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CA 010/2015 Deyaar Development P.J.S.C. v (1) Taaleem P.J.S.C. (2) National Bonds Corporation P.J.S.C.

CA 010/2015 Deyaar Development P.J.S.C. v (1) Taaleem P.J.S.C. (2) National Bonds Corporation P.J.S.C.

May 3, 2017

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Claim No. CA-010-2015

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF APPEAL

BETWEEN

DEYAAR DEVELOPMENT P.J.S.C. 

Second Defendant / Appellant

and

(1) TAALEEM P.J.S.C.

Claimant / First Respondent

(2) NATIONAL BONDS CORPORATION P.J.S.C.

First Defendant / Second Respondent


ORDER WITH REASONS OF COURT OF APPEAL


UPON reviewing the Appellant’s application by way of letter dated 28 September 2016 for the Court to exercise its discretion under Rule 44.179 of the Rules of the DIFC Courts (“RDC”) and vary the judgment of the Court of Appeal dated 18 August 2016 so as to order the payment of the First Respondent’s costs by the Second Respondent

AND UPON reviewing the correspondence received from the Second Respondent dated 6 October 2016

AND UPON reviewing the correspondence received from the First Respondent dated 6 December 2016

AND UPON reviewing the following correspondence received from the Parties in response to the DIFC Courts Registry’s letter dated 28 February 2017:

(a) A letter dated 6 March 2017 from the First Respondent

(b) A letter dated 13 March 2017 from the Second Respondent

(c) A letter dated 14 March 2017 from the Appellant

(d) A letter dated 23 March 2017 from the Second Respondent

(e) A letter dated 2 April 2017 from the Appellant

AND UPON reviewing the relevant material on the case file

IT IS HEREBY ORDERED THAT:

1.The Appellant’s application for permission to reopen the final appeal under RDC 44.179 is dismissed.

2. The Court of Appeal is in the position to review further submissions from the parties on the issue of costs under paragraph 131 of the judgment of the Court of Appeal dated 18 August 2016.

3. Paragraph 131 of the judgment of the Court of Appeal dated 18 August 2016 be varied to reflect as follows:

(a) The Appellant shall pay the Second Respondent’s costs, excluding any settlement costs for any matters that were dealt with or the subject of the settlement agreement between the Appellant and the Second Respondent dated 14 October 2015.

(b) The Second Respondent shall bear its own costs incurred in relation to its cross-appeal against the First Respondent.

(c) The Second Respondent shall bear the First Respondent’s costs incurred after 25 November 2015.

Issued by:

Nassir Al Nasser

Judicial Officer

Date of Issue: 3 May 2017

At: 4pm 

REASONS:

Brief Background

1.The Appellant (“Deyaar”) appealed against the Second Judgment of Justice Sir David Steel dated 23 March 2015 (the “Second Judgment”). The Second Judgment finalised the orders relating to quantum consequent on the liability findings in the First Judgment of Justice Sir David Steel dated 19 February 2014.

2. After a consent order based on an agreement between the First Respondent (“Taaleem”) and Deyaar was issued on 25 November 2015 (“Consent Order between Deyaar and Taaleem”), the only ground of appeal which was left to be determined by the Court of Appeal was whether Deyaar was liable to the Second Respondent (“NBC”) for payment of the outstanding total Murabaha profit charges.

3. On 2 December 2015, NBC made four applications in the event that Deyaar’s appeal was allowed. NBC’s fourth application was an application for permission to appeal the order in the Second Judgment to counterclaim the Murabaha profit from Taaleem (“NBC’s Fourth Application”).

4. On 22 and 23 May 2016, the hearing of the appeal was held. At the hearing, NBC and Taaleem addressed NBC’s Fourth Application.

5. On 18 August 2016, the Court of Appeal issued its judgment (“Appeal Judgment”). Paragraph 131 of the Appeal Judgment states as follows.

“As the Appellant has been unsuccessful in this appeal, it shall pay the First and Second Respondents’ costs of this appeal on the standard basis to be assessed after further submissions on costs.”

6. By way of letter dated 28 September 2016, Deyaar made an application under RDC 44.179 for the Court to exercise its discretion and vary the Appeal Judgment so as to order NBC to pay Taaleem’s costs (the “Application”). Deyaar gave the following reasons:

“1. Taaleem was required to play a role in the Appeal due to the applications to cross-appeal as filed by NBC. Taaleem’s involvement in the Appeal was not in relation to Deyaar’s Appeal.

2. Taaleem was required to attend the Appeal Hearing on 22 and 23 May 2016 (the “Appeal Hearing”) because the Court accepted NBC’s submission that NBC’s applications for permission to cross-appeal should be heard at the Appeal Hearing, notwithstanding that those applications were conditional upon the Appeal succeeding.

3. Taaleem’s counsel was unreasonably required to attend both days of the Appeal Hearing, despite both Deyaar’s and Taaleem’s counsel’s efforts to have Taaleem heard at the very beginning of the first day. That requirement was also at the behest of NBC.

4. The Court did not invite the parties to make submissions as to costs at the Appeal Hearing.”

7. By way of letter dated 6 October 2016, NBC objected to Deyaar’s Application. NBC argued that Deyaar failed to comply with RDC 44.183 which states that any application under RDC 44.179 must be made by way of application notice and supported by written evidence verified by a statement of truth. NBC gave the following reasons.

(a) It was reasonable and appropriate to involve Taaleem. NBC was “fully entitled to make its applications against Taaleem just to protect its position.”

(b) The parties had exchanged timetables and the parties had been in agreement that Taaleem should respond to the NBC’s applications after Deyaar’s appeal had been heard.

(c) While Deyaar was not invited to make submissions on costs at the appeal hearing, it made submissions on costs in its skeleton argument. At paragraph 52 of Deyaar’s supplementary skeleton argument of 24 April 2016, Deyaar submitted that NBC should in any event be liable for the costs of its application against the Taaleem.

(d) Deyaar’s Application did not satisfy the cumulative criteria in RDC 44.179 that (1) it was necessary to avoid real injustice, (2) the circumstances are exceptional, and make it appropriate to reopen the appeal; and (3) there is no effective alternative remedy.

(e) Deyaar’s Application is contrary to clause 1.5 of the settlement agreement between Deyaar and NBC dated 14 October 2015 (the “Settlement Agreement”), “pursuant to which [the Appellant] waived all its rights and claims etc. against NBC in respect of the DIFC proceedings, subject to certain limited exceptions, none of which apply.”

8. In a letter dated 6 December 2016, Taaleem stated that it was neutral on Deyaar’s Application and took no position on whether its costs should be borne by Deyaar or NBC.

9. By way of letter dated 28 February 2017, the DIFC Courts Registry posed the following questions to the parties (“Registry’s Letter of 28 February 2017”):

“(1) Whether NBC’s cross-application against Taaleem was unnecessary because Mr Leech QC (representing Deyaar) had accepted at the appeal hearing that Deyaar assumed all of Taaleem’s obligations with regard to financing. With Deyaar having conceded that their liability and Taaleem’s liability are coterminous, there is no ground available to NBC to make any claim against Taaleem for the Murabaha profits.  The transcript of the appeal hearing (Day 1, Page 24) states as follows.

“Chairman: Sorry, Mr Leech, to interrupt you. Just to clarify your position. Would you accept that as between NBC and Taaleem the arrangements did provide for payment of the late charge of 2 per cent per annum after August 2008?

Mr Leech QC: No. No, your honour. The question is what were the liabilities of the transfer. What I do accept is that the liabilities of Taaleem and Deyaar were the same. So the critical question is what were the obligations that were transferred?”

(2)  At the appeal hearing, Deyaar argued that Sharia Standards were incorporated and that recurring Murabaha profits were inconsistent with the Sharia Standards. However, Deyaar’s argument failed due to the concession made by its former leading counsel, Mr Robin Knowles QC. In light of the concession, any discussion on Sharia Standards was rendered academic.

(a)  However, if Deyaar had won its argument, NBC would not have been entitled to claim any Murabaha profits.

(b)  If NBC had won its argument that Sharia Standards were not incorporated and were irrelevant, then NBC would have been able to claim Murabaha profits from Deyaar. Inherent in the nature of the original obligation, NBC would still be claiming the Murabaha profits from Deyaar, and not from Taaleem. It was therefore not necessary for NBC to make its cross-application against Taaleem.

If the two points (1) and (2) above are correct, there seems to be no justification for Deyaar to be liable to pay NBC’s costs for its cross-application against Taaleem and Taaleem’s costs from 25 November 2015 up to the outset of the hearing on 22 May 2016.”

10. In response to the Registry’s Letter of 28 February 2017, Taaleem maintained that it took no position on whether costs should be borne by Deyaar or NBC in its letter dated 6 March 2017.

11. In NBC’s letter dated 13 March 2017, NBC argued that its cross-appeal against Taaleem was necessary for the following reasons:

(a) Deyaar had changed positions throughout the litigation. When NBC’s cross-application was issued, it was by “no means clear that Deyaar would accept that its liabilities to NBC were identical to Taaleem.” Accordingly, it was unclear how Deyaar would argue the appeal prior to the hearing.

(b) NBC had “no confidence that Deyaar would not seek to attack” the Judge’s (i.e Justice David Steel’s) central finding on novation during the appeal hearing as Deyaar had a “track record of making arguments on appeal for which they had not obtained permission”. NBC therefore sought to ensure that Taaleem remained involved.

(c) It was “necessary and reasonable” for Taaleem to attend the hearing and to be represented because the precise scope of the appeal was “not entirely clear” and the Court had acknowledged that Taaleem’s counsel could make a useful contribution in the event the parties strayed from the scope of their permission.

12. With regard to the DIFC Courts Registry’s question on Sharia Standards, NBC disagreed that, if Deyaar had won its argument that claiming Murabaha profit was contrary to Sharia law, then NBC would not have been entitled to claim Murabaha profit from Taaleem. NBC argued that Taaleem had never taken a point on Sharia compliance and did not make the same case as Deyaar on appeal.

13. In Deyaar’s letter dated 14 March 2017, Deyaar did not make any further submissions to the Court on the merits of its Application. Deyaar stated that it was open to the Court to make the proposed order notwithstanding the provisions in the RDC on reopening of final appeals. Deyaar noted that at paragraph 131 of the Court of Appeal’s judgment, the Court had invited “further submissions on costs”.

14. On 23 March 2017, NBC wrote to the DIFC Courts Registry in response to Deyaar’s letter dated 14 March 2017. NBC argued that paragraph 131 of the Appeal Judgment was not an invitation to the parties to produce further submissions. It submitted that “further submissions” could only relate to quantum, not to Deyaar’s liability in principle to pay costs.

15. The Court has considered the correspondence from the parties and elaborates on its analysis below.

 Whether the Application should be considered a reopening of a final appeal

16. Under RDC 44.179, the Court of Appeal will not reopen the final determination of an appeal unless –

(1) it is necessary to do so in order to avoid real injustice;

(2) the circumstances are exceptional and make it appropriate to reopen the appeal; and

(3) there is no alternative effective remedy.

17. The Court emphasises that final appeals should only be reopened in exceptional circumstances. In the Order of Justice Roger Giles dated 13 November 2014 in the case CA-004-2014 Raul Silva v United Investment Bank Limited, Justice Roger Giles stated, at [6] that the “jurisdiction must be exercised with caution, given the importance of the public interest in the finality of litigation.  Generally it will not be exercised unless the applicant can show that by accident and without fault on his part he has not been heard or his appeal has not been fully considered, although there may be other circumstances in which, for example, misapprehension of the facts or the law has fundamentally afflicted the integrity of the judgment in question.”

18. The Court notes that there is a high threshold for the reopening of final appeals and finds that Deyaar has not met the cumulative requirements in RDC 44.179. However, the Court is aware that it did not have the opportunity to hear the parties’ submissions on costs at the appeal hearing. It therefore included the words “after further submissions on costs” to indicate that the Court’s order in paragraph 131 was subject to “further submissions on costs”. On this basis, the Court is in position to hear further submissions from the parties.

19. The Court has considered the correspondence received by the DIFC Courts Registry from the parties dated 28 September 2016 to 2 April 2017 and takes the view that no oral hearing is necessary.

Whether NBC’s cross-appeal against Taaleem was unnecessary

20. The main premise of NBC’s argument was that it brought Taaleem into the picture because there was a possibility that Deyaar would attack the Judge’s finding on novation. NBC argued that Deyaar had a history of making arguments which they did not have permission for and the precise scope of appeal was unclear.

21. NBC is incorrect in its assertion. The precise scope of appeal was very clear to NBC. In paragraph 4 of NBC’s Skeleton Argument for the Appeal dated 16 December 2015, NBC stated as follows.

“Happily, the issues between the parties have been reduced considerably as a result of the limited grant of permission by the Court of Appeal on Grounds 1 and 4 only and the confidential settlement of certain of the issues between NBC and Deyaar (resulting in Deyaar’s subsequent abandonment of all grounds of appeal save for Ground 4) and a Consent Order between Taaleem and Deyaar). Therefore, the only ground of appeal which the Court of Appeal is required to determine is Ground 4 which complains that the Judge’s refusal to consider Deyaar’s defences to NBC’s claim for Murabaha profit was inconsistent with his acceptance of NBC’s “new” argument that there was a “series of separate and direct contracts” under which Deyaar agreed to pay additional profit of 5.5% per annum.” (emphasis added)

22. Additionally, Mr Flynn (Counsel for Taaleem) confirmed that the scope of appeal did not consist of any arguments on novation. Page 11 of the transcript of the appeal hearing states as follows:

“MR FLYNN: …but as I understand it, both Mr Leech has confirmed that he is not attacking the scope or existence of the novation, nor is NBC.”

23. Mr Leech QC (Counsel for Deyaar) also stated the same position at the appeal hearing. Page 5 of the transcript of the appeal hearing states as follows:

“MR LEECH QC: …we don’t challenge any of the declarations; we simply challenge the Murabaha profit and the issue, we say, which the judge really was required to decide at the second hearing is a very simple one, which was namely: what was the Murabaha profit payabale under the Murabaha Agreement…” (emphasis added)

24. It is clear that Deyaar had no intention of contesting the issue of novation. Accordingly, it was not necessary for NBC to make the cross-appeal against Taaleem. NBC was therefore incorrect in arguing that the scope of appeal was unclear, especially since it had clearly stated the scope of appeal in its Skeleton Argument dated 16 December 2015.

Whether NBC would still be claiming Murabaha profits from Deyaar regardless of Deyaar’s argument on Sharia Standards

25. At the appeal hearing, Deyaar argued that NBC could not claim Murabaha profits from Taaleem because Sharia Standards were incorporated, and recurring Murabaha profits were inconsistent with Sharia Standards.

26. In the Registry’s Letter of 28 February 2017, the DIFC Courts Registry raised the issue that, due to the nature of Deyaar’s obligation to NBC, NBC would still be claiming the Murabaha profits from Deyaar. The DIFC Courts Registry reasoned that it was not necessary for NBC to make its cross-application against Taaleem because, if NBC had won its argument that the Sharia Standards were not incorporated and were irrelevant to the appeal, NBC would have been able to claim Murabaha profits from Deyaar. If NBC had lost its argument on Sharia Standards, NBC would not have been entitled to claim any Murabaha profits at all.

27. In NBC’s letter dated 13 March 2017, NBC argued that Taaleem had never taken a point on Sharia compliance and did not make the same case as Deyaar on appeal. NBC’s argument is irrelevant, as the focus of the DIFC Courts Registry’s question was on the original obligation owed by Deyaar to NBC.

28. The Court notes that any discussion on Sharia Standards was academic owing to the concession made by Deyaar’s former leading counsel, Mr Robin Knowles QC. However, in the event that the Court of Appeal had considered the issue of Sharia Standards, it is clear that, regardless of whether Sharia Standards were incorporated, NBC would still be claiming Murabaha profits from Deyaar because of the nature of the original obligation. NBC therefore did not need to launch a cross-appeal against Taaleem.

29. The Court finds that NBC’s cross-appeal against Taaleem was unnecessary. Accordingly, NBC should bear its own costs incurred in relation to its cross-application against Taaleem.

30. The Court also notes that, pursuant to Order 3 of the Consent Order between Deyaar and Taaleem and a confidential settlement agreement dated 4 May 2016, Deyaar had settled Taaleem’s costs of the appeal up to and including the date of the Consent Order (i.e. 25 November 2015).

31. Given that Taaleem’s involvement in the cross-appeal was unnecessarily initiated by NBC, NBC should bear Taaleem’s costs incurred after 25 November 2015.

Clause 1.5 of the Settlement Agreement between NBC and Deyaar

32. NBC argued that Deyaar’s Application to make NBC liable for Taaleem’s costs was contrary to clause 1.5 of the Settlement Agreement, “pursuant to which Deyaar waived all its rights and claims etc. against NBC in respect of the DIFC proceedings, subject to certain limited exceptions, none of which apply.”

33. The Court notes that clause 1.5 in the Settlement Agreement prohibits further claims from being made between Deyaar and NBC. Deyaar’s application for the Court’s review of its costs order is not a further claim against NBC. The Court is aware that Deyaar has stated, in paragraph 52 of its Supplementary Skeleton Argument, that “there was no warrant for NBC to seek to involve Taaleem in the Appeal and it should bear the costs of this application in any event.”

Conclusion

34. Based on the above reasoning, the Court makes the following costs orders:

(a) Deyaar shall pay NBC’s costs, excluding any settlement costs for any matters that were dealt with or the subject of the Settlement Agreement between Deyaar and NBC dated 14 October 2015.

(b) NBC shall bear its own costs incurred in relation to its cross-application against Taaleem.

(c) NBC shall pay Taaleem’s costs incurred after 25 November 2015.