an abuse of process for two reasons. First, that it is a claim that could and should have been brought together with the Taaleem proceedings and second, that the claim is a collateral attack on the Taaleem

24. In response, the Defendant argues that had Deyaar brought the proceedings in the DIFC Courts rather than the Dubai Courts it would not have been an abuse of process so a priori it cannot be an abuse of process to bring them in the Dubai Courts. Additionally the Defendant argues that it is not an abuse of process to re-litigate an issue the determination of which was not fundamental or essential to the conclusion reached in the earlier proceedings or where re-litigation would not be manifestly unfair. As such, the Defendant maintains that the application for an injunction should be dismissed.

25. On the injunction issue, I am inclined to take the view of Justice Sir John Chadwick in Taaleem v National Bonds [CFI-014-2010] (21 Oct 2010). In those proceedings the Claimant Taaleem asked this Court for an injunction requiring the First Defendant NBC to stay the proceedings in the Dubai Civil Court. To this, Justice Sir John Chadwick ruled,

“15. I am asked, in effect, to make an order which is intended to have the result that the Dubai Civil Court will not have the opportunity…of considering the question whether or not it claims jurisdiction. I put it that way because, if the Dubai Civil Court were to accept that the dispute fell within one or other of the five heads in Article 3 of the Protocol, it could be expected to recognise, under the terms of the Protocol, that exclusive jurisdiction lay in this Court. Equally, if the Dubai Civil Court were to reach the conclusion that the matter did not fall within one or other of those five heads then [sic] Article 4 of the Protocol it would be led to the view that the matter was exclusively within its own jurisdiction.

16. In those circumstances, as it seems to me, the sensible course is to allow the Dubai Civil Court to consider the matter unimpeded by any order of this Court in the terms sought in the present application. The Dubai Civil Court will know that this Court has made the order of 26 September accepting jurisdiction. It will have the opportunity to consider, first, whether it accepts that view of jurisdiction; second whether, it prefers to await a reasoned judgment of this Court before coming to a conclusion on that point; and third, whether it would prefer to wait until there was an appeal judgment in this Court on the point.

…

18. What, as it seems to me, is unlikely to be helpful is for this Court to seek to appropriate to itself the right to decide questions of jurisdiction to the exclusion of the Dubai Civil Court; without affording to the Dubai Civil Court the opportunity of considering the problem in the individual case. It may be expected – that as the jurisprudence develops and as more cases come before the two Courts – a pattern will emerge which enables the parties and their advisors to predict with reasonable certainty which Court will accept jurisdiction and which will not.

19. It is plainly not intended either that both Courts will accept jurisdiction; or that both Courts will decline jurisdiction. The framework within the legislation in force in the Emirate contemplates these matters will be heard in one Court rather than the other and sets out provisions which enables a decision to be made as to which Court that should be.”

26. I concur with the idea that to grant the injunction and seek the right to decide questions of jurisdiction to the exclusion of the Dubai Court (and to the neglect of the Protocol) is unlikely to be helpful. Furthermore the DIFC Courts should hesitate to stop a party from filing a claim in another court regardless of whether or not we have assumed jurisdiction.

27. As Justice Sir John Chadwick noted in paragraph 19 cited above, the framework within the legislation between the two courts operate to produce a reasonable and accurate outcome with regards to jurisdiction. Given the facts of the underlying case and the fact that the Dubai Court of First Instance has already dismissed the Dubai Court Claim for want of jurisdiction, it seems wholly unnecessary to grant an injunction at this stage. In addition to this, the Union Supreme Court, (“USC”) as the highest judicial court in the UAE has amongst other powers, the authority to hear any conflicts in jurisdiction between Dubai and the DIFC Courts. Surely, the USC has the jurisdiction to hear any jurisdictional or constitutional issues in all of the Emirates, including the DIFC. The establishment of the USC is laid out in Federal Law No 10. of 1973 as amended by Law No. 26 of 1992 and the DIFC is certainly not exempted from the jurisdiction of the USC. As his Excellency Justice Al Madhani directed in ARB-001-2014, X1 and X2 v Y,

“I also agree with the Defendant’s submission that the DIFC regime is not exempted from the jurisdiction of the USC when it comes to the Constitutionality Examination, including the fact that the DIFC Court is a UAE Court that can refer a matter to the USC if requested to do so, and then must comply with the decision of the USC rendered in that connection.”

28. In view of this and for the reasons stated above, I am not inclined to make a declaration asserting abuse of process.

29. For these reasons I dismiss the remedy sought in the Claimant’s application for an injunction and a declaration that the Dubai Court Claim constitutes an abuse of process.

Costs

30. My provisional view is that there should be no order as to costs but this is without the benefit of any argument. If the parties are unable to agree on the costs issue, I invite each side to furnish details of their costs together with short written submissions within 21 days of the date of this judgment.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 9 December 2015

At: 3pm

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