February 13, 2023 Technology and construction division - Orders
Claim No: TCD 001/2020
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
TECHNOLOGY AND CONSTRUCTION DIVISON
BETWEEN
(1) GATE MENA DMCC (FORMERLY HOUBI OTC DMCC)
(2) HUOBI MENA FZE
Claimants
and
(1) TABARAK INVESTMENT CAPITAL LIMITED
(2) CHRISTIAN THURNER
Defendants
ORDER WITH REASONS OF JUSTICE SIR RICHARD FIELD
UPON considering the Claimants’ application for a stay (the “Stay Application”) pursuant to RDC 4.2 (6) of all costs matters including any orders consequential to the judgment herein dated 26 October 2022 (the “Judgment”) pending final determination of the Claimants’ application for permission to appeal the Judgment (the “Permission Application”) and, if granted, the appeal itself
AND UPON considering the Second Witness Statement of Sara Jayne Sheffield served in support of the Stay Application
AND UPON considering the written submissions dated 19 December 2022 in response to the Stay Application served by the First Defendant (“D1”)
AND UPON considering the written submissions dated 19 December 2022 in response to the Stay Application served by the Second Defendant (“D2”)
AND UPON reviewing the Defendants’ first round submissions on the costs of the proceedings dated 3 November 2022, the Claimants’ reply submissions on costs dated 14 November 2022 and the Defendants submissions dated 21 November 2022 in response to the Claimants’ said submissions
IT IS HEREBY ORDERED THAT:
1. The Stay Application is dismissed.
2. The Claimants shall pay the costs of each of the Defendants to be the subject of a detailed assessment by the Registrar on the standard basis.
Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 13 February 2023
At: 4pm
SCHEDULE OF REASONS
1. The Defendants succeeded after an 8-day trial in having the Claimants’ claim for a very large sum in damages dismissed. They are now applying for orders that the Claimants pay each of them their costs with interest at 9% pa. D1 estimates its total costs to be substantially in excess of AED 3,729,891.27, the total sum specified in its Statement of Costs dated 31 October 2021 served in connection with its application for security for costs. D1 seeks orders: (i) that it be awarded its costs to be the subject of a detailed assessment on the standard basis; (ii) an order that AED 750,000 presently held in court as security for its costs be paid out to it forthwith; and an interim payment on account of costs in the sum of AED 1,150,000.
2. D2 is seeking an immediate summary assessment of his costs of the proceedings in the sum of AED 3,256,499.97, to be assessed on the indemnity basis. D2 also seeks an order that the sum of AED 550,000 paid into court as security for his costs be paid out to him forthwith and, if the Claimants fail to comply with the adverse order as to costs that he confidently expects will be awarded against them, that he may have immediate recourse to seek enforcement of the balance of the unpaid costs against the seven properties made available by Mr Al Ali and Mr Mohit Davar, the controllers of the Claimants, as security for costs, as ordered on 18 November 2021. In the alternative, D2 seeks: (i) that he be awarded his costs to be the subject of a detailed assessment and on the indemnity basis; (ii) an interim payment on account of costs in the sum of AED 1,628,249.99.
3. I shall be issuing an Order with Reasons dealing the Defendants’ costs applications shortly and am well versed in the issues raised therein. One of the conclusions that will be expressed in that Order will be that D2’s costs must be the subject of a detailed assessment.
4. Faced with these claims for costs, the Claimants apply under RDC 4.2 (6) for a stay of all costs matters, including any orders consequential to the Judgment herein, pending final determination of their application for permission to appeal, and, if granted, pending the appeal itself.
5. By an order dated 7 February 2023, the Claimants were granted permission to appeal to the Court of Appeal in respect of four of their eight proposed grounds of appeal. They were refused permission to appeal in respect of the additional four issues on the ground that these appeals had no real prospect of success since they involved findings of fact made by the trial judge.
6. In Part C of their Notice of the Stay Application, the Claimants aver and submit that: (i) they have already provided significant security for costs in the form of AED 1.3 million paid into court, as well as the provision of the said seven properties valued up to AED 5.8 million as further security; (ii) if the stay is granted, this security for costs will remain in place until such time as the Claimants’ application for permission to appeal is determined and, if granted, the final outcome of any such appeal is known; (iii) given the prospect that any costs order made pursuant to the Judgment would be overturned and reversed if the Claimants’ appeal is successful, it would be inappropriate for any costs order to be made and enforced at this stage, particularly in circumstances where the Claimants have already provided substantial security for costs; (iv) the Defendants will not suffer any prejudice as a result of the issue of costs being settled once the outcome of the proceedings has been finally determined since the Claimants are shell companies that have little or no ostensible assets and thus there is little risk of the Claimants dissipating their assets to avoid paying any costs order; and (v) the Claimants need to conserve their funds in order to fund their appeal.
7. Both Defendants submit that it is only in a compelling case that a stay pending appeal will be granted and the Claimants’ case for a stay falls well short of this high standard. They argue that they will be seriously prejudiced if the proposed stay is granted because, during the period of the stay, whilst the Claimants will be spending what they claim to be their resources in financing their appeal, the Defendants will be prohibited for the length of the stay from getting on with the rather lengthy process of a detailed assessment of their costs.
8. The Defendants also justifiably make much of the fact that the Claimants have served no real evidence as to their financial position. Thus, no accounts or other financial statements and bank records are exhibited and there are no professional valuations of the seven properties, just the self-estimated values asserted by Mr Al Ali and Mr Davar totalling AED 5.8 million. Instead, it is merely asserted in Part C of the Stay Application Notice that the Claimants have little or no ostensible assets and nor is any evidence given as to the financial position of Messrs Al Ali and Davar who the Claimants have admitted were helping to finance the Claimants’ claim, the justification for such absence of evidence being said to be the fact that those gentlemen are not parties to the proceedings.
Discussion and decision
9. RDC 44.4 provides that, unless the appeal Court or the lower Court orders otherwise, an appeal shall not operate as a stay and it is trite law that successful litigants are entitled to the fruits of their victory; see Al Khorafi and others v Bank Sarasin-Alpen (ME) Ltd and others [2009] DIFC CFI 026 (21 January 2016).
10. It is also commonly accepted that the merits of the appeal at the centre of a stay application are almost always entirely irrelevant. If it is obvious that the order appealed against was misconceived so that the prospects of success of the appeal are demonstrably high, that may be a relevant consideration but that is far from being the case here.
11. As Justice Sir David Steel observed in Taaleem P.J.S.C. v National Bonds Corporation P.J.S.C. and others [2010] DIFC CFI 014 (27 April 2015) at [2] & [5], the burden is on the applicant to put forward good grounds for a stay and the important consideration on applications of this nature is the relative risk of injustice in granting or not granting a stay.
12. The approach to applications for a stay pending appeal in this court is very similar to, and indeed informed by, the approach taken in numerous cases on the subject decided in the Courts of England and Wales, see e.g. Taaleem at [4]. Such a case is the decision of the EWCA in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065. Here, the appellants (“Agrichem”) sought a stay pending their appeal against the decision of the trial judge who had very substantially upheld the respondent solicitors’ claim for unpaid bills. Agrichem was a privately owned BVI company that was owned by a discretionary trust, the beneficiaries of which were members of one family and the company was not required to produce accounts. At the heart of Agrichem’s application was the contention that, but for a stay, its appeal would be stifled. The only evidence of Agrichem’s financial situation put before the Court of Appeal was an extremely simplistic homemade balance sheet. At the time the appeal was heard, the applicable CPR provision (Part 52.7) was in substantially similar terms to RDC 44.4
13. The Court of Appeal dismissed Agrichem’s application. In the course of delivering the main judgment of the Court, Clarke LJ made the following pertinent observations:
“We regard the "balance sheet" produced by Ms Marr as a wholly inadequate document to support an application for discretionary relief by an entity such as the appellant, which is not registered in the United Kingdom, has no assets here and a PO box address in Jersey and is not subject to either the Brussels or the Lugano Conventions. In our judgment, the evidence in support of an application for a stay needs to be full, frank and clear. The "balance sheet", in our view, is none of these.” [13] [Emphasis supplied]
“The material we have set out above explains why we take the view that Ms Marr's statement produced for this application is wholly insufficient evidence to show that there is any risk of the appeal being stifled unless a stay is granted. In our judgment, a foreign corporate entity without assets within the United Kingdom and without readily identifiable assets elsewhere, which is not subject to any international conventions to facilitate enforcement, and which seeks to stay orders obtained after a lengthy and fair hearing must produce cogent evidence that there is a real risk of injustice if enforcement is allowed to take place pending appeal.” [19] [Emphasis supplied]
“Before it could properly grant a stay, the court needs to have a full understanding of the true state of the company's affairs. Simple assertion, particularly if it is scarcely consistent with previous assertions, is not enough. Thus, in the instant case, we would have expected the appellant to produce accounts showing precisely what its trading and financial position is and how it has changed since 1998 in order to evaluate the risks of allowing enforcement to proceed in the ordinary way.” [20] [Emphasis supplied]
“The thrust of Ms Marr's 1998 affidavit is that the owners of the appellant were wealthy and willing to stand behind it. In the absence of evidence to the contrary, there is no reason to think that they are not still wealthy or that, if they wished to, and if they thought it in their or the appellant's interests to do so, they could satisfy or secure the judgment debt and the orders for costs. They plainly have an interest in the appeal succeeding. We note in this regard that the appellant is able to fund its own costs of the appeal. It appeared before us by leading and junior counsel, who, we understand, will be briefed at the hearing of the appeal, which is due to last three to four days. The evidence does not make it clear how those costs are being funded.” [21] [Emphasis supplied]
“By CPR rule 52.7, unless the appeal court or the lower court orders otherwise, an appeal does not operate as a stay of execution of the orders of the lower court. It follows that the court has a discretion whether or not to grant a stay. Whether the court should exercise its discretion to grant a stay will depend upon all the circumstances of the case, but the essential question is whether there is a risk of injustice to one or other or both parties if it grants or refuses a stay. In particular, if a stay is refused what are the risks of the appeal being stifled? If a stay is granted and the appeal fails, what are the risks that the respondent will be unable to enforce the judgment? On the other hand, if a stay is refused and the appeal succeeds, and the judgment is enforced in the meantime, what are the risks of the appellant being able to recover any monies paid from the respondent?” [22]
14. One of the central, albeit implicit, points made by the Claimants in support of their Stay Application is that, but for a stay, their appeal will be stifled because the money that is being employed to fund their appeal will be susceptible prior to the appeal to measures taken by the Defendants in execution of the costs awards they expect to be granted, including interim payment awards. This implicit contention is advanced without any evidence being put before the Court as to the terms on which the money to pay for the appeals is being made available to the Claimants’ solicitors, Charles Russell Speechlys (“CRS”). It is readily to be inferred that the source of this financing is Messrs Al Ali and Davar, but without detailed evidence as to the financing agreement for the appeal made between those individuals and the Claimants and CRS, it is impossible for the Court to determine whether the funds in question are indeed vulnerable to recovery by the Defendants through enforcement measures granted by the courts. The Claimants have also failed to adduce evidence from Messrs Al Ali and Davar as to their personal wealth and whether they would be prepared to finance the discharge of the Claimants’ judgment debts arising from adverse costs orders and/or the appeal if the funds presently with CRS are recovered by the Defendants through execution procedures. Instead, the Claimants take the simplistic view that since Messrs Al Ali and Davar are not parties to the proceedings, there is no call for the missing evidence to be provided. I know not whether those acting for the Claimants took the opportunity to study the judgment in the Hammond Suddard appeal before launching the Stay Application. If they had done so, I can only think that this would have rendered them if not wiser, then better informed.
15. I turn to consider the consequences for the Defendants if the stay were granted. In my ruling on the Defendants’ costs applications to be issued in the near future, I shall award the Defendants their costs on the basis that they are to be the subject of detailed assessment. It follows that no final orders determining the quantum of the Defendants’ costs will be in the hands of the Defendants until the Registrar has conducted the detailed assessment and this could take several months after the lapse of the proposed stay. Thus, if the stay were granted, the Defendants would be kept out of their final entitlement to costs for a considerably longer period than would be the case if no stay were granted. In addition, if a stay is granted, the Defendants will face delay in receiving the security for costs sums in court and obtaining orders for the sale of the seven properties provided as security for costs as part of an enforcement order of an interim payment. It is true that the Defendants will be awarded interest on the sums due to them by way of costs, but this is likely to be of little value if the Claimants are as destitute as they claim to be.
16. What about the consequences for the Claimants if the Stay Application is refused? Since no evidence has been produced (as distinct from assertions) dealing with the financing arrangements governing the provision of funds to CRS for the appeal or as to the financial standing of the Claimants and Messrs Al Ali and Davar, and as to whether those individuals would cover the Claimants’ liability for the Defendants’ costs, I am in no position to assess whether the funds for the appeal would cease to be available if the stay were not granted. Accordingly, I readily conclude on the evidence before me that the risk of prejudice to the Defendants if the stay is granted significantly outweighs the risk of prejudice to the Claimants if their Stay Application is refused.
17. I also note that it is not suggested (and no evidence has been adduced) that if the appeal succeeds the Claimants will be at risk of not being able to recover from the Defendants the money they might already have received for their costs.
18. For the reasons given in [9] – [17] above, I dismiss the Claimants’ Stay Application with costs.
19. By way of a postscript, I wish to add this observation. RDC 4.2 (6) grants the court a discretion whether or not to order a stay. In my opinion, the discretion so conferred permits the Court to take into account against the Claimants that they proceeded with their very large damages claim when they must have known, if their evidence is to be accepted, certainly by the time of the Assignment Agreement dated 1 September 2021 by which C2 agreed to indemnify C1 as its costs, if not well before, that neither of them was worth powder and shot and the security for costs ordered to be provided was likely to fall significantly short of covering the costs that would be awarded to the Defendants if the claim was dismissed. Nonetheless, they decided to take the significant risk that they might not succeed at trial and, that risk having gone against them, they now seek to mitigate the consequences thereof by bringing this audacious application for a stay pending appeal.
