DIFC Courts

Dutch Equity Partners Limited v Daman Real Estate Capital Partners Limited [2006] DIFC CFI 001

August 20, 2007 Court of First Instance -Judgments

CFI 001/2016

THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE

BEFORE HIS HONOUR JUSTICE MICHAEL HWANG

BETWEEN

DUTCH EQUITY PARTNERS LIMITED

Claimant

– and –

DAMAN REAL ESTATE CAPITAL PARTNERS LIMITED

Defendant

25 July 2007 - Judgment reserved

Judgment - 20th August 2007

JUDGMENT ON COSTS

1. On 25 July 2007, after having informed the Parties on 24 July 2007 of my decision on this matter, I heard arguments on costs.
2. Mr Buderi's position was simple: his clients had won the case, and he submitted that the Defendant was accordingly entitled to full costs. He also argued that the Claimant knew that it had no support from the other shareholders and that the case of 95% of the shareholders would prevail.

3. Mr Black's arguments were as follows,

a) In relation to the First Declaration, the Claimant would certainly have won its case had it not been for the shareholders' meetings convened by the Defendant after the filing of this Claim as well as the letters written by the shareholders to plead for validation of all the procedural irregularities in the various meetings. The action would have been concluded within weeks but for those shareholders' meetings convened by the Defendant and the Defendant's application for validation under Article 157 of the Companies Law (DIFC Law No. 3 of 2006) ('2006 Companies Law').

b) In relation to the Second Declaration, it seemed unfair that the Claimant should be penalised in costs for including a claim that had been suggested by the Court.

c) Accordingly, the Claimant should be awarded all its costs until 14 January 2007 when the Second Declaration was introduced. The Claimant should also be awarded costs until the first day of the main trial on 30 January 2007 when the Defendant's application under Article 157 of the 2006 Companies Law was formally introduced. Thereafter, there should be an apportionment of time in the calculation of costs on the basis that the Claimant would have won its case relating to the First Declaration but for the Defendant's Article 157 application.

d) Since the present trend is for courts to award costs on a broad percentage-based approach rather than conduct a detailed exercise in apportionment of costs, the Claimant should be awarded half of its costs.

4. On the question of the First Declaration, I agree that the irregularities in the three shareholders' meetings would have invalidated the resolutions purportedly passed at those meetings but for the application by the Defendant under Article 157 of the 2006 Companies Law. While I have not found any directly applicable authority from the other jurisdictions on the liability to pay costs in a similar fact situation, I believe that in principle the correct approach should be as follows. Since it was the Defendant's procedural irregularities which led to the Claimant challenging the validity of the proceedings held at those meetings, the costs of validating those proceedings should be borne by the Defendant. However, the Claimant should pay for the costs of its own challenge, which was unlikely to have succeeded as a claim standing in isolation (see paragraph 5 below).

5. On the question of the Second Declaration, I had suggested that the Claimant amend its Claim to include a prayer to declare the Management Agreement invalid to avoid a ruling that I would have otherwise made to deny the declaratory relief requested even if I had found the proceedings of the 5 April 2005 Meeting invalid. This was because the claim for the First Declaration would have been an entirely academic question in the light of the 10 September 2006 Meeting adopting the Current Articles in place of the New Articles, which would have made the legality of the New Articles moot. However, the responsibility for a decision to amend must always rest on the litigant (since I was not exercising my power to direct an amendment pursuant to Rule 3.3 of the CPR). Accordingly, the Claimant having lost on this point, it should bear the costs relating to the claim for the Second Declaration.

6. In any event, I would not award costs to either party on the application for summary judgement taken out by the Claimant or the application for striking out and/or summary judgement taken out by the Defendant, as both applications were unjustified.

7. I acknowledge that the time and effort spent by each party on getting up their respective cases on the First and Second Declarations (as well as the Article 157 application) may not be equal. Nevertheless, I see little merit in encouraging a detailed enquiry into relative time and effort spent by each party on all the issues in this case. My decision is therefore that, in the circumstances of this case, my findings on the costs of the First and Second Declarations above should effectively be treated as cancelling each other out, with the result that each party should bear its own costs.

Justice Michael Hwang

Judge

Date of issue: 20th August 2007