How did the Claimants in CFI 026/2009 seek to expand their litigation against Bank Sarasin-Alpen to include a breach of the Law?
The Claimants—Mr. Rafed Abdel Mohsen Bader Al Khorafi, Mrs. Amrah Ali Abdel Latif Al Hamad, and Mrs. Alia Mohamed Sulaiman Al Rifai—sought to amend their existing Re-Amended Claim Form and Re-Amended Particulars of Claim to introduce a specific cause of action against the Second Defendant, Bank Sarasin & Co Limited (BSC). The core of this dispute involves allegations that the Second Defendant, a Swiss-based entity, conducted financial services within the DIFC without the requisite authorization from the Dubai Financial Services Authority (DFSA).
By way of their application dated 14 March 2013, the Claimants aimed to invoke Article 65(1) of the Law to recover money paid and seek compensation for losses resulting from transactions they alleged were entered into in violation of the Financial Services Prohibition. The Claimants argued that the Second Defendant was not an "authorised person" under Article 42(3) of the Law and that its activities—ranging from advising on financial products to arranging credit—constituted a breach of Article 41. As noted in the court's order:
Save as provided in paragraphs 1 and 2 of this Order the Claimants' application for permission to amend or re-amend the Claim From and to further re-amend the Re-amended Particulars of Claim is refused.
This application represents a significant tactical shift in the long-running litigation, AL KHORAFI v BANK SARASIN-ALPEN [2011] DIFC CA 026 — Permission to appeal granted (24 May 2011), as the Claimants moved to hold the Swiss entity directly accountable for regulatory non-compliance within the DIFC jurisdiction.
Which judge presided over the application to amend pleadings in CFI 026/2009?
The application was determined by Justice Sir John Chadwick sitting in the DIFC Court of First Instance. The matter was decided on the papers without an oral hearing, following the submission of witness statements and skeleton arguments from both the Claimants and the Respondents. The order was issued on 15 April 2013.
What were the competing legal arguments regarding the proposed amendments to the Claim Form in Al Khorafi v Bank Sarasin-Alpen?
The Claimants argued that the amendments were necessary to fully articulate the Second Defendant’s liability for carrying on financial services by way of business without a license. They contended that the facts already pleaded in their existing particulars provided a sufficient foundation to allege that the Second Defendant was "dealing in investments" and "arranging credit" in breach of the Financial Services Prohibition. They sought to add a prayer for relief specifically targeting the Second Defendant under Article 65(1) of the Law to recover payments made under the impugned agreements.
Conversely, the Respondents (Bank Sarasin-Alpen (ME) Limited and Bank Sarasin & Co Limited) opposed the application. While the specific arguments of the Respondents' counsel are not detailed in the order, their opposition necessitated the court's intervention to weigh the procedural fairness of introducing new causes of action at this stage of the proceedings. The court ultimately adopted a restrictive approach, granting only the specific amendments related to the breach of the Law and rejecting the broader scope of requested changes.
What was the precise doctrinal issue the court had to resolve regarding the application of Article 41 of the Law?
The court was tasked with determining whether the Claimants had sufficiently pleaded a case that the Second Defendant, Sarasin Switzerland, acted as an unauthorized person carrying on financial services in the DIFC. The doctrinal issue centered on whether the activities described—advising on financial products and arranging credit—fell within the definition of "Financial Service" activity under the DFSA’s General Module (GEN) rules, thereby triggering the prohibition in Article 41 of the Law. The court had to decide if it was procedurally appropriate to allow the Claimants to introduce a claim for recovery and compensation under Article 65(1) based on these alleged breaches, balancing the interests of justice against the potential prejudice to the Defendants in a case that had already seen multiple iterations of pleadings.
How did Justice Sir John Chadwick apply the test for amending pleadings under RDC 18.2(2)?
Justice Sir John Chadwick exercised his discretion under Rule 18.2(2) of the Rules of the DIFC Courts (RDC) to permit the amendments that specifically addressed the alleged breach of the Law. The judge focused on the necessity of the amendments to allow the Claimants to pursue the recovery of money and compensation under Article 65(1). By allowing the addition of paragraphs 138A through 138D, the court enabled the Claimants to formalize the contention that the agreements were unenforceable due to the Second Defendant's lack of authorization.
However, the judge was careful to limit the scope of the permission granted, refusing all other requested amendments that did not directly pertain to the breach of the Law. The reasoning reflects a strict adherence to the procedural requirements for amending pleadings, ensuring that the Defendants were not unfairly burdened by extraneous claims. As the order states:
The costs of and incidental to making the amendments to the Claim Form and the Re-Re-Amended Particulars of Claim shall be paid by the Claimants in any event.
This order underscores that while the court may grant permission to amend, it will impose strict conditions regarding costs to mitigate the impact on the opposing party.
Which specific DIFC statutes and regulatory rules were cited in the court's reasoning?
The court’s decision was grounded in the following legislative framework:
- Law Article 41: The Financial Services Prohibition, which restricts the carrying on of financial services in the DIFC without proper authorization.
- Law Article 42(3): The definition of an "authorised person" under the Law.
- Law Article 65(1): The provision allowing for the recovery of money paid and compensation in instances where agreements are entered into in breach of the Law.
- GEN Rule 2.2: Defining "Financial Service" activity by way of business.
- GEN Rule 2.7, 2.9, 2.11, 2.14: Defining specific activities such as dealing in investments, arranging credit, advising on financial products, and arranging custody.
How did the court utilize the RDC rules to manage the procedural outcome of the application?
The court utilized RDC 18.2(2) as the primary procedural vehicle for the application. By granting permission to amend the Claim Form and the Re-Amended Statement of Claim, the court effectively allowed the Claimants to realign their case to target the Second Defendant's regulatory status. The court also utilized its power under the RDC to manage the consequential amendments to the Defence, granting the Second Defendant 14 days to file and serve an amended Defence once the Claimants had served their updated documents. This ensures that the litigation remains orderly and that the Defendants have a fair opportunity to respond to the new allegations.
What was the final disposition and the specific orders regarding costs made by the court?
The court granted the application in part and refused it in part. The Claimants were permitted to amend their Claim Form and Re-Amended Statement of Claim to include the claim against the Second Defendant for breach of the Law. However, all other requested amendments were refused. Regarding costs, the court ordered that the Claimants bear the costs of the application and the costs incidental to the Second Defendant's consequential amendments to its Defence. As specified in the order:
The Claimants shall pay to the Defendants the costs of this application and the costs of and incidental to amendments to the Second Defendant's Defence which are consequential to the amendments (if any) to the amended (or re-amended) Claim From and the Re-Re Amended Particulars of Claim.
The Claimants were ordered to file and serve the amended documents by 4pm on 18 April 2013.
What are the wider implications for litigants seeking to amend pleadings to include regulatory breaches in the DIFC?
This order highlights the court's willingness to allow amendments that introduce substantive regulatory claims, provided they are clearly pleaded and grounded in the relevant Law and GEN rules. However, it also serves as a warning that such applications come with significant cost consequences, particularly when the amendments are extensive or late in the proceedings. Litigants must be precise in their drafting, as the court will not hesitate to refuse broad or vague requests for amendment. Practitioners should anticipate that the DIFC Court will prioritize the efficient management of the trial timeline, and any attempt to introduce new causes of action will be scrutinized for its impact on the existing procedural schedule.
Where can I read the full judgment in MR RAFED ABDEL MOHSEN BADER AL KHORAFI v BANK SARASIN-ALPEN [2013] DIFC CFI 026?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0262009-application-order
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| AL KHORAFI v BANK SARASIN-ALPEN | [2011] DIFC CA 026 | Contextual background for the ongoing litigation |
Legislation referenced:
- Law Article 41
- Law Article 42(3)
- Law Article 65(1)
- RDC Rule 18.2(2)
- GEN Rule 2.2
- GEN Rule 2.7
- GEN Rule 2.9
- GEN Rule 2.11
- GEN Rule 2.14