Default judgment granted in part in long-running hacking and fraud claim (Ras Al Khaimah Investment Authority v Azima and others)

Dispute Resolution analysis: The High Court has granted default judgment on part of a counterclaim against the Ras Al Khaimah Investment Authority in a long-running set of proceedings, following the decision by the Investment Authority to take no further part in the proceedings. However, following submissions made by Additional Defendants in the proceedings, another part of the counterclaim will proceed to trial in 2024.

Ras Al Khaimah Investment Authority v Azima and others [2023] EWHC 2018 (Ch)

What are the practical implications of this case?

This is an interesting judgment in relation to the circumstances in which the statements of case of a party which is no longer participating in proceedings and obtaining default judgment against them. It also offers an interesting analysis of the standing of a party to proceedings to make submissions in relation to an application in respect of which no relief is sought against them. On the first issue, this judgment highlights the fact that even where a Claimant extracts themselves completely from the proceedings and indicates to the Court that they have no intention on participating further in the claim, the Defendant does not have an automatic right to strike the Claimant’s defence to a counterclaim or to obtain default judgment on that counterclaim. The Court is entitled, in those circumstances, to consider the impact which a default judgment would have on the ongoing substantive dispute between the Defendant and any other parties to the proceedings (e.g. Part 20 Defendants) and to balance any unfair caused to them with the Defendant’s right to disposal of any part of the proceedings no longer in dispute. On the latter point, whilst a party to proceedings always has standing in the strict sense to make submissions in relation to an application made in those proceedings, a party against whom relief is not sought in the application will generally need to demonstrate that they are directly affected by the application.

What was the background?

As part of protracted and complex proceedings awaiting a ten-week trial listed in May 2024 were two counterclaims brought by Mr Azima against the Ras Al Khaimah Investment Authority (“RAKIA”). A number of Additional Defendants are also party to those proceedings. Those counterclaims were (1) a claim which has previously been tried by Andrew Lenon QC, sitting as a Deputy High Court Judge but which was remitted to trial by the Court of Appeal in which Mr Azima raised allegations of hacking against RAKIA and the Additional Defendants (the “Hacking Counterclaim”) and (2) a claim against RAKIA only to set aside the original judgment and order of Mr Lenon QC on the grounds that they were procured by fraud (the “Set Aside Counterclaim”). Since June 2022, RAKIA has not participated in the proceedings when its solicitors, Stewarts, came off the record. Shortly before coming off the record, Stewarts, on behalf of RAKIA made an open offer in full and final settlement of the Hacking Counterclaim for $1 million plus costs to date. When that offer was rejected, RAKIA wrote to the Court indicating that it would take no further part in the proceedings and was content for judgment to be entered against it for damages to be assessed. As a consequence, RAKIA failed thereafter to comply with various directions given to all parties. The most significant for the purpose of this judgment was that it failed to give extended disclosure are required by 2 June 2023. Upon that default, Mr Azima applied for default judgment on both the Hacking Counterclaim and the Set Aside Counterclaim (albeit in the former case it was coupled with an application to strike out RAKIA’s defence and an application in the alternative for an unless order in relation to RAKIA’s failure to provide disclosure). Two of the Additional Defendants opposed default judgment on the Hacking Counterclaim, despite not being parties to it. Nobody opposed default judgment on the Hacking Counterclaim.

What did the court decide?

The Court struck out RAKIA’s defence to the Hacking Counterclaim, reasoning that the breaches of the Court Orders in relation to giving extended disclosure were sufficiently serious to justify that action being taken. In light of the stance already adopted by RAKIA and communicated to the Court, it was determined that there was no value in granting an unless order in circumstances where it was already apparent that RAKIA would not comply. Default judgment on the Hacking Counterclaim was awarded along with costs to be assessed and an interim payment representing 75% of Mr Azima’s estimated total costs of that claim. The Court held that the Additional Defendants had standing to oppose the granting of default judgment on the Set Aside Counterclaim on the basis that they could show they would be directly affected by the grant of default judgment on that claim. The Court declined to grant default judgment against RAKIA on the Set Aside Counterclaim, reasoning that the unfairness caused to two of the Additional Defendants in relation to their defences in both the Hacking Counterclaim and Set Aside Counterclaims outweighed any unfairness there might be to Mr Azima in being denied default judgment and being forced to have a substantive trial. Nor would he be prejudiced by the main Defendant, RAKIA not taking part in that trial, particularly in light of the substantial disclosure already given in those proceedings.

Case details

• Court: High Court of Justice, Business and Property Courts of England and Wales, Business List
• Judge: Mr Justice Michael Green
• Date of judgment: 21 August 2023

Article by Phillip Patterson – first published by LexisNexis.