December 09, 2022 COURT OF FIRST INSTANCE - ORDERS
Claim No. CFI 057/2021
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
KHALED SALEM MUSABEH HUMAID AL MHEIRI
Claimant
and
(1) MOHAMMAD EZELDDINE EL ARAJ
(2) JOHN CAMERON
Defendants
AMENDED ORDER WITH REASONS OF JUSTICE MICHAEL BLACK
UPON reviewing the Claimant’s Application Notice No. CFI-057-2021/6 seeking a variation of the Order of Registrar Nour Hineidi dated 14 September 2022 (the “Order”) and the evidence filed in support of the Application Notice (the “Application”)
AND UPON reviewing the Second Defendant’s evidence in answer to the Application
AND UPON reviewing the Claimant’s evidence in reply
AND UPON reviewing the Court file
IT IS HEREBY ORDERED THAT:
1. The Application is dismissed.
2. Paragraph 2 of the Order of Registrar Nour Hineidi dated 14 September 2022 shall be amended to read as follows:
“The Claimant is to pay the Second Defendant’s costs incurred between 31 October 2021 and 14 September 2022 arising out of or in connection with the Claimant’s failure to pay the first part of the filing fee by 31 October 2021 or the extended deadline of 16 January 2022 including (but not limited to) the Claimant’s application for a retrospective extension of the extended deadline dated 2 August 2022 forthwith on the indemnity basis to be assessed by the Registrar”.
3. The Claimant shall pay the Second Defendant the costs of this Application forthwith on the indemnity basis, to be assessed by the Registrar if not agreed.
Issued by:
Delvin Sumo
Assistant Registrar
Date of Re-issue: 9 December 2022
At: 9.30am
SCHEDULE OF REASONS
1. By an Application Notice issued on 28 October 2022, the Claimant, Khaled Salem Musabeh Humaid Al Mheiri, seeks an order varying paragraph (2) of the Order of Registrar Nour Hineidi dated 14 September 2022, to read “costs in the case”, or alternatively, “costs reserved’’.
2. The Claimant requests that the Application is dealt with without a hearing. I am not aware whether the Second Defendant (the claim having been discontinued against the First Defendant - see paragraph 21 below) consents to the Application being dealt with on paper but in any event, I do not consider that a hearing would be appropriate, in accordance with RDC rule 23.69.
3. The Claimant commenced proceedings on 30 May 2021 by Part 8 Claim Form against Mohammad Ezelddine El Araj and John Cameron claiming to enforce Indemnity Agreements signed by each Defendant in favour of the Claimant on 26 August 2015.
4. By his reasons supporting his Order dated 28 July 2021, Justice Wayne Martin noted that the Claimant commenced proceedings against the First and Second Defendants claiming an amount of USD30,414,489.71 from each Defendant, together with interest, default interest and all costs payable by the principal debtor accruing since 23 May 2019. Each Defendant was said to be liable in that amount under various security agreements particularized in the Particulars of Claim which were allegedly executed in connection with a series of commercial transactions also particularized in the Particulars of Claim. In Justice Martin’s view, the amount of the claims against each Defendant and the complexity of the matters particularized in the Particulars of Claim suggested, on their face, that the Claimant was using the Part 8 procedure inappropriately given that the procedure is only available where a claimant “seeks the Court’s decision on a question which is unlikely to involve a substantial dispute of fact”. Consequently, he ordered that the parties had 14 days from the date of publication of his reasons to provide submissions to the Court on the question of whether the Court should make a direction pursuant to RDC rule 8.4 to the effect that the claim continue as if the Part 8 procedure had not been used and if so, what other directions would be appropriately made with that order.
5. On 22 August 2021, it was ordered by consent (amongst other things) that:
1. The parties have one month from the date of this Order to attempt to settle the dispute.
2. If the dispute is not settled by the parties submitting an agreed Consent Order and settlement terms to the Court by 16 September 2021, the parties shall by 4pm on 23 September 2021 comply with the directions made by Order of Martin J dated 28 July 2021.
6. On 7 October 2021 Justice Wayne Martin ordered that:
1. The proceedings were to continue as if the Claimant had not used the Part 8 procedure.
2. The Claim was transferred to a Part 7 claim and would be progressed through the procedure applicable to Part 7 claims pursuant to the DIFC Court Rules.
3. No further directions were required until the First Defendant’s application to contest the jurisdiction of the DIFC Courts made on 30 June 2021 (the “Jurisdiction Application”) had been determined.
4. No more than 14 days after the determination of the Jurisdiction Application, the parties to the proceedings as then constituted would provide to the Court and the other parties draft orders for directions and written submissions with respect to the procedural directions which should then be made.
7. On 31 October 2021 the Court issued an invoice for immediate payment of the first part of the filing fee in the sum of AED 100,534.69.
8. The Claimant failed to make the payment. No explanation has been provided for the failure.
9. On 25 November 2021, the Registrar ordered that:
1. The case was administratively stayed, pursuant to the general case management powers set out at Part 4 of the Rules of the DIFC Courts.
2. In the event the filing fee is not paid by 4pm on 16 January 2022, the case would be closed.
10. The Claimant failed to make payment by 4pm by 16 January 2022.
11. On 16 January 2022, Mr Antonios Dimitracopoulos of the Claimant’s lawyers, BSA Ahmad Bin Hezeem & Associates LLP, wrote to the Court Registry on behalf of the Claimant noting that the deadline given under the Order of 25 November 2021 fell on a Sunday, which was no longer a working day after the introduction of the new work regime in the UAE. He requested that the deadline be extended a further month, until 17 February 2022, pending ‘without prejudice’ settlement negotiations between the parties.
12. No explanation was offered as to why the Claimant had not made the payment before 16 January 2022 nor why it was only seeking an extension on that day, which on its own submission was not a working day.
13. On 18 January 2022, the Court sought the comments of the Defendants by 4pm the following day, and Clyde & Co, acting for the Second Defendant, by email timed at 4pm (just on the deadline set by the Court) stated that the Second Defendant did not consent to the one-month extension sought by the Claimant in relation to the payment of the Court filing fee. Twenty-eight minutes later the Claimant informed the Court that he had paid the filing fee.
14. On 19 January 2022, the Court directed the Claimant to seek a retrospective extension of the Order of 25 November 2022 on the basis that payment was not made by 4pm on 16 January 2022.
15. It is true, as the Claimant points out, that the direction did not provide a deadline for the filing of the application for an extension. In the circumstances the direction can only be understood as requiring the application to be made within a reasonable time.
16. In the event, the Claimant did not file the application for some 7 months: a period I regard as wholly unreasonable. His excuse is that during the intervening period, he was engaged in settlement discussions with the First Defendant. That seems to me to be quite irrelevant, in particular since it was the Second Defendant who had objected to any extension of time for payment of the filing fee. It was only on 2 August 2022 that the Claimant made the application.
17. The Second Defendant opposed the application.
18. The Court did grant the retrospective extension on 14 September 2022, but directed that “The Claimant is to pay the Defendants’ costs accrued to date, in these proceedings, on the indemnity basis to be assessed by the Registrar if not agreed.” It is of this paragraph that the Claimant seeks review and variation so as to read “costs in the case”, or alternatively, ‘costs reserved’’.
19. The Claimant criticizes the absence of reasons, but I note (a fact not adverted to by the Claimant) that the order was made after the receipt of submissions by the Second Defendant (albeit in the guise of evidence) and answered by the Claimant on 22 August 2022. The Second Defendant’s submissions included the following paragraph:
“Alternatively, if the Court is minded to grant the Application, the Claimant should be ordered, as a condition of continuing with the claim, to pay the Second Defendant’s costs of the present proceedings on an indemnity basis pursuant to RDC 38.17(2), inter alia, on the basis that:
(a) the claim was inappropriately commenced as a Part 8 claim, which led to wasted costs – this should (and would), ordinarily, have cost consequences;
(b) in the circumstances, the Court has the power to award such costs pursuant to, inter alia, RDC 8.4, RDC 38.7(1) and RDC 38.17;
(c) the Second Defendant has incurred further costs in dealing with the Claimant’s delays in payment of the Part 7 court fee and this Application; and
(d) it is entirely appropriate to impose costs sanctions on the Claimant for conducting the claim in the manner that it did, which is at best dilatory and at worst an abuse of process, which is prejudicial to and unfair on the Second Defendant.”
20. It appears from the Order that the Registrar accepted the Second Defendant’s alternative submission.
21. On 21 September 2022, the Claimant wrote to the Court seeking clarification of the Order, in particular whether the term “these proceedings” refers to the entirety of Claim No. CFI-057-2021 or whether it only refers to the Claimant’s application for a retrospective extension of time. He also noted that the First Defendant did not oppose the application. Indeed, that day the Claimant gave Notice of Discontinuance against the First Defendant and 2 days later, an Order discontinuing the proceedings against him was issued.
22. Also, on 21 September 2022, the Second Defendant sent to the Claimant an unparticularized demand for his accrued costs in the sum of AED 424,855.80 (inclusive of VAT) pursuant to paragraph 2 of the Order of 14 September 2022.
23. On 22 September 2022, the Court replied to the Claimant that the Part 7 filing fee had not been paid by the Claimant. This was an error, the first tranche of the filing fee had been paid on 18 January 2021. The Claimant responded the same day pointing out the error.
24. On 23 September 2022, the Registrar replied at length to the Claimant, and it is important I set out what was said:
‘‘Thank you for confirming that payment for the Part 7 claim in CFI-057-2021 was made on 18 January 2022.
As the Claimant is aware, Justice Wayne Martin issued his order on 7 October 2021 (the “October Order”) transferring the case to a Part 7 case. Based on the “paper trail” set out on the eRegistry portal, we cannot see that the case has progressed at all since 7 October 2021 save for correspondence flowing between the parties between 21 November 2021 and August 2022 with respect to payment of the Part 7 filing fee.
It is for this reason that I made the relevant costs order on 14 September 2022. It was intended that the Claimant would be liable for the Defendants’ costs (if any) which accrued between the October Order and the date of my Order (i.e. until 14 September 2022). I made this Order on the indemnity basis because the Claimant should have been prompt with its payment. Instead, the Claimant only complied with October Order approximately 3.5 months after it was made, and after a great deal of correspondence flowing between the Registry and the parties. Furthermore, the extension of time application filed by the Claimant was made some 6 months after payment of the filing fee. In my view, the Claimant was indulged because by August 2022, the claim against the Defendants’ ought to have been struck out (and the Claimant would have been prevented from bringing any fresh / further actions against the Defendant under the doctrine of res judicata).
Reference to “these proceedings” under paragraph 2 of my Order, was reference to the proceedings following the administrative transfer of the case to Part 7. As a point of final clarification, my Order did not intend to hold the Claimant liable for the Defendants’ costs since the commencement of the Part 8 claim; that order was limited to costs accrued between 8 October 2021 and 14 September 2022.
In the event that the Claimant now makes the submission that the case has progressed “behind the scenes” and that the Defendants’ costs accrued between the October Order and 14 September 2022 are far more substantial than the Registry’s paper trail would reflect, then the Claimant is at liberty to make an application seeking to vary my Order. I will consider that application while having regard to the Defendants’ response (if any) and issue a further decision thereafter”.
25. It appears clear from this communication that on the material before the Registrar, the only activity on the case that was visible to the Court was in relation the late payment of the filing fee and the delay in seeking a retrospective extension. Accordingly, the only costs considered by the Court were those relating to those issues. The Court was of the view that the Claimant’s conduct required marking with an award of costs on the indemnity basis. I am in entire agreement with that decision. It seems likely to me that the Claimant deliberately held back from paying the filing fee and making the application for the retrospective extension in the hope of avoiding those fees and costs by settling with the Defendants.
26. The Registrar also very properly accepted that there may have been more activity on the case than was apparent from the Court file and therefore gave the Claimant liberty to apply to vary the Order.
27. On 29 September 2022, the Claimant wrote to the Registry and requested that the Registrar consider the following:
1. The events that took place between Justice Martin’s October 2021 Order and 18 January 2022 (when the relevant court fee payment was made), were set out under the Claimant’s retrospective extension of time application and the Second Defendant did not submit any evidence to the contrary;
2. The Claimant respectfully submitted that it was not aware of any specific deadline for him to pay the court fees (other than the deadline of 18 January 2022, clearly set out in the Registrar’s 25 November 2021 order) nor that it would be penalised with costs, not least on the indemnity basis, if it were not to make such payment within any such unknown deadline;
3. Likewise, the Claimant was also not aware of any specific deadline set for his application for a retrospective extension of time to be made, nor was there any warning that, if his application were not filed by such an unknown deadline, he would be penalised with costs on an indemnity basis;
4. As it was set out in the application for retrospective extension, the Claimant was engaged in settlement discussions with the First Defendant throughout that period, which resulted in the notice of discontinuance filed in the preceding week;
5. This is important because, the Claimant was aware that, if he were to make an application for a retrospective extension of time and that application were to be approved (as indeed it was), then he would have to proceed with the Part 7 claim, in circumstances where he was - at the same time – hoping to conclude a settlement;
6. This would of course affect the chances of that settlement being successfully concluded, as indeed it was;
7. To summarise, it would seem overly unfair for the Claimant to be penalised with exorbitant costs, or indeed any costs at this stage, simply because he missed a deadline by one working day.
28. On 30 September 2022 the Second Defendant replied to the Claimant’s request pointing out that:
1. the Claimant misused the Part 8 procedure;
2. the Claimant failed to progress its case at all since the order of Mr Justice Martin dated 7 October 2021 transferring the case to Part 7;
3. the case should, properly, have been administratively closed with effect from 15 October 2021, in accordance with Article 1(A)(3) of Practice Direction No.2 of 2019;
4. the Claimant only paid the Part 7 filing fee on 18 January 2022, more than three months after it fell due;
5. No further action was taken by the Claimant in connection with the proceedings between 18 January 2022 and 2 August 2022, over a period of some six months. That the Claimant may have been engaged in settlement discussions with the First Defendant during this period, is beside the point. The proper course would have been for the Claimant to apply for a stay of proceedings; not to unilaterally hold the proceedings in abeyance;
6. The Claimant’s conduct is far from commendable; at best, such conduct is dilatory and at worst, an abuse of process;
7. As regards any allegation that the case progressed “behind the scenes”, so far as concerns the Second Defendant, this is simply not the case;
8. An order for costs on an indemnity basis is, in the circumstances, entirely appropriate.
29. Also, on 30 September 2022, the Second Defendant wrote to the Claimant noting that on 23 September 2022 the Court had clarified the 14 September 2022 Order in that it was limited to costs accrued between 8 October 2021 and 14 September 2022. The Second Defendant therefore reduced its claim (again unparticularized) to AED 123,322.22 (inclusive of VAT).
30. On 3 October 2022, the Claimant wrote again to the Court submitting that an order for costs on an indemnity basis at that stage was overly punitive and the Registrar was requested to consider amending her order so that costs be in the case. On 10 October 2022, the Court replied that it maintained its position.
31. On 18 October 2022, the Second Defendant issued a further letter of demand seeking the Accrued Costs; noting that in the absence of payment, in full, by 21 October 2022, the Second Defendant would be making costs submissions to the Registrar seeking, in addition to the accrued costs, his costs incurred in connection with the preparation of such submissions.
32. On 29 October 2022, the Claimant issued this application.
33. On 9 November 2022, the Second Respondent issued his statement of costs in the updated figure of 150,962.71 (including VAT).
34. The Claimant submits that paragraph 2 of the 14 September 2022 Order should be varied to read “costs in the case” or “costs reserved” on the grounds that:
1. There was no deadline given to the Claimant for payment of the filing fee since the invoice was issued, except for the November Order, which provided that the case will be closed if payment was not made by 16 January 2022;
2. The Claimant paid the filing fee on 18 January 2022, i.e., only one working day after the deadline of the November Order;
3. When directed to file an application for retrospective extension of time, the Claimant was not required to file it by any given deadline, and during that time between January – August 2022, he was absorbed in settlement negotiations with the First Defendant, the result of which would ultimately determine whether the Claimant would continue with the proceedings whether against both Defendants or only against the Second Defendant;
4. The Application for retrospective extension was filed by the Claimant after conclusion of the settlement discussions with the First Defendant and when it was clear that proceedings must go ahead as against the Second Defendant;
5. The only failure on the part of the Claimant was the one-day delay in payment, which was remedied by granting the Application;
6. There does not seem to be any legitimate basis to penalise the Claimant with costs on the indemnity basis at this early stage of the intended proceedings;
7. It was clear from the correspondence exchanged with the Registry that there was a misunderstanding that, since 7 October 2021 and until 14 September 2022, that the Claimant had not yet complied with payment of the filing fee;
8. The point was clarified to the Registry after the Order was made, and it is presumed that such misunderstanding coupled with the inactive ‘paper trail’ on the eRegistry portal, have resulted in, or at least influenced, the Registrar’s decision regarding costs levied against the Claimant on the indemnity basis and for both Defendants when in fact this would be inapplicable with regard to the First Defendant because the matter is settled and proceedings have been withdrawn as against the First Defendant with both the Claimant and the First Defendant bearing their own costs;
9. Given the early stage of these proceedings where the Second Defendant has not even filed a defence to the claim yet, it is unfair and extremely prejudicial on the Claimant to be ordered to pay such a significant amount of costs on the indemnity basis and in circumstances where the Claimant will now pursue a multimillion US Dollar claim against the Second Defendant;
10. The only action carried out and the only time incurred by the Second Defendant is one submission in response to the Application, which Application was granted and the amount of costs claimed by the Second Defendant against the Claimant is exorbitant and clearly far more substantial than the Registry’s paper trail would reflect;
11. An order as to costs against the Claimant is inappropriate, devoid of reasoning within the text of the Extension Order and proven to have been driven by a misinformed understanding regarding the earlier payment of the relevant filing fee.
35. For his part, the Second Defendant submits that the variation application should be dismissed on the grounds in his email of 30 September 2022 set out at paragraph 28 above as the Court was correct to order costs against the Claimant on the indemnity basis and there is no reason (let alone any good reason) for paragraph 2 of the Extension Order to be varied.
36. The Second Defendant raises an issue that the Claimant has failed to identify any provision of the RDC that would enable the Court to vary paragraph 2 of the 14 September 2022 Order. He then rehearses the arguments already canvassed in correspondence.
37. In his response, the Claimant notes that his application is under the liberty to apply granted by the Registrar in her email of 23 September 2022. I accept this point and consider that I have jurisdiction to review the 14 September 2022 Order.
38. RDC rule 4.7 also provides that a power of the Court under the Rules to make an order includes a power to vary or revoke the Order, although the English jurisprudence on the identical provision in the English CPR states that while the power to revoke or vary an order is apparently broad and unfettered it would normally only be exercised (a) where there has been a material change of circumstances since the order was made, or (b) where the facts on which the original decision was made were (innocently or otherwise) misstated. In the present case the Claimant argues that (b) applies in that the Court apparently believed that the filing fee had not be paid as stated in the email of 22 September 2022. That was certainly a mistake in the Court’s email of 22 September 2022 but it is also clear that it was not a mistake shared by the Registrar who stated the next day that part of the rationale for her decision on costs was that the filing fee was paid 3½ months late. Indeed, I consider it unarguable that the Registry was operating under a misunderstanding that since 7 October 2021 and until 14 September 2022, the Claimant had not yet complied with payment of the filing fee. The whole basis of the retrospective extension application was that the fee had been paid, but paid late.
39. The application that the cost order should be varied to costs in case or costs reserved is without merit. The suggestion in the Claimant’s email of 29 September 2022 that he was not aware of any specific deadline for him to pay the court fees (other than the deadline of 18 January 2022, clearly set out in the Registrar’s 25 November 2021 order) is simply untrue. The invoice issued by the Court on 31 October 2021 (exhibited to the witness statement of Mr Antonios Dimitracopoulos in support of this application) for the first part of the filing fee in the sum of AED 100,534.69 was clearly marked for immediate payment. Further, the deadline in the order 25 November 2021 was not 18 but 16 January 2022 hence the whole reason for the retrospective application for an extension. However, that was merely a deadline, there was no reason for the Claimant to await to very last minute and (indeed) beyond to make the payment.
40. Mr Dimitracopoulos was slightly more careful in his witness statement where he says that there was no deadline given to the Claimant for payment of the filing fee since the invoice was issued, except for the November Order. This however misses the point made by the Registrar in her 23 September 2022 email, that the November Order was an indulgence, the time for payment already having passed and the claim could have been struck out before then.
41. Equally there was no apparent reason to wait a further 7 months before making the retrospective application for an extension. The Claimant must have understood the direction of 19 January 2022 to be that the application should be made within a reasonable time. It was a formal application that could have been made immediately and, in the circumstances where the applicant is seeking an indulgence for missing a court-ordered deadline should have been made with some dispatch.
42. The Claimant’s email of 29 September 2022 gives the game away. As I noted at paragraph 25 above, it seems likely to me that the Claimant deliberately held back from paying the filing fee and making the application for the retrospective extension in the hope of avoiding those fees and costs by settling with the Defendants. This suspicion would seem to be confirmed by the statement that if he were to make an application for a retrospective extension of time and that application were to be approved then he would have to proceed with the Part 7 claim, in circumstances where he was - at the same time – hoping to conclude a settlement. I consider that to be an admission of an abuse of process – court orders are not optional, and it is not open to parties decide when compliance might be convenient. As the Second Defendant rightly submits the proper course would have been for the Claimant to seek to stay the proceedings.
43. The Claimant’s defaults have been further exacerbated by his conduct in the pursuit of the variation. I accept that that the Claimant was entitled to seek a variation, but I find placing untruthful statements before the Court in correspondence unacceptable and the tone of the submissions to be inappropriate when some becoming contrition might have been more helpful: “devoid of reasoning” and “driven by a misinformed understanding regarding the earlier payment of the relevant filing fee” are statements that are both inaccurate and inappropriate.
44. I do not consider it to be “unfair and extremely prejudicial on the Claimant to be ordered to pay such a significant amount of costs on the indemnity basis and in circumstances where the Claimant will now pursue a multimillion US Dollar claim against the Second Defendant” who is yet to file his defence. The Claimant only has himself to blame for delays in prosecuting his claim against the Second Defendant and for the costs incurred in his deliberate attempts to avoid or delay paying the filing fee.
45. Accordingly, the application to vary paragraph (2) of the Order of Registrar Nour Hineidi dated 14 September 2022 must be dismissed. Further, given my observations in the preceding paragraphs, the Claimant shall pay the Second Defendant’s costs of this Application on the indemnity basis too. If a party decides to “tough it out” rather than “confess and avoid”, he cannot complain of the consequences.
46. Having said that, in the hope of avoiding any further correspondence on this matter I will amend the order to clarify its terms exceptionally under RDC rule 4.7 on my own initiative and in furtherance of the Overring Objective. I therefore order that:
1. The Application dated 28 October 2022 by the Claimant, Khaled Salem Musabeh Humaid Al Mheiri to vary the Order of Registrar Nour Hineidi dated 14 September 2022 is dismissed with costs payable to the Second (now sole) Defendant forthwith on the indemnity basis to be assessed by the Registrar if not agreed.
2. Paragraph 2 of the Order of Registrar Nour Hineidi dated 14 September 2022 shall be amended to read as follows –
“The Claimant is to pay the Second Defendant’s costs incurred between 31 October 2021 and 14 September 2022 arising out of or in connection with the Claimant’s failure to pay the first part of the filing fee by 31 October 2021 or the extended deadline of 16 January 2022 including (but not limited to) the Claimant’s application for a retrospective extension of the extended deadline dated 2 August 2022 forthwith on the indemnity basis to be assessed by the Registrar”.