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Claim No: CA 005/2015

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 THE CHIEF JUSTICE MICHAEL HWANG, DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK AND H.E. JUSTICE ALI AL MADHANI

BETWEEN

FRONTLINE DEVELOPMENT PARTNERS LIMITED

Appellant/Defendant

and

ASIF HAKIM ADIL

Respondent/Claimant

Hearing:            7 September 2015

Counsel:           Zeeshan Dhar (Al Tamimi & Co) for the Appellant

Bushra Ahmed (KBH Kaanuun) for the Respondent

Judgment:        7 September 2015

JUDGMENT HANDED DOWN ON 7 SEPTEMBER 2015

Transcribed from the oral judgment delivered on 7 September 2015, revised and approved by the judges.

 JUDGMENT

Deputy Chief Justice Sir John Chadwick:

1. This is the judgment of the Court of Appeal in an appeal from an Order made by H.E. Justice Omar Al Muhairi on 25 February 2015 in proceedings commenced on 6 May 2014 (under reference CFI-015-2014) in which Asif Hakim Adil (“the Claimant”) lodged a claim against Frontline Development Partners Limited (“the Defendant”). In those proceedings the Claimant sought payment arising from the termination of his employment with the Defendant.

2. On 10 December 2014 the Defendant made an application in the proceedings for the provision by the Claimant of security for its costs. The order sought in that application was that, as a condition of being allowed to continue to prosecute his claim, the Claimant furnish security for the defendant’s costs in the sum of US$200,000. The application was supported by material which indicated that the ongoing costs from that date would be in the order of US$350,000. The application came before H.E. Justice Omar Al Muhairi in February 2015.

3. The judge dismissed that application. No written record of his reasons for doing so has been provided either to the parties or to this Court. In those circumstances the judge’s reasons are to be distilled from the recitals to the Order of 25 February 2015. There are two recitals which are of relevance: first, the recital “Upon being satisfied that the Claimant has a valid residency visa in the United Arab Emirates”; and, second, the recital “Upon there being no evidence before me providing a detailed breakdown of the Defendant’s costs to be incurred up to the trial”. The latter recital is difficult to reconcile with the fact that a statement of costs has been exhibited (as Exhibit TS1) to the affidavit of Mr Tarek Shrayh.

4. The power of the Court to order security for costs is conferred by Part 25 of the Rules of the DIFC Courts (“RDC”), in particular, by RDC 25.101. That provides that:

“25.101 The Court may make an order for security for costs under Rule 25.100 if it is satisfied, having regard to all the circumstances of the case that it is just to make such an order and:

(1) one or more of the conditions in Rule 25.102 applies; or

(2) an enactment permits the Court to require security for costs.”

The conditions in RDC 25.102 include conditions (1) and (6):

“25.102…

(1) the Claimant is resident out of the UAE”;

…

(6) the Claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him”.

5. The structure of RDC 25.101 is that the Court cannot make an order for security for costs unless one or more of the conditions in RDC 25.102 are established; or, which is not this case, an enactment permits the Court to require security for costs. But, notwithstanding that one or more of those conditions is established, the Court must also be satisfied, having regard to all the circumstances of the case, that it is just to make such an order.

6. In the present case, the judge does not appear to have addressed the question whether or not condition (6) of RDC 25.102 was satisfied: that is to say, he does not appear to have considered whether this was a case in which the Claimant had taken steps in relation to his assets that would make it difficult to enforce an order for costs against him. If he had considered that question, he would have come to the conclusion that condition (6) was satisfied. There was no dispute that the Claimant had transferred a property which he owned – a flat in Dubai – to his wife in or about March 2013. There is no suggestion that he took that step with the intention of defeating the claims of creditors; but his intention is not a relevant factor. Condition (6) of RDC 25.102 is framed in terms which are wholly objective: has the Claimant taken steps which would make it difficult to enforce an order for costs against it. If the consequence of the transfer is that it makes it more difficult to enforce an order for costs against the Claimant/transferor, it is immaterial whether or not that consequence was intended by the Claimant/transferor.

7. The requirement, under condition (1) is that the Claimant is resident out of the UAE; it is not, in terms, that the Claimant is not resident in the UAE (although, if it be assumed that there can be only one place of residence for the purposes of the condition, the answer to a condition expressed in those terms would be the same). Be that as it may, the fact that a Claimant holds a residency visa permitting residence in the UAE is of little materiality in determining whether that condition is satisfied. A Claimant may hold a residency visa permitting residence in the UAE, but choose to reside elsewhere. If the judge took the view that the Claimant was not resident out of the UAE because he held a residency visa (as the recital to his Order suggests that he did), his reasoning on that question cannot be supported.

8. For those reasons, this Court must hold that the basis on which the judge made the Order dated 25 February 2015 was flawed; in that he did not address himself correctly to his task under RDC 25.101. No doubt that was in the mind of Justice Sir David Steel when he gave leave to appeal on the basis that the appeal would have a real prospect of success.

9. The appeal was listed for hearing before this Court on 5 May 2015. That was some two and a half months before the date (19 July 2015) on which, as was then known to the parties, the hearing of the trial of these proceedings had been fixed to commence. This Court was ready and able to hear the appeal against H.E. Justice Al Muhairi’s Order on 5 May 2015; if it had done so, this appeal would have been heard and determined before the trial. But shortly before this Court was due to convene and sit on 5 May 2014, the parties asked that the hearing be vacated and the appeal adjourned. They did so, we were told, on the basis that they thought that they were close to settlement. But they failed to make provision for the possibility that, if terms of settlement were not concluded, there was a risk that the appeal would not be heard before the trial commenced; although we understand that directions were given to enable an application to be made to this Court to deal with that possibility if it became necessary to do so. In the event, there was no such application; the trial commenced on 19 May 2015 before Justice Roger Giles over the three days, 19-21 May 2015; and judgment is awaited.

10. The adjourned hearing of the appeal (which could have been heard on 5 May 2015) came before this Court for hearing this morning. As I have indicated, the Order made by the judge on 25 February 2015 is flawed: first, for lack of reasoning; and, second, because the only reasons that can be ascertained (from the recitals to that Order) do not provide a sufficient basis for dismissing the application for security that had been made to him. In those circumstances it is open to this Court to consider whether to set aside the Order and refer the matter back to the judge (or to another judge of the Court of First Instance), or, as would be more usual in a case of this nature, to ask itself what Order it would make if it were now exercising de novo the power to order security for costs conferred by RDC 25.101.

11. In addressing that question it is necessary, first, to ask whether it would now be just in all the circumstances of the case to make an order for security for costs. I return to the application made on 10 December 2014. As I have said, the order sought by that application was that, unless the Claimant furnish security, he is not to be allowed to continue to prosecute his claim. In my view, it would not be just to make an order in those terms at this stage; in the circumstances that the Claimant has now prosecuted his claim to the conclusion of a trial – at which, no doubt, the merits of the claim were investigated and evidence was called – and that the only step remaining is for judgment determining the claim to be delivered. If, following delivery of that judgment, the Claimant wished to appeal, then, of course, there would be nothing to prevent the Defendant seeking security for the costs of the appeal; but that is not the application that is before the Court.

12. So on that ground, the Court declines to set aside the Order of 25 February 2015: not because it was made on the proper basis, but rather because no purpose is now served by setting the Order aside. There is no purpose in setting aside the Order of 25 February 2015 because the Claimant has now prosecuted his claim in these proceedings to trial. Having failed to obtain an order for security for its costs in February 2015, the Defendant chose not to take the opportunity to have its appeal heard on 5 May 2015 – an opportunity that was available to it – and having taken that view, then allowed the matter to proceed to trial without making any application for the trial to be adjourned on the basis that it did not have an order for security for costs. In other words, the Defendant chose to take the risk of proceeding to trial without the benefit of an order for security. There is no reason to think that that was not a choice freely made; and no reason why the Defendant/applicant should be fixed with the consequences of that choice.

13. There are other reasons why it would be wrong to set aside the Order of 25 February 2015: reasons which would have led this Court to dismiss the appeal if it had been heard (as it could have been) on 5 May 2015.

14. The Court accepts that condition (6) in RDC 25.102 was satisfied: in that the Claimant did transfer property in March 2013 which had the effect of making it more difficult to enforce an order for costs against him. It would take the view, also, if it were necessary to do so, that – on a first impression of the evidence – condition (1) in RDC 25.202 was satisfied: in that the Claimant was claiming at the time to be a permanent resident of India (whether or not he was also resident in the UAE). But, notwithstanding that one (or both) of conditions (1) and (6) were satisfied, the Court would have had to ask itself in May 2015 whether it was satisfied, having regard to all the circumstances of the case, that it was just to make an order for security for costs.

15. The circumstances of the case included the fact that an offer of security had been made to the Defendant by lawyers acting for the Claimant and his wife. The offer was to provide an undertaking by the Claimant’s wife to pay on first written demand such costs as might be ordered by the Court or agreed in an amount up to US$200,000. That undertaking was to last until final judgment in the action. The undertaking was offered by the Claimant’s wife who, on the evidence, had substantial assets in Dubai, including cash and a number of properties. It was reinforced in a letter of 13 January 2015 from the Claimant’s legal representatives stating that:

“The proposed undertaking was to be made in Court and based on which a consent order was supposed to be issued by the Court’s registry. The nature of an undertaking made in Court and the issuance of a consent order should save any further litigation to directly enforce the payment against the undertaker if costs were ordered for your client.”

16. In those circumstances, had the matter come before this Court in May 2015, there is no reason to doubt that the Court would have taken the view that it was not just to make an Order for security for costs against the Claimant. The Defendant had a readily enforceable undertaking which would enable it to recover US$200,000 towards satisfaction of its costs, in the event that, following trial, an order for costs was made in its favour, That undertaking would have been re-enforced by the fact that it was to be made to the Court; and by the fact that it would have been incorporated in a consent order. The undertaking was to be given by a person having substantial assets in Dubai. Had the appeal been heard in May 2015, it would have been dismissed.

17. Accordingly, this Court declines to set aside or vary the Order of 25 February 2015. This appeal is dismissed.

Chief Justice Michael Hwang SC:

18. The Appellant should bear the costs of this appeal. Justice Al Muhairi had made no order as to costs with regard to the application before him; we are not going to disturb that order.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 15 September 2015

At: 4pm