May 19, 2023 court of first instance - Orders
Claim No: CFI 088/2019
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
(1) AL SOOR INVESTMENTS LLC
(2) AL BARAKA INVESTMENTS LLC
(3) SARI INVESTMENTS LLC
Claimants/Applicants
and
(1) JULIUS BAER (MIDDLE EAST) LIMITED
(2) BANK JULIUS BAER & CO LTD
(3) MR EMAD ODEH
(4) MR NICO TSCHUI
Defendants/Respondents
ORDER WITH REASONS OF H.E. DEPUTY CHIEF JUSTICE ALI AL MADHANI
UPON the Claimant’s Application No. CFI-088-2019/1 dated 12 December 2019 seeking an order for a pre-action disclosure (the “PAD Application”)
AND UPON the Claimant’s Application No. CFI-088-2019/7 dated 21 September 2022 seeking to stay the proceedings and to determine the matter in private (the “Stay Application”)
AND UPON hearing counsel for the Claimants and counsel for the Defendants at the hearing for the PAD Application and the Stay Application held before me on 11 October 2022
AND UPON reviewing the relevant submissions in the case file
IT IS HEREBY ORDERED THAT:
1. The Applicants shall file a schedule (the “Schedule”) within 14 days of this order setting out the documents listed at [69] to [72] and [74] to [77] of the first witness statement of Sara Jayne Sheffield (“SS1”) only which it needs by way of pre-action disclosure to determine the issue recorded at [81.a] of SS1. Each document or class of documents should be explained with brief submissions.
2. The Respondents may file brief submissions in response to the Schedule and its contents within 14 days of the Schedule being filed by the Applicants.
3. Any order for pre-action disclosure will be made under Article 34 of the DIFC Court Law and according to the principles set out in the Schedule of Reasons to this order.
4. The parties shall provide submissions on costs within the time they each have to file submissions on pre-action disclosure under [1] and [2] above.
5. The Stay Application is dismissed.
Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 19 May 2023
At: 2pm
SCHEDULE OF REASONS
1. This is an application for pre-action disclosure (the “PAD Application”). The underlying dispute relates to investment services provided to the Applicants. The Applicants say that they intend to bring proceedings against the Respondents or some of them for, amongst other things, providing negligent investment advice, misrepresentations about a fund into which investment was made and/or breach of DIFC Regulatory Law by arranging deals for which the Respondents were not licenced by the DFSA. The pre-action disclosure is sought in support of those intended claims.
Background
2. The Applicants are UAE investment companies. They are part of the same group.
3. The First Respondent (“R1”) is a DIFC establishment. It is licenced by the DFSA to provide advice on and arrange investments in financial products. The Second Respondent (“R2”) is a Swiss bank with headquarters in Zurich. R1 and R2 are part of the same group of companies.
4. The Third Respondent (“R3”) and the Fourth Respondent (“R4”) are individuals. It is common ground that they are former employees of R2. By the Application, the Applicants seek clarification on whether R3 and R4 were employees of R1 and/or R2 at material times.
5. The Applicants say that in around November 2015, they were approached by the Respondents (it is a feature of the Applicants’ case that frequently no distinction is made between each of the Respondents, notwithstanding that two are separate legal persons and the remaining respondents are natural persons; but it should be noted that one of the stated objectives of the PAD Application is to assist the Applicants in identifying the party with whom they engaged) in relation to an opportunity to purchase units (“Fund Units”) in a fund known as the Al Dana Investment Fund (the “Fund”) which was managed by Abu Dhabi Commercial Bank. The Applicants assert that they had a number of meetings between 2015 and 2018 with R3 and then with R3 and R4 about the investments. The meetings took place at the Applicants’ offices in Dubai which I understand to be “onshore” Dubai rather than the DIFC.
6. In late 2015, the First Applicant (“A1”) opened an account with R2 to facilitate the investments which are the subject of the proposed claim and thereafter separate such accounts were opened for the Second Applicant (“A2”) in 2016 and the Third Applicant (“A3”) in 2017 (the “First Investment”).
7. Between 29 November 2015 and 3 April 2016, A3 entered into eight subscription agreements with R2 for the purpose of subscribing for Fund Units. On 12 October 2016, R2 transferred the Fund Units on A3’s instruction to A1’s account. Thereafter, A1 entered into 3 further subscription agreements with R2, between 7 November 2016 and 10 March 2017.
8. It is an important part of the Applicants’ case in these proceedings for pre-action disclosure and in the case that they intimate they will be making in substantive proceedings that at no time were they warned by the Respondents of any risks associated with investment in the Fund, nor were they provided with any advice or analysis of market trends or any advice as to the suitability of those investments.
9. The investments made by the Applicants were in the form of equity swaps. They would contribute various securities which they held in publicly quoted companies in exchange for Fund Units i.e. like-kind shares. Those securities were then pooled with those of other investors in the Fund and profits were to be paid out by way of dividends.
10. The Fund Units, however, were not exchanged one-for-one with like-kind shares or directly purchased by the Applicants. Instead, they were obtained indirectly by a number of methods, including through leveraged cash to be provided by R2 which were securitised against the Fund Units issued in the Applicants’ favour.
11. In total, the Applicants invested almost AED 700 million in like-kind share contributions. The Applicants say that at no point was financial or investment advice provided by the Respondents regarding the complex series of transactions through which Fund Units were purchased. What that meant, the Applicants contend, was that they had no means of knowing what assets had been contributed to the Fund by other investors, nor did they have any oversight of the strategic management of the Fund or any means of knowing how those equities were performing.
12. In May 2017, the Applicants made a further investment, this time by way of a differently structured investment (the “Second Investment”). The Applicants say they did so relying upon the Respondents’ advice. Ultimately, the outcome was that Fund Units would be purchased using leveraged cash. Again, the Applicants submit, at no point was specific financial or investment advice provided by the Respondents in relation to the complex series of transactions through which the Fund Units were purchased.
13. By mid to late 2017, the net asset value of the Fund had dropped significantly. That, in turn, meant that the agreed loan to value ratio (“LTV”) of the loans provided by R2 were in danger of exceeding agreed limits, necessitating the payment of substantial LTV maintenance payments by the Applicants from September 2017 to February 2018 in order to avoid the Applicants’ investment positions being closed out by R2.
14. Despite those payments, the Applicants remained in default. A1 and A2 were sent a margin call letter on 16 February 2018, and the Applicants’ investment positions were ultimately closed out. The Applicants incurred substantial losses, totalling in excess of approximately AED 100 million. It is those losses which are the subject of the Applicants’ potential claim preceded, at this stage, by the PAD Application.
15. The Applicants say that this closing out was carried out in a deliberately confusing and unclear manner. They accept that terms in a General Pledge and Assignment Agreement dated 28 August 2016 permitted unilateral close out in defined circumstances but say that those terms were not adequately brought to their attention or explained.
16. In order to understand how R1 comes into the picture, it is necessary to go back in time to before investment was made into the Fund. In July 2013, A1 opened a custody account with R2 in Switzerland for a personal private banking relationship. R1 was contracted to provide local advisory and arranging services in relation to that account. Then in September 2013, A1 applied to open a custody account with R2’s branch in Singapore. At that time, A1 and R1 entered into a financial services agreement which contained certain “Additional Terms.” It is not alleged by the Applicants that those Additional Terms extended beyond the accounts then in place but the Applicants submit that they reveal that R1 is an agent or intermediary for R2. For example, by the Additional Terms it was agreed that R1 was to be appointed and designated as the Applicants’ “contact with the Bank or any other member of the Julius Baer Group,” the Applicants would “communicate with the Bank primarily through [R1]” and R1 would act “in its capacity as an intermediary between the Bank and the [Applicants].”
17. Returning to where we were, on 5 March 2020, R2 brought proceedings in the Sharjah Courts against Mr Abdalla Juma Majid Al Sari, the controlling person of A1, A2 and A3 at that time, under the terms of a guarantee provided as security for R2’s claims against A1 in connection with the credit facilities. The guarantee required proceedings be brought in the Sharjah court.
18. A1 and A2 brought proceedings in the Abu Dhabi Courts, challenging the validity of the subscription agreements and facility agreements, as well as R2’s right to redeem. On 16 April 2020, the Abu Dhabi Court of Cassation rejected A1’s claim and held that A1 is indebted to R2 in the sum of USD 45,780.27. A2’s claim was rejected on 18 August 2020.
The PAD Application
A preliminary issue: proceedings are already on foot
19. These proceedings for pre-action disclosure pursuant to RDC r. 28.48 were commenced by the Applicants on 12 December 2019. Later on 25 November 2021, the Applicants commenced further proceedings which were until that point in time, it seems uncontroversial, the “anticipated” or “subsequent” proceedings referred to in RDC r. 28.48 which the present proceedings were supposed to precede or prevent in furtherance of any of the grounds set out at RDC r. 28.48(4) subparagraphs (a) to (c).
20. It is important to highlight that all that happened in the further proceedings was that a protective claim form was issued by the Applicants and a standstill agreement was entered into by the parties on 22 March 2022 with a consent order being issued on 23 March 2022, which had the effect of staying any proceedings until after the final resolution of the PAD Application. It seems uncontroversial that it was understood by all parties that the effect of the standstill agreement would be to preserve the parties’ respective positions with respect to the PAD Application as well as the substantive proceedings.
21. The Respondents submit nevertheless that by issuing the “subsequent” proceedings the Applicants have precluded the Court’s power to order pre-action disclosure under RDC r. 28.48. The Respondents’ case is premised principally on the terms of RDC r. 28.48, providing as it does that the Court may “only” order pre-action disclosure where the respondent and the applicant are likely to be party to “subsequent proceedings,” the Court would order production of the sought documents “if proceedings had started” and it is desirable that there be “production before proceedings have started.” (emphasis added)
22. The Respondents also rely on Personal Management Solutions Ltd v Gee 7 Group Wealth Ltd [2015] EWHC 3859 (Ch) and Hart v Royal Borough of Kensington and Chelsea [2022] EWHC 1090 (QB). In the former decision, Morgan J stated at [18] in respect of CPR r. 31.16, the English rule equivalent to RDC r. 28.48, as follows:
“… the question as to whether there are relevant proceedings in existence goes to the jurisdiction of the court to make an order which can only be made pre-action; that is before the relevant proceedings are commenced. On the facts of this case, the court did not have jurisdiction on 2 June 2015 to make an order for disclosure before proceedings under section 33, given that proceedings had already been brought.” (emphasis added)
In Hart, Master Fontaine said at [5] of the case before her: “in my judgment an application cannot be made under CPR 31.16 as proceedings were issued on 11 June 2020, although not served, pursuant to stays made by order of the court by consent, so the application is not made pre-action.” (emphasis added)
23. I agree with the Respondents that the Court’s power to order pre-action disclosure under RDC r. 28.48 has been precluded. In my view, the power in RDC r. 28.48 is clearly designed to support potential, not extant, proceedings or to prevent them and is unavailable where proceedings which were or might have been subsequently issued. Where such proceedings have been commenced, other procedures are available to a party in pursuit of the production of documents.
24. Confronted with this argument, the Applicants proposed other routes outside the regime created by RDC r. 28.48 to obtaining the production sought. One proposal concerned RDC r. 28.56 which provides: “The Court may at any time request a party to produce to the Court and to the other parties any documents that it considers to be relevant and material to the outcome of the case.” The power in this rule is not precluded by and is indeed premised on the existence of the proceedings in support of which production is sought. The Respondents’ response to the proposal was that, under RDC r. 28.56, the production must be relevant to the outcome of the case in which production is sought, not another case. In other words, the power is not available to the Court in these proceedings in respect of the outcome of the further proceedings issued in November 2021.
25. I agree with the Respondents. The reference to “the case” in RDC 28.56 is a reference, in my view, to the case implicitly referred to earlier in the rule to which the producing party and the other parties are party. Part 28 of the RDC is clear in the few places it is concerned with other proceedings. RDC r. 28.56 does not appear to me to be one of those places. Moreover, on my reading of RDC r. 28.56, production ordered under that rule should be relevant and material to the outcome of a case. I think RDC r. 28.56 envisions two stages to a case: the outcome stage and, before that, the stage in which an order for production of documents relevant and material to the outcome can be made. Where a case is confined to the production of documents, as in this case, I do not think it would be correct to characterise an order for production as relevant and material to the case’s outcome as opposed to the case’s outcome itself. For these reasons, I do not think that RDC r. 28.56 is the source of a power by which the Court can order the production sought by the Applicants.
26. Another route to production proposed by the Applicants outside the regime created by RDC r. 28.48 concerned Article 34 of the DIFC Court Law which provides that: “The DIFC Court may, on the application of a party or on the DIFC Court’s own motion, require the attendance of any person as a witness, and the production of any documents.” This provision was originally relied on in support of the Applicants’ argument that, unlike CRP r. 31.16, which is confined by Section 33(2) of the Senior Courts Act 1981 to situations in which a person is “likely to be a party to subsequent proceedings in that court,” (emphasis added) the DIFC Court’s statutory power with respect to disclosure i.e. Article 34 of the DIFC Court Law is considerably wider with the result that, it was submitted, the Court could proceed to entertain the application for pre-action disclosure notwithstanding that the formerly subsequent proceedings were now extant. The Respondents’ response to the connection made between the English and DIFC statutory provisions and procedural rules, with which I agree, was that it demonstrates only that RDC r. 28.48 could have been wider, but it is the rule, not the legislation, which is relevant to an application under the rule.
27. In the Applicants’ reply at the hearing of the application, direct reliance was placed on Article 34. The Applicants submitted that the production sought could be ordered under Article 34. It was emphasised that all that had changed since these proceedings were issued is that a protective claim form has been issued in respect of the formerly subsequent proceedings. All parties recognised it was a protective claim form and there was no intention that particulars be provided before the determination of the pre-action disclosure application. It was said that Article 34 is a very broad power and that if there would have been good grounds for ordering pre-action disclosure and it was in the interests of justice to do so then an order under Article 34 can and should be made.
28. I agree with the Applicants. In my judgment, Article 34 is the source of a freestanding power to order production. The power is, as the Applicants submitted, very broad. Article 34 does not provide a test for production like the various regimes of Part 28 of the RDC. As far as I can tell the power is fettered only by any requirements which govern the exercise of discretion. If asked to exercise the power under Article 34 to order production, as I have been, I think it would be appropriate to import a test into the assessment in order to ensure that the power is exercised judiciously. Part 28 of the RDC, as I have mentioned, provides for several regimes for the production of documents. In my judgment, the regime that governs pre-action disclosure is plainly the most suitable to import in this case.
29. It is instructive to consider the policy behind RDC r. 28.48 which, in my view, is given in RDC r. 28.48(4). RDC r. 28.48 is designed to facilitate the fair disposal of anticipated proceedings, the resolution of disputes without proceedings and the saving of costs (RDC r. 28.48(4) (a), (b) and (c), respectively). If the Applicants are provided with the production sought, each of the policies underpinning RDC r. 28.48 can, in my view, be furthered to substantially if not entirely the same extent they could have been if the substantive proceedings did not exist. All that has happened in the substantive proceedings is that a claim form has been issued and a stay has been imposed. If, following any disclosure, the Applicants decide to pursue or instead discontinue the substantive proceedings, their existence now will make hardly any difference to their fair disposal, the resolution of disputes without them or to the saving of costs. In other words, I think that even if the present application has fallen outside of the letter of RDC r. 28.48, it is still within its spirit.
30. Moreover, the parties have addressed the test of RDC r. 28.48 and so it is possible for me to import that test with confidence that the parties have had a full opportunity to address the relevant issues and without the time and costs of the parties’ preparations for the application under RDC r. 28.48 being wasted.
31. For these reasons, I think the approach proposed by the Applicants, to, if there are good grounds for ordering pre-action disclosure, order the production sought under Article 34, is appropriate in the circumstances of the case.
Another preliminary issue: the merits of the potential claims
32. There was debate between the parties about whether the potential claim must have merit as a requirement. The Applicants’ position is that the merits of the claim are only likely to be determinative if a respondent can show “beyond argument” that a claim is hopeless. They rely on Smith v Secretary of State for Energy and Climate Change [2013] EWCA Civ 1585 and the earlier English Court of Appeal decision Total E&P Soudan SA v Edmonds [2007] EWCA Civ 50 along with my decision in these proceedings of 2 March 2022. The Respondents’ position is that the potential claim must have a real prospect of success and an applicant for pre-action disclosure must show at the least a prima facie case on the substance of the claim. They rely on Gwelhayl Ltd v Midas Construction Ltd [2008] EWHC 2316 (TCC) and Mars UK Ltd v Waitrose [2004] EWHC 2264 (Ch), respectively, for these propositions.
33. In my view, Smith has settled the question whether there is any merits threshold for applications for pre-action disclosure. At [23], the Court stated:
“… there is no jurisdictional “arguability threshold”… The jurisdictional requirements for the making of an order under CPR 31.16 are expressly set out at heads (a)-(d) in para. (3) of the rule, and they say nothing about the applicant having to establish some minimum level of arguability. If such a requirement exists it can only be implicit, and I see no basis for making any such implication… I accept of course that it cannot have been the intention of the rule-maker that a party should be entitled to pre-action disclosure in circumstances where there was no prospect of his being able to establish a viable claim; but in such a case disclosure could and no doubt would be refused in the exercise of the discretion which arises at the second stage of the enquiry.”
As can be seen, not only did the Court of Appeal clearly state that there is no jurisdictional arguability threshold, but it then went no further than saying that a judge could refuse pre-action disclosure in the exercise of his or her discretion even where there was no prospect of the applicant being able to establish a viable claim. It was not said that a judge was bound to do so. All of this is inconsistent, in my view, with a merit requirement.
34. To comment briefly on Gwelhayl Ltd, at [8(d)] of that judgment, in summarising what earlier authorities had said about the court’s investigation into the merits of the potential claim, the Court cited from Rose v Lynx Express Ltd [2004] EWCA Civ 447 where the English Court of Appeal had stated:
“A court should be hesitant, in the context of an application for pre−action disclosure, about embarking upon any determination of substantive issues in the case. Accordingly, it would normally be sufficient to found an application under CPR 31.16(3) for the substantive claim pursued in the proceedings to be properly arguable and to have a real prospect of success, and it would normally be appropriate to approach the conditions in CPR 31.16(3) on that basis.”
This is where the Respondents’ proposition that the potential claim must have a real prospect of success comes from.
35. This passage was considered briefly in Smith at [26] where it was said that the observations in Rose were not addressed to the question whether “arguability” is to be treated as going to jurisdiction. Given the Court in Smith’s comments in the preceding paragraphs, outlined immediately above, it is implicit, in my view, that it regarded that if the Court in Rose held that the potential claim must have merit as a jurisdictional requirement, it would have been wrong to do so. In my view, the language used in Rose is not exactly consistent with the formulation of a requirement in any event. On my reading, the principle set down in Rose and endorsed in Gwelhayl Ltd is that it will usually be enough for the potential claim to be properly arguable, which strikes me as probably being guidance for the exercise of discretion.
36. And Smith, in my judgment, also rebuts the proposition that the Respondents take from Mars UK that an applicant must show a prima facie case. I think it is clear from [22] of Smith that the Court of Appeal dealt with the question whether an applicant needed an arguable or a prima facie case as a single question i.e. the two terms were dealt with interchangeably: “The only question of pure law raised on the appeal to this Court is whether Judge Langan was right to proceed on the basis that the Appellant was required to establish, as a matter of jurisdiction, that he had an “arguable” or “prima facie” case (whatever the precise height of the threshold).” (second emphasis added) And this is clear also from [21] and [27] of the judgment read together. At [27] the Court concluded, first, that Flaux J had been wrong to proceed in Kneale on the basis that there was a “jurisdictional threshold of arguability” (emphasis added) prescribed by CPR r. 31.16(3) (a) and (b) and, second, that the judge below was wrong for following Kneale in that regard. At [21] the Court explained what it was exactly in Kneale that the judge had followed: “[the judge below] held that he was bound by the decision in Kneale and accordingly that the Appellant had to show, in Flaux J’s words, “some kind of prima facie case which is more than a merely speculative “punt”’.” The White Book does state at [31.16.5], citing Mars UK, that “The applicant must show at least a prima facie case of entitlement to substantive relief,” which has the same meaning as a prima facie case (see Mars UK at [7]). But I respectfully think, for the reasons just explained, that the White Book is, after Smith, incorrect to say so.
37. The degree to which a potential case has merit is of course a relevant consideration at the discretionary stage of the inquiry. At [28] of Smith, the Court discouraged judges from asking at that stage whether a case is arguable and encouraged the question whether the applicant has shown some reason to believe that he may have suffered a compensatable injury. The Court also noted that the difference was largely a matter of language. Indeed, if an applicant has shown some reason to believe that he may have suffered a compensatable injury, presumably he will thereby have demonstrated he has a case with some degree of arguability. In Smith, the Court’s discretion was exercised in favour of ordering pre-action disclosure on the basis that the applicant’s evidence did “afford sufficient reason to believe that [he] may indeed have suffered hearing loss, and that, if so, it may have been caused by the fact that he worked for many years in a very noisy environment.” ([32]) In other words, the applicant had established a viable personal injury claim against his former employer, whatever the merits of that claim.
38. This leads me to a final point which I will make for reasons which will become apparent later in this decision. In my judgment, nothing in Smith or the authorities generally alleviates applicants for pre-action disclosure of the need to articulate a case. It may be straightforward to establish that a loss has occurred but showing that a compensatable loss has or may have been suffered requires the articulation of a case as that will be founded upon a cause of action. And I do not believe that such an articulation is relevant only to the court’s discretion, the stage of the inquiry in which the phrase compensatable injury was deployed in Smith. In Total there is a suggestion at [17] that it is relevant to an application for pre-action disclosure at large. After outlining the background of the dispute and before setting out CPR r. 31.16 and the caselaw which interpreted and applied it, the Court of Appeal stated as follows: “There has been some uncertainty about the cause or causes of action which Total might rely on. When this court granted the Respondents permission to appeal Total was ordered to make its position clear. It has now done so…” The Court then set out two potential causes of action duly put forward by the applicants, namely that the respondents unlawfully interfered with the applicant’s economic interests and/or induced another to breach its contract with the applicant. It is not clear whether there was to be any sanction if the applicant did not comply with the Court’s order to outline its potential case, but it is clear that this clarification was important enough to the Court to warrant an order for it.
39. [17] of Total is instructive for another related reason. In my opinion it provides context useful for understanding [29] where the Court disapproved of judges investigating “legally complex” and “debatable” potential defences in the context of pre-action disclosure applications and from where I extracted the term “beyond argument” which I employed in my decision of 2 March 2022:
“I do not think such arguments are relevant to this application or appeal. Generally when considering an application under CPR 31.16 the court does not need to and therefore should not embark upon a consideration of arguments of this kind. Such applications are in the nature of case management decisions requiring the judge to take a “big picture” view of the application in question. This obviously involves the judge taking a broad view of the merits of the potential claim, but should not necessitate an investigation of legally complex and debateable potential defences or grounds for stay. That is what the Respondents’ arguments are in this case and I need say no more about them than that. Mr Greenwood conceded that the situation would be different if a respondent could show beyond argument that the claim was hopeless or non-justiciable or if disclosure of the documents themselves raised non-justiciable issues such as sovereign confidentiality. I agree, but that is not this case.”
40. What was said in [29] of Total was said about potential defences or grounds for a stay specifically, not cases including claims generally. My reading of Total in general and this passage in particular is that the Court regarded that unless a respondent could show beyond argument that a potential claim was hopeless, such an argument should generally not be determinative. But it was taken for granted that the judge deciding a pre-action disclosure application would take a view, albeit a broad one, of the potential claim, which, as we have seen from [17], should be clearly articulated. And so, on my reading, the proposition derived from [29] of Total puts potential claims including weak ones outside the reach of anything but the strongest potential defences, but it does create a burden on respondents to demonstrate that the existence of a claim at all is hopeless, such that an applicant might rely on the possibility of the existence of a claim rather than more focused allegation.
41. This conclusion is, in my judgment, supported by a number of authorities. In Gwelhayl, for example, Coulson J stated as follows:
“19. A claim against a professional man will focus on what he did that he should not have done, or sometimes what he failed to do that he should have done, and it will go on to explain how and why those acts or omissions have given rise to financial loss on the part of his employer. In my judgment, in the present application, one looks in vain, either in the evidence or in the correspondence, to find any such claim against Bailey arising out of the project at Gull Rock.
20. As I have indicated, the high point of the proposed claim is the suggestion that Gwelhayl wish ‘to investigate Bailey's role in the project and in particular in relation to the final account’. With respect, civil litigation does not consist of “an investigation” simply for its own sake. The investigation carried out by the court is only that which is necessitated by the claims that are made, in order to see whether those claims are made out or not. It is therefore the underlying financial claims that matter in the present case. As I have indicated, no such claims are identified in the documents.”
At [26] of the judgment, Coulson J stated, to paraphrase, that it is not enough that a loss or potential loss is identified; it is for an applicant to explain how the loss may give rise to a claim in the circumstances. Similarly, by way of further example, Patten J cautioned at [81] of BSW Limited v Balltec Limited [2006] EWHC 822 (Ch) that pre-action disclosure is not a mechanism for a party to discover whether he has a case at all.
42. In conclusion, I would say that there is no requirement that an applicant for pre-action disclosure establishes an arguable or prima facie case, but the flexibility inherent to this approach does not extend to the articulation of the case. In other words, the potential case put forward by the applicant does not need to have merit as a requirement, but it should exist with requisite clarity in order to get the whole inquiry off the ground.
The law
43. To proceed, RDC r. 28.48 provides as follows:
“The Court may only make an order where:
(1) the respondent is likely to be a party to subsequent proceedings;
(2) the applicant is also likely to be a party to those proceedings;
(3) if proceedings had started, the Court would make a Document Production Order directing the production of the documents or classes of documents of which the applicant seeks production; and
(4) production before proceedings have started is desirable in order to:
(a) dispose fairly of the anticipated proceedings;
(b) assist the dispute to be resolved without proceedings; or
(c) save costs.”
And so, there is a two-stage approach to an application under RDC r. 28.48. First the Court asks whether the criteria of the rule have been met. These are jurisdictional requirements (“…only… where…”) and are four in number. As I found in my order of 2 March 2022, the question whether the DIFC Court has jurisdiction in the sense of authority (i.e. under the Dubai Judicial Authority Law) to hear and determine an application for pre-action disclosure is implicit in the first and second and/or the third jurisdictional requirements of RDC r. 28.48 (see [28] to [29]). If these requirements are met, the Court then asks whether it ought to exercise its discretion to make the order sought (“The Court may…”).
44. The parties were not in disagreement about the principles to be applied in pre-action disclosure applications which I will outline now.
The jurisdictional thresholds
RDC r. 28.48(1) and (2)
45. The requirements that the respondent and the applicant are likely to be parties to the subsequent proceedings does not mean that it must be likely that proceedings will be issued; it means that the respondent and the applicant are likely to be parties if proceedings are issued (Black at [17]). And “likely” in that context means no more than “may well” (Black at [72]).
RDC r. 28.48(3)
46. The Respondents made the majority of the submissions on the effect of RDC r. 28.48(3). The Applicants’ submission was that documents that may be sought under a document production order are those which are in the possession, custody or control of the respondent. The Respondents went much further and contended, paraphrasing slightly, that an applicant for pre-action disclosure must demonstrate, as a consequence of RDC r. 28.48(3), that the documents of which production are sought are relevant and material to issues in the potential claim. It follows from this, the Respondents submitted, that the issues in the potential claim must be sufficiently clear at the time of the pre-action disclosure application. To the extent that they are not, the relevance and materiality of the documents to the issues cannot be addressed and to that extent the application cannot get off the ground.
47. The Respondents base their assertion on RDC r. 28.48(3)’s requirement that pre-action disclosure be limited to the production of documents which the Court would, if proceedings had started, direct the production of by a document production order. The Court would only do so, the Respondents submit, in respect of documents which are relevant and material to the issues in the case.
48. I agree with the Respondents. There are two circumstances in which the Court will make a document production order. One is where the responding party makes an unjustified objection to a request for production (RDC r. 28.36(1)) and the other is where the responding party has failed to produce documents without an objection despite having possession, custody or control of them (RDC r. 28.36(2)). In both scenarios, therefore, the requesting party is entitled to the production sought on the basis that there is no justified objection to it.
49. The grounds for objecting to a request for the production of documents i.e. the bases for a justified objection are set out in RDC r. 28.28. One of them is important for present considerations, namely that set out in paragraph (1) of the rule. The responding party has a justified objection to a request for production where a document lacks sufficient “relevance or materiality.” To what extent must the document lack sufficient relevance or materiality? This question is plainly answered by RDC r. 28.17 which concerns requests for production. Paragraph (3) requires a requesting party to give a description of how the documents requested are relevant and material to “the outcome of the case.” While as a matter of language this does not amount to a requirement that the requested documents are relevant and material to the outcome of the case—and instead is only a requirement that a description is given—when RDC r. 28.17(3) and 28.28(1) are read together it is clear, in my view, what the intent of the draftsman is: requests for production are only justified to the extent that the sought documents are relevant and material to the outcome of the case. Indeed, this is the precise basis upon which the Court would order the production of documents on its own initiative under RDC r. 28.56 and I see no reason why the Court would make an order on a different basis under RDC r. 28.36 simply because that order was applied for by a party.
50. It would follow, in my judgment, that the Court will only make a document production order if the sought documents have these characteristics, relevance and materiality, in relation to the outcome of the case and it would follow, in turn, that for RDC r. 28.48(3) to be satisfied, the documents of which production is sought by pre-action disclosure must be relevant and material, if the subsequent proceedings had started, to the outcome of the case in those subsequent proceedings. The Respondents have spoken of relevance and materiality in relation to issues rather than the outcome of the case but, in my view, the two amount to the same thing: the Court’s determinations of the issues in a case comprise the outcome of the case.
51. Where do issues come from? From denied assertions, the Respondents submit. And inasmuch as it is documents which are sought, the issues will be issues of fact. In the context of pre-action disclosure, therefore, the Court is concerned with factual disputes. I agree with the Respondents in principle though I am reluctant to go so far as to say that there must be actual denials of assertions before an order for pre-action disclosure can be made. A respondent may not be in a position to deny an assertion at the time of the application and this, in my view, should not preclude an order for production. Moreover, if a denial was required to exist, a respondent could potentially stifle an application by ignoring it or by otherwise depriving the applicant of the denial.
52. In my view, it should be enough that the potential claims are sufficiently clear. A denial can be conceived of from an assertion, such that a potential issue is already present in potentia within an assertion (for example, if it is asserted that X is true, the denial would be that X is not true and the issue would be whether X is true). As such, I do not think actual denials from a respondent are necessary. In my judgment, the word “if” in the words “if proceedings had started” in RDC r. 28.48(3) renders the case referred to in the words “the outcome of the case” in RDC r. 28.17 and implied in RDC r. 28.28 sufficiently hypothetical to enable this approach.
53. These conclusions are, in my judgment, in line with the English authorities on the CPR’s equivalent jurisdictional requirement, CPR r. 31.16(3)(c), which makes an order for pre-action disclosure conditional upon the requirements of standard disclosure being met i.e. pre-action disclosure extends only to documents which adversely affect or support a party’s case (CPR r. 31.6). The requirements of RDC r. 28.48(3) and CPR r. 31.16(3)(c) are different, but in my opinion, nothing turns on this difference for present purposes as both rules are concerned ultimately with supporting the resolution of the dispute through supporting a party’s case.
54. In Black, for example, at [76], the Court commented as follows:
“In general, however, it should in my judgment be remembered that the extent of standard disclosure cannot easily be discerned without clarity as to the issues which would arise once pleadings in the prospective litigation had been formulated. This court touched on the question in Bermuda v. KPMG when Waller LJ there said (at para 26) that -
The circumstances spelt out by the rule show that it will "only" be ordered where the court can say that the documents asked for will be documents that will have to be produced at the standard disclosure stage. It follows from that, that the court must be clear what the issues in the litigation are likely to be i.e. what case the claimant is likely to be making and what defence is likely to be being run so as to make sure the documents being asked for are ones which will adversely affect the case of one side or the other, or support the case of one side or the other.”
At [78] the Court emphasised “the necessity for clarity as to the issues in the prospective litigation” when determining whether sub-rule (3)(c) was satisfied.
55. In Snowstar Shipping Ltd v Graig Shipping Plc [2003] EWHC 1367 (Comm), the applicant sought by way of pre-action disclosure the production of documents which would either be privileged or subject to considerable commercial sensitivity. The judge foresaw “considerable scope for argument about the extent of Graig's disclosure obligation were proceedings to be issued and the disclosure stage was reached” while “this is not the occasion for such a determination.” ([35]) Accordingly, the judge was not satisfied that CPR r. 31.16(3)(c) had been fulfilled.
56. In Hutchison 3G UK Ltd v O2 (UK) Ltd [2008] EWHC 55 (Comm), the requirement that all the documents within a class or category must be subject to standard disclosure was explained in this way:
“39. Given that by definition the claim has not been pleaded, this on the face of it requires the Applicant to identify correctly what documents in due course will be relied upon by the Respondents (or will adversely affect the Respondents’ case) on the basis of the allegations that may well be made when the case is pleaded. The Applicant submitted that the rule needs to be applied with a “measure of common sense” since otherwise the court would be requiring the Applicant to show that, when examined, the documents will indeed prove to be amongst those relied on (or will in fact be adverse to the Respondents’ case).
40. Whilst I have some sympathy with the Applicant’s contention that the rule must be applied with a measure of flexibility, the difficulty is that to pray in aid “common sense” inevitably risks importing with it a significant degree of judgment on the part of the Respondents. This emphasises in my judgement the need for a highly focussed application which clearly does not encompass categories of documents which will simply prove to be relevant (if at all) as part of the background (let alone of course documents which might merely lead to a train of inquiry)…
44. … it would appear that it has to be established that the scope of standard disclosure would actually extend to the documents. In my judgment the test is indeed more stringent [than the test under CPR r. 31.17 (orders for disclosure against a person not a party, where the question is whether the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings]. The applicants have to show that it is more probable than not that the documents are within the scope of standard disclosure in regard to the issues that are likely to arise.”
57. In Hart, an application decided under the rules for specific disclosure but with express reference to the rules and principles for pre-action disclosure was dismissed on the primary basis that the insufficiently detailed case against the defendant made it difficult and in certain cases impossible to show the relevance of the documents sought to the issue or issues in the case. The Court commented at [23] as follows: “pre-action disclosure procedure is not in place to enable a claimant to identify if they have a claim at all, but to assist them in further investigating a claim that is already identified and explained, to enable the parties to obtain a better understanding of each other’s position to assist in disposing of or narrowing issues before expensive litigation is embarked upon.”
58. Summarising these authorities and bringing them into the context of the RDC, in my view, in order to assess whether the Court would make a document production order, there must be clarity as to the issues which would arise once pleadings in the prospective litigation have been formulated. In other words, the Court must be clear what case the applicant is likely to be making and what defence would accordingly likely be run. There must be a claim or claims identified and explained. The applicant must identify correctly what documents in due course will be relevant and material to the outcome of the case on the basis of the allegations that may well be made when the case is pleaded. Categories of documents which will simply prove to be relevant only as part of the background or which might merely lead to a train of inquiry will not qualify: the test under RDC r. 28.48(3) is a stringent one.
RDC r. 28.48(4)
59. Pre-action disclosure must be desirable for one of the reasons set out at subparagraphs (a) to (c) of RDC r. 28.48(4). Pre-action disclosure may be ordered where there is a “real prospect” that the order is fair to the parties, to assist the avoidance of litigation or to save costs (Black at [81]). RDC r. 28.48(4) may be satisfied where the disclosure would enable there to be fully pleaded particulars of claim from the start, and where it would make resolution easier to achieve by enabling the parties to have a real appreciation of the extent of any claim (Hays Specialist Recruitment (Holdings) Ltd v Ions [2008] EWHC 745 (Ch) at [44]). In respect of RDC r. 28.48(4)(b) in particular, pre-action production may be refused where proceedings are inevitable such that RDC 28.48(4)(b) cannot be satisfied: Ittihadleh v Metcalfe [2016] EWHC 376 (Ch) at [65].
The discretionary stage
60. If the jurisdictional thresholds are satisfied, the Court is then required to move to the discretionary stage of its considerations. Applications for pre-action disclosure frequently turn on this exercise. In Black the Court held at [88] that the exercise of the Court’s discretion depends on all the facts of the case, and that:
“Among the important considerations, however, as it seems to me, are the nature of the injury or loss complained of; the clarity and identification of the issues raised by the complaint; the nature of the documents requested; the relevance of any protocol or pre-action inquiries; and the opportunity which the complainant has to make his case without pre-action disclosure.”
61. The Court should consider the matter in the round and ask whether the request for pre-action disclosure furthers the overriding objective in the case or not (Hands v Morrison Construction Services Ltd [2006] EWHC 2018 (Ch) at [30]).
Some other principles
62. What follows are some further principles derived from case law.
63. The more speculative the claim, the less inclined the court is to grant the application (Snowstar at [33]). The court is especially sceptical where the speculative claim is a commercial claim. In Black, the Court stated at [83], “if the case is a personal injury claim and the request is for medical records, it is easy to conclude that pre−action disclosure ought to be made; but if the action is a speculative commercial action and the disclosure sought is broad, a fortiori if it is ill−defined, it might be much harder.”
64. Applications for pre-action disclosure in commercial cases are not exceptional but they are unusual (Assetco at [17]). It has been said that there must be convincing grounds which make the case out of the ordinary such that an application should be granted (Carillion at [15]). In my view, however, caution may be warranted in terms of applying these principles in proceedings in this court as these authorities both come from the English Commercial Court. The Commercial Court Guide relevantly discourages parties from engaging in “elaborate or expensive pre-action procedures” and states “restraint is encouraged” ([B3.2] and see Carillion at [16]).
65. The fact that one party kept notes and the other did not does not support disclosure where the party seeking disclosure could have kept notes (Corbyn v Evans [2021] EWHC 130 (QB) at [37]).
66. The court will not allow the procedure to be used when it would frustrate or interfere with a contractually agreed ADR mechanism (Taylor Wimpey UK Ltd v Harron Homes Ltd [2020] EWHC 1190 (TCC) at [41] and [54]). It seems to me that this proposition would apply with equal force in respect of any dispute resolution agreement.
67. Where pleadings can be based on witness evidence, for example where the allegation is that there was an oral agreement, the jurisdictional threshold may not be met (Corbyn at [34]). In Corbyn, the Court refused pre-action disclosure in relation to an alleged oral agreement. The Court remarked at [34] as follows: “The representatives of Mr Corbyn can give witness evidence on which pleadings can be based. Mr Corbyn, in order to rely on the agreement must know of its terms. The three terms which have been set out are easily understood and any breach can be pleaded.”
68. Where an applicant has information or can obtain it, the need for disclosure is thrown into doubt (Black at [93]). In Black, one criticism that was made of the applicant, who was denied pre-action disclosure, was that he did not make clear to what extent he already had or could obtain documentation which would enable him either to plead his case or to recognise that he did not have one ([93]).
The potential claims
69. The assessment must start, in my judgment, with the Applicants’ potential claims. These are principally set out at [80] of SS1:
“80. In light of the foregoing, one or more of the Respondents are likely to be named as defendants in the following potential claims brought by the Applicants:
a. in tort, as codified under the DIFC Law of Obligations, including:
i. professional negligence, by providing negligent investment advice; and/or
ii. negligent misrepresentation, by representing untrue information about the Fund and its performance, or being reckless as to its truth; and/or
b. for breach of DIFC law, including:
i. breach of statutory duty – on similar grounds to those set out at paragraph(s) 80(a) immediately above; and/or
ii. breach of the DIFC Regulatory Law – by arranging deals for which the Respondents appear not to have been licensed.”
At [17] of SS2, a further claim is intimated in relation of R1 specifically:
“… there are likely to be:
… claims for breach of contract in respect of any express or implied obligations that the First Respondent owed to the Applicants in relation to the investments. The precise scope of these contractual duties is likely to be informed by disclosure of the classes of documents referred to in paragraphs 69 to 73 of my first witness statement…”
At [26.1] of SS3, an identical contractual claim is intimated in relation to R2, R3 and R4.
70. In relation to these claims, the Applicants seek the production of three classes of documents:
(a) “Documents which may assist the Applicants to identify the Respondent entity with whom the Applicant’s Banking relationship was properly formalised and for what purpose”;
(b) “Documents which may assist the Applicants to identify the professional services performed and advice given by the Respondents, and on behalf of which Respondent, and whether in performing those services and giving that advice the Respondents fell short of their standards of professional care”; and
(c) “Documents which may assist the Applicants to identify whether the Third and Fourth Respondents were employees of the First and/or Second Respondents at material times”
(SS1 at [68] to [77]).
71. The Applicants say that the classes of documents sought are relevant to determining, in relation to the potential claims, the following issues:
(a) “The appropriate defendant(s) to the Applicants’ intended claim”;
(b) “The scope and standard of the Respondents’ respective duties of care”;
(c) “Whether and how the Respondents breached their standard of professional care duties owed to the Applicants”; and
(d) “Whether or not the Third and Fourth Respondents are personally liable for tortious acts or omissions or breaches of statutory duty that caused loss to the Applicants, or the First and/or Second Respondents to be held vicariously liable”
(SS1 at [81]).
72. As can be seen, only four potential claims are outlined in any detail at [80] of SS1. They are expressed as being examples. [80.a] states that the Applicants have potential claims “in tort, as codified under the DIFC Law of Obligations, including…” (emphasis added) before outlining two potential claims and [80.b] states that the Applicants have potential claims “for breach of DIFC law, including…” (emphasis added) before outlining a further two potential claims, but no explanation is given of the claims implied by use of the word “including.” The contractual claims intimated in SS2 and SS3 are similarly unexplained: the Applicants do not point to any contractual term imposing an obligation on any of the Respondents which they allege has been breached.
73. As I have concluded above, unless a potential claim is articulated, it is not possible to determine whether, if proceedings had started, the Court would make a document production order in respect of that claim. If the case is unknown so too are the issues which are likely to arise in it and the parameters of its outcome, and so the exercise does not get off the ground as a matter of jurisdiction and should not be successful to the extent the Court has any discretion.
74. It is difficult for me to view the Applicants’ request for pre-action disclosure insofar as it relates to these intimated but unarticulated claims in SS1, SS2 and SS3 as anything other than an attempt to acquire evidence which might reveal a claim rather than a method of investigating claims which are already identified. This approach is contrary to the established principles and is, in any event, highly speculative. These unarticulated claims must, in my judgment, be disregarded from the outset. That leaves four potential claims.
75. In terms of the issues and the classes of documents, I think one issue and two classes of documents stand separately from the others and indeed pervade them, namely the issue of the appropriate defendant(s) to the Applicants’ potential claims and the documents which may assist the Applicants in identifying the respondent entity with whom the Applicants’ banking relationships were properly formalised and whether R3 and R4 were employees of R1 and/or R2 at material times. The other issues and documents go to the merits of the potential claims whereas this issue and these categories of documents are relevant, as I see it, to determining whether the Court would have jurisdiction over the substantive claim, and if so to what degree of surety, and whether the DIFC Law of Obligations and Regulatory Law have or may have been engaged. Below, I will deal with the PAD Application insofar as it is for production that will support these jurisdictional questions separately.
(1) A claim in tort, as codified under the DIFC Law of Obligations, for professional negligence for providing negligent investment advice
76. With one exception, I have not found in the Applicants’ evidence allegations that the Respondents had provided the Applicants advice. To the contrary, the Applicants’ criticism of the Respondents, apart from this exception which I will come to, appears to be that the Respondents had not given advice. The following examples are from SS1:
(a) “24. I am informed by the Applicants that at no point during any of the meetings which took place in respect of the Fund between late 2015 and early 2016 did the Respondents outline any risks associated with investment in the Fund or provide any advice or analysis in respect of market trends, or suggest or discuss any suitable investment(s) as alternative(s) to the Fund.”
(b) “33. I am informed by the Applicants that at no point was any financial or investment advice provided by the Respondents in relation to the Subscription Agreements, the Undertakings and Guarantees in respect thereof, the Al Soor Credit Facility, or the First Investment generally.”
(c) “44. I am informed by the Applicants that at no point during any of their discussions with the Respondents regarding the Structured Notes or the NBAD Transaction Memorandum was any financial or investment advice provided by the Respondents in relation to the Second Investment.”
(d) Six further allegations that the Respondents failed to advise the Applicants are made at subparagraphs iv, v, vi, vii, x and xi of [81.c] of SS1.
In my judgment, there can be no case for negligent advice insofar as the allegation is that no advice was given.
77. The exception to these allegations of a failure to advise is found at [81.c.viii] of SS1 where it is alleged that the Respondents “[advised] the Applicants to enter into the First and Second Investments which were commercially unfavourable to the Applicants.” This alleged advice is not explained in SS1. Instead, in respect of the First Investment it is said at [22]: “I am informed by the Applicants that in or around October 2015, the Respondents met with the Applicants to discuss an expansion of the banking/client relationship. As a result of that meeting, in November 2015, the Bank approached the Applicants with an investment opportunity to purchase units… in the [Fund].” (emphasis added) And in respect of the Second Investment it is said at [37] that, “By May 2017, the Respondents proposed, and the Applicants agreed, to make a further investment into the Fund, this time through the Second Applicant…” (emphasis added)
78. In submissions, the Applicants intimated an alternative case, for failure to offer advice. The Respondents criticised the Applicants for not pointing to any obligation on the part of the Respondents to give advice at all and in breach of which liability might have arisen. The Applicants’ reply to this criticism was that the question whether the Respondents operated under a duty to provide advice to the Applicants is a question of fact, or a mixed question of fact and law, for trial in due course.
79. My view is as follows. I begin with the potential case premised on the Respondents’ alleged provision of negligent advice. If the alleged advice, the subject of this potential claim, was or was part and parcel of the Respondents’ approach and proposal to the Applicants in respect of the First and Second Investments, respectively, this has not been explained. As such, notwithstanding the Applicants’ allegation that the Respondents provided them with negligent advice, there appears to me to be no explanation whatsoever of how that occurred. There is only the allegation. In other words, the Applicants have failed, in my view, to give the Court reason to believe that they may have suffered a compensatable injury.
80. If advice was given to the Applicants and caused them loss, they should know about it as they would have received it and acted upon it. This I think is important for two reasons. First, and inasmuch as there is no explanation given, it throws into doubt the Applicants’ allegation that any advice was provided. Second, if negligent advice was given, it throws into doubt whether disclosure is needed to understand and if necessary plead that case as it will presumably be known to the Applicants.
81. As to the potential case premised on the Respondents’ alleged failure to advise, in my judgment the fact that the question whether the Respondents operated under a duty to provide advice to the Applicants may be a question for trial in due course does not alleviate the Applicants of the need at this stage to at least set out grounds for their belief that such a duty existed. The provisions of the DIFC Law of Obligations are already in hand. SS1 is replete with contextualised allegations that the Respondents failed to advise the Applicants. Could not the two have been brought together to provide a fuller explanation of how the Respondents’ alleged failure to advise may give rise to a claim?
82. In my judgment, it was for the Applicants to explain in relation to any advice given or not given what the Respondents did that they should not have done or did not do that they should have done and to explain why those acts or omissions gave rise to a loss on the part of the Applicants. No such case is disclosed in the Applicants’ evidence or submissions. All one finds are unexplained allegations of what the Respondents did do or did not do. I do not consider that any claims have been made in relation to the alleged negligent provision of advice or failure to advise which justify the investigation which the Applicants seek to persuade the Court to carry out.
83. I note that no reference has been made by the Applicants to specific provisions of DIFC Law of Obligations. I think it would have been helpful if the Applicants pointed to particular provisions and explained the issues they gives rise to and the documents which are needed to give clarity to the issues. If I conducted that exercise myself, I could be criticised for doing so. But having reviewed the DIFC Law of Obligations in the interests of giving the Applicants’ application as full consideration as I can, I am not able to say what prevents the Applicants from pleading a case that the Respondents owed them a duty of care and failed in respect of that duty, much less what prevents them from providing an explanation sufficient for the purposes of pre-action disclosure. At least one of the questions which the Applicants submit production for will assist them in determining, namely the standard of the Respondents’ respective duties of care, may even be answered already in the law.
84. To conclude, in my judgment to the extent it is not known whether the Respondents gave negligent advice, the purpose of pre-action disclosure is not to enable an applicant to find out whether he or she has a claim at all and a potential claim based upon such an allegation would be speculative in any event; and to the extent the Applicants know that negligent advice was given or that the Respondents negligently failed to advise, the Applicants can base their pleadings on witness evidence.
(2) A claim in tort, as codified under the DIFC Law of Obligations, for negligent misrepresentation, by presenting untrue information about the Fund and its performance, or being reckless as to its truth
85. It is not clear whether there are any allegations in SS1 or any other evidence that the Respondents made negligent misrepresentations, whether in relation to the Fund or to its performance. There are suggestions perhaps, but no allegations, of misrepresentation at [65(c)] and [81.c.x] of SS1 in relation to the Fund. At [65(c) it is stated as follows:
“As it subsequently became apparent, however, the Bank was able to do so because in fact the Fund Units were at all material times registered with the Fund in the name of the Second Respondent and held beneficially for the Applicants. As such, the Applicants had no legal ownership over the Fund Units and the Redemption was simply a re-registration of the sales in the Second Respondent’s internal accounts. In failing to register Fund Units in the names of the Applicants, the Bank was easily able to transact in the Fund Units in service of its own interests and at its own discretion.”
At [81.c.x], it is stated that the Respondents “[failed] to advise the Applicants as to… the Respondents’ entitlement to unilaterally redeem Fund Units without the Applicants’ consent and/or [encouraged] the Applicants to believe that their consent was required for the Redemption of the Fund Units.”
86. In relation to the Fund’s performance, I have been unable to find even a suggestion that misrepresentations were made. All that I have gotten is a reference, at [40.4] of SS3, to discussions between the Applicants and the Respondents about the former’s dissatisfaction with the performance of the Fund in which, conceivably, representations could have been made by the Respondents about that performance. There it is stated that certain undertakings and guarantees were provided to A1 and A2 by R3 and R4 on behalf of R2 “following several discussions between R3, R4 and the Applicants in which the Applicants expressed dissatisfaction with the performance of the Fund.”
87. I can only make similar criticisms to those I made of the first potential claim. If a misrepresentation was made, the Applicants should know about it as it would have been made to them and would have caused them to relevantly change their position. No such claim is found in the evidence or submissions. It is not clear to me what prevents the Applicants from pleading a case that the Respondents are liable to them for misrepresentation, if misrepresentations were made. No reference is made to the provisions of the DIFC Law of Obligations and the issues they give rise to. To the extent it is not known whether the Respondents made misrepresentations, the purpose of pre-action disclosure is not to investigate the existence claims, which would at this stage have to be speculative, and to the extent the Applicants know of misrepresentations the Applicants can base their pleadings on witness evidence.
(3) A claim for breach of DIFC law for breach of statutory duty, on similar grounds to those underpinning the professional negligence and negligent misrepresentation claims
88. This potential claim is very vaguely stated. The statutory duty is not identified. To the extent that the intimated claim will be made on similar grounds to those underpinning the negligence claims, I dismiss pre-action disclosure in support of it on the grounds I dismissed it in support of those.
(4) A claim for breach of the DIFC Regulatory Law, for arranging deals for which the Respondents appear to not have been licenced
89. This potential claim is also vaguely stated. It relates to the structuring of the deal to avoid contravening Ajman Bank’s controlling shareholding limits (see SS1 at [79.f]) which is dealt with at [37] to [48] of SS1 (see SS3 at [26.3]). Interestingly, the facts which are said to give rise to a potential claim under the DIFC Regulatory Law are given in relative detail. At [42] of SS1 it is noted that A1 and A2 were provided with a memorandum dated 24 May 2017, prepared by R4 on behalf of R2, which recorded the “key features” of the deal which are then set out. Notwithstanding this, the Applicants have not explained what provisions of DIFC regulatory law have been breached, nor what conduct gives rise to that breach. The term “arranging deals in investments” is explained at [2.9.1] of the DFSA Rulebook General Module. There is no allegation that R1 has engaged in any of the conduct which would fall within that definition. Nor is there any allegation of conduct occurring “in or from the DIFC” within the meaning of Article 41 of the DIFC Regulatory Law. Nor is there any explanation why arranging deals would be a breach by R1. At [52.2] of SS3 it is conceded on the Applicants’ behalf that the alleged breaches of the DIFC Regulatory Law are not particularised. In my judgment, pre-action disclosure in support of this potential claim does not get off the ground for that reason.
90. With the relevant facts and the DIFC Regulatory Law in hand, it is probably identification of the entity which arranged the deal which the Applicants seek clarification of by way of production. This brings me onto the final issue that I will discuss.
Issues and documents which go to the jurisdiction of the DIFC Court
91. I have concluded that the Applicants should generally be able to plead any potential case based on witness evidence. I do not think the same can be said, however, for their case on jurisdiction in particular. For the following reasons, I am content to grant the PAD Application insofar as it concerns documents which will settle the question of whether the DIFC Court would have jurisdiction over any of the Applicants’ potential claims.
92. On 16 February 2017, a member of staff of R1 sent to the Applicants by way of email—an email expressly stated to have been “distributed by Julius Baer (Middle East) Ltd” i.e. by R1—a letter from an Executive Board Member of R2, Mr Remy Bersier, on the letterhead of R2. In that letter, Mr Bersier thanked Mr Abdalla Juma Majid Al Sari, the controlling person of A1, A2 and A3 at that time, for his “substantial business relationship with our bank” and promised to “work closely with my colleagues on the different topics addressed [during Mr Bersier and Mr Sari’s discussion earlier that day] and we won’t miss to come back to you with a tailored made [sic] proposition.” It seems highly likely that this letter concerns, at least in part, the investments the subject of the potential claim.
93. In my judgment, R1’s conveyance of this letter is sufficient to render it arguable to at least some degree that the contracts concluded between the Applicants and R2 were at least partly performed in the DIFC by R1 and that the dispute relates to incidents or transactions which were wholly or partly performed in the DIFC which itself renders it arguable to a similar extent that the DIFC Law of Obligations and Regulatory Law are engaged. This is sufficient to enliven the Court’s jurisdiction for the purposes of pre-action disclosure (Al Soor at [31]).
94. The Applicants and the Respondents are likely to be parties if proceedings are issued. Jurisdiction has been argued fully by the parties. The provisions of Article 5(A) of the Judicial Authority Law have been addressed in detail and the issues are clear such that it will be possible to determine whether a particular document is relevant and material to those issues. Production would be desirable in order to save costs inasmuch as it will enable the Applicants to bring proceedings against the right defendant(s) or to realise that proceedings should not be brought in this court at all. Moreover, if the Applicants are prevented from investigating whether the Court’s jurisdiction is made out, they may be precluded from bringing valid claims on that basis notwithstanding that the Court may in actual fact have jurisdiction. In my judgment that would be disproportionate. And if no link to the DIFC sufficient to establish the Court’s jurisdiction is revealed then that will bring an end to the dispute in this jurisdiction once and for all without the need for the substantive proceedings to be progressed. For these reasons, I think it is appropriate for me to exercise my discretion in favour of ordering pre-action disclosure insofar as it will reveal the appropriate defendant(s) to the Applicant’s potential claims and the documents which may assist the Applicants in identifying the respondent entity with whom the Applicants’ banking relationships were properly formalised and whether R3 and R4 were employees of R1 and/or R2 at material times.
95. The Applicants shall file a schedule within 14 days of receipt of this order setting out the documents listed at [69] to [72] and [74] to [77] of SS1 only which it needs by way of pre-action disclosure to this end. Each document or class of documents should be explained with brief submissions. In particular, the documents should be limited to those which are strictly necessary. Space should be allocated in the schedule for responses by the Respondents. The Respondents may file brief submissions in response to the schedule and its contents within 14 days of the schedule being filed by the Applicants. Any order for production will be made under Article 34 of the DIFC Court Law and according to the principles set out in the Schedule of Reasons to this order.
Costs
96. The parties shall provide submissions on costs within the time they have to provide or respond to submissions on pre-action disclosure.