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Claim No. CFI 025/2022

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

DR OTHMAN ABDULLAH O ALSWAYEH

Claimant

and

GII ISLAMIC REIT (CEIC) LIMITED

Defendant

ORDER WITH REASONS OF JUSTICE LORD ANGUS GLENNIE

UPON reviewing the Defendant’s Application Notice No. CFI-025-2022/1 dated 26 April 2022 seeking a declaration that the DIFC Courts do not have jurisdiction (the “Application”)

AND UPON reviewing the Claimant’s evidence in answer to the Application dated 24 May 2022

AND UPON reviewing the Defendant’s evidence in reply dated 7 June 2022

AND UPON reading the Claimant’s skeleton argument dated 16 August 2022

AND UPON reading the Defendant’s skeleton argument dated 16 August 2022

AND UPON reviewing the Claimant’s statement of costs dated 22 August 2022

AND UPON reviewing the Defendant’s statement of costs dated 23 August 2022

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at the hearing on 23 August 2022

IT IS HEREBY ORDERED THAT:

1. The Application is dismissed.

2. The Court has jurisdiction over the claim.

3. The Defendant shall pay the Claimant his costs of the Application on the standard basis, summarily assessed in the sum of AED 180,000.

Issued by:
Ayesha Bin Kalban
Deputy Registrar
Date of issue: 31 August 2022
At: 10am

SCHEDULE OF REASONS

1. The Claimant (‘‘Dr Othman’’) is a Saudi national. The Defendant (“GII”) is an investment company incorporated in the DIFC.

2. By a written sale and purchase agreement (‘‘SPA’’) dated 22 September 2019, Dr Othman agreed to sell to GII a property (the “Property”) known as Binghatti Horizons. The property, comprising 160 residential apartments and two shops, is located in Silicon Oasis in onshore Dubai.

3. In terms of the Particulars set out in the SPA, the Purchase Price payable for the Property (the “Purchase Price”) was AED 110 million (‘‘exclusive of applicable VAT’’) comprising the Cash Balance (the “Cash Balance”) and the Subscription Amount (the ‘‘Subscription Amount’’). The Cash Balance was AED 66 million. The Subscription Amount was AED 44 million, “payable by way of issuance and allotment of the Subscription Shares to the Subscriber, such Subscription Shares to be issued on the Transfer Date”. The Subscription Shares were defined to be 13,431,224 Participating Shares, i.e. shares in GII.

4. Clause 4.1 of the SPA provided inter alia as follows:

Clause 5 of the SPA provided that the Seller (‘‘Dr Othman’’) would transfer the Property to the Purchaser (‘‘GII’’) on the Transfer Date.

5. Clause 17.13 of the SPA provided that if GII was not listed on a stock exchange within 18 months of the Transfer Date (‘‘i.e. within 18 months after the transfer of the Property to GII under the SPA’’) GII would pay Dr Othman AED 44 million and the Participating Shares would be transferred back to GII.

6. The SPA contained at clause 18 a Governing Law and Jurisdiction Clause in the following terms:

7. On the same day as executing the SPA the parties entered into (i) a lease agreement (the ‘‘Lease’’), pursuant to which GII, as purchaser of the Property, agreed to lease the Property to Dr Othman; and (ii) a subscription agreement (the “Subscription Agreement’’), which governed the formalities surrounding the issue and registration of the Participating Shares to Dr Othman.

8. It is maintained by Dr Othman, and I did not understand this to be disputed, that the Purchase Price was satisfied and discharged in full on 10 October 2019, and on the same date legal title to the Property passed from Dr Othman to GII.

9. On 17 December 2020 the parties agreed to extend the 18-month period mentioned in clause 17.13 (which would otherwise have expired in April 2021) to 31 December 2021.

10. GII was not listed on any stock exchange by 31 December 2021 (the revised date for the purposes of clause 17.13). Accordingly, so Dr Othman contends, GII is liable to pay Dr Othman a sum equal to the Subscription Amount (AED 44 million). GII has not paid and in late March 2022 Dr Othman commenced the current proceedings in the DIFC Courts to recover that sum.

11. GII dispute the jurisdiction of the DIFC Courts. They contend that the dispute is a dispute arising out of or in connection with the transfer or registration of the Property, or is otherwise in connection with the Property. They maintain, therefore, that the claim falls within clause 18.1.1 of the SPA and that, in accordance with the terms of that clause, the courts of (onshore) Dubai have jurisdiction over the claim. Dr Othman, on the other hand, contends that the dispute or claim arises out of or in connection with his role as Subscriber under the Subscription Agreement or as shareholder or member of GII (as a result of the transfer of the shares to him on the Transfer Date), so that clause 18.1.2 applies and the courts of the DIFC have jurisdiction.

12. The question turns on the proper construction of clause 18 of the SPA. Does the dispute fall within clause 18.1.1 or 18.1.2?

13. Certain matters were not in dispute. First, parties were agreed that, although the expression “courts of Dubai” is apt as a generality to include the courts of the DIFC, as used in clause 18.1.1 it clearly is intended to refer to the courts of (onshore) Dubai in contradistinction to the courts of the DIFC mentioned in clause 18.1.2. Second, parties were broadly agreed that, as a matter of DIFC law, the interpretation of the jurisdiction clause should be governed by the law of the state or judicial territory whose proper law would apply and to whom exclusive jurisdiction is given by the clause. Thus, clause 18.1.1 should be construed in accordance with Dubai Federal law whereas clause 18.1.2 should be construed in accordance with the law of the DIFC. In fact nothing turns on this, since the two systems of law are not materially different on the question of construction of contractual provisions. Third, both parties sought to emphasise the objective approach to construction of the SPA and in particular the jurisdiction clause – the only difference being as to the extent to which pre-contractual negotiations between lawyers could be referred to. In light of the decision I have come to in this case I need not decide that issue.

14. In arguing in favour of clause 18.1.1 being the applicable provision, counsel for GII placed emphasis on the words in the clause, viz “or which is otherwise in connection to, the Property”. These words, he submitted, were wide and all embracing. To my mind that submission goes too far and, indeed, is self-defeating. The words are indeed very wide, wide enough on a literal interpretation to cover all disputes arising out of or in relation to the SPA and related agreements. It would cover disputes about the Purchase Price, including its component parts such as the Subscription Shares. But if that broad interpretation is given to clause 18.1.1, it would almost completely overlap with clause 18.1.2 and render it redundant. But clearly clause 18.2 is meant to have some real content.

15. Counsel for GII sought to characterise the dispute as one relating to the consideration payable for the Property. I reject this submission. The consideration was made up of a cash sum and the shares. The cash sum was paid and the shares were transferred in October 2019. In reality this dispute concerns events over two years later, arising from the failure of GII to get itself listed on a stock exchange. This is a dispute arising out of Dr Othman’s status as shareholder of shares in GII.

16. It seems to me that on a proper construction of the contract the parties have determined that issues to do with transfer or registration of the Property should be dealt with by the courts of onshore Dubai. This makes sense since the Property is in onshore Dubai. This is what parties would expect to happen. It makes sense to distinguish such property matters from other issues which might give rise to disputes, such as commercial considerations and issues arising from the transfer of the shares. It would, of course, be perfectly reasonable for the parties to have agreed that the courts of onshore Dubai should deal with such disputes also, but they have not done that. They have in their agreement decided to separate out matters to be resolved by the onshore Dubai courts from matters to be resolved by the courts of the DIFC. The task of this court on this Application is not to express a view about what they should have done but simply to identify which matters have been agreed to fall into which category. In my view, parties have agreed that the courts of the DIFC should have exclusive jurisdiction over non-property issues such as are before the court in this action.

17. For these reasons, I shall refuse GII’s Application. The court has jurisdiction over the claim.

18. It was agreed that costs should follow the event. I was asked to assess costs summarily and I shall do so. The Defendant shall pay the Claimant his costs of the Application on the standard basis, in an amount which I assess at AED 180,000.