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CFI 037/2017 Ilyas Gaffar Saboowala v (1) Soman Kuniyat Kunjunni Nair (2) Mini Soman Thoruvil Veluthedath (3) RAG Foodstuff Trading LLC

CFI 037/2017 Ilyas Gaffar Saboowala v (1) Soman Kuniyat Kunjunni Nair (2) Mini Soman Thoruvil Veluthedath (3) RAG Foodstuff Trading LLC

April 17, 2019

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Claim No. CFI 037-2017

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

ILYAS GAFFAR SABOOWALA

Claimant/Applicant

and

(1) SOMAN KUNIYATH KUNJUNNI NAIR

(2) MINI SOMAN THORUVIL VLUTHEDATH

(3) RAG FOODSTUFF TRADING LLC 

Defendants/Respondents


ORDER OF H.E. JUSTICE OMAR AL MUHAIRI


UPON the Claimant’s Application No. CFI-037-2017/6 dated 16 January 2019 (the “Application”) seeking to Re-Amend the Particulars of Claim pursuant to the Rule 18.2(2) of the Rules of the DIFC Courts

AND UPON reading the documents submitted in the Court file

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a Hearing on 27 March 2019

IT IS HEREBY ORDERED THAT:

1.The Claimant’s Application to Re-Amend the Particulars of Claim is dismissed in part and allowed in part.

2. The Claimant shall file its Re-Amended Particulars of Claim within 14 days from the date of this Order.

3. The Defendants shall file their amended Defence, if any, within 28 days from the filing of the Re-Amended Particulars of Claim.

4. The Claimant shall pay 50% of the costs of this Application on the standard basis, to be agreed by the parties within 30 days of this Order. If no agreement is made, the costs shall be assessed by the Registrar.

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of Issue: 17 April 2019

At: 11am

 

SCHEDULE OF REASONS

Procedural Background

1.This is an Application by the Claimant to Re-Amend the Particulars of Claim, filed on 16 January 2019 (the “Application”). The Claimant is seeking to make significant changes to the already Amended Particulars of Change, against the Defendant’s objections, as detailed in the Draft Re-Amended Particulars of Claim.

2. As brief background to the case, the Claimant filed the claim with the Original Particulars of Claim (the “Original PoCs”) on 17 August 2017, seeking specific performance of the Sale and Purchase Agreement (the “SPA”) entered into between the Claimant and the First and Second Defendant for sale of the Third Defendant company to the Claimant. The Original POCs also sought repayment of certain sums not included in the purchase price, pursuant to the terms of the SPA. However, these sums had yet to be particularised in the Original POCs, with specific sums to be filled in after disclosure.

3. The Defendants duly filed their Defence and Counterclaim on 21 September 2017 to which the Claimant replied with Reply and Defence to Counterclaim on 1 October 2017. The Defendants further replied on 15 October 2017.

4. The Claimant filed an ex parte Application for Interim Relief on 17 August 2017, which was followed by the granting of an injunction issued by Justice Sir Richard Field on 21 August 2017 prohibiting the Defendants from causing any liability on the part of the Third Defendant company save in the ordinary and proper course of business. That injunction remained in effect, however further interim relief was denied by the Order of Deputy Chief Justice Sir David Steel issued on 9 October 2017.

5. It was at this point in the proceedings that the Claimant filed its first Application to Amend the Particulars of Claim (the “Amendment Application”) on 21 December 2017. The Amendment Application was ultimately denied as to the contested changes suggested by the Claimant, while all other changes consented to by the parties were allowed. The contested portion of the proposed amendments comprised of the deletion of paragraph 61 in the Original POCs and the addition of paragraphs 60A-61A.

6. The contested portions of the proposed amendments were addressed in detail by the Order of Deputy Chief Justice Sir David Steel dated 15 February 2018 (the “Amendment Order”). The DCJ declined to allow the contested amendments, making note that there was no documentary evidence or witness evidence illustrating the terms on which the alleged payments claimed for reimbursement by the Claimant were made. Furthermore, it did not appear and was not pled that those payments were made under the terms of the SPA and thus a jurisdiction issue arose.

7. The Deputy Chief Justice further noted that “the difficulty facing the Claimant (and indeed the defendants) is that the pleading as a whole is fairly incoherent. It is tempting to require the whole document to be reviewed and reformulated. Certainly, the claimants should review the pleading in the light of the difficulties and inconsistencies outlined above. But as regards the application to amend I will confine myself to an order that application be refused as regards the revisions to paragraphs 60 and 61 of the pleaded case. This is without prejudice to a further application. Any amended formulation must be particularised and be supported by appropriate evidentiary material.”

8. The other amendments proposed by the Claimant at this time were allowed and thus the Claimant filed its revised Amended Particulars of Claim (hereafter the “Amended POCs”) on 1 March 2018. The Amended POCs were allowed via the Order of Deputy Chief Justice Sir David Steel dated 13 March 2018.

9. The parties then allegedly participated in settlement negotiations for several months. Following the breakdown of these discussions, the Claimant sought to re-amend the Amended POCs. The Claimant contends that he sought the Defendants’ agreement on proposed changes starting from 14 October 2018. Once it became clear that the Defendants would not agree to the amendments, on 6 January 2019, the Claimant filed this Application in short order, on 16 January 2019.

The Parties’ Arguments

10. The Claimant argues that in making this second Application to Re-Amend the Particulars of Claim, he is following the suggested actions outlined by DCJ Steel in his Amendment Order. In reviewing and updating the Amended POCs, the Claimant has made the following adjustments:

a. Crediting the claimed amount in light of the Claimant’s receipt of AED 3 million paid by the Defendants to the Public Prosecutor’s office;

b. Reflecting that the Claimant no longer wishes to pursue his claim for specific performance in respect of transfer of the shares of the Third Defendant company;

c. Various adjustments to ensure that the Draft Re-Amended POCs are clear and unambiguous, following the suggestions of DCJ Steel as outlined in Amendment Order;

d. Clarifying the relief sought for the Defendants’ lack of cooperation in breach of clause 2.4 of the SPA;

e. Identifying the manner in which the indemnity provision at second-numbered clause 5 of the SPA is being relied upon; and

f. Fully particularising the basis upon which the Claimant contends that he advanced approximately AED 6.8 million pursuant to the SPA and the basis upon which the Claimant is entitled to repayment of such sums pursuant to clauses 3(xvi) and 5 of the SPA.

11. The Claimant has included extensive witness and documentary evidence to support his Application to Re-Amend the POCs. He argues that this evidence clearly shows the basis upon which approximately AED 6.8 million was expended by the Claimant and/or on his behalf.

12. The Claimant highlights that, as to the timing of this Application, the Defendants have yet to respond to the Amended POCs and thus, further amendment of this nature would not prejudice the Defendants. The Claimant contends that the Defendants’ opposition to the Claimant’s current proposed amendments is without justifiable grounds.

13. The Claimant argues that, as per DIFC law, general amendments ought to be allowed in cases where they are properly pleaded and have a real prospect of success. Additionally, any prejudice to the other parties caused by the amendments can be compensated for in costs. Furthermore, in assessing an application to amend, the judge must have regard to the public interest of efficient administration of justice. Specifically, as to a “real prospect of success,” this standard only requires that the amendment has a “realistic” rather than “fanciful” prospect of success, a fanciful claim being one entirely without substance. Furthermore, the Court is not required to take everything attested to in a witness statement at face value without analysis. The Court should also not conduct a mini-trial of the issues without disclosure and oral evidence.

14. As according to the legal standard set out above, the Claimant argues that he has met all requirements to be allowed to further amend his Amended POCs. The Draft Re-Amended POCs are properly pleaded in accordance with RDC Part 17 and the claims set out in the Draft Re-Amended POCs have a real prospect of success. The Claimant contends that Deputy Chief Justice Sir David Steel has already accepted that the Claimant’s claims as set out in the Original POCs were at least arguable. Deputy Chief Justice Sir David Steel also accepted that the Claimant had a real prospect of success on the prior amendments allowed to be made, resulting in the Amended POCs. The Defendants also do not convincingly contend that the Claimant has no real prospect of success on the amendments as proposed in this Application.

15. As to the most contested portion of amendments, the claim for repayment of the AED 6.8 million, the Claimant argues that this claim too has a real prospect of success, supported by the terms of the SPA, evidence, and legal analysis. This claim is clearly in good law and is supported by sufficient and appropriate evidentiary material, including the Witness Statement of Sajid Saboowala dated 15 January 2019 and extensive supporting documents. The Claimant contends that his case is “supported by witness evidence endorsed by a statement of truth from a third party underpinned by corroborating contemporaneous documents.” All this amounts to a clear showing that the Claimant has a “realistic” rather than “fanciful” prospect of succeeding on this aspect of the claim.

16. Efficient case management would suggest that, should the DIFC Courts accept jurisdiction over the Claimant’s claims for recovery of sums advanced by himself personally, further payments made on the Claimant’s behalf by third parties should also be included. Failure to allow this would result in multiple proceedings and the possibility of inconsistent findings.

17. This Application is not an abuse of power, as the Defendants suggest. This argument is wholly without legal grounds. There is no prohibition against substantially amending a pleading, provided any prejudice felt by the opposing party be compensated by costs. There is no requirement for a change in circumstances to trigger the current Application. However, in any event, the reasoning of the Deputy Chief Justice Sir David Steel included in his Amendment Order would certainly qualify as changed circumstances.

18. There is no reason to object to the Application on costs alone, as these can be compensated in an appropriate manner. Finally, this Application is not made at a late stage in the proceedings, seeing that the Defendants have yet to respond to the Amended POCs, disclosure has not commenced, and no trial date has been set. Any delay caused by this Application will be minimal, and thus the public interest in efficient administration of justice will not be harmed if the Application is allowed.

19. The Defendants argue that the proposed amendments are inappropriate for a number of reasons:

a. The Claimant is seeking to significantly broaden the ambit of his claim to include matters which patently do not arise from the SPA and thus fall outside of the jurisdiction of the DIFC Courts;

b. The Claimant is seeking to recharacterise sums that he previously stated he “invested” in the company as sums he was “obliged” to invest in the company in order to make a claim for reimbursement pursuant to clause 3(xvi) of the SPA;

c. The Claimant seeks to advance a number of alternative arguments to receive reimbursement of the disputed sums. However, claims falling outside of the scope of the SPA are not within the jurisdiction of the DIFC Courts; and

d. The Claimant seeks costs of a mediation that did not take place.

20. As such, the Defendants oppose this Application for two main reasons. First, the claims and relief sought within the Draft Re-Amended POCs are not claims falling within the SPA and therefore they fall outside of the jurisdiction of the DIFC Courts. Second, the proposed amendments have no real prospect of success.

21. The Defendant argues that wherever the Claimant cannot demonstrate that the amendments fall within the ambit of clause 8 of the SPA, then those amendments have no prospect of success, being outside of the jurisdiction of the DIFC Courts. It is important to note that the Claimant has failed to plead his reasoning for why the various claims fall within the jurisdiction of the DIFC Courts. Clause 8 of the SPA, the Defendants submit, is carefully worded to ensure that only those disputes relating to the SPA fall within the jurisdiction of the DIFC Courts.

22. In furtherance and addition to the Defendants’ jurisdiction arguments, the Defendants point to specific instances where they argue that the Claimant’s amendments have no real prospect of success, specifically as to the claims for Quistclose Trust, unjust enrichment, mediation costs, consequential losses, and the revised claim under representations and warranties.

Discussion

23. It is imperative to keep in mind the standard of review required in assessing an Application to Amend the Particulars of Claim. RDC 18.2(2) states in relevant part:

“18.2

If his statement of case has been served, a party may amend it only:

  • with the written consent of all the other parties; or
  • with the permission of the Court.

. . .

18.12

Questions of amendment, and consequential amendment, should wherever possible be dealt with by consent. A party should consent to a proposed amendment unless he has substantial grounds for objecting to it.”

24. While the Court generally has wide discretion to permit an amendment upon a party’s application, DIFC Courts’ precedent prescribes that such amendments will generally be allowed only in instances where the proposed amendments have been properly pleaded and have a real prospect of success. The Court may consider such other factors as the progress of proceedings and any potential prejudice to respondents. Further consideration should be given to the Overriding Objectiveof the DIFC Courts set out in RDC 1.6, especially efforts to deal with each case expeditiously and justly.

25. In spite of the relative complexity of the issues and arguments included in this case, the task at hand is simply to assess whether the Claimant’s proposed amendments may be permitted pursuant to the relevant standard and further, whether any other consideration should prevent the Claimant from moving forward with the amendments.

26. The Claimant makes great emphasis of the Amendment Order, as cited above. While this language is certainly relevant to my assessment, it is in no way binding that any further application to amend or re-amend should be granted. Instead, the analysis remains based upon the DIFC precedent and standards.

27. It is prudent to begin with the question of whether the Claimant has a real prospect of success on his claims, given the amendments proposed. The standard requires just a realistic prospect of success, rather than a fanciful one. Upon review of the Draft Re-Amended POCs as suggested by the Claimant, I find that most of the proposed amendments fall squarely within the standard of a real prospect of success. The Claimant’s contentions about the meaning and requirements of the SPA as regards his alleged payments or investments in the Third Defendant are firmly plausible given the Claimant’s narrative of facts, legal arguments and submitted evidence. These claims are largely made based upon the specific provisions of the SPA and while the Defendants may not agree with the Claimant’s interpretation of the SPA, these claims are not fanciful. Further arguments are based in principles of DIFC contract law that may apply to the SPA. These claims should benefit from full argument at a trial.

28. However, there are a few proposed amendments that cannot be accepted as they do not fall within the category of a real prospect of success. These are the amendments that are not based upon the provisions of the SPA or DIFC contract law and instead are based upon other legal theories. I agree here with the Defendants that these claims fall outside of the jurisdiction of the DIFC Courts in circumstances where the parties have opted-in to the DIFC Courts’ jurisdiction in the SPA. Furthermore, the Claimant has not put forward any legal argument as to why the DIFC Courts do have jurisdiction over these claims. While he has argued that the DIFC Courts should maintain jurisdiction over certain claims in order to prevent multiple proceedings or potentially conflicting decisions, the DIFC Courts is not at liberty to assume jurisdiction over otherwise impermissible claims just to avoid these potential complications.

29. Thus, I must reject the changes proposed at Paragraphs 90-92 of the Draft Re-Amended POCs having to do with the Quistclose Claim and Unjust Enrichment. These claims fall outside of the jurisdiction of the DIFC Courts and in any event, are sparsely and incompletely pleaded. The requested Declarations contained at the end of the Draft Re-Amended POCs should be duly adjusted to reflect these rejected amendments.

30. For the sake of clarity moving forward in this decision, the rejected amendments contained in Paragraphs 90-92 of the Draft Re-Amended POCs shall be referred to as the “Rejected Amendments” while all other proposed amendments shall be referred to as the “Accepted Amendments.”

31. As to whether the Accepted Amendments are properly pleaded, I find that the Claimant has supported his amendments with sufficient witness statements and documentary evidence. This was an area that Deputy Chief Justice Sir David Steel found was lacking in the prior Amendment Application, however the Claimant has remedied this inadequacy for the current Application. This is not to say that I have determined that the Claimant has proven his case with the evidence provided, as I will not be performing a mini-trial in this decision. However, I find that the Claimant’s theory of the case is plausible based on the evidence provided and the Claimant should have a chance to properly argue his case based upon that evidence.

32. Furthermore, the Accepted Amendments are properly pleaded in the Draft Re-Amended Particulars of Claim. While I acknowledge that the Amended POCs have been significantly redrafted, the resulting pleading is adequate and “properly pleaded” for the purposes of this Application. The Claimant’s theory of the case and alleged factual background has been clarified and is consistent. The Claimant has endeavored to remedy the pleading based upon recommendations from DCJ Steel, and has been successful in at least creating a properly pleaded narrative and legal argument. The Draft Re-Amended POCs are sufficiently robust to allow the Defendants to adequately respond to the claims against them.

33. The Rejected Amendments may be supported with evidence; however, I make no finding on this as the Claimant has not properly pleaded them. Had the Claimant included some plausible theory of why the Rejected Amendments would fall within the jurisdiction of the DIFC Courts, this may be a different analysis. As it stands, the Rejected Amendments are not properly pleaded and have no real prospect of success as pleaded.

34. As to the other factors which the Court may appropriately consider when assessing an application for amendment, I find that the Accepted Amendments should still be allowed. While there has been significant time passed since the claim was originally filed, the claim has not progressed to a late stage for numerous reasons. Therefore, seeing as the Defendants have yet to respond to the Amended POCs, there is little delay or prejudice in having the Defendants respond to the Re-Amended POCs instead.

35. While this is the second amendment application presented by the Claimant, this duplicative filing can be adequately addressed by awarding the Defendants their costs as to the Application. By awarding the Defendants their costs and allowing adequate time to respond to the Re-Amended POCs, there can be no claimed prejudice to the Defendants. While allowing the Re-Amended POCs will cause some minor delay in the proceedings, this minor delay is outweighed by the need for the Claimant to have a full opportunity to plead his case. Contrary to the Defendants arguments, allowing the Accepted Amendments comports with the overriding objectives of expeditious case management and attention to justice by allowing the Claimant to have his full claims heard without prejudicing the Defendants. Therefore, I find there to be no other reason to reject the Accepted Amendments.

36. The Defendants argue that numerous of the Claimant’s claims fall outside the gambit of clause 8 of the SPA dealing with jurisdiction of the DIFC Courts. However, the claims included in the Accepted Amendments are primarily based upon the provisions of the SPA or are otherwise pleaded in contract law. It is for the Claimant to first prove his legal theory at trial and then for the Defendants to provide a defence showing that, in fact, these claims fall outside of the jurisdiction envisioned by the SPA. Thus, the Defendants are free to continue this argument. However, this argument does not serve to show that the Accepted Amendments have no real prospect of success as they are based upon the provisions of the SPA.

37. The Defendants further argue that there are certain fatal flaws within the Claimant’s arguments surrounding clause 3(xvi) of the SPA. The Defendants argue that the Claimant has stretched the bounds of contractual interpretation in arguing that he was obliged to invest personal monies in the Third Defendant Company. The Defendant also argues that the Claimant’s theory of the case amounts to double recovery if he is successful. Furthermore, the Defendants argue that the Claimant has mischaracterised a warranty as a guarantee. While these arguments are not without any merit, I find them more appropriate for trial. It is not clear that the Claimant’s arguments have no prospect of success, as the Defendants argue. Instead, it seems that the parties have conflicting theories of the case, disputes that should rightly be assessed at trial after the benefit of full pleadings and arguments.

38. The same can be said for the claim of mediation costs. While the Defendants claim no mediation happened, the Claimant contends that he has incurred wasted costs in the attempt to invoke the mediation provisions of the SPA and should be reimbursed for these costs. The Defendants argue that, in any event, this claim for costs is outside the scope of the SPA. However, although the SPA may not specifically address the costs of mediation, such costs could possibly be claimed via the principles of contract law and thus are not fanciful. Whether such costs can be claimed pursuant to the provisions of clause 8 of the SPA is for a judge to determine at trial.

Costs

39. At this juncture, it is appropriate to assign 50% of the costs of this Application to the Claimant. The Claimant shall pay 50% of the costs of the Defendants as to this Application, to be agreed by the parties within 30 days of this Order. If the parties are unable to reach an agreement on costs, they shall be assessed by the Registrar.

Conclusion

40. In sum, the Claimant’s Application to Re-Amend the Particulars of Claim is denied as to the Rejected Amendments and allowed as to the Accepted Amendments, with the Claimant to pay 50% of the Defendants’ costs of the Application.

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