GATE MENA v TABARAK INVESTMENT CAPITAL [2023] DIFC TCD 001 — Balancing security for costs against the risk of stifling an appeal (15 June 2023)

What was the specific dispute regarding the AED 1,551,591.99 security for costs order in Gate Mena v Tabarak Investment Capital?

The litigation concerns a high-stakes dispute involving cryptocurrency assets, where the Claimants, Gate Mena DMCC (formerly Huobi OTC DMCC) and Huobi Mena FZE, sought an extension of time to provide security for the Respondents' costs of an appeal. The Court had previously ordered the Claimants to pay AED 1,551,591.99 into court as security. The Claimants, citing financial difficulties and ongoing settlement negotiations in unrelated Hong Kong arbitration proceedings, requested an extension of the payment deadline from June 2023 to 15 October 2023. They argued that forcing payment earlier would effectively stifle their appeal, preventing them from pursuing their claims regarding the alleged loss of millions of dollars in Bitcoin.

The Respondents, Tabarak Investment Capital Limited and Christian Thurner, vehemently opposed this extension. They contended that the Claimants had failed to provide transparent evidence of their financial position and that the delay would cause significant prejudice by leaving the Respondents’ legal costs unprotected for an extended period. The core of the dispute was whether the Court should prioritize the Claimants' desire to avoid "stifling" the appeal or the Respondents' right to be secured against the risk of non-payment of costs. As noted in the judgment:

I reject the Claimants’ submission that the proposed extension of time for payment of the security does not give rise to any prejudice to the Defendants. In my Judgment, the Defendants will be significantly prejudiced by having the uncertainty as to whether the costs already incurred in the appeal and the costs that will be incurred in preparing for the appeal prior to 15 October 2023 will be covered by the security ordered to be paid by the SFCA Order.

Further details on the underlying commercial dispute and the procedural history can be found at: Gate Mena v Tabarak Investment Capital [2022] DIFC TCD 001: The High Cost of Misjudged Cryptocurrency Custody. Sibling orders in this case family include the 2020-07-28, 2020-09-16, 2020-11-09, 2021-02-04, and 2021-05-09 orders.

Which judge presided over the Gate Mena v Tabarak Investment Capital security for costs application in the Technology and Construction Division?

The application was heard and decided by Justice Sir Richard Field, sitting in the Technology and Construction Division (TCD) of the DIFC Court of First Instance. The order was issued on 15 June 2023, following the consideration of multiple witness statements and written submissions from both parties.

What were the specific legal arguments advanced by Charles Russell Speechlys LLP and KBH Limited regarding the extension of time?

Charles Russell Speechlys LLP, representing the Claimants, argued that the Court should grant the extension to prevent the "stifling" of the appeal. They relied on the assertion that the Claimants were "innocent victims" of fraud and that they expected to receive funds from a Hong Kong arbitration settlement that would allow them to satisfy the security order. They maintained that the extension to October 2023 would still be well in advance of the January 2024 appeal hearing, thereby causing no prejudice to the Respondents.

Conversely, KBH Limited, acting for the Respondents, argued that the Claimants had failed to provide full and frank disclosure of their financial position. They highlighted that the Claimants had previously failed to pay interim costs orders and that the proposed reliance on speculative settlement funds from Hong Kong was insufficient to justify delaying the security payment. They argued that the Respondents were entitled to the security as ordered and that any further delay would unfairly prejudice their position by leaving them exposed to unrecovered legal costs.

What was the precise doctrinal issue Justice Sir Richard Field had to answer regarding the extension of time for security for costs?

The Court had to determine whether, in the exercise of its discretion, it was "just and appropriate" to grant an extension of time for the payment of security for costs when the applicant claims that immediate payment would stifle their appeal. The doctrinal challenge lay in balancing the procedural requirement for security—intended to protect a successful respondent—against the fundamental principle that a party should not be prevented from pursuing a legitimate appeal due to temporary impecuniosity, provided that the claim of stifling is supported by transparent and comprehensive evidence.

How did Justice Sir Richard Field apply the test for stifling and prejudice in his reasoning?

Justice Sir Richard Field emphasized that while the Court has the discretion to extend time, such an application requires the applicant to provide full and frank evidence regarding their financial status. He found that the Claimants had failed to provide this evidence at the outset, which weakened their position. Furthermore, he balanced the Claimants' need for time against the prejudice suffered by the Respondents, concluding that the uncertainty regarding the security of their costs was a significant factor.

As I have indicated above, it is well-known that a stifling case requires full and frank evidence as to the applicant’s financial position and I think that the evidence now supplied by Al Ali as to the financial position of the Claimants and the state of play in the settlement negotiations in the Hong Kong arbitration proceedings should have been served at the outset of the application.

The judge ultimately decided that while an extension was warranted due to the scheduling of the appeal hearing in January 2024, the requested date of October 2023 was excessive. He granted a shorter extension until 10 July 2023, effectively forcing the Claimants to demonstrate their commitment to the litigation sooner than they had requested.

Which specific statutes and RDC rules were central to the Court's decision in TCD 001/2020?

The Court’s decision was primarily governed by the Rules of the DIFC Courts (RDC), specifically RDC 4.7, which grants the Court broad case management powers to extend or shorten the time for compliance with any rule, practice direction, or court order. The application was also framed within the context of the Court’s inherent jurisdiction to manage appeals and ensure that orders for security for costs are effective and not rendered illusory by non-compliance.

How did the Court utilize English precedents like Tibbles v SIG Plc and Oyston v Rubin in its reasoning?

Justice Sir Richard Field relied on established principles from English jurisprudence to guide his exercise of discretion. In Tibbles v SIG Plc [2012] EWCA Civ 518, the court clarified the circumstances under which it may vary or revoke an order, emphasizing that the court must consider whether there has been a material change in circumstances. In Oyston and Anor v Rubin and Anor [2021] EWHC 448 (Ch), the court provided guidance on the factors relevant to security for costs and the assessment of prejudice. These cases were used to reinforce the requirement that any application for an extension must be supported by robust evidence and that the court must be vigilant against attempts to delay proceedings without a compelling, evidence-backed justification.

What was the final disposition and the specific monetary relief ordered by the Court?

The Court granted the application in part. Justice Sir Richard Field ordered that the deadline for the payment of the security for costs be extended, but only until 10 July 2023, rather than the requested 15 October 2023. The total sum to be paid remained AED 1,551,591.99, with specific allocations for each Respondent.

Paragraph 1 of the SFCA Order shall be amended so as to read:
“The Appellants must provide security for the Respondents’ costs of the appeal herein by paying into Court by 4.00 pm on 10 July 2023 the total sum of AED 1,551,591.99, whereof AED 969,386.99 will secure the costs of R1 and AED 582,205 will secure the costs of R2”.

The Claimants were also ordered to pay the costs incurred by the Defendants in resisting the application, to be assessed on the standard basis if not agreed.

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

This decision serves as a stern reminder that the DIFC Courts will not tolerate "wait-and-see" tactics when it comes to security for costs. Practitioners must ensure that any argument regarding the "stifling" of an appeal is supported by comprehensive, contemporaneous financial evidence at the very first opportunity. The Court’s willingness to grant only a partial extension demonstrates a pragmatic approach: while it will accommodate genuine procedural shifts (such as the setting of an appeal date), it will not allow impecuniosity to be used as a shield to delay the protection of a respondent’s costs. Litigants should anticipate that the Court will prioritize the Respondents' right to security unless the evidence of financial hardship is both clear and compelling.

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-2christian-thurner or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-001-2020_20230615.txt.

Cases referred to in this judgment:

Legislation referenced:

• Rules of the DIFC Courts (RDC) 4.7