DIFC Courts - 2022 Round-Up

The 12 days of Christmas may be over but to start your 2023 we offer up 12 highlights from the 2022 DIFC Courts’ caseload (with a few extra crackers thrown in) to demonstrate the Courts’ developing diet.

January. Just prior to the start of 2022 the DIFC Court of Appeal handed down its decision in Lachesis v Lacrosse [2021] DIFC CA 005 (29 December 2021). The Court considered an application to set aside an arbitral award on grounds of failure to observe arbitral procedure (as the award was not signed on every page); incapacity (the appellant alleged that its former solicitors did not have the capacity to change the applicable law of one of the charterparties from UAE law to English law); and unfair treatment (the appellant complained of unfair and unequal treatment during the course of the arbitration hearing, and that it was unable to present its case before the tribunal). Following the arbitral tribunal and Court of First Instance before it, the Court of Appeal declined to set aside the award, emphasising the finality of arbitral awards. The merits of the dispute could not be relitigated before the court in the guise of a challenge on the grounds of natural justice or procedural failure. The Court demonstrated its keen awareness of losing parties trying to side-step an unfavourable award by seeking a second shot in a different forum.

February. In Salem Altamimi & ors v Emirates NBD Bank & ors [2021] DIFC CFI 085 (18 February 2022), the Court of First Instance dismissed a claim brought by trustees seeking recognition in the DIFC of parallel restructuring and bankruptcy proceedings in the Abu Dhabi Courts. The trustees argued that the debtor’s existing Abu Dhabi bankruptcy proceedings ought to be recognised by the DIFC Court as 'foreign main proceedings' under Article 15 of Schedule 4 of the DIFC Insolvency Law No 1 of 2019. The Court rejected the application, which would have stayed litigation against the bankrupts in the DIFC, finding, amongst other things, that no order had been made by the Abu Dhabi Courts for any reorganisation or liquidation and that the trustees' function was 'preparatory' in nature and did not extend to administering any reorganisation or liquidation.

March. The Court of First Instance handed down its decision in Hexagon Holdings (Cayman) Limited v (1) Dubai International Financial Centre Authority (2) Dubai International Financial Centre Investments LLC [2019] DIFC CFI 013 (2 March 2022). The parties had had been joint venturers engaged in the development of a valuable parcel of land in the DIFC. The joint venture agreement was terminated by the claimant nearly 15 years after it was entered into, at which point there was no finalised design for the mixed-use development envisaged, nor any building on the site. The claimant blamed the defendants for this situation, instituting proceedings in the DIFC Courts (for over AED 1 billion) and seeking a declaration that it had validly terminated the joint venture agreement. The Court dismissed all the claims: the joint venture agreement had not been lawfully terminated, there had been no non-performance by the defendants, and the claimant was not entitled to damages of any kind or restitution for unjust enrichment or wrongful act. By the time the claimant chose to terminate the agreement, any anticipatory non-performance had been remedied and the claimant had already lost the right to terminate for any earlier breaches that were not time barred.

April. Shortly before April the DIFC Courts found, for the first time, both individual and corporate defendants guilty of serious contempt of court and referred them to the Attorney General of Dubai for investigation and prosecution. In (1) Lateef (2) Lukman v (1) Liyela (2) Liyani [2020] DIFC ARB 017 (24 March 2022) the DIFC Court had issued worldwide freezing orders and accompanying asset information orders, as part of the claimants' attempts to enforce a New York arbitral award. In breach of the worldwide freezing order, the defendant had instructed a bank to transfer AED 7 million to another company from an account specifically identified in the order. He also failed to properly comply with the asset information order. The judgment gives helpful guidance on the principles relevant to applications relating to contempt of court and demonstrates that whilst the DIFC Courts do not have the power to impose criminal sanctions, it can and will refer serious breaches of court orders to the Dubai Attorney General for prosecution.

May. This month saw the DIFC Courts grant immediate judgment to a syndicate of banks in an AED 2 billion (USD 540 million) claim for recovery of restructuring loans in Emirates NBD Bank PJSC and ors v Advanced Facilities Management LLC and ors [2020] CFI 065 (9 May 2022). The judgment is one of the largest issued by the DIFC Courts. The Court also gave useful guidance on a number of issues, including the relationship between allegations of misrepresentation and the interaction between the requirement of certainty for contractual provisions and implied representations. The Court stressed that, where a promise is insufficiently certain to carry contractual force, a party is unlikely to be able to escape those consequences by recasting it as carrying implied representations.

June. In DIFC Investments Ltd v Dubai Islamic Bank [2022] DIFC CFI 024 (13 June 2022), the Court considered a claim arising out of a construction contract that the claimant employer had entered into with a contractor to construct the DIFC’s Gate Avenue area. The contractor had obtained finance from the defendant bank. As security for the sums owed, the contractor assigned sums due to it from the claimant to be paid directly to the defendant. Following an arbitration between the claimant and contractor, the defendant sought payment from the claimant of sums owed to it by the contractor under the assignment. The claimant was successful in its application for immediate judgment seeking a declaration that no sums were due to the defendant, who had already unsuccessfully sued it in the Dubai Courts.

July. In Massun v Mousi and ors [2022] DIFC CA 004 (22 July 2022), the DIFC Courts considered the “reflective loss” principle for the first time. The claimant had claimed a beneficial interest in the shares of certain companies at the top of two corporate structures. Two large assets were held in these corporate structures, registered to companies at the bottom of the structures. The claimant asserted that the companies had tried to misappropriate these assets, claims denied by the defendants. The claimant amended her claim to argue that she had a direct beneficial interest in the two assets. The Court of First Instance’s permission to amend was subsequently rescinded by the Court of Appeal, considering the approach of the UK Supreme Court in Marex Financial Ltd v Sevilleja [2020] UKSC 31 and the principle that, if a company suffers loss, the loss suffered by a shareholder as a result of the reduction in value of that shareholding is not a loss which is recognised by law.

Also in July, H.E. Dubai Justice Ali Shamis Al Madhani was promoted to Deputy Chief Justice of the DIFC Courts and Justice Michael Black KC, an English barrister instrumental in setting up the DIFC Courts, was appointed as a DIFC Court of Appeal Judge and judge in charge of the new Digital Economy Court.

August. In Larmag Holding B.V. v (1) First Abu Dhabi Bank PJSC (2) Fab Securities LLC (3) Mr Abdullah Saeed Bakheet Obaid Aljaberi (4) Mr Ali Mohammed (5) Elite Holding Group Limited DIFC CFI 054 2019 (19 August 2022), the Court of First Instance refused an application to appeal in a civil fraud claim. In the substantive proceedings, the claimant claimed that it was induced by a fraud allegedly committed by the third and fifth defendants to sell bonds to the fifth defendant and deliver them by transfer to an account held by second defendant. In 2021, following a substantive hearing, the Court had ruled in the claimant’s favour, holding that the material bonds had been fraudulently transferred between the defendants using forged documents. The third defendant had been liable for deceit and the fourth and fifth defendants were ordered to pay the claimant’s costs on an indemnity basis.

September. The Court of Appeal handed down judgment in The Industrial Group Limited v Abdelazim El Sheikh El Fadil Hamid [2022] DIFC CA 005 and CA 006 (20 September 2022). The defendant employee had been dismissed by the claimant employer for, amongst other things, misappropriating company funds. The claimant made a police complaint and commenced civil recovery proceedings in the DIFC. The defendant counterclaimed for employment entitlements and sought a penalty for failure to pay sums due on termination. He also sued for malicious prosecution and abuse of process, claiming over AED 52 million (USD 14 million). The Court of First Instance awarded a penalty of AED 7.5 million on the old, pre-2019 DIFC Employment Law, finding that the right to a penalty had accrued and continued unchanged during the course of the dispute. The Court of Appeal reduced the penalty to AED 2.4 million, holding that the penalty stopped accruing when the former Employment Law was replaced in 2019. The Court also dismissed the malicious prosecution and abuse of process claims, finding those torts not to be part of DIFC law, contrary to the defendant’s arguments that the common law jurisdiction of the DIFC left it open to the Courts to develop judge-made law in the same way as other common law jurisdictions.

Also, on 1 September the DIFC launched its Global Family Business and Private Wealth Centre to act as a hub for global and regional family-owned businesses, ultra-high net worth individuals and private wealth. The centre is intended to provide a range of services to family-owned businesses to assist their legacy and succession planning, from advisory and education services to networking events. The centre will capitalise upon and further develop the DIFC’s position as the region’s leading centre for private wealth.

October. In Lunars v (1) Liuns (2) Lerstin (3) Liwt (4) Lohan (5) Lufits [2022] DIFC CFI 042 (26 October 2022), the claimant sought pre-action disclosure under RDC 28.48 against the first to third defendants and a non-party disclosure order (Norwich Pharmacal relief) and a Banker’s Trust order against the fourth and fifth defendants. The Court of First Instance gave extensive guidance on pre-action disclosure following principles and authorities established in other common law jurisdictions. Ultimately, the Court concluded that it could not grant pre-action disclosure in aid of a dispute that would be referred to arbitration rather than litigated in court because the power to invoke pre-action disclosure could only be invoked by an applicant who appeared to the Court likely to be a party to subsequent proceedings in that Court. The claimant also failed in its applications against the fourth and fifth defendants.

Also in October, the DIFC Courts launched a global digital vault called ‘tejouri’. This allows users to upload and securely store digital documents such as insurance contracts, title deeds, wills, and financial certificates, as well as images and multimedia files.

November. In Eminent Trading & Services Pte. Limited v Beaufond plc [2022] DIFC CFI 054 (10 November 2022), the Courts considered a claim for enforcement in the DIFC of a judgment of the Singapore Courts for around USD 650,000. The judgment debtor defended the enforcement claim and asserted that the claimant had to prove that the judgment of the Supreme Court of Singapore was final and conclusive and capable of being enforced, and that the amount of the judgment did not include taxes, fines or penalties which were unenforceable under the common law principles of recognising and enforcing foreign judgments. The defendant also claimed that the Singapore judgment was unenforceable because that court had never had jurisdiction over it: the defendant did not participate in the Singapore proceedings, had had no legal representation, and had not otherwise submitted to the Singaporean jurisdiction. The judgment creditor confirmed that the Singapore judgment was final and enforceable and was not an order for the payment of taxes, fines or penalties. It also submitted that the defendant had submitted to the jurisdiction of Singapore by filing a memorandum of appearance in the proceedings and participating in the document discovery process. The Court of First Instance granted the claimant’s immediate judgment application, finding that the defendant had no real prospect of successfully defending the claim and that there was no other compelling reason why the case should be disposed of at a trial.

December. At the end of the year, the DIFC Court of Appeal allowed an appeal against an order of the Court of First Instance discharging contempt orders against defendants who had played a role in allowing an aircraft, named in a freezing order, to leave Dubai: Gulf Wings FZE v A And K Trading Limited and (1) Mr Kamel Abou Aly (2) Mr Ahmed Abouhashima [2022] DIFC CA 014 (22 December 2022). The claimant had filed a debt recovery claim for around USD 1.3 million and obtained a freezing order in support of its claim. The aircraft was moved to Cairo in breach of the freezing order, and the Court of First Instance made three contempt orders against the corporate defendant and two individuals registered as its shareholders and directors, ordering them to pay a fine of USD 100,000 and referring the matter of their contempt to the Attorney General of Dubai for his review and consideration of committal. After payment of the debt was made into the DIFC Courts, the Deputy Chief Justice discharged the contempt order against one of the individuals, causing the Dubai Attorney-General to close his investigation into both individuals. The claimant appealed the discharge, having not been given the opportunity to oppose the discharge and because the defendants had not paid any interest or costs on the debt sum. In restoring the contempt orders, the appeal Court ordered the contemnors to make good to the claimant that which had been lost by their contempt, including providing security in place of the aircraft that had been allowed to depart and paying the costs of the foreign proceedings to recover the aircraft.

Also in December, a new Practice Direction regarding the Digital Economy Court came into effect (on 9 December 2022).

Conclusion

In their 2022 Annual Report released in February 2023, the Courts indicated that they had had a very successful year:

• 861 cases were brought in 2022, approaching the Courts’ all-time high of 952 cases shortly before Covid began.
• The total value of claims and counterclaims filed across all Divisions was over AED 4.4 billion, breaking down to around AED 3.14 billion in the Civil and Commercial Division, over 1.222 billion in the Arbitration Division and over AED 7 million in the Technology and Construction Division.
• The average sums claimed and/or counterclaimed across the three Divisions and the Digital Economy Court was over AED 58 million.
• Over 90% of hearings were conducted remotely, a trend we expect to continue.

The cases above show the range, variety and depth of proceedings before the DIFC Courts.

We expect a similar case load in 2023, with a diet of enforcements of judgments and arbitral awards, substantive claims and, in particular, high-value banking and finance disputes.

We also expect an increasing number of interim applications, in particular for injunctive relief in cross-border disputes.