Claim No: CFI 014/2010
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF APPEAL
BETWEEN
TAALEEM PJSC
and
(1) NATIONAL BONDS CORPORATION PJSC
First Defendant
(2)DEYAAR DEVELOPMENT PJSC
Second Defendant
ORDER OF CHIEF JUSTICE MICHAEL HWANG SC
UPON reviewing the Second Defendant’s Application Notice CFI-014-2010/27 dated 9 August 2015 and supporting documents seeking reconsideration at an oral hearing of the Order of Chief Justice Michael Hwang SC dated 3 August 2015 denying permission to appeal against the Second Judgment of Justice Sir David Steel dated 23 March 2015
AND UPON reading the Second Defendant’s Brief Written Statement in support of its oral application for permission to appeal
AND UPON reading the relevant material in the case file
AND UPON hearing Counsel for the Claimant, Counsel for the First Defendant and Counsel for the Second Defendant on 7 September 2015
IT IS HEREBY ORDERED THAT:
1. The Second Defendant shall be granted leave to appeal to the Court of Appeal on the following bases:
(a) First, the argument that the trial judge made no factual finding which supported his legal conclusion that the Second Defendant’s obligation to repay the Claimant arose because of a novation (the “First Ground”) has a real prospect of success.
(b) Second, the argument that the trial judge’s treatment of the Second Defendant’s arguments in respect of the additional Murabaha profit charges was inconsistent has a real prospect of success (the “Fourth Ground”).
SCHEDULE OF REASONS
1. The Second Defendant applied for reconsideration at an oral hearing of my Order dated 3 August 2015 refusing permission to appeal the Second Judgment of Justice Sir David Steel dated 23 March 2015 (the “Second Judgment”).
2. There was a hearing on 7 September 2015 at which the Second Defendant was represented by Mr Roger Kennell.
3. I have reconsidered my previous order and now decide to grant the Second Defendant leave to appeal the Second Judgment, for the reasons given below.
THE SECOND DEFENDANT’S FIRST GROUND OF APPEAL
The Second Defendant submits that at the merits hearing before Justice Sir David Steel, the Agreed List of Issues contained the following issues:
(a) Issue 1: (A) whether Deyaar entered into a legally binding agreement under which Deyaar assumed or agreed to acquire Taaleem’s rights and obligations in respect of Sky Gardens (“Issue 1A”) including Taaleem’s obligation to repay NBC in respect of the financing it had provided to Taaleem to purchase the interest in Sky Gardens (“Issue 1B”)?
(b) Issue 5: whether there was a novation or an assignment to Deyaar of Taaleem’s obligation to repay NBC, and in either case whether NBC could sue Deyaar (“Issue 5”).
(c) Issue 6: whether Deyaar and NBC otherwise reached a binding legal agreement in relation to Sky Gardens or its financing, and if so what agreement (“Issue 6”).
5. The Second Defendant then submits that the trial judge made no findings on Issue 5 and did not address or discuss the novation or assignment or their requirements. Crucially, the trial judge did not consider the relevant provisions of the DIFC Contract Law to determine whether they were satisfied, and hence, whether there was a novation or assignment. Further, in the Second Judgment, the trial judge stated for the avoidance of doubt that he “so find[s]” that “Deyaar, NBC and Taaleem reached agreement for the transfer of all Taaleem’s rights and obligations in respect of Sky Gardens, including the obligation to repay NBC and that was achieved by a novation of the existing finance structure. Such was the clearest mutual intention of the parties” (paragraph 13, Second Judgment).
6. In respect of novation, Articles 101 and 102 of the DIFC Contract Law require the acceptance by the obligee of a substituted contract with a third party in satisfaction of the obligor’s existing obligations.
7. While it is possible inferentially to read the First and Second Judgments of Justice Sir David Steel to such that Issue 1A and 1B were answered in the affirmative, I agree that neither judgment has set out the factual basis (whether documentary or otherwise) for the finding of either a novation or an assignment.
8. While the neglect of an express reference to Articles 101 and 102 of the DIFC Contract Law is not, of itself, determinative of my decision to grant the Second Defendant leave to appeal, it is a strong factor in favour of my grant of leave that neither of Justice Sir David Steel’s two judgments showed – expressly or inferentially – that he had considered Articles 101 and 102 and the necessary elements in so far as his judgments did not consider the necessary elements as provided by law and the factual bases for showing that those elements arose in this case. This is equally true in respect of an assignment.
9. The findings referred to by Justice Sir David Steel at paragraph 9 of the Second Judgment are relied upon by him for the proposition that “inferentially [a valid transfer of Taaleem’s obligations to Deyaar] is only consistent with Deyaar being liable to repay NBC since otherwise there would be no commercial value to Taaleem in concluding the transfer of Sky Gardens to Deyaar”. I agree that his conclusions on the Second Defendant’s liability to repay the Claimant (which at paragraph 13 of his Second Judgment are stated to arise out of a novation) are the type of conclusions made on the basis of a mix of fact and law. They are not, of themselves, factual findings. Indeed, there are no factual findings made in respect of the issue of novation or assignment (and whether the necessary elements of a novation or assignment were satisfied on the facts) in either of Justice Sir David Steel’s judgments.
10. The lack of a factual finding by the trial judge raises the possibility that, on a review of the factual record, there may be a lack of factual evidence necessary to make the finding that a novation or assignment took place, and correlatively, that the Second Defendant has a real prospect of success on appeal. Accordingly, I agree that the Second Defendant’s First Ground should have a hearing before the Court of Appeal.
THE SECOND DEFENDANT’S FOURTH GROUND OF APPEAL
11. The core of the Second Defendant’s Fourth Ground is whether Justice Sir David Steel was entitled to accept a new argument advanced by the First Defendant that there was a series of separate and direct contracts between the First and Second Defendants under which the Second Defendant agreed to pay an additional interest at 5.5% per annum.
12. The Second Defendant’s complaint is that the existence of these contracts were not pleaded by the First Defendant, nor were they asserted in the latter’s Opening or Closing Submissions, and only canvassed in the hearing (on 23 and 24 November 2014) leading to the Second Judgment. Conversely, the Second Defendant was precluded from raising its defences that Articles 101 and 102 of the Contract Law were not satisfied, or that the additional Murabaha profit charges were inconsistent with Sharia Law, on the basis that it should not have raised these “unpleaded and unargued” matters at the hearing which lead to the Second Judgment. The Second Defendant submits that this is inconsistent treatment.
13. I agree that there was an inconsistency in the treatment of the Second Defendant’s arguments and those advanced by the First Defendant.
14. I also note that Justice Sir David Steel had accepted that, as a matter of construction, it was not a term of the Murabaha Agreement that a recurring profit element of 5.5% was payable (at [31] of the Second Judgment). Further, Justice Sir David Steel had not found that, in the “concluded agreement for transfer of Taaleem’s interest in Sky Gardens to Deyaar on 4 December 2008”, there was any such term imposing on the Second Defendant any liability for a recurring profit element of 5.5%. These factors, in addition to the inconsistent treatment of the Parties’ arguments, support the Second Defendant’s application.
15. I am accordingly of the opinion that the grounds of appeal advanced before me have a real prospect of success. Further, the fundamental principle that justice should also be seen to be done, and that adequate reasons are provided, warrants the grant to the Second Defendant for leave to appeal so that the question of how its liability arose.
Issued by:
Amna Al Owais
Date of issue: 18 November 2015
At: 10am
