November 28, 2019 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
and
TABARAK INVESTMENT LLC
Defendants
ORDER WITH REASONS OF H.E. JUSTICE ALI AL MADHANI
UPON considering the Defendant’s costs submissions filed on 11 March 2019
AND UPON considering the Claimants’ costs submissions filed on 17 March 2019
AND UPON reviewing all other relevant case documents filed in this matter
IT IS HEREBY ORDERED THAT:
The costs of Claimants shall not be awarded on an indemnity basis but rather on a standard basis, to be assessed by a Registrar if not agreed by parties.
Issued by:
Nour Hineidi
Date of issue: 28 November 2019
Time: 8am
SCHEDULE OF REASONS
The Claimant Application for Cost
1.In this application, the Claimants seek their costs on an indemnity basis for the Defendant’s application (No. CFI-016-2018/1) disputing the jurisdiction of the DIFC Courts (the “Application”). The claim was issued on 4 September 2018. The Defendant filed the Application on 19 October 2018, and it was listed to be heard on 5 March 2019.
2. The Claimants’ case is that it was not revealed to them until 3 March 2019, that is, only two days before the date the hearing was listed for, that the Defendant had filed a claim in the Dubai Courts, despite it having done so as early as 7 February 2019, nor that it had filed a petition to the Joint Judicial Committee (the “JJC”), despite this having been done on the 27 February 2019, with this leading, moreover, to a stay of these DIFC Courts proceedings.
3. The result of these actions of the Defendant was that the Application was never heard. The Claimants argue that they have therefore incurred substantial costs in responding to an application which the Defendant itself made, but which the Defendant subsequently frustrated by its own actions, moreover, unbeknown to the Claimants until just before the hearing of the Application.
4. As far as the Claimants are concerned, by the time they knew about the adjournment of the Application, their costs for the Application had already been incurred. The Defendant had not disclosed to them that it had begun proceedings in the Dubai Courts at the time it decided to embark on that course of action, and so the Claimants continued to incur costs preparing for the Application. The Claimants argue that these costs could have been avoided – either by the Defendant petitioning the JJC immediately or, at the very least, by informing the Claimants and the Court of its intention to do so.
5. The Claimants further argue that the Defendant’s approach appears to have been designed to cause the Claimants to incur the maximum possible costs, with this being an entirely unreasonable approach to the litigation, resulting in the costs of the Application being entirely wasted.
6. From a legal perspective, the Claimants’ position is that the Application brought by the Defendant was hopeless, at least without a change in the law of the DIFC, for the following reasons:
6.1 the Defendant’s primary position was that Article 5(A)(1)(b) of the judicial authority law (the “JAL”) did not have the meaning that the Court of Appeal had already found it had in the case of Khorafi;
6.2 the Defendant’s argument that the existing test was not satisfied involved a total mischaracterisation of the facts of the case in the face of uncontradicted and perfectly-credible evidence that the undertaking in question was signed in, sent from and received back to the DIFC, with this more than satisfying the Khorafi test;
6.3 in any event, the parties “opted in” to the DIFC Courts. In line with the Court of Appeal’s decision in Investment Group Private Limited v Standard Chartered Bank [2018] DIFC CA 002, the parties’ choice of “the Dubai courts” included the DIFC Courts. Thus, the argument that this was not “specific, clear and express” was hopeless in light of the Sunteck
7. In response to the Defendant’s argument that the Court lacks jurisdiction to make costs orders, the Claimants contended that this was simply wrong. They argued that the Court can makes orders as to the costs of a jurisdiction application, even where it is found that it lacks jurisdiction: see, for example, Gaetan Inc v Geneva Investment Group LLC [2015] ARB 010. The Court regularly makes such orders, again, even where it finds that it has no jurisdiction, awarding costs to the applicant.
8. Similarly, where a party disputing jurisdiction makes an ancillary application, for example for the disclosure of documents or for an adjournment, that party can be ordered to pay the costs of that application if it was unsuccessful, irrespective of whether its jurisdiction application succeeds or not.
9. Furthermore, the Claimants argue that the stay imposed on the DIFC proceedings does not prevent the Court from making costs orders because, if it did, that would reward the sort of conduct it accuses the Defendant of embarking upon. Had the Defendant revealed its actions in the Dubai Courts and at the JJC, the DIFC Courts could have made costs orders before the stay was imposed. It cannot be right, the Claimants argued, that it should be able to improve its position by concealing those steps from the Claimants.
10. Finally, the Claimants argue that at the very least, the Court should determine the issue of costs now and impose the order once the stay is lifted. This is a course of action available whether or not the JJC petition is successful. In one case, that of Liu v Waterfront Properties [2016] DIFC ARB 004, the DIFC Courts went so far as to reinstate its original order. This Court need not go that far, the Claimants argue; it need only make costs orders to regulate its own procedures to date.
The Defendant’s response to the Application
11. As for the Defendant, it rejects the Claimants’ application for costs on the basis that the Claimants have attempted to bring a case before the DIFC Courts that has no link in substance whatsoever to the DIFC Courts, based on an uncorroborated assertion that there may have been internal discussions about the contract in the DIFC or an alleged “opt in” to the jurisdiction of the DIFC. The Defendant submits that the Claimants’ position in bringing the Claim before the DIFC Courts is without merit in law, fact or commercially speaking.
12. The Defendant’s view is that the application to the JJC was not a last-minute attempt to stifle an otherwise meritorious claim. It argues that once the Claimants brought their claim in the DIFC it was necessary to investigate the substance of it and, in doing so, the Defendant concluded that it in fact had a claim against the Claimants.
13. The Defendant admits the fact that it filed its case before the Dubai Courts on 7 February 2019 and then, after the case was accepted by the Dubai Courts on 26 February 2019, that it filed its jurisdictional challenges on 27 February 2019 before the JJC. The Defendant made no submission as to why it never informed the Claimant or this Court of its intent to file a petition before the JJC.
14. The Defendant submits that the Claimants’ application for costs is misconceived for the following reasons:
14.1 if the DIFC Courts do not have jurisdiction, the Claimants could never recover any costs;
14.2 the Claimants cannot be entitled to costs that they would never have received because the opposing party acts within its rights to challenge an unmeritorious claim;
14.3 it is correct that this case raises interesting questions concerning the meaning in Arabic of the JAL, with these questions never having been ventilated before the DIFC Courts. Moreover, the JAL is, of course, a Dubai Law and it is also right that judges of the Dubai Court and the DIFC Courts should jointly deliberate in the JJC as to which Court is the more appropriate one to determine the meaning of the JAL;
14.4 if the DIFC Courts is found not to have jurisdiction, it will be the Defendant who is entitled to its costs, not the Claimants. If the DIFC Courts is found to have jurisdiction the challenge will be dismissed and, subject to any further argument, the costs are likely to follow the event; and
14.5 in the circumstances, the appropriate course of action, both in line with the procedure under Dubai Decree No. 19 of 2016 and as a matter of principle, is that no immediate order for costs should be made, but that costs should only be considered when the final outcome of the issue as to jurisdiction is known.
Decision
15. Before proceeding, I make note of the fact that I deal with this costs application with the benefit of the JJC having issued its judgment in favour of the Defendant, finding that the Dubai Courts and not the DIFC Courts have jurisdiction.
16. To proceed with my decision, first of all, I have to accept the Claimants’ argument that this Court can order costs of a jurisdiction application, even where it lacks jurisdiction. As was demonstrated in Gaetan Inc v Geneva Investment Group LLC [2015] ARB 010, the Court regularly awards costs to the applicant even where no jurisdiction is found for the Court.
17. With regards to the Claimants’ request for costs on an indemnity basis for the Application of 19 October 2018, this Court’s view is that the Defendant’s conduct was not reasonable since it submitted an application for a jurisdictional challenge and allowed the Claimants to continue incur costs for its reply and preparation for that application, before bringing proceedings to the JJC on the same grounds, moreover, without alerting the Court or the Claimants.
18. The Defendant not only surprised the Court and the Claimants by petitioning the JJC, but it did not subsequently justify its conduct and, until now, I have no idea why it chose not to address the matter until only two days before the hearing. In my view, if the Defendant had alerted the Court with its intention to file such a petition earlier, the amount of the Claimants’ costs would certainly have been different to what it finally became.
19. Accordingly, the Defendant’s conduct warrants an order that it is liable for the cost. However, the question of whether or not the costs should be awarded on an indemnity basis remains.
In my judgment, the fact that the Defendant has been successful in its petition to the JJC, with the jurisdiction dispute being decided in its favour, is a determining factor that the costs of the Claimants shall not be awarded on an indemnity basis but rather on a standard basis, to be assessed by a Registrar if not agreed by parties.
