LARMAG HOLDING B.V. v FIRST ABU DHABI BANK [2019] DIFC CFI 030 — Proprietary injunction extension pending appeal (02 September 2019)

What is the nature of the dispute between Larmag Holding B.V. and First Abu Dhabi Bank regarding the 70 million Reditum SA corporate bonds?

The dispute concerns an application by Larmag Holding B.V. for a proprietary injunction to restrain First Abu Dhabi Bank (FAB) and FAB Securities LLC from dealing with or diminishing the value of 70 million nominal Reditum SA corporate bonds. Larmag alleges that these bonds were obtained through fraudulent means by third parties, specifically Mr. Abdulla Saeed Aljabri and Elite Holding Group Limited, and that the Respondents are wrongfully holding or controlling these assets. The Applicant contends that the bonds represent stolen property to which it retains legal title.

The stakes involve the preservation of these assets pending the resolution of an intended claim for unjust enrichment, the tort of deceit, fraud, and constructive trust. As the Court noted:

The injunction sought to be continued is known as a proprietary injunction since it is an injunction the entitlement to which is founded on a claim that the Respondents are wrongfully refusing to recognise the Applicant’s title in the Bonds. In my judgment, Larmag has a good arguable case that the Bonds are effectively stolen property and remain in the ownership of Larmag.

Further details regarding the case background and the specific nature of the assets can be found at the DIFC Courts website.

Which judge presided over the application to continue the injunction in Larmag Holding B.V. v First Abu Dhabi Bank in the DIFC Court of First Instance?

Justice Sir Richard Field presided over this matter in the DIFC Court of First Instance. The order to continue the injunction was issued on 2 September 2019, following a series of procedural steps including a jurisdictional ruling delivered by the same judge on 4 August 2019.

What were the primary legal arguments advanced by Larmag Holding B.V. and the Respondents, First Abu Dhabi Bank and FAB Securities LLC?

Larmag argued that the continuation of the injunction was essential to prevent the dissipation of the bonds, asserting that it had a strong, arguable case against the Respondents and the other intended defendants. Larmag maintained that the balance of convenience heavily favored the maintenance of the status quo, supported by its provision of security in the form of EUR 350,000 paid into court.

Conversely, the Respondents challenged the Court’s jurisdiction and argued that the balance of convenience did not support the continuation of the injunction. They sought permission to appeal the Court’s earlier Jurisdictional Ruling and requested a stay of the proceedings pursuant to RDC 44.4. The Respondents contended that their freedom of action should not be restrained while the jurisdictional issue remained subject to potential appeal.

What was the precise doctrinal issue the Court had to resolve regarding the continuation of the proprietary injunction?

The Court was required to determine whether it was "just and convenient" to extend the proprietary injunction pending the resolution of the Respondents' application for permission to appeal the Jurisdictional Ruling. This involved assessing whether the Applicant had established a "serious issue to be tried" and whether the balance of convenience favored the restraint of the Respondents' assets, notwithstanding the ongoing jurisdictional challenge.

How did Justice Sir Richard Field apply the test for granting a proprietary injunction in the context of the Larmag Holding B.V. dispute?

Justice Sir Richard Field applied the principles governing interim relief, emphasizing that the Court must evaluate the strength of the claim and the potential for irremediable harm. The judge confirmed that the Applicant had met the threshold for a serious issue to be tried regarding the underlying claims of fraud and constructive trust.

As I held when issuing the Original Injunction, I find that there is a serious issue to be tried on the merits of Larmag’s intended claim against the Respondents, Mr Aljabri and Elite.

The Court further reasoned that the potential prejudice to the Applicant if the assets were dissipated outweighed the temporary restriction on the Respondents' commercial freedom, particularly given the financial security provided by the Applicant.

I accordingly conclude that the grant of the injunction sought by Larmag is less likely to cause irremediable prejudice if it turns out that the injunction ought not to have been granted and that the balance of convenience is accordingly in favour of granting the injunction.

Which DIFC statutes and RDC rules were central to the Court’s decision to extend the injunction?

The Court relied primarily on Article 32 of the DIFC Court Law, which empowers the Court to grant injunctions where it is just and convenient to do so. Additionally, the Court referenced Article 5(A)(1)(a) of the Judicial Authority Law to affirm its jurisdiction over the intended claim. Procedurally, the Court addressed the Respondents' application for a stay under RDC 44.4 and treated the Respondents' written submissions as an Appellants Notice to expedite the process.

How did the Court utilize English and DIFC precedents to determine the appropriateness of the injunction?

The Court utilized American Cyanamid Co v Ethicon Ltd [1975] AC 396 to frame the balance of convenience test, noting that if damages are an adequate remedy, an injunction is generally inappropriate. However, in this case, the proprietary nature of the claim necessitated protection.

As the House of Lords pointed out in American Cyanamid Co v Ethicon Ltd [1975] AC 396, that means that if damages will be an adequate remedy for the plaintiff, there are no grounds for interference with the defendant's freedom of action by the grant of an injunction.

The Court also drew upon the principle that the test for "appropriate" relief under Article 32 of the DIFC Court Law is consistent with the "just and convenient" standard. Furthermore, the Court cited Westdeutsche Landesbank Girozentrale v London Borough of Islington [1996] UKHL 12 and Republic of Haiti v Duvalier [1990] 1 QB 202 to support the underlying legal theories of constructive trust and the protection of assets in cases of alleged fraud.

What was the final outcome of the application, and what specific orders were made regarding the injunction and costs?

The Court ordered that the Original Injunction be extended for a period of 8 weeks from the date of the ruling. The Court also directed that the Respondents' written submissions serve as their Appellants Notice and set a timeline for Larmag to file opposition submissions. The Applicant’s cross-undertaking in damages, fortified by the EUR 350,000 payment into court, was deemed sufficient to protect the Respondents.

I am satisfied that that Larmag’s cross-undertaking in damages, fortified as it as by US$350,000 paid into court, provides an adequate remedy should it turn out that the extended injunction ought not to have been granted and the Respondents suffer any loss as a result.

Costs were reserved pending the outcome of the appeal application.

What are the wider implications of this decision for practitioners handling proprietary injunctions in the DIFC?

This ruling clarifies that the DIFC Court will prioritize the preservation of assets where there is a "good arguable case" of fraud, even when the respondent is actively challenging the Court's jurisdiction. Practitioners should note that the Court is willing to grant or extend injunctions pending the resolution of jurisdictional appeals, provided the applicant offers robust financial security (cross-undertakings) to mitigate potential losses to the respondent. The decision underscores the Court's proactive approach to utilizing Article 32 of the DIFC Court Law to prevent the dissipation of assets in complex commercial fraud cases.

Where can I read the full judgment in Larmag Holding B.V. v First Abu Dhabi Bank [2019] DIFC CFI 030?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0302019-larmag-holding-bv-vs-1-first-abu-dhabi-bank-pjsc-2-fab-securities-llc-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-030-2019_20190902.txt.

Cases referred to in this judgment:

Legislation referenced:

• Judicial Authority Law, Article 5(A)(1)(a)
• DIFC Court Law, Article 32
• RDC 44.4