Claim No: CFI-030-2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE ROGER GILES
BETWEEN
FIRSTRAND PROPERTY HOLDING (MIDDLE EAST) LIMITED
and
DAMAC PARK TOWERS
Hearing: 5 March 2015
Counsel: Tim Killen and Tarek Shrayh (Al Tamimi & Co) for the Claimant
Rupert Reed QC and Christopher Bourke (Damac Group) for the Defendant
Judgment: 2 April 2015
RULING OF JUSTICE ROGER GILES
Ruling
1. This became an application by the Defendant to strike out a number of paragraphs of the Claimant’s particulars of claim. An application for immediate judgment on the basis that the Claimant lacked standing to bring its claims is no longer pursued.
Background
2. The Claimant is a property holding company, now registered in Guernsey but at the time of the events next described registered in the DIFC. The Defendant is the developer of the DAMAC Park Towers, a mixed residential and commercial development in the DIFC.
3. On 15 July 2008 the Claimant and the Defendant entered into eight separate Sale and Purchase Agreements (“SPAs”), each for the sale by the Defendant and purchase by the Claimant of a commercial unit and two parking spaces in Park Towers. The units were described in the manner –
“Unit: Tower: DFO office unit no: DFO2A/209
Floor: DFO/2A Area [gross]: 1456.4 Sq. ft.”
4. The units were all on Floor 2A, and the unit numbers ran from 209 to 216. The areas varied from 813.9 sq. ft. (unit 215) to 2,123.3 sq. ft. (units 212 and 213). The contract prices varied, approximately according to the area, from AED 1,627,800 to AED 4,264,000. The total of the contract prices was AED 22,751,400.
5. Park Towers was two linked tower buildings on a larger area of land, in the SPAs called “the Plot” as shown on a “Master Plan”. In the SPAs “Unit” meant the unit as described; “Building” meant the building(s) to be constructed on the Plot as shown on the “Park Towers Plan”; “Common Property” meant those parts of the Plot and the Building (excluding parking spaces) not physically forming part of the Units in Park Towers and “intended for benefit or use in common by all Owners in Park Towers”; and “Property” meant the Unit together with an undivided share in the Common Property apportioned to the Unit according to a “Participation Quota” calculated in a particular way.
6. As at 15 July 2008 the construction of the Building had not progressed: the sales and purchases were “off the plan”. By Clause 8.2 of each SPA the Defendant –
“…undertakes to cause the Unit to be built substantially in accordance with the Drawing and in a proper and workmanlike manner in accordance with good building practice, with good and suitable materials in accordance with the requirements of all competent authorities”.
“Drawing” was defined to mean “the Unit floor plan attached hereto marked Schedule 5”.
7. Schedule 5 of each SPA comprised, according to Clause 1.5 which provided that the Schedules formed part of the agreement and should have effect as if set out in full, “Floor Plan / Elevation of Park Towers, Unit Floor Plan, Drawing and Detail of the Unit”. Each Schedule 5 included a page describing itself as “Drawing of the Unit”: from the materials before me on the application, it is not clear whether this was the “Unit Floor Plan” or the “Drawing and Detail of the Unit”. It showed a floor plan noted as “Floor second, third & fourth” with a central core surrounded by eight units, and beneath it another floor plan of a unit described as “Office No. 09 [etc] Floor second, third, & fourth”. The office numbers ran from 09 to 16, and beneath the two floor plans was the caption “DFO/2A/209 [etc]”, running from 209 to 216.
8. If the Building was constructed in accordance with these floor plans, by the eight SPAs in combination the Claimant would purchase all the units on Floor 2 of one of the towers.
9. However, each SPA contained as Clause 12 –
“12. Variations
12.1 The Seller is at its sole discretion entitled to change, vary or modify the plans (which include all architectural, structural, landscaping, grading, mechanical or other plans whatsoever), colour, materials, finishes, equipment, fixtures, specifications pertaining to the Building and Units from the plans, colour, materials, finishes, equipment, fixtures and specifications, sales brochures, models or otherwise that were disclosed to the Purchaser at the time when this Agreement was signed, all without notice or the consent of the Purchaser, provided that the substituted items and materials are of equivalent or superior standard.
The Purchaser hereby consents to any changes, variations, modifications and substitutions, and agrees to comply with his obligations contained in this Agreement notwithstanding any of the changes, variations or modifications described above.
12.2 The Seller and the Master Developer may from time to time make such variations to the Master and Park Towers Plans as may in the circumstances be necessary provided such variations are insubstantial or of a routine nature. Thus, whilst the Master and Park Towers Plan have been prepared and are as accurate as possible, the Purchaser acknowledges that they are not yet final and adjustments to the final measurements of the Unit may need to be made. If the final measurement of the Unit differs by more than three (3%) percent from the measurement represented to the Purchaser in this Agreement, then the Purchase Price for the Property will be increased or decreased proportionally. However, no adjustment to the Purchase Price shall be made if the final measurement of the Unit differs by less than three (3%) percent from the measurement represented to the Purchaser in this Agreement. In this case, the Purchaser will have no claim against the Seller for the deficiency in size of the Property.
12.3 The Purchaser is aware that the Park Towers Plan consists of two towers and acknowledges that in the event of any change in the Park Tower Plan which results in merger of the two towers or any substantial reduction in the scope of the project, the Seller may at its sole discretion relocate the Unit to a similar location in the Park Towers.”
10. The SPAs provided for giving possession and occupation of the unit on a “Completion Date”, being “the date upon which the Property is completed as per the Drawing as certified by the Project Consultant”. They provided also for an “Anticipated Completion Date”, and by Clause 13.1 if the Defendant was unable to give possession and occupation of the unit by the Anticipated Completion Date it was to pay a penalty to the Claimant; however, the Defendant “shall have no other liability to the Purchaser in connection with any delay with providing the possession of the Unit”
11. There was delay in completion of the Building: in the Defendant’s submissions it was said that the Anticipated Completion Date became 30 October 2010. As far as appears, the Claimant did not complain about the delay until the time of handover next described.
12. Payment of the purchase price under the SPAs was by instalments. In early January 2012 the Defendant invoiced the Claimant for the final instalments, and gave notice that it was ready to commence handover of the units on 30 January 2012. According to the accompanying statements of account, the Defendant credited the Claimant with amounts representing penalties for delay in giving possession and occupation, and for two of the units (units 215 and 216) with amounts for “area variation – SPA >3%”. The invoices also included amounts for service charges for the period 1 February – 30 June 2012. The Claimant paid the invoices in late January 2012.
13. Dissension arose. According to the allegations in the particulars of claim, there was dispute and a heated argument at a handover meeting on 26 February 2012, and from a partial inspection grudgingly permitted it was apparent that the units were not ready for handover. Notwithstanding, in November 2012 the Claimant paid the invoiced amounts for service charges for the period 1 July – 31 December 2012.
14. Still according to the allegations in the particulars of claim, there was a further handover meeting on 30 November 2012, when again handover was not possible. At a site inspection following the meeting the Claimant became aware, it alleges for the first time, that Floor 2 had been constructed with two additional units, units 210A and 215A, with consequent reduction in the areas of some or all of the eight units. It was told that the two additional units had been sold to someone else. As well, the Claimant considered that the two parking spaces associated with each unit, which were in tandem, were unsatisfactory because not wide enough for two cars to park next to each other.
15. Continuing with the allegations in the particulars of claim, there were further meetings and exchanges of correspondence, in which the Claimant complained that it was not obtaining the whole of Floor 2A, of the parking spaces, and of delay. It alleges that it was unable to obtain details of the changes in floor areas of the eight units. The Defendant’s responses included reliance on Clauses 12 and 13 of the SPAs and the credits it had given in January 2012.
16. An impasse was reached at a meeting in March 2014. No further service charges were paid.
17. On 28 August 2014 the Claimant’s lawyers wrote to the Defendant –
“Notice of Termination
We are the legal representatives of FirstRand Property Holding (Middle East) Limited, the purchaser of Floor 2A in DAMAC Park Towers, DIFC, Dubai.
As you are aware, in July 2008 our client agreed with DAMAC Park Towers Company Limited to purchase the entire second floor of Park Tower A and 16 parking bays (the ‘Contract’). Eight individual Sale & Purchase Agreements (‘SPAs’) dates 15 July 2008 were signed, each with a floorplan appended indicating that the eight units purchased by our client under the SPAs would together comprise the entire second floor of Park Tower A.
Your non-delivery of the entirety of the second floor of Park Tower A to our client in line with the requirements and specifications of the Contract amounts to a fundamental non-performance/breach of the Contract. Our client has, since discovering your fundamental breach of the Contract, made numerous attempts to persuade you to rectify this breach, including by engaging in email correspondence and attending meetings with you in Dubai to discuss this breach. Despite being given a reasonable additional period of time to remedy your fundamental non-performance of the Contract, you have failed to do so.
Alternatively, your representations that our client would be purchasing the entirety of Floor 2A were fraudulent, and in the circumstances our client was induced to enter into the Contract by reason of fraud.
In view of the above, our client is left with no option other than, by this notice, to terminate/avoid the Contract by reason of your fundamental non-performance/breach of the Contract and/or your fraud.
Subject to the above, all our client’s other rights are reserved.”
The Particulars of Claim: Overview
18. The particulars of claim present some difficulties in their structure and framing.
19. Although it pleads them, the Claimant does not sue upon the SPAs, either asserting that they had been validly terminated or claiming damages for their breach. Rather, and in conformity with the letter of 28 August 2014, it alleges an agreement to sell and purchase “the entirety of Floor 2A and 16 parking spaces in DAMAC Park Towers for a total purchase price of AED 22,751,400”, in the particulars of claim called “the Contract” (paragraph 14). It alleges that the Defendant had failed to perform the Contract and that it (the Claimant) had validly terminated the Contract. It claims a declaration as to valid termination and restitution of the purchase price and /or damages in lieu (it claims AED 42,064,853), alternatively damages for breach, and alternatively again specific performance by an order that it receive the entirety of Floor 2A.
20. In addition to the contract claims, the Claimant pleads a negligence claim, a misrepresentation claim, and a fraud claim. As to each it claims damages (although there is no prayer in relation to the negligence claim). I will describe these claims in more detail later in these reasons.
The Allegations of Representations
21. The pleading of the Contract and of each of the negligence, misrepresentation and fraud claims takes up allegations of representations. The allegations, in paragraphs 22 and 23, are –
“22. Further, prior to and at the time that the Contract was agreed, DAMAC represented to FirstRand that FirstRand would be purchasing the whole of Floor 2A. Such a representation was made clearly and unequivocally by reason of the supply of Schedule 5 of the SPAs, showing Floor 2A to the entirely comprised of the eight units referred to in the SPAs.
23. Further, the representations made by EPI DOS in the EPI DOS Report and orally to FirstRand that they purchased from DAMAC (and that FirstRand was in turn to purchase) the entirety of Floor 2A was a representation which is believed to have been made originally to EPI DOS by DAMAC, and which EPI DOS repeated to FirstRand acting as an agent of DAMAC for the purpose of repeating the representation alone. For the avoidance of doubt, EPI DOS did not act as DAMAC’s agent in any capacity other than in the repeating of the representation.”
22. I will call these “the Schedule 5 representation” and “the EPI DOS representations” respectively.
23. The EPI DOS representations must be understood from the earlier pleading (paragraphs 6 – 11) that in January 2007 EPI Delta Syndicate Ltd Partnership (“EPI DOS”) had entered into a contract with the Defendant “to purchase the entire commercial floor space on Floor 2A of Tower DFO – A” and 16 parking bays; that the Claimant had negotiated to purchase the interest of EPI DOS; that during the negotiations a due diligence report produced by EPI DOS (“the EPI DOS Report”) was disclosed to the Claimant, which described the property as “Level 2…in Tower A” comprised of eight units and spoke of an objective of controlling whole and adjacent floor spaces if possible; that during the negotiations EPI DOS orally “repeated their assertion that they had purchased from [the Defendant] the entirety of Floor 2A”; and that the Claimant agreed to purchase EPI DOS’ rights to Floor 2A at a premium whereby EPI DOS would relinquish its rights and permit the Claimant “to contract with [the Defendant] for the purchase of Floor 2A in its stead”.
24. The Defendant applied to strike out both of paragraphs 22 and 23, but for the present I deal only with the EPI DOS representations. I will return to the Schedule 5 representation in connection with the misrepresentation claim.
25. The Defendant submitted that the EPI DOS Report did not convey that EPI DOS had purchased the entirety of Floor 2A (which would leave the oral representations), but more widely that no facts were pleaded from which actual or implied authority could be found to underpin the allegation in paragraph 23 that EPI DOS was acting as agent of the Defendant.
26. In my opinion, in this respect the pleading is clearly deficient. Agency is a legal construct, not a fact but a conclusion from facts (see for example Launchbury v Morgans [1972] UKHL 5; (1973) AC 127 at 135, 144; Scott v Davis [2000] HCA 52; (2000) 204 CLR 333 at [227] – [239] and especially at [268], “[T]o use the term ‘agent’ is to begin but not to end the enquiry..”). Nothing in the positions of the Defendant and EPI DOS as present or parting vendor and purchaser makes out the agency, and no other facts are pleaded from which it could be found – especially the pleaded agency for the sole purpose of repeating the representation alone.
27. The Defendant relied on Pilmore v Hood (1838) 5 Bing (NC) 98. In that case it was alleged that the defendant fraudulently misrepresented the takings of a public house to Bowmer, who agreed to purchase it; that Bowmer was unable to complete the purchase, and it was agreed between the defendant, Bowmer and the plaintiff that the plaintiff should become the purchaser in his place; and that to the knowledge of the defendant Bowmer repeated to the plaintiff the representation as to takings. The defendant pleaded that he did not authorise Bowmer to communicate the representation to the plaintiff. It was held on demurrer that the plea was bad, because no authority had been alleged and it was not necessary to allege it.
28. The case does not assist the Claimant. Tindal CJ described the defendant’s knowledge of the repetition as “an important ingredient” (at 104), the fraud lying in allowing the plaintiff to proceed with that knowledge. The reasons of Vaughan, Bosanquet and Coltman JJ all also rested upon the defendant’s knowledge of the repetition and his standing by. The case is not authority for agency at all, but for finding fraud in the absence of agency, and in the present case it is not alleged that the Defendant knew of the representations said to have been made by EPI DOS through the EPI DOS Report or orally.
29. Paragraph 23 should be struck out.
The Contract Claims
30. I have referred to the allegation of the Contract. It is pleaded that “[t]he documents evidencing the Contract included” the eight SPAs (paragraph 15), and in paragraph 20 –
“20. It was an express, alternatively implied, term of the Contract that:
20.1. By acquiring all eight units, FirstRand was acquiring the entire Floor 2A, such a term being agreed:
20.1.1. By reason of the clear and unambiguous representation from DAMAC by way of Schedule 5 of the SPAs (which was by Clause 1.5. of the SPAs a term of each SPA); alternatively
20.1.2. By reason of the representations made to FirstRand prior to contracting which became a condition of the Contract upon the signing of the SPAs.”
31. The other terms pleaded in paragraph 20 were Clauses 8.2, 12.1 and 12.2 of the SPAs and some of their provisions concerning the Anticipated Completion Date.
32. The allegations of breach of contract in paragraph 52 are mixed up with breach of the duty of care in the negligence claim, but in substance are constructing the two additional units 210A and 215A and the consequences for the eight units, and failing to provide the Claimant with exclusive ownership of the entirety of Floor 2A by the Anticipated Completion Date. Again in substance, these defaults plus the deficiency in the parking spaces are said in paragraphs 53 – 57 to constitute fundamental breach of the Contract founding valid termination.
33. Counsel for the Defendant said that it accepted that there is an arguable case for breach of contract, both as to timely completion of the Building and as to variation from a floor of eight units and deficient parking spaces. I understood this to include whether or not the agreement between the parties was the Contract with the term alleged in paragraph 20.1, and the Defendant did not apply to strike out paragraph 20.1.
34. The Defendant applied to strike out the paragraphs alleging termination of the Contract (paragraph 57), entitlement to a declaration (paragraph 62), and entitlement to have and elect between restitution or damages (paragraph 68), together with the prayers for a declaration of valid termination and restitution of the purchase price and/or damages (prayers 1 and 2 and 3). It submitted that the Claimant had plainly lost the right to terminate the Contract because, on its case, it had known of fundamental non-performance by the Defendant some time after June 2010 (the passing of the Anticipated Completion Date), in January 2012 (the credit for area variation), and at the latest in November 2012 (the site inspection), but had not terminated the Contract until August 2014; moreover, it had paid the final instalment of the purchase price and the service charges, including paying the service charges in November 2012. It referred to Article 87(2) of the DIFC Contract Law, Law No 6 of 2004, providing –
“87 (2) If performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the non-conforming performance.”
35. Neither party referred to the choice of law clause in the SPAs (Clause 20) providing that “the rights of the Parties hereunder shall be governed by the Laws of the United Arab Emirates and the Laws of Dubai…” and both appeared to accept that Article 87 (2) applied. However, what is a reasonable time depends on the circumstances. What the credit for area variation conveyed or should have conveyed to the Claimant at the time, particularly as to construction of the two additional units, is not clear. Notwithstanding the delay in completion and then the dissension, there were continuing dealings between the Claimant and the Defendant until at least March 2014, and determination of whether notice was given within a reasonable time requires appreciation of the circumstances as more fully exposed at trial.
36. This is not a case in which a conclusion that the right to terminate the Contract had been lost is so clear as to warrant striking out the paragraphs without more detailed factual investigation. Further, so far as payment of the instalments and the service charges might do more than go to reasonableness and found affirmation of the Contract, that also depends on the circumstances and again is not so clear as to warrant striking out the paragraphs.
The Negligence Claim
37. A duty of care is pleaded in paragraph 25 in the terms –
“25. By reason of the facts and matters stated above, DAMAC undertook to provide FirstRand with the entirety of Floor 2A of the DAMAC Park Towers development (as detailed in Schedule 5 of the SPAs) and, in so doing, DAMAC assumed a duty of care in tort:
25.1. To ensure that such representation was true at the time that it was made; and/or
25.2. To ensure that such representation remained true; and/or
25.3. To inform FirstRand of changes to the DAMAC Park Towers development which would, or would likely, render their clear representation false.”
38. Breaches of the duty of care are subsequently alleged in paragraphs 52, 58 and 60, although not always in terms conforming to this statement of the duty and mixed up with breach of contract, misrepresentation and fraud. I do not describe them, since the Defendant’s application in relation to the negligence claim was confined to striking out paragraph 25. If that occurs, however, consequential amendments to the mixed up allegations of breach will be necessary.
39. The duty of care is said to arise from undertaking to provide the Claimant with the entirety of Floor 2A, the undertaking being by reason of earlier stated facts and matters. This is not entirely clear; is the duty of care to be found from the representations, or from the Contract?
40. As explained in the Claimant’s skeleton argument, referring to the duty of care, “The duty which the Defendant owed was twofold; first to comply with its contractual requirements, and secondly a duty of disclosure in circumstances where such a fact had become untrue because of the Defendant’s conduct”. The Claimant supported the duty of care by submitting in the skeleton argument that –
“…[i]t is common practice in the common law world for conduct which results in contractual duties being owed also to amount to a common law duty (e.g. where breach of a solicitor’s retainer is actionable in both tort and in contract)”.
41. Counsel for the Claimant orally submitted to the effect that where there is a contract between the parties, there can be a tortious duty of care matching the contractual duty and a limited duty to inform.
42. Accordingly, the “facts and matters stated above” in paragraph 25 are to be understood not as the representations alone, but as the Contract with its term (derived from the representations) that by acquiring all eight units the Claimant was acquiring the entire Floor 2A; that is the undertaking.
43. The Defendant submitted that no such duty of care could have been owed. The Claimant submitted that a duty of care could arise pursuant to Article 18 of the DIFC Law of Obligations, DIFC Law No 5 of 2005, prescribing consideration of reasonable foreseeability, a relationship of proximity, and fairness, justice and reasonableness in the circumstances. It acknowledged that it could cite no authority for the duty of care for which it contended, but said that whether it arose was a question “in an area of developing jurisprudence…[which]… should be decided on real rather than assumed facts” (JD Wetherspoon Plc v Van De Bergh Co Ltd [2007] EWHC 1044 (Ch) at [4]).
44. In my opinion, a duty of care as pleaded in paragraph 25 is untenable.
45. Taking first a duty of care to ensure that the Schedule 5 representation (which alone need be considered) was and remained true, the language of “to ensure” should not mislead. A duty of care calls for the taking of reasonable care towards a result, and does not promise the result. The Claimant’s suggestion of co-extensive contractual and tortious duties is misconceived. The duty under the Contract (if the Contract be upheld) is an unqualified obligation to sell the entirety of Floor 2A. It does not give rise to a lesser duty to take reasonable care to fulfill a representation of that result; there is no need for the lesser duty, and it would bring incoherence to the law to impose it.
46. The further duty of care to inform of changes which would or might mean that the Claimant was not purchasing the entirety of Floor 2A is otiose in the face of the contractual duty (again, if the Contract be upheld). The obligation to sell the entirety of Floor 2A to the Claimant is not accompanied by a duty, let alone one of reasonable care, to tell the Claimant that the contractual duty will or might not be performed.
47. Having regard to Article 18, in my opinion there is no realistic prospect that a duty of care in either of these respects would be held to have arisen. Paragraph 25 should be struck out.
The Misrepresentation Claim
48. The misrepresentation claim is founded on the misrepresentations pleaded in paragraphs 22 and 23, which I have earlier set out. It is alleged in paragraph 58 that “by reason of the facts and matters pleaded at paragraph 52…the representation outlined at paragraphs 22 and 23…was, or became, false”, and that the Defendant is liable for misrepresentation under Article 29 of the Law of Obligations. The “was or became false” was explained by Counsel for the Claimant in submissions as meaning was or became false prior to entry into the Contract; a confirmatory letter was to be sent.
49. The Defendant applied to strike out paragraph 58, and prayer 5 claiming damages for misrepresentation. It relied on a number of grounds, but with the explanation abovementioned (perhaps not as paragraph 58 would ordinarily have been read) a sufficient ground for striking it out was exposed.
50. It is not possible to see the facts and matters pleaded in paragraph 52 as making the pleaded representations (again, now only the Schedule 5 representation) false prior to entry into the Contract. Paragraph 52 is concerned with breach of contract and breach of the duty of care. Some of its allegations have nothing to do with the representation (e.g. failure to construct Floor 2A by the Anticipated Completion Data). All of them rest upon events occurring after entry into the Contract, essentially construction of units 210A and 215A and selling them to a third party.
51. The pleading fails to allege facts whereby the Schedule 5 representation could be found to have been or become false prior to entry into the Contract, and paragraph 58 and prayer 5 should be struck out.
52. For completeness, I should deal with two other matters going to the misrepresentation claim.
53. Although as a challenge to the fraud claim, the Defendant applied to strike out paragraphs 22 and 23 on grounds additional to the matter of agency in paragraph 23 earlier considered. Again, now only the Schedule 5 representation need be considered. The application, if successful, would also be fatal to the misrepresentation claim, and is conveniently now dealt with.
54. The Defendant submitted, perhaps rather faintly, that the pleaded representation that the Claimant “would be purchasing the whole of Floor 2A’ was not a statement of present fact within Article 29 (1) of the Law of Obligations. Rather, it was said, it was at best a representation that the Defendant would perform what became its contractual promise. The Claimant responded that the representation was one of present fact, namely, that what was for sale at the time the representation was made was the whole of Floor 2A.
55. The pleaded representation is open to the Claimant’s response, but of more importance it is expressly sourced in the supply of Schedule 5 of the SPAs. The representation is to be found in what was conveyed by the floor plans earlier described in the circumstances in which the documents containing Schedule 5 were provided. The pleading is not to be understood in a vacuum, and whether there was a representation of present fact reasonably falling within the terms of the pleaded representation is a matter for trial.
56. The Defendant further submitted that the Claimant was precluded from relying on the representations by the entire agreement clause, Clause 16.5, in the SPAs. The clause provided –
“16.5 This Agreement constitutes the entire agreement between the Parties relating to the subject matter of this Agreement and supersedes all previous verbal or written agreements, negotiations between the Parties including but not limited to, representations made in the marketing material, sales brochures, models, view sets, showroom displays, photographs, videos, illustrations and revenue projections and financial statements made available to the Purchaser.”
57. The construction and effect of such a clause has been considered in, for example, AXA Sun Life Services Plc v Campbell Martin Limited [2012] Bus LR 203 at [78] – [94] and Shoreline Housing Partnership v Mears Ltd [2013] EWCA Civ 639 at [15] – [16], to which the Claimant referred. In my opinion, it is far from clear that Clause 16.5 would exclude reliance on the Schedule 5 representation, and its proper construction and effect in that respect should be left to trial and findings as to the circumstances in which the SPAs, and the clause, were agreed.
58. I would not strike out paragraph 22 on either of these grounds.
The Fraud Claim
59. The fraud claim is also founded, in part, on the representations pleaded in paragraphs 22 and 23 of the particulars of claim; again, now only the Schedule 5 representation need be considered. After the allegation in paragraph 58 that the representation ‘was, or became, false’ and the Defendant is liable for misrepresentation, the pleading continues:
“59. Further, insofar as DAMAC had already taken the decision to create the additional units on Floor 2A at the time of entering into the Contract, the representation(s) at paragraphs 22 and 23 were fraudulently made in accordance with Article 31 of the Law of Obligations.
60. In the further alternative, insofar as the decision to create the additional units on Floor 2A was taken after the Contract was entered into, DAMAC acted fraudulently (within the meaning of Article 31 of the Law of Obligations)… by reason of the fact that it recklessly or intentionally hid the construction of the additional units on Floor 2A by:
60.1. Failing to provide keys for FirstRand to inspect the entirety of Floor 2A at the February Meeting;
60.2. Failing to inform FirstRand why eight separate NOLs were required in place of the single NOL for the entirety of Floor 2A which had already been issued;
60.3. Failing to supply FirstRand with the surveyor general diagrams, in spite of numerous requests for supply of the same;
60.4 Failing to inform FirstRand, either at the February Meeting or at the November Meeting, of the revised layout of Floor 2A.”
60. In paragraph 55 it is alleged that if the Defendant be liable for fraud by pre-contractual representation, the Contract was induced by fraud within the meaning of Article 40 of the Contract Law. There is no clear pleading of avoidance of the Contract for that reason, but that was not a point taken by the Defendant.
61. The Defendant applied to strike out paragraphs 59 and 60 and the associated paragraph 55, and prayer 6 claiming damage for deceit. It submitted that no facts were pleaded with the fullness and specificity required under RDC 17.43 and in conformity with the common law pleading requirements discussed in Three Rivers District Council v Bank of England (No.3) [2001] UKHL 16: (2001) 2 All ER 513, sufficient to raise an inference of fraud.
62. It became accepted, I think, that the language of ‘insofar as’ in paragraph s 59 and 60 was intended to express alternatives, the Claimant being unable to say whether the decision to create the additional units had been taken prior to or after entry into the Contract but saying that it must have been one or the other. (In any event, that is a sensible reading, and so far as the Defendant submitted that the pleading was entirely hypothetical, I do not agree).
63. If the former, the fraud lies in representing that the Claimant would be purchasing the whole of Floor 2A, when at the time it had made a decision which would in due course falsify the representation. If the latter, the fraud lies in later concealing the fact that the additional units had been constructed whereby the representation had been falsified.
64. Rule 17.43(1) requires “full and specific details of any allegation of fraud…”. The Claimant has complied with it, in that the details of the paragraph 59 allegation are that the Defendant had already taken the decision to create additional units and the details of the paragraph 60 allegation are that it recklessly or intentionally hid the construction of the additional units by the stated omissions. Whether the acts or omissions as detailed make out fraud is another matter: the Claimant has set out what it relies on.
65. Both parties accepted the guidance found in the Three Rivers case, although there was some difference upon what it was. The Defendant referred to the speech of Lord Millett at [183] – [186], and submitted that a pleading of fraud was bad if the facts pleaded were consistent with honesty. His Lordship dissented in the result, and the Claimant referred to the speech of Lord Hope, with whom Lord Steyn relevantly agreed, and submitted that provided fraud was clearly alleged and was particularised, and the particulars were capable of supporting the allegation, whether the evidence made out fraud or only established an honest default was a matter for trial.
66. Lord Hope explained at [55] that the principle was one of pleading, and –
“The other party is entitled to notice of the particulars on which the allegation is based. If they are not capable of supporting the allegation, the allegation itself may be struck out. But it is not a proper ground for striking out the allegation that the particulars may be found, after trial, to amount not to fraud, dishonesty or bad faith but to negligence”.
67. The distinction between pleading fraud and proving fraud is important. I take from the speech of Lord Hope at [57] – [58] the following. If fraud is not directly alleged, a finding of fraud cannot be made on facts which are equivocal, that is, consistent with honest conduct. But if fraud is directly alleged, and the particulars are capable of supporting the allegation, the pleading will stand. Whether fraud is proved is a matter for trial. Lord Hutton at [122] – [125] is to the same effect. To the extent to which Lord Millett expresses greater stringency in pleading (see also at [187] – [189], I respectfully do not think it represents the law.
68. I accept to the full the importance of restraint in, and the need for strict requirements for, pleading fraud. But the purpose of pleadings is to enable the opposing party to know the case being made and to prepare to meet it, and if the allegation of fraud is clear and the pleaded facts are capable of bearing the fraudulent complexion alleged it is a matter for trial whether they are made out and should be given that complexion.
69. Fraud is clearly alleged against the Defendant, and is particularised. The acts and omissions as detailed in the particulars of claim are capable of making out the fraud alleged, although it may be found at trial that they should not be given that complexion. Subject to the matter to which I now go, I decline to strike out paragraphs 59 and 60.
70. The Defendant applied to strike out paragraph 59 on a different ground. Through the witness statement of Mr Christopher Bourke, it proffered evidence which it said established that the Defendant took the decision to create the additional units after the time of entry into the Contract; so, it said, that alternative in the fraud claim could not succeed.
71. Mr Bourke is a lawyer working for the Defendant. His witness statement was provided on the day of the hearing of the application. He did not suggest personal knowledge of the decision-making, but attached a drawing approved in December 2007 showing eight units on the second floor of one of the towers; a letter to engineering consultants in July 2009 speaking of having to “revise layouts again” with a table of revised areas but still eight unit numbers 209 to 216, but also with a drawing showing a “new proposal” second floor with two additional units; and a drawing approved in May 2010 showing ten units.
72. These materials suggest that the change in the planned layout was made after 15 July 2008. But they are not conclusive against a decision-making process under way at that date, and it is far from satisfactory to have no more than pieces of paper from a person without personal knowledge, rather than direct evidence from someone putting his word to the fact that creation of the additional units was not entertained until after July 2008. It may be that after interlocutory processes the Claimant does not maintain paragraph 59, but for the present it should remain; I decline to strike it out.
Other matters
73. The Defendant applied to strike out paragraph 67, in which it is alleged that its conduct in reconfiguring Floor 2A and/or concealing the same from the Claimant was “deliberate and particularly egregious and/or offensive” and the Claimant asks for an uplift in damages pursuant to Article 40(2) of the DIFC Law of Damages and Remedies, DIFC Law No 7 of 2005, and also prayer 8 claiming the uplift. Its submissions treated the claim as standing or falling with the fraud claim. It does not, at least as a matter of pleading, but the fraud claim survives and in any event entitlement to an uplift should be left to trial when all the facts are exposed and the Defendant’s conduct can be evaluated for the purposes of Article 40(2).
74. The Defendant’s table of paragraph graphs to be struck out included paragraph graph 24. Its continuing function in the pleading is unclear, but it could go to establishing the Contract. Nothing was said of it, and it should remain for future elucidation.
75. It will be necessary for the Claimant to file amended particulars of claim in conformity with these reasons, including amendments consequential on striking out paragraph 25. The Defendant had filed a defence. As discussed at the hearing of the application, the defence is manifestly unsatisfactory in form and content. The Defendant has general leave to file an amended defence.
Orders
76. Counsel should submit agreed draft orders within 14 days, including a short timetable for the amended pleadings. There has been success and failure on both sides of the record. As at present advised, I consider that the costs of the application should be costs in the proceedings. If either party seeks a different order, the draft orders should provide for submissions stating what order is sought and why and submissions in response.
Issued by:
Natasha Bakirci
Assistant Registrar
Date of Issue: 2 April 2015
At: 3pm
