GATE MENA v TABARAK INVESTMENT CAPITAL [2023] DIFC TCD 001 — The high threshold for staying costs orders pending appeal (13 February 2023)

What was the nature of the dispute between Gate Mena DMCC and Tabarak Investment Capital Limited that led to the application for a stay of costs?

The litigation arose from a high-stakes commercial dispute in the Technology and Construction Division (TCD) involving claims for significant damages related to cryptocurrency custody and investment management. Following an eight-day trial, the Court dismissed the Claimants’ substantive claims against the Defendants, Tabarak Investment Capital Limited and Christian Thurner. The Defendants subsequently sought orders for the payment of their legal costs, which were substantial, with the First Defendant estimating costs in excess of AED 3,729,891.27 and the Second Defendant seeking a summary assessment of costs totaling AED 3,256,499.97.

The Claimants, having been granted limited permission to appeal the trial judgment, filed an application under RDC 4.2(6) to stay all costs-related orders pending the outcome of their appeal. They argued that they had already provided significant security for costs—including AED 1.3 million paid into court and seven properties valued at approximately AED 5.8 million—and that forcing them to pay costs at this stage would stifle their ability to fund the appeal. The court had to weigh these arguments against the Defendants' right to recover the costs of a successful defense. As noted in the court's reasoning:

"In the alternative, D2 seeks: (i) that he be awarded his costs to be the subject of a detailed assessment and on the indemnity basis; (ii) an interim payment on account of costs in the sum of AED 1,628,249.99."

For further context on the underlying litigation, see 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 TCD 001/2020 stay application and in which division was the order issued?

The application was heard by Justice Sir Richard Field, sitting in the Technology and Construction Division (TCD) of the DIFC Court of First Instance. The order with reasons was issued on 13 February 2023.

What were the primary arguments advanced by the Claimants and Defendants regarding the stay of costs?

The Claimants argued that a stay was appropriate because they had already provided substantial security for costs, meaning the Defendants would not be prejudiced by a delay. They contended that they were "shell companies" with limited assets, and therefore, there was no risk of asset dissipation. Furthermore, they asserted that they needed to conserve their remaining funds to finance the ongoing appeal process.

Conversely, the Defendants argued that the Claimants failed to provide the necessary evidence to justify a stay. They maintained that the Claimants’ status as shell companies actually increased the risk that the Defendants would be unable to recover their costs if the appeal were to be delayed or if the Claimants exhausted their remaining funds. The Defendants emphasized that they had successfully defended a long and complex trial and were entitled to the immediate benefit of the court's cost orders.

What was the central legal question Justice Sir Richard Field had to resolve regarding the stay of execution?

The court was tasked with determining whether the Claimants had met the high evidentiary burden required to grant a stay of execution pending an appeal under RDC 4.2(6). Specifically, the court had to decide if the mere existence of an appeal, combined with a claim of financial hardship, was sufficient to override the general principle that a successful party is entitled to the fruits of their litigation. The court had to balance the risk of the appeal being stifled against the risk that the successful Defendants would be unable to recover their costs if a stay were granted.

How did Justice Sir Richard Field apply the test for a stay of execution in this case?

Justice Sir Richard Field emphasized that the burden of proof rests squarely on the applicant to demonstrate that a stay is justified. He noted that the court must consider the relative risks to both parties. The judge highlighted that the evidence provided by an applicant must be "full, frank and clear" to convince the court that a stay is necessary to prevent an injustice, such as the stifling of a legitimate appeal.

The judge’s reasoning focused on the lack of sufficient financial disclosure from the Claimants. He found that the Claimants’ assertions regarding their financial status were insufficient to meet the required threshold. The court’s reasoning is captured in the following passage:

"In our judgment, the evidence in support of an application for a stay needs to be full, frank and clear."

The court also considered the practical realities of the costs assessment process, noting that the delay requested by the Claimants would only serve to further postpone the Defendants' recovery of costs that were already due.

Which statutes and RDC rules were central to the court's decision on the stay application?

The court primarily relied on RDC 4.2(6), which grants the court the discretion to stay proceedings or the execution of an order. Additionally, RDC 44.4 was referenced in the context of the court's general powers regarding appeals and stays. The court also considered the principles of the DIFC Courts' inherent jurisdiction to manage its own process, ensuring that the enforcement of costs orders remains consistent with the overarching objective of the Rules of the DIFC Courts.

How did the court use the precedent of Hammond Suddard Solicitors v Agrichem International Holdings Ltd in its reasoning?

Justice Sir Richard Field utilized Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 to illustrate the high threshold for staying costs orders. In that case, the court examined the contention that a refusal to grant a stay would stifle an appeal. The court cited the case to highlight the necessity of detailed financial evidence:

"Here, the appellants (“Agrichem”) sought a stay pending their appeal against the decision of the trial judge who had very substantially upheld the respondent solicitors’ claim for unpaid bills. Agrichem was a privately owned BVI company that was owned by a discretionary trust, the beneficiaries of which were members of one family and the company was not required to produce accounts. At the heart of Agrichem’s application was the contention that, but for a stay, its appeal would be stifled."

By referencing this, the judge underscored that the Claimants in the present case had failed to provide the level of transparency and financial detail that Agrichem demanded, thereby failing to justify their application.

What was the final outcome of the application and the specific orders made by the court?

The court dismissed the Claimants’ Stay Application in its entirety. Consequently, the Claimants were ordered to pay the costs of each of the Defendants, with those costs to be subject to a detailed assessment by the Registrar on the standard basis. The court’s disposition was clear:

"For the reasons given in [9] – [17] above, I dismiss the Claimants’ Stay Application with costs."

The court also noted the procedural reality that the Defendants would not receive final orders on the quantum of costs until the Registrar completed the detailed assessment, a process that would proceed without the requested stay.

What are the wider implications of this ruling for DIFC practitioners?

This decision serves as a stern reminder that the DIFC Courts will not grant a stay of execution as a matter of course, even when an appeal has been permitted. Practitioners must anticipate that any application for a stay must be supported by comprehensive, "full, frank and clear" financial evidence. The court’s reliance on the principle that successful litigants are entitled to the fruits of their victory means that the burden on the applicant is significant. Litigants should be prepared for the court to scrutinize claims of "stifling" an appeal with skepticism, particularly where the applicant is a corporate entity that has not provided transparent financial disclosures.

For further reading on the procedural history of this case family, see:
- HUOBI OTC DMCC v TABARAK INVESTMENT CAPITAL [2020] DIFC TCD 001 — Formalizing TCD jurisdiction for complex commercial disputes
- HUOBI OTC DMCC v TABARAK INVESTMENT CAPITAL [2021] DIFC TCD 001 — Procedural framework for cryptocurrency litigation

Where can I read the full judgment in GATE MENA v TABARAK INVESTMENT CAPITAL [2023] DIFC TCD 001?

The full judgment can be accessed via 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-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-001-2020_20230213.txt

Cases referred to in this judgment:

Legislation referenced:

• RDC 4.2 (6)
• RDC 44.4