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Claim No: CFI 054/2023

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

KARL SEBASTIAN GREENWOOD

Claimant

and

(1) ISA BIN HAIDER

(2) BIN HAIDER ADVOCATES & LEGAL CONSULTANTS

Defendants

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ORDER WITH REASONS OF JUSTICE MICHAEL BLACK KC

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UPON the Claimant filing a Part 8 Claim Form dated 28 July 2023 (the “Claim”)

AND UPON the Defendants’ Application No. CFI-054-2023/5 dated 20 November 2023 requesting that the Claim be heard in private in accordance with the Rule 35.4 of the Rules of the DIFC Courts (“RDC”)

AND UPON the Order of Assistant Registrar Hayley Norton dated 25 October 2024 administratively closing the Claim

AND UPON the Defendants’ Statement of Costs filed on 6 November 2024

AND UPON the Defendants’ Application No. CFI-054-2023/6 dated 7 November 2024 seeking an order that Franklin Morgan Legal Advisory LLC (“FMLA”), the Claimant's former legal representatives in these proceedings, pay the Defendants' wasted costs of these proceedings in full, in accordance with RDC 38.83 to 38.87 and PD 4/2014.

IT IS HEREBY ORDERED THAT the Defendants are awarded costs by way of a Wasted Costs Order against FMLA in the sum of AED 672,601.50.

Issued by
Hayley Norton
Assistant Registrar
Date of issue: 4 December 2024
At: 1pm

SCHEDULE OF REASONS

Introduction

1. There are before me two applications:

2. I shall dismiss the first application and allow the second: in short, these proceedings have a complex and chequered history involving allegations of the utmost seriousness against the First Defendant, a UAE Advocate and the Second Defendant, his law firm. These allegations were unceremoniously abandoned. The first application was made at a time when the allegations were pending and it is understandable that a party will be concerned for his professional reputation while they remain unsubstantiated, however since they are no longer pending and have been withdrawn under circumstances that do the Defendants no discredit I cannot see any remaining basis for the privacy application.

Background

3. The reasons for allowing the second application require a rather fuller exposition.

4. The Claimant, Karl Sebastian Greenwood, was arrested in Thailand in 2018 for his part in a multi-billion dollar cryptocurrency fraud. On 13 September 2023, he was sentenced to 20 years in jail by a federal court in the Southern District of New York for wire fraud and money laundering and ordered to pay approximately USD 300 million in forfeiture.

5. Greenwood was represented in these proceeding by FMLA and Shaun Morgan in particular. On 15 March 2024 Justice Wayne Martin (as he then was) found that FMLA and Shaun Morgan had committed breaches of the Mandatory Code of Conduct for Legal Practitioners in the DIFC Courts (Order No. 4 of 2019) and ordered that they were to be publicly admonished, fined and removed respectively from the list of firms registered to represent parties in proceedings before the DIFC Courts and the DIFC Courts’ Register of Practitioners.

6. FMLA appealed and on 17 September 2024, the Court of Appeal reduced FMLA’s fine but otherwise upheld Justice Martin’s Orders. The Court of Appeal noted that Justice Martin’s findings were (somewhat strangely) not challenged.

7. Justice Martin described Morgan as “a charlatan who has not established an entitlement to practice law in any jurisdiction. He is dishonest, completely lacking in integrity, and a fraudster.” As for FMLA he found:

8. On 28 July 2023 Morgan and FMLA issued a Part 8 Claim Form seeking the appointment of an expert to investigate all sums of money received and collected by Bin Haider & Advocates and Legal Consultants and Isa Bin Haider on behalf of Karl Sebastian Greenwood to enable an additional Claim for monetary damages and compensation to be registered within the DIFC Court. This was accompanied by a “Statement of Claim” which alleged that

9. On 21 August 2023 FMLA re-submitted the Statement of Claim and an application for the appointment of an expert supported by a “Witness Statement Affidavit” from one Thani Mohd Thani Belaisha Alfalasi claiming to be the authorized representative of Karl Sebastian Greenwood pursuant to a General Power of Attorney entered into on 16 August 2022.

10. On 2 October 2023 FMLA made application for a freezing order against the Defendants supported by a witness statement from Mr Alfalasi.

11. On 6 October 2023 Holman Fenwick Willan Middle East LLP (“HFW”) acknowledged service on behalf of the Defendants indicating an intention to contest the jurisdiction of the Court.

12. On 16 October 2023 FMLA served another “Witness Statement Affidavit” from Mr Alfalasi alleging (amongst other things) that any document or agreement purporting to be signed by Greenwood was clearly fabricated or a forgery as Greenwood had been in custody in the US since 2018 (presumably it was implied that this did not apply to the power of attorney dated 16 August 2022). It was also alleged that the Defendants were seeking to pervert the course of justice.

13. The next day FMLA served another witness statement from Mr Alfalasi repeating what had been said before but claiming in addition that the Defendants' actions had (1) caused Mr. Greenwood significant financial and emotional distress (presumably in addition to that caused by awaiting trial on a multi-billion dollar fraud and a forfeiture order for hundreds of millions of dollars), (2) undermined public confidence in the legal system (it was not said how), and (3) damaged the reputation of the DIFC Court (which was surprising, as before Greenwood himself had instituted proceedings in the DIFC Courts, there had been none).

14. On 18 October 2023 following a hearing at which the Defendants were represented I ordered that the Claim shall proceed under Part 7 and gave certain directions.

15. On 20 October 2023 HFW served the Defendants’ application challenging service, jurisdiction and the nature of the Claim.

16. On 27 October 2023 FMLA served a witness statement from Ahmed Abdo Al Hajj Aldubaili. Mr Aldubaili also claimed to have a General Power of Attorney issued by Greenwood. He alleged (amongst a repetition of previous allegations) that the First Defendant falsely claimed to have sent to him by way of bank transfer of cheque [sic] amounts of up to AED 67 Million.

17. On 30 October 2023 the Defendants made an application for security for costs. Between 6 and 10 November 2023 the Defendants served evidence in support of their applications.

18. On 13 November 2023 FMLA served anther witness statement from Mr Al Falasi [sic]. In addition to making repeated claims of dishonesty against the First Defendant in increasingly intemperate terms, Mr Alfalasi now claimed (contrary to the pleaded case) that the sums held by the Defendants did not in fact belong to Greenwood but were the proceeds of crime following the Forfeiture Order made on 21 September 2023.

19. On 16 November 2023 FMLA served a witness statement from Obaid Al Marri, its Managing Partner. Mr Al Marri picked up and ran with the new case that the sums held by the Defendants were the proceeds of crime. He went on to make serious allegations of impropriety against the Defendants based on matters of which he could have no personal knowledge.

20. On 20 November 2023 the Defendants made the first (privacy) application supported by a witness statement from the First Defendant.

21. The hearing of the Claimant’s application for a freezing order against the Defendants and the Defendants’ application for security for costs was listed for 24 November 2023. On 20 and 21 November 2023 the Defendants served their skeleton argument (settled by English counsel) accompanied an extensive list of authorities.

22. On 21 November 2023 FMLA also served the Claimant’s skeleton argument signed by Shaun Morgan. The skeleton asserted that “The funds which the Defendants are wrongly claiming never belonged to the Claimant” in direct contradiction to the “Statement of Claim”. It is pertinent to observe that if Greenwood never had any right to the money it is hard to understand how he was asserting any claim at all.

23. On 22 November 2023 FMLA served another witness statement from Mr Al Marri, he asserted (without evidence) that “it is undeniable that the Defendants were always materially aware that the funds they have falsely claimed as fees do not belong to the Claimant” . This seems odd in the light of the terms of the Statement of Claim unless FMLA were misled by Greenwood, in which case they should have withdrawn from the case when they learned the truth. He went on to make highly argumentative and tendentious statements on matters outside his personal knowledge.

24. On 23 November 2023 I adjourned the hearing listed for 24 November 2023 on the grounds that Shaun Morgan’s rights of audience before the DIFC Courts under Part II of the DIFC Register of Practitioners were under temporary administrative suspension and I considered that it would be unfair to deprive FMLA’s client of Morgan’s services at short notice.

25. What followed is set out at paragraphs 5 and 7 above.

26. On 15 October 2024 FMLA wrote to the Court:

They provided a Hotmail address for correspondence.

27. On 16 October 2024 the Court wrote to the parties:

28. Shortly thereafter the Court received an email from the Hotmail address:

29. On 17 October 2024 the Court wrote

30. HFW responded with comments:

31. There was a further email form Hotmail address:

32. On 23 October 2024 the Court wrote:

33. On 23 October 2024 Engy Nabil Law Firm wrote to the Court stating “our cancellation of the intention to represent the plaintiff, Karl.” On 25 October 2024 the Court ordered that the Claim was administratively closed.

34. On 30 October 2024 FMLA wrote to the Court confirming its consent to the dismissal of the Claim although it is unclear on what basis FMLA could claim to have any locus standi to give such consent.

Discussion

35. Where a claimant discontinues a claim, prima facie, the claimant will be liable for the defendant’s costs (RDC 34.15). The facts of this case are so murky that I am not convinced that any of the people purporting to act for Greenwood had his authority either to commence or discontinue the proceedings. The Defendants do not seek a costs order against him for the obvious reasons that he shall be languishing in a US jail for the foreseeable future and there are prior claims upon his assets. The Defendants therefore seek their costs as a wasted costs order against FMLA.

36. I have set out the background in some detail as the principles applicable to wasted costs orders require the Court to be persuaded that the necessary criteria have been satisfied. Those criteria are set out in RDC 38.83 to 38.87 and Practice Direction No. 4 of 2014 DIFC Courts’ Wasted Costs Orders, dated 23 June 2014 (“PD 4/2014”).

37. RDC 38.83 provides that the Court shall have the power to order the legal or other representative concerned to meet the whole of any wasted costs or such part of them as may be determined. Paragraph 5 of PD 4/2014 states that it is appropriate for the Court to make a wasted costs order against a legal representative, only if –

38. Paragraphs 7 and 8 of PD 4/2014 provide that as a general rule the Court will consider whether to make a wasted costs order in two stages, the second stage being that the Court will consider, after giving the legal representative an opportunity to make representations in writing or at a hearing, whether it is appropriate to make a wasted costs order in accordance with paragraph 5. The Court may proceed directly to the second stage if it is satisfied that the legal representative has already had a reasonable opportunity to make representations. In the present case FMLA has had an opportunity to make representations and has done so.

39. The Defendants point to the comments of Justice Martin and the Court of Appeal. It is true that FMLA was complicit in the prosecution of proceedings by Shaun Morgan that he was unqualified to conduct. I do not however consider that of itself is enough to justify a wasted cost order. The Defendants elide Shaun Morgan’s misconduct and the claim itself. I consider them to be different. If Greenwood’s claim had been meritorious, the only material wasted costs would have been incurred by the Defendants in Greenwood’s change of representation on discovery of Shaun Morgan’s misconduct. It is necessary to focus on the claim.

40. The Defendants submit that the claim filed by the Claimant was a vexatious and groundless claim, which constitutes as an abuse of the Court's process. They contend that the claim was advanced by a convicted fraudster, Shaun Morgan, who likely brought this claim on behalf of the Claimant despite the fact that there has been no independent verification that the Claimant is aware of the claim, let alone that he is behind it. The Claimant himself has never provided a witness statement nor issued any correspondence in the proceedings. In the recent correspondence between Engy Nabil, FMLA and the Court Registry, Engy Nabil was unable to provide an adequate Power of Attorney and abandoned the proceedings when pressed.

41. FMLA responded to the application in a document dated 11 November 2024 portentously entitled “Official Memorandum”. I will recite its contents in full:

42. This is, not to put too fine a point on it, nonsense. The fact that the case has been dismissed is why the Defendants have suffered wasted costs, it is therefore the reason for the application not a defence to it. The next sentence is not only a non sequitur but is wrong in law as Federal Decree Law No. (34) of 2022 has no application in the DIFC. The final sentence is irrelevant as whether or not FMLA can claim fees from Greenwood is not the issue.

43. This is a fair example of the quality of legal argument with which the Defendants have had to contend throughout, albeit in support of allegations of the utmost gravity.

44. I agree that FMLA’s conduct has been improper and unreasonable, has caused the Defendants to incur unnecessary costs and that it is just in all the circumstances to order FMLA to compensate the Defendants for the whole of those costs. These proceedings should never have been brought. On FMLA’s own submission the object of the proceedings was to recover sums that were the proceeds of Greenwood’s crimes. Whether or not the allegations made against the Defendants were true the claim as brought could not possibly have succeeded as Greenwood and his attorneys had no right to the money claimed.

45. It is unnecessary to consider whether Shaun Morgan brought the proceedings for his own benefit to secure a portion of Greenwood’s ill-gotten gains or was genuinely acting for Greenwood. Either way the claim (if true) was irredeemably tainted with illegality and doomed to failure. Of course, the Defendants maintain the claim was false and fraudulent. The unexplained abandonment of the proceedings supports the contention that they were brought vexatiously in the knowledge they were groundless.

Costs claimed

46. The Defendants seek an immediate assessment of their costs. They filed a Statement of Costs on 7 November 2024. The only response was the so-called “Official Memorandum”.

47. By RDC 38.8(1) in deciding what order (if any) to make about costs, the Court must have regard to all the circumstances, including the conduct of all the parties. I am in no doubt that the significant level of impropriety and unreasonable conduct exhibited by FMLA amply justifies assessment of the costs on the indemnity basis. Where the Court is assessing costs on the indemnity basis it will decide whether the costs were unreasonably incurred and unreasonable in amount (RDC 38.21(2)) and will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party (RDC 38.19).

48. I am in no doubt that the costs claimed were reasonably incurred having reviewed the allegations made and the steps taken by FMLA in these proceedings. As to the amount of the costs claimed, I have reviewed the hours claimed as well as the disbursement for counsel’s fees and I accept that the allegations made, and the manner of their presentation required substantial work on documents which was properly undertaken by Associates rather than Partners.

49. The only respect in which I have some doubt is that the rates charged for Fee Earners Numbers 7, 10 and 11 exceed the rates in Registrar’s Direction No. 1 Of 2023 – Indicative Hourly Legal Charges, but the rates are only indicative averages and as I am assessing costs on the indemnity basis, I resolve the doubt in the Defendants’ favour.

50. The Defendants are therefore entitled to their costs by way of a Wasted Costs Order against FMLA in the sum claimed, namely AED 672,601.50.