RAFED ABDEL MOHSEN BADER AL KHORAFI v BANK SARASIN-ALPEN [2009] DIFC CFI 026 — Refusal of financial conditions on appeal (05 April 2015)

What was the nature of the dispute and the financial stakes in Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin-Alpen [2009] DIFC CFI 026?

The lawsuit arose from a high-value banking dispute involving the Claimants—Rafed Abdel Mohsen Bader Al Khorafi, Amrah Ali Abdel Latif Al Hamad, and Alia Mohamed Sulaiman Al Rifai—and the Respondents, Bank Sarasin-Alpen (ME) Limited and Bank Sarasin & Co. Ltd. The Claimants sought damages arising from investment losses, with the quantum hearing involving claims exceeding USD 35 million. The dispute reached a critical juncture following judgments in 2014 that ordered the Defendants to pay approximately USD 10.44 million in damages and USD 1 million in costs.

Following the grant of permission to appeal, the Claimants sought to impose stringent financial conditions on the Second Defendant, Bank Sarasin & Co. Ltd. Specifically, they requested that any further sums awarded at the quantum hearing be paid directly to them, rather than into court, and that the Second Defendant provide security for the costs of the appeal. The Claimants argued that these measures were necessary to protect their position, given the complexity of enforcing a DIFC judgment against a Swiss-based entity. As noted by the Court:

In relying on its objection to jurisdiction in the Swiss courts the Second Defendant would have exercised an entitlement open to it, made known from the beginning of the Claimants’ steps to obtain judgment against it in the DIFC Courts; it would not have “cynically based [failure to pay] upon the practical difficulties for the respondent in seeking enforcement in a foreign jurisdiction” (Bell Electric Ltd v AWECO Applicance Systems GMBH & Co KG at [22].

Full judgment available here

Which judge presided over the application for financial conditions in the Court of First Instance?

The application was heard by Justice Roger Giles in the Court of First Instance. The order was issued on 5 April 2015, following a series of procedural steps that included the grant of permission to appeal on 3 February 2015 and subsequent written submissions from the parties regarding the conditions to be attached to that appeal.

What were the specific legal arguments advanced by the Claimants and the Second Defendant regarding the conditions of appeal?

The Claimants argued that the Second Defendant should be required to pay any further judgment sums directly to them as a condition of pursuing an appeal. They contended that the Court should ensure the Claimants were not prejudiced by the delay inherent in the appellate process, particularly given the potential difficulties in enforcing a DIFC judgment in Switzerland. Furthermore, the Claimants sought security for the costs of the appeal, citing the financial burden of the ongoing litigation.

The Second Defendant, conversely, maintained that it had acted in good faith and had already demonstrated its willingness to pay sums into court. It argued that there was no "compelling reason" to deviate from the standard practice by ordering direct payment or security for costs. The Second Defendant emphasized that its jurisdictional challenges were legitimate legal maneuvers rather than an attempt to evade liability. Regarding the security for costs application, the Court observed:

As to security for costs, the willingness to pay into court does not extend so far; but for the reasons thus far given I am not persuaded that it is just to require that the Second Defendant provide security for the costs of its appeal.

What was the precise doctrinal question the Court had to answer regarding the imposition of conditions on an appellant?

The Court was tasked with determining whether, as a condition of granting permission to appeal, it was appropriate to order the Second Defendant to pay future judgment sums directly to the Claimants or to provide security for the costs of the appeal. The doctrinal issue centered on the threshold for imposing financial conditions on an appellant under the Rules of the DIFC Courts (RDC). Specifically, the Court had to decide if the mere existence of an appeal or the potential difficulty of enforcement in a foreign jurisdiction constituted a "compelling reason" to depart from the general rule that an appeal does not automatically require the provision of security or the immediate payment of the judgment sum to the respondent.

How did Justice Roger Giles apply the test for imposing financial conditions on an appellant?

Justice Giles applied a restrictive test, noting that the power to impose conditions is discretionary and should be exercised sparingly. He held that a condition of payment into court is not the general rule and is reserved for "unusual and rare cases." The judge reasoned that the Claimants failed to demonstrate that the Second Defendant was attempting to frustrate the court's orders or that there was an "unexplained failure" to pay.

The Court found that the Second Defendant’s reliance on jurisdictional arguments was a legitimate exercise of its rights and did not justify the punitive measures requested by the Claimants. The judge concluded that the existing mechanism—payment into court—was sufficient to protect the Claimants' interests without imposing the additional, more onerous conditions of direct payment or security for costs. As stated in the judgment:

In my opinion, no compelling reason appears whereby the first order should be made as a condition of the grant to the Second Defendant of permission to appeal.

Which specific DIFC statutes and RDC rules were central to the Court’s reasoning?

The Court’s analysis was heavily grounded in the Rules of the DIFC Courts (RDC). Key provisions cited included:

• RDC Rule 4.3: Regarding the general powers of the Court to manage cases.
• RDC Rule 44.22(2) and 44.89(3): Concerning the conditions that may be attached to the grant of permission to appeal.
• RDC Rule 25.105 and 25.102(1): Governing the circumstances under which the Court may order security for costs.

The Court also referenced the general principles of case management and the court's inherent jurisdiction to ensure that justice is served between the parties without imposing undue financial burdens on an appellant.

How did the Court utilize English case law to interpret the requirements for security for costs and payment into court?

Justice Giles relied on several English authorities to interpret the threshold for these applications. Bell Electric Ltd v AWECO Appliance Systems GMBH & Co KG was used to distinguish between a legitimate jurisdictional challenge and a "cynical" attempt to avoid enforcement. The Court also considered Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd, which the Claimants cited to support their request for security for costs. However, Justice Giles distinguished the present case, noting that the specific circumstances—namely the Second Defendant's willingness to pay into court—rendered the requested conditions unnecessary. The Court further noted:

The Claimants submitted that a condition could also be imposed that an appellant provide security for costs; that also was done in Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd. There is provision for ordering security for the costs of an appeal in Rule 25.105, in the particular circumstances set out in Rule 25.102 (1) and on the test in Rule 25.101 that it is just to order the security.

What was the final outcome and the specific orders made by Justice Roger Giles?

The Court refused the Claimants' application for new orders, specifically denying the request for direct payment to the Claimants and the request for security for costs. Instead, the Court ordered that the Second Defendant pay any further sums awarded at the quantum hearing into court, pending the final determination of the appeals. Regarding costs, the Court ordered:

The Second Defendant submitted that the costs of the application should be costs in the appeal up to 11 February 2015 (the date of the Claimants’ further submissions, that is, when they asked for the new orders), and thereafter its costs payable on an indemnity basis.

The Claimants were ordered to pay the Second Defendant's costs of the application from 11 February 2015 onwards.

What are the wider implications of this ruling for DIFC practitioners?

This decision serves as a significant precedent for practitioners regarding the high threshold for imposing financial conditions on appellants. It clarifies that the DIFC Courts will not readily impose conditions such as direct payment or security for costs simply because an appellant is challenging a judgment or is based in a foreign jurisdiction. Practitioners must be prepared to demonstrate a "compelling reason," such as evidence of bad faith or a clear risk that the appellant is attempting to dissipate assets or frustrate the court's enforcement mechanisms. The ruling reinforces the principle that the right to appeal should not be unduly hindered by financial barriers unless the justice of the case clearly demands it.

Where can I read the full judgment in Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin-Alpen [2009] DIFC CFI 026?

Full judgment available on the DIFC Courts website

Cases referred to in this judgment:

Legislation referenced:

• RDC Rule 4.3
• RDC Rule 44.22 (2)
• RDC Rule 44.89 (3)
• RDC Rule 44.90
• RDC Rule 25.105
• RDC Rule 25.102 (1)