DIFC Courts

CFI 033/2017 Bankmed (SAL) Trading in the DIFC under The Trade Name Bankmed (Dubai) v (1) Fast Telecom General Trading LLC (2) Ali Mohammed Salem Abu Adas (3) Mohammad Jawdat Ayesh Mustafa Al Bargouthi (4) Saif Saeed Sulaiman Mohamed Al Mazrouei (5) Ibrahim Saif Hormodi (6) Ahmed Abdel Kader Hamdan Zahran

July 16, 2019 court of first instance - Orders

 

Claim No. CFI-033-2017

 

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

 

BANKMED (SAL) TRADING IN THE DIFC UNDER THE TRADE NAME BANKMED (DIFC BRANCH)

 

   Claimant

and

(1) FAST TELECOM GENERAL TRADINGS LLC 

(2) ALI MOHAMMED SALEM ABU ADAS 

(3) MOHAMMAD JAWDAT AYESH MUSTAFA AL BARGHOUTI 

(4) SAIF SAEED SULAIMAN MOHAMED AL MAZROUEI 

(5) IBRAHIM SAIF HORMODI 

(6) AHMED ABDEL KADER HAMDANZAHRAN

                                   Defendants

 

ORDER OF H.E. JUSTICE OMAR AL MUHAIRI

UPON reading the Claimant’s Application for Immediate Judgment dated 13 December 2018

UPON reading the Statements of Case and Witness Statements in these proceedings

AND UPON hearing the parties’ submissions at the Application hearing dated 2 July 2019

AND UPON reviewing all other relevant documents in the case file

IT IS HEREBY ORDERED THAT:

  1. Pursuant to Article 24.11 of the Rules of the DIFC Courts, the Claimant’s Application for Immediate Judgment is granted.

  2. The Fourth Defendant shall pay to the Claimant the amount of USD 14,463,479.03 in satisfaction of the claim.

  3. The Defendant shall pay to the Claimant a further amount of USD 3,866,100 representing pre-judgment interest on the claim at 12.4 per cent per annum, commencing on 30 November 2016. The interest shall accrue at a daily rate of USD 5,260 from the date of which the Immediate Judgment is issued, until the date of payment.

  4. The Fourth Defendant shall pay the Claimant’s costs of the application and of these proceedings to be assessed by the Registrar if not agreed. 

Issued by:

Nour Hineidi

Deputy Registrar

Date of Issue: 16 July 2019

At: 4pm

 

SCHEDULE OF REASONS

Background

  1. This dispute concerns the liability of several guarantors of a facility agreement, entered into by the parties in order to facilitate the Defendants’ purchase and distribution of mobile phones for their wholesale business. 

  1. The Claimant, Bankmed (SAL) Trading in the DIFC Under the Trade Name Bankmed (DIFC Branch), (“Bankmed”), is a Lebanese joint stock company established as a foreign recognised company in the DIFC.

  1. On the 22 December 2015, Bankmed entered into a USD 15,000,000 facility agreement with Fast Telecom General Trading LLC (the “First Defendant”), aimed at financing the purchase and distribution of mobile phones and handsets for the First Defendant’s trade and wholesale business (the “Facility Agreement”).

  1. The Facility Agreement was signed by Ali Mohammed Salem Abu Adas in his capacity as Managing Director and Guarantor for the First Defendant (the “Second Defendant”).

  1. Similarly, the Facility Agreement was also signed by Mohammad Jawdat Ayesh Mustafa Al Bargouthi in his capacity as Managing Director and Guarantor of the First Defendant (the “Third Defendant”).

  1. With the Facility Agreement, the Second and Third Defendants executed First Demand Limited Personal Guarantee letters, in which they agreed to be bound by the terms of the Facility Agreement in the event of non-payment of the amounts owed to the Claimant (the “Guarantee”).

  1. On 21 November 2016, Saif Saeed Sulaiman Mohamed Al Mazrouei allegedly executed the same Guarantee (the “Fourth Defendant”).

  1. On 21 November 2016, Ibrahim Saif Hormodi (the “Fifth Defendant”) and Ahmed Abdel Kader Hamdan Zahram (the “Sixth Defendant”) also signed the same Guarantee letters.

  1. As early as April 2016, the First Defendant started defaulting on the loan The Claimant met with the First Defendant several times to reach alternative payment schedules that would grant it more flexibility to settle the outstanding loan. 

  1. A final settlement plan was issued by the Claimant on 6 March 2017, to which the First Defendant expressed its commitment on 9 March 2017. No payment was made as per the settlement plan. 

  1. The First Defendant repeatedly defaulted on its payments of the outstanding loan. 

  1. Following the First Defendant’s default on the loan, the Guarantors were served with a notice of default and a demand letter on 13 April 2017. They were asked to settle the full loan balance on 25 April 2017, in addition to accrued interest, as set out by the Facility Agreement. 

  1. The Guarantors did not respond to the letters, nor did they settle the requested loan balance. The outstanding balance is of USD $14,463,479,03, in addition to the applicable interest rate. 

  1. While several claims and counterclaims were filed by the different parties, the current dispute specifically concerns an application for immediate judgment by the Claimant against the Fourth Defendant, pursuant to Rule 24.1 of the Rules of the DIFC Courts (“RDC”).

 

Procedural History

 

  1. On 23 July 2017, the Claimants filed formal proceedings against the First, Second, Third, Fourth and Fifth Defendants. Although the Defendants filed their Acknowledgement of Service on 5 September 2017, they failed to file a Defence in the appropriate time, as set out by Rule 13.5(1) of the RDC. 

  1. On 22 October 2017, the Claimants requested a Default Judgment against the Defendants, in accordance with Rule 13.1 (1) and (2) of the RDC. The request for Default Judgment was granted on 29 October 2017. 

  1. Although this dispute specifically relates to the Fourth Defendant, it is nonetheless relevant to consider the chronological developments concerning the other defendants, on the basis that similarities between the claims exist.

 

The Other Defendants

 

  1. The Fifth Defendant was the first to submit an application to set aside the Default Judgment under Rule 14.2(1) of the RDC on 13 November 2017, on the grounds that the claim form was never served on the Fifth Defendant and that counsel acting on behalf of all the Defendants, in these proceedings, was never authorised to do so. 

  1. This application was dismissed on 14 January 2018 (“January 14 Order”), on the grounds that it lacked the formal requirements required by Rule 14.4 and that it had no real prospect of success, as required by Rule 14.2(1). Nearly one year later, on 6 January 2019, the Fifth Defendant submitted an application for leave to appeal this Order. This application was denied on 13 January 2019. 

  1. On 3 February 2019, the Fifth Defendant submitted another application for leave to appeal the January 14 Order. On 27 February 2019, permission to appeal was granted on the grounds that the Default Judgment has been set aside for several of the other Defendants. 

  1. The Third Defendant also submitted an application to set aside the 29 October Default Judgment under Rule 14.1(1) and Rule 14.1(2) on 26 March 2018, on the grounds that the claim form was not served on the Third Defendant, and that counsel that had acted on his behalf was never authorised to do so. 

  1. This application was granted on 22 April 2018 and Default Judgment against the Third Defendant was set aside. 

  1. On 24 May 2018, the Third Defendant submitted an application for an immediate dismissal or stay of the Claimant’s proceedings, on the grounds that the dispute is subject to an Arbitration Agreement. This was followed by back-and-forth correspondence between the parties, contesting or defending the Court’s jurisdiction. 

  1. On 16 August 2018, it was the Second Defendant’s turn to submit an application to set the Default Judgment against him aside, on the grounds that the claim form was never served on the Second Defendant. Pursuant to a hearing on 21 October 2018, the application was granted on 12 November 2018 by H.E. Justice Omar Al Muhairi. 

  1. While the 12 November 2018 Order was in favor of the Second Defendant, he nonetheless submitted an application for appeal on 25 November 2018, on the grounds that the learned Judge made several errors of fact in obiter dicta in the Order, notably with regards to the Courts’ jurisdiction over this dispute. The Third Defendant also sought permission to cross-appeal the same Order on similar grounds. 

  1. On 10 January 2019, permission to appeal the 12 November Order was granted for both the Second Defendant and the Third Defendant, pursuant to Rule 44.1(2).

  1. The Appeal was rejected by Chief Justice Zaki Azmi, Justice Sir Jeremy Cooke and H.E. Justice Ali Al Madhani on 9 June 2019 (“Court of Appeal Decision”). While the Court found that the obiter dicta of the learned Judge cannot be the subject of an appeal, it also rejected the Appellants’ arguments about the arbitrability of the dispute. Indeed, the Court held that the First Demand Limited Personal Guarantee, signed by both Defendants, clearly indicates that the law of the DIFC is the governing law in this dispute.

  1. Finally, on 8 July 2019, the Second Defendant submitted an application to challenge the Court’s jurisdiction, pursuant to Part 12 RDC.

 

The Fourth Defendant

 

  1. The Fourth Defendant submitted an application to set the Default Judgment aside under Rules 14.1(1) and 14.1(2) of the RDC on 14 November 2018, on the grounds that the claim form was never served on the Fourth Defendant. 

  1. This application was granted by the Court of First Instance on 19 November 2018. The Fourth Defendant was given fourteen days to file a Statement of Defence. 

  1. The Fourth Defendant submitted his Statement of Defence on 5 December 2018, thus exceeding the applicable time limit. However, on 27 November 2018, the Fourth Defendant had filed an application to extend the required submission date of his Statement of Defence. This was retrospectively granted on 17 December 2018. 

  1. Realising that the Fourth Defendant exceeded the applicable deadline, the Claimant filed another application for a Default Judgment on 5 December 2018. This application was found to be without merit and was rejected on 10 December 2018. 

  1. On 13 December 2018, the Claimant filed another application to reject the Fourth Defendant’s Statement of Defence, as well as for an Immediate Judgment, pursuant to Rules 24.1(1) and 24.1(2) of the RDC. However, this application was stayed until the outcome from the appeal application which was rejected as mentioned above.

  1. On 2 July 2019 I heard this application for the Immediate Judgment which is granted, based on the reasoning set out from paragraph 44 of this Judgment.

 

The Claimant’s position

 

  1. As required by Rule 24.1 of the RDC for an immediate judgment, the Claimant submission is that the Fourth Defendant has no real prospect of successfully defending the claim at trial.

  1. The Claimant contends that the Fourth Defendant agreed to guarantee the indebtedness of the First Defendant by his execution of the First Demand Limited Personal Guarantee, signed on 21 November 2016.

  1. Indeed, the Claimant alleges that Clause 3 of the Guarantee requires the Fourth Defendant to guarantee and undertake to pay the amounts demanded by the Bank, in addition to interest and other expenses. As the First Defendant has defaulted on his due receivables since June 2016, they argue that the Fourth Defendant is bound to honor the First Defendant’s dues.

  1. The Claimant contends that Clauses 2,3,4,7 and 10 of the Guarantee give rise to a primary liability of the Fourth Defendant. By executing this Guarantee, the Fourth Defendant waived his right to a defence and undertook to pay the bank the requested amounts.

  1. Finally, the Claimant asserts that the DIFC Courts have exclusive jurisdiction over this matter, as indicated by clause 14 of the First Demand Limited Guarantee. 

 

The Forth Defendant’s position

 

  1. The Fourth Defendant first contests the jurisdiction of this Court to hear this matter. On this basis, the Fourth Defendant requests that the Court reject the Claimant’s application. 

  1. Indeed, the Fourth Defendant claims that clause 39.1(a) of the Facility Agreement expresses the non-exclusive jurisdiction of the DIFC Courts, and that clause 39.2 of the same Agreement requires the parties to resolve any dispute through mandatory arbitration. He contends that this Claim must be submitted to arbitration under the DIFC-LCIA Rules, and that the DIFC Courts have non-exclusive jurisdiction in supervising the arbitration proceedings. 

  1. Furthermore, the Fourth Defendant alleges that he never signed the First Demand Limited Personal Guarantee and that the signature on the document is forged. As for the Facility Agreement, the Fourth Defendant claims that he is not bound by its terms, as he never signed it. 

  1. Finally, the Fourth Defendant cites the limitation period set out by clause 1092 of the UAE Civil Procedure Law No.5/1985 amended by Law No.1/1987, which requires a plaintiff to claim any due amount within six months from its due date, otherwise releasing the guarantor from its guarantee. The Fourth Defendant claims that this provision precludes the Claimant’s request, as the Fourth Defendant was not informed of the due amounts in the appropriate time.

 

Discussion

 

  1. Pursuant to Rule 24.1 of the RDC, an immediate judgment may be given by the Court if:

(1). It considers that:

a. That claimant has no real prospect of succeeding on the claim or issue; or

b. That defendant has no real prospect of successfully defending the claim or issue; and

(2). There is no other compelling reason why the case or issue should be disposed of at a trial

  1. As outlined by Rule 24.2, an application for immediate judgment may be based on a point of law, on the evidence which can be reasonably expected to be available at trial or the lack thereof, or a combination of these elements.

  1. The criteria for immediate judgement are spelt out in convenient form in GFH Capital v David Laurence Haigh [2014] DFIC CFI 020 in a judgment of Justice Roger Giles. As these principles are well-established, I will not go through them in detail. Yet broadly speaking, the Court has to consider whether the defendant has a “realistic” prospect of success, which carries a certain degree of conviction rather than being merely arguable. In reaching its conclusion, the court must take into account not only the evidence placed before it, but the evidence that can reasonably be expected at trial.

  1. The threshold for an immediate judgment is quite high – it must be demonstrated that no reasonable grounds exist for believing that a fuller investigation into the facts of the case would have an impact on the evidence available to the trial judge, as to affect the outcome of the case.

  1. In the present case, the threshold is met. The Fourth Defendant does not appear to have a realistic prospect of success, and it does not seem to me that the Defendant’s position is likely to be better at a trial.

  1. The Fourth Defendant’s main defence consists of disputing this Court’s jurisdiction over the claim. This argument must be rejected for both procedural and substantive reasons.

  1. With regards to procedure, the Defendant never submitted the required application to challenge this Court’s jurisdiction, as indicated in Part 12 of the RDC. Rule 12.5(1) of the RDC provides that an omission to submit an application disputing the Court’s jurisdiction means that a defendant is to be treated as having accepted the Court’s jurisdiction over the claim.

  1. As for the substantive reasons, the Court’s jurisdiction over this claim was settled by the aforementioned 9 June Court of Appeal Decision. Indeed, as was stated by Justice Sir Jeremy Cooke, the guarantors in this dispute are bound by the First Demand Limited Personal Guarantee, in which Clause 14 provides for the DIFC Courts’ jurisdiction in “any legal action or proceedings with respect to the Guarantee.” As clauses 2,3,4,7 and 10 of the Guarantee give rise to a primary liability on the Defendant, this document evidently governs the relationship between the parties. The parties have therefore clearly opted for the Court’s jurisdiction over such matter.

  1. The Fourth Defendant’s entire argument is based on his interpretation of the Facility Agreement to which he is not a signing party, while his signature is found on the First Demand Limited Personal Guarantee.

  1. At the hearing, the Fourth Defendant claimed that the signature on the Guarantee was forged and that he never signed the document. This argument was raised for the first time at the hearing and was wholly unsupported by any evidence. As the Guarantee was part of the proceedings since the very beginning, the Fourth Defendant could have included this allegation in his Statement of Defence and produce the necessary evidence to render his claim credible. Without such evidence, and considering the last-minute nature of the argument, I do not find this allegation to be credible. Consequently, I cannot accept it.

  1. The Fourth Defendant briefly puts forth another argument based on UAE Law and the Civil Procedure Code No. 5/1985 as amended by law No.1/1987. It is irrelevant to consider this argument, as the parties agreed in article 14 of the Guarantee that the governing Law is DIFC Law.

  1. As the Court’s jurisdiction over this dispute has already been settled by the Court of Appeal, it appears that the Fourth Defendant’s defence has no reasonable prospect of success at further proceedings – moving forward would rather constitute a considerable waste of resources.

  1. For these reasons, the Immediate Judgment under Part 24 of the RDC is granted.

 

Conclusion

 

  1. For the reasons given above, pursuant to Rule 24.1 of the RDC, I grant the Immediate Judgment against the Fourth Defendant.

  2. The Fourth Defendant shall pay the Claimant’s costs of this application and of these proceedings, to be assessed by the Registrar if not agreed.