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Claim No. CFI 063/2020

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

MASHREQ BANK PSC

Claimant

and

(1) INFINITE PARTNERS INVESTMENT LLC
(2) KHALEEFA BUTTI OMAIR YOUSIF ALMUHAIRI
(3) HIS EXCELLENCY SAEED MOHAMED BUTTI MOHAMED ALQEBAISI
(4) FRESHLY FOODS BAKERY LLC
(5) FRESHLY FROZEN FOODS FACTORY LLC
(6) SENORA FOODS LLC
(7) SENORA QUALITY GENERAL TRADING LLC

Defendants

ORDER WITH REASONS OF JUSTICE SIR JEREMY COOKE

UPON the Order of Justice Sir Jeremy Cooke dated 9 December 2020 staying the proceedings due to referral to the Joint Judicial Tribunal (the “Stay Order”)

AND UPON reviewing the Claimant’s Application No. CFI-063-2020/3 dated 15 June 2021 to lift the Stay Order (the “Application”)

AND UPON reviewing the Defendants’ evidence in answer to the Application dated 22 June 2021

AND UPON reviewing the Claimant’s evidence in reply to the Application dated 9 September 2021

AND UPON reviewing the Defendants’ Application No. CFI-063-2020/4 dated 8 September 2021 for continuation of the Stay Order (the “Continuation Application”)

AND UPON reviewing the Claimant’s evidence in reply to the Continuation Application dated 16 September 2021

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a hearing on 20 September 2021

IT IS HEREBY ORDERED THAT:

1. The Application is granted and the stay of the proceedings imposed by the Stay Order is lifted.

2. The Continuation Application, as amended on 17 September 2021, is refused.

3. The Letter of Request for assistance from the Dubai Courts numbered 453800/2021 is acknowledged but respectfully declined.

4. The Letter of Request for assistance from the Abu Dhabi Court with reference ADJB-ADMB/OUT//2021/98039 is acknowledged but respectfully declined.

5. The Defendants shall pay the Claimant’s costs of the applications, to be the subject of assessment if not agreed. In the case of the Claimant’s application, the Defendants should pay the Claimant’s costs on the indemnity basis.

6. The parties shall provide Schedules of Costs within 7 days of the date of the hearing on 20 September 2021.

Issued by:
Nour Hineidi
Registrar
Date of issue: 22 September 2021
At: 9am

SCHEDULE OF REASONS

Introduction

1. There are 2 applications before the Court.

2. There was an issue between the parties as to which of the applications should be determined first. This turned out to be an arid dispute as I have decided to accept the Claimant’s application to lift the stay of proceedings and can see no proper basis for acceding to the Defendants’ application for its continuation or reimposition.

3. It was agreed between the parties that costs would follow the event and it therefore follows that the Defendants must pay the Claimant’s costs of both applications, to be the subject of assessment if not agreed.

The Claimant’s Application to lift the stay

4. On the basis of the Court of Appeal decision in Lakhan v Lamia [2021] CA 001, and in particular the ratio in paragraphs 29 to 37 of the judgment of the Court, there is no basis for staying an action in the DIFC Courts unless there is a dispute as to the jurisdiction of the DIFC and the onshore Dubai Courts. For such a dispute to arise, there must be some Court decision which gives rise to inconsistency: either both Courts deciding that they each have jurisdiction over the same dispute; or both Courts declining jurisdiction in favour of the other; or the courts entering inconsistent judgments – see the terms of Article 4 of Decree 19 of 2016.

5. The ratio of the Court of Appeal decision is directly applicable here and the Order for the stay of these proceedings in the DIFC which I granted, on the basis of the then existing to practice, should not have been made. This should be recognised and the stay lifted, whether or not there is some other basis which now exists for a stay based on a later application.

6. None of the points made by the Defendants against the lifting of the stay, which was then imposed, have any weight:

7. It is neither here nor there that there has been substantial discussion of the merits of the underlying litigation in the onshore Dubai Courts which have not yet determined their own jurisdiction because such jurisdiction depends on a substantive issue, namely whether the agreements containing jurisdiction clauses in favour of the DIFC are enforceable or are invalid by reason of alleged false signatures of those who purportedly signed them on the behalf of the Defendants. The question whether such forgery took place has not yet been determined. As it appears that the onshore Dubai Courts have now stayed or are staying the proceedings there, the point does not assist the Defendants. Such evidence as has been obtained is available regardless.

8. Nor is it anything to the point that the Claimant sought a stay of the onshore Dubai Court proceedings, both on the basis of the agreements containing the jurisdiction clauses in favour of the DIFC Courts and also on the basis of Articles 4 and 5 of Decree 19 of 2016 and on the basis of this Court’s order to stay the DIFC proceedings. Seeking a stay in the onshore Court is, self- evidently, not a conclusive factor and is not even a relevant factor when:

9. The stay granted cannot therefore be justified and should therefore be lifted with immediate effect and the Defendants, who have opposed this, must pay the costs of the application and must do so on the indemnity basis since the Court of Appeal decision was known to be the foundation of the Claimant’s application.

The Defendants’ application for continuation/reimposition of the Stay.

Recognition of the Abu Dhabi Bankruptcy Order.

10. The Defendants apply for recognition and/or enforcement of the Bankruptcy Order of the Abu Dhabi Court and/or the Delegation Letters to the DIFC Courts issued by that Court and by the onshore Dubai Court. The applications are made under Part 45 of the RDC, Articles 7 (4) – 7 (6) of the Judicial Authority Law (the “JAL”) and Article 24 of the DIFC Court Law No 10 of 2004 (the “Court Law”) or alternatively as a requirement of comity to cooperate with the Abu Dhabi Court (as requested in the delegation letter from that Court) under Articles 1, 25 and 27 of Schedule 4 of the DIFC Insolvency Law No 1 of 2019 (the “UNCITRAL Model Law”).

11. The Bankruptcy Order and each of the Delegation Letters relate to proceedings taken in the Abu Dhabi Court pursuant to the Federal Law of the UAE which operates in the Courts of the UAE other than the zones where it is provided that other laws are to apply, such as the DIFC. Federal law in civil and commercial matters has no application in the DIFC, as is common ground between the parties. The Bankruptcy Order, made in Abu Dhabi, can have no extraterritorial effect in the DIFC without an order of the DIFC Courts which recognises it.

12. Part 45 of the RDC contains general rules about enforcement of judgments and orders. Part 45.2 (1) of the RDC defines a “judgment creditor” as “a person who has attained or is entitled to enforce a udgment or order” whilst RDC 45.5 provides that “the enforcement of a judgment or order may be affected by the Laws and Regulations relating to insolvency.” Article 7 of the JAL provides that “where the subject matter of execution is situated in DIFC, the judgments, decisions and orders rendered by Dubai Courts… shall be executed by the execution judge of the Courts” subject to various conditions, including the requirement that the judgment, decision or order to be executed is final and executory.

13. Under Article 7(5), when executing judgments decisions or orders issued by the onshore Dubai Courts, the Dubai Courts are required to issue an execution letter to the Chief Justice of the Court stating the procedure to be carried out. The person requesting such execution is to submit to the DIFC Courts an application accompanied by a copy of the judgment, decision or order and the execution letter. The execution judge may not reconsider the merits of the judgment, decision or order. Under Article 7(6), judgments, decisions and orders rendered outside DIFC by any Court other than the onshore Dubai Courts are to be executed within DIFC in accordance with the procedure prescribed in the Rules of Court.

14. Whilst I have no difficulty with the concept that the Defendants are persons who are entitled to enforce a judgment or order of the Abu Dhabi Court, issues arise in the context of insolvency where technical rules are important and in the context of jurisdiction which is governed by statute in the DIFC. Although RDC 45.5 only speaks of the possibility of an enforcement of an order being affected by insolvency, the reality is that the DIFC legislation contains its own insolvency regime, including the interrelationship of the DIFC Courts with foreign insolvency orders made by other Courts. A distinction is drawn between the insolvency of individuals, foreign corporations generally and foreign corporations incorporated in the country where a winding up, liquidation, administration or restructuring order is in process.

15. It is necessary to examine the terms of the Insolvency Law and of Schedule 4 because the jurisdiction of the DIFC Courts is a statutory one, as has been emphasised by the Courts on many occasions. Whilst the underlying litigation in this action in the DIFC has a clear jurisdictional basis in Article 5 (2) of the JAL by reason of alleged jurisdiction agreements in favour of the DIFC Courts, insolvency proceedings can only be pursued pursuant to the Insolvency Act as “any action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations”. Jurisdiction in respect of recognition of foreign insolvency proceedings is provided for in Articles 15 – 24 of Schedule 4 to the Insolvency Law.

16. An application for recognition of a foreign proceedings can only be made by a “foreign representative”, as provided by Article 15 (1). A “foreign representative” is defined in Article 2 (d) as “a person or body… authorised in a foreign proceeding to administer the reorganisation or the liquidation the debtor’s assets or affairs or to act as a representative of the foreign proceeding”. The application for recognition in the present case is made, not by a trustee in bankruptcy or liquidator who falls within the definition, but by the Defendants themselves.

17. Whilst, at paragraph 13 of the Third Witness Statement of Zarghona Farzal, filed on behalf of the Defendants, the following appears, this is in my judgment wholly inadequate to show that an application has been made by or a “foreign representative” or someone authorised to so act:

“Whilst I have not had any direct interactions with Mr Al Tamimi, I am aware that Mr Al Tamimi has instructed that these Defendants (and the other parties to the Commencement Order) file applications for the enforcement of the Commencement Order and a stay of these proceedings with the Court and has consented to the Defendants acting in these applications through their lawyers”

18. Under Article 9 of the Insolvency Law, “a foreign representative is entitled to apply directly to the Court” and to take various other steps in commencing and participating in proceedings under the Insolvency Law. Whilst Article 9 does not prohibit someone applying on the half of a foreign representative and, in the usual way it might be expected that the foreign representative would be represented by lawyers, there are significant insurmountable difficulties which stand in the way of the application for recognition.

19. The first difficulty is that, as matters currently stand, there is no “foreign representative” within the meaning of Article 15 of the Insolvency Law. The original trustee appointed was Mr Al Tamimi, but under the terms of the original Bankruptcy Order, referred to above in the citation in paragraph 17 as the Commencement Order, the assets of the “Applicant” (the Second Defendant) and the joined litigants (including the other Defendants) did not vest in him by virtue of the Order. The Bankruptcy Order approved the initiation of the procedure set out in Chapter 4 on Bankruptcy of Federal Law No. 9 in 2016 and for the appointment of a “custodian” or trustee with specific tasks, including the compilation of an inventory and initial report, publishing a summary of the report, inviting creditors to submit requests and supporting documents, submitting list of creditors to the Court and in due course commencing the procedures for a proposed restructuring. It did not vest assets in the trustee and they remain with the Defendants.

20. The second difficulty is that, although Mr Al Tamimi was the trustee initially appointed, the creditors, including the Claimant filed a Grievance Petition in which they sought the reversal of that decision to appoint a single trustee and his replacement with a suitably qualified trustee from a reputable and reputed large firm with experience of complex restructuring and liquidation proceedings. On 23 August 2021, the Abu Dhabi Court rejected the request to dismiss Mr Al Tamimi but directed the appointment of two additional trustees from international expert firms. The Abu Dhabi Court directed the appointment of “two additional trustees from international expert firms, to be determined by the Department of Legal Affairs and Experts from among those registered in the Experts’ Roll or outside the same”.

21. The Abu Dhabi Court decided that, when the two additional experts had been appointed as trustees, decisions should be taken by the trustees together, with a majority decision prevailing. The additional trustees have not yet been appointed and it is clear therefore that no assets have yet vested in the trustees. There is therefore no “foreign representative” within the meaning of Article 15 and no who could properly give instructions to the Defendants or to lawyers to act on behalf of a properly appointed “foreign representative”.

22. There is a further difficulty, in as much as it can properly be said that the Claimant is not a party to the Abu Dhabi proceedings. The Bankruptcy Order made in Abu Dhabi on 28 July 2021 (sometimes referred to as the Commencement order) was made on an ex parte basis. The only subsequent participation by the Claimant in those proceedings, in which the Claimant objected to the order made, took place on the basis of not submitting to the jurisdiction of that Court. The ordinary rules relating to the recognition of a foreign judgment as “final and conclusive on the merits” against a party over which the Court had jurisdiction would not therefore appear to be satisfied.

23. There would appear therefore to be not only a jurisdictional objection to recognition in the DIFC Courts of the Abu Dhabi Bankruptcy Order by reference to the statute which provides for recognition, but also a substantive objection by reference to the ordinary common law requirements for any recognition to be given.

24. On this basis the application for recognition of the Abu Dhabi Bankruptcy Order is doomed to fail. The current state of proceedings in Abu Dhabi also makes it impossible for the conditions set out in Article 15 (2) (a), (b) and (c) to be fulfilled when making any application for recognition. Furthermore, the requirements of Article 15 (3) (a) statement identifying all foreign proceedings in respect of the debtor, which must here include the conjoined litigants) has not been provided, with limited reference to proceedings in the UK and US.

25. Under Article 20, the effect of recognition of foreign insolvency proceedings as “main proceedings” is that the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights and obligations or liabilities are stayed. This is the prescribed method for obtaining a stay on the basis of foreign liquidation or restructuring proceedings.

26. It is pointed out that there is no evidence whatsoever of any assets of any of the Defendants within the jurisdiction of the DIFC, the fundamental basis for this court’s jurisdiction being the exclusive jurisdiction agreements concluded between the parties. The sole purpose, it would seem, of the application for recognition is to achieve a stay of this action, along with 4 other actions in the DIFC against the Second Defendant and/or various companies directly or indirectly beneficially owned by him. This cannot be achieved by the recognition route unless the requirements of the statute are met, which, for the reasons set out above, they are not in respect of the Abu Dhabi Bankruptcy Order.

Recognition of the Delegation Letters

27. In the absence of recognition of the Abu Dhabi Bankruptcy Order, the Defendants seek an order for recognition and/enforcement of the delegation letters addressed to the DIFC Courts.

28. There was some debate between the parties as to the appropriate characterisation of the Delegation Letters issued by the Abu Dhabi Court and the onshore Dubai Courts. The Court was presented with translated versions of a letter dated 17 August 2021 from the Abu Dhabi Courts to the President of the onshore Dubai Court of First Instance, a letter dated 9 September 2021 from the Dubai Court of First Instance to the Chief Justice of the DIFC Courts and a letter dated 13 September 2021 from the Abu Dhabi Courts to the DIFC. The language, in translation, does not lend itself to easy interpretation but it would, in my judgment plainly be wrong to refer to any of these delegation letters as judgments, decisions or orders of the Courts in question.

29. These are described as “Delegation Letters” and all constitute, in my judgement, letters of request to the court to which they are addressed, or conceivably, execution letters within the meaning of Article 7(5)(b) of the JAL. There is only one judgment or order and that is the Bankruptcy Order of the Abu Dhabi Court of 27 July 2021, as later amended. The Abu Dhabi Court has requested the onshore Dubai Courts to request the DIFC Court to stay proceedings before it in the light of the Bankruptcy Order. The onshore Dubai Courts has passed on that request to the DIFC Courts, despite the use of the word “ordered” which cannot operate to convert an earlier request from the Abu Dhabi Court into an order (and self- evidently the onshore Dubai Courts cannot order the DIFC Courts to do anything). It can only be a request to the DIFC Courts to “execute the content” of the Abu Dhabi Court Bankruptcy Order. The use of the words “delegate” and “address” in these letters, as in the letter from the Abu Dhabi Court directly to the DIFC, to my mind make it plain that each of these letters is a letter of request from one Court to another.

30. As these do not constitute orders, there is no possibility of recognition of any Delegation Letter issued by a Court outside DIFC, even if the appropriate statutory requirements had been met, as if they were orders.

Requests for Assistance or Co-operation

31. The Defendants seek to rely upon other provisions in the Insolvency Law and Schedule 4 which provide for assistance to be rendered by the DIFC Courts in respect of insolvency proceedings relating to Foreign Companies. Again, the Defendants face insuperable problems in relation to the requirements of the statute.

32. Article 117 of the Insolvency Law provides as follows:

“(1) where a Foreign Company is the subject of insolvency proceedings in its jurisdiction of incorporation, the Court shall, upon request from the court of that jurisdiction, assist that court in the gathering and remitting of assets maintained within the DIFC.”……

(3) the UNITRAL Model Law (with certain modifications for application in the DIFC) as set out in Schedule 4 of this Law has force in the DIFC in respect of Foreign Companies.”

33. The request here can come from the foreign corporation, unlike the request in Article 15 of the Schedule for recognition where it must come from the foreign representative. However, the request can only relate to a foreign company which is incorporated in the jurisdiction of that foreign Court. The evidence before the Court is that, of all the Defendants, only one, namely the First Defendant, is a company incorporated in Abu Dhabi, from which the requests for execution or assistance, in the shape of the Delegation Letters, issued by the Court, have come. There is no basis upon which, under Article 117, this Court can assist the Abu Dhabi Court in respect of insolvency proceedings relating to the Second and Third Defendants who are individuals and the Fourth to Seventh Defendants which are companies incorporated in Dubai, not Abu Dhabi. It would be open to the Court to assist the Abu Dhabi Court in relation to insolvency proceedings in relation to the First Defendant alone, if other requirements were satisfied, but what is sought by way of assistance is not “the gathering and remitting of assets maintained within the DIFC” which belong to the First Defendant, but the stay of all proceedings against all the Defendants.

34. Under Articles 25 – 27 of Schedule 4, provision is made for co-operation and direct communication between a Court of the DIFC and foreign Courts or foreign representatives, either directly or through a DIFC insolvency office-holder. Article 27 provides that cooperation may be implemented by any appropriate means including coordination of the administration and supervision of the debtor’s assets and affairs and approval or implementation by Courts of agreements concerning the coordination of proceedings. Whilst this gives flexibility to this Court in relation to the means by which any assistance could be given, the only relevant assistance which is being sought is the stay of proceedings which could only be granted against the First Defendant, which is not a form of assistance envisaged in Article 117.

Discretion

35. It was argued by the Defendants that, regardless of the statutory regime, the DIFC Courts retained an ability at common law or under its inherent jurisdiction to stay the proceedings by way of support of the Abu Dhabi Bankruptcy Order. Whilst it is clear that the Court does have considerable discretion in case management terms in relation to the grant or refusal of a stay of proceedings, that discretion must be exercised judicially and in accordance with principle. Where there is a statutory regime for recognition of foreign insolvency proceedings and stays of actions pursuant thereto, it would take a very compelling case to grant a stay where the requirements of the statute were not met, even if there was jurisdiction to do so. I can see no basis for doing so here, certainly at this stage.

36. The absence of jurisdiction in the DIFC to make the orders sought in respect of recognition and enforcement of the Abu Dhabi Bankruptcy Order and the challenge to that order to which reference is made below also present reasons against imposing a stay, as a matter of discretion. The extraterritorial jurisdiction exercised by the Abu Dhabi Court in relation to companies which are not incorporated within its jurisdiction, however intertwined their affairs may be with those of the individual Second Defendant, is also questionable, even if Abu Dhabi represents his centre of main interest. The Court was informed that there was an appeal pending against the decision of the Abu Dhabi Court of 23 August 2021. This appeal is made by the other creditors as well as the Claimant against the refusal to accept the grievances put forward concerning the appointment of Mr Al Tamimi and the failure to appoint major liquidators of repute instead, as well as against the order for the conjoined restructuring or liquidation of 29 other entities including the other Defendants herein.

37. It is, of course, a matter for the Abu Dhabi Court of Appeal to decide whether or not the orders made should be upheld, whether the assets and debts of the Second Defendant and the Joint Litigants are inextricably intertwined; whether it is neither cost-effective nor practical for bankruptcy proceedings to be commenced elsewhere; whether the commencement procedures in Abu Dhabi provide adequate and sufficient protection for the creditors; and whether the joinder of the Joined Litigants to those proceedings is permissible under the Federal Decree. It is not known when that appeal will be heard and all else being equal, which it is not, granting a stay before that decision would deprive the Claimant of its rights in Court when the Abu Dhabi Court of Appeal might decide that it did not have jurisdiction over several of these Defendants.

38. The history of these proceedings and the approach of the Defendants thereto is also not such as to militate in favour of continuing the stay. The fate of similar arguments on forged documents in proceedings involving some of the same Defendants reinforces the immediate view that companies which take the benefit of loans and subsequently allege forged signatures on the Loan Agreements have a long row to hoe. The question immediately arises as to the terms upon which such money was received, leaving aside issues on any guarantees. The Claimant has a prima facie entitlement under the Loan Agreements and guarantees and wishes to amend its Particulars of Claim to plead the conduct of the Defendants during the course of negotiations and subsequent receipt of the funds advanced as establishing the terms of the contracts between the parties in the event that the Court is not satisfied about the due execution of the documents upon which reliance is currently placed by the Claimant.

39. It appears that there may be compelling reasons why this litigation should proceed and why a summary judgment application would have some prospect of success which, if achieved, would result in a crystallisation of the sums owed, even if, as appears to be common ground, all the Defendants are asset insolvent and the judgment some would only qualify for a pro rata distribution from the pool of assets available to the particular Defendants.

40. The Claimant called into question the bona fides of the Second Defendant who has orchestrated the Defendants’ approach to the proceedings in Abu Dhabi and the approach of Mr Al Tamimi which appears, in its eyes, to be aligned with that of the Second Defendant and not designed to achieve the best results for all the Defendants and the creditors amongst whom, it appears, that all the assets of the Second Defendant’s group will be distributed, with no equity left for its owners. There are issues which arise here that I need not and cannot resolve on the evidence available, but if there was any residual discretion to be exercised, I do not consider that it would give justify a stay of the DIFC proceedings in all the circumstances set out above.

41. This is not to say that such an application seeking recognition of a foreign winding up order by those authorised to seek it and the requesting a stay of litigation in the light of such a recognised order, if compliant with the Statute, could not succeed on appropriate evidence, but this is not the position here.

42. In the circumstances the application for continuation or reimposition of a stay of the DIFC proceedings must fail and costs must follow the event, including indemnity costs in respect of the Claimant’s application because of the well-known Court of Appeal decision, which made opposition to the application “outside the norm”.