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Claim No: CA 014/2022

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 LORD ANGUS GLENNIE AND JUSTICE SIR PETER GROSS

BETWEEN

GULF WINGS FZE

Appellant/Claimant

and

A AND K TRADING LIMITED

Respondent/Defendant

and

(1) MR KAMEL ABOU ALY
(2) MR AHMED ABOUHASHIMA

Respondents

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JUDGMENT OF THE COURT OF APPEAL

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UPON the Order of Justice Sir Jeremy Cooke dated 11 March 2022 (the “Contempt Order”) ordering that the Defendant, Mr Kamel Abou Aly (“Mr Abou Aly”) and Mr Ahmed Abouhashima (“Mr Abouhashima”) be held in contempt of Court in Claim No. CFI-004-2022

AND UPON the Order of H.E. Deputy Chief Justice Ali Al Madhani dated 5 September 2022 (the “Discharge Order”) discharging the Contempt Order as against Mr Abou Aly

AND UPON the Claimant’s Appeal Notice dated 5 September against the Discharge Order

AND UPON the Claimant’s Skeleton Argument dated 28 September 2022 filed in support of the Appeal Notice seeking permission to appeal the Discharge Order (the “Permission to Appeal Application”)

AND UPON the submissions dated 7 October 2022 filed by Al Jallaf Advocates & Legal Consultants on behalf of the Defendant, Mr Abou Aly and Mr Abouhashima in opposition to the Permission to Appeal Application

AND UPON the Order of H.E. Deputy Chief Justice Ali Al Madhani dated 19 October 2022 granting the Permission to Appeal Application

AND UPON the Skeleton Argument filed on behalf of the Claimant dated 25 November 2022

AND UPON the Skeleton Argument filed on behalf of the Defendant, Mr Abou Aly and Mr Abouhashima dated 24 November 2022

AND UPON hearing Ms Charlotte Bijlani of Watson Farley & Williams (Middle East) LLP (“WFW”) for the Claimant and Ms Amna Al Jallaf of Al Jallaf Advocates & Legal Consultants on behalf of the Defendant, Mr Abou Aly and Mr Abouhashima at the Appeal Hearing on 30 November 2022 (the “Appeal Hearing”)

IT IS HEREBY ORDERED THAT:

1. The Appeal is allowed with costs (to be assessed by the Registrar if not agreed by the parties).

2. The Discharge Order is set aside.

3. The Contempt Order is restored and remains in force against the Defendant, Mr Abou Aly and Mr Abouhashima and each of them.

4. A letter shall be sent to the Attorney General of Dubai bringing to his notice the continued finding of contempt against Mr Abou Aly and Mr Abouhashima for his review and consideration of committal.

5. The Defendant, Mr Abou Aly and Mr Abouhashima shall be jointly and severally liable to pay the Claimant’s costs of the Appeal as awarded in paragraph 1 of this Order.

Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 12 December 2022
At: 9am

SCHEDULE OF REASONS

1. This is an appeal by the Claimant, Gulf Wings FZE (the “Claimant”), against the Discharge Order pronounced by H.E. Deputy Chief Justice Ali Al Madhani on 5 September 2022 discharging (or setting aside) the Contempt Order made by Justice Sir Jeremy Cooke on 11 March 2022 insofar as it concerned Mr Abou Aly.

2. At the hearing of the appeal on 30 November 2022, Ms Charlotte Bijlani appeared for the Claimant and Ms Amna Al Jallaf appeared on behalf of the Defendant, Mr Abou Aly and Mr Abouhashima (collectively “the Respondents”). At the end of the Appeal Hearing, we gave our decision allowing the appeal, setting aside the Discharge Order, restoring the Contempt Order (making clear that it applies to all of the Respondents) and ordering the Respondents to pay the costs of this appeal, to be assessed by the Registrar if not agreed. We indicated that we would give our reasons later in writing. These are those reasons.

The Claim and the Freezing Order

3. In this action, the Claimant seeks to recover a debt allegedly due to it from the Defendant, A and K Trading Ltd (the “Defendant”) under an Aircraft Management Agreement dated 14 March 2021 relating to an Embraer EMB-135-BJ Legacy 600 aircraft (the “Aircraft”). As at the date of the claim form, the sum allegedly due was USD 1,272,798.55, but this was subject to other sums accruing after that date.

4. At an ex parte hearing on 14 January 2022 Justice Sir Jeremy Cooke, at the behest of the Claimant, granted a Freezing Order (the “Freezing Order”) preventing the Defendant from removing from the DIFC assets to the value of USD 1.3 million and preventing the disposal of or dealing with or diminution in value of any assets whether inside or outside the DIFC to that value. In particular, the Aircraft was named in the freezing order as a specific asset which was not to be removed from Dubai.

5. In breach of the Freezing Order, on 22 January 2022, the Aircraft was flown from Dubai to Cairo. It is now in Malta.

The Contempt Proceedings

6. On 27 January 2022, the Claimant filed an application with the Court for a committal order for contempt against the Defendant and also against two individuals, namely Mr Abou Aly and Mr Abouhashima, (together “the Directors”) on the basis that they were (still) the registered shareholders and directors of the Defendant and had either facilitated the removal of the Aircraft or had failed to take steps to prevent it. An order for committal was sought against each of them as well as a reference to the Attorney General of Dubai.

7. The Claimant’s contempt application came on for hearing before Justice Sir Jeremy Cooke on 8 March 2022. Neither the Defendant nor the Directors were legally represented, though lawyers from Al Jallaf Advocates & Legal Consultants acting for some or all of them (the precise position was not clear), had by letter written to the Court requesting a stay of proceedings and challenging jurisdiction, albeit not within the time prescribed by the Rules of Court (RDC Part 12). In his Judgment issued on 11 March 2022 (re-issued by the Court on 14 March 2022), the judge refused the jurisdiction challenge both on the basis of the jurisdiction clause in the Management Agreement and the failure to formally issue any challenge to the court’s jurisdiction within the time allowed by the Rules of Court (Judgment, paragraph 21). He also rejected the contention that the Directors were no longer Directors of the Defendant at the time of the removal of the Aircraft from Dubai in breach of the Freezing Order – he held that they remained directors of the Defendant and had the power to prevent the removal of the Aircraft from Dubai. His conclusion (in paragraph 64) was in the following terms:

8. Having made this finding of contempt, the judge went on (in paragraph 65) to set out the consequences of that finding. He said this:

He went on to find the Defendant and the two Directors liable for the Claimant’s costs on the indemnity basis which he summarily assessed in the sum of USD 288,017.67.

9. It should be noted that the judge made three separate contempt orders (the “Contempt Orders”), one each in respect of the Defendant, Mr Abou Aly and Mr Abouhashima. Those in respect of Mr Abou Aly and Mr Abouhashima were in identical terms. They provided as follows:

The Discharge Order

10. The Discharge Order was made by H.E. Deputy Chief Justice Ali Al Madhani on 5 September 2022. In the Discharge Order, after referring to the Contempt Order in respect of Mr Abou Aly, and to Mr Abou Aly’s payment into the DIFC Court’s Escrow Account in the amount of AED 4,674,354.33, he ordered that “the Contempt Order against Mr Abou Aly be discharged”.

11. The Deputy Chief Justice gave brief reasons for his decision. The following passages are relevant:

12. Paragraph 3 of the Deputy Chief Justice’s Reasons quoted above needs some unpicking. The Order of 2 September 2022 (referred to in that paragraph) was an order granting Mr Abou Aly’s Urgent Application for permission to pay the amount of AED 4,674,354.33 into court (the DIFC Court’s Escrow Account). That Order provided that “the Return Date Hearing” should be re-listed on the first available date suitable to the Court and the parties. That Return Date Hearing was defined in the Order of 2 September 2022 as being the hearing which Justice Sir Jeremy Cooke had ordered Mr Abou Aly and Mr Abouhashima to attend to provide information relevant to the Freezing Order but which they had failed to attend. In effect, therefore, the Deputy Chief Justice was ordering them to attend at a re-listed hearing on a date to be fixed. The proposed re-listed Return Date Hearing had nothing to do, directly at any rate, with the application by Mr Abou Aly to purge his contempt. Mr Abou Aly’s desire to purge his contempt, having paid into court the AED equivalent of the principal amount claimed by the Claimant in the action, appears to have been dealt with by the Court in the Discharge Order without it ever having been the subject of any formal application to the Court.

13. It should be noted that the Discharge Order was made only in respect of Mr Abou Aly. Nothing in that Order affects the position of Mr Abouhashima. However, we were told that, upon sight of the Discharge Order, the Attorney General, to whom the matter had been referred by Justice Sir Jeremy Cooke in the Contempt Orders, effectively closed the case against both Mr Abou Aly and Mr Abouhashima. He may have been under the impression that the Discharge Order had the effect of discharging the Contempt Orders against both Mr Abou Aly and Mr Abouhashima, or it may be that the Attorney General simply treated the reference to him as all one case. We shall come back to this point later in this judgment.

The Appeal

14. The Claimant appeals to this court against the Discharge Order on two main grounds: first, that it was not given notice of the hearing, if there was one, before the Deputy Chief Justice and had no opportunity to present its case in opposition to the Order that came to be made; and, second, that the sum paid into court by Mr Abou Aly (AED 4,674,354.33), although representing the principal sum claimed in the action, did not make any provision for interest and costs of the action, to which the Claimant was entitled, nor for any further legal costs incurred by the Claimant as a result of the contempt.

15. We shall deal first with the point about the lack of notice to the Claimant before the Discharge Order was made.

The circumstances in which the Discharge Order came to be made

16. The circumstances in which the Discharge Order came to be made are set out, from the Claimant’s perspective, in paragraphs 24-32 of the Claimant’s skeleton argument in this appeal. That account of events was not the subject of any challenge before this court. We therefore quote what is said, retaining the Claimant’s paragraph numbering, and adopt it as an accurate account of what appears to have happened:

17. An appeal against the Discharge Order was filed by the Claimant on the same day. On 14 September 2022 the Registry called a meeting attended by WFW on behalf of the Claimant, Mr Abou Aly (by telephone), a representative of Mr Abou Aly, and Ms Al Jallaf, apparently representing the Defendant and Mr Abouhashima. The purpose of the meeting is not entirely clear, but it seems to have been an attempt to clarify the position in respect of the Discharge Order and the Claimant’s application for permission to appeal that Order. Subsequently permission to appeal was granted on 19 October 2022. It is worth noting that, in paragraph 3.2 of its skeleton argument opposing the grant of permission to appeal, the Defendant invited the Court to revise the Discharge Order to include a discharge of Mr Abouhashima from the Contempt Order on the ground that he had jointly paid the principal amount into court. By email of 8 September 2022 the (then) Acting Registrar noted that request but pointed out that “such requests need to be made formally to the Court in accordance with the Rules of the DIFC Courts”. No formal request has ever been made by or on behalf of Mr Abouhashima.

18. It is a fundamental legal principle that, with certain well recognised exceptions, a party is entitled to be informed of an application against it and to be given an opportunity to respond to such an application and make representations on it before an Order is made. This applies as much to applications in respect of contempt proceedings as to any other type of application: see e.g. Swindon Borough Council v Webb [2016] EWCA Civ 152 at para.25. The principle is obvious. It finds expression in RDC Part 23 which contains “General Rules About Applications For Court Orders”. The general rule is that an applicant must file an application notice unless the court dispenses with that requirement. A copy of the application notice must be served by the applicant on each respondent, even if such service is on short notice. The permission of the court is required for an application to be made without serving an application notice; and such permission will be granted only in the exceptional circumstances as enumerated in Rule 23.6. There is provision for informal notice to be given where there is insufficient time to do so in accordance with the Rules.

19. None of these Rules were followed in the present case. The request to have the payment of AED 4,674,354.33 paid into the DIFC Court’s escrow account should have been made by an application in terms of RDC Rule 23. So should the request by Mr Abou Aly to be relieved of the Contempt Order after paying that amount into Court. This is not mere formalistic pedantry. The making of an application in terms of the Rules of Court sets in train a series of steps designed to ensure that all relevant parties are made aware of it and have an opportunity to consider it and to make appropriate representations to the court. The Rules lay down a general rule that an application must be made by application notice (Rule 23.2) and that a copy of the application notice must be served on each respondent, even if such service is on short notice (Rule 23.4). There are exceptions (set out in Rule 23.6) and there is provision for informal notification if time is short (Rule 23.7). But the essential point remains, namely that except in the exceptional cases where, for good reason, an application notice is not required, an application must be made by notice and that notice must be served on the other parties to the proceedings; and, in any event, if, for whatever reason, the formalities cannot be observed, the substance of the application must be notified to the other parties and those other parties must be given a proper opportunity to be heard.

20. In the present case there was no justification for proceeding without giving the Claimant an opportunity to present its case. There was no exceptional urgency. If Mr Abou Aly was anxious to leave the country imminently, and the Contempt Order was preventing this, a hearing could have been arranged at short notice. It may be that informal notice was given to WFW, acting for the Claimant, that Mr Abou Aly wanted to settle the dispute and have the Contempt Order lifted (see paras. 24 - 32 of the Claimant’s skeleton argument quoted in paragraph 16 above). Had this been followed by a hearing at which WFW could have had an opportunity to be heard no harm would have been done by the informal nature of the application. But despite WFW telling the Registry that they wished to oppose the application and setting out the grounds of opposition, the Discharge Order was made without them being given the opportunity to be heard.

21. The Deputy Chief Justice referred in his brief judgment to Articles 32(f) and 43 of Court Law (DIFC Law No 10 of 2004) as giving the Court power to make such orders as it considers appropriate in the interest of justice and to do so of its own motion where necessary. We have no difficulty with this. We were referred in this context to RDC Rules 4.9 – 4.14 which empowers the court to exercise its powers either on an application or of its own initiative. But nothing in these Rules dispenses with the requirement in the ordinary case to give a person likely to be affected by such an order an opportunity to make representations (see Rules 4.10 and 4.11). There is power (in Rule 4.12) for the court to make an order of its own initiative without hearing the parties or giving them an opportunity to make representations but, when it does so, a party affected by the order may apply to have it set aside, varied or stayed and, importantly, the order must contain a statement of such a right (Rule 4.13). The Discharge Order contained no such statement; and we suspect that the Deputy Chief Justice was not intending to proceed down this route. But in any event, it seems to us that the power of the Court under Rule 4.12 to make an order without giving parties an opportunity to be heard must be subject to the general rule referred to above and is exercisable only in the exceptional case. Neither the Discharge Order nor the accompanying Reasons provide any basis for thinking that the Deputy Chief Justice was intending to proceed under this provision in the Rules of Court.

22. For these reasons the Discharge Order, having been made without allowing the Claimant an opportunity to appear and present its case in opposition to the relief sought by Mr Abou Aly, cannot stand and must be set aside. The Contempt Order made by Justice Sir Jeremy Cooke remains in force against the Defendant, Mr Abou Aly and Mr Abouhashima; and we have directed that a letter be sent anew to the Attorney General bringing to his notice the continued finding of contempt against Mr Abou Aly and Mr Abouhashima for his review and consideration of committal.

Purging the contempt

23. In light of this decision it is unnecessary for us to deal formally with the other basis for appeal, namely that although the sum paid into court by Mr Abou Aly represented the principal sum claimed in the action, it did not make any provision for interest and the costs of the action, to which the Claimant was entitled, nor for any further legal costs incurred by the Claimant as a result of the contempt. However, in case the matter goes further and there is another application to purge the contempt, and while recognising that it is for the judge hearing any such application to make his own decision in light of the material placed before him by the parties, it may be helpful if we give our views briefly on the points raised on the material presented to us on this appeal.

24. The guiding principle must be that the contemnors (Mr Abou Aly and Mr Abouhashima) should make good what has been lost by reason of their contempt. The Freezing Order gave the Claimant security for its claim. The removal of the Aircraft from Dubai in contempt of the Order has deprived the Claimant of that security. It has also caused the Claimant to incur expense in seeking to recover the Aircraft or its value. Any purging of the contempt should be on terms that Mr Abou Aly and/or Mr Abouhashima makes good the security for its claim which the Claimant has lost by reason of the contempt and compensate the Claimant for the costs and expenses incurred by it in dealing with the circumstances brought about by the contempt.

25. The obvious starting point is paragraph 65.3 of the judgment of Justice Sir Jeremy Cooke quoted above: “It remains open to the Defendant, Mr Abouhashima and Mr Abou Aly to purge their contempt, which might well include procuring the return of the Aircraft and/or paying the Claimant’s claim in full with a full indemnity for costs and/or making a full apology to this Court and paying any fines imposed.” This goes beyond the principal sum claimed in the action. The Claimant’s claim, for which judgment was given, includes statutory interest at 9% per annum. The Claimant’s costs of the action, including the costs of the contempt proceedings, were summarily assessed by Justice Sir Jeremy Cooke in the sum of USD 288,017.67.

26. In addition, the contempt itself has caused the Claimant to incur further expense. Such expense includes the costs of this appeal, which we have awarded to the Claimant. It will also include the costs reasonably incurred by the Claimant in consequence of the contempt, such as in taking steps to try to recover the Aircraft from Malta insofar as those costs are not recoverable from the Maltese court (and we were told that they are not recoverable there).

27. Next, there is the fine of USD 100,000 imposed on the Defendant by Sir Jeremy Cooke in paragraph 65.1 of his Judgment. We consider that the relationship between the Defendant and Mr Abou Aly and Mr Abouhashima, as found by the judge and set out in detail in that Judgment, is such that each of the individuals concerned should be required to pay or secure that sum too if he wishes to purge his contempt.

28. In summary, therefore, we would anticipate that any application to purge the contempt will only be successful if payment is made or security furnished for these amounts.

29. The Claimant sought to argue that that as a further condition of purging their contempt Mr Abou Aly ought to pay or secure the costs incurred by the Claimant in defending two sets of proceedings brought against it by the Defendant in onshore Dubai, the argument being that those Dubai proceedings were brought in breach of a DIFC jurisdiction clause and were for that reason, and in any event standing the failure of the Defendant to challenge jurisdiction in the DIFC Courts, vexatious. We make no comment about the basis of this claim. But we do not consider that it falls into the same category of expense as those previously mentioned. The bringing of proceedings in onshore Dubai is unrelated to the contempt of court with which this court is concerned. We are not familiar with the procedure at the Dubai onshore courts which follow the Civil Law.