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Claim No: CA 003/2020

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 ROGER GILES AND JUSTICE ROBERT FRENCH

BETWEEN

HEXAGON HOLDINGS (CAYMAN) LIMITED

Claimant/Appellant

and

(1) DUBAI INTERNATIONAL FINANCIAL CENTRE AUTHORITY
(2) DUBAI INTERNATIONAL FINANCIAL CENTRE INVESTMENTS LLC

Defendants/Respondents

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REASONS FOR JUDGMENT OF THE COURT OF APPEAL DATED 29 SEPTEMBER 2020

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Introduction

1. This is an appeal against a judgment of H.E. Justice Ali Al Madhani dated 25 March 2020 in which he ordered that the Appellant’s Claim and Particulars of Claim be struck out, that immediate judgment be granted in favour of the Respondents and that the Appellant pay the Respondents’ costs of the proceedings. The orders were made pursuant to an application by the Respondents. Permission to appeal was granted by Order of H.E. Justice Ali Al Madhani on 18 May 2020. On hearing argument on the appeal on 27 September 2020 the Court allowed the appeal and made orders accordingly. What follows are the reasons for that decision.

The Applicable Rules of Court

2. The application for immediate judgment in the CFI was made under Part 24 of the Court Rules, which provides:

3. The procedure for making an application requires, inter alia:

4. The parties are required to comply with Part 23 which includes Rule 23.25:

A party may rely upon written evidence at the hearing in reply to any other party’s written evidence.

5. The orders that the Court may make on such an application are set out, non-exhaustively, in Rule 24.11:

6. The application for a strike out order was made pursuant to Rule 4.16 which provides:

The Claim

7. On 6 March 2019, the Appellant filed a Claim Form in the CFI naming the Dubai International Financial Centre Authority (“DIFCA”) and the Dubai International Financial Centre Investments LLC (“DIFCI”), a company wholly owned by DIFCA as first and second defendants respectively. The claim value was said to be AED1,751,000,000. The brief details of the claim were as follows:

On or about 5 May 2004 the first Defendant and the Claimant entered into a Joint Venture Agreement (“JVA”) in respect of a project to develop land at the Dubai International Financial Centre (the “Project”). The second Defendant, a subsidiary of the first Defendant, renounced the JVA, claiming it was not bound by the JVA. This constitutes a repudiatory breach of the JVA. The Defendants committed additional fundamental breaches of the JVA, including their failure to undertake the required steps to progress the Project. The Claimant has accepted DIFCI’s repudiatory breach and elected to terminate the JVA on the basis of i) the repudiatory breaches and ii) the Defendants’ further fundamental breaches. As a result of DIFCI’s breaches of the JVA, the Claimant incurred loss and suffered damage. In these proceedings, the Claimant seeks to recover these losses and damages caused to it by the Defendants. The relief sought by the Claimant is particularised in the Particulars of Claim appended to this Claim Form.

Particulars of the Claim

8. Particulars of Claim were filed with the Claim Form. The substance of the claim, as set out in the Particulars was summarised in the Appellant’s Grounds of Appeal:

9. As appears from the above, the claim alleges two classes of breach by DIFCA and DIFCI. DIFCI’s conduct appears to be attributed to DIFCA by virtue of an agency relationship.

The Immediate Judgment and Strike-Out Application

10. On 10 April 2019, the Respondents filed an application for Orders that:

11. The ground of the application was stated thus:

For the reasons set out in detail in the enclosed Application for Strike Out and/or Immediate Judgment and supporting witness statement of Mr Jacques John Visser dated 10 April 2019, the Claim and Particulars of Claim disclose no reasonable grounds for bringing or defending the Claim and/or the Claim has no real prospect of success and there is no other compelling reason why the case should be disposed of at trial.

Strike-Out and Immediate Judgment Applications — Relevant Principles

12. The Primary Judge referred to Rules 4.16 and 24.1 of the Rules of the DIFC Courts. He observed that there is significant overlap between the approach to deciding applications under each of those provisions. He quoted the observation to that effect by Giles J in Nest Investments Holding Lebanon SAL & Ors v Deloitte & Touche (M.E). & Joseph El Fadl (DFI-027-2016) at [20]:

There is a degree of overlap between these two provisions. RDC 4.16 is apt for an application on the basis that, even if the pleaded grounds are accepted, the claim must fail. That can also be the basis for an application under RDC 24.1, but that rule is apt for an application on the basis of evidence showing that the claim must fail, or of absence of evidence to support it. The overlap suggests, however, a common approach under either rule, subject to questions of fact in an evidence-based application and to RDC 24.1(2).

13. The Primary Judge approached the application before him on the basis that no material difference exists between the application of the two rules. The question to be addressed was whether the Appellant’s claim had a “realistic” as opposed to a “fanciful” prospect of success. To meet the latter criterion a claim must “carry some degree of conviction” and be more than “merely arguable”, quoting Potter LJ in ED & F Man Liquid Products v Patel [2003] EWCA Civ 472. The position of the Respondents articulated by His Excellency was that the Appellant had no reasonable ground for bringing its claim and no real prospect for success.

14. His Excellency recognised that the Court should not determine the application by conducting a mini trial. Where there were real disagreements on matters of fact the Court should not seek to dispose of the case by immediate judgment. However, the mere appearance of factual discrepancies would not of itself preclude the Court from giving judgment at an early stage if a surface-level review revealed that a party’s case had been constructed on the basis of factual assertions which were likely to be false. His Excellency’s statement of the relevant principles was not really in contention in this case.

15. The difficulty with the judgment under appeal is that it involved conclusions, necessarily based on the pleadings, and sparse written evidence, that were inherently fact-sensitive and required evaluative judgments to be made which could only really be made in the context of a factual matrix and specific findings of fact identified after a trial of the claim. Those observations relate particularly to His Excellency’s conclusions in relation to the character of the alleged breaches and whether they were fundamental or non-fundamental, whether there was an affirmation of the contract by the Appellant/Claimant notwithstanding prior breaches and whether the causes of action asserted by the Appellant/Claimant were barred by operation of the time limitation in section 123 of the Contract Law of Dubai.

Materials before the Primary Judge

16. Materials placed before the CFI by the Respondents in support of their application included two witness statements by Mr Jacques Visser, the Chief Legal Officer of DIFCA, a role he has held since 2015. The second was a reply statement to witness statements filed by the Appellant.

17. Mr Visser’s first witness statement set out a chronological history covering the following periods:

18. Mr Visser said that his statement was not intended to be exhaustive of the facts in those time periods, but it was intended to assert only those facts relied upon by the Respondents in support of the Application. He nevertheless proceeded on the basis that the Respondents’ Application was made on the assumption that the alleged breaches of clause 3 of the Amended Agreement would be proven by the Appellant. He contended that even if they could be proven, the claim was bound to fail.

19. He then dealt with the first of the specified periods from execution of the Joint Venture Agreement as amended on 5 May 2004. Mr Visser stated that the Project had stalled in its early stages. He referred to the difficulty of finding suitable investors and further delays caused by shareholder changes on the part of the Appellant “and then on account of the parties trying to settle a host of issues relating to the proposed terms, structure, design, viability and financing of the Project.”

20. None of the parties, including the Appellant, had ever formally demanded performance of the Amended Agreement pursuant to DIFC Contract Law within a specified period of time or at all. At no time did the Appellant request the Respondents to perform the steps under clause 3 within the relevant time frame or an additional reasonable period of time. Nor was there any suggestion that their failure to do so amounted to fundamental non-performance of the Amended Agreement.

21. Mr Visser offered the general and conclusionary observation that “the focus of the parties during this period was not upon performance of their mutual obligations under Clause 3 of the Amended Agreement” but upon the issues mentioned earlier relating to the proposed terms, structure, design, viability and financing of the Project. He referred to several proposals submitted by the Appellant and made in discussion between the parties which included the draft Shareholders’ Agreement dated 19 February 2008, which was ultimately not fully executed between the parties.

22. He referred to various communications between the parties and said:

My understanding from reviewing the Defendants’ files in connection with this Project is that the Tanmiyat Group became involved in this Project on account of Mr Suleiman Al Majed from the Tanmiyat Group at some point being (and may still be via a Cayman Island company called Ruby Limited) an indirect shareholder in the [Appellant].

He said:

Ultimately, the parties could not come to a uniform view on how to proceed with the Project in the context of the Amended Agreement, or otherwise, between 2004 to 2009.

This was a matter of inference offered by Mr Visser rather than a statement of primary fact. Indeed, some elements of Mr Visser’s statement were really in the nature of argument and submission rather than testimony as to matters of primary fact.

23. The Appellant then sought to revive discussions with a letter to DIFCI on 21 March 2010 which was resubmitted to DIFCI on 26 April 2012. The proposals were not acceptable to the Respondents as they were said to have deviated from the Amended Agreement in significant respects.

24. Mr Visser then went on to deal with the history of interactions between the parties in the period following the 2012 letter. He stated at paragraph 15 that the view expressed by DIFCI in the 2012 letter had to be understood in its context. The contextual matters he referred to were:

25. He referred to the Appellant’s affirmation of the Amended Agreement in response to the 2012 letter.

26. There then followed a reference to detailed discussions between the parties from September 2012 to October 2018 to try and agree a solution. However, they could not come to any final agreement in connection with the Project. Despite the lengthy time which had elapsed since the 2012 letter, no formal demands were ever issued by the Appellant requiring the Respondents to perform any of their obligations under the Amended Agreement. Nor did the Appellant give any indication of its intention to terminate the Amended Agreement nor was there any suggestion that the Appellant had purported to accept the 2012 letter as constituting an anticipatory breach of the Amended Agreement.

27. Mr Visser referred to the Respondents’ letter of 10 October 2018, which he called the “Performance Letter”. It was intended to break the logjam between the parties and seek performance of their obligations under the Amended Agreement, which had effectively stalled since 2004. The Performance Letter was said to have been issued to clarify the Respondents’ revised view that the Amended Agreement remained on foot and to request performance of the parties’ obligations within a reasonable period of time. The Performance Letter was said to have made it clear that the Respondents intended to comply with their own obligations under the Amended Agreement.

28. The Appellant responded to the Performance Letter on 19 November 2018. Its response was described by Mr Visser as the “Invalid Termination Letter”. He asserted that the Respondents remained ready, willing and able to perform their obligations under the Amended Agreement and had retracted the 2012 letter which had then been superseded by the Performance Letter. The Respondents rejected the Invalid Termination Letter by way of a letter dated 19 December 2018.

29. In reply to the Respondents’ application for immediate judgment, the Appellant filed a witness statement of Abdullah Al Majed who is currently the CEO of Tanmiyat Investment Group and with his brother Sulyman Al Majed is a shareholder in the Appellant. His witness statement dealt with matters set out in the first witness statement of Mr Visser. It is sufficient to say that his statement set out a lengthy and somewhat complex factual history of dealings between the Appellant and the Respondents. He took argumentative issue with Mr Visser’s statement as “very hard to reconcile with reality”. He claimed that the record showed that the Appellant and its representatives:

spent years pressing the DIFC to perform its obligations under the JVA (as amended), namely to proceed with the finalisation and execution of the key project documentation and incorporate the JVCO and proceed with the finalisation execution of the, without result.” (sic).

Again, this was a statement by way of submission rather than primary fact.

30. A further witness statement was filed on behalf of the Appellant made by Gaith Aboul Hosn, Managing Director of Kablen Holding, a real estate consultancy group working with one of the Appellant’s shareholders, Mr Abdullah Al Romaizan on a number of property related matters. Again, by way of argument, he took issue with Mr Visser’s account of the period from 2010 to 2018 contending that the “straightforward narrative” appearing in Mr Visser’s statement did not reflect what had gone on. He had become involved in the matter in 2014 when Mr Al Romaizan had asked him to try and work with the DIFCA on a way forward for the Project. However, he referred to the documentary record covering the period before his direct involvement.

31. A further witness statement was made by Sara Yasmin Walker on behalf of the Appellant. She is a solicitor and a partner in the London office of King & Spalding International LLP and has conduct of the matter on behalf of the Appellant. Ms Walker’s statement also had the character of argument or submission rather than evidence.

32. She referred to the witness statement of Mr Al Majed and Mr Aboul Hosn and the exhibits to those statements which, she said, set out the history of the Project in detail. They focussed on the Appellant’s interactions with the DIFCA and attempts to realise the Project over the course of about 15 years. She sought to draw from that evidence and to place Mr Al Majed and Mr Aboul Hosn’s evidence in the context of what she believed to be the legal standard applicable to the application. She also addressed the accuracy of the main factual points advanced by the DIFCA. Her statement was argumentative rather than factual. Its express purpose was “… to highlight the numerous and significant matters of controversy between the parties as to important factual issues that arise in this dispute, that in turn raise equally contentious points of contract construction and legal analysis”.

33. Her statement made reference to the factual matters said to bear upon the Respondents’ contention that the Appellant’s termination notice was invalid because the Respondents “expression of intention” to terminate in its 2012 termination letter was “revoked and superseded” by its letter of 10 October 2018 referred to as the “Alleged Performance Letter”. She referred also to the Respondents’ contention that the termination notice was invalid because the Appellant had “affirmed” the JVA as amended in the intervening period.

34. In relation to that aspect of the Respondents’ contentions she asserted that as a matter of fact the Respondents renounced and repudiated the JVA on a number of occasions between 2012 and 2018. She then made reference to a number of events including an email from the Respondents to the Appellant of 21 October 2013 in which it was said:

One thing we can confirm at the moment, however, is that we will not be giving Hexagon or any other party any exclusivity over the plot at this stage. Nevertheless, we will give Hexagon (or its affiliates) a fair opportunity to submit a proposal to us for the plot which we will genuinely consider in good faith before deciding how and with whom we provide exclusivity for exploring a JV opportunity for development of the plot.

35. The Respondents were said to be in breach of the JVA by entertaining offers from other buyers for the project land. Reference was then made to a meeting of 16 May 2016 in which the Respondents’ representative, Mr Visser, told Mr Aboul Hosn and other representatives of the Appellant that he did not consider the JVA (as amended) to be binding on the Respondents. This was said to have been confirmed by a letter to the Appellant dated 6 August 2017 and signed by Mr Visser and again at a meeting on 19 September 2017 between Mr Visser and Mr Aboul Hosn.

36. There was reference also to a “Standstill” Agreement entered into in relation to claims under the JVA in late 2017. With respect to the alleged affirmation of the JVA by the Appellant, Ms Walker argued that the Respondents’ application did not mention the fact that the Appellant expressly reserved all of its rights in respect of the 2012 termination letter, leaving it open to press for performance without affirming the agreement.

37. The second aspect of the contentions advanced in Ms Walker’s statement concerned the Respondents’ arguments about the status of the Appellant’s claims in respect of the alleged Clause 3 Breaches.

38. Contrary to the Respondents’ position that the Appellant had not notified them of non-performance pursuant to DIFC Contract Law, Ms Walker referred to the witness statements of Mr Al Majed and Mr Aboul Hosn and the documentary record between 2000 and 2012 which were said to show that the Appellant had repeatedly pressed the Respondents to perform their obligations under the JVA as amended. Reference was then made to emails, meetings and communications. In another section of her lengthy statement, Ms Walker referred to other alleged discrepancies between the Respondents’ case on the application and the factual record. It is not necessary, for present purposes, to refer to those in any detail.

39. On the question of the time limitation asserted by the Respondents in relation to the alleged breaches, Ms Walker argued that it was not known what the Respondents’ pleaded case on the limitations would be given that it had so far failed to file a defence. The Appellant’s position was that the Respondents had not explained as a matter of fact and law how their breaches of the JVA as amended were not continuing breaches and/or that no fresh accrual of such breaches occurred on the multiple occasions on which the Appellant pressed for performance. She also noted that neither in the application for immediate judgment, nor in Mr Visser’s witness evidence in his first statement, was any mention made of the Standstill Agreement or a full reservation of rights by the Appellant in its letter dated 2 September 2012.

The Contract Law of the DIFC

40. The Contract Law of the DIFC No 6 of 2004 had application to this case.

41. Article 86 which deals with termination of a contract for fundamental non-performance provides:

42. Article 81 which provides for a case in which the aggrieved party allows the party in breach an additional period of time for performance is not material for present purposes. The definition of non-performance is set out in Article 77:

Non-performance is failure by a party to perform any one or more of its obligations under the contract, including defective performance or late performance.

43. Article 87 provides for a notice of termination:

What is necessary to constitute “notice” is spelt out in Article 13 which provides:

44. Anticipatory non-performance is covered by Article 88:

Where prior to the date for performance by one of the parties it is clear that there will be a fundamental non-performance by that party, the other party may terminate the contract.

45. Article 89(2) provides that termination does not preclude a claim for damages for non-performance.

46. Part 7 of the Act provides for “Performance”. Article 64 relates to the “Time of Performance” and provides:

47. It will be seen from the provisions of Article 86 that the concept of a fundamental non-performance is evaluative and potentially involves consideration of a number of factual circumstances. It is against this background that consideration may be given to His Excellency’s reasoning on the Clause 3 Breaches. His Excellency held that the first question that must be addressed in relation to Clause 3 Breaches was whether they amounted to fundamental or non-fundamental non-performance of the Amended Agreement. In making that distinction he referred to Article 86 of the Contract Law.

48. Also relevant in the present case was Article 123 of the Contract Law relating to the limitation of time for bringing actions for breach of contract. It provides:

The Joint Venture Agreement – Relevant Provisions

49. Clauses 3.1, 3.2 and 3.3 of the JVA as amended by the Amendment Agreement were central to the claim. It is breaches of those provisions that are alleged by the Appellant.

50. The JVA, originally an agreement between the DIFCA and Nexus contemplated the addition of the Investor as a party. Clause 2 of the JVA provided:

51. Clause 3 then contained operative provisions of the JVA in the following terms:

52. Under the terms the parties to the Amended Agreement which was dated 5 May 2004 were DIFCA, Nexus SA and the Appellant. Under the Amendment Agreement the Appellant was added as a party to the Joint Venture Agreement with consequential amendments being made including the deletion of clause 3.1.1. The words in clause 3.1.2 “and Nexus shall procure that the Investor signs all documents required on its part” was to be deleted.

The Reasons of the Primary Judge on the Merits of the Application

The Clause 3 Breaches – Whether Fundamental

53. As His Excellency observed the Respondents had not filed a defence to the claim at the time of the application for immediate judgment. They contended that the grounds for the orders they sought were established in the Appellant’s pleaded case. For the purpose of their applications the Respondents proceeded on the hypothetical basis that they were in breach of clause 3 obligations in the Amended Agreement and that they had renounced the Amended Agreement on 12 June 2012. (Para 9)

54. His Excellency turned to the facts alleged in the Particulars of Claim which he set out in narrative form in his reasons for judgment. In particular he recited that:

Clause 3.1.3 of the Amended Agreement provided for the Shareholders’ Agreement to be executed between Nexus, Hexagon and the Defendants in a form prepared by Nexus and approved by the Hexagon and the Defendants. During 2008, the parties sought to negotiate a draft of the Shareholders’ Agreement. However, at no time was the Shareholders’ Agreement executed. (Para 14)

55. The Appellant had submitted that over time the Respondents failed to comply with their obligations under the JVA and the Amended Agreement both of which required steps to be taken as soon as “reasonably practicable” and imposed a time limit on completion of the Project. In the circumstances, on 2 May 2012 the then project manager acting on behalf of the Appellant requested a status report of the project and required further steps to be taken to progress it. In the response dated 12 June 2012, DIFCI, on behalf of DIFCA, asserted as follows:

56. His Excellency referred to the response of the Appellant’s legal representatives on 13 August 2012 rejecting the Respondents’ contentions about the status of the Amended Agreement and their obligations under it. There was no answer from the Respondents. The Appellant’s counsel wrote a further letter to DIFCI on 2 September 2012 reiterating its position while reserving its rights. DIFCI, on behalf of DIFCA, responded on 27 September 2012 restating the position that neither of the Respondents was bound by the Amended Agreement. (Para 17)

57. The Appellant had submitted before the primary judge that the letters from DIFCI and the Respondents’ conduct before and after the exchange of the letters amounted to breaches of obligations under the Amended Agreement. The Appellant submitted that the Respondents committed the following breaches of the Amended Agreement:

His Excellency pointed out that these were collectively referred to as the “Clause 3 Breaches”. (Para 18)

58. The Appellant took the position before His Excellency that the latest letter constituted a clear renunciation of the Amended Agreement and that the Appellant had formally accepted the renunciation by its letter of 19 November 2018 which was the Purported Termination of the agreement. The Appellant claimed it should be compensated for loss and damage incurred up until the Purported Termination. (Para 20)

59. Against that background His Excellency referred to the Appellant’s submission that not enough evidence had been furnished in the proceedings and that the Court should accordingly refrain from making any findings. It was argued before the CFI that the existence of highly contentious issues of fact, which must be determined by reference to large volumes of communications, documentation and commercial activities over an extended period, meant that the dispute was not amenable to summary disposal. On the other hand, as His Excellency pointed out, the Respondents had conceded the Clause 3 Breaches and the Renunciation as a hypothesis for the purposes of the applications. (Para 21)

60. His Excellency then observed:

Accordingly, the Defendants’ arguments are concerned with points of law as applied to the facts of the dispute as outlined by Hexagon itself. (Para 21)

He quoted from the judgment of Lewison J in Easy Air Ltd v Opal Telecom Ltd [2019] EWHC 339 (Ch) at [15], where it was said:

If the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simply: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better.

He said it was open to the Appellant to deal with the questions of law raised by the Respondents and any deficiency in that regard had not been due to any lack of opportunity on the part of the Appellant to do so.

61. His Excellency characterised the Appellant’s case, as premised on the validity of its Purported Termination of the Amended Agreement, a Purported Termination said to be justifiable on two grounds, the Clause 3 Breaches and the Renunciation. (Para 22)

62. The Respondents had submitted that the Purported Termination was invalid on the following separate grounds:

63. The Particulars of Claim were summarised earlier. It is necessary to refer in a little more detail to the pleading of the breaches of clause 3 of the JVA before considering His Excellency’s treatment of those alleged breaches.

64. The Appellant alleged in its Particulars of Claim that the Respondents had, over time, failed to comply with their obligations under clause 3 of the JVA and the Amended Agreement which required steps to be taken as soon as “reasonably practicable” and imposed a time limit on the projection of the Project. The exchange of letters in 2012 was set out. Paragraph 21 of the Particulars of Claim then alleged:

65. The Appellant then pleaded that the breaches entitled it to terminate the JVA both at common law and under the DIFC Contract Law. Plainly the Appellant was relying upon a characterisation of the alleged breaches as fundamental non-performance under Article 86 and/or Article 88 of the Contract Law.

66. Notwithstanding the Appellant’s clear pleading of the Clause 3 Breaches as “fundamental”, His Excellency opened for consideration as “the first question” in his reasons, whether they amounted to a fundamental or non-fundamental performance of the Amended Agreement. He came to the view that each of the Clause 3 Breaches was a “time-related” breach. His Excellency then observed at paragraph 34:

Hexagon proceeded with its response to the Applications on the basis that the Defendants had conceded, for the purposes of the Applications, to having committed fundamental breaches of the Amended Agreement. Accordingly, Hexagon did not itself outline why, as it saw it, the Clause 3 Breaches were of a fundamental as opposed to a non-fundamental nature. (emphasis added)

67. His Excellency referred to the Respondents’ submission in support of their application for immediate judgment contesting the characterisation by the Appellant of the alleged breaches as '”fundamental”. He then commented:

In my view, and while acknowledging that this passage could have been worded more clearly, the ‘Other Alleged Breaches’ which the Defendants for the purposes of the Applications conceded to were the alleged breaches themselves and not to their status as fundamental or otherwise. (Para 34) (emphasis in original)

68. His Excellency took the view that the Respondents had not:

conceded to breaches which amounted to fundamental non-performance of the Amended Agreement, rather only to the occurrence of breaches without specifying a degree of seriousness. Accordingly, it was for the [Appellant] to demonstrate that the breaches amounted to fundamental non-performance of the Amended Agreement. Again, however, it did not. (emphasis in original)

69. The characterisation of the alleged breaches as “fundamental” or “non-fundamental” was not a pure question of law. The Contract Law makes clear that the determination of whether non-performance of a contractual obligation is “fundamental” involves evaluation of a factual nature by reference to the factors set out non-exhaustively in Article 86(2). It was not for the Appellant to establish that, on the pleaded facts, the alleged breaches constituted fundamental non-performance. If that characterisation was open and arguable its correctness should have been assumed. It was for the Respondents to persuade the CFI that the characterisation was not open.

70. The Respondents argued in the CFI that the Clause 3 Breaches were simple breaches of the obligation to perform, as was required by clause 3, within a particular time-frame. For a time requirement breach to constitute fundamental non-performance of a contract and for it to give rise to a right to terminate on the part of the aggrieved party, time must be ‘of the essence’ under the contract. The Respondents argued that clause 3 neither expressly nor impliedly provided that time for their performance was intended to be of the essence in the Amended Agreement. On that basis they stated in their written submissions:

The Claimant cannot contend as a matter of DIFC law or common law that the Clause 3 Breaches, individually or collectively, constituted ‘fundamental non-performance’ for the purposes of Article 86(1) of the DIFC Contract Law (interpreted by reference to Article 86(2)(b)). (Para 35)

His Excellency concluded that the Respondents were correct. In its appeal the Appellant made the arguable point that what it alleged in its Particulars of Claim was non-performance not non-performance within a given time.

71. In the event, His Excellency concluded that the Clause 3 Breaches were ‘non-fundamental breaches of the Amended Agreement’. As a result Article 86 was not engaged by the Clause 3 Breaches and the Appellant therefore did not have the right to terminate the Amended Agreement under Article 86(1).

72. His Excellency went on to consider the application on the basis, not pleaded, that the breaches were cases of non-fundamental non-performance. On that characterisation the Appellant had not taken the step required by Article 81(3), for termination under the Article to be valid, namely it had not given notice requiring performance of the obligations within a reasonable period of time. The requirements in Article 81(3) not having been met no termination right at DIFC law could have arisen. This conclusion was said to be “rather fatal to Hexagon’s case to the extent that the Claim relies on the Clause 3 Breaches as Article 81 provides the exclusive regime under DIFC law by which non-fundamental delay breaches can entitle an aggrieved party to terminate.”

73. His Excellency concluded that the Appellant’s claim, relating to the Clause 3 Breaches, failed to disclose reasonable grounds for bringing the Claim, had no real prospect of success and lacked any compelling reason why it should be disposed of at trial:

The Clause 3 Breaches amounted to non-fundamental non-performance of the Amended Agreement and so any claim premised on their (sic) being fundamental breaches will unlikely have even a fanciful prospect of succeeding and much less a real prospect.

74. His Excellency acknowledged in paragraph 40 of his reasons for judgment that it was not inconceivable that the Appellant would be able to adduce evidence which demonstrated intentional non-performance on the part of the Respondents. Notwithstanding his conclusion that the Clause 3 Breaches were not fundamental, His Excellency then considered submissions that even if the breaches constituted fundamental non-performance, the Appellant’s claim would fail on other grounds.

Clause 3 Breaches – the Notice Question if the breaches were fundamental

75. The first of those other grounds was that the Appellant had failed, as required by Article 87 of the Contract Law, to give notice of termination within a reasonable time after it had or ought to have become aware of the Clause 3 Breaches. His Excellency concluded that on any view the Appellant was or ought to have been aware of the Clause 3 Breaches in the years following execution of the Amended Agreement. It nevertheless failed to give anything which could be considered notice of termination until its Purported Termination on 19 November 2018. This was patently beyond the “reasonable time” granted to an aggrieved party by Article 87 of the Contract Law for termination. Any right that the Appellant had to terminate the Amended Agreement on the basis of fundamental breaches of that agreement was lost in the passage of what ended up being a rather lengthy period of time.

76. This Court was taken, by counsel for the Appellant, to a chronology reflecting the dealings between the parties over an extended period of time. It is not necessary for present purposes to reflect upon the merits of the notice argument. The question whether notice of termination was required to be given within a reasonable time and whether it was given within a reasonable time is a matter which is fact sensitive and should not in these circumstances have been determined on an application for immediate judgment. Further, the absence of a requisite notice might have been a matter for the Respondents to assert by way of defence and to establish as a matter of fact. In that context, regard should be had to the expansive definition of “Notice” in Article 13 of the Contract Law.

Clause 3 Breaches – The Time Limitation

77. His Excellency then turned to the proposition that the causes of action in respect of the Clause 3 Breaches were time-barred. He referred to Article 123 of the Contract Law.

78. In answer to this argument, the Appellant directed the CFI’s attention to attempts which it says it made over the years to have the amended agreement performed. Nevertheless, it was said to have failed to demonstrate to the Court what bearing that would have on the issue of whether the claim was time-barred.

79. His Excellency held that whenever the Clause 3 Breaches had occurred, they occurred once and finally and attempts made by the Appellant to have the obligations performed did not have the effect of extending or continuing what were express provisions of the Amended Agreement. In His Excellency’s view the Clause 3 Breaches “crystallised” within a period of years after the Amended Agreement was entered into. Even on a generous view they had crystallised four and a half years after the Amended Agreement was made and action on them would be time-barred by Article 123 of the Contract Law.

80. There are cases in which a time limitation argument may support a strike-out application or an application for immediate judgment but such applications have to be approached with caution. Presumably, if the Respondents file a defence raising the Article 123 limitation the Appellant will file a Reply setting out the basis upon which it would assert that the limitation was not applicable or that for one reason or another, the Respondent was barred from raising it. It appears that some reliance will be placed upon the Standstill periods. Again this is an issue which, not having been raised in a pleaded defence, has not been the subject of a pleaded reply and plainly arises in a complex factual matrix. It is not the kind of case in which the limitation question should be determined at the threshold.

Clause 3 Breaches – The Alleged Affirmation

81. His Excellency then turned to the alleged affirmation of the Amended Agreement by the Appellant following the Clause 3 Breaches and the Respondents alleged renunciation of its obligations under the agreement. His Excellency referred to the letter of 12 June 2012 in which DIFCI stated that it was “under no obligation to continue any negotiation with [Hexagon] (or any other party) of any Shareholders’ Agreement for the development of the plot”. The Appellant said that this statement constituted a renunciation of the Amended Agreement falls in itself a fundamental breach of contract.

82. His Excellency referred to case law including a judgment of Rix LJ in Stocznia Gdanska SA v Latvian Shipping Co (No 2) [2002] EWCA Civ 889 at [87] when His Lordship said:

In my judgment, there is of course middle ground between acceptance of repudiation and affirmation of the contract, and that is the period when the innocent party is making up its mind what to do. If he does nothing for too long, there may come a time when the law will treat him as having affirmed.

83. His Excellency said:

In my view, it can be said without reservation that Hexagon far exceeded any period of time it needed to ‘make up its mind’ about what it should do regarding the Clause 3 Breaches and the Renunciation before it finally attempted termination of the Amended Agreement by way of its Purported Termination.

84. His Excellency went on to say that it appeared to him that the Appellant had made up its mind early in the piece. He referred to a letter dated 13 August 2012 from the Appellant’s lawyers to DIFCI and a subsequent email. In the email sent by representatives of the Appellant to representative of the Respondents it was stated:

I am now instructed by Mr Al Romaizan that he and his partners have decided that they would like to implement the original agreement with the DIFCI and enter a joint venture to develop the plot.

85. A term sheet attached to the email stated in the background section:

The Parties hereby acknowledge and agree that the [Amended Agreement] is still valid and binding on the parties thereto.

86. His Excellency observed that there was no dispute that the Appellant knew of the Clause 3 Breaches at the time of the correspondence to which he referred. He concluded that the correspondence amounted to unequivocal acts from which it could have been inferred that the Appellant would not exercise any right to treat the Amended Agreement as repudiated. The Appellant was deemed to have affirmed the Amended Agreement. Alternatively, after the Clause 3 Breaches and the Renunciation and up until the Purported Termination, the Appellant did ‘nothing for too long’ and it is therefore to be treated as having affirmed the Amended Agreement at law. Again, we respectfully disagree with His Excellency having regard to the documentation to which we were referred and the course of dealings between the parties and without expressing any concluded view on the merits of their respective positions, this was not a case for immediate judgment.

Conclusion

87. It is not necessary for present purposes to say anything further. It is not for this Court to express a view on the strengths or weaknesses of the claim or to anticipate what defences might be pleaded and what replies to those defences might be filed. This case was not one for immediate judgment nor for a striking out of the Statement of Case. It was for that reason that the Court concluded that the appeal should be allowed, the orders below set aside and substituted with an order that the application for immediate judgment and/or striking out the statement of case should be dismissed. We ordered also that the Respondents should pay the Appellant’s costs of the appeal and of the application in the Court below.

88. The Court made the following orders:

Issued by:
Nour Hineidi
Registrar
Date of issue: 10 January 2021
At: 3pm