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KBC Aldini Capital Limited v (1) David Baazov (2) Canaccord Genuity Corp (3) Canaccord Genuity (Dubai) Limited [2017] DIFC CFI 002

KBC Aldini Capital Limited v (1) David Baazov (2) Canaccord Genuity Corp (3) Canaccord Genuity (Dubai) Limited [2017] DIFC CFI 002

October 14, 2018

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Claim No: CFI-002-2017

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 JUSTICE SIR JEREMY COOKE

BETWEEN

KBC ALDINI CAPITAL LIMITED

Claimant

and

(1) DAVID BAAZOV

(2) CANACCORD GENUITY CORP

(3) CANACCORD GENUITY (DUBAI) LIMITED

Defendants


Hearing: September 24 2018

Counsel: Bushra Ahmed of KBH Kanuun for the Claimant

Rupert Reed QC instructed by Norton Rose Fullbright LLP for the First Defendant

Judgment: September 24 2018


JUDGMENT


Transcribed from the oral judgment delivered on 24 September 2018, revised and approved by the Judge.

ORDER

UPON the First Defendant’s Application dated 31 May 2018 (the “First Defendant’s Application”)

AND UPON reviewing all documents recorded on the case file

AND UPON hearing Counsel for the Claimant and Counsel for the First Defendant at a hearing on 24 September 2018

IT IS HEREBY ORDERED THAT the First Defendant’s Application is dismissed.

 

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of Issue: 14 October 2018

At: 3pm

 

REASONING

1. This is the First Defendant’s application for a stay of the proceedings commenced against him on the grounds of forum non conveniens. The submission is that Canada is the more appropriate forum for the determination of the matters in dispute between the Claimant and the First Defendant.

2. It is accepted that jurisdiction is established by reason of article 5A(1)(a) of the Judicial Authority Law because the Claimant is a DIFC establishment. I do not find the submission that there are other grounds for jurisdiction which apply very persuasive.  It is right to point out that the Third Defendant is a DIFC establishment as well but there are significant differences between the causes of action which will run against the Third Defendant, or at least the factual background to any such causes of action, because of the latter’s late involvement in the matters which are essentially the subject of the dispute between Claimant and First Defendant.

3. The principles which apply to the notion of forum non conveniens are well known and, subject to various glosses put on them by Ms Ahmed for the Claimant, in essence come down to the Spiliada and the test put forward in that case by Lord Goff, in particular. It is, as is recognised by both parties, a two-stage test.

4. First, the Defendant must show that there is another available forum that is clearly more appropriate than the forum chosen by the Claimant. For that purpose, the Court must consider the connecting factors to the other forum in order to determine whether that may make it the more appropriate forum, including considerations affecting convenience and expense of trial, availability of witnesses, governing law and the places where the parties are located.  Additionally, questions of ease of disclosure may fall for consideration.

5. The second stage of the inquiry is to determine whether justice requires that a stay of the proceedings should be granted and it is recognised that unless it can be shown that injustice will take place or there is a risk of injustice in the forum in question then the interests of justice will require that the action should proceed in the forum found to be more convenient at the first stage of the test.

6. I have listened to submissions which place certain glosses upon the foundational test set out in Spiliada from both the Claimant and the First Defendant. In essence what the First Defendant says is that in the context of a statutory jurisdiction which is on any view “long arm” in as much as the foundation for jurisdiction here is the location of the Claimant being a DIFC establishment, forum non conveniens acts as a filter and is the means of control over what is otherwise to be seen as a “exorbitant” jurisdiction.  I have been referred to the Corinth decision in that regard.

7. The First Defendant is a Canadian businessman who resides in Canada, although he has international business interests and homes elsewhere in the world. The Claimant, by contrast, says that the statutory jurisdiction is quite clear and being based in this case upon the fact the Claimant is a DIFC establishment, effect must be given to it and notions of “exorbitance” in jurisdiction are simply not appropriate in that context.  Therefore, the burden on the defendant is higher than would be the case elsewhere because it is necessary, when relying on the doctrine, to displace a statutory right.  The distinction is drawn between the position in the UK and the position here where the general principle in the United Kingdom is that the defendant’s domicile/residence is the primary requirement for a jurisdiction, whereas here it is that of a Claimant which is relevant.

8. It does not seem to me to be necessary to decide whether or not either of those submissions from either party is correct because the end result here appears to me to be the same however the matter is perceived.

9. The Court must first look at the connecting factors with the two competing jurisdictions and decide if there is a clearly more convenient forum, or more appropriate forum where the litigation can take place in the interests of the parties and the ends of justice.

10. In that context it is necessary to consider the causes of action in order to decide what issues would arise, what documents and what witnesses will be required and what law falls to be applied in the case in question.

11. I should perhaps say something at this stage about the evidence which has been adduced. I say this because a point is taken by the Claimant in relation to a breach of Practice Direction 1 of 2016, in as much as the First Defendant’s supporting evidence is that of a solicitor rather than that of the client, the First Defendant, or anyone involved in the facts that underlie the dispute.

12. What Mr Stoddard fairly says at paragraph 15 is that Mr Baazov, the First Defendant is currently fully engaged in a trial in ongoing and unrelated litigation before the courts in Quebec and it has not been possible to obtain detailed instructions from him in relation to this matter. At that stage it was anticipated that the trial would run until at least October 2018, but as I understand it the position now is that it has now come to an end.

13. It is somewhat unsatisfactory that it has not proved possible to obtain detailed instructions from Mr Baazov. In reality, however, the points made by Mr Stoddard go essentially to the recitation of connecting factors and the weight to be attached to them.  The connecting factors are themselves essentially uncontroversial in content, if not in emphasis and in what is omitted.  Whether or not this is technically a breach of Practice Direction 1 seems to me in the end to be of little importance.  I do not see any need to discount from the evidentiary weight to be given but it is significant that he can only say what he does say as a lawyer and there is no more than that  before the Court, whereas more might have been said in relation to the substance of the dispute and the various matters which were raised before the courts on instructions by Mr Reed.

14. So far as arguments are concerned, which is what the witness statements tend to do, Mr Reed needed no assistance to make his points by reference to the well-known test.

15. The causes of action are put in different ways by the Claimant but in essence the point taken is very simple. It comes down to the first and second defendants’ failure to check that a Mr Chegodaev or a Mr Akkerman, whose names appear in Mr Stoddard’s statement and in the defences of the Second and Third Defendants, had authority to commit the Claimant company to an equity commitment letter by which the Claimant purportedly agreed to take up $800 million worth of shares as part of a bid organised by the First Defendant to acquire 100 per cent of the shares of a publicly quoted Canadian company, Amaya Inc.  I understand from the submissions made in evidence that Amaya Inc is the largest international online gaming company in the world.

16. The case is put variously at paragraphs 59 through to 77 of the amended particulars of claim and is described by Mr Reed as adopting a “scattergun” approach. Ms Ahmed says that this is unsurprising in the context of ignorance on the part of the Claimant as to exactly what was going on in the defendant’s camp, with the First Defendant’s or the Second Defendant’s officers and amongst the advisors concerned and it is to be expected that disclosure in due course will lead to greater clarity.

17. It is worth, perhaps, referring to paragraph 103 of the amended particulars of claim where the Claimant sets out the relief sought against the first and second defendants together while separate relief is sought against the Third Defendant.

18. First, damages are sought for unlawful interference with a contract under article 34 of the DIFC Law of Obligations, then damages for inducing or procuring a breach of contract under article 32, damages for passing off under articles 38 and 40, damages for unlawful conspiracy pursuant to article 36 and damages for negligence under articles 17, 18, 21 and 22. Additional claims are made for breach of statutory duty, negligent statement at common law, defamation and injurious falsehood , the latter two or three being matters that fall outside the DIFC Law of Obligations as pleaded.

19. When reference is then made to the body of the pleading one sees that the breaches of statutory duty alleged against the first and second defendants amount essentially to breaches of US and Canadian statutes whereas that in relation to the Third Defendant relates to breaches of DIFC statute law.

20. The question arises as to the applicable law so far as the torts are concerned. In paragraph 18 the Claimant pleads that the law applicable to the present dispute is the law of the DIFC and goes on to say that, without prejudice to that, the existence and scope of the defendants’ duties of care pursuant to their regulatory obligations in the United States and Canada are matters governed respectively by the law of the United States and Canada.  That point is reinforced by the terms of paragraphs 59 through to 61 of the amended particulars of claim to which reference should be made.

21. As matters have proceeded, it appears that what is really being said is that there is a duty of care as a matter of the law of DIFC, which is informed by the duties owed by the first and second defendants under statutory obligations in the USA and Canada.

22. The criticism of the scattergun approach that is made by Mr Reed is essentially, I think, based on paragraph 65 where there is an allegation of wrongful intention of misconduct, alternatively reckless misconduct, or alternatively negligent misconduct in naming the Claimant as a party that has committed itself to the equity commitment letter.

23. What is plain, and Mr Reed laid some stress on it in the context of the claim as a whole and in relation to any alleged damage, is that the misnaming of the Claimant in the bid documents as a party to the equity commitment letter was corrected within a matter of nine days, a point which is pleaded by the Claimant at paragraph 51 of the amended particulars of claim. To that extent the Claimant says that to all intents and purposes the wrongdoing has been admitted.

24. The question still arises, however, as to the existence, nature and extent of any duty of care that might be owed and that undoubtedly will prove a battleground in the determination of the dispute between the parties.

25. The Claimant goes on to allege loss and damage by reason of being so wrongly named and, in particular, the loss of business in respect of two specified projects. It also alleges loss of other new business because of the link or association drawn by entities in the Middle East with Amaya, which, as I have indicated, is a large international player in the gaming and gambling sector, a matter which is antithetical to Islamic businessmen and the principles of business under which they operate.  It is pleaded more generally that the Claimant’s good name had been sullied and its reputation affected in consequence.

26. The case for the First Defendant, as put by him for the purposes of this application, is however summarised in Mr Reed’s skeleton where he says that at the heart of the claims are allegations of breaches of various statutory duties said to arise by reference to Canadian and US financial regulatory law, and that whilst the DIFC Court can receive evidence or submissions on issues of Canadian and US regulatory law, there comes a point at which both the number and difficulty involved in such issues indicate they would be better determined by a Canadian court with relevant expertise and experience. It is said that all the relevant witnesses are based in Canada and the USA and that the Claimant’s proposed witnesses have no relevant evidence to give.  Furthermore, although less stress is placed on this, the documentation relating to the bid by the First Defendant to acquire the shares in Amaya involved substantial teams of lawyers and investment professionals in Canada and the United States, and there is therefore a substantial volume of hard-copy and soft-copy documents in Canada and the US.

27. Further, it is said that, in reality, the crux of the problems arise in relation to Mr Chegodaev, who held himself out as someone who had found the investors to finance the First Defendant’s bid to acquire shares in Amaya and appears to have misled both the First Defendant and/or his investment team in Canada and the US by saying that the Claimant would provide its share of the necessary investment and who himself provided the equity commitment letter which purported to be signed on behalf of the Claimant.

28. It is therefore contended that there is obvious sense in the various claims made by the Claimant against the First Defendant being heard together with the First Defendant’s claims against Mr Chegodaev in a court that has jurisdiction as well as the necessary expertise to hear both. It is said there is a significant issue as to whether the DIFC Court would have jurisdiction over any claim made by the First Defendant against Mr Chegodaev.

29. In those circumstances, it would be unfair for the matter to proceed against the First Defendant in the DIFC and the matter should be heard in Canada.

30. So far as the identity and location of the parties are concerned, as I have said, the First Defendant is a Canadian businessman who founded Amaya and was assisted by a team of professional people in that country and the USA in the various listings and de-listings of the company and mergers and takeovers of other companies in which the First Defendant was involved. He had a bid team, which included the Second Defendant, a Canadian investment banking and financial service company based on Toronto, the Canadian law firm Goodmans, a leading US law firm Greenberg Traurig, from where a Mr Goldstein had moved to become executive vice president and general counsel of, I take it, Amaya; likewise, Mr Grundman, who was an associate of the First Defendant was resident and based in Quebec.  It is said that all the dealings between Mr Chegodaev and Mr Grundman were by telephone call or email and that the equity commitment letter was provided to the bid team in Canada by Mr Chegodaev in Canada and was then submitted as part of the filing to the United States regulator.  The Claimant is a company incorporated in the DIFC and the Third Defendant is, likewise, incorporated in the DIFC.

31. It is, I think, tolerably plain that the issues which arise concerning the acts and omissions of the First Defendants which could give rise to liability, as opposed to questions of causation and loss, centre on events in Canada and the United States. However, the issues relating to causation and actual loss of damage turn on matters which arise in Dubai and elsewhere in the Middle East.

32. The witnesses, therefore, from the First Defendant’s side of the fence are essentially in Canada and the United States and it would no doubt be inconvenient to them to have to come to Dubai should their evidence be required as part of the defence if the proceedings continue against the First Defendant here. Mr Stoddard, in paragraph 15 of his second witness statement, sets out in some detail all the individuals who might be so involved, all of whom are doubtless busy professional people with many commitments.

33. Although the Third Defendant’s witnesses are in the Middle East, their involvement is limited to events post 23 November at a time when the Claimant was seeking to dissociate itself from the bid and at a time when the defendants entered into conversation with the Claimant to ascertain the true position as to the signature of the equity commitment letter.

34. But the fact remains that the witnesses on the Claimant’s side of the fence in relation to damage to its reputation and loss of business will be resident in Dubai and the Middle East. Whilst, therefore, it might be thought that the preponderance of witnesses are likely to be found in Canada and the United States, it is hard to see that all of those listed by Mr Stoddard will be necessary for the purpose of giving evidence as to what checks were made of Mr Chegodaev and Mr Akkerman and what steps were taken to investigate their authority to act on behalf of the Claimant and to provide the equity commitment letter purportedly signed by the Claimant.  I do not, therefore, regard the question of the location of witnesses as being decisive in this matter.

35. Again, when one looks at the question of location of documents, there is a mixture. For much the same reasons, the preponderance in relation to the bid and the offer and the equity commitment letter are likely to be in the United States and Canada, but since much of that would be electronic, it is hardly a strong factor in this day and age.  Moreover, as Mr Reed made plain in his submissions, when it comes to disclosure, disclosure will be sought of the Claimant’s own position and whether or not it did have any relationship with Mr Chegodaev or any connection with the bid and transactions in question.  Whilst it is said by the Claimant that it was a total stranger to such matters, that does not appear, from what Mr Reed says, to be accepted by the First Defendant.

36. I turn then to the question of governing law where issues arise. Primarily there is an argument over the applicable law and the question as to the claims in tort.  Under article 8.2(d), so far as the DIFC conflict of laws is concerned, it is likely that the proper law will be the law most closely connected with the facts under article 8.2(d).  Mr Reed says that must be the law of Canada, the place where the tort was committed, and then goes on from there to say that the location of the tort is the natural and appropriate forum.  In so submitting, he relies on a passage in Dicey at paragraph 11.2.17 and the decision in The Albaforth.  Various different torts have been pleaded, some perhaps a little optimistically, but it is the case in negligence, which now seems to be clarified in the manner that I have indicated, as being a case based on a common law duty of case informed by breaches of statutory duties under US and Canadian law, rather than a claim for breach of freestanding duties owed to the Claimant under the law of Canada or the United States.  Whichever way the matter is approached, however, evidence or submissions from foreign lawyers would be required for a trial in the DIFC and that, says Mr Reed, is a much less better option than the matter being dealt with in a court in Canada, where the judges will have familiarity with the complex law surrounding securities and the SEC.  The First Defendant makes much of this in paragraph 10 of Mr Reed’s skeleton.

37. Whilst I see that a Canadian court might be better equipped to deal with such matters, I certainly do not think that this court would have any difficulty in resolving such issues, with the parties able to make submissions through no doubt extremely capable foreign lawyers, with judges here who are not unfamiliar with grappling with problems of foreign law of one kind or another.

38. The bottom line, or the key question in the end, to my mind, which overrides and outweighs the other matters which are not heavily weighted one way or the other is the fact to which both sides refer in argument, namely the possibility or likelihood of multiple proceedings. The position at present is straightforward enough. Subject to any application for strikeout or reverse summary judgment in this jurisdiction, the case will go on against the second and Third Defendants in the DIFC.  Each has submitted to the jurisdiction.  The case has reached the stage of the Claimant filing a reply and it is hard to see that there is any real prospect of an application for strikeout of the whole case or reverse summary judgment in such circumstances.  The court must proceed on the basis that the matter will go on against the second and Third Defendants in this jurisdiction.  The case against the second defendant is not that different in nature from that being pursued against the First Defendant and overlaps with it so far as questions of fact are concerned, whilst it is clear that the case against the Third Defendant, because of its later involvement, is much more limited and somewhat discrete.

39. What it comes to, however, is this, and Mr Reed dealt with it frankly, in this context. He said that a stay against the First Defendant should be ordered and that this might lead to the Claimant agreeing to abandon the pursuit of the second and Third Defendants in this jurisdiction and to pursue them in Canada.

40. There is no reason why that is a solution which should commend itself to the Claimant and, on the current state of affairs, that appears to me the wrong way to look at the matter. If the Claimants wish to pursue the second and Third Defendants, as they undoubtedly do, and have already reached the point in the proceedings to which I have referred, they are entitled to do that and that will continue to be the case.  In those circumstances, it makes sense for the claim against the First Defendant to be heard in this jurisdiction at the same time as the claim made against the second defendant.

41. What Mr Reed says, however, in the context of the question of multiplicity of proceedings is that the First Defendant intends to commence proceedings against Mr Chegodaev and that those claims are likely to be much more significant in terms of their true quantum than the claim which is made by the Claimant in this jurisdiction. There is a significant issue, he says, as to whether the DIFC Court has the necessary jurisdiction to hear the First Defendant’s claims against Chegodaev and in that context refers to the problem of the absence of an express “necessary and proper party” jurisdiction.  Reference is made to Nest Investments but also to a more recent decision in Orion, which say contradictory things on the subject, the latter of which is going to the Court of Appeal in relation to what is essentially an unreasoned judgment on the point.  The decision of the Court of Appeal is not expected until sometime next year.

42. The reality, however, is this. The First Defendant has not yet commenced proceedings against Mr Chegodaev anywhere.  That is explained by Mr Reed as being the result of his involvement in other litigation and an investigation process which has been taking place since July to ascertain where he is to be found, what his assets are and where they are located, no doubt with a view to determining whether or not it makes any sense to pursue him.  There is before the court no evidence that Mr Chegodaev is in fact susceptible to Canadian court jurisdiction and he may well take jurisdiction issues if an attempt is made to do so.  There is a possibility – and I put it no higher than that – of joinder of Mr Chegodaev into proceedings in this country but, either way, the position is shrouded with a degree of uncertainty.  It is surprising, given the attempts to serve the First Defendant with these proceedings long ago and the progress that had been made in the litigation against the second and Third Defendants in this jurisdiction, that no steps had been taken by the First Defendant any earlier to pursue Mr Chegodaev.  The First Defendant has not, on the material before me, yet given instructions to commence such proceedings.  The most that I was told was that there was a declared intention to do so.  There is, however, no commitment on his part.

43. In those circumstances, it is clear to me that it cannot be shown that Canada is clearly the more appropriate forum on any of the grounds or for any of the reasons put forward by Mr Reed, but above all because the proceedings in this jurisdiction will go ahead against the second and Third Defendant and it is just and in the interests of the parties and the ends of justice that the matter should be dealt with here in the round against the First Defendant as well as the Second Defendant.

44. For those reasons, I therefore dismiss the First Defendant’s application.

 

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of Issue: 14 October 2018

At: 3pm

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