November 11, 2019 Court of Appeal - Orders
Claim No. CA-007-2019
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 APPEAL
BEFORE CHIEF JUSTICE ZAKI AZMI, JUSTICE RICHARD FIELD AND DEPUTY CHIEF JUSTICE OMAR AL MUHAIRI
BETWEEN:
GRAND VALLEY GENERAL TRADING LLC
Appellant
and
(1) GGICO SUNTECK LIMITED
(2) SUNTECK LIFESTYLES LIMITED
Respondent
REASONS FOR DECISION GIVEN ON 18 SEPTEMBER 2019 DISMISSING THE APPEAL
Hearing:18 September 2019
Counsel: Andrew Maguire instructed by Holman Fenwick Willan Middle East LLP for the Appellant.
Sophia Hurst instructed by Clyde & Co. for the Respondent.
JUSTICE SIR RICHARD FIELD
The factual background to the appeal
1.The First Defendant (“GSL”) is a joint venture company established in the Jebel Ali Freezone. Its share capital is held as to 50% by the Claimant (“GVGL”) and the remaining 50% is held by the Second Defendant (“SLL”), which is a 100% subsidiary of Sunteck Realty Ltd (“SRL”), GSL’s principal joint venture partner. The terms of the joint venture are contained in a Joint Venture Agreement executed by GVGL, SLL, Gulf General Investment Company, SRL and Mr Mohamed Abdalla Juma Al Sari on or about 27 April 2014. The joint venture’s purpose is the development of land in downtown Dubai. Annexure 2 of GSL’s Articles of Association sets out the sums that each of GVGL and SLL are to contribute for the recapitalisation of GSL’s share capital.
2. The validity of the Joint Venture Agreement, its interpretation and its execution are governed by the law of the UAE and the laws applicable in the Emirate of Dubai. Clause 36 provides that any disputes, differences or disagreements arising out of or in relation to the agreement shall be finally resolved by arbitration in Singapore in accordance with the rules of the LCIA if not earlier resolved amicably in informal negotiations.
3. GVGL claims that the financial contribution to the joint venture by SLL has fallen very significantly short of what had been agreed, with the result that the joint venture became impossible to progress, leaving GVGL with substantial losses. On 13 June 2018, GVGL issued a Claim Form against GSL which was amended on 21 June 2018. In the ensuing proceedings GVGL averred that whilst it had made the financial contribution agreed in Annexure 2, SRL and SLL had failed to adhere to their obligations to the point that the joint venture was no longer financially viable. GVGL claimed dissolution of GSL pursuant to Article 295 (6) and or/Article 298 of the UAE Federal Law No. 2 of 2015 concerning Commercial Companies. GVGL also claimed interest on the money it had contributed to the joint venture and to be entitled to be paid its costs of the proceedings out of the proceeds upon GSL’s dissolution.
4. At all material times GSL’s Board of Directors has been deadlocked. In consequence, GSL failed to file an Acknowledgment of Service and GVGL applied for, and on 19 September 2018 was granted, judgment in default of filing an Acknowledgement of Service pursuant to RDC Rule 13.1 (1) and (2). SLL, which at the time was not a party to the proceedings, then applied pursuant to RDC 14.2 to have the default judgment (“the judgment”) set aside, contending that it had standing to make the application under RDC 36.33, which provides:
“A person who is not a party but who is directly affected by a judgment or order may apply to have the judgment or order set aside or varied.”
5. The other RDC provisions relevant to this appeal are as follows:
RDC 13.4
“The claimant may obtain judgment in default of an acknowledgment of service only if—
(1) the defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and
(2) the relevant time for doing so has expired.
RDC 13.6
The claimant may not obtain a default judgment:
(1) … (2) … (3) …
(4) unless he has either filed a certificate of service under Rule 9.43
RDC 14.1
The Court must set aside a judgment entered under Part 13 if judgment was wrongly entered because.
(1) in the case of a judgment in default of an acknowledgment of service, any of the conditions in Rules 13.4 and 13.6 was not satisfied;
RDC 14.2
In any other case, the Court may, on such conditions as it sees fit, set aside or vary a judgment entered under Part 13 if:
(1) the defendant has a real prospect of successfully defending the claim; or
(2) it appears to the Court that there is some other good reason why:
(a) the judgment should be set aside or varied; or
(b) the defendant should be allowed to defend the claim.”
The judgment below
9. SLL’s application to set aside the judgment in default was heard and determined by HE Justice Shamlan Al Sawalehi (“the judge”) who granted the application. It is against this judgment that GVGL has appealed.
10. The judge’s reasons for granting SLL’s application can be summarised as follows. First, he correctly held that to establish that it was “directly affected” by the judgment for the purposes of RDC 36.33, SLL had to show that it had some interest capable of recognition by the law that was materially and adversely affected by the judgment. He then went on to find that since SLL’s material interest in GSL was adversely affected because the dissolution of GSL would deprive it of the ability to exercise its rights through voting and participation in GSL, SSL was “directly affected” by the judgment and therefore had standing to make its application.
11. The judge next held that SSL could not rely on RDC 14.1[1], 14.2 (1) or 14.2(2) (b) in seeking to set aside the judgment because in his view these provisions can only be relied on by the party against whom a judgment had been entered.
12. The judge then considered whether the judgment should be set aside “for some other good reason” pursuant to RDC 14.2 (2) (a) and found that it should be set aside for the following reasons: (i) there was a question as to the DIFC Courts’ jurisdiction over the matter; (ii) there was an interested party (SSL) that wished to seek to be joined and heard in the matter; (iii) there was an interested party (SSL) whose interests were directly affected and was unable to participate in the merits of the dispute; (iv) there was some question as to the proper service of the Claim on GSL, there being a question whether the DIFC branch of Al Tamimi & Co where the Claim Form was served acted as the registered agent of GSL or as an escrow agent; and (v) there were doubts that the DIFC Court could grant the remedy sought under the UAE Federal Law 2 of 2015.
The findings announced by the Court of Appeal at the end of the hearing on 18 September 2019
13. The Court found:
“(1) The judge correctly decided that SSL was directly affected by the judgment and therefore had standing to apply to set aside the judgment.
(2) It had been open to the judge to find that since SSL had standing to set aside the judgment pursuant to RDC 36.33, SSL could rely on RDC 14.1, 14.2 (1) or 14.2(2) (b) in seeking to set aside the judgment.
(3) GVGL had not served the Claim Form on GSL as required by the RDC and therefore the time to serve an Acknowledgement of Service had never begun to run and the certificate of service GSL had relied on was not a good certificate of service. It followed that the requirements of RDC 13.4 had not been satisfied.
(4) It therefore followed that, pursuant to RDC 14.1, it was mandatory that the judgment be set aside and the appeal should be dismissed with costs.”
The reasons for the Court’s findings
Finding (1)
14. It was GVGL’s case that the judge’s finding that SSL was directly affected by the judgment was erroneous in light of the decision of the Court of Appeal of England and Wales in Abdelmamoud v The Egyptian Association in Great Britain Ltd et al [2018] EWCA Civ 879. In this case, judgment in default of acknowledgement of service was entered against the defendant incorporated charity (“EAGB”) on a claim for money due under a contract of loan. Four members of EAGB, three of whom claimed to be directors and trustees of the charity, successfully applied to a Deputy Master to have the judgment set aside on the ground that they were “directly affected” by the judgment for the purposes of CPR r 40.9 9 (the wording of which is identical to the wording of RDC 36.33). This decision was over turned by a Deputy of the High Court whose judgment was upheld by the Court of Appeal.
15. The Court of Appeal held that those of the applicants who were directors of EAGB could not be regarded as directly affected by the judgment because, under EAGB’s constitution, the management of the company was in the hands of the directors and the applicant directors could not usurp the other directors by seeking to have the judgment set aside. The Court of Appeal also rejected the argument that, as members of EAGB, the four appellants were “directly affected” because they could seek to bring a derivative action under Part 11 of the Companies Act 2006 for and on behalf of the company. Newey LJ said that it was doubtful if derivative actions could be brought against charitable bodies and in any event four years had gone by since the default judgment had been entered and no action had been taken to mount a derivative claim. Further, pursuant to the reasoning in Prudential Assurance Co Ltd v Newman Industries Ltd (No. 2) [1982] Ch 204, shares in a commercial company were not directly affected by wrongdoing against the company and this approach applied a fortiori where the wronged entity was a charity.
16. In my judgment, the case before us is clearly distinguishable from the Abdelmamoud decision for the following reasons: (i) the claim against GSL is to have it dissolved with the inevitable consequence that the shares held by SSL would be extinguished; (ii) unlike the Board of Directors in Abdelmamoud, the Board of Directors of GSL is deadlocked and nothing has been put before the Court to show that a derivative action can be brought under UAE Law 2 of 2015.
17. It is also the case that the Claim Form alleges that SSL is in breach of its financial obligations under the joint venture agreement.
18. It follows, in my view, that SSL was directly affected by the judgment in that: (a) GVGL was thereby granted an order dissolving GSL which involved the extinguishment of SLL’s shares in that company; and (ii) it is alleged in the Claim Form that SSL is in serious breach of contract. The judge was therefore right to find that SSL had standing to bring its application pursuant to RDC 36.33.
Finding (2)
19. In my opinion, the natural meaning of RDC 36.33 is that a party “directly affected” by a default judgment is entitled to apply to set it aside on any of the grounds identified in RDC 13 and 14. It follows that, contrary to the view of the judge, SSL was entitled to rely on RDC 14.1 in pursuing its set-aside application.
Finding (3)
20. The entity on which, and the address at which, service was effected by courier (not posting to the PO Box) as stated in the Certificate of Service was: “C/O Al Tamimi and Company Limited, registered agent of the First Defendant, to its DIFC Office connected with PO Box No 9275, 6th Floor, Building 4 East, DIFC, Dubai, UAE”.
21. Under the heading “Registered Office”, GSL’s Articles of Association state that “The registered agent of the Company [GSL] is Al Tamimi and Company, Advocates and Legal Consultants, 20th Floor, the MAZE Tower, Sheikh Zayed Road, P.O. Box 9275 Dubai, UAE”. This address is in onshore Dubai and is different from that of the Al Tamimi & Co DIFC office.
22. In earlier proceedings in 2017 relating to an escrow agreement between the parties in respect of certain shares, Al Tamimi & Co DIFC were named as the escrow agent.
23. At the time the service certified in the Certificate of Service was effected, no legal representative was acting for GSL and GSL had not given an address for service. It follows that the place for service pursuant to the table contained in RDC 9.19 was “any place within the DIFC or Dubai where the corporation carries on its activities; or any place of business of the company within the DIFC or Dubai”.
24. As already noted, the Claim Form was not served at the address of GSL’s registered agent at Al Tamimi and Company, Advocates and Legal Consultants, 20th Floor, the MAZE Tower, Sheikh Zayed Road, P.O. Box 9275 Dubai, UAE, as provided for in GSL’s Articles of Association. Instead, it was served at C/O Al Tamimi and Company Limited, registered agent of the First Defendant, to its DIFC Office connected with PO Box No 9275, 6th Floor, Building 4 East, DIFC, Dubai, UAE, which is the address of the escrow agent in the earlier proceedings above referred to.
25. Mr Maguire for GVGL submitted that it was where Al Tamimi & Co entity held some of the shares that were the subject of the joint venture at the 6th Floor, Building 4 East, DIFC, Dubai, UAE, which was the place where GSL carried on its activities or was its place of business for the purposes of RDC 9.19. I do not accept this submission. In my judgment, the place of business of GSL was where the registered agent of GSL, Al Tamimi & Company, Advocates and Legal Consultants, was located at 20th Floor, The MAZE Tower, Sheikh Zayed Road, as specified in GSL’s Articles.
26. Mr Maguire also submitted that since the PO Box specified for the posting of documents was the same in the details of the Registered Office specified in the Articles and in the details stated in the Certificate of Service, the service actually effected was good service. I reject this submission. The Claim Form was not sent to the specified PO Box but delivered by a courier to the address at the 6th Floor, Building 4 East in the DIFC.
27. Finally, relying on the decision of the UK Supreme Court in Abela et al v Baadarani and another [2013] UKSC 44, Mr Maguire argued that even if service of the Claim Form was not in strict accordance with RDC Part 9, the DIFC Court should hold that there had been effective service by an alternative method on GSL occurring retroactively on 26 June 2018 by service originally performed via Al Tamimi & Co Ltd (DIFC entity). This submission I also reject. In my opinion, there is no scope for the approach taken in Abela in a case such as this where a judgment in default of an Acknowledgement of Service has been issued in circumstances where the original service of the Claim Form was not in accordance with Rules of Court.
28. It follows that GSL cannot be said to have failed to serve an Acknowledgment of Service within the specified period of time since the obligation to do so was never engaged because there had been no effective service of the Claim Form. The condition in RDC 13.4 that the defendant has not filed an Acknowledgment of Service within the relevant time for doing was therefore not satisfied in this case; nor was the requirement in RDC 13.6 (4) that an applicant for judgment in default of an Acknowledgment of Service must file a Certificate of Service, since it is implicit that the certificate must certify service that was effective under the RDC.
29. It follows that, pursuant to RDC 14.1, the Court is obliged to set aside the judgment and the appeal in this case must be dismissed.
CHIEF JUSTICE ZAKI AZMI
30. I agree with the above and have nothing further to add.
DEPUTY CHIEF JUSTICE OMAR AL MUHAIRI
31. I agree with the above and have nothing further to add.
Issued by:
Nour Hineidi
Date of issue: 11 November 2019
At:12pm
