The Bank obtained a judgment in the Sharjah Court in the UAE against the Al Sari defendants. The Bank sought to enforce the judgment by taking control of the shares of several BVI companies formerly owned by the second and third defendants. The Bank had been unable to realise any value from the real properties held by the BVI companies by reason of what the Bank described as a dishonest scheme designed by the defendants to preserve the properties and their proceeds of sale for the benefit of the Al Sari family, via a series of sham contracts.

The sham contracts first emerged after the Bank commenced enforcement proceedings against the BVI companies. The contracts purported to impose a debt on the BVI companies in favour of the seventh defendant. The Al Sari defendants commenced proceedings in the Sharjah Court seeking recovery of the purported debt arising under the sham documents, and were successful on appeal in obtaining a judgment against the BVI companies (UAE Appeal Judgment) in a sum significantly exceeding the earlier judgment due from the defendants to the Bank (Bank’s Judgment). The BVI companies (as parties) and the Bank (as non-party) requested the Sharjah Court of Appeal to review its decision in the UAE Appeal Judgment arguing that the contracts between the Al Sari defendants and the BVI companies were fabricated. The Sharjah Court of Appeal rejected the request for a review.

In connection with UK enforcement proceedings of the Bank Judgment, the Bank sought a declaration from the Commercial Court that the UAE Appeal Judgment had been obtained by fraud and sought an injunction restraining the enforcement of the UAE Appeal Judgment against the BVI companies. In finding that the Bank had established that the contractual documents relied upon were shams, the English Commercial Court concluded that the UAE Appeal Judgment was similarly obtained by fraud and should not be recognised or enforced at common law in the UK. The English Court granted the Bank’s claim for declaratory relief, and a permanent anti-enforcement injunction restrain the Al Sari defendants from enforcing the UAE Appeal Judgment in the UK.

In giving its decision, the English Court gave guidance on the scope of application of the rule in House of Spring Gardens v Waite (No 2)  and held that the Bank was not precluded from alleging fraud in the English proceedings by reason of bringing a review procedure within the UAE Appeal proceedings in which the allegation of fraud was rejected. Specifically, the decision clarifies that:

1. The principle is a rule of estoppel or abuse of process. It would operate only where the issue has already been raised and adjudicated upon in a separate action, or in new proceedings after a final and enforceable judgment has been entered in earlier foreign proceedings.
2. The review procedure under the civil law of Sharjah does not constitute a separate action and did not determine whether the UAE Appeal Judgment had been obtained by fraud. Rather, the review amounted to a procedural mechanism for the same court to reconsider its judgment, which is fundamentally different to a fresh action before a new court to set aside a prior judgment for fraud.
3. There was no issue estoppel and it was not an abuse of process for the Bank to argue new matters which the Bank could not have argued before the Sharjah appeal proceedings, which was not party to the Sharjah appeal proceedings.

The decision confirms the broad discretion of the English courts to grant anti-enforcement injunctions to restrain the enforcement of an impugned judgment by a party who has submitted to the jurisdiction of the English courts. While Harneys does not practise the law of England and Wales, the decision will be of general interest to practitioners in the BVI and Cayman Islands, where enforcement of foreign judgments is a regular procedure invoked before the Courts of those jurisdictions.