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Claim No: ARB 035/2020

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANC

BETWEEN

MIBOT

Claimant

and

MFAST

Defendant

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ORDER WITH REASONS OF H.E JUSTICE SHAMLAN AL SAWALEHI

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UPON reviewing the Defendant’s Application No. ARB-035-2020/1 dated 18 April 2021 for the judgment in default of acknowledgment of service dated 15 March 2021 to be set aside (the “Set Aside Application”)

AND UPON reviewing the Claimant’s Application No. ARB-035-2020/2 dated 3 May 2021 for the Set Aside Application to be struck out (the “Strike Out Application”)

AND UPON hearing counsel for the Claimant and counsel for the Defendant at the hearing on 3 October 2021

AND UPON reviewing the relevant documents on the Court’s file

IT IS HEREBY ORDERED THAT:

1. The Set Aside Application is dismissed.

2. The Strike Out Application is dismissed.

3. The parties shall bear their own costs of the applications.

Issued by:
Nour Hineidi
Registrar
Date of issue: 25 January 2022
Time: 2pm

SCHEDULE OF REASONS

Introduction

1. The Claimant, Mibot (“Mibot”), is a real estate developer. The Defendant, Mfast (“Mfast”), is an interior fit out company.

2. Mfast asks the Court to set aside judgment entered against it on 15 March 2021 in default of acknowledgment of service (the “DIFC Default Judgment” and the “Set Aside Application”). Mibot asks the Court to strike out the Set Aside Application (the “Strike Out Application”).

3. For the reasons which follow, both applications are dismissed.

Background

The Agreements

4. Mibot and Mfast have two agreements with each other, both of which concern parts of Mibot’s “Mruf” development in Jumeirah Village Circle, Dubai (the “Project” and the “Contracts”). One agreement concerns gypsum works (the “Gypsum Contract”), the other joinery works (the “Joinery Contract”).

5. The Gypsum Contract, entered into on 26 June 2016, was originally between Mfast and Mosla ( “Mosla”), the main contractor of the Project. Clause 36 of the addendum to the Gypsum Contract stipulates that any disputes arising in connection with the Gypsum Contract are required to be resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre.

6. On 1 July 2017, Mibot, Mosla and Mfast entered into a novation agreement by which Mosla transferred its interest and obligations under the Gypsum Contract to Mibot (the “Novation Agreement”). Clause 4.1 of the Novation Agreement stipulates that the Dubai Court has exclusive jurisdiction to hear any disputes between the parties arising from that agreement.

7. The Joinery Contract, entered into on 8 February 2018, was between Mibot and Mfast from the start. Clause 4.14 stipulates that the Dubai Court has exclusive jurisdiction to hear any disputes between the parties arising from the agreement. Mibot places emphasis on the fact that, pursuant to Clause 1.1 of the Joinery Contract, Mfast undertook to perform obligations arising from a suite of documents, one of which is “Addendum No. 1 dated 1 July 2017”. Pursuant to Clause 12 of Addendum No. 1, any disputes arising in connection with the addendum are required to be resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre (together with Clause 36 of the addendum to the Gypsum Contract, the “Arbitration Agreements”).

8. In both Arbitration Agreements, the DIFC is identified as the seat of arbitration

The Dispute

9. A dispute arose.

10. On 18 March 2020, Mfast filed a civil action against Mibot before the Dubai Court (the “Onshore Claim” and the “Onshore Proceedings”). Mibot responded by filing a defence and a counterclaim. In short, Mfast claimed a sum of AED 17,338,390.74 for alleged outstanding dues for works carried out under the Contracts—that is, both the Gypsum Contract and the Joinery Contract—plus interest, and Mibot counterclaimed a sum of AED 8,463,413 in damages under the Contracts for losses allegedly suffered by it on account of a delay in completion of the Project that Mibot submitted was caused by Mfast, plus interest.

11. On 6 October 2020, the Dubai Court of First Instance issued a judgment granting the Onshore Claim and dismissing the Onshore Counterclaim (the “Onshore CFI Judgment”)

12. On 4 November 2020, Mibot filed an appeal against the Onshore CFI Judgment (the “Onshore Appeal”).

13. On 15 November 2020, Mibot issued proceedings in the DIFC Court (the “DIFC Court Proceedings”), in the Technology and Construction Division. On the claim form, Mibot stated under the heading “Remedy Sought”:

It is worth highlighting that there was no mention in the Initial DIFC Claim of either any arbitration agreement or the Onshore Proceedings.

14. On 19 November 2020, Mibot requested by email that the DIFC Court Proceedings be transferred to the Court’s Arbitration Division.

15. On 23 November 2020, Registrar Nour Hineidi granted the request.

16. The same day, Mibot filed a new claim form in the Arbitration Division. The next day, Mibot amended the new claim form. The amended claim form, which does not include much information, made reference to particulars of claim.

17. In particulars of claim dated 24 November 2020 (the “PoC”), Mibot stated under the heading “Reliefs Sought”:

There was no mention in the PoC of any dispute, the Dubai Court Proceedings or the Onshore Judgment, nor any intended future arbitral proceedings.

18. On 7 December 2020, Mibot filed an application before the Joint Judicial Committee (the “JJC”), requesting it to determine a supposed conflict of jurisdiction between the Dubai Court and the DIFC Court (the “Claimant’s JJC Application”).

19. On 29 December 2020, the Dubai Court of Appeal dismissed the Onshore Appeal and upheld the Onshore CFI Judgment (the “Onshore CA Judgment”). This decision was not subsequently appealed.

20. On 24 December 2020, Mibot made a request in the DIFC Court Proceedings for judgment in default of acknowledgment of service pursuant to Part 13 of the Rules of the DIFC Court (the “RDC”).

21. On 15 March 2021, default judgment was given i.e. the DIFC Default Judgment. At [2] of the DIFC Default Judgment it was declared that “The arbitration clause contained in clause 36 of the Addendum in the First Sub-Contract Agreement dated 26 June 2016 [i.e. the Gypsum Contract] is binding on the Claimant and Defendant” and at [3] it was declared that “The arbitration clause contained in clause 12 of the Addendum in the Second Sub-Contract Agreement dated 8 February 2018 [i.e. the Joinery Contract] is binding on the Claimant and Defendant”.

22. On 18 April 2021, Mfast filed an application for the DIFC Default Judgment to be set aside i.e. the Set Aside Application.

23. On 3 May 2021, Mibot filed an application for the Set Aside Application to be struck out i.e. the Strike Out Application.

24. On 3 October 2021, Mfast’s and Mibot’s applications were heard (the “Hearing”)

The Set Aside Application

Mfast’s Case

25. Mfast advances its Set Aside Application under RDC rr. 14.1 and 14.2 i.e. it submits that the DIFC Default Judgment must be set aside and, in the alternative, that should be set aside. These rules provide as follows:

As to the RDC r. 14.1 argument, Mfast submits that Mibot’s claim i.e. the DIFC Claim was satisfied before the DIFC Default Judgment was entered, engaging RDC r. 14.1(3). As to the RDC r. 14.2 argument, Mfast submits that it has a real prospect of successfully defending the DIFC Claim, engaging RDC r. 14.2(1), and, in the alternative, that there is also some other good reason why Mfast should be allowed to defend the DIFC Claim, engaging RDC r. 14.2(2)(b).

Discussion

26. Needless to say, Mfast goes into far more detail in submissions than has been given in the preceding paragraph. Nevertheless, and notwithstanding that no reference has been made to Mibot’s case, in my judgment the Set Aside Application can be disposed of with reference to these key points.

27. While it may be Mibot’s intention to arbitrate the dispute determined by the Dubai Court—that determination taking the form of the Onshore CFI Judgment, upheld by the Onshore CA Judgment, not appealed by Mibot —or more precisely a part thereof, the DIFC Claim concerns the validity of the Arbitration Agreements, not the parties’ substantive dispute, whether determined by the Dubai Courts in breach of the Arbitration Agreements or with the parties’ consent, express or implied. It is Mfast’s case that the Arbitration Agreements were not so much as mentioned in the Onshore Proceedings, never mind invoked or otherwise put before the Dubai Courts. It necessarily follows, in my judgment, that the DIFC Claim, a claim for declarations that the Arbitration Agreements are binding, cannot have been satisfied before the DIFC Default Judgment was entered as such a claim had not previously been made. On this basis I dismiss Mfast’s case under RDC r. 14.1. (I note that it is not at all clear how there could be a conflict of jurisdiction between the Dubai Court and the DIFC Court for the same reason.)

28. As to the question of Mfast’s prospect of successfully defending the DIFC Claim, while Mfast has not expressed it in this way, in my view the question can be reformulated as follows: does Mfast have a real prospect of successfully defending Mibot’s claim that the Arbitration Agreements are binding? In my judgment, the answer to this question is “no”. Mfast has not challenged the validity of the Arbitration Agreements. Its primary position is that Mibot waived its right to invoke the Arbitration Agreements when it filed a defence and counterclaim in the Onshore Proceedings and advanced these cases to conclusion without invoking the Arbitration Agreements. In my view, Mibot waiving a right to invoke the Arbitration Agreements presupposes the Arbitration Agreements being valid and therefore, without more, binding. Unless the Arbitration Agreements were binding, how could Mibot waive a right to invoke them in the Onshore Proceedings?

29. Mibot has not asked the Court to determine the scope of the Arbitration Agreements, whether the subject matter in the Onshore Proceedings or any part thereof fell within that scope or whether the Onshore CFI Judgment and the Onshore CA Judgment were obtained in breach of the Arbitration Agreements rather than with the parties’ consent, express or implied—and for the avoidance of doubt, the Court has not determined any of these questions—which no doubt would have been much more contentious questions. Instead, it has simply asked the Court to declare something that, so far as I am aware, has not been disputed by Mfast, namely that the Arbitration Agreements are binding, without reference, moreover, to any particular dispute or particular proceedings where agreement or waiver of a right to arbitration might operate to put the Arbitration Agreements out of reach for that dispute or in those proceedings

30. In my judgment, the foregoing is a sufficient basis to dismiss Mfast’s RDC r. 14.2 argument also.

The Strike Out Application

31. Mibot’s Strike Out Application is made on several technical bases:

As Mfast has argued, the arguments that comprise the Strike Out Application could have been conveniently made in response to the Set Aside Application. I do not consider that there was a need for a separate application to be made. More importantly, given my decision on the Set Aside Application, the Strike Out Application does not require determination. I dismiss the application.

Costs

32. The utility of both the Set Aside Application and the Strike Out Application strikes me as being minimal to say the least. Nor is it clear that the DIFC Claim and the DIFC Default Judgment serve any useful purpose. Again, the Court was asked to declare, and it did declare, that the Arbitration Agreements were binding, in circumstances where the same had not, so far as I am aware, been disputed by Mfast. In these circumstances I think it is appropriate to make no order as to costs. Each party shall bear its own costs of the applications.