July 15, 2024 COURT OF FIRST INSTANCE - ORDERS
Claim No. CFI 041/2021
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
(1) ABRAAJ INVESTMENT MANAGEMENT LIMITED (IN OFFICIAL LIQUIDATION)
(2) ABRAAJ CAPITAL LIMITED (IN OFFICIAL LIQUIDATION)
Claimants
and
(1) KPMG LOWER GULF LIMITED
(2) KPMG (A FIRM)
(3) KPMG LLP
Defendants
ORDER WITH REASONS OF JUSTICE WAYNE MARTIN
UPON the Part 7 Claim Form dated 29 March 2021
AND UPON the Claimants’ application letter dated 2 May 2024 (the “Letter Application”)
AND UPON the parties’ submissions and email correspondence dated 7, 10, 17, 22, 31 May and 7, 14 June and 3 July 2024
AND UPON reviewing all relevant material added onto the Court file
AND UPON reviewing the Rules of the DIFC Courts (the “RDC”)
IT IS HEREBY ORDERED THAT:
1. The First Defendant shall pay the Claimants’ costs of the Application to Lift the Stay of Proceedings, which costs were previously reserved by Order 4 of the Orders of 8 September 2023.
2. The costs awarded in favour of the Claimants in the preceding Order, and the other six Orders for costs made in favour of the Claimants by this Court shall be assessed forthwith by way of a detailed assessment procedure pursuant to RDC Part 40.
3. No later than 21 days from the date of this Order, the Claimants shall serve on the First Defendant pursuant to RDC 40.5 a Notice of Commencement in Form P40/01 and a copy of the Bill of Costs in relation to each of the seven Orders for costs made in favour of the Claimants.
4. The Claimants’ application for an order for assessment of their costs of the proceedings before the JJC is dismissed.
5. If the costs assessed in favour of the Claimants are not paid within 21 days of assessment, interest will thereafter accrue on those costs or any unpaid part thereof outstanding from time to time at the rate of interest applicable to judgments of the Court.
6. All parties will have liberty to apply within 21 days of this Order in respect of the costs of the Letter Application. If no party exercises the liberty to apply within that period, there will be no order as to costs.
Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 15 July 2024
Time: 11am
SCHEDULE OF REASONS
Procedural history
1. On 2 May 2024, lawyers representing the Claimants wrote to the Registrar requesting that she undertake an immediate assessment of costs to be paid by the First Defendant to the Claimants in respect of their costs incurred in relation to eight separate steps in these proceedings and a related proceeding before the Joint Judicial Committee (the “JJC”).
2. The immediate assessments were sought in relation to the Claimants’ costs with respect to the following proceedings (in chronological order):
(a) The Claimants’ application to lift the stay of proceedings (the “Application to Lift the Stay”) which was instituted by a consent order made on 19 January 2022. On 8 September 2023, I granted the Claimants’ application and set aside the stay. I ordered that the costs of the Application “were to be reserved”. I will refer to my reasons for reserving the costs of the Application to Lift the Stay later in these reasons.
(b) The application of the First Defendant for permission to appeal from an order which I made on 30 November 2021 dismissing the First Defendant’s application for a declaration that the Court had no jurisdiction with respect to the claim against that Defendant by the First Claimant (the “Application for Permission”). On 2 November 2023, I ordered that the Application for Permission be dismissed and that the First Defendant should pay the First Claimant’s costs of the Application for Permission “to be assessed by the Registrar in default of agreement between the parties”.
(c) The application by the First Defendant for permission to appeal from the order lifting the stay of the proceedings (the “Application for Permission to Appeal in respect of the Stay”). On 28 November 2023, I dismissed the Application for Permission to Appeal in respect of the Stay and ordered that the First Defendant was to pay the Claimants’ costs of the Application “to be assessed by a Registrar of the Court in default of agreement between the parties”.
(d) A renewed application by the First Defendant to the Court of Appeal seeking the permission of that Court to appeal from the decision to dismiss the First Defendant’s application for an order that the Court had no jurisdiction to entertain the First Claimant’s claim against the First Defendant (the “Renewed Permission Application relating to Jurisdiction”). On 19 December 2023, the Chief Justice dismissed the Renewed Permission Application relating to Jurisdiction and ordered that “costs shall be assessed by the Registrar unless the parties agree otherwise”.
(e) A petition by the First Defendant to the JJC seeking orders that the First Claimant’s claim against the First Defendant be tried in the on-shore Courts of Dubai and the proceedings in the DIFC Courts with respect to that claim be permanently stayed (the “JJC Petition”). On 19 February 2024, the JJC ordered that the JJC Petition be dismissed and that the First Claimant’s claim against the First Defendant be tried in the DIFC Courts. The JJC further ordered that the First Defendant “must pay the costs of the Cassation”.
(f) An application by the First Defendant to the Court of Appeal seeking the permission of that Court to appeal from the decision to lift the stay of proceedings (the “Renewed Application for Permission in respect of the Stay“). On 20 February 2024, the Chief Justice ordered that the Renewed Application for Permission in respect of the Stay be dismissed and that the First Defendant pay the First Claimant’s costs of the Application “to be assessed by the Registrar unless agreed by the parties”.
(g) An application by the First Defendant for an extension of time within which to file its Acknowledgement of Service (the “Extension Application). By a consent order in terms agreed between the parties and made on 8 March 2024 it was recorded that the Extension Application was withdrawn. The consent order provided that “the First Defendant shall pay the Claimants’ costs of the Extension Application to be assessed by a Registrar of the Court in default of the agreement between the parties”.
(h) An application by the First Defendant for its application for permission to appeal from the order relating to the jurisdiction of the DIFC Courts to be considered at an oral hearing of the Court of Appeal (the “Oral Hearing Request“). By the consent order dated 8 March 2024, it was ordered that “the First Defendant shall pay the Claimants’ costs of the Oral Hearing Request to be assessed by a Registrar of the Court in default of an agreement between the parties”. Although no express order was made relating to the disposition of the Oral Hearing Request, it is implicit in the consent order of 8 March 2024 that there was to be no oral hearing before the Court of Appeal.
3. The letter from the Claimants’ solicitors enclosed a bundle of documents which included Statements of Costs in respect of each of the eight proceedings in respect of which immediate assessment was requested. Those Statements were summarised in Schedule 1 to the letter, and totaled USD 524,611.89.
4. On 7 May 2024, lawyers representing the First Defendant wrote to the Court opposing the Claimants’ request for immediate assessment of the costs claimed on various grounds.
5. The correspondence from the parties was referred to me and on 8 May 2024, I directed that the Registry write to the parties requesting confirmation that they were content for the letter from the Claimants’ lawyers of 2 May 2024 to stand as an application (the “Letter Application”), pursuant to RDC 23.6(3) for orders that:
1. The First Defendant pay the Claimants’ costs of the Application to Lift the Stay (being the costs which were reserved), to be assessed immediately by way of detailed assessment by the Registrar;
2. The First Defendant pay the Claimants’ costs of the Petition to the JJC, to be assessed immediately by way of detailed assessment by the Registrar; and
3. The costs previously awarded in the Claimants’ favour [in various other orders] be assessed immediately by way of detailed assessment by the Registrar.
6. By email dated 10 May 2024, lawyers representing the First Defendant confirmed that this procedural approach was acceptable, provided that they were given 14 days within which to respond to the application.
7. By letter dated 17 May 2024, lawyers representing the Claimants confirmed that they also were content for the letter of 2 May 2024 to be treated as an application pursuant to RDC 23.6(3), but added that the orders which were sought were orders for immediate assessment pursuant to RDC 38.3 rather than for a detailed assessment of costs. However, the letter also stated that the Claimants sought “in the strict alternative” to an order for immediate assessment, an order for detailed assessment pursuant to RDC Part 40 and an interim payment on account in an amount equal to 60 per cent of the costs claimed. The letter also contained further submissions in support of the orders sought.
8. By email dated 22 May 2024, lawyers representing the First Defendant wrote to the Court noting that the letter of 17 May not only sought to clarify the scope of the Letter Application but also included substantial further argument in support of the Application, and appeared to attempt to introduce additional requests which were not sought in the Letter Application. In that email the lawyers sought 14 days from 17 May 2024 in which to respond.
9. On 31 May 2024, the First Defendant provided its Response in the form of a witness statement from a lawyer representing the First Defendant. That statement included an acknowledgement that in paragraphs [10] and [22] of the letter of 17 May 2024 from the Claimants’ lawyers, the Claimants sought an order in the alternative for a detailed assessment of costs and an interim payment on account, in lieu of immediate assessment. The lawyer asserted that because there had been no application to vary the relief sought in the letter of 2 May 2024, there was no application before the Court for that additional relief.
10. In the statement the lawyer also asserted that there was no order in favour of the First Claimant in respect of the costs of the Application to Lift the Stay and that the parties should be afforded an opportunity to make submissions on the principle of costs before any consideration was given to assessment of those costs. This assertion was made despite the Court advising that the Letter Application was to be regarded as an application for an order that the First Defendant pay the Claimants’ costs of the Application to Lift the Stay. The Letter Application was therefore the occasion upon which the parties were to advance any submissions on the question of whether such an order should be made.
11. On 7 June 2024, lawyers representing the Claimants wrote again to the Court in reply to the submissions made on behalf of the First Defendant in the witness statement referred to above. In that letter the lawyers reiterated that the Claimants’ request was for immediate assessment of costs in accordance with RDC 38.3(1) by the Judge granting the costs award, or alternatively the Registrar. However, the Claimants reiterated their application, in the alternative, for detailed assessment of their costs pursuant to RDC 40.1, with appropriate directions to be given in relation to the same, together with an interim payment of 60% of the costs claimed.
12. Two draft orders were attached to the letter, consistently with the alternative relief sought by the Claimants. One draft order proposed immediate assessment of the costs relating to the eight proceedings, and the other draft order proposed detailed assessment pursuant to RDC Part 40, on the basis that the Claimants would serve within 21 days of the order a Notice of Commencement pursuant to RDC 40.5 and a copy of the Bill of Costs in relation to each of the eight proceedings in respect of which costs were sought.
13. In the letter, the Claimants also sought an order for costs in respect of the Application for Assessment of Costs in the amount of USD 99,595.90 and provided a Statement of Costs in respect of that request.
14. By email dated 14 June 2024, lawyers representing the First Defendant reiterated the assertion that the orders sought by the Claimants exceeded the scope of the Letter Application and invited the Court to disregard the Claimants’ submissions to that effect. In the email the First Defendant’s lawyers also proposed that the question of the costs of the Letter Application be deferred until after the Application had been determined.
15. The file was then referred to me for review. Following that review, I directed the Registry to advise the parties that the Court considered, contrary to the position adopted by the First Defendant, that all relief sought by the Claimants in the draft orders which had been filed fell within the scope of the Letter Application of 2 May 2024, and that the First Defendant would have 14 days within which to file and serve any submissions or evidence in response to the relief sought by the Claimants. I also directed the Registry to advise the parties that the Court would not consider any matters relating to the costs of the Letter Application until that Application had been determined.
16. On 3 July 2024, the First Defendant filed additional submissions in opposition to the relief sought by the Claimants.
Consideration
17. It is convenient to differentiate between those proceedings in respect of which orders for costs have been made in favour of the Claimants (or the First Claimant) by this Court, and those in which no such orders have yet been made. Two of the eight proceedings in respect of which the Claimants seek an assessment of their costs fall into the latter category, namely the Application to Lift the Stay, in respect of which costs were reserved, and the JJC Petition, in respect of which the costs order was made by the JJC, not this Court. It will be convenient to return to those proceedings after consideration has been given to the other six proceedings, in which orders for costs have been made against the First Defendant in favour of the Claimants (or the First Claimant).
18. Two of those orders were made by me, two were made by the Chief Justice, and two were made by consent. The terms of the orders have been set out at paragraph 2(a)-(h) above. The issues which have arisen between the parties in relation to those orders turn upon the proper meaning and effect of the orders made.
19. The essential questions raised by the parties in their respective submissions are:
(a) Whether the orders provide for immediate assessment or detailed assessment; and
(b) The time at which assessment should take place.
Immediate or detailed assessment
20. RDC Part 38 differentiates between immediate and detailed assessment. RDC 38.3 provides:
“Immediate assessment” means the procedure by which the Court, when making an order about costs, orders payment of a sum of money instead of fixed costs or “detailed assessment”.
21. RDC 38.4 provides:
“Detailed assessment” means the procedure by which the amount of costs is decided by the Court in accordance with Part 40.
22. Further, RDC 38.28 provides:
Where the Court orders a party to pay costs to another party (other than fixed costs) it may either:
1. Make an immediate assessment of the costs; or
2. Order detailed assessment of the costs …
23. The Claimants contend that the orders for costs made in its favour are orders for immediate assessment within the meaning of RDC 38.3. That submission must be rejected. RDC 38.3 makes clear that “immediate assessment” is a procedure by which the Court orders payment of a sum of money. Usually, such orders will only be made after Statements of Costs have been filed and served by the parties in accordance with Part 38. No Statements of Costs in accordance with Part 38 were filed or served by any party prior to the making of any of the six costs orders in favour of the Claimants. No sum of money was ordered to be paid by the Court. To the contrary, the Court ordered assessment by the Registrar of the Court in default of agreement between the parties or, in the case of the first order made by the Chief Justice, irrespective of any agreement between the parties.
24. When the costs orders made are considered in the context of the processes of assessment for which provision is made by the Rules of Court, there can’t be any doubt that the orders provided for detailed assessment pursuant to Part 40 of the RDC, rather than immediate assessment pursuant to Part 38.
The time at which detailed assessment should take place
25. The First Defendant relies upon RDC 40.1 which provides:
The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of the proceedings. However, the Court may order them to be assessed immediately.
26. The First Defendant contends that because no order was made by the Court with respect to the time at which detailed assessment should occur, it should not occur until the conclusion of the proceedings. On the other hand, the Claimants apply, in the alternative, for orders that detailed assessment now take place.
27. None of the orders for costs make any provision with respect to the time at which detailed assessment should take place. In respect of the two orders which I made, that question was not ventilated by the parties before the orders were made. Further, there is no indication in the records maintained by the Court to the effect that the question of the time at which detailed assessment should take place was ventilated by the parties before either of the orders were made by the Chief Justice, or the order of 8 March 2024 was made by consent. It follows that the Court’s power to determine the time at which costs should be assessed has not yet been exercised.
28. Both parties have had full opportunity to provide submissions to the Court with respect to this issue. Having considered those submissions I am firmly of the view that detailed assessment of the costs ordered in favour of the Claimants should be undertaken now, rather than at the conclusion of the proceedings. The progress of these proceedings has been undesirably delayed, largely as a consequence of the very considerable delay in the determination of the JJC Petition. More years are likely to pass before these proceedings are substantively determined.
29. The costs orders made in favour of the Claimants all relate to procedural issues arising from the First Defendant’s assertion that the DIFC Courts lacked jurisdiction to determine the First Claimant’s claim against it. That issue has now been definitively and indisputably resolved adversely to the First Defendant. The substantive determination of the proceedings will have no impact or effect upon the issue of jurisdiction or the costs that were incurred by the Claimants as a result of the First Defendant unsuccessfully contesting jurisdiction.
30. In these circumstances there is no reason why the Claimants’ costs should not be assessed and, following assessment, paid forthwith by the First Defendant. There will therefore be orders to that effect.
31. I now return to the matters in respect of which the Claimants seek an order for the assessment of their costs notwithstanding the lack of an order of this Court entitling them to payment of their costs.
The JJC Petition
32. In the course of their submissions relating to the costs of the JJC Petition, the parties have raised various issues relating to those costs including:
(a) Whether the Claimants were legally represented before the JJC;
(b) Whether the order of the JJC, properly construed, relates only to the costs of filing the Petition; and
(c) Whether this Court should use its processes to fill a gap in the processes of the JJC relating to costs.
33. It is unnecessary to consider or resolve any of these issues because the Claimants have not identified any plausible basis upon which this Court has jurisdiction to assess costs awarded by another Tribunal or to enforce payment of those costs, at least in the absence of an order from the other Tribunal to that effect. The proper construction and effect of the order for costs made by the JJC and the mechanism, if any, for enforcement of that order are matters for the JJC, not this Court. There will therefore be no order for the assessment of the Claimants’ costs of the JJC Petition.
The costs of the Application to Lift the Stay
34. The costs of the Application to Lift the Stay were reserved by me in response to a submission from Senior Counsel for the First Defendant to the effect that this was the proper course, given the pendency of the JJC Petition. He submitted, and I accepted, that if the First Defendant’s petition to the JJC was upheld and this Court was prevented from exercising jurisdiction in relation to the First Claimant’s claim against the First Defendant, it could have an impact upon the proper order to be made with respect to the costs of the Application to Lift the Stay of the proceedings in this Court.
35. Put another way, the stay of proceedings was ordered (by consent) because of the pendency of the JJC Petition. The question of whether the stay should be lifted notwithstanding the continuing pendency of the JJC Petition turned upon issues of jurisdiction. The substantive merits of the claim had no impact upon those jurisdictional issues. It follows that the only contingency against which the question of costs was reserved was the contingency relating to the outcome of the JJC Petition. The costs of the stay application were not reserved on the basis that the substantive outcome of the proceedings might have some impact upon the proper order to be made with respect to the costs of the Application to Lift the Stay.
36. The contingency against which costs were reserved did not materialise, and the First Defendant’s Petition to the JJC was dismissed. There is therefore no reason why the question of the costs of the Application to Lift the Stay should not now be determined and the First Defendant has been given every opportunity to put any submissions on that subject before the Court in response to the Claimants’ application for an order in relation to those costs. Notwithstanding those opportunities, the First Defendant has not advanced any reason why the costs of the Application to Lift the Stay should not follow the event, in accordance with the usual practice of the Court.
37. Accordingly, the First Defendant will be ordered to pay the Claimants’ costs of the Application to Lift the Stay. As with the other orders for costs in favour of the Claimants, those costs should be subjected to detailed assessment in accordance with RDC Part 40 and that assessment should be undertaken now, rather than at the conclusion of the proceedings.
Interim payment of the costs claimed by the Claimants
38. The Claimants assert that the Court should order the First Defendant to pay 60% of the costs claimed by the Claimants as an interim payment against the amount of costs to be assessed in their favour. The First Defendant opposes this proposal and asserts that the costs claimed by the Claimants are significantly inflated, both in terms of the hours and rates claimed in the Statements of Costs.
39. In light of the orders for detailed assessment which are to be made, I would not expect the time by which those costs will be assessed to be lengthy. In light of the First Defendant’s submission with respect to the quantum of the costs claimed by the Claimants, I think it preferable to await assessment of those costs rather than order payment on account at this stage.
40. However, my reasons for ordering detailed assessment now rather than at the conclusion of the proceedings also support the proposition that the costs should be paid promptly following assessment. Accordingly, there will be orders that unless the costs are paid within 21 days of assessment, interest will thereafter accrue on all unpaid costs or part thereof outstanding until paid in full at the rate of interest applicable to judgments of the Court.
The costs of the Letter Application
41. I will grant the parties liberty to apply with respect to the costs of the Letter Application within 21 days of the date of these orders.
42. However, it might assist the parties if I were to express my provisional view, which is to the effect that there should be no order as to the costs of that Application.
43. On the one hand, the Letter Application was, with respect, misconceived in a number of respects. The Application proceeded on the basis that orders had been made for the immediate assessment of costs in favour of the Claimants, when plainly such orders had not been made. Further, the Application sought the assessment of costs in respect of two matters in which no order for costs had been made in favour of the Claimants by this Court.
44. On the other hand, the orders that had been made by the Court were clearly intended to encourage the parties to confer and endeavor to reach agreement in respect of the costs due to the Claimants, thereby avoiding the cost to the parties and the Court of assessing that quantum. It appears that the First Defendant has refused to engage in that process of conferral, contrary to the evident wishes of the Court. Further, the First Defendants’ contentions that there should be no detailed assessment, nor any order made in respect of the costs of the application for the stay until the conclusion of the proceedings have failed.
45. As both parties have had a mixture of success and failure, it is my provisional view that the costs should lie where they fall. However, I will of course entertain submissions to the contrary.