September 07, 2022 COURT OF FIRST INSTANCE - ORDERS
Claim No: CFI 030/2022
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
MAD ATELIER INTERNATIONAL B.V.
Claimant
and
(1) AXEL MANES
(2) CATHERINE ZHILLA
Defendants
ORDER OF H.E DEPUTY CHIEF JUSTICE ALI AL MADHANI
UPON the Second Defendant’s Application no. CFI-030-2022/8, filed on 5 August 2022, for an extension of time to dispute the Court’s Jurisdiction (the “EOT Application”)
AND UPON the Second Defendant’s Application no. CFI-030-2022/10, filed on 8 August 2022, seeking an order that Court has no jurisdiction over the Second Defendant in these proceedings (the “Jurisdiction Application”)
AND UPON considering the submissions of the parties in respect of the EOT Application and the Jurisdiction Application
AND UPON reviewing the case file
IT IS HEREBY ORDERED THAT:
1. The EOT Application is dismissed.
2. The Jurisdiction Application falls away as a result of my dismissal of the EOT Application. The Second Defendant shall pay the Claimant’s costs of the EOT Application on the standard basis, to be assessed by a registrar if not agreed.
Issued by:
Ayesha Bin Kalban
Deputy Registrar
Date of Issue: 7 September 2022
At: 1pm
SCHEDULE OF REASONS
Introduction
1. The Second Defendant (“D2”) applies for an extension of time to dispute the Court’s jurisdiction over the claim. Her primary case is that she in fact filed a jurisdiction application within time. The EOT Application is made on the basis, therefore, that that contention might be wrong. For the reasons which follow, I think it is wrong, and also that no extension of time should be granted. For these reasons I dismiss the EOT Application.
Background
2. The Claimant (“C”) is a company incorporated under Dutch law with its registered office in the Netherlands. The First Defendant (“D1”) and D2 reside in Dubai. Until 17 January 2022, the Defendants were married. They have two children together.
3. Until about 24 August 2021, D1 was the registered shareholder of all the shares in Five Dining Corporation Limited, a DIFC-incorporated company which owns and operated L’Atelier de Joel Robuchon, a restaurant in the DIFC Gate Village (“Five Dining” and the “Shares”). D1 was also a director of Five Dining until about 21 January 2022.
4. On 11 April 2019, C commenced proceedings against D1 in the English Courts (the “English Proceedings”). D1 defended the claim. The subject matter of the English Proceedings need not be outlined here.
5. On or about 24 August 2021, D1 transferred the legal ownership of the Shares to a company, Five Aces Limited (“Five Aces”).
6. On 25 November 2021, D2 filed for a divorce from D1 in the Personal Status Court of Dubai.
7. Judgment was handed down in the English Proceedings on 9 December 2021 (the “Judgment”). The English court made an order consequential on the Judgment on 13 January 2022 (the “Order”).
8. By the Judgment and Order, the English court directed D1 to pay C:
a. damages of EUR 11,383,359;
b. interest up to 13 January 2022 of EUR 1,142,089;
c. interest on the sums set out at paragraphs 4(a)and 4(b) above at the rate of 5% per annum from 13 January 2022 until the date of payment;
d. costs on the indemnity basis; and
e. GBP 2,600,000 by way of interim payment on account of the costs referred to at paragraph 4(d) above.
9. In January also, D2 issued a claim in the Dubai Court against C and D1 seeking:
a. an order stopping the enforcement of the English Judgment against D1;
b. a declaration that she and her children own the Shares; and
c. a declaration that C and D1 have no rights over the Shares (the “D2’s Dubai Court Claim”).
10. The DIFC Court is told that, on 13 January 2022, D1 gave an undertaking to the English Court not to dispose of, deal with or diminish the value of any interest which he had in Five Dining.
11. On 17 January 2022, the Dubai Personal Status Court issued a divorce order (the “Divorce Order”). The Divorce Order declared the dissolution of D1 and D2’s marriage and:
a. assigned custody of their two children to D2;
b. ordered a transfer of 100% of the shares of MAD Development, a Belgian company which was under the control of D1 at the time of the Divorce Order, to D2; and
c. ordered the transfer of 66% of the Shares to D1 and D2’s two children in equal parts.
12. On 18 January 2022, the legal ownership of the Shares was transferred from Five Aces to D2.
13. On 24 January 2022, the English court refused D1’s application to stay execution of the Judgment and Order pending appeal. D1 had applied for permission to appeal against the quantum of the Judgment and Order. The application was finally refused by the English Court of Appeal on 28 March 2022.
14. On 10 February 2022, the Execution Department of the Personal Status Court issued an execution order (the “Dubai Execution Order”). The Dubai Execution Court required D2 to transfer two thirds of her shareholding in Five Dining to D1 and D2’s two children.
15. On 7 March 2022, D2 made an application to the DIFC Courts Enforcement Division requesting the DIFC Courts assistance in executing the part of the Dubai Execution Order relating to Five Dining. The DIFC Court subsequently recognised and enforced the Dubai Execution Order and ordered the DIFC Registrar of Companies to give effect to the Dubai Execution Order. As a result of that Dubai Execution Order, D2’s shareholding in Five Dining decreased from 100% to 34% and each of D1 and D2’s children obtained 33% shares in the company.
16. On 17 March 2022, C issued proceedings in the DIFC Court against the Defendants for a freezing order concerning the Shares and dividend payments of Five Dining (“CFI-021-2022”). The next day, Justice Lord Angus Glennie issued the order sought.
17. On 29 March 2022, D2 filed an acknowledgment of service of CFI-021-2022 and indicated in it that she intended to contest the DIFC Court’s jurisdiction to try the claim.
18. On 7 April 2022, D2 filed an application to the Joint Judicial Committee (the “JJC”) for determination of a purported conflict of jurisdiction between the Dubai Courts and the DIFC Courts in respect of D2’s Dubai Court Claim and CFI-021-2022 (the “JJC Application”).
19. On 18 April 2022, D2 filed an application in this Court for CFI-021-2022 to be stayed pursuant to Article 5 of Dubai Decree No. 19 of 2016 (the “Decree”).
20. On 15 April 2022, C issued substantive proceedings in this Court against the Defendants (“CFI-030-2022”). By CFI-030-2022, C seeks two remedies, namely, first, an order for D1 to pay the English judgment debt and, second, a declaration that the Shares are held by D2 on trust for D1.
21. On 9 May 2022, D2 filed an acknowledgment of service of CFI-030-2022 and indicated in it that she intended to contest the DIFC Court’s jurisdiction to try the claim.
22. On 12 May 2022, D2 filed an application for CFI-030-2022 to be stayed pursuant to Article 5 of the Decree.
23. On 22 June 2022, H.E. Justice Maha Al Mheiri ordered that CFI-021-2022 and CFI-030-2022 be consolidated (the “Claim”) and, on 29 June 2022, she stayed the Claim on the basis of the JJC Application (the “Stay Order”).
24. On 4 July 2022, C applied for the Stay Order to be set aside.
25. On 1 August 2022, I set aside the Stay Order (the “Set Aside Order”).
26. On 5 August 2022, D2 filed the EOT Application, for an extension of time to contest the Court’s jurisdiction. In the application notice, D2 indicated that she wished for the EOT Application to be dealt with without a hearing.
27. On 8 August 2022, D2 filed the Jurisdiction Application contesting the Court’s jurisdiction.
The EOT Application
28. As stated in the introduction, D2 seeks an extension of time to dispute the Court’s jurisdiction. C says that D2 has failed to provide an explanation of why a jurisdictional challenge was not made within time nor why it is appropriate for the Court to retrospectively grant an extension.
29. D2 recorded in her acknowledgments of service in both CFI-021-2022 and CFI-030-2022 on 29 March 2022 and 9 May 2022, respectively, her intention to contest the jurisdiction of DIFC Courts. A defendant who wishes to either dispute the Court’s jurisdiction to try the claim or argue that the Court should not exercise its jurisdiction may apply to the Court for an order declaring that it has no or should not exercise any jurisdiction pursuant to RDC r. 12.1. Pursuant to RDC r. 12.2 such a defendant must first file an acknowledgment of service and pursuant to RDC r. 12.4 the defendant must make the jurisdiction application within 14 days of doing so. D2 therefore had until 12 April 2022 in respect of CFI-021-2022 and 23 May 2022 in respect of CFI-030-2022 to make applications under Part 12 of the RDC challenging the Court’s jurisdiction.
30. It is uncontroversial that no such applications were made within those time frames. What D2 did instead was make an application to the JJC on 7 April 2022 in respect of CFI-021-2022, being the JJC Application and, the Court is told, added exhibits to this application in respect of CFI-030-2022 later on 9 May 2022. D2 submits that the JJC Application had the effect of suspending all time limits as a consequence of Article 5 of Dubai Decree No. 19 of 2016 —as material, “The referral of a dispute to the [JJC] … will result in: (1) the stay of proceedings … in respect of which a conflict of jurisdiction arises…”—such that she was not required to make DIFC Court applications disputing the Court’s jurisdiction by 12 April 2022 (CFI-021-2022) and 23 May 2022 (CFI-030-2022). I disagree.
31. The mere referral of a jurisdiction question to the JJC does not trigger a stay under Article 5 of the Decree. That which is referred must be, as material, a dispute as to jurisdiction ( Lakhan v Lamia [2021] DIFC CA 001 at paragraph 29). And whether there is such a dispute is a matter to be determined by the court in which the stay is sought (ibid. at paragraph 28). There are then two prerequisites for a stay under Article 5 of the Decree on the basis of a conflict of jurisdiction: (i) the existence of a referral to the JJC to determine the competent court and (ii) the existence of a conflict of jurisdiction in the first place which requires resolution (ibid. at paragraph 31). The first requires an act of the party who contests jurisdiction and the second requires a finding of the court in which the stay is sought, and where both prerequisites exist the Court will stay proceedings pursuant to Article 5 of the Decree. It follows from these conclusions that the mere existence of the JJC Application was not sufficient to trigger stays of the DIFC Court proceedings, suspending any extant time limits within them. An order of the Court staying the proceedings on the basis that there also existed a conflict of jurisdiction between the DIFC and the Dubai courts was needed as well.
32. H.E. Justice Maha Al Mheiri’s made the Stay Order (CFI-021-2022 and CFI-030-2022 now consolidated) only on 29 June 2022, which is to say after the opportunities for D2 to dispute the Court’s jurisdiction in respect of both CFI-021-2022 and CFI-030-2022 had lapsed.
33. Pursuant to RDC r. 12.5(1), if a defendant files an acknowledgment of service and does not make an application disputing the Court’s jurisdiction within 14 days of doing so, he is treated as having accepted that the Court has jurisdiction to try the claim. While it does not appear to me to be expressly stated, the “application disputing the Court’s jurisdiction” referred to in RDC r. 12.5 is, in my judgment, the application referred to in RDC r. 12.1 and thereafter throughout Part 12; it is not any application which challenges the Court’s jurisdiction. This distinction is potentially important in the context of the DIFC Court as here a defendant can, as D2 has attempted to do, challenge the DIFC Court’s jurisdiction before the JJC in addition to challenging it in the ordinary way under Part 12 of the RDC. In my view, for a defendant to challenge the DIFC Court’s jurisdiction in the DIFC Court itself, an application under Part 12 of the RDC must ordinarily be made within 14 days of the defendant filing an acknowledgment of service of the DIFC claim. It is irrelevant, in my opinion, that the defendant may have made an application disputing the DIFC Court’s jurisdiction to the JJC or that such an application was made within 14 days of the defendant acknowledging service in the DIFC Court. Those are steps relevant to contesting the DIFC Court’s jurisdiction before the JJC, not the DIFC Court.
34. Nor would there be much utility in the words “application disputing the Court’s jurisdiction” in RDC r. 12.5 encompassing applications to the JJC. Let it be recalled that the primary purpose of the JJC is to decide whether the DIFC Court or the Dubai Court is the competent court to hear a claim where there is a conflict of jurisdiction between the two courts (Article 2(1) of the Decree). In Lakhan, the Court of Appeal stated that:
“33. … the conflict of jurisdiction [between the DIFC Court and the Dubai Court] can be either through inconsistent judgments or through both Courts maintaining or declining jurisdiction over a claim … Maintaining or declining jurisdiction over a claim must be something less than judgment on the substance of the claim; conversely, mere existence of proceedings with the same claim in both of the Courts cannot be enough for conflict of jurisdiction, as if that were so there would be no point in making inconsistent judgments an occasion of conflict of jurisdiction – there would be conflict of jurisdiction before getting to judgment. …
35. … When a party commences proceedings, it asks the Court to exercise jurisdiction. The Court does not do so by the administrative act of receiving the initiating process when filed. At the least, there must be some step in the proceedings amounting to a relevant exercise of jurisdiction by the Court, or refusal of the step on jurisdictional grounds, in order that there be maintenance or declining of jurisdiction within the words in the chapeau to Article 4. All translations [of the Decree] require a positive act on the Court’s part (“claimed or disclaimed jurisdiction”; “assert or decline jurisdiction over a claim”; “no court decides to waive hearing of the action or both courts waive the hearing thereof”). As to “no court decides to waive the hearing of the action”, which had to be the nub of the Claimant’s submission as the negative act, it must be read with the alternative of waiving the hearing, indicating a choice; there must be at least an occasion for deciding to waive or not waive, as is clear from the other translations.”
As such, for there to be a conflict of jurisdiction between the two courts of Dubai, with both courts either maintaining or declining jurisdiction, there must be positive acts of the courts which together create that conflict. As the Court stated in Lakhan, the DIFC Court’s mere receipt of the initiating process is not such a positive act. So in CFI-030-2022, for example, there cannot have been a conflict of jurisdiction between the courts of Dubai by 9 May 2022 when D2 updated the JJC Application to incorporate CFI-030-2022 as the DIFC Court had not yet taken any step in the proceedings, much less one amounting to exercise of jurisdiction or a refusal to do so on jurisdictional grounds. If there was or could have been a conflict of jurisdiction between CFI-021-2022 and Dubai Court proceedings or between the interim Freezing Order and a judgment of the Dubai Court, and so on, that has not been explained.
35. The DIFC Court’s handing down of a decision on an application under Part 12 of the RDC will, I would have thought, usually be the first occasion on which it can be said that the Court has maintained or declined jurisdiction for the purposes of the Decree.
36. Returning to the main point and contrary to her submission, in my judgment D2 missed both deadlines for contesting the jurisdiction of the DIFC Court in the DIFC Court itself.
Relief from sanction
37. The sanction for not filing an application under Part 12 of the RDC within the period specified in RDC r. 12.4 is that, RDC r. 12.5(1) explains, the defendant is to be treated as having accepted that the Court has jurisdiction to try to claim. If a defendant is not content with being so treated, he should apply for relief from that sanction pursuant to RDC r. 4.49 and a retrospective extension of time pursuant to RDC r. 4.2(1). Alternatively, the relief from sanctions principles apply because of the potential implicit sanction that the court will refuse to extend time to dispute the Court’s jurisdiction.
38. RDC rr. 4.2(1) and 4.49 provide as follows:
“4.2
Except where these Rules
provide otherwise, the Court may:
(1) extend or shorten the time for compliance with any Rule, Practice Direction or Court order (even if an application for extension is made after the time for compliance has expired) …
4.49
On an application for relief from any sanction imposed for a failure to comply with any Rule, Practice Direction or Court order the Court will consider all the circumstances including:
(1) the interests of the administration of justice;
(2) whether the application for relief has been made promptly;
(3) whether the failure to comply was intentional;
(4) whether there is a good explanation for the failure;
(5) the extent to which the party in default has complied with other Rules, Practice Directions and Court orders;
(6) whether the failure to comply was caused by the party or his legal representative;
(7) whether the trial date or the likely trial date can still be met if relief is granted;
(8) the effect which the failure to comply had on each party; and
(9) the effect which the granting of relief would have on each party.”
39. In in Denton v TH White Ltd [2014] EWCA Civ 906 the English Court of Appeal clarified how relief from sanctions under the English rule equivalent to RDC r. 4.49, CPR r. 3.9, should be approached. Though RDC r. 4.49 and CPR r. 3.9 are not identical, in my view the approach to be taken under each provision will be substantially the same: both rules require the court to consider “all the circumstances,” rendering the ensuing illustrative lists in each rule only that—illustrations—and while RDC r. 49 leaves out the requirement that the case is dealt with justly, the same requirement is brought into play for RDC r. 4.49, in my view, by RDC r. 1.6 read with RDC r. 1.7.
40. In Denton, the Court stated that courts should approach applications relief from sanctions in three stages, asking: (i) whether the breach is significant and serious; (ii) why the breach occur; and (iii) whether, in all the circumstances of the case, dealing with the case justly requires granting or refusing relief from sanction. The RDC requires me to consider the circumstances set out in RDC r. 4.49(1) to (9) as part of the third stage of the Denton approach.
41. Was D2’s breach significant and serious? In my view, it was. Time limits are critical to the Court’s ability to ensure that cases are dealt with expeditiously and fairly, as required by RDC r. 1.6(4). And where, notwithstanding that a time limit has been missed, a party nevertheless wishes to take the precluded step and so applies for relief from sanction, one consequence of this is that more of the Court’s resources are allotted to that case, which creates a risk that the Court allots an inappropriate share of its resources to that case which would be contrary to RDC r. 1.6(5).
42. Why did the breach occur? D2’s primary case is that no breach occurred. As explained above, in my judgment this case is misconceived. More importantly for present purposes, however, D2’s primary case suggests that the reason that D2 did not contest the Court’s jurisdiction within time is that D2 was, at best, simply unaware of what the rules required rather than, for example, being unable, for understandable reasons, to comply with rules at the time she was required to do so. Unsurprisingly, I do not think that there is a good reason for the breach.
43. In all the circumstances of the case, should relief from sanction be granted or refused? This EOT Application has increased the risk of unnecessary delay in the resolution of these proceedings. It has also caused D1’s and D2’s cases to become out of step somewhat. In addition, the EOT Application was not made promptly. It was made nearly four months after the relevant deadline in CFI-021-2022 passed and more than two months after the relevant deadline passed in CFI-030-2022. RDC r. 23.16 provides that every application should be made as soon as it becomes apparent that it is necessary or desirable to make it. D2 has not explained to the Court why the EOT Application was made on 5 August 2022 and not earlier.
44. While there is no evidence to suggest that D2’s failure to make applications under Part 12 of the RDC was in bad faith, in my view the failures were intentional in the sense that, based on an incorrect understanding of the law, D2 did not make Part 12 applications, intentionally, because she did not think she needed to. Nor has any explanation for the incorrect understanding been provided.
45. I do note, however, that I am unaware that D2 has otherwise neglected other rules, practice directions and orders. I must also note that no trial date has been jeopardised by D2’s failure but, inasmuch as D2 now applies for relief from sanctions, her failure has increased the burden of the litigation on the other parties, including financially, and inevitably will delay their conclusion.
46. Nor is it insignificant that this decision will not prevent D2 from perusing the JJC Application, and so D2’s challenge to the Court’s jurisdiction before the JJC will not be prejudiced by my decision.
47. There are three further circumstances that I think are noteworthy. Firstly, D2’s case on jurisdiction appears to be that the Court does not have jurisdiction over the entirety of the Claim. No explanation has been given for D2’s apparent concern for C’s case against D1 as well. RDC r. 4.2(6) empowers the Court to stay the whole of any proceedings or any part thereof. I would have expected D2 to apply for a stay of the proceedings only to the extent that they concern her and, in my view, D2’s EOT Application is undermined by the by the fact that she has not. Secondly, I think it is in fact in D2’s interests if she is present to defend the Claim insofar as it concerns her. On the face of it, the Claim is capable of progressing without her and capable also of significantly affecting her interests and those of her children. Thirdly, D2 has apparently continued to engage with the Dubai Court proceedings notwithstanding her interpretation of the effect of the Decree. The Court is told that, on 27 April 2022, D2 filed a Memorandum of Reply in the Dubai Courts which was only 20 days after D2 made the JJC Application. No explanation has been given for this apparent inconsistency of positions taken by D2.
48. Taking all of these circumstances into consideration, I think dealing with the case justly requires refusing the EOT Application.
Conclusion
49. For the reasons given above, the EOT Application is dismissed.
50. The Jurisdiction Application falls away as a result of my dismissal of the EOT Application. D2 shall pay C its costs of the EOT Application on the standard basis, to be assessed if not agreed.