GATE MENA DMCC v TABARAK INVESTMENT CAPITAL [2023] DIFC TCD 001 — Permission to appeal and the threshold for challenging factual findings (07 February 2023)

Did Gate Mena DMCC and Huobi Mena FZE establish a realistic prospect of success to appeal the judgment in TCD 001/2020?

The litigation arises from a complex commercial dispute involving Gate Mena DMCC (formerly Huobi OTC DMCC) and Huobi Mena FZE against Tabarak Investment Capital Limited and Christian Thurner. Following an eight-day trial, the Claimants sought permission to appeal the judgment delivered by Justice Sir Richard Field on 26 October 2022. The core of the dispute concerns allegations of breach of confidence and negligence, with the Claimants seeking to overturn findings that were unfavorable to their position.

The application for permission to appeal was contested by the Defendants, who argued that the proposed grounds failed to meet the threshold required by the Rules of the DIFC Courts (RDC). In evaluating the application, the Court had to determine which aspects of the appeal possessed a "realistic" rather than "fanciful" prospect of success. As noted in the Court’s order:

In my judgment, the following grounds have a realistic prospect of success and I grant permission for them to be argued in the Court of Appeal: 1. (claim for breach of confidence) pleaded in para 1 6. (claim for negligence (3) pleaded in paragraphs 6-11 including “Breach of Duty” 7. (appeal on a point of law) pleaded in para 12 8. (appeal on a point of law) pleaded in para 13

Further details regarding the underlying commercial context of this dispute can be found in the deep editorial analysis at: Gate Mena v Tabarak Investment Capital [2022] DIFC TCD 001: The High Cost of Misjudged Cryptocurrency Custody.

Which judge presided over the application for permission to appeal in the Technology and Construction Division?

The application for permission to appeal was heard and determined by Justice Sir Richard Field, sitting in the Technology and Construction Division of the DIFC Court of First Instance. The order was issued on 7 February 2023, following the Claimants' filing of their Appeal Notice on 5 December 2022.

How did the parties frame their arguments regarding the "real prospect of success" test under RDC 44.19?

The Defendants, Tabarak Investment Capital Limited and Christian Thurner, opposed the application in its entirety. Their legal strategy centered on the assertion that the Claimants’ proposed grounds of appeal failed to meet the mandatory threshold for appellate review. The Defendants relied heavily on the strict interpretation of RDC 44.19, which requires that an appeal must have a "real prospect of success" or some other compelling reason to be heard.

As recorded in the Court's schedule of reasons:

The First Defendant and the Second Defendant oppose the Application in its entirety on the grounds that the proposed grounds of appeal have no real prospect of success as required by RDC 44.19.

Conversely, the Claimants argued that their grounds—specifically those pertaining to breach of confidence, negligence, and specific points of law—were legally sound and necessitated appellate scrutiny. They sought to distinguish these legal arguments from the factual findings they were also challenging, attempting to bypass the high bar set for overturning trial judge determinations.

What was the precise legal question Justice Sir Richard Field had to answer regarding the Claimants' alternative case under the Law of Obligations?

The Court was required to determine whether the Claimants’ alternative case, predicated on Articles 13 and 15 of the Law of Obligations, provided a sufficient legal basis to warrant an appeal against the Second Defendant, Christian Thurner. The legal question was whether, if the appeal against the First Defendant (Tabarak Investment Capital Limited) were to succeed, the Claimants had established a viable pathway for judgment against the Second Defendant based on these specific articles.

Justice Sir Richard Field concluded that this alternative argument was sufficiently grounded in law to be heard by the Court of Appeal. He stated:

In my judgment, the Claimants’ alternative case based on Articles 13 and 15 presently constitutes an arguable legal basis for obtaining judgment against the Second Defendant if the appeal succeeds against the First Defendant.

How did Justice Sir Richard Field apply the "plainly wrong" test to the Claimants' challenge of factual findings?

In addressing the grounds of appeal that challenged the trial judge's findings of fact, Justice Sir Richard Field applied the established doctrine of appellate deference. He emphasized that an appellate court should not re-examine evidence simply because it might have reached a different conclusion. Instead, the court must be satisfied that the trial judge’s findings were "plainly wrong" or exceeded the "generous ambit" of reasonable disagreement.

The Court held that the Claimants failed to meet this high threshold regarding the factual issues identified as Issues 2 through 5. The reasoning was clear:

In my judgment, in light of the above cited authorities, the grounds of appeal styled Issue 2, Issue 3, Issue 4 and Issue 5, all of which challenge findings of fact, do not have a realistic prospect of success and accordingly I decline to grant permission for them to be argued on appeal.

Which DIFC and English authorities did the Court rely upon to define the "real prospect of success" and the limits of appellate interference?

Justice Sir Richard Field relied on a consistent line of DIFC and English jurisprudence to guide his decision. Regarding the definition of "real prospect of success," the Court cited Khorafi et al v Bank Sarasin-Alpen (ME) Limited (CFI-026-2009), DNB Bank ASA v (1) Gulf Eyadah Corporation; and (2) Gulf Navigation Holding PJSC (CFI-043-2014), and Vannin Capital PCC Plc v Mr Rafed Abdel Mohsen and Ors [2014] CFI 036. These cases collectively establish that a "real prospect" must be "realistic" rather than "fanciful."

Regarding the deference owed to trial judges on factual findings, the Court cited Hormodi Bankmed (SAL) (CA006/2019), where the DIFC Court of Appeal affirmed that appellate interference is reserved for findings that are "plainly wrong."

How did the court use the UK Supreme Court decision in McGraddie v McGraddie to justify its refusal of permission to appeal on factual grounds?

The Court utilized McGraddie v McGraddie [2013] UKSC 58 as a definitive authority on the rationale for appellate restraint. Justice Sir Richard Field highlighted that the trial judge is in a "privileged position" to assess witness credibility and that the trial itself should be the "main event" rather than a "tryout on the road." By citing Lord Reed’s analysis in McGraddie, the Court underscored that duplicating the trial judge’s efforts at the appellate level is an inefficient use of judicial resources and undermines the finality of the trial process. This reasoning was further supported by references to In the matter of B (a Child) [2013] UKSC 33.

What was the final disposition of the application and how were the costs apportioned between the parties?

The application was granted in part and refused in part. Permission to appeal was granted for grounds concerning breach of confidence, negligence, and specific points of law. Permission was refused for all grounds challenging findings of fact. Regarding the costs of the application, the Court ordered:

The Claimants must pay 35% of the costs incurred by the First Defendant and the Second Defendant in opposing the Application.

The Court further ordered that the remaining costs of the application be treated as costs in the appeal itself.

What are the practical implications of this ruling for practitioners litigating in the DIFC Technology and Construction Division?

This decision serves as a stark reminder of the difficulty in challenging factual findings in the DIFC Courts. Practitioners must anticipate that the Court will strictly apply the "plainly wrong" test, making it highly unlikely that an appeal will succeed if it merely seeks to re-argue the evidence presented at trial. Litigants should focus their appellate strategies on clear errors of law or procedural irregularities rather than attempting to relitigate the facts.

The ruling also clarifies the potential liability of individual defendants under the Law of Obligations, provided that the legal basis is clearly articulated in the grounds of appeal. For further context on the procedural history, see the sibling orders: HUOBI OTC DMCC v TABARAK INVESTMENT CAPITAL [2020] DIFC TCD 001, 2020-09-16, 2020-11-09, 2021-02-04, and 2021-05-09.

Where can I read the full judgment in Gate Mena DMCC v Tabarak Investment Capital [2023] DIFC TCD 001?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/tcd-0012020-1-gate-mena-dmcc-formerly-houbi-otc-dmcc-2-huobi-mena-fze-v-1-tabarak-investment-capital-limited-2-christian-thurner and via CDN: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-001-2020_20230207.txt.

Cases referred to in this judgment:

Legislation referenced:

• Law of Obligations Articles 13 and 15
• RDC 44.19