MR RAFED ABDEL MOHSEN BADER AL KHORAFI v BANK SARASIN-ALPEN [2016] DIFC CFI 005 — Winding up order despite pending appeal (02 May 2016)

The DIFC Court of First Instance confirmed that a company’s inability to satisfy a judgment debt warrants a winding-up order, even where the underlying quantum is subject to a pending appeal, particularly when the respondent has ceased trading and failed to comply with interim payment orders.

How did the Petitioners establish the USD 35,028,474 debt in the winding-up petition against Bank Sarasin-Alpen?

The Petitioners, Mr Rafed Abdel Mohsen Bader Al Khorafi, Mrs Amrah Ali Abdel Latif Al Hamad, and Mrs Alia Mohamed Sulaiman Al Rifai, initiated insolvency proceedings against Bank Sarasin-Alpen (ME) Limited following a protracted legal battle concerning the mis-selling of investment products. The core of the claim rested on a specific judicial determination regarding the quantum of damages owed to the claimants.

As noted in the court records:

The Petitioners claim the Respondent is indebted to them in the sum of USD 35,028,474 pursuant to the Order of Deputy Chief Justice Sir John Chadwick (“DCJ Chadwick”) dated 3 November 2015 in CFI 026/2009 (the “Quantum Order”).

The Petitioners argued that this sum, designated as "Additional Damages," constituted a clear judgment debt. Despite the Respondent's attempts to characterize the debt as disputed due to a pending appeal, the Petitioners maintained that the Respondent’s cessation of business and failure to pay the funds into court—as mandated by the judiciary—rendered the company insolvent under the DIFC Insolvency Law. The petition sought to trigger the court's power to wind up the entity to protect the interests of the creditors and the integrity of the DIFC financial ecosystem. Read the full judgment here.

Which judge presided over the winding-up petition of Bank Sarasin-Alpen in the DIFC Court of First Instance?

The petition was heard and determined by H.E. Justice Omar Al Muhairi. The proceedings, which culminated in the order issued on 2 May 2016, involved multiple hearings, including an adjourned session on 14 March 2016 due to technical difficulties with video conferencing equipment. Justice Al Muhairi’s ruling addressed both the insolvency status of the Respondent and the procedural objections raised by the bank regarding the timing of the winding-up petition relative to their ongoing appeal.

What were the primary legal arguments advanced by Richard Hill QC and David Allison QC in the insolvency proceedings?

Richard Hill QC, representing the Petitioners, argued that the Respondent was clearly insolvent, having ceased all business operations and failing to satisfy the court-ordered payment of the Additional Damages. He contended that the winding-up was a necessary step to address the Respondent's inability to pay its debts as they fell due, emphasizing that the Respondent’s non-compliance with the court's earlier order to pay the funds into court demonstrated a lack of good faith.

Conversely, David Allison QC, acting for Bank Sarasin-Alpen, argued that the petition was an abuse of process. He posited that because the Quantum Order was subject to a pending appeal—for which permission had been granted by Chief Justice Michael Hwang—the debt could not be considered "due and payable" in a manner that justified insolvency proceedings. Allison QC maintained that the Petitioners were attempting to use the winding-up petition as a tactical tool to extract payment and circumvent the appellate process, urging the court to adjourn the petition until the Quantum Appeal was resolved.

What was the precise legal question regarding the impact of a pending appeal on a winding-up petition under DIFC Law?

The court was tasked with determining whether a winding-up order could be granted under the DIFC Insolvency Law No 3 of 2009 when the underlying judgment debt, which formed the basis of the insolvency claim, was currently subject to a pending appeal. Specifically, the court had to decide if the existence of a "real prospect of success" in an appeal—as acknowledged by the granting of permission to appeal—precluded a finding that the company was "unable to pay its debts" or that it was "just and equitable" to wind it up. The court had to balance the Respondent's right to appeal against the Petitioners' right to seek recovery from an entity that had already ceased trading and failed to comply with interim court orders.

How did Justice Al Muhairi apply the "just and equitable" doctrine to the winding-up of Bank Sarasin-Alpen?

Justice Al Muhairi focused on the practical reality of the Respondent’s status. He noted that the bank had ceased its operations and that its license had been withdrawn, leaving no prospect for the company to generate future revenue to satisfy the debt. The judge rejected the argument that the pending appeal created a sufficient "bona fide dispute" to stay the winding-up proceedings, particularly given the Respondent's previous failure to comply with the court's order to pay the disputed sum into court.

The reasoning followed a clear path:

I am satisfied that it is just and equitable to make a winding up order both in the public interest and perhaps more particularly in the interest of the DIFC.

Justice Al Muhairi emphasized that the Respondent’s own admissions regarding its cessation of business were dispositive. He concluded that the Petitioners were not acting in bad faith, but were instead seeking a legitimate remedy for a debt that the Respondent had failed to secure or pay, despite multiple opportunities to do so.

Which specific sections of the DIFC Insolvency Law No 3 of 2009 and English authorities were cited in the judgment?

The court relied heavily on Articles 50(b) and 50(e) of the DIFC Insolvency Law No 3 of 2009, which provide the grounds for a court-ordered winding-up when a company is unable to pay its debts or when the court deems it "just and equitable" to do so. Additionally, the court referenced Article 58(1) regarding the appointment of a liquidator.

To support the decision to proceed despite the pending appeal, the court cited several English authorities:
* Amalgamated Properties of Rhodesia (1913) Ltd [1917] 2 Ch 115
* Mahan Air v Blue Sky One Limited [2011] EWCA Civ 544
* James v Silver Fund Investment Company Ltd (unreported, 15 Nov 2001)
* re A & BC Chewing Gum [1975] 1 WLR 579

How did the court utilize the cited English precedents to justify the winding-up order?

The court utilized these precedents to establish that a winding-up order is not automatically stayed by the existence of an appeal against the underlying judgment. In Mahan Air v Blue Sky One Limited, the court found support for the principle that insolvency proceedings can proceed even when the debt is contested, provided the court is satisfied that the company is indeed insolvent. The reference to re A & BC Chewing Gum reinforced the court's discretion to wind up a company when it is clear that the entity has ceased trading and cannot meet its financial obligations. These cases collectively allowed Justice Al Muhairi to distinguish between a genuine, substantial dispute that might warrant a stay and a tactical attempt to delay the inevitable liquidation of an entity that has already effectively ceased to function.

What was the final disposition of the petition and the specific orders made regarding the liquidator?

Justice Al Muhairi granted the petition and ordered that Bank Sarasin-Alpen (ME) Limited be wound up under the DIFC Insolvency Law No 3 of 2009. Pursuant to Article 58(1) of the Insolvency Law, the court appointed Mr Shahab Haider of Sajjad Haider Chartered Accountants LLP as the liquidator. The court further ordered that the costs of the winding-up petition and the application for the appointment of the liquidator be paid as an expense of the liquidation. No order for costs was made regarding the adjourned hearing on 14 March 2016, acknowledging that the technical issues were beyond the control of the parties.

How does this case change the practice for creditors seeking to enforce judgment debts against insolvent DIFC entities?

This ruling clarifies that the DIFC Courts will not allow a pending appeal to serve as a "shield" for insolvent companies to avoid liquidation, especially when the company has ceased trading. Practitioners must note that the failure to comply with interim orders—such as paying a disputed sum into court—significantly undermines a respondent's argument that a petition is an "abuse of process." For creditors, this case provides a clear roadmap: if a debtor is insolvent and has ceased operations, the court is willing to appoint a liquidator to protect the assets, regardless of ongoing litigation regarding the quantum of the debt. Litigants must now anticipate that the court will prioritize the "just and equitable" winding-up of a defunct entity over the preservation of an appellate process that offers no realistic prospect of the company returning to solvency.

Where can I read the full judgment in Mr Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin-Alpen (ME) Limited [2016] DIFC CFI 005?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0052016-1-mr-rafed-abdel-mohsen-bader-al-khorafi-2-mrs-amrah-ali-abdel-latif-al-hamad-3-mrs-alia-mohamed-sulaiman-al-rifai-v or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-005-2016_20160502.txt.

Cases referred to in this judgment:

Legislation referenced:

• DIFC Insolvency Law No 3 of 2009 (Articles 50, 58)
• DIFC Insolvency Regulations (Regulation 5.2)