May 17, 2020 court of first instance - Orders
Claim No: CFI 061/2018
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
(1) KHALDOUN TABARI
(2) ZEINA TABARI
Claimants/Respondents
and
TABARAK INVESTMENT LLC
Defendant/Appellant
AMENDED ORDER WITH REASONS OF H.E. JUSTICE ALI AL MADHANI
UPON reviewing the order of H.E Justice Ali Al Madhani issued on 28 November 2019 (the “Order”)
AND UPON reviewing the Appellant’s application filed on 19 December 2019 for permission to appeal the Order (the “Permission Application”)
AND UPON considering the Appellant’s skeleton argument and Grounds of Appeal filed on 9 January 2020
AND UPON considering the Respondent’s submissions filed in opposition to the Permission Application on 2 February 2020
AND UPON reviewing all the relevant documents on the case file
IT IS HEREBY ORDERED THAT:
1. The Permission Application is denied.
2. The Appellant is to pay USD 50,000 to the Respondents’ account pending final determination of the costs Order and the assessment of quantum.
3. The Appellant is to pay the costs of this application on the standard basis to be assessed if not agreed.
Issued by:
Nour Hineidi
Date of Issue: 30 April 2020
Date of Re-Issue: 17 May 2020
At: 12pm
SCHEDULE OF REASONS
1. This is my reasoned order in respect of the Appellant’s application for permission to appeal the order of this Court’s made on 28 November 2019, being the Order, together with its schedule of reasons (the “Reasons”), in respect of the costs of the Appellant’s (then the Defendant / Applicant) application challenging the jurisdiction of the DIFC Courts over the claim.
2. I have the benefit of both parties’ submissions. I note that the submissions were unnecessarily lengthy. I also note the agreement between parties for the Permission Application to be dealt with on the papers without a hearing.
3. To proceed, the background of this case is that on 4 September 2018, the Respondents brought a claim before the DIFC Courts in respect of an alleged breach of an undertaking that had been provided by the Appellant to the First Respondent. The Appellant took the position, however, that the Respondents’ case was one which had no substantive link to the DIFC.
4. In the week commencing 7 October 2018, discussion took place between the parties about the jurisdiction of the DIFC Courts over the case and they ended with the Respondents insisting that DIFC Courts did indeed have jurisdiction to hear the matter. In the circumstances, on the 18 October 2018, the Appellant formally submitted its application to challenge the jurisdiction of this Court. A hearing for the Application was listed for 5 March 2019 with the following case management timetable determined:
I. the Respondents’ evidence in response to the Application was to be served by 29 November 2018;
II. the Appellant’s evidence in reply was to be served by 10 January 2019;
III. the Application bundle was to be agreed between the parties by 7 February 2019; and
IV. skeleton arguments were to be filed by both parties before 28 February 2019.
5. On 28 February 2019, both parties filed and served their skeleton arguments together with the authorities that they relied on for the hearing on 5 March 2019. It was not until the 3 March, however, that the Appellant disclosed to the Respondents and to this Court that it had filed a claim against the latter in the Dubai Courts (the “Onshore Proceedings”). Furthermore, the Appellant informed the Respondents and this Court of its application to the Joint Judicial Committee (the “JJC”) in respect of the conflicting DIFC and Onshore Proceedings and that, moreover, this application had been accepted by the JJC. Accordingly, by the acceptance of this application by the JJC, the DIFC Courts proceedings were thereby stayed and the Appellant sought vacation of the hearing listed for 5 March 2019.
6. On 3 March 2019, the Respondents advised the Court that they had not been made aware of the Onshore Proceedings or any application to the JJC and they asked that if the Court was minded to vacate the hearing on 5 March 2019, that it do so only on terms that the Appellant pay the Respondents’ costs of the Appellant’s application on an indemnity basis, such costs to be assessed if not agreed.
7. On 4 March 2019, the Court vacated the hearing listed for 5 March 2019 and ordered the parties to serve written submissions in relation to costs.
8. On 11 March 2019, the Appellant filed its submissions on costs in which it argued that the Respondents’ application for costs was misconceived for the following reasons:
I. If the DIFC Courts did not have jurisdiction over the Claim, the Respondents could never recover any costs;
II. The Respondents could not be entitled to costs that they would never have received because the opposing party acted within its rights to challenge an unmeritorious claim;
III. The case raised interesting questions about the meaning in Arabic of the judicial authority law which should be decided by the JJC;
IV. Since the proceedings were stayed, this should extend to the DIFC Courts’ power to make an order for costs;
V. If the DIFC Courts were found not to have jurisdiction, it would be the Appellant who was entitled to its costs, and not the Respondents;
VI. In all the circumstances, the appropriate course of action was to consider costs when the final outcome of the issue as to jurisdiction was known.
9. On 17 March 2019, the Respondents filed their submissions on costs in which they maintained that they sought their costs on an indemnity basis on the basis that it had defended the Appellant’s application disputing the jurisdiction of the DIFC Courts, while the Appellant itself had rendered this application pointless.
10. On 20 June 2019, the JJC concluded that the Dubai Courts had jurisdiction to hear the dispute and that the DIFC Courts should cease hearing it. Later, on 28 November 2019, I gave the Order on costs, ordering the Appellant to pay the Respondents’ costs of the application challenging this Court’s jurisdiction on a standard, but not an indemnity, basis.
11. The Appellant’s case now is that, following a reasonable period of investigation, it became aware that it had claims against the Respondents and, accordingly, that it filed a claim against the Respondents in the Dubai Courts (Case No. 411/2019), with these courts being, the Appellant submits, the courts that were properly seized of jurisdiction over the matter.
12. The Appellant further submits that the Onshore Proceedings were formally accepted by the Dubai Courts on 26 February 2019 and that Immediately thereafter on 27 February 2019, and in accordance with general practice where a jurisdictional conflict exists as between the DIFC Courts and the Dubai Courts, the Appellant applied to the JJC for a determination in respect of that conflict. The JJC proceedings were formally registered on 3 March 2019. The Appellant submits that on both occasions that proceedings were issued by the Appellant, adequate notice was given to the Respondents in accordance with the relevant laws and procedures of the Dubai Courts and the JJC.
The Appellant’s appeal
13. Notwithstanding that the Appellant succeeded in its case on jurisdiction and that the Respondents’ claim has thereby failed entirely, the Appellant submits in this Permission Application that the decision in the Order was wrong on the following four grounds (the “Grounds”):
I. The Court erred by failing to consider, apply, or otherwise adequately take into account the material provisions of Part 38 of the Rules of the DIFC Courts (the “RDC”), and in particular Rule 38.7(1). The Court should have ordered that the Respondents pay the Appellant’s costs on the basis that it was the successful party and that the Respondents failed entirely in their claim;
II. The Court erred in finding that the Appellant’s conduct was not reasonable, in circumstances where it acted in a reasonable and timely manner, and in any event where it at all times complied with the relevant procedural rules of the DIFC Courts, the Dubai Courts, and the JJC. Accordingly, the Court should not have determined that there were grounds on which to depart from the general position set out in Rule 38.7(1) RDC;
III. In the alternative, the Court erred in concluding that the costs incurred by the Respondents in responding to the application were caused by the unreasonable conduct of the Appellant, through an alleged failure to give adequate notice to the Respondents of proceedings before the Dubai Courts and the JJC. In particular, the Appellant avers that most, if not all, of those costs would have been incurred in any event, since even if notice had been provided at an earlier time it would still have been given after most of the costs of the Application had been incurred. Further, notice of intention to commence proceedings would not have provided the Court with sufficient grounds on which to justify a stay of proceedings, and had such notice been provided at an earlier time it would not have made any difference;
IV. In the further alternative, the Court erred in the exercise of its discretion by making an Order that was manifestly wrong, in that it was disproportionate having regard to all of the circumstances of the case. In particular, having regard to the range of orders open to the Court in accordance with Rule 38.10 RDC, the Appellant’s conduct could not have reasonably justified an order that it pay the entirety of the losing parties’ costs of the Application.
The Respondents’ response
14. The Respondents first argue that none of Grounds 2 to 4 above were raised previously as arguments before myself and, moreover, that the Appellant had not made any application for permission to raise them on appeal. In this regard, the Respondents rely on the case of Damac Park Towers Company Ltd v Youssef Issa Ward [2015] DIFC CA 006 (14 December 2015), in which the DIFC Court of Appeal held at [65] to [70] that an appeal court should generally not allow a new argument to be run on appeal where the new point presents factual questions which might have affected the conduct of the proceedings before the lower court.
15. The Second argument made by the Respondents is that Grounds 2 to 4 of this proposed appeal comprise an attempt by the Appellant for fresh evidence to be adduced in order for the arguments made therein to be properly put before the Court. The new evidence should not be permitted, the Respondents maintain, and these Grounds imply a concession that the new issues turn on facts not previously put before the Court.
16. The Respondents’ third argument is that it is inconceivable that the Court would not have been aware of the general rule stipulating that the unsuccessful party is ordered to pay the costs of the successful party or that it confused the Appellant’s position as being unsuccessful rather than successful. The Respondents assert, furthermore, that the Appellant should not be deemed the successful party in its application before the DIFC Courts to contest its jurisdiction over the matter, not least because of its unreasonable behaviour.
17. Of importance with regards to this third argument, the Respondents submit, is that the Appellant was fully engaged in the DIFC proceedings right up until just before the hearing, without giving the Respondents nor the Court any warning of its intention to make a claim before the Dubai Courts and to make an application thereafter to the JJC. By the time the Dubai proceedings and the JJC proceedings had been commenced, the Respondents were, in effect, facing a completely different application to that which both parties had prepared to argue on 5 March 2019. As such, the Respondents submit, it cannot sensibly be said that the Appellant was successful in its original application to the DIFC Court.
18. The fourth argument made by the Respondents concerns the second Ground of Appeal, that the Court erred in finding that the Appellant’s conduct was unreasonable. The Respondents contend, in agreeance with the Court, that the Appellant’s conduct was plainly unreasonable as the Appellant should have informed the Respondents of its intention to issue other proceedings from the outset. This is particularly the case as, the Respondents submit, the inevitable effect of the JJC application would be to render the entirety of the Appellant’s DIFC Courts application moot.
19. The Respondents’ fifth argument concerns the Appellant’s submission that even if its conduct was to be regarded as unreasonable, still, it did not, as a matter of fact, cause the Respondents to incur costs. The Respondents say that this is wrong. They argue that the only evidence the Appellant relies on – namely the Respondents saying they would proceed with preparations for the hearing of the application until they heard from the JJC – is irrelevant. By that stage, they submit, all the costs of responding to the DIFC Courts application had been incurred, including the costs of the hearing; counsel had already been briefed and had travelled to Dubai, even. The Respondent submits that it was obviously appropriate in the circumstances to proceed until the they were sure that a hearing would either not be required or not be possible.
20. The last argument put forward by the Respondents against the appeal grounds relates to the Appellant’s submission that the judgment against it regarding costs was disproportionate having regard to all the circumstances of the case. The Respondents submit that this Ground appears, at best, to be an amalgamation of other Grounds and, at worst, to be an impermissible attempt to ask the Court of Appeal to substitute its judgment for the Judge’s exercise of discretion.
21. The Respondents insist that the order on costs was, in any event, correct as the misuse of the JJC jurisdiction should be discouraged and should, accordingly, be reflected in the costs order. The Respondents says that where parties use the JJC to make extant DIFC jurisdiction applications redundant, the general rule should be that those parties meet the costs thereby “thrown away,” unless there are very good reasons to order otherwise: there is nothing the DIFC Courts can do to prevent these abusive practices, but what the Courts can do is mark its disapproval with robust costs orders.
22. The Respondents ask this Court to order the Appellant to pay USD 115,941.46, being 50% of the sum sought on account of its costs subject to detailed assessment as they have claimed USD 231,882.92 in their Statement of Costs in accordance with Paragraph 5 of Practice Direction No.5 of 2014 which provides:
Where the Court has ordered a party to pay costs subject to detailed assessment unless agreed, it will order 50% of the amount claimed in the statement of costs to be paid on account before the costs are assessed, unless the Court sees fit to order otherwise.
Discussion
Ground 1
23. As for the first Ground of appeal – that the Court failed to recognise that the Appellant was the successful party in the case and then failed to consider, apply, or otherwise adequately take into account the material provisions of RDC 38.7(1), with the general principal being that the successful party is entitled to its cost – in my judgment, it is evident from the Order itself that neither of these assertions is correct. The following clearly establishes this:
I. The Judgment on Costs referred to the Appellant’s submission that “if the DIFC Courts is not found to have jurisdiction, it will be the [the Appellant] who is entitled to its costs, not the [Respondents]” ([14]);
II. I decided to await the decision of the JJC before making my Judgment on Costs, and then finally issued the Order “with the benefit of the JJC having issued its judgment in favour of the [Appellant]” ([15]);
III. The Order expressly referred to the fact that the Appellant had been successful in the JJC proceedings; it was my decision that the Claimants should not be awarded their costs on an indemnity basis since they have the JJC decision against them.
24. As to the point that I should not have departed from the general rule that the losing party bear the costs, the RDC provides that such departure is permissible. RDC 38.7 states:
If the Court decides to make an order about costs:
(1) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(2) the Court may make a different order. (emphasis added)
25. Moreover, DIFC Courts caselaw demonstrates that the approach of this Court in circumstances where a DIFC Courts hearing has been lost as a result of a late application to the JCC is to, in disapproval of such conduct, depart from the general rule regarding costs and even to award costs to the “losing” party on an indemnity basis: See Standard Chartered Bank v Investment Group Private Ltd [2014] DIFC CFI 026 (27 October 2016) and Barclays Bank PLC v Kapoor [2018] CFI 030 (20 May 2019). In Standard Chartered Bank, the then Deputy Chief Justice, Sir David Steel, observed at [2]:
…[the] application [was] made at the last possible moment. No explanation is forthcoming as to why no application was made much earlier, so as to avoid the waste of costs and time involved in waiting until the eve of the immediate judgement hearing.
26. At [4] to [6] the learned judge held:
4. Nonetheless, it is not appropriate for me to disregard… the Order that has been made by the Chief Justice of the Court of Cassation on 13 October, and accordingly I suspend the hearing on the merits of this case. I have no idea what in due course the tribunal will decide in relation to the application, but I do know that, prima facie, they need to decide it within 30 days as expressed in the terms of the decree. It follows that the Order being dated 13 October, it is appropriate to pencil in a date for a refixture of a hearing on the merits for 13 November 2016, being just over 30 days from today.
5. It is clearly right that the hearing on the merits is determined as promptly as possible. The original proceedings were issued in this court in August 2014 in relation to loans that had been outstanding since 2009. In effect, the present manoeuvres afford no credit to the activities of the Defendant. Neither do they redound to the credit of this Court and the Courts of Dubai. In those circumstances, it seems to be clearly appropriate to make some order in relation to the significant costs that have been thrown away by this late application and the emergence of this order.
6. It seems to me that the Defendant must pay the costs thrown away in any event and it should do so on an indemnity basis. I order that a payment on account of costs should be made of USD 10,000 payable within 30 days.
27. In the instant matter, the Appellant’s choice to wait until the very last minute before the hearing of their application before notifying the Court and the Respondents of its claims before the Dubai Courts and its application to the JJC attracts, in my judgment, liability on the part of the Appellant for these costs “thrown away” as a result of such conduct.
Ground 2
28. With regards to the second Ground – that the Court erred in finding that the Appellant’s conduct was not reasonable – the short response to this is that the Court is not confined to considering the Appellant’s conduct in these proceedings. The Court is required to have regard to all the circumstances in the matter, including, but not limited to, conduct in the proceedings: RDCs 38.8 and 38.9. The Court plainly can and must have regard to the other relevant circumstances. These rules provide:
38.8 In deciding what order (if any) to make about costs, the Court must have regard to all the circumstances, including:
(1) the conduct of all the parties;
(2) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(3) any payment into Court or admissible offer to settle made by a party which is drawn to the Court’s attention and which is not a Part 32 offer.
38.9 The conduct of the parties includes:
(1) conduct before, as well as during, the proceedings;
(2) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(3) the manner in which a party has pursued or defended his case or a particular allegation or issue; and
(4) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.
29. In my judgment, my approach in the Order was consistent with both the above guidance from the RDC and with DIFC Courts’ precedents which have considered the costs implications of very late applications to the JJC. My cost decision was based on the facts that I considered material to the decision, such as the fact that Appellant itself made the jurisdiction application before the DIFC Courts, that it forced the Respondents to incur costs on this application and that it then took steps in the JJC to render its own application redundant. This is all properly regarded as conduct in the proceedings for the purposes of RDCs 38.8 and 38.9.
30. In the Permission Application, no explanation was advanced by the Appellant for its conduct. The Appellant’s belated attempt to justify its conduct now should be rejected since the evidence it relies on is inadmissible insofar as it is pleaded for the first time and without the Court’s consent.
Ground 3
31. To recap, the third Ground of appeal is against the Court’s conclusion that the costs incurred by the Respondents in responding to the application were caused by the unreasonable conduct of the Appellant as it had not provided adequate notice of the proceedings before the Dubai Courts and the JJC. The Appellant says that the Court incorrectly took the position at [18] of the Order that “if the Defendant had alerted the Court with its intention to file such a petition earlier, the amount of the Claimant’s costs would certainly have been different to what it finally became”. The Appellant contends that even if it had been reasonable or practicable to give prior notification of the proceedings before the Dubai Courts – which it should be noted it denies was the case – the majority, if not all, of the costs of the application would have been incurred in any event. As such, this Ground deals specifically with the timing of the notice in these proceedings of the proceedings before the Dubai Courts or even the JJC. As the Appellant has said, once its case was registered before the JJC, they put the Respondents in notice. The question, then, is could the Appellant have given some type of notice earlier than it did?
32. In my judgment, and as was my opinion when making the Order, the Appellant should have communicated its intention to issue proceedings before the Dubai Court and subsequently to the JJC. Whether the proceedings were in fact accepted is another matter. How parties conduct their cases is up to them and steps like those taken by the Appellant are part of their legitimate strategies. But I do not think it proper for an applicant to the Dubai Court or the JJC to delay informing their opponent or this Court of their application until some type of decision has been made. For example, the JJC might make a decision after a hearing has taken place or after a decision has been handed down by this Court. Informing a respondent to a JJC application and this Court of the application’s existence can only enable them both to take appropriate steps in anticipation of the possibility of the JJC making a finding in favour of the Courts of Dubai, including vacating hearings. The users of this Court have a duty towards it and transparency and integrity are expected under all circumstances. For me, the Appellant’s belated informing of the existence of its applications to the Dubai Court and the JJC suggests bad practice. Merely informing the Respondents and the Court of its intentions with respect to these other proceedings would have adequately dispelled this suggestion.
33. The Appellant participated in these proceedings and even applied to challenge the jurisdiction of this Court, while not bringing to the Court’s attention or that of the Respondents that it had a case against them in simultaneous proceedings in another venue. In my judgment, the sooner the party that had issued alternative proceedings alerted the Court of its intention, the less costs the parties would incur. There is no evidence before me as to when exactly the Appellant conceived of issuing the Dubai Court or the JJC proceedings, but in any event, the proceedings’ conceptions will have come about before the Appellant notified this Court and the Respondents of them two days prior to the hearing listed for 5 March 2019.
Ground 4
34. In its fourth ground of appeal, the Appellant contends that the Order was wrong as a matter of fact and law, on the basis that the Court erred in the exercise of its discretion by awarding the Respondents the entirety of their costs of the jurisdiction application in accordance with RDC 44.31(1)(a). The Appellant submits that in making the Order, the Court erred in failing to apply, or otherwise adequately consider, the provisions of Rule 38.10 RDC. It is further averred that awarding the Respondents the entirety of their costs was an unlawful exercise of the Court’s discretion, since such orders should only be made in exceptional circumstances. The Appellant suggests that the Court could have made a costs order which was less harsh than awarding the Respondents all of their costs.
35. This is difficult ground of appeal. Under it, the Appellant will ask the Court of Appeal to reconsider the proportionality of the first instance judge’s decision based on his analysis of the evidence then before him. But in doing so, the Appellant will in fact have to submit that the judge at first instance should have considered making an order which he was not asked to make by the Appellant at the time he was asked to deal with the question of costs.
36. The decision on costs was, in my view and as shown above, consistent with the RDC and with prior decisions of two other senior judges of the DIFC Courts. Indeed, to the extent that my Order was not consistent with these decisions, it is less harsh than them as I had rejected awarding costs to the Respondents on an indemnity basis.
37. Finally, I agree with the point raised by the Respondents, namely that where parties use the JJC to make extant DIFC Courts jurisdiction applications redundant, the general rule should be that the applying party should meet the costs thereby thrown away, unless there are very good reasons to order otherwise. There is little else this Court can do other than making robust costs orders to prevent opening the floodgates to abusive practices.
Costs on account
38. As to Respondent request for this Court to order the Appellant to pay USD 115,941.46, being 50% of the sum sought on account of its costs subject to detailed assessment, this Court instead orders the Appellant to pay USD 50,000 to the Respondents’ account pending final determination of the costs Order and the assessment of quantum.
Costs of this application
39. The Appellant is to pay the costs of this Permission Application on the standard basis, to be assessed if not agreed.
Conclusion
40. For the reasons given above, the Appellant’s Permission Application is denied.
