Ilyas Gaffar Saboowala v Soman Kuniyath Kunjunni Nair [2017] DIFC CFI 037 — Mandatory injunctions and the high threshold for specific performance (10 October 2017)

This judgment addresses the stringent requirements for obtaining mandatory interim relief in the context of a disputed Share Purchase Agreement, clarifying the court’s reluctance to grant specific performance where the underlying contractual obligations are subject to significant factual contention.

What was the specific monetary value and nature of the dispute in Ilyas Gaffar Saboowala v Soman Kuniyath Kunjunni Nair?

The litigation centers on a Share Purchase Agreement (SPA) concerning the acquisition of RAG Foodstuff Trading LLC. The Claimant, Ilyas Gaffar Saboowala, sought a mandatory injunction to compel the transfer of shares and his reinstatement as manager of the company, or alternatively, the appointment of a receiver. The dispute arose from a complex payment structure and a failure to finalize essential annexures to the agreement, which were intended to itemize company assets including premises, equipment, vehicles, and intellectual property.

The financial stakes were significant, with the purchase price tied to various performance and due diligence milestones. As noted in the judgment:

It had been drafted it appears by the Claimant’s legal advisors. Subject to certain potential deductions, the purchase price was AED 10.5 million.

The Claimant alleged that the Defendants failed to cooperate with the due diligence process and sought to enforce the SPA, while the Defendants countered that the Claimant had failed to satisfy the conditions precedent for the transfer of shares and was himself in breach of the agreement.

Which judge presided over the application for a mandatory injunction in the DIFC Court of First Instance in October 2017?

The application was heard by Deputy Chief Justice Sir David Steel in the DIFC Court of First Instance. The hearing took place on 8 October 2017, with the oral judgment delivered on 9 October 2017 and the formal order issued on 10 October 2017.

What were the primary legal arguments advanced by Harris Borr for the Claimant and Bushra Ahmed for the Defendants regarding the SPA?

Harris Borr, representing the Claimant, argued that the Claimant was entitled to specific performance under the SPA, emphasizing his prior appointment as manager and the subsequent exclusion from the company’s affairs. The Claimant contended that the Defendants had obstructed the due diligence process and failed to facilitate the transfer of assets as required by the agreement. Specifically, the Claimant pointed to his prior management role:

As I understand it, the Claimant was appointed manager of RAG as of 14 January 2016 and his nominee was added as a signatory to company bank accounts as of 8 February 2016.

Conversely, Bushra Ahmed, representing the Defendants, argued that the Claimant’s application for a mandatory injunction was fundamentally flawed because the Claimant was in material breach of the SPA. The Defendants asserted that the due diligence report provided by the Claimant’s auditors was unsatisfactory and that the Claimant’s failure to meet payment obligations constituted a repudiatory breach. As the court summarized:

The Defendants’ case is that the Claimant is in repudiatory breach and such has been accepted thereby bringing the SPA to an end.

What was the precise doctrinal issue the Court had to resolve regarding the threshold for a mandatory injunction?

The court was tasked with determining whether the Claimant had met the exceptionally high threshold required to obtain a mandatory injunction at an interim stage. The doctrinal issue was whether the Claimant could demonstrate a "high degree of assurance" that he would succeed at trial, rather than merely establishing a "serious question to be tried." The court had to decide if the evidence of the alleged repudiatory breach by the Claimant and the ambiguity surrounding the due diligence completion precluded the granting of specific performance before a full trial on the merits.

How did Deputy Chief Justice Sir David Steel apply the "much the better of the argument" test to the Claimant’s request for specific performance?

Sir David Steel applied the principle that a mandatory injunction, which effectively grants the final relief sought in the proceedings, requires a claimant to show that their case is significantly stronger than a mere "serious question to be tried." The judge noted that the Claimant’s reliance on the "serious question" standard was insufficient for the relief sought. He emphasized that the court must be satisfied that the claimant has a high degree of assurance of success at trial.

The judge found that the Claimant’s position was undermined by the disputed nature of the due diligence report and the potential for the Claimant to be in repudiatory breach. The court observed:

If not enough as intimated at least in the Claimant’s skeleton argument that there is a serious question to be tried.

Consequently, the court concluded that the Claimant had failed to demonstrate that he had "much the better of the argument," particularly given the unresolved disputes regarding the SPA’s annexures and the failure to satisfy the conditions for the fourth payment installment.

Which specific DIFC Contract Law provisions and RDC rules were central to the Court’s analysis of the SPA?

The court relied on Article 86 of the DIFC Contract Law No. 6 of 2004, which governs the circumstances under which specific performance may be ordered. Sir David Steel noted the relevance of this provision when evaluating the conduct of the parties:

In my judgment, it is strongly arguably that such activities fell squarely within the terms of Article 86 of the DIFC Contract Law No. 6 of 2004.

Furthermore, the court’s procedural authority to grant or refuse interim injunctions was governed by RDC 49, specifically RDC 49.10–49.13, which outline the requirements for interim remedies and the court’s discretion in maintaining the status quo.

How did the Court utilize English case law to interpret the requirements for mandatory interim relief?

The court cited Nottingham Building Society v Eurodynamic Systems plc [1993] FSR 468 to reinforce the principle that a mandatory injunction requires the applicant to demonstrate a high degree of assurance of success at trial. This authority was used to distinguish the standard for a prohibitory injunction (which often only requires a "serious question to be tried") from the more rigorous standard required for a mandatory injunction, which effectively forces a party to perform contractual obligations before the court has heard the full evidence.

What was the final disposition and the specific order regarding costs in this matter?

The Court refused the application for a mandatory injunction and the application for the appointment of a receiver. However, the Court maintained the existing order from Justice Sir Richard Field dated 21 August 2017, which prohibited the Defendants from incurring liabilities outside the ordinary and proper course of business, thereby preserving the status quo until trial. Regarding costs, the Court ordered:

The Claimant shall pay the Defendants’ costs, assessed in the amount of USD 95,000, within 14 days of the date of this Order.

What are the wider implications of this judgment for practitioners seeking mandatory injunctions in the DIFC?

This judgment serves as a stern reminder that the DIFC Courts will not grant mandatory injunctions—such as specific performance of an SPA—on a summary basis if the underlying facts are heavily contested. Practitioners must be prepared to provide evidence that goes well beyond a "serious question to be tried." The case also highlights the critical importance of finalizing all annexures and schedules to an SPA; the absence of these documents created significant ambiguity that ultimately proved fatal to the Claimant’s application. Litigants should anticipate that where a defendant raises a credible defense of repudiatory breach, the court will prioritize the preservation of the status quo over the granting of mandatory relief.

Where can I read the full judgment in Ilyas Gaffar Saboowala v Soman Kuniyath Kunjunni Nair [2017] DIFC CFI 037?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/ilyas-gaffar-saboowala-v-1-soman-kuniyath-kunjunni-nair-2-mini-soman-thoruvil-veluthedath-3-rag-foodstuff-trading-llc-2017-difc

Cases referred to in this judgment:

Legislation referenced:

• DIFC Contract Law No. 6 of 2004, Article 86
• Rules of the DIFC Courts (RDC), Part 49 (RDC 49.10–49.13)