x Abu Dhabi, UAEThursday 18 January 2018

Khorafis appeal against court ruling in fraud case

A DIFC court hears appeals from three members of a prominent Kuwaiti family who say they lost Dh275.4m due to fraud and the misrepresentation of 'safe' investments.

A Dubai International Financial Centre (DIFC) court heard appeals yesterday from three members of a prominent Kuwaiti family who say they lost US$75 million (Dh275.4m) due to fraud and the misrepresentation of "safe" investments. Rafed Khorafi and his wife and mother are seeking triple damages, or $225m, under DIFC laws covering improper financial advice. The family are trying to have an earlier decision by the court to strike out their claims reversed.

Bank Sarasin-Alpen, a DIFC subsidiary of Switzerland's Bank Sarasin, won an initial judgment in July when a DIFC judge ruled that the Khorafis' allegations lacked the detail to be tried. Lawyers for Bank Sarasin-Alpen said yesterday they had no objection to a move by the Khorafis to amend their original claims to respond to the judge's concerns about their vagueness. However, Mark Hoyle, a lawyer at Al Tamimi & Company in Dubai who is representing the bank, said the pleading still failed to pin down how and when fraud was committed.

"If they are sure there is an element of falsity or an element of fraud, why can't they say what it is?" he said. Sir Anthony Colman, one of the judges on the three-member appeals panel, questioned why Bank Sarasin-Alpen had not responded to the Khorafis' claims, which detail complicated and risky investments that were allegedly presented as ones that "could not lose money". "I can't see why you have difficulty in pleading to that application," he said.

The panel also heard an appeal from Bank Sarasin-Alpen against an earlier decision to allow the case to be tried under laws covering breaches of banks' duties to investors. Bank Sarasin-Alpen argued the Khorafis had invoked a law that applied only to actions already found to be in breach of Dubai Financial Services Authority (DFSA) regulations covering DIFC companies. The DFSA has not found Bank Sarasin-Alpen to be in breach of its rules.

The Khorafis had chosen "simply the wrong avenue" to seek compensation from the courts, Mr Hoyle said. Sir John Chadwick, also on the panel, said there were other regulations under which the DFSA had authority to seek judgments on compensation from the courts. The rule the Khorafis were suing under did not explicitly apply to the DFSA, he said. The court also weighed an appeal from the Khorafis against an earlier decision requiring them to post Dh3m in court security.

A decision on all the appeals will come within a few weeks, Judge Colman said. The Khorafi case is the first of its kind to be tried in the DIFC, as the number of legal actions in the court system grows. A total 36 cases were filed in the DIFC courts last year, a sharp increase from the nine cases filed in 2008.