What was the specific dispute between Mad Atelier International B.V. and Axel Manes regarding the beneficial ownership of Five Dining Corporation?
The dispute centered on the Claimant’s efforts to enforce a substantial English judgment against the assets of Mr. Axel Manes, a renowned chef and restauranteur. Following a finding of fraud and deceit by the Courts of England and Wales, the Claimant sought to execute against shares in Five Dining Corporation Limited, a DIFC-registered entity operating a successful restaurant. The Claimant alleged that Mr. Manes had engaged in a series of transactions designed to distance himself from these assets to evade enforcement.
The core of the conflict involved the true ownership of Five Dining. While Mr. Manes initially attempted to claim that his former wife, Ms. Catherine Zhilla, and her children held the shares, the Claimant argued that Mr. Manes remained the true beneficial owner at all times. The Court was tasked with determining the reality of this ownership structure in light of the Claimant’s assertion that the transfers were sham transactions. As noted in the court's findings:
In consequence, the Claimant seeks a declaration that Mr Manes is the beneficial owner of Five Dining and has been the beneficial owner since its incorporation on 10 October 2019.
The stakes were high, as the restaurant’s success—linked directly to Mr. Manes’s reputation—represented a primary asset for satisfying the multi-million Euro and Sterling judgment debt. [Source: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/mad-atelier-international-bv-v-1-axel-manes-2-catherine-zhilla-2022-difc-cfi-030]
Which judge presided over the trial of Mad Atelier International B.V. v Axel Manes in the DIFC Court of First Instance?
Justice Sir Jeremy Cooke presided over the trial, which took place in the Court of First Instance on 6 February 2023. The final judgment was issued on 10 February 2023. This followed a series of procedural developments, including the consolidation of Claim Nos. CFI-021-2022 and CFI-030-2022 by H.E. Justice Maha Al Mheiri and earlier interlocutory orders made by Justice Lord Angus Glennie.
What were the respective legal positions of Mad Atelier International B.V. and Axel Manes regarding the transfer of shares in Five Dining Corporation?
The Claimant, represented by Mr. Tom Montagu-Smith KC, argued that the purported transfer of shares in Five Dining to "Five Aces" and the subsequent claims of ownership by Ms. Zhilla were fraudulent attempts to shield assets from the English judgment. The Claimant highlighted the timing of these transfers, noting they occurred shortly after the English proceedings were amended to include specific allegations of fraud and deceit. The Claimant contended that the Defendants’ accounts of the share transfers were entirely lacking in credibility.
Conversely, the Defendants, Mr. Manes and Ms. Zhilla, failed to participate in the trial. While Mr. Manes had previously submitted seven witness statements and Ms. Zhilla had provided two statements and an affidavit, they ultimately ceased participation in the proceedings on 29 December 2022. Mr. Manes’s final position, as stated in his fifth witness statement, was a belated admission of ownership based on an alleged agreement for sale with Ms. Zhilla, though he failed to provide the necessary disclosure or evidence to substantiate this claim or comply with the Court's directions.
What was the precise doctrinal issue the Court had to answer regarding the beneficial ownership of Five Dining Corporation?
The Court was required to determine, as a matter of fact and law, the true beneficial ownership of Five Dining Corporation Limited (DIFC registered company number 3517) since its incorporation on 10 October 2019. The doctrinal issue was whether the Court could look behind the formal corporate register and the Defendants' assertions of share transfers to declare that Mr. Manes was, and had always been, the beneficial owner. This required the Court to assess whether the Defendants’ conduct—specifically their failure to comply with disclosure orders and their attempts to distance Mr. Manes from the company—constituted a sham, thereby justifying a judicial declaration of beneficial ownership to facilitate the enforcement of the English judgment.
How did Justice Sir Jeremy Cooke apply the test for beneficial ownership in the absence of Defendant participation?
Justice Sir Jeremy Cooke utilized the history of the litigation and the Defendants' non-compliance to draw adverse inferences. The Court observed that the timing of the share transfers was highly suspicious, aligning precisely with the escalation of the Claimant’s fraud allegations in the English courts. By failing to comply with disclosure orders and abandoning the proceedings, the Defendants left the Claimant’s evidence unchallenged.
The Court concluded that the Defendants' explanations were not credible and that the corporate structure was a facade. The judge emphasized the sequence of events, noting:
From this history of events, it can be seen that the transfer of the shares in Five Dining to Five Aces followed shortly after the amendment of the Claimant in the English proceedings to include allegations of fraud and deceit.
Consequently, the Court exercised its power to declare the true state of affairs, confirming that the beneficial interest had never left Mr. Manes.
Which specific statutes and regulations did the Court consider in determining the beneficial ownership of the DIFC entity?
The Court referenced the Ultimate Beneficial Ownership Regulations 2018, specifically Regulation 4.1, in the context of identifying the true controller of the DIFC-registered entity. Additionally, the Court relied on its inherent jurisdiction to enforce foreign judgments and its procedural powers under the Rules of the DIFC Courts (RDC). Specifically, RDC 28.61 was relevant to the Court's ability to grant immediate judgment and manage the enforcement process. The Court also drew upon the principles established in Stack v Dowden [2007] 2 AC 432 regarding the determination of beneficial interests, applying these principles to the context of corporate shareholding and asset shielding.
How did the Court utilize the precedent of Stack v Dowden in the context of this DIFC commercial dispute?
The Court cited Stack v Dowden [2007] 2 AC 432 to support the broader legal principle that the Court may look behind the legal title to determine the true beneficial ownership of assets. While Stack is a seminal English case concerning the beneficial interest in residential property, Justice Sir Jeremy Cooke applied its underlying logic to the commercial context of Five Dining Corporation. The Court used this precedent to reinforce the principle that where the legal title is held in a manner inconsistent with the reality of control and financial interest—particularly in cases involving fraud—the Court is not bound by the formal register and may declare the true beneficial owner to prevent the evasion of legal obligations.
What was the final disposition and the specific monetary relief ordered by the Court?
The Court granted the Claimant’s request for a declaration that Mr. Axel Manes is the beneficial owner of Five Dining Corporation Limited and has been since its incorporation on 10 October 2019. Furthermore, the Court ordered the Defendants to pay the Claimant’s costs on an indemnity basis for both Claim No. CFI-021-2022 and Claim No. CFI-030-2022.
The Court’s orders regarding costs were specific:
The Defendants shall pay the Claimant’s costs of Claim No. CFI-021-2022 on the indemnity basis, such costs to be the subject of detailed assessment if not agreed.
The Defendants shall pay the Claimant’s costs of Claim No. CFI-030-2022 on the indemnity basis, such costs to be the subject of detailed assessment if not agreed.
Additionally, the Court mandated interim payments on account of costs, totaling USD 494,000 for the consolidated claims, plus specific amounts for individual liabilities, totaling hundreds of thousands of dollars to be paid by 20 February 2023.
What are the wider implications of this judgment for practitioners dealing with judgment enforcement in the DIFC?
This judgment serves as a strong warning to litigants who attempt to use corporate structures or sham transfers to evade the enforcement of foreign judgments. It confirms that the DIFC Court will not be deterred by a lack of Defendant participation or by complex, opaque corporate arrangements. Practitioners should anticipate that the Court will take a robust approach to disclosure and will readily pierce corporate veils where there is evidence of fraud or bad faith. The ruling underscores that the DIFC Courts are a hostile environment for judgment debtors attempting to hide assets, and that the Court will use its powers to ensure that its processes are not abused to frustrate the enforcement of legitimate foreign judgments.
Where can I read the full judgment in Mad Atelier International B.V. v (1) Axel Manes (2) Catherine Zhilla [2022] DIFC CFI 030?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/mad-atelier-international-bv-v-1-axel-manes-2-catherine-zhilla-2022-difc-cfi-030
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Stack v Dowden | [2007] 2 AC 432 | Principles of beneficial ownership |
Legislation referenced:
- Ultimate Beneficial Ownership Regulations 2018, Regulation 4.1
- Rules of the DIFC Courts (RDC), Rule 28.61