LARMAG HOLDING v FIRST ABU DHABI BANK [2022] DIFC CFI 054 — Enforcement of post-judgment freezing orders and debarring of contumacious litigants (02 September 2022)

This order addresses the procedural consequences of a defendant’s persistent refusal to comply with court-ordered disclosure and asset-freezing obligations following a finding of fraud and deceit.

How did Larmag Holding B.V. establish the basis for an 'unless' order against Mr Abdullah Saeed Bakheet Obaid Aljaberi in CFI 054/2019?

The dispute centers on the fraudulent procurement of 70,000 Reditum SA bonds, valued at EUR 64,352,669, which the Third Defendant, Mr Aljaberi, transferred into his own account through the forgery of banking documents. Following the Court’s Corrected Judgment on 30 August 2021, which held that Mr Aljaberi had engaged in grave dishonesty and provided false evidence, the Claimant sought to enforce compliance with asset-freezing and disclosure orders. Despite these findings, Mr Aljaberi failed to comply with the Court’s directives, leading Larmag to file an application for an 'unless' order.

The Claimant argued that the Third Defendant’s continued non-compliance with the Corrected Judgment and the Passport Seizure Order necessitated a strict procedural sanction to prevent the abuse of the Court’s process. The Court noted the gravity of the underlying fraud and the defendant's subsequent failure to provide the required asset information. As the Court observed:

It is necessary in a case such as this, where there is a challenge to the jurisdiction and to the making of a freezing order, carefully to consider whether or not it is right to require the immediate production of information given the prospect that the court may later hold that jurisdiction should not have been exercised or that the freezing order should not have been made.

Which judge presided over the enforcement proceedings in Larmag Holding v First Abu Dhabi Bank on 2 September 2022?

The order was issued by Justice Sir Richard Field, sitting in the DIFC Court of First Instance. The proceedings, which culminated in the order dated 2 September 2022, followed an oral hearing held on 13 December 2021, where the Court reviewed the Claimant’s applications for the continuation of the post-judgment worldwide freezing order (PJWFOA) and the 'unless' order (UOA) regarding the Third Defendant’s appeal.

What were the specific legal arguments advanced by Mr Aljaberi regarding the scope of the freezing order?

Mr Aljaberi contested the continuation of the freezing order, arguing that the Claimant had failed to demonstrate a sufficient risk to justify such a restrictive measure. He sought to challenge the Court’s jurisdiction and the necessity of the disclosure requirements imposed upon him. His defense focused on the premise that the Claimant’s position was not at risk and that the Court’s orders were overly broad. As noted in the record:

Mr Aljaberi also contended that there is no justification for the scope of the Freezing Order: the Claimant is not at risk.

Conversely, the Claimant maintained that the Third Defendant’s history of fraud and his ongoing failure to comply with previous orders necessitated the continuation of the worldwide freezing order to ensure that the judgment debt of over EUR 64 million could be satisfied.

What was the jurisdictional question the Court had to resolve regarding the production of information during an appeal?

The Court had to determine whether it possessed the authority to compel a party to comply with disclosure and freezing obligations while that party was simultaneously challenging the Court’s jurisdiction and seeking permission to appeal. The doctrinal issue was whether a pending appeal or a challenge to the Court’s jurisdiction acts as a stay on the enforcement of interlocutory or post-judgment orders. Justice Sir Richard Field addressed whether the Court could enforce compliance with disclosure obligations despite the Third Defendant’s claim that the Court lacked the authority to issue such orders in the first place.

How did Justice Sir Richard Field apply the doctrine of contempt to the Third Defendant’s non-compliance?

Justice Sir Richard Field applied the principle that a party who is subject to a court order must comply with it, regardless of their belief that the order is invalid or that the court lacks jurisdiction. The judge emphasized that the Third Defendant’s conduct was contumacious and impeded the administration of justice. By failing to disclose assets and refusing to transfer the Reditum Bonds, the Third Defendant effectively sought to frustrate the Court’s judgment. The Court reasoned that it has the inherent power to debar a party from further participation in proceedings if their contemptuous conduct prevents the fair resolution of the case. As the Court stated:

It is plain from Grupo Torras that it is open to the court to make an order for the production of information even during the pendency of a challenge to the jurisdiction.

The Court further clarified that the prejudice to the defendant, while significant, did not outweigh the necessity of maintaining the integrity of the Court’s orders.

Which specific DIFC statutes and RDC rules were applied to justify the 'unless' order?

The Court relied on its inherent jurisdiction to manage its own proceedings and ensure compliance with its orders, specifically referencing the principles governing the strike-out of pleadings and the debarring of parties for contempt. While the order references the broader procedural framework of the DIFC Courts, the application was grounded in the Court’s authority to enforce judgments under the Rules of the DIFC Courts (RDC). The Court specifically addressed the requirements for the continuation of a worldwide freezing order, citing the necessity of ensuring that the judgment debt is satisfied.

How did the Court utilize English case law precedents to support the decision to debar the Third Defendant?

The Court utilized several English precedents to reinforce the principle that a party in contempt cannot be heard until they purge their contempt. Specifically, the Court cited Hadkinson v Hadkinson [1952] P 285 to establish that the Court has the discretion to refuse to hear a party who is in breach of an order. Furthermore, the Court referenced Grupo Torras to confirm that the production of information can be ordered even when jurisdiction is challenged. The Court also relied on Chuck v Cremer (1846) to emphasize that a party who knows of an order, whether null or valid, cannot be permitted to disobey it. These cases were used to demonstrate that the Third Defendant’s procedural rights were secondary to his obligation to comply with the Court’s prior rulings.

What was the final disposition and the specific relief granted to Larmag Holding B.V.?

The Court granted the Claimant’s application for an 'unless' order. The Third Defendant was given 18 days to comply with the obligations set out in the Corrected Judgment, the order of 27 May 2021, and the Passport Seizure Order. Failure to comply would result in the Third Defendant’s Appeal Notice being struck out and his debarment from further participation in the proceedings. Additionally, the post-judgment worldwide freezing order was continued until the judgment debt of EUR 64,352,669 is satisfied in full. The Third Defendant was also ordered to pay the Claimant’s costs for both the UOA and the PJWFOA applications. As the Court noted:

The Third Defendant must pay the Claimant’s costs incurred in the UOA to be assessed on the standard basis by a Registrar, if not agreed

How does this decision influence the enforcement of judgments in the DIFC?

This decision serves as a significant warning to litigants who attempt to use jurisdictional challenges or appeals as a shield against the enforcement of freezing orders. It reinforces the DIFC Courts' commitment to the principle that court orders must be obeyed, regardless of a party's intent to appeal. Practitioners must advise clients that persistent non-compliance, particularly in cases involving fraud, will lead to the loss of procedural rights, including the right to appeal. The ruling confirms that the DIFC Courts will not tolerate the use of the judicial process to frustrate the satisfaction of a judgment debt.

Where can I read the full judgment in Larmag Holding B.V. v First Abu Dhabi Bank [2022] DIFC CFI 054?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0542019-larmag-holding-bv-v-1-first-abu-dhabi-bank-pjsc-2-fab-securities-llc-3-mr-abdullah-saeed-bakheet-obaid-aljaberi-4-mr-3 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-054-2019_20220902.txt

Cases referred to in this judgment:

Legislation referenced:

• RDC 20.7 (Rules of the DIFC Courts)
• Corrected Judgment dated 30 August 2021
• First Judgment dated 15 August 2021
• Passport Seizure Order dated 3 August 2021