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Claim No: CA 006/2019

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 TUN ZAKI AZMI, H.E JUSTICE ALI AL MADHANI, JUSTICE JUDITH PRAKASH

BETWEEN

IBRAHIM SAIF HORMODI

Appellant

and

BANKMED (SAL) TRADING IN THE DIFC UNDER THE TRADE NAME BANKMED (DUBAI)

Respondent

JUDGMENT

UPON the order of Judicial Officer Nassir Al Nasser issued on 29 October 2017 entering default judgment against the Appellant (the “Default Judgment”)

AND UPON the Appellant’s application dated 13 November 2017 to set aside the Default Judgment Order (the “First Set Aside Application”)

AND UPON the Witness Statement of the Appellant filed 22 November 2017 (the “2017 Witness Statement”)

AND UPON the order of H.E. Justice Shamlan Al Sawalehi issued on 14 January 2018 refusing the Appellant’s Set Aside Application (the “First Refusal to Set Aside Order”)

AND UPON the order of Judicial Officer Nassir Al Nasser issued on 16 January 2018 to confirm that the stay of enforcement proceedings shall be lifted (the “Stay Lift Order”)

AND UPON the Appellant’s application for leave to appeal the Refusal to Set Aside Order (the “Second Set Aside Application”) filed 6 January 2019

AND UPON the Second Set Aside Order being denied on 13 January 2019 (the “Second Refusal to Set Aside Order”)

AND UPON the Appellant’s appeal notice filed 3 February 2019 seeking permission to appeal the First Refusal to Set Aside Order (the “Permission to Appeal Application”)

AND UPON the order of Justice Zaki Azmi issued on 27 February 2019 (the “Permission to Appeal Order”) granting the Appellant permission to appeal the First Refusal to Set Aside Order

AND UPON the hearing of 27 August 2019 (the “Appeal Hearing”)

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

IT IS HEREBY ORDERED THAT:

1. The Appellant’s Appeal is dismissed.

2. Costs of this Appeal shall be paid to the Respondent by the Appellant, the amount of which shall be assessed, if not agreed within 30 days of the issuance of this order, by the Registrar.

Issued by:

Nour Hineidi

Deputy Registrar

Date of issue: 11 February 2020

Time: 12pm

JUDGMENT

CHIEF JUSTICE ZAKI AZMI

Summary

1. This Appeal is against the Order of H.E. Justice Shamlan Al Sawalehi (the “CFI Judge”) issued on 14 January 2018 (the “First Refusal to Set Aside Order”), which rejected a set aside application filed on 13 November 2017 (the “First Set Aside Application”).

2. The First Set Aside application concerned the default judgment of Judicial Officer Nassir Al Nasser issued on 29 October 2017 (the “Default Judgment”), which was entered against the Appellant (and against all defendants in the substantive claim) in the sum of USD 14,463,479.03.

3. Except for the Default Judgment Order against the Appellant, (who is one of the Defendants in an action by the Respondent) all other default judgment orders have been set aside against the other Defendants. This Appeal, however, is dismissed. The decision of this Court was handed down to the parties at the hearing of 27 August 2019 with brief oral reasoning. Fuller reasons are given in this judgment.

4. In short, there are two options within the RDC for setting aside a default judgment; the first in which the Court must set aside, the second where the court may set aside. In a sense, there is a mandatory provision on the one hand, and a discretionary power on the other.

5. Pursuant to RDC 14.1 the Court must set aside a judgment; (i) in the case of a judgment in default of an acknowledgment of service; (ii) in the case of a judgment in default of a defence; or (iii) if the whole of the claim was satisfied before judgment was entered.

6. On the one hand, alternatively, as per RDC 14.2, the Court may, set aside (or vary) a judgment if: (i) the defendant has a real prospect of successfully defending the claim; or (ii) there is some other good reason why (iii) the judgment should be set aside or varied; or (iv) the defendant should be allowed to defend the claim.

7. The Appellant argues this appeal under the grounds of both RDC 14.1 and RDC 14.2. This Court finds that the Appellant has failed to prove the first arm (14.1 – the mandatory provisions) does not succeed, for reasons which I shall come to. This leaves us with the second arm (14.2 – the exercise of discretion), which does not succeed, as I shall explain.

8. In sum, Counsel for the Appellant has also failed to demonstrate a real prospect of proving a good defence and has further failed to prove that discretion should be exercised in the Appellant’s favour.

Background

9. It is not necessary to delve into the details of the dispute, save to say that the underlying claim concerns a USD 15,000,000 facility agreement dated 22 December 2015 (the “Facility Agreement”) which provided for various securities to be provided by, amongst other defendants, the Appellant.

10. The Appellant is a former shareholder of Fast Telecom General Trading LLC (“Fast Telecom” or the “Appellant”). The Respondent, Bankmed (Sal) (“Bankmed” or the “Respondent”) is a Lebanese joint stock company registered in the DIFC as a foreign recognised company.

11. The substantive claim was filed by Bankmed, the Respondent in these proceedings, on 23 July 2017.The claim form was subsequently sent by courier to Mr Hormodi, the Appellant, at Al Warka 4, Street 35, Villa 11, Dubai (the “Al Warka”). There has been an ongoing dispute about whether or not this was the correct address to which the claim form was meant to be delivered. The Appellant insists that Al Warka was not, nor has it ever been his address. It is also the Appellant’s case that he never instructed or authorised BSA to act on his behalf. 1

12. In any event, the Acknowledgement of Service (the “AoS”) was filed by instructing solicitors BSA Ahmad Bin Hazeem & Associates LLP (“BSA”) on behalf of Fast Telecom and all defendants on 5 September 2017, yet BSA failed to file a defence in the appropriate time as set out in Rule 13.5(1) of the RDC.

13. On 14 January 2018 the CFI Judge rejected the First Set Aside Application on the grounds that the application both lacked the formalistic requirements of Part 14.4 of the RDC and the Appellant had no real prospect of successfully defending the claim (14.2(1)).

14. Almost a year later, on 6 January 2019, the Appellant submitted an application seeking permission to appeal the 14 January 2018 Order (the “First Permission to Appeal Application”). That Application was denied by the CFI Judge on 13 January 2019 on the basis that the First Permission to Appeal Application fell outside of the 21-day time period, pursuant to RDC 44.10.

15. On 3 February 2019 the Appellant then filed a second “fresh” application (the “Second Permission to Appeal Application”). I granted permission on 27 February 2019 (the “Permission to Appeal Order”). The matter consequently came before this Court of Appeal on 27 August 2019.

The Appeal

16. The Appellant argues that in respect of the First Refusal to Set Aside Order the CFI Judge:

i. erred by dismissing the Appellant’s application dated 6 January 2019 (First Permission to Appeal). The Appellant argues that it complied with the requirements of RDC 14.4 by submitting evidence in the form of the 2017 Witness Statement. On the Appellant’s case, the Learned Judge failed to give due weight to that Witness Statement;

ii. erred by failing to consider that the Appellant acted as a litigant in person. Here, the Appellant cites RDC 14.2(2)(b) and argues that despite any technical irregularity in the application, they had sufficiently demonstrated a strong reason why the Default Judgment Order should be set aside;

iii. erred by concluding that the Appellant had no real prospect in successfully defending the claim if the Appellant’s application was not considered in the first instance on the basis that the Learned Judge dismissed the Appellant’s application for failing to adhere to the requirements of RDC 14.4;

iv. erred by dismissing the Appellant’s First Set Aside Application and is unjust and in conflict with the overriding objective of the Courts;

v. erred by concluding the AoS was served. On the Appellant’s account, the time for him to file either an AoS or a defence had not “started to run”;

vi. erred in fact and law by failing to accept that even if the fifth defendant’s position was that BSA were properly instructed the original application for default judgment was not in compliance with the requirements of RDC 13 and therefore must be set aside in accordance with RDC 14.1.

The Appellant thus seeks the following from the Court: a) an order setting aside the Default Judgment Order of Judicial Officer Nassir Al Nasser issued on 29 October 2017; b) a declaration that the Appellant did not instruct BSA to act on his behalf in respect of the proceedings; c) a declaration that the Appellant has a reasonable prospect of defending the claim in the substantive proceedings; d) an order for costs in favour of the Appellant; and e) any other order the Court deems appropriate.

The Defence

17. The Respondent’s defence is quite simply that the Learned Judge was neither wrong nor unjust, and that the Appellant has failed to offer any defence to the claim, even though proceedings commenced in July 2017 (sic. 23 July 2017).

18. As a preface to their submissions, the Respondent quotes Justice Sir Jeremy Cooke’s judgment of 9 June 2019 (Claim No. CA-001-2019) in relation to appeals brought by the second and third defendants.2 In that judgment, the Learned Judge warned of the continued delay to these proceedings:

"It appears to me that there has been enough delay in this action already and that it should now continue following dismissal of the appeals, at a much faster rate than heretofore." [paragraph 37]

19. The Respondent contends that the Appellant is now seeking to further delay matters. On their account, it is apparent that the Appellant has no reasonable prospect of defending the claim and a fuller investigation into the facts of the dispute would not alter the outcome of the case.

Discussion

20. First and quite crucially, in determining this appeal, there is the high hurdle of RDC 44.117, the rule which sets out the limited grounds upon which this Court of Appeal would allow an appeal from a decision of the Court of First Instance; that is, only if the lower Court decision was; (i) wrong; or (ii) unjust because of a serious procedural or other irregularity.

21. As the Respondent rightly points out, in McGraddie v McGraddie [2013] the Supreme Court of England and Wales considered the principles governing when an appellate court would be able to interfere with findings of fact at first instance. McGraddie showed how the appellate court should intervene only in the very rare cases in which it is satisfied that the judge below was “plainly wrong".

22. The same applies here at the DIFC Courts. We cannot re-open the case nor re-try the issues heard at first instance, we can only determine whether the Learned Judge erred in fact or law and came to a decision which was plainly wrong or unjust.

23. I must agree with the Respondent in that an even fuller investigation into the facts of the dispute would not alter the outcome of the case. The reasons for this are multifarious.

24. I will go through both limbs with reference to the three main issues that permeated the hearing; the premature filing, the delay, and the lack of defence.

25. Let me first address RDC 14.1 and the argument of the alleged premature filing for default judgment. The recent authority of Sir Jeremy Cooke in his judgment of CA-001-2019 is crystal clear on this matter; the Learned Judge directly refutes the Appellant’s arguments regarding premature filing. I echoed similar sentiments at the hearing.

26. The bench would have expected Counsel for the Appellant, (who was also instructed for the previous case) to have brought the alleged AoS/address issue to our attention in the very first instance. Counsel’s failure to notify us sooner could constitute a breach of ethics. The argument simply has little plausibility when made so late in proceedings.

27. To elaborate, it is simply not acceptable, that the factual matrix of this claim proves that the Appellant has not been served with the claim form and therefore the time for him to file either an AoS or a defence has “not started to run” and consequently the mandatory provisions that the Court must set aside the Default Judgment Order come into effect.

28. Rather, it appears on the factual matrix of this claim that the Appellant was served with the Claim Form at the address designated for service pursuant and likely failed to file an AoS in time. There is no evidence before this Court that the Learned Judge erred in his findings pertaining to the issue of the alleged premature filing and resulting Default Judgment.

29. Notably, and as an aside, it is not disputed that the guarantee between the parties was signed and dated on 21 November 2017 by the Appellant. As per clause 2 and clause 15 of the guarantee, the Appellant confirmed that the Al Warka Address was in fact his domicile and the designated place at which he was to be reached. Accordingly, in line with the Respondent’s submissions, the Court could only conclude that the Al Warka Address was in fact the contractually designated place for service.

30. It is also pertinent to note, as the Respondent did at the Hearing in reference to the judgment of Justice Sir Jeremy Cooke, that in relation to the issue of the allegedly premature Default Judgment “it is in fact only 14 days which must elapse following service of the Particulars of Claim where they are served separately from the Claim Form” [see paragraph 23].

31. So, in reference to the first limb (RDC 14.1), that is the mandatory provisions, we cannot find that (i) applies. It is simply not the case that the judgment was issued in default of an AoS. Indeed, there was an AoS. And as the Court has found the AoS, the onus was on the Appellant to participate in proceedings. With reference to RDC 14.1(i) therefore, it is not that the Court must set aside the Default Judgment because it was wrongly entered.

32. Secondly, I shall address 14.1 (ii) and the issue of the delay between the First Application to Set Aside the filing of the ill-conceived Second Application to Set Aside.

33. It remains unclear as to why the Appellant waited so long to apply to set aside the default judgment. Although the Appellant allegedly had a telephone call from a Mr. Fadi of Fast Telecom (the First Defendant), who informed him that matters were being resolved and to “continue his life as normal”, there still remained a Default Judgment issued against him for significant sums of money. Save to say, the rationale proffered to the Court for this lack of action on the Appellant’s part is unconvincing.

34. Had the Appellant filed for Appeal on 14 January 2018 Order in time, pursuant to Part 44, perhaps this appeal would have stood on different grounds. However, as it stands now, the significant delay in filing this appeal severely damages the plausibility of the Appellant’s claim. The rationale for explaining the year-long duration is simply not of substance; to believe Mr Fadi’s phone call is not enough of an explanation; it does not make logical sense.

35. Counsel was unable to provide a clear articulation of any intended defence against the underlying claim and persuade the Court to exercise its discretionary power to set aside the judgment under RDC 14.2. Despite being pressed several times, and indeed despite being heavily assisted by the Court, Counsel had clearly not turned their mind to 14.2 nor the case law in this field.

36. Counsel did make reference to a criminal matter in the Dubai Courts, but it was not put to the Court the precise way in how that proceeding would invalidate the agreement between the parties. Throughout, it remained unclear how an alleged on-shore criminal proceeding may affect the validity of the agreement between the parties, or how that proceeding should be taken under DIFC Law, and which common law theories of the DIFC would come into effect. Though Appellant’s Counsel made some reference to the principles of misrepresentation, she did so without clear connection to the facts of the case or specific reference to the applicable DIFC Law and without elaborating on the ways to show that the defendant had a real prospect of successfully defending the claim.

37. The case law of England and Wales indicates that the discretionary power to set aside under the “reasonable prospect of success” section of the setting-aside limb is seldom used, and sometimes not even exercised in the most exceptional cases (see De Ferranti v Execuzen Ltd [2013] EWCA Civ 592 2913; Continuity Promotions Ltd v O’Connor’s Nenagh Shopping Centre Ltd [2005] EWHC 3462; Henriksen v Pires [2011] EWCA Civ 1621.) Regretfully, Counsel made no reference whatsoever to examples in which the Courts of England and Wales have set aside default judgment and failed to make an argument for a good defence that shows a reasonable prospect of success.

38. Turning then the second part of 14.2, that is “some other good reason”, one can see that there are many reasons why the Default Judgement in this case may be set aside. Arguably, the allegation of misrepresentation could potentially constitute a “good reason”.

39. It is not for the Court to fill in the gaps, but rather, the burden is on the Appellant to argue why there was a good reason. As Counsel has failed to do so, and show pursuant to 14.2(ii), and indeed did not make an arguable case as explained above in relation to 14.2(i), the Court will not exercise its discretionary power in this case.

Conclusion 

40. For the reasons set out above, this Appeal is dismissed.

41. Similarly, is not within the scope of this Court to provide a declaration that the Appellant did not instruct BSA to act on his behalf. As referred to above in paragraph 5 and footnote 1, that is a matter for the Registry to determine within the context of the Code of Conduct Investigation and is entirely separate from any judicial decisions.

Costs

42. The parties were given the brief opportunity to make arguments on costs at the conclusion of the 27 August 2019 Hearing. Based on these arguments, it is determined that the Appellant is to pay the Respondent’s costs of this Appeal, to be assessed by the Registrar of the DIFC Courts if not agreed between the parties within 30 days of the issuance of this Judgment.

H.E. JUSTICE ALI AL MADHADI

43. I agree.

JUSTICE JUDITH PRAKASH

44. I agree.

Issued by:

Nour Hineidi

Deputy Registrar

Date of issue: 11 February 2020

Time: 12pm