THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF APPEAL
BEFORE THEIR HONOURS
SIR ANTHONY EVANS, CHIEF JUSTICE, TAN SRI DATO' SERI SITI NORMA YAAKOB
and SIR JOHN CHADWICK
BETWEEN
ITHMAR CAPITAL LTD
Claimant/Respondent
– and –
8 INVESTMENT INC
First Defendant/Appellant
8 INVESTMENT GROUP FZE
Second Defendant
Counsels : Michael Black QC and Philip Punwar, Al Tamimi & Co
Counsel: Mr Kaashif Basit ,JSA Law
Hearing: 31st January 2008
Judgment: 17 March 2008
JUDGMENT
Sir Anthony Evans, Chief Justice:
1. This is the judgment of the Court in what are the first proceedings to come before the DIFC Courts of Appeal.
2. The matter came before the Court as an application for permission to appeal from an Order made by Judge Michael Hwang, the Deputy Chief Justice, in Case No.CFI 8/2007 on 11 December 2007. In the action, Ithmar Capital is the Claimant and there are two Defendants, 8 Investment Inc. and 8 Investment Group FZE. The First Defendant is the Applicant, and the Appellant if leave is granted: the Claimant is the Respondent to the Appeal. The Second Defendant is not a party to the Appeal but its solicitors, Holman Fenwick & Willan, were present at the hearing as observers.
3. At the direction of the Court the application for permission to appeal was listed to be heard inter partes on 31 January 2008 with the appeal to follow immediately thereafter if leave was granted. The Court heard submissions from both parties as regards both the application and the proposed appeal, before determining whether or not the application should be granted. In the course of those submissions, the Court granted the application for permission to appeal. We shall refer hereafter to the First Defendant as "the Appellant" and to the Claimant as "the Respondent".
4. The Order made on 11 December 2007 inter alia (i) amended and continued a Freezing Injunction made against the Appellant by the same Judge on 22 November 2007 (paragraph A), and (ii) made no order on the Appellant's Applications dated 28 November 2007, which were for similar relief against the Respondent. The Appellant appeals against both parts of the Order.
5. The relevant parts of the Order made on 22 November 2007, as amended, read as follows:
"Freezing Injunction
1. Until after trial or further order of Court, the [Appellant], whether by itself or by its servants, employees, officers or agents must not in any way dispose of, deal with or diminish the value of any of its directly or indirectly held tangible and intangible assets in the United Arab Emirates ("U.A.E.") up to the value of 16,785,800 (Sixteen Million Seven hundred and eighty five Thousand, Eight Hundred) dirhams.
2. Paragraph 1 applies to all the [Appellant's] assets in the U.A.E. whether or not they are solely or jointly owned. For the purpose of this order the [Appellant's] assets include any asset which it has the power, directly or indirectly, to dispose of or deal with as if it were its own. The [Appellant] is to be regarded as having such power if a third party holds or controls the asset in accordance with its direct or indirect instructions.
3. This prohibition includes the following assets in particular:
(a) Any payment the [Appellant] has received from or on account of the sale of its interest in the Sale and Purchase Agreement dated 24 April 2007 between itself and ETA Star Property Developers LLC in respect of the real property known as and situate at Unit 1007, 10th. Floor, Liberty House, Dubai International Financial Centre, Dubai, U.A.E. ('the Property') which still remains under the possession, power or control of the [Appellant] or assets which are derived from the proceeds of the sale of the Property;
(b) The [Appellant's] interest in the Sale and Purchase Agreements between itself and ETA Star Property Developers LLC in respect of the real properties known as and situate as Unit 102 1st Floor and Unit 202, 2nd Floor, Liberty House, Dubai International Financial Centre, Dubai, U.A.E. ("the Units") or any payment it has received from or on account of the sales of these Units or assets which are derived from the proceeds of the sale of the Units;
(c) Any money standing to the credit of any bank account in the U.A.E. (including such sum as may have been paid into any account of 8 Investments Group FZE) including the amount of any cheque drawn on such account which has not been cleared; and
(d) Any money beneficially owned by the [Appellant] and held by 8 Investments Group FZE."
Further Orders
H
(I) If the total value free of charges or other securities ("unencumbered value") of the [Appellant's] assets in the U.A.E. exceeds 16,785,800 dirhams, the [Appellant] may remove any of those assets from the U.A.E. or may dispose of or deal with them so long as the total unencumbered value of its assets still in the U.A.E. remains above 16,785,800 dirhams.
(II) If the total unencumbered value of the [Appellant's] assets in the U.A.E. does not exceed 16,785,800 dirhams, the [Appellant] must not remove, dispose of or deal with any of them. If the Respondent has other assets outside the U.A.E., he may dispose of or deal with those assets outside of the U.A.E. so long as the total unencumbered value of all his assets whether in or outside the U.A.E. remains above 16,785,800 dirhams.
I …
J. No order shall be made on the [Appellant's] Applications dated 28 November 2007 with liberty to apply."
The background
6. Liberty House is a multi-storey building under construction in the DIFC. The Appellant agreed to buy the part known as Unit 1007 on the 10th. Floor from the developers, ETA Star Property Developers LLC ("ETA") under a Sale and Purchase Agreement dated 24 April 2007. The purchase price was AED 21.8 million approx. and the anticipated completion date was June 2008. On 9 October 2007 the Appellant and the Respondent signed a Memorandum of Understanding ("the MOU") under which the Appellant agreed to assign its interest in the Sale and Purchase Agreement to the Respondent in consideration of payments totalling AED 27.6 million approx. payable in the manner therein set out. The terms of the MOU were not straightforward, but in essence the parties envisaged that the Respondent would enter into a new Purchase and Sale Agreement with ETA, described as "the Original Seller", by not later than 15 November 2007.
7. The Respondent became concerned lest the Appellant would fail to perform its obligations under the MOU and on 13 November 2007 it claimed an injunction against the Appellant restraining it from assigning its interest in the property otherwise than pursuant to the MOU, in other words, to the Respondent. The Respondent at that date had heard rumours and suspected, but did not know, that the Appellant had assigned its interest elsewhere.
8. The Respondent's suspicions proved correct. It is now known that on 21 October 2007 the Appellant assigned its interest in Unit 1007 to a third party, Future Investment LLC, under an Assignment Agreement to which ETA was also a party. Confusingly, the Agreement is misdated 21st September 2007. The Assignment Agreement envisaged that ETA as seller would enter into a new Sale and Purchase Agreement with Future Investment LLC as buyer. The Appellant received AED 10,550,332 from Future Investment LLC in consideration of the assignment.
9. The Respondent does not pursue its claim to be entitled to or to be assigned any interest in the property. It claims damages for what it alleges was the Appellant's breach of the terms of the MOU. The Appellant denies any breach. It contends that the MOU was not a binding contract and/or that the Respondent was in breach of its obligations under it so that it ceased to be binding on the Appellant.
10. The Respondent's application for a Freezing Order is in support of its claim for damages which it quantifies as AED 16.78 million approx. (the sum stated in the Order appealed against).
The proceedings to date
11. The Respondent commenced proceedings on 13 November 2007 against the Appellant as sole Defendant and applied for an Injunction and other orders against it on the following day. The application was made without notice to the Appellant, and the relief sought was to prevent the Appellant from assigning its interest in the property otherwise than in accordance with the MOU with the Respondent, alternatively to require the Appellant to give full particulars of any assignment it had made and to preserve the proceeds of sale, if any had taken place. The Deputy Chief Justice made an Order to that effect dated 15 November 2007, with a return date for the application to be heard on notice to the Appellant on 22 November 2007.
12. On that date, the Appellant was represented by Mr. Kaashif Basit of Counsel who said that he had been instructed at short notice and that the Respondent's counsel, Mr. Philip Punwar, had informed him only minutes before the hearing that there were several new applications which extended the scope of the original ex parte application. This was because the Respondent had learned, and Mr. Basit confirmed, that the property had been sold, and the Respondent no longer sought to prevent the sale or to assert any interest in the property. The primary application was for a Freezing Order against the Appellant directed principally towards the proceeds of sale but also in respect of all other assets of the Appellant in the U.A.E. In the circumstances the Judge treated the hearing as "contested ex parte which means that as it is ex parte you have no right of asking for it to be held off in order to file responses to affidavits but I will hear you, since you are here and have the right to be heard." He proceeded to make an Order dated 22 November 2007 which essentially was a Freezing Injunction against the Appellant's assets in the U.A.E., including any proceeds of sale of the property, without limit as to amount. The return date for a hearing inter partes was 5 December 2007.
13. The Respondent's applications were supported by two Affidavits from Paul Sansom, the Chief Operating and Financial Officer of the Respondent, dated 13 November 2007 and 3 December 2007 respectively. On behalf of the Appellant, Ronnie Decker had sworn an Affidavit dated 28 November 2007. He described himself as President of the Advisory Board of the Appellant at an address in Las Vegas, Nevada, USA which appears to be the Appellant's rather than his personal address. He described the Appellant as a property and trading company incorporated in the State of Nevada USA and stated that although President of the Advisory Board he is neither a Director or Shareholder of the Appellant.
14. Meanwhile by a letter dated 28 November 2007, as ordered by the Judge on 14 November 2007, Mr. Basit's firm JSA Law stated that the Appellant received AED 10,550,332 from Future Investment LLC by a Manager's Cheque from Mashreq Bank which was encashed over the counter, and that this sum had been allocated as follows:
"(a) AED 299,051 to ETA Star Properties as late payment interest;
(b) AED 755,361 to Isle Commercial Brokers LLC as assignor's broker fees;
(c) AED 1,000,000 to Mr. Alzaher as assignee's broker fees;
(d) AED 100,000 to Ms Jumanah Saeh, as return of the holding deposit paid for the Property;
(e) AED 3,709,633 to VeeTee International LLC for purchase of Ruby stones for delivery in Dubai. These Rubies are being kept in our safe pending receipt of an Export Licence;
(e) AED 5,372,800 to TECSBACO International Incorporated Company Limited towards part payment for purchase of diamonds for delivery in the USA."
15. At the 5 December hearing, the Respondent's applications included extending the Freezing Order to have world-wide effect, and the Appellant raised four principal reasons why the Orders should be rescinded. These were:
"(a) the Claimant does not have a good arguable case;
(b) there is insufficient evidence before the court of risk of dissipation of assets;
(c) in any event, it is not just and convenient to continue the Freezing Injunction;
(d) the Claimant did not comply with its duty of full and fair disclosure".
[Ronnie Decker's Affidavit, para. 50].
The Appellant also claimed similar relief, namely a Freezing Injunction against the Respondent, in support of its proposed counterclaim, which was for damages for the repudiatory breach of the MOU which it alleged had been committed by the Respondent. In this regard, the Judge considered that the Respondent should provide some evidence of assets in Dubai which were not likely to be moved out of Dubai. He indicated that he was prepared to continue the Freezing Injunction he had made against the Appellant, extended to have world-wide effect as sought by the Respondent, but he said that the existing Orders were to remain in effect until a further hearing on 11 December 2007 when fresh Orders would be drawn up.
16. The reason for making a fresh Order was that he had accepted Mr. Basit's submission on behalf of the Appellant that the Respondent had failed to comply with its duty of full and fair disclosure when the original application was made ex parte on 14 December (submission (d) in Mr. Decker's Affidavit quoted above). In the course of the hearing he said this:
"I think the principle has to be established. If there is a material non-disclosure, it must follow that there must be a setting aside. If I thought that it was a really bad case, then I would not even reimpose the injunction. But because it is, I think, of relatively small consequence, I am prepared to reimpose the injunction so that, in the broader issues of justice, I will give your client the protection they need to know that they did not get their application quite right the first time."
17. Thus far, matters had proceeded regularly and with reasonable despatch, given the nature of the issues that had arisen. But they developed on the following day in a manner which must be seen as unusual; although, in the event, neither party's interests were prejudiced in any way. On the following day, 6 December 2007, the parties received an email from the Court in these terms:
"Justice Hwang has reconsidered his decision to set aside Orders 1 to 3 of the Interim Order granted on 22nd. November 2007 (the 'Freezing Injunction') and has advised that there will be no setting aside of the Freezing injunction ordered. As such, the Freezing Order will remain in force, but with such modifications (if any) that should be made on return date in light of the new facts which have emerged. Justice Hwang will explain his reasons for this change on the return date hearing scheduled for Tuesday 11th. December 2007…. In light of the above, can you please ensure that the Draft order being prepared reflects the change?".
18. We describe this as unusual, not because the Judge reconsidered the decision he had indicated at the previous day's hearing — he was entitled to do this up to the time the Order was formally approved — but because of the manner in which it was announced. The parties had no opportunity to react to the Judge's proposal before the order was drawn up. However, as stated above, we do not consider that their interests were prejudiced in the circumstances of this case, and there could be other cases where the parties would welcome advance notice from the Court of further points which the judge intended to raise at a forthcoming hearing.
19. On 11 December 2007, the Judge explained his reasons for continuing the Orders made on 22 November 2007 rather than setting them aside for the non-disclosure which he found took place at the first ex parte hearing on 14 November:
"What I said the other day was I was going to set aside all the ex parte injunctions I had made because of what I considered to be material non-disclosure or misrepresentation in the affidavit…. I then informed the parties that I was only going to set aside the orders made on 14 November. I was not going to set aside the orders made on 22 November … because, although there was non-disclosure or misrepresentation … on the 14th., so those orders need to be set aside, … on the 22nd you, Mr. Basit, were present and it was you at that hearing who drew my attention to the fact that there was noncompliance with that particular provision in the contract where it required the cheque to be paid on a certain day and it was required to be a manager's cheque. So when I made that order on 22 November I was already aware of that particular non-compliance of the contract. I have taken that into account, and I still made the freezing order, so that at that point there was no reason to penalise the applicant any further because that position had been corrected by that time."
20. So the Order was made on 11 December 2007 in the form of amendments to the 22 November Order, as quoted above, with the "world-wide" extension in paragraph H. The Appellant's application for a Freezing Order against the Respondent was refused (paragraph N).
The law
21. The appeal highlights an important part of the powers which the Court has in common with common law jurisdictions around the world. The Court can order injunctions which have the effect of preventing or limiting a person's ability to deal freely with his assets, not only when those assets are the immediate subject matter of the proceedings before the Court, but in other circumstances also, where assets which would otherwise be available to satisfy a judgment given by the Court against him are about to be dissipated or removed from the jurisdiction of the Court or the reach of its order.
22. This power has been developed since two landmark cases in the Court of Appeal for England and Wales, Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093 and Mareva Comp. Nav. SA v International Bulk Carriers Ltd. [1975] 2 Lloyd's Rep. 509. The second of those cases gave its name to the new form of remedy, the Mareva Injunction, which has now been superceded by the literal, if more prosaic, term 'Freezing Order'. The full story is set out in Commercial Injunctions by Steven Gee Q.C. (5th.ed. 2004), which underlines both its importance and the detailed Rules which now regulate the general principle as expressed in the previous paragraph.
23. The present case contains examples of both the original and the new forms which an injunction may take. The initial application was for an order protecting the interest which the Claimant alleged that it had acquired in the Property (Unit 1007 at Liberty House) under the MOU; and the order made ex parte dated 15 November 2007 was made in those terms. On 22 November 2007, however, when it was confirmed that the Defendant had assigned its right to buy the Property to a third party, Future Investment LLC, and the original owner ETA Star Property had transferred it to them, the Order required the Defendant to preserve the proceeds of the assignment; but the Order was widened to include, also, "any money standing to the credit of any bank account in the United Arab Emirates". Finally, on 11 December 2007, the Order appealed against, paragraph 1 was amended to exclude the reference to the Property which was replaced by the Freezing Order in Mareva style terms "must not in any way dispose of, deal with or diminish the value of any of its directly or indirectly held tangible and intangible assets" (11 December 2007 Order, paragraph A).
24. Mr. Decker had emailed Ms. Karla Boustany, who acted as broker in the MOU transaction, on Nov. 9 as follows:
"Karla
I told you before I got a better offer from someone else. If Paul had put the deposit down with me I won't be backing out of the deal. This is Dubai, he didn't want to do it the Dubai way. I will sell him 102 or 202 at a mutually agreed updated price. Please remember that there is no such thing as 'specific performance' in Dubai…".
This was not strictly a claim for Specific Performance, but Mr. Decker seems not to have realised that the Court had power to order injunctions affecting not only the Defendant's interest in the Property but also the proceeds of any sale of that interest and the Defendant's assets generally, within Dubai and the U.A.E. and even world-wide.
25. The four main requirements of a claim for Mareva style relief can be summarised as follows. The Applicant must produce evidence which satisfies the Court:
(1) that it has a "good arguable case";
(2) that the Defendant has or may have assets which will be available to satisfy the judgment against him, if judgment is given in the Claimant's favour;
(3) that there is a real risk that the judgment will not be satisfied by reason of an "unjustifiable" disposal of those assets; and
(4) that in all the circumstances it is "just and convenient" to make the Order sought.
Moreover, the Applicant making an ex parte application is under a strict duty to disclose to the Court "all material facts" including expressly any defences which the Defendant has asserted or which, on an objective assessment of the facts may be open to him.
26. The Court's powers exist in the present proceedings under Part 25 of the English Civil Procedure Rules ("CPR") by reason of Rule 4.3 of the Rules of DIFC Courts (Interim Arrangements) Order No 1 of 2005. In future they will exist under the Rules of the DIFC Courts ("RDC") subject to the transitional provisions set out in Practice Direction No. 2 of 2008.
Grounds of Appeal
27. The Judge held that the Claimant's evidence establishes "a good arguable case" as that has been defined (see generally Gee on Commercial Injunctions (5th.ed. para.12.023 at p.340)) and we agree with him. The grounds of appeal pursued by the Appellant were stated as follows:
"(a) First, that the Learned Judge erred (to the requisite extent) in the exercise of his discretion by refusing to set aside the Freezing Injunction, notwithstanding that the Claimant was in breach of its duty of utmost good faith, having committed various material non-disclosures.
(b) Secondly, that the Judge erred in law by holding that there was a sufficient risk of unjustified disposal of assets to warrant the grant of a freezing injunction because the ordinary course of the Appellant's business involves the acquisition and disposal of assets."
(a) Failure to disclose material facts
28. The fact in question was the existence of defences or possible defences to the claim made by the Claimant. The claim was for non-performance of the Defendant's obligations under the MOU. Under Clause 2(a) the Claimant undertook to pay AED 8,096,680 "in the following manner:
i on the date of execution of this Memorandum — AED 2,172,280 ….(the 'Deposit') to be held in escrow by Al Tamimi & Company pursuant Clauses 5-7 inclusive",
and Clause 7 reads:
"7. Despite Clause 2(a), the Seller acknowledges and agrees that on the date that the parties sign this Memorandum, instead of providing the Seller with cleared funds for the Deposit, the Purchaser shall provide to Al Tamimi & Company a bank manager's cheque made payable to the Seller for the amount of the Deposit, to be held in escrow and payable per the provisions of this Memorandum."
29. Mr. Sansom's Affidavit dated 13 November 2007 informed the Court as follows:
"Payment of Deposit by the Claimant
12. In accordance with Clause 2(a)(i) of the MOU, the Claimant paid the sum of AED 2,172,280 on the date of execution of the MOU by handing over to Mr. Omar Sawaf, of Al Tamimi & Company, a HSBC cheque for the said sum to be held in escrow by Al Tamimi & Company as per the terms of the MOU. A true copy of the HSBC cheque dated 9 October 2007 is exhibited [hereto]".
30. This statement was incorrect in two material respects. First, the cheque was not handed over on the date of execution of the MOU, which was 9 October 2007, but on the following day. This is now common ground between the parties. Secondly, as is apparent from the cheque itself, it was a cheque dated 9 October 2007 drawn by the Claimant on HSBC Bank Middle East Ltd. in favour of the First Defendant, but it was not a "bank manager's cheque" or banker's draft as required by Clause 7.
31. In his Second Affidavit after being confronted with these facts Mr. Sansom acknowledged that the cheque was not delivered to Mr. Omar Sawaf until the following morning, 10 October 2007. He said "This is an error on my part and I seek the Court's indulgence to allow me to correct matters" (paragraph 43). Regarding the fact that it was not a bank manager's cheque, he asserted that that this was not a "material" breach of the Claimant's obligations under the MOU (Second Affidavit paragraph 44) and moreover that Mr. Decker had not regarded it as material nor had he expressed any concern over it (paragraph 46).
32. The Judge held in the passages quoted above that "when you come in for an ex parte the bar is raised very high" and that there was material non-disclosure in the present case (22 November hearing, transcript pages 121 and 126). We have no hesitation in holding that he was correct. The principle was stated in Brink's Mat Ltd. v Elcombe [1988] 1 WLR 1350, as follows:
"The rule that an ex parte injunction will be discharged if it was obtained without full disclosure has a two-fold purpose. It will deprive the wrongdoer of an advantage improperly obtained: …….But it also serves as a deterrent to ensure that persons who make ex parte applications realise that they have this duty of disclosure and of the consequences (which may include a liability in costs) if they fail in that duty." [per Balcombe L.J. at p.1358].
33. In Behbehani v Salem [1989] 1 WLR 723 Lord Woolf (then Woolf L.J.) added this:
"…[it is] undesirable to apply hard and fast rules. It is preferable, in my view, for each case to be considered on its own merits taking into account the public interest which exists in protecting the administration of justice from the harm that will be caused if applicants for the draconian relief of Mareva……orders do not, on an ex parte application, make full disclosure of all the material facts, whether or not the non-disclosure is innocent. I recognise the strain placed on legal advisers and the pressure under which they have to work…………However, if the court does not approach the question of the non-disclosure of material matters in the way that has been indicated in earlier decisions, there will be little hope of solicitors who are subjected to such pressures appreciating the importance of making full disclosure and, more important, bringing home to clients the serious consequences of non-disclosure." (p. 729).
34. It is clear from other authorities, which we need not set out in detail, first, that with regard to defences or possible defences which the defendant may rely upon, the duty is not limited to any which he has already raised; the applicant (and his lawyers) must form an objective view as to what defences there are "which, although not yet taken, would have been available to be taken by the defendant had he been present at the application" excluding only ones which could not reasonably be expected to be taken in due course or which can be dismissed as without substance or importance (Gee on Commercial Injunctions (5th.ed. at para. 9.004); and secondly, that it is not sufficient to refer to the matter in an exhibit to an affidavit without expressly drawing attention to it (Gee para.9.003).
35. Mr. Sansom's Affidavit was factually wrong in two respects: the cheque was not handed over until the following day, and it was not a bank manager's cheque. He described it as "a HSBC cheque" which it was not except in the sense that it was drawn on HSBC, and the fact that the cheque was exhibited as an exhibit to his Affidavit does not assist him. Both of these in our view were matters of significant commercial importance. Both involved an apparent breach of the MOU by the Claimant, and it was clearly arguable for the Defendant that the breaches were repudiatory of the MOU and that the Defendant had been entitled to rescind it on that ground. We express no view as to whether that argument was or is correct, nor as to whether the Claimant can contend that the Defendant's right to rescind, if it existed, was never exercised; those issues remain for determination at the trial. But we hold that they ought to have been disclosed to the Court by the Claimant when the ex parte application was made on 14 November 2007.
36. The Judge also held that the non-disclosure was such that the injunction first ordered ex parte on 15 November should be discharged. He held that it should, and again we agree entirely with his decision. He then addressed the question whether a fresh injunction should be ordered, when the relevant facts were known to the Court.
37. It is clearly established that in such circumstances — that is to say, in circumstances where the order granted ex parte is discharged on the grounds of material non-disclosure — the Court has power either to order an injunction in whatever terms are justified by the evidence then before it, or to refuse the application altogether regardless of what merits it might otherwise have had. This is for a matter for the discretion of the Court:
"……even though a first injunction is discharged because of material non-disclosure, the court has a discretion whether to grant a second Mareva injunction at a stage when the whole of the facts, including that of the original non-disclosure, are before it, and may well grant such a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed." [Lloyds Bowmaker Ltd. v Britannia Arrow Plc [1988] 1 WLR1337 at p. 1344 per Glidewell L.J.].
38. Here, the Judge decided what were essentially two different issues. On 5 December 2007 he said (as quoted above) "If I thought that it was really a bad case, then I would not even reimpose the injunction. But because it is, I think, of relatively small consequence, I am prepared to reimpose the injunction so that, in the broader issues of justice, I will give [the Claimant] the protection they need". On that basis, he would have set aside the Orders made on 15 and 22 November 2007 and made a fresh Order to take effect on 5 December 2007. However, following his email communication through the Acting Registrar on 6 December, the Order he made on 11 December 2007 did not set aside the 22 November 2007 Order but continued it on amended terms. The two issues were (1) should a fresh order be made, notwithstanding the non-disclosure on the ex parte application, and (2) from what date should the fresh order take effect?
39. In his helpful Submissions, Mr. Basit reminded us of the Court of Appeal's limited power to interfere with the judge's exercise of discretion in circumstances such as this. This was summarised in A.E.I. Rediffusion Music Ltd. v Phonographic Performance Ltd. [1999] 1 WLR 1507 as follows:
"Before the Court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or has taken into account, some feature that he should, or should not, have considered, or that his decision was wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale" [per Lord Woolf MR at 1523]).
40. In the view of this Court, the Claimant's non-disclosure was more serious than the Judge's description "of relatively small consequence" implies. In a commercial context such as this, where the agreement was concerned with the right to buy real estate and a "bank manager's cheque" was prescribed and the relevant payment was described as "the Deposit", to be made on a specified date, it seems to us that payment by means of a personal cheque on the following day was not only a clear breach of the agreement but also, at least arguably, a significant breach which could affect the Claimant's demand for performance of it. We take account of the Respondent's submission before us that in the absence of express provision, time is not of the essence in a contract such as this. However, this difference of view as to the significance of the facts which were not disclosed is not sufficient, of itself, to justify this Court in interfering with the Judge's Order. We turn, therefore, to consider the second aspect of his Order, namely, that the Order made on 22 November 2007 should not be set aside.
41. Here, in our view the Judge was wrong in his second thoughts. His reasons were set out in the email dated 6 December 2007. Although he was aware on 22 November 2007 that the Defendant challenged the accuracy of Mr. Sansom's Affidavit, and even that the Claimant was prepared to accept that the Affidavit was incorrect, he had renewed the injunction on that date at the invitation of the Claimant and on the basis of the evidence that was before him. There was no further evidence from Mr. Sansom, and if it had been suggested that the Judge should rule forthwith on the question whether there had or had not been material non-disclosure on 15 November, with the possible result that the 15 November order might be discharged, it seems to us that the Claimant could properly have objected to him taking that course. In the event, the order he made was a continuation of the earlier order, with certain amendments requested by the Claimant, and in our view it should stand or fall with it.
42. For these reasons, we hold that this Court is required to set aside the order made on 11 December 2007, and that the previous Orders made on 15 and 22 November 2007 should both be set aside. To that extent, this Appeal is allowed. But the remaining issue is whether the Judge was wrong to make a fresh order, as he contemplated doing on 5 December and in fact did make on 11 December 2007. This depends on all the circumstances, including the second issue, whether there was evidence of a sufficient risk of unjustified disposal of assets, to which we shall turn.
43. First, however, we should record that Mr. Basit's Submission states that at trial the Appellant's primary contention will be that the MOU is non-binding (paragraph 2.4). This was not urged upon us at the Appeal hearing, and it is unnecessary for us to express any view on either this defence or the fact that it was not disclosed.
(b) Sufficient risk of unjustified disposal of assets
44. Mr. Sansom's First Affidavit was concerned with the specific risk of the Appellant assigning or transferring its interest in the property otherwise than in accordance with the MOU (paragraphs 29–30 refer). He also drew attention to Mr. Decker's failure to respond to enquiries which the Respondent had made when they believed or suspected that he had assigned his interest to another party.
45. Mr. Decker's description of the First Defendant has been quoted above. Further, in paragraph 54 of his Affidavit he said this:
"54. There are a number of objective facts which establish that there is no such risk of the Respondent unjustifiably disposing of its assets.
a. First, the Respondent is a property investment and trading company of substantial means. As per the last audited financial statements dated 31 December 2006, the net book value of 8 Investments was approximately US$41,000,000 (Forty One Million Dollars).The Respondent could, and would, meet any adverse judgment rendered against it by this Court in favour of the Claimant.
b. Secondly, as a property investment and trading company, the Respondent's principal assets are real property. These assets cannot, by their very nature, be liquidated quickly and the Respondent would, on any view, find it difficult to quickly remove the value of such assets from any jurisdiction.
c. Thirdly, the Respondent is incorporated in the State of Nevada, USA."
46. Mr. Decker added in paragraph 62:
"In particular, 8 Investments is prevented from undertaking any effective business or meeting any of its financial obligations within the U.A.E. as a result of this Freezing Injunction."
47. Mr. Sansom responded in his Second Affidavit "the Respondent has not provided……any evidence that it is a company of substantial means and further there is no publicly available information with respect to the Respondent, its officers or its business" (paragraph 64(a)). He also questioned Mr. Decker's assertion that he was not a director of the Defendant company, suggesting that he had purported to act as if he was (in relation to other properties, Units 102 and 202, which he had indicated he could arrange to be transferred to the Respondent).
48. There was also the letter dated 28 November 2007 from JSA Law quoted above regarding the Appellant's allocation of the proceeds of the assignment to Future Investments LLC.
49. It is established that there must be "solid evidence" of the risk of unjustified disposal of assets by the party against whom a Mareva style injunction is sought (see Gee on Commercial Injunctions (5th. Ed. Para. 12.039)), and it is a cardinal principle of the Court's exercise of its power to make such an order that it shall not interfere with the ordinary course of business as carried on by the party against whom it is made. In short, it is not made in order to give the claimant security for his claim, but in order to prevent the risk that an "unjustified" disposal of assets will have the effect of preventing the claimant from enforcing a judgment in its favour.
50. The Judge held that such a risk is established on the evidence in the present case, and on this issue we agree with him. However, this is limited to assets within the U.A.E. Insofar as the Appellant asserts that the Order has had the effect of interfering with its ordinary course of business in the U.A.E., there is no clear evidence as to what business, if any, it does carry on in the U.A.E. and we are clearly of the view that the Court's orders have not, and if renewed will not interfere with it.
Should there be a fresh Order with effect from 11 (or 5) December 2007?
51. We return, therefore, to the question whether there should be a fresh Order with effect from 11 (or 5) December 2007 when the previous Orders, by reason of this Judgment, have been set aside? For this purpose, we have to take all relevant circumstances into account, as they were on that date, including the previous non-disclosure and the reasons for it, and the risk of unjustified disposal of assets within the UAE to which we have referred above. Overall, the question is whether it was "just and convenient" for the Court to make a fresh Order at that stage, and in agreement with the Judge we hold that it was. We hold also that the fresh Order shall take effect from 5 December 2007 when the previous Orders, by reason of this Judgment, are set aside.
52. The Judge decided, on the 5/11 December 2007, that the Order was to be given world-wide effect. Apart from the Appellant's real estate interests in Nevada, U.S.A. as described by Mr. Decker, and the statement that a part of the proceeds of the assignment to Future Investments LLC was used to purchase a parcel of diamonds currently in Africa but intended for delivery in the USA, there is no evidence as to what assets the Appellant owns, nor in what countries, nor as to its ordinary course of business except in general terms, "property investment and trading company".
53. In all the circumstances, we hold that the need for a world-wide extension of the Freezing Order has not been demonstrated, and that it would not be just and convenient to make that extension. For that reason, the second sentence of paragraph H(II) of the Order dated 11 December 2007 (signed 17 December 2007) is set aside, and we question the need for the first sentence in the sub-paragraph.
Conclusion (Appeal against Order dated 11 December 2007)
54. The Appeal is allowed to the extent stated above, namely, the previous Orders dated 15 and 22 November 2007 are set aside, and the Order dated 11 December 2007 is varied by the exclusion of the second sentence of paragraph H(II). Save to that extent, the Appeal is dismissed.
APPEAL AGAINST THE REFUSAL OF THE APPELLANT'S APPLICATION FOR A FREEZING ORDER AGAINST THE RESPONDENT (as Defendant to the proposed Counterclaim)
55. The Appellant contends that the Respondent has failed to pay the amount of the Deposit, as required by the MOU, and proposes to counterclaim AED 2,172,280 or that sum as damages for the Respondent's alleged breach of contract, in these proceedings.
56. The Appellant applied to the Judge for a Freezing Order against the Respondent in respect of that Counterclaim.
57. The Judge refused the application, saying that it was premature, insofar as the counterclaim had not been formulated, and that there was insufficient evidence that there was a risk of unjustified removal of assets by the Respondent from Dubai. The Judge indicated that, on the evidence, the Respondent had substantial assets in Dubai which would remain available to satisfy any judgment against it.
58. That evidence is contained in Mr. Sansom's Second Affidavit in paragraphs 14 and following. The Respondent was incorporated in the Cayman Islands in February 2005 and has its headquarters in Dubai. It carries on business through its registered Dubai branch primarily as a GCC focused private equity firm. Currently it manages Ithmar Fund I with USD 70 million fully invested in a number of well established local firms, and it has launched a second fund, Ithmar Fund II, targeting US$ 250 million which has been well received. It has two local founders and managing partners and a Board of Directors consisting of high-profile GCC nationals. It operates out of offices at Garhoud, Dubai, and is planning to move into the DIFC; Unit 1007 in the Liberty Building was intended to be its Head Office.
59. In the Appellant's Submissions, Mr. Basit contended that the application was made in support, not only of the proposed counterclaim, but also in respect of the claim for damages which the Respondent will become liable to pay under its cross-undertaking to the Court as part of its application for a Freezing Order. At the Appeal hearing, however, he stated that the Appellant does not seek an Order that the Respondent shall fortify or secure its cross-undertaking, and as we understood him this was not presented to us as a separate ground supporting the Appellant's application.
60. In the result, it is immaterial whether the application relates only to the proposed Counterclaim or whether it also includes a sum which the Respondent may become liable to pay under its cross-undertaking in damages. We are not satisfied that there is any real risk of an unjustified disposal of its assets by the Respondent which would have the effect of preventing the Appellant from enforcing a judgment in its favour for either or both amounts.
61. For these reasons, the Appeal against the Judge's refusal to make a Freezing Order against the Respondent is dismissed.
Conclusions
(1) Save to the extent stated in paragraph 54 above, the Appeal is dismissed.
(2) The Orders dated 15 November 2007 and 22 November 2007 are set aside.
(3) We invite the parties to draw up a revised Order, to take effect from 5 December 2007, accordingly.
(4) We are minded to direct that all questions as to costs, including the costs of this appeal, are reserved to the trial judge. If the parties are unable to agree as to the appropriate order
as to costs, they should exchange and lodge written submissions which the Court will consider without the need for an oral hearing (unless the Court otherwise directs).
(Signed)
Sir Anthony Evans
Chief Justice
Date of issue: 17 MARCH 2008
(The original has been signed by the Honourable Justice Sir Anthony Evans)