London High Court Enforces Dubai Court Judgment against UAE National: Liability Cannot be Evaded by Transferring Assets to Family

London High Court Enforces Dubai Court Judgment against UAE National: Liability Cannot be Evaded by Transferring Assets to Family

The High Court in England and Wales has held that a judgment obtained in the onshore Dubai Courts in favor of Emirates NBD Bank to enforce a personal guarantee against a UAE national is enforceable in England and Wales allowing the bank to recover against the individual’s assets in the UK.

Justice David Edwards KC ordered that the Dubai Court judgment in favor of Emirates NBD Bank PJSC (the Bank/claimant), was enforceable in England and Wales, thereby, allowing the Bank to take action against the defendant’s UK assets.

The defendant, Mr. Almakhawi a UAE national, was initially the sole beneficial owner of a Dubai based construction company, which experienced significant losses and went into liquidation in September 2014.

In January 2010, before its liquidation, the company entered into a facility agreement with the Bank, to provide financial facilities and credit support. The defendant, along with the other company directors, agreed to provide personal guarantees as security.

After entering liquidation, the Bank had initiated legal proceedings in October 2015 in the onshore Dubai Courts to recover the outstanding amount from the company under the facility and hold the directors liable for the equivalent amount under their personal guarantees.

The Dubai Court of First Instance, Court of Appeal and Court of Cassation all ruled in favour of the Bank culminating in an order in July 2019 that the company and the guarantors pay the Bank AED 211.3 million (approximately £47.5 million) plus interest.

Thereafter, for recovering the balance payment, the Bank eventually turned to the High Court to pursue recovery against the assets of the defendant which were located in UK.

As there is no treaty for the recognition and enforcement of judgments between the UK and the UAE, the Bank sought an order under common law that it could enforce the Dubai Judgment in England and Wales.

The key issue between the parties concerned one of the exceptions to enforcement that, “A foreign judgment may be impeached if the proceedings in which the judgment was obtained were opposed to natural justice.”

The defendant argued that the Dubai Judgment was obtained through a breach of natural justice due to issues with the two reports submitted by the Dubai court-appointed expert.

He further contended that the Transfers represented gifts principally for the purposes of succession or inheritance planning and were not made for one of the prohibited purposes under Section 423 Insolvency Act, 1986 (“IA”).

The Judge held that the Dubai Judgment was enforceable as a matter of common law under English law.

The Court while referring to the basic principle set out in Dicey, Morris & Collins on the Conflict of Laws (16th ed.) held that, a foreign judgment in personam given by the Court of a foreign country with jurisdiction to give the judgment may be enforced as a claim or counterclaim for the amount due under it if the judgment is for a debt or a definite sum of money and is final and conclusive.

The Court highlighted that there are certain exceptions to this principle, including where the proceedings in which the judgment was obtained were opposed to natural justice. Natural justice relates to procedural fairness and proof of a mere irregularity in a foreign court is not enough. Availability of a remedy in the foreign court is also a relevant factor in determining whether substantial injustice occurred.

In this instance, the Court held that the erroneous references to outdated law in the expert reports were not sufficient to breach natural justice. Mr Almakhawi had multiple opportunities to object to the Dubai Court’s reliance on the reports or to argue that the erroneous references rendered the reports null and void but did not do so.

Accordingly, the Court declared that the Dubai Judgment is enforceable in England and Wales and entered a monetary judgment against Mr Almakhawi.

With respect to the issue of ‘Transfers,’ the Court reckoned that transfers were gratuitous and the general rule is that a gratuitous transfer is rebuttably presumed not to be a gift.

The Court asserted that this presumption is easily rebutted by evidence and by the counter-presumption of advancement which applies to transfers between parent and child, even as was the case here, where the child is not a minor. The focus is on the intention of the transferor and acts and declarations antecedent to, contemporaneous with or immediately after (so as to constitute part of the same transaction) may be relied upon to rebut or support the presumptions, opined the Judge.

The Court held that there was insufficient evidence to rebut the presumption of advancement. The transfer of the property in particular, had written evidence from advisers as well as lawyers from the outset which showed Mr Almakhawi’s intention that the property was intended to be a gift and a deed of gift had been entered into, albeit it post-dated the transfer of the property.

Accordingly, the Court dismissed this ground for relief.

The rest of the judgment addressed the Bank’s claims regarding the transfer of assets made by the defendant to his son in 2019, including a London property and cash transfers of approximately £2.5 million.

The Court held that there was every reason that Mr Almakhawi both foresaw and desired that the effect of the Transfers would be to put assets beyond the reach of his creditors. Therefore, the Bank was granted relief under Section 423 of the Insolvency Act 1986 which dealt with transactions for a ‘prohibited purpose’, including putting assets out of creditors’ reach.

Justice Edwards concluded that he was quite satisfied that one “purpose of the transfers, and not merely a consequence of them, was a Prohibited Purpose, i.e., to put [his] assets beyond the reach of, and to prejudice the interests of, the Bank and his other creditors.”