El Haddad v Al Rostamani & Ors

Factual and Procedural Background

The claimant ("Plaintiff") brought claims against the first to seventh defendants (the "AR Defendants"), members of a prominent family owning a business group in the United Arab Emirates ("UAE"), and the eighth defendant ("Defendant Eight"), a UAE-based lawyer. The Plaintiff, a UK citizen, alleges that he and the first defendant entered into a partnership in 2002, initially orally and later through a written agreement governed by English law, known as the "KMI Partnership Contract" ("KMI-PC"). The partnership's business spanned management consultancy, real estate, property development, and other sectors, operating initially in England with expansion plans to Dubai and Saudi Arabia.

The AR Defendants deny the existence of any partnership or the authenticity of the KMI-PC but accept these issues are not suitable for determination at this stage. The Plaintiff also relies on several written undertakings indicating that shares and assets held in various companies, particularly in Dubai, were held on trust for the partnership.

The personal relationship between the Plaintiff and the first defendant ended in 2006, after which the Plaintiff alleges that the first defendant and other defendants conspired to misappropriate partnership assets, including the disposal of significant real estate assets in Dubai at undervalue, causing substantial losses. The eighth defendant is alleged to have been involved in these wrongful transactions despite acting as the partnership's lawyer.

Claims include breach of fiduciary, contractual and statutory duties, conspiracy to defraud, dishonest assistance, knowing receipt, and fraudulent misrepresentation. The Plaintiff seeks dissolution and winding-up of the partnership and related accounts and inquiries.

Procedurally, the Plaintiff initiated proceedings in 2019, obtaining permission to serve the claim form outside the jurisdiction on the defendants. The AR Defendants and Defendant Eight applied to set aside this permission ("Service-out Order"). The applications were heard together, with Defendant Eight participating only on overlapping issues with the AR Defendants.

Legal Issues Presented

1. Whether this court has jurisdiction over the claims against the AR Defendants and Defendant Eight under the gateways in Practice Direction 6B paragraph 3.1, particularly the contract, tort, trust, and constructive trust gateways.
2. Whether the Plaintiff's claim is barred by issue estoppel arising from final judgments of the Dubai courts.
3. Whether the KMI Partnership Contract is void or unenforceable on grounds of illegality under UAE law and public policy.
4. Whether the Plaintiff failed to make full and frank disclosure to the court in the application for service out of jurisdiction, justifying setting aside the Service-out Order.

Arguments of the Parties

Defendants' Arguments

• The claims do not fall within any jurisdictional gateway for service out under Practice Direction 6B.
• The Plaintiff's claims are barred by issue estoppel due to prior final decisions of the Dubai courts rejecting the existence of an overarching partnership.
• The KMI Partnership Contract is void as it was entered into for an illegal purpose, breaching UAE laws restricting foreign ownership of land and companies.
• The Plaintiff failed to disclose material facts and misrepresented the position regarding prior Dubai litigation in his application for service out, breaching the duty of full and frank disclosure.

Plaintiff's Arguments

• The Plaintiff contends there is a good arguable case that the partnership existed and that the KMI-PC is authentic and governed by English law, thereby satisfying the contract gateway.
• The issues decided by the Dubai courts differ from those in the current proceedings, so issue estoppel does not apply.
• The contract gateway is satisfied despite allegations of illegality because the predominant purpose of the partnership was not to breach UAE law and the contract gives rise to legal consequences under English law.
• The non-disclosure in the service out application was an oversight and not deliberate, and the matters omitted were already known to the defendants.
• Claims under tort, trust, and constructive trust gateways also establish jurisdiction.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first addressed the issue of jurisdiction, applying the established three-limbed test requiring (1) a serious issue to be tried against foreign defendants, (2) a good arguable case that the claim falls within a jurisdictional gateway under Practice Direction 6B paragraph 3.1, and (3) England as the appropriate forum. The defendants accepted England as the proper forum if the first two limbs were satisfied.

Regarding the contract gateway, the court found that the Plaintiff failed to establish a good arguable case that the partnership existed, as the issue was conclusively determined against him by the Dubai Court of Cassation in Decision 508, which created an issue estoppel. The court carefully analyzed the scope and identity of issues in the Dubai proceedings and found them to be the same as those in the present case, particularly concerning the existence of the partnership and entitlement to 50% shares in the relevant companies. Differences in relief sought or legal capacity were insufficient to avoid issue estoppel.

The court rejected the Plaintiff’s reliance on other Dubai decisions which did not constitute final and conclusive judgments or give rise to issue estoppel. It also found no breach of natural justice in the foreign judgments, as the Plaintiff had the opportunity to present his case and the court was not obliged to address every argument raised.

On the illegality argument, the court accepted the defendants’ expert evidence that prior to 7 June 2006, foreign ownership of land and majority shares in Dubai companies was unlawful and contrary to public policy. The KMI-PC’s provisions to circumvent these restrictions rendered it, at least in part, illegal under UAE law. However, applying a modern and flexible approach to foreign illegality, the court held that this did not prevent the contract gateway from being satisfied, since the contract was governed by English law and had legal consequences under that law. The court also found that the predominant purpose of the partnership was not solely to breach UAE law, given the broad scope of business activities and geographic reach.

The court found that the Plaintiff failed to establish jurisdiction under the other gateways (tort, trust, constructive trust) because these claims depended on the existence of the partnership. The tort gateway failed as the alleged damage was not sufficiently suffered within England but rather in the UAE, and the trust and constructive trust claims lacked a good arguable case on their governing law and connection to England.

On the issue of non-disclosure, the court found that the Plaintiff breached the duty of full and frank disclosure in his application for service out by failing to disclose material pre-action correspondence from the defendants and misrepresenting the relationship between the Dubai litigation and the present claim. The court rejected the Plaintiff’s explanation of oversight, concluding the omissions were deliberate and misleading, particularly regarding the issue estoppel defense.

Holding and Implications

The court set aside the Service-out Order as against the first to seventh defendants (the AR Defendants). The court concluded that the Plaintiff failed to establish a good arguable case on the existence of the partnership, a prerequisite for jurisdiction under any gateway relied upon. The issue estoppel arising from final Dubai court decisions barred the claim on this core issue. The court also found the Plaintiff had breached the duty of full and frank disclosure, further justifying setting aside the order.

The implications are that the Plaintiff’s claims against these defendants cannot proceed in England on the current basis and must be commenced, if at all, in another jurisdiction. No new precedent was established beyond the application of existing principles on issue estoppel, foreign illegality, and disclosure obligations. The court reserved the position regarding the eighth defendant, pending further submissions on the effect of this judgment on his application.