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Claim No: CA 011/2022

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF APPEAL
BEFORE THE REGISTRAR AYESHA BIN KALBAN

BETWEEN

SBM BANK (MAURITIUS) LTD

Respondent/Claimant

and

(1) RENISH PETROCHEM FZE
(2) MR HITESHKUMAR CHINUBHAI MEHTA

Appellants/Defendants

ORDER OF WITH REASONS OF THE REGISTRAR AYESHA BIN KALBAN

UPON the Order of Chief Justice Zaki Ami dated 18 August 2022 (the “Order”) granting the Respondent’s Renewed Permission to Appeal Application on the condition the Appellants pay security for costs

AND UPON hearing Counsel for the Appellants and Counsel for the Respondent at the hearing on 25 October 2022 to determine quantum of security

IT IS HEREBY ORDERED THAT:

1. The Appellants shall provide security for the Respondent’s costs of the appeal in the sum of USD 250,000, by paying the sum into the DIFC Courts’ Escrow account within 30 days of this Order.

2. In the event of default of payment and pursuant to Rule 25.112 of the Rules of the DIFC Courts (the “RDC”), the Respondent is granted permission to apply to the Court for the case to be stayed.

Issued by:
Ayesha Bin Kalban
Registrar
Date of issue: 22 December 2022
At: 9am

SCHEDULE OF REASONS

1. The parties appeared before me at a hearing on 25 October 2022 (the “Hearing”) to determine the quantum of security for costs to be paid by the Appellants to the Respondent, pursuant to the Order of Chief Justice Zaki Azmi dated 18 August 2022. Mr James Weale appeared before me on behalf of the Respondent and Mr Rajesh Pillai KC appeared on behalf of the Respondents.

2. Prior to the Hearing, I reviewed the Respondent’s schedule of prospective costs and both parties’ skeleton arguments. I do not propose to refer to every point made by the parties. The fact that I may omit reference to some argument or authority does not mean that it has been overlooked.

3. At the outset of the Hearing, I provided an initial indication that the Respondent’s estimated costs as set out in its schedule of prospective costs were excessive. I also indicated that I did not accept the Appellants’ assertion that it was impecunious, nor did I accept that its proposal for security for costs in the sum of USD 65,000 to be appropriate. I further indicated that the likely approach to determine quantum was to reduce the headline costs.

4. I will not set out an extensive factual background of the case given the history of the proceedings to date and the narrow scope of what I am asked to consider at this stage, save for noting that there were six claims brought by the Respondent against the Appellants. The Respondent had alleged there were payment representations which were made fraudulently. Out of the six payments that were alleged to be fraudulent, only two were held by the judge to be legitimately fraudulent.

5. The principal areas of contention between the parties at the Hearing were as follows:

Form of Respondent’s Schedule of Prospective Costs

6. The Appellants’ primary issue was that the Respondent had not provided details of the costs in line with the RDC requirements. In particular, RDC 25.99 (3) and in the alternative had filed an Excel spreadsheet. Additionally, the Appellants took an issue with the document not having been signed appropriately. The contention was that the schedule had not been signed by the party or its legal representative as required by RDC at 25.99(3) and RDC 38.35. In response, Mr Weale submitted that the Respondent was not making an application for security for costs as the Court of Appeal had already determined that security should be provided, and this Hearing had simply been fixed to determine quantum. Mr Weale further submitted that the Respondent had adopted a proportionate approach in the circumstances by filing a schedule of costs. Mr Weale indicated at the Hearing that those instructing him would be content to provide a signed copy of the schedule of costs. Mr Weale invited the Court to consider the absence of any schedule prepared by the Appellants and the sole reliance on the evidence contained within Mr Mehta’s tenth witness statement.

Appellants’ objections to items within the Respondent’s schedule of cost

7. The Appellants objections are set out at paragraph 22 of their skeleton argument and the Court was invited to accept the points as the basis for significantly reducing the headline costs figure against which security is to be calculated. Mr Weale addressed the Court in relation to each of the objections and the Respondents’ position. I do not set out the objections in this short Order and note that the concessions made by the Respondent have been set out in its revised schedule of costs. Mr Weale indicated during the course of the Hearing that the schedule would be revised to include the actual incurred costs in relation to three categories of work to be undertaken in respect of this hearing. The categories were the preparation of the schedule of costs, the skeleton argument and the hearing bundle. Mr Weale’s submissions in relation to counsel’s costs to attend the hearing were prepared with a view that the appeal hearing would be held in person, including travel and accommodation costs. I notified the parties during the Hearing that the appeal hearing would be conducted virtually and requested Mr Weale to ensure the appropriate amendments were made to the Appellants’ costs.

8. Mr Pillai drew my attention to various paragraphs of Mr Mehta’s tenth witness statement, in support of the Appellants’ impecuniosity and the efforts made hitherto by Mr Mehta to raise security. In reliance on paragraph 88(v) in Pisante v Logothetis [2020] EWHC 3332 (Comm), Mr Pillai KC submitted that security should be proportionate and reasonable and that costs should not be set in an amount that would stifle the appeal. Mr Pillai KC invited the Court to set security at USD 65,000 and in determining the appropriate level of security to be awarded, submitted that a significant discount in the region of 60% to 65% would be appropriate and should be applied in this case.

9. Mr Weale addressed me in relation to Mr Mehta’s impecuniosity and why the Court should reject the contention in this regard. Mr Weale’s submissions centred on the absence of any proper, cogent or detailed evidence of Mr Mehta’s financial position and the failure to provide full and frank disclosure of his financial resources. Mr Weale submitted that Mr Mehta’s tenth witness statement included evidence at paragraphs 6 to 9 which in his view, do no more than provide several bare a list of individuals who he has contacted to provide him with money, and without any exhibited relevant correspondence or documents in evidence as to the financial positions of the respective individuals. Mr Weale further submitted that Mr Mehta had not provided any evidence to establish his own impecuniosity and that of Renish Petrochem FZE.

10. Prior to the end of the Hearing, I rejected the Appellants’ impecuniosity argument and indicated that there was in my view a further amount that could be paid by Mr Mehta, than had been suggested to date.

11. I directed Mr Weale to have the Respondent provide the Registry with a signed copy of the schedule of costs and to amend the schedule of prospective costs in line with the Registrar’s Direction 1 of 2017 which sets out indicative hourly legal charges. I noted that these hourly rates had been reviewed in 2021 and that they continued to be applied. Despite their indicative nature, I found that they should be applied in this case in order to ensure that the appeal was not stifled.

Legal Framework

12. There are several authorities under English Law which I consider to be relevant in determining quantum of security in the present case. The relevant legal test is contained in the case of Pisante v Logothetis [2020] EWHC 3332 (Comm) at [88], which sets out guidance on how to approach the issue of quantum:

13. I am guided by the principles in the Pisante case and in particular that I am not to undertake a detailed assessment but instead approach the issue in a robust and broad-brush manner. In addition, that a Court can apply an overall percentage discount and that there is no hard and fast rule as to the percentage discount to apply and that each case must be decided upon its own circumstances. In deciding the amount of security to award, the Court may consider the balance of prejudice, which in this case requires a comparison between the harm the Respondent would suffer if too little security were given and the harm the Appellants would suffer if the amount secured were too high. I note that the relevant principles governing how to determine quantum for security for costs are summarised in note 25.12.7 in the English Civil Procedure Rules

14. The English Courts general approach to quantum is that security should be as the Court thinks fit in all the circumstances ( Procon (Great Britain Ltd v Provincial Building Co Ltd [1984] 1 WLR 557), proportionate to the amount involved in the case and should neither be illusory or oppressive ( Dominion Brewery v Foster (1897) 77 LT 507). The English Courts approach has been to apply a percentage reduction to the future estimated costs rather than engage in any such detailed assessment.

15. I am aware of the varying percentage discounts that have been applied in cases considered under English law when determining quantum of security. In Royal Bank of Scotland Plc v Hicks [2012] EWCA Civ 1665, 70% of the sum sought was considered to be appropriate, where it appeared likely that costs would be ordered on the standard basis. In Newwatch Ltd v Bennett [2016] EWHC 3506 (Comm), 75% was considered to be appropriate in all the circumstances. In Vegie Bar LLC v Emirates National Bank of Dubai Properties [2016] DIFC CFI 009, the Court found that security should be paid but not in the full amount being sought. As such, 50% of the costs was deemed to be appropriate amount in the circumstances.

Decision

16. In reaching the decision contained herein, I have carefully considered the skeleton arguments submitted by both parties, oral submissions amplifying those arguments at the Hearing, the Respondent’s revised schedule of costs and accompanying explanatory note, the Appellants’ response to the Respondent’s revised schedule of prospective costs of the appeal, and the relevant legal framework.

17. I note the updated sum sought by way of security, as set out at paragraph 11 of the Respondents’ explanatory note to its revised schedule of prospective costs. The overall costs of the appeal are now USD 703,498.09 of which USD 251,700.13 represents costs already incurred and billed. The remaining USD 451,797.96 represents future estimated costs for the remainder of the appeal proceedings.

18. In the time since the Hearing, the Chief Justice has determined an application filed by the Respondent seeking to impose additional security upon the granting of permission to appeal. In his order dated 16 December 2022, the Chief Justice declined to add further conditions upon granting permission to appeal and awarded the Appellants their costs of that application. It follows that I will not be considering the addition of the Respondents’ costs to the quantum finding for security.

19. Of the Respondent’s costs which have already been incurred and billed (USD 251,700.13) is included a costs order in its favour of USD 174,798.42 which arose out of a consent order dated 9 August 2022, pursuant to which the Appellants agreed to pay the Respondent’s costs in this sum by 23 August 2022. This order remains unpaid, which is why the Respondent has included it as part of incurred costs and requires security for it. I take the view that as an order has already been made in the Respondent’s favour on this specific amount, I do not intend to include it within the amount of costs to be secured for the appeal.

20. I turn to the issue of transcription costs included within the Respondent’s schedule. I do not intend to consider these to form part of the security amount, seeing as alternative options for transcription services may be considered, and the Appellants should not have to provide security for a service that can be offered at a lesser rate.

21. In determining the amount to be awarded, I have considered the costs already incurred by the Respondent and those costs which are estimated to be incurred (on a reasonable basis) in the future in connection with these proceedings. In my view and being guided by previous authorities, it is essential to undertake a balancing exercise, on the one hand ensuring that the Respondent is not subjected to a further shortfall and on the other hand making sure that the appeal is not stifled, given Chief Justice Zaki Azmi’s finding that the appeal has a real prospect of success. As indicated at the Hearing, I do not accept that the Appellants are impecunious and consider that they are able to pay a greater sum by way of security, than has been suggested. In light of the Respondent’s revised schedule of costs, I maintain my view that the estimated costs for the remainder of the appeal proceedings are excessive, despite the amendments made in line with the guideline rates.

22. I have taken into account the estimated length of the appeal hearing, which is scheduled to take place over two days and will be conducted virtually. I also take into consideration the generally discrete nature of appeal costs which may give less scope for argument than litigation costs. In the present case, I note that the issues to be considered by way of appeal are familiar to the parties.

23. In consideration of all the circumstances in the round, I have adopted a proportionality approach in determining the appropriate level of security to be awarded in this. Therefore, I consider USD 250,000 to be a reasonable and proportionate award for security for costs.