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Claim No: CFI-036-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE OMAR AL MUHAIRI

BETWEEN

VANNIN CAPITAL PCC PLC

For and on behalf of protected cell – Project Ramsey

                                                                                                Claimant

and

(1)  Mr RAFED ABDEL MOHSEN BADER AL KHORAFI

(2)  MRS AMRAH ALI ABDEL LATIF AL HAMAD

(3)  MRS ALIA MOHAMED SULAIMAN AL RIFAI

(4)  KBH KAANUUN LIMITED

(5)  BANK SARASIN-ALPEN (ME) LIMITED

(6)  BANK J. SAFRA SARASIN LTD (FORMERLY BANK SARASIN & CO LIMITED)

Defendants

Hearing:            6 November 2014

Counsel:           Rupert Reed QC instructed by Clyde & Co for the Claimant

Gayle E. Hanlon and Hamdan Al Shamsi (Hamdan Al Shamsi Lawyers and Legal Consultants)

for the First, Second and Third Defendants

Bushra Ahmed and Sharon Lakhan (KBH Kaanuun) for the Fourth Defendant

Submissions:    20 November 2014 and 18 December 2014

Judgment:        18 February 2015

JUDGMENT OF H.E. JUSTICE OMAR AL MUHAIRI

Summary of Judgment

 This summary is not part of the Judgment and should not be cited as such

ORDER

UPON the Claimant’s Application by way of Part 8 Claim Form dated 3 November 2014 seeking interim payment of monies into Court (“the Claimant’s Application”)

AND UPON the First, Second and Third Defendants’ Application Notice CFI-036-2014/1 dated 5 November 2014 contesting the DIFC Courts’ jurisdiction and seeking a stay of the proceedings (“the First through Third Defendants’ Application”)

AND UPON hearing Counsel for the Claimant and Counsel for the Defendants on 6 November 2014

AND UPON reading the submissions and evidence filed and recorded on the Court file

IT IS HEREBY ORDERED THAT:

1. The First through Third Defendants’ Application is dismissed and the DIFC Courts do have jurisdiction to hear and determine the Claimant’s Application.

2. The First, Second and Third Defendants shall pay to the Claimant and the Fourth Defendant 50% of their costs incurred as a result of both the Claimant’s Application and the First, Second and Third Defendants’ Application within 14 days of the date of this order, the amount of which shall be assessed, if not agreed, by the Registrar.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 18 February 2015

At: 10am

JUDGMENT:

1. On 13 November 2014, I issued the following order:

“UPON reviewing the Claimant's Application Notice by way of Part 8 Claim Form dated 3 November 2014 seeking interim payment of monies into Court (“the Claimant’s Application”);

AND UPON the direction of HE Justice Omar Al Muhairi that the time for service of the Claimant’s Application be abridged so that it be heard on 6 November 2014, and that the Claimant’s Application be heard in private;

AND UPON reviewing the First, Second and Third Defendants’ Application Notice CFI-036-2014/1 dated 5 November 2014 seeking an order that the DIFC Courts do not have jurisdiction and that the matter be stayed (“the Defendants’ Application”);

AND UPON hearing Counsel for the Claimant, Counsel for the First, Second and Third Defendants and Counsel for the Fourth Defendant on 6 November 2014;

AND UPON reading the relevant material in the case file;

AND PURSUANT TO Rule 36.41 of the Rules of the DIFC Courts, the paragraph numbers referred to in paragraphs 2, 4, 6 of this Order are amended, and reference to “Defendant’s Application” in paragraphs 4 and 5 of this Order is amended to read “Defendants’ Application”;

IT IS HEREBY ORDERED THAT: 

A. The Claimant’s Application 

1. Pursuant to RDC 25.1(12) the adjudged sums of US$ 10,445,049 and US$ 1,000,000 together with any interest thereon awarded to the First, Second and Third Defendants (as the Claimants in CFI 026/2009) as compensation and as an interim payment of costs, respectively, as ordered to be paid by the Fifth and Sixth Defendants jointly and severally (as the Defendants in CFI 026/2009) by the Order of Deputy Chief Justice Sir John Chadwick dated 28 October 2014 shall be paid into Court by the Fifth and Sixth Defendants by not later than 4pm on Tuesday 11 November 2014.

2. The monies or any part thereof paid into Court pursuant to paragraph 1 above shall be held until further Order of the Court as to whom and in what amount payments shall be made, such an order to be in the form of an order made by consent of the Claimant and theFirst, Second, Third and Fourth Defendants (as parties to an Amended Restated Litigation Funding Agreement dated 21 April 2013) and/or (insofar as it relates to the respective entitlements of the Claimant and the First, Second, Third and Fourth Defendants) pursuant to an order of any competent court and/or an arbitration award.

B. The Defendants’ Application

3. The First, Second and Third Defendants shall file and serve any further evidence and submissions with regard to the Defendants’ Application within 7 days from 6 November 2014, and in any event by no later than 4pm on Thursday 13 November 2014.

4. The Claimant and Fourth Defendant shall file and serve any evidence and submissions in reply to the Defendants’ Application within 7 days from the submissions of evidence in paragraph 3 above, and in any event by no later than 4pm on Thursday 20 November 2014.

5. The Defendants’ Application be dealt with on paper.

C. Costs

6. The Claimant and the First, Second, Third and Fourth Defendants shall file and serve cost statements within 14 days from the submission of evidence in paragraph 4 above.

7. Liberty to apply.”

Background

2. Before the Court is the Claimant, Vannin Capital PCC PLC, a company incorporated in the Isle of Man as a Protected Cell Company. The Claimant provides funding for parties in commercial litigation and is reimbursed in an entitlement where the funded party wins in addition to a premium often as a multiple of the funding.

3. The First through Third Defendants are Kuwaiti nationals and residents who are the Claimants in the underlying CFI-026-2009 proceedings brought against the Fifth and Sixth Defendants in the present case for regulatory breaches, breaches of contract and breaches of duties of care, among other claims. The First, Second and Third Defendants terminated the retainer of the Fourth Defendant (KBH) in August 2014 and are currently represented by Hamdan Al Shamsi Lawyers & Legal Consultants (HAS).

4. The Fourth Defendant, KBH Kaanuun Limited, is a limited liability company incorporated in the DIFC and the former legal representatives of the First through Third Defendants in CFI-026-2009.

5. The Fifth Defendant is a company incorporated in the DIFC and the Sixth Defendant is a private bank incorporated in Switzerland. The Fifth and Sixth Defendants are the Defendants in the matter CFI-026-2009.

6. On 13 January 2012, a ‘Type B’ litigation funding agreement was entered into between the Claimant and the First through Third Defendants in relation to the pursuit of the matter CFI-026-2009. When the First through Third Defendants replaced their legal counsel at the time, Eversheds LLP, with KBH, an Amended and Restated ‘Type B’ litigation funding agreement (Restated LFA) was entered into on 21 April 2013 between the Claimant, First through Third Defendants and KBH.

7. Pursuant to the Restated LFA, the Claimant agreed to provide funding to the First through Third Defendants in relation to their claim brought in the matter CFI-026-2009.

8. On 21 August 2014, the judgment in the matter CFI-26-2009 was handed down by Deputy Chief Justice Sir John Chadwick which held the Fifth and Sixth Defendant in the present case jointly and severally liable to pay compensation to the First through Third Defendants in the present case for breach of DIFC Regulatory Law.

9. After a hearing to determine costs and consequential orders arising out of the judgment, on 28 October 2014, Deputy Chief Justice Sir John Chadwick adjudicated in an order (the Interim Order) that the Defendants (the Fifth and Sixth Defendants in the present case) are liable jointly and severally to pay USD 10,400,000 together with costs and interest. Justice Chadwick ordered an interim payment in the total sum of USD 11,445,049 (the Interim Payment Fund) to be paid within 14 days.

10. To date, this sum has yet to be paid by the Fifth and Sixth Defendants.

11. Pursuant to the Restated LFA, once damages are recovered, the First through Third Defendants are liable to pay the Claimant USD 9,951,723 plus interest at 8% per annum (USD 2,181 per day).

12. Due to the discharge of legal representation of KBH by the First through Third Defendants in August 2014 (and the ensuing dispute between them in CFI-035-2014), a replacement payment receipt mechanism per the Restated LFA has yet to be finalized.

13. On 3 November 2014, the Claimant filed a Part 8 Claim with the Court against the Defendants in accordance with RDC 8.38 and 23.15 to protect and preserve its interest in the Interim Payment Fund arising from CFI-026-2009 and applied for an urgent interim order of the Court to either facilitate an agreement between the Claimant and the First through Fourth Defendants as to the distribution of the funds pursuant to the Restated LFA or a final arbitration award declaring the distribution of the Interim Payment Fund.

14. Specifically, the Claimant sought an order pursuant to RDC 25.12 that a sum of USD 10,451,723 plus interest from the Interim Payment Fund be paid into Court by the Fifth and Sixth Defendants and shall not be paid in whole or in part to any other party until further order of the Court as to whom and in what amount payment of the Interim Payment Fund shall be made.

The Order

15. On 6 November 2014, I issued an order that can be read in full above. In short, I ordered that the adjudged sum of USD 11,445,049 together with any interest awarded to the First, Second and Third Defendants by the Order of Deputy Chief Justice Sir John Chadwick be paid into the Court by the Fifth and Sixth Defendants no later than 11 November 2014.

16. Furthermore, I ordered that any monies paid into the Court would be held until further instruction of the Court as to whom and in what amount payments shall be made; such an order to be in the form of an order made by consent of the Claimant and the First, Second, Third and Fourth Defendants and/or pursuant to an order of any competent court and/or an arbitration award.

17. The First through Third Defendants were allotted seven days to file and serve any further evidence or submissions with regard to the Defendants’ Application. The Claimant and Fourth Defendant were to file and serve further evidence and submissions in reply to the Defendants’ Application by 20 November 2014.

Jurisdiction

18. In response to my Order, the First through Third Defendants’ primary position is that there is no jurisdiction for the DIFC Courts to hear this matter and they rely on the witness statement of Gayle E. Hanlon on behalf of the First through Third Defendants dated 23 October 2014. 

19. Ms Hanlon quotes Clause 33.6 of the Restated LFA, which states:

“The [Amended LFA] is governed by the law of England and Wales. Save for enforcement proceedings and save where an English Court (including any competent Tribunal) orders otherwise, any dispute pertaining to it must be litigated exclusively within the jurisdiction of England & Wales.”

She contends that the parties to the Restated LFA, which include the Claimant, agreed that jurisdiction over any dispute arising out of or in relation to the Restated LFA lies solely with the Courts of England & Wales and that the Claimant has chosen the wrong forum for these proceedings. As such, the First through Third Defendants posit that the DIFC Courts lack jurisdiction to adjudicate these proceedings.

20. In response to this, the Claimant asserts in its Second Witness Statement of Keith Lyall Hutchison that the challenge to jurisdiction is wholly misconceived and that the Claimant’s application was an application for interim relief from the DIFC Courts in support of the intended claim to be made by the Claimant against the First through Third Defendants in the DIFC-LCIA Arbitration Centre, not a claim for substantive relief under the Restated LFA.

21. Additionally, the Claimant argues that the challenge to jurisdiction ignores the arbitration agreement in Clause 17.1.3 of the Restated LFA, which provides that the parties shall arbitrate their dispute under the DIFC-LCIA Arbitration Rules.

22. Lastly, the Claimant contends that the First through Third Defendants have taken a contradictory position with regard to jurisdiction. On the one hand, the Defendants’ claim there is no jurisdiction for the DIFC Courts to hear this case, yet on the other, they seek an order to consolidate the proceedings with their own claim commenced in CFI-035-2014.

23. The Fourth Defendant KBH assumes the same position as the Claimant as stated in the Second Witness Statement of Daleep Kumar Singh on behalf of KBH. He states, “I…agree that the challenge to jurisdiction by the Khorafi Defendants is without merit. In addition to the points raised by Mr. Hutchison, I would also refer to the DIFC Arbitration Law Article 15.”

This article states the following:

“15. Arbitration Agreement and interim measures by the Court

It is not incompatible with an Arbitration Agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a Court to grant such a measure.”

24. I tend to agree with the Claimant and the Fourth Defendant. As the Claimant pointed out, Clause 17.1.3 of the Restated LFA contains a DIFC-LCIA Arbitration Clause to resolve disputes relating to the amounts payable under the Second LFA, which are final payments. The Clause reads:

“17.1.3 Quantum or principle (final): If the dispute relates to the amounts payable under this Agreement which are final payments, then the parties are required to consider mediation. If that does not work, then the parties will be at liberty to have the matter decided by arbitration pursuant to the DIFC-LCIA Arbitration Rules.”

25. The DIFC Courts is the supervisory court for DIFC-LCIA arbitrations and has the power to issue interim measures as elucidated in Article 15 of the DIFC Arbitration Law, laid out above.

26. It is therefore my clear view that the DIFC Courts do in fact have jurisdiction to hear and determine the Claimant’s Part 8 Application, notwithstanding the governing law paragraph at Clause 33.6 of the Restated LFA.

Costs

27. The second and final issue to be determined from the Order is the question of costs. According to RDC 38.7, if the Court decides to make an order on costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. However, the Court may make a different order (RDC 38.7.2) and has the discretion to determine whether costs are payable (RDC 38.6).  In exercising this discretion, the Court, “must have regard to all the circumstances” including “the conduct of the parties” (RDC 38.8(1)), and that conduct includes, “whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue” (RDC 38.9(2)).

28. The circumstances surrounding this case are unusual.  The Claimant’s application was still in its early stages when the order in CFI 026/2009 was issued on 28 October 2014. The Claimant applies for urgent interim relief in support of a claim for substantive relief that it will pursue in DIFC LCIA arbitration to be commenced.

29. The Claimant has always maintained the position in their original claim and subsequent submissions that their costs ought to be paid by the First through Third Defendants.

30. According to the submissions of the Fourth Defendant on costs, KBH proposes that it should be paid costs by either the First, Second and Third Defendants or by the Claimant. Specifically, KBH cites RDC 38.7 and the general rule that the unsuccessful party pays the costs of the successful party. KBH suggests that, in this instance, the issue before the Court was whether the Court ought to make an Interim Order. Given that the Court did make the Interim Order, the First through Third Defendants are the losing party to this issue and should therefore pay KBH’s costs.

31. Furthermore, I accept KBH’s submissions that in order to protect its interests it was forced to incur costs in considering the Claimant’s Part 8 Application and attached documents, preparing a witness statement and attending Court and that had KBH been involved in discussions at an early stage between the Claimant and the First through Third Defendants, the Application may have been avoided entirely.

32. More than this however, according to KBH, had the First through Third Defendants consented to either an amended escrow agreement or to the Application then it would have prevented litigation and the need for anyone to incur costs altogether.

33. Considering the fact that the First through Third Defendants have been silent as to the substantive issue of costs, (save a statement of costs in the amount of USD 59,537.85), their conduct before and during the proceedings must be examined, pursuant to RDC 38.9.

34. Pursuant to the arbitration agreement in Clauses 17, 30.1, 31.1 and 31.2 of the Restated LFA, the parties set-up a mechanism for Recovered Damages and Recovered Costs, once paid by the Fifth and Sixth Defendants as defined shall be paid into an account held by the Fourth Defendant KBH.

35. In August of 2014 the First through Third Defendants disinstructed KBH as their legal representatives and replaced them with HAS. As a result, the mechanism contained within the Restated LFA that directs how funds are to be received were no longer workable without KBH. Thus, the Claimant engaged the First through Third Defendants along with HAS and their various legal advisors to agree to an amendment to the existing Restated LFA or a separate agreement in order to ensure any funds received from the Fifth and Sixth Defendants would be distributed in accordance with the Restated LFA.

36. Subsequent to this, various e-mails and phone calls ensued between the Claimant and the First through Third Defendants and their legal advisors as to the suitability of HAS as legal representatives in the DIFC, the confirmation of the Claimant’s existing rights under the Restated LFA, alternatives to the existing arrangement of funds received due to the removal of KBH and the mutual agreement to the amendment of the existing Restated LFA or alternatively a separate agreement in order to ensure any funds received would be distributed according to the Restated LFA.

37. Many alternatives to the existing arrangement of funds received were put forth by both parties. The First through Third Defendants suggested, albeit misguidedly, that HAS’ account be set up in the same way as KBH’s account. The Claimant discounted this suggestion and proposed a separate designated client account regulated by the DFSA or the Solicitors’ Accounts Rules 1998, as governed by Clause 31 of the Restated LFA (which HAS was lacking), such as an account with Irwin Mitchell or alternatively to continue with the status quo under KBH. The First through Third Defendants later recommended either a trust or escrow account with Emirates NBD (which was never finalized), and finally the Claimant provided that Clyde & Co LLP would be willing to accept any monies payable by the Fifth and Sixth Defendants into its client account to be held in escrow in accordance with the Restated LFA. Despite express confirmation of this by Mr Hamdan Al Shamsi, the escrow account was never finalized nor did the Claimant hear anything further from HAS regarding this new agreement. Despite the attempts at reaching an agreement as to the new client account, to date, no agreement has been made and accordingly, it was decided in my Order that any monies paid by the Fifth and Sixth Defendants be paid into Court and held until further instructions.

38. Furthermore, the First through Third Defendants were afforded numerous opportunities to enter into a new or amended LFA after the disinstruction of KBH (a signatory to the Restated LFA), that included the newly appointed HAS as well as a new funding agreement. The Claimant provided the First through Third Defendants and their legal advisors with a draft deed of amendment and restatement as well as a marked version of the Restated LFA in order to move forward. This was never finalized.

39. The failure to secure a new fund agreement and enter into a new or amended Restated LFA compelled the Claimant to file this Part 8 Application. Had HAS proceeded with a new agreement, this Application as well as the costs incurred on all parties would have been avoided in its entirety.

Order as to Costs:

40. In light of the foregoing, I find that the First through Third Defendants should pay 50% of the costs incurred as a result of both applications (the Claimant’s Application and the First through Third Defendants’ Application) to the Claimant and the Fourth Defendant, to be subject to detailed assessment if not agreed.

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue:  18 February 2015

At: 10am