This judgment addresses the liability of Mr Abdulla Saeed Bakheet Obaid Aljaberi and associated entities for the fraudulent misappropriation of EUR 70 million in corporate bonds, specifically clarifying the interplay between DIFC and UAE law regarding non-compensatory damages.
What were the specific factual allegations and the total value of the bonds at stake in Larmag Holding B.V. v First Abu Dhabi Bank?
The dispute centers on the alleged fraudulent inducement of Larmag Holding B.V. (Larmag) to transfer 70,000 Reditum SA corporate bonds—valued at EUR 70 million—into an account held by the Third Defendant, Mr Abdulla Saeed Bakheet Obaid Aljaberi, at FAB Securities LLC. Larmag contended that it was misled by forged documents, including statements purportedly from Noor Bank, which falsely confirmed a EUR 20 million pre-payment for the bonds. Furthermore, Larmag alleged that it was fraudulently induced to permit a coupon payment of EUR 2,187,500 to be diverted to an account controlled by Mr Aljaberi under the pretense that the funds would be repaid.
The litigation sought to recover the value of these assets, which were allegedly dissipated by Mr Aljaberi and his controlled entity, Elite Holding Group Limited. The court was tasked with determining the valuation of these bonds at the time of the misappropriation. As noted in the judgment:
In my judgment, Mr Caldwell’s report provides sufficient evidence of the market value of the Claimed Bonds at the date they were wrongly appropriated (3 July 2018) for the Court to adopt his valuation of EUR 57,711,500.
The claimant sought restitution and damages, but the court emphasized that recovery must be carefully calibrated to avoid unjust enrichment. As stated in the judgment:
If the Claimant receives the damages awarded below in respect of the deceitful misappropriation of all the EUR 70 million Claimed Bonds, it will not be entitled to a payment in lieu of actual restitution of any of those bonds because this would be double recovery for the same wrongful act.
[Source: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/larmag-holding-bv-v-1-first-abu-dhabi-bank-pjsc-2-fab-securities-llc-3-mr-abdulla-saeed-bakheet-obaid-aljaberi-4-mr-ali-mohamed-5-elite-holding-group-limited]
Which judge presided over the trial of Larmag Holding B.V. v First Abu Dhabi Bank in the DIFC Court of First Instance?
The trial of this action was presided over by Justice Sir Richard Field, sitting in the DIFC Court of First Instance. The judgment was delivered on 15 August 2021, following a comprehensive examination of the evidence regarding the fraudulent inducement and the subsequent dissipation of the Claimed Bonds.
How did Mr Black QC and Mr Thompson QC frame the arguments regarding the applicability of the double actionability rule and UAE law?
Mr Black QC, representing the Claimant, Larmag, argued that if UAE law were determined to be the governing law for the substantive claims, the court should apply the English "double actionability" rule. This rule would have allowed Larmag to sue in the DIFC on equivalent English causes of action for wrongs committed outside the jurisdiction. Larmag’s strategy was to maintain a dual-pleading approach, relying on both DIFC Law and UAE Law to ensure that the fraudulent conduct—which occurred across multiple jurisdictions—remained actionable regardless of the court’s choice-of-law determination.
Conversely, the defense, led by Mr Thompson QC, contested the availability of punitive or exemplary damages under UAE law. The defense maintained that the court should strictly adhere to the governing law provisions under DIFC Law No. 3 (2004). The defense successfully argued that the claimant’s attempt to import non-compensatory damages via Article 293 of the UAE Civil Code was fundamentally flawed, as those provisions did not contemplate the punitive nature of Article 40(2) of the DIFC Damages and Remedies Law.
What was the precise legal question regarding the nature of Article 40(2) of the DIFC Damages and Remedies Law that the court had to resolve?
The court was required to determine whether Article 40(2) of the DIFC Damages and Remedies Law—which provides for exemplary or punitive damages—could be applied to claims governed by UAE law. The central doctrinal issue was whether Article 40(2) is a procedural rule of the forum (lex fori) or a substantive provision that cannot be invoked when the underlying cause of action arises under the UAE Civil Code. The court had to decide if the claimant could "mix and match" substantive UAE law with DIFC remedial provisions to secure punitive damages for deceitful misappropriation.
How did Justice Sir Richard Field apply the test from Harding v Wealands to determine the availability of punitive damages?
Justice Sir Richard Field utilized the reasoning established in Harding v Wealands to categorize the nature of the damages sought. The court reasoned that if the underlying causes of action are predicated on harm that is purely compensatory, then a claim for punitive damages under Article 40(2) cannot be treated as a mere procedural matter. The judge concluded that the claimant’s attempt to rely on Article 293 of the UAE Civil Code to justify these damages was insufficient.
The reasoning process is captured in the following excerpts:
Adopting the reasoning of Lord Hoffmann in Harding v Wealands, in my judgment, if the UAE causes of action relied on by Larmag for its damages claims are all predicated on the claimant having suffered harm which can be compensated in damages, Larmag’s claim under Article 40 (2) must fail.
Adopting this approach, I find that Article 40 (2) is not a procedural provision but is of a substantive nature and it is not sufficiently analogous to Article 293 to be available to Larmag because, as I have held, the damages Article 40 (2) provides for are not compensatory but are exemplary or punitive.
Which specific statutes and DIFC laws were cited by the court to govern the choice of law and the assessment of damages?
The court relied heavily on Article 8 of DIFC Law No. 3 (2004) to determine the governing law of the dispute. Regarding the assessment of damages, the court referenced Article 40(2) of the DIFC Damages and Remedies Law and Article 40 of the DIFC Law of Contract (2004). The court also engaged with Article 293 of the UAE Civil Code, which the claimant attempted to use as a gateway for non-compensatory damages. The court ultimately rejected the application of the double actionability rule, citing the substantive nature of the damages provisions.
How did the court utilize the precedents of Derry v Peak and Harding v Wealands in its final judgment?
The court utilized Derry v Peak to address the foundational elements of the fraud claim, specifically the false statements made by the defendants that induced the transfer of the bonds. This case provided the standard for the deceit claim. Harding v Wealands was used as the primary authority for the choice-of-law analysis. Justice Sir Richard Field applied the Harding test to distinguish between procedural and substantive law, ultimately determining that the claimant could not use DIFC remedial law to inflate a claim governed by UAE substantive law.
What was the final disposition of the court regarding the claims for damages and the request for non-compensatory relief?
The court dismissed the claimant’s argument that Article 293 of the UAE Civil Code allowed for the award of non-compensatory damages. The court held that the claimant failed to satisfy the court that such damages were available. Furthermore, the court clarified that it would not award damages for loss of reputation, as these were not properly pleaded.
The court’s stance on the limitations of the damages award is summarized here:
I say this because, for reasons that I give later in this judgment, I dismiss Mr Black’s argument founded on Article 293 on the ground that he has not satisfied the Court that this Article contemplates the award of non-compensatory damages in the nature of the exemplary, punitive damages available under Article 40 (2).
In my judgment, those advising Mr Aljaberi could not be expected to have anticipated Mr Black’s contention that moral damages as provided for in Article 293 included exemplary or punitive damages such as are contemplated in Article 40 (2) of the Damages and Remedies Law.
Accordingly, for the reasons given in paragraphs 217 – 219, I find that Larmag cannot pursue its claim for multiple damages under Article 40 (2) of the DIFC Remedies Law.
In fact, loss of reputation damages have not been pleaded and Mr Black did not seek an award of such damages. I therefore make no order under this head of damages.
What are the wider implications of this judgment for practitioners litigating fraud claims in the DIFC?
This judgment serves as a critical reminder that the DIFC Court will not permit the "cherry-picking" of remedial provisions from DIFC law to supplement claims governed by UAE law. Practitioners must be precise in pleading the specific provisions of the UAE Civil Code and should not assume that DIFC remedial statutes, such as Article 40(2) of the Damages and Remedies Law, will automatically apply to foreign or UAE-governed substantive claims. Litigants must anticipate that the court will apply a rigorous characterization test to determine whether a provision is substantive or procedural, and failure to plead specific UAE-based remedies will likely result in the denial of punitive or exemplary damages.
Where can I read the full judgment in Larmag Holding B.V. v First Abu Dhabi Bank [2019] 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/larmag-holding-bv-v-1-first-abu-dhabi-bank-pjsc-2-fab-securities-llc-3-mr-abdulla-saeed-bakheet-obaid-aljaberi-4-mr-ali-mohamed-5-elite-holding-group-limited
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Derry v Peak | [1889] 14 App Cas 337 | Established the standard for the fraud/deceit claim. |
| Harding v Wealands | [2007] UKHL 32 | Provided the test for distinguishing substantive vs procedural law. |
Legislation referenced:
- DIFC Law No. 3 (2004) Article 8
- DIFC Law of Contract (2004) Article 40
- DIFC Damages and Remedies Law Article 40(2)
- UAE Civil Code Article 293