Mad Atelier International B.V. v (1) Axel Manes (2) Catherine Zhilla [2022] DIFC CFI 030 (07 September 2022)

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URL: http://www.bailii.org/ae/cases/DIFC/2022/DCFI_030.html
Cite as: [2022] DIFC CFI 030, [2022] DIFC CFI 30

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CFI 030/2022 Mad Atelier International B.V. v (1) Axel Manes (2) Catherine Zhilla

September 07, 2022 COURT OF FIRST INSTANCE - ORDERS

Claim No: CFI 030/2022

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

MAD ATELIER INTERNATIONAL B.V.

Claimant

and

(1) AXEL MANES
(2) CATHERINE ZHILLA

Defendants


REASONS FOR THE ORDER OF H.E DEPUTY CHIEF JUSTICE ALI ALMADHANI DATED 1 AUGUST 2022


UPON reviewing Application No. CFI-021-2022/3, CFI-021-2022/6, CFI030-2022/2 and CFI-030-2022/3 (the “JJC Stay Applications”)

AND UPON reviewing Application No. CFI-030-2022/5 to set aside the Order of H.E. Justice Maha Al Mheiri dated 29 June 2022 (the “Stay Order”)

AND UPON hearing Counsel for the Claimant and Counsel for the First Defendant and the Second Defendant (the “JJC Hearing”)

AND UPON considering Dubai Decree No. 19 of 2016 establishing the Joint Judicial Committee

IT IS HEREBY ORDERED THAT:

1. The Stay Order is set aside.

2. The JJC Stay Applications are dismissed.

3. The Freezing Order of Justice Lord Angus Glennie made on 18 March 2022 and 25 March 2022 continue to remain in effect and were not affected by the Stay Order.

Issued by:
Ayesha Bin Kalban
Deputy Registrar
Date of Issue: 7 September 2022
Time: 3pm

SCHEDULE OF REASONS

Introduction

1. On 23 May 2022, the First and Second Defendant’s filed the following stay applications pursuant to Article 5 of the Dubai Decree No.19 of 2016 (the “Dubai Decree”): CFI-021-2022, CFI-030-2022 (the “Second Defendant’s JJC Stay Applications”) CFI-021-2022/6 and CFI-030-2022/3 (the “First Defendant’s JJC Stay Application”).

2. On 29 June 2022, the JJC Stay Applications were granted by H.E Judge Maha Al Mheiri on the papers.

3. On 4 July 2022, the Claimant exercised its rights under the Rules of the DIFC Courts (“RDC”) 4.13(1) and applied for the Stay Order to be set aside (the “Set Aside Application”).

4. On 29 July 2022, the set aside application was heard before me via video conference at the JJC Hearing. The JJC Stay Applications were dismissed by way of a summary judgment as set out in my order dated 1 August 2022 (the “Order”).

5. My reasons for granting the Order are set out below. I should make it clear that in addition to the oral submissions made at the JJC Hearing, I have read carefully through the evidence submitted by both parties. In this short schedule of reasons, I do not propose to refer to each point made by the parties. The fact that I may omit some references to some arguments or authorities does not mean that I have overlooked it.

6. Further, I will not repeat the facts of the dispute and the background of the case as this is to be dealt with at length in my Order in respect of CFI-030-2022/11 pertaining to the Second Defendant’s Application for an extension of time.

Reasons

7. In the absence of reasons for the Stay Order, it can only be assumed that Justice Al Mheiri was of the view that there was a conflict of jurisdiction between the DIFC Court and the Dubai Court which justified the Stay Order. In deciding the Stay Order on the papers, it is clear that Justice Al Mheiri was seeking to exercise the Court’s powers to deal with an application on the Court’s own initiative without a hearing, in circumstances where the Court felt a hearing would not be appropriate (RDC 23.69(3) and RDC 23.78).

8. Pursuant to RDC 4.13(1), where a Court makes an order on its own initiative the parties have a right to apply for that order to be set-aside.

9. The Claimant has applied for the Stay Order to be set aside on the basis that it was unjust for the Stay Order to have been granted without first permitting the parties an opportunity to make legal representations, particularly given the importance of the issue to be determined and in circumstances where the Court was on notice that further material relevant to the applications would be forthcoming. The Claimant also relies on factual errors in the recital to the Stay Order which it suggests indicates that the procedural background and submissions were not properly understood by the Court when making the Stay Order.

10. In allowing the Claimant’s application to set aside the Stay Order, I rely on two main reasons.

11. First, I agree that it was unjust for the Stay Order to have been issued without first providing the parties with an opportunity to make legal representations pertaining to the JJC Applications. Particularly given the circumstances in which the Claimant emailed the Court’s Registry on 29 June 2022 at 11:52 AM requesting the Registry’s position with respect to the determination of the JJC Applications. On 29 June 2022, 11:54 AM, the Court’s Registry confirmed that the matter would be dealt with on the papers. On the same day, at 3pm the Court issued the Stay Order.

12. In the circumstances of this case, it was incumbent upon the Court to consider the parties representations. This was particularly so because a hearing had been requested by the Claimant’s representatives on various occasions, including in its letter to the DIFC Registry of 26 May 2022, Mr Paul Michael Stothard’s First Witness Statement and the Claimant’s submissions in respect of the consolidation of CFI-020-2022 and CFI-030-2022. On 9 June 2022, whilst the First Defendant’s Counsel did not propose to file any evidence of fact, they emailed the DIFC Court Registry seeking directions for the parties to file and mutually exchange written submissions in respect of the JJC Stay Applications, prior to the Registry making a determination of the JJC Stay Applications on the papers.

13. Secondly, I agree with the Claimant’s submissions as articulated by Mr Paul Michael Stothard in his third witness statement, that there was a misunderstanding about what the parties had agreed to as evidenced in the terms of the recital to the Stay Order.

14. I also note that the timing of the issuing of the Stay Order denied the Claimant and the First Defendant the opportunity to make legal submissions in respect of the JJC Stay Applications.

15. I now turn to the JJC Applications of the First and Second Defendant, which I dismissed in my Order of 1 August 2022, I refer to two primary reasons.

16. First, the mere fact that competing proceedings have been commenced and an application to the JJC does not give rise nor warrants a stay. There must have been an opportunity for both courts to make a positive decision on jurisdiction. The judgment inLakhan v Lamia [2021] DIFC CA 001, is the leading decision in relation to stay of proceedings resulting from a reference to the JJC. This judgment provides that the referral must be, as material, of a dispute as to jurisdiction (paragraph 29 of the judgment). Also, whether there is such a dispute is a matter to be determined by the Court in which the stay is sought (ibid. at paragraph 28). There are two main requirements in order to justify a stay under Article 5 of the Dubai Decree on the basis of a conflict of jurisdiction: first, the exercise of an application to the JJC to determine the competent court and second the existence of a conflict of jurisdiction. The first requires an act from the defendant who contest jurisdiction and the second requires a finding of the Court in which the stay is sought. Accordingly, the mere existence of the JJC Application was not sufficient to trigger stay of the proceedings in the DIFC Court. There must have been an opportunity for both courts to make positive decision on jurisdiction. The DIFC Court and the Dubai Court have made no conflicting decision.

17. InLakhan, the Court of Appeal stated that (paragraph 33 to paragraph 35):

33. … the conflict of jurisdiction [between the DIFC Court and the Dubai Court] can be either through inconsistent judgments or through both Courts maintaining or declining jurisdiction over a claim … Maintaining or declining jurisdiction over a claim must be something less than judgment on the substance of the claim; conversely, mere existence of proceedings with the same claim in both of the Courts cannot be enough for conflict of jurisdiction, as if that were so there would be no point in making inconsistent judgments an occasion of conflict of jurisdiction – there would be conflict of jurisdiction before getting to judgment. …

35. … When a party commences proceedings, it asks the Court to exercise jurisdiction. The Court does not do so by the administrative act of receiving the initiating process when filed. At the least, there must be some step in the proceedings amounting to a relevant exercise of jurisdiction by the Court, or refusal of the step on jurisdictional grounds, in order that there be maintenance or declining of jurisdiction within the words in the chapeau to Article 4. All translations require a positive act on the Court’s part (“claimed or disclaimed jurisdiction”; “assert or decline jurisdiction over a claim”; “no court decides to waive hearing of the action or both courts waive the hearing thereof”). As to “no court decides to waive the hearing of the action”, which had to be the nub of the Claimant’s submission as the negative act, it must be read with the alternative of waiving the hearing, indicating a choice; there must be at least an occasion for deciding to waive or not waive, as is clear from the other translations.

18. Accordingly, it can be deduced fromLakhanthat for there to be a conflict of jurisdiction between the Dubai Courts and the DIFC Court, there must be positive acts of both Courts to create a conflict (claimed or disclaimed jurisdiction). The mere receipt of an application to contest jurisdiction is not a positive act.Lakhanhas been applied consistently by the DIFC Courts in various cases and the current JJC Stay Applications do not meet the criteria for a stay order.

19. Based on the criteria inLakhan,as set out above, I issued the Order on 1 August 2022.

20. Secondly, the Court’s recognition that a JJC decision may not have been forthcoming within a reasonable time period. The subsequent risk of uncertainty and delay may prejudicially impact the parties, particularly the Claimant’s ability to enforce against the First Defendant’s assets.

21. As part of the Claimant’s submissions, it was stated that the Stay Order would have had an impact on the Freezing Order issued by Lord Justice Glennie on 18 March 2022 and 25 March 2022 respectively. The Stay Order (irrespective if it was justified or otherwise) would not have an impact on the Freezing Order.

22. On 15 April 2022, I note that the Second Defendant sought an order revoking the Freezing Order against the Second Defendant. It was wrong to suggest that pending a final outcome from the JJC Tribunal would result in any freezing orders being revoked. The language of RDC 25.66 makes it abundantly clear that the effect of the freezing order would continue despite a stay that may have been imposed. This position is also echoed in Article 5 of the Dubai Decree, the effect of Article 5 would not have resulted in any injunction being set aside under RDC 25.66.

Conclusion

23. For the reasons set out above, the Stay Order is set aside, and the JJC Stay Applications are dismissed.

24. The Stay Order shall have no effect on the Freezing Order issued by Lord Justice Glennie made respectively on 18 March 2022 and 25 March 2022.

25. In accordance with the draft Consent Order submitted by the Parties. I grant the Claimant, First Defendant and Second Defendant extension of time from 2 September to 10 calendar days to provide submissions pertaining to Costs.


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