Dubai court orders two defendants to repay Dh20.7 million fraudulently seized from company

Dubai: The Dubai Civil Court of First Instance ordered two defendants, jointly, to repay Dh20,726,390 to a company after fraudulently obtaining its funds by misleading it into believing they had substantial investment activities and financial resources capable of generating significant profits. The court also ordered them to pay the company Dh3.5 million in compensation for material damage caused by depriving it of the use of its funds for more than two years. The company filed the lawsuit seeking the return of $5.636 million, equivalent to Dh20,726,390 at the exchange rate applicable when the case was heard, as well as Dh10 million in compensation. Its claim was based on a criminal judgment issued in connection with the fraud and seizure of its funds. According to the lawsuit, the defendants misled the company into believing they had investment activities, substantial financial resources and investments in major projects that generated large profits. This prompted the company to transfer funds under an agreement to acquire shares in another company. The Public Prosecution referred the defendants to criminal trial. Each was sentenced to two years in prison, while they were jointly fined $5.49 million, or its equivalent in dirhams, representing the value of the seized funds. The court also ordered their deportation and referred the civil claim to the competent court. The Public Prosecution and the first defendant appealed. The Court of Appeal increased the fine to $5.636 million and upheld the remainder of the judgment, while ruling that the first defendant's appeal had lapsed. The first defendant subsequently filed a further appeal, but the court ruled that it was deemed never to have been filed. The judgment became final after no appeal was lodged against it, according to a certificate issued by the Public Prosecution. An expert report submitted in the civil case found that the second defendant, in his capacity as the authorised representative and owner of one of the companies, signed an agreement to transfer 60% of the shares in another company to the plaintiff. However, only 51% of the shares were registered in the plaintiff company's name. The report also found that 34% of the company's shares were registered in the second defendant's name, including 9% that should have been allocated to the plaintiff under the agreement. It further stated that the second defendant did not provide documents proving that the $6 million paid by the plaintiff to acquire the shares had been transferred to the agreed party or used for the purposes specified in the agreement. The court explained that a final criminal judgment is binding on civil courts in matters it has determined concerning the occurrence of a crime, its legal characterisation and its attribution to the perpetrator. Those matters therefore cannot be reconsidered. Accordingly, the court relied on the criminal judgment in determining the first defendant's liability. It considered the second defendant's liability separately on the basis of the case file and supporting documents, concluding that the elements required to establish tortious liability were present. On the claim for repayment, the court found that the defendants' actions caused material damage to the company through the misappropriation of Dh20,726,390. It therefore ordered them, jointly, to repay the full amount, together with legal interest of 5% a year from the date the lawsuit was filed until full payment. On compensation, the court said the company had been deprived of the use and investment of its funds for more than two years, resulting in material damage in the form of lost profit. It awarded the company Dh3.5 million in compensation, rather than the Dh10 million it had sought, together with legal interest of 5% a year from the date the judgment becomes final until full payment.