January 22, 2020 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 (DUBAI)
and
(1) FAST TELECOM GENERAL TRADING LLC
(2) ALI MOHAMMED SALEM ABU ADAS
(3) MOHAMMED JAWDAT AYESH MUSTAFA AL BARGUTHI
(4) SAIF SAEED SULAIMAN MOHAMED AL MAZROUEI
(5) IBRAHIM SAIF HORMODI
(6) AHMED ABDEL KADER HAMDAN ZAHRAN
Defendants
ORDER WITH REASONS OF H.E. JUSTICE OMAR AL MUHAIRI
UPON reviewing the application filed on 24 May 2018 by Mohammed Jawdat Ayesh Mustafa Al Barguthi (the “Applicant” or “Third Defendant”) and supporting documents (the “Application”)
AND UPON reviewing Bankmed (SAL) Trading in the DIFC under the trade name Bankmed (Dubai)’s (the “Respondent” or the “Claimant”) submissions in response
AND UPON hearing the parties’ submissions at a hearing on 27 November 2019
AND UPON considering all other documents on the case file
IT IS HEREBY ORDERED THAT:
1. The Application is dismissed
2. The Third Defendant shall pay the Claimant’s costs of the Application on a standard basis, to be assessed by a Registrar if not agreed.
Issued by:
Nour Hineidi
Date of issue: 22 January 2020
Time: 12pm
SCHEDULE OF REASONS
Introduction
1. This is a strange application. I am asked to decide on a matter which has already been the subject of judicial consideration in these Courts; not in the context of the application itself, but before then, in an appeal in which the appellants, being the Applicant and the Second Defendant, appealed from a decision that did not involve the former and that was in favour of the latter; or more precisely, and even more strangely, from certain obiter dicta in that decision. With that said, however, this Court has no jurisdiction over such peculiarities. The application will be decided on the usual bases.
2. To proceed, the Applicant made the Application under Article 13 of the DIFC Arbitration Law, Law No.1 of 2008 as amended (“Article 13”; the “Arbitration Law”), for an order dismissing or staying the claim brought against him by the Respondent on the ground that the claim is subject to a valid and binding arbitration agreement for arbitration under the rules of the DIFC-LCIA Arbitration Centre.
3. To expand, the Third Defendant’s case is that the claim against him is alleged to arise under a guarantee contained in two documents – a facility agreement dated 22 December 2015 (the “Facility Agreement”) and a first demand personal guarantee also dated 22 December 2015 (the “Personal Guarantee”). He says that those documents must be read and interpreted together. Crucially, the Facility Agreement contains an arbitration agreement (the “Arbitration Agreement”) while the Personal Guarantee does not. The Claimant says that the claim against the Third Defendant is made under the Personal Guarantee. But the Third Defendant submits, further, that when interpreting a dispute resolution clause, the following presumption should be applied: the parties intended that “any dispute arising out of the relationship into which they have entered or purported to enter [should] be decided by the same tribunal” (Fiona Trust & Holding Corp v Privalov [2007] UKHL 40; [2007] 4 All ER 951 at [13]). Accordingly, the Third Defendant submits, correctly interpreted, and having regard to this presumption, a dispute under the Personal Guarantee is in any case covered by the Arbitration Agreement in the Facility Agreement. In conclusion, the Third Defendant submits that this Court shall dismiss or stay the action under Article 13.
Background and Procedural History
4. Orders and judgments in the matter of Bankmed (Dubai) v Fast Telecom General Trading LLC and others (2017) CFI-033 are by now prolific and so I do not need to spend time recounting the background and procedural history of the case again. My order with reasons issued on 16 July 2019 can be referred to for these. As far as the present decision is concerned, the below outline will suffice.
5. The Facility Agreement is stated to be made between the Claimant as lender, the First Defendant, Fast Telecom General Trading LLC, as borrower, and the Second and Third Defendants as guarantors. It was a term of the Facility Agreement that no funds could be drawn down until specified finance and security documents had been provided. Those documents included personal guarantees. The Second to Sixth Defendants provided the personal guarantees for the facilities (the “Personal Guarantees”).
6. To move swiftly forward, and to focus on the Third Defendant specifically, the Claim Form which began these proceedings was issued on 23 July 2017 (and amended on 24 August 2017), but as it happened, the first that the Third Defendant knew about the proceedings was when he was informed on 30 October 2017 of the default judgment dated 29 October 2017 that had been obtained against him. The Claimant had obtained default judgment on the basis that the Third Defendant had acknowledged service but had failed to serve a defence. In fact, the acknowledgment of service had been filed by lawyers purporting to act on the Third Defendant’s behalf but without any authority or instructions to do so. The lawyers had then failed to take any adequate steps in relation to the litigation.
7. As a result, the Third Defendant applied to set aside the default judgment. The application was made on the ground of non-service but reference was also made of the Third Defendant’s position that the claim was subject to an arbitration agreement.
8. The application was successful. My order dated 22 April 2018 set aside the default judgment. The order directed the Claimant to file and serve its statement of case and particulars of claim within 14 days and directed the Third Defendant to file and serve its defence within 28 days after service of the particulars of claim.
9. The Particulars of Claim as against the Third Defendant were served on 2 May 2018. The Third Defendant’s application under Article 13 was issued on 23 May 2018. There were various activities in the matter thereafter – including the appeal mentioned at the start of this judgment – but ultimately the Article 13 Application was heard on 27 November 2019. This is my decision on that application.
The Article 13 Application
10. Article 13 provides as follows:
13. Arbitration agreement and substantive claim before a Court
(1) If an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this Article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the DIFC Court.
11. For Article 13 to apply, then, firstly, the matter brought before this Court must be the subject of an arbitration agreement, secondly, a party to the matter must request for the action to be dismissed or stayed no later than when submitting his first statement on the substance of the dispute and thirdly, the arbitration agreement must not be null and void, inoperative or incapable of being performed. To start with the last requirement first, neither of the parties have contested the validity of the arbitration agreement in question. Disagreement only regards the Arbitration Agreement’s scope and in particular whether the present matter is within that scope. Regarding the second requirement, I am satisfied that the Third Defendant did request at the earliest opportunity for the action to be dismissed or stayed, namely in his application of 23 May 2018 for dismissal or stay of the claim under Article 13. It is correct that the Third Defendant had previously submitted a statement on the substance of the dispute. However, that was after default judgment had been entered against him and so it was not possible for him to request that the action, which had effectively come to an end, be dismissed or stayed. In that statement, dated 26 March 2018, the Third Defendant appropriately sought that the default judgment against him be set aside. I do not think that the draftsman of Article 13 intended to catch out those against whom default judgment was entered and who, therefore, would not be in a position to request that the action be dismissed or stayed in their first statement on the substance of the dispute. With that said, and in any case, I regard that, and given the nature of the Third Defendant’s first submission – being, again, an application for the default judgment to be set aside – the Third Defendant sufficiently gestured towards the second requirement of Article 13 when he said in that submission, “the Third Defendant [further] intends to show that the DIFC Courts do not have jurisdiction over this claim as it is subject to a valid and binding arbitration agreement.” The consequence of a valid and binding arbitration agreement, and so the implication of the Third Defendant’s submission, is that the action in these Courts should be dismissed or stayed. Accordingly, again, I am satisfied that the Third Defendant satisfied the second requirement of Article 13. As such, the question before me now is whether or not the first requirement of Article 13 has also been satisfied, that is, whether the matter before me is the subject of an arbitration agreement and should, therefore, be dismissed or stayed.
12. As stated above, the Arbitration Agreement is contained in the Facility Agreement, not the Personal Guarantee. The Third Defendant says that the Arbitration Agreement nevertheless includes the Personal Guarantee in its scope. To support this conclusion, the Third Defendant deploys two lines of argument. The first is that the Claimant makes its claim under a guarantee in the Facility Agreement as well as under the Personal Guarantee. The second is that the Facility Agreement and the Personal Guarantee are for all intents and purposes inseparable and should be read together. I will discuss each in turn now.
Claim under both the Facility Agreement and the Personal Guarantee
13. The Third Defendant submits that the Claimant makes its claim against him under the guarantee in the Facility Agreement and under the Personal Guarantee and that this is of significance in determining whether the claim is covered by the Arbitration Agreement contained in the Facility Agreement as the court must consider and interpret the contractual arrangements between the parties to identify how the parties intended that any dispute arising under them should be dealt with. In particular, the Third Defendant makes reference to the Claimant’s letter of demand dated 13 April 2017 (the “Letter of Demand”) and its Particulars of Claim Against the Third Defendant dated 2 May 2018 which, the Third Defendant contends, demonstrate that the Claimant makes its claim under both documents.
14. It is correct that the Letter of Demand is expressed to be made under both documents: “we refer to the above mentioned Facility Agreement and more particularly clause 18 thereof, in addition to the First Demand Limited Personal Guarantee dated 21 November 2016” and “we hereby come to exercise our rights under clause 18 of the Facility and clause 2 of the First Demand Limited Personal Guarantee…” Moreover, the Particulars of Claim Against the Third Defendant also refers to both documents; indeed, the Claimant spent more time in the statement discussing the Facility Agreement and the guarantee within that document than it did the Personal Guarantee. However, nowhere in either the Letter of Demand or the Particulars of Claim Against the Third Defendant did the Claimant state that it relied on the guarantees in the Facility Agreement and – in the sense of ‘in conjunction with’ – the Personal Guarantee; the Personal Guarantee simply features in both as an additional document under which liability arose. For me, the sense is very much and in the sense of ‘additionally.’ By way of example, we saw above that the Letter of Demand stated, “we refer to the above mentioned Facility Agreement and more particularly clause 18 thereof, in addition [emphasis added] to the First Demand Limited Personal Guarantee.” The amended Claim Form of 23 July 2017 states, “the Claimant has suffered losses and damages in respect of the Defendants [sic] non-payment of amounts due and payable to the Claimant under the Facility Agreement or [emphasis added] the First Demand Personal Guarantees.” In the Particulars of Claim Against the Third Defendant we find: “despite the joint and severable obligations under Clauses 18.2, 18.7 (Facility Agreement) and Clause 3 [(Personal Guarantee)], the Third Defendant chose to ignore his undertakings…” I do not think it insignificant that the Claimant referred to “obligations” as opposed to a single “obligation” in this passage. The above is enough, I think, to demonstrate that, at least initially, the Claimant pursued the Third Defendant under the Facility Agreement and, that is, additionally, under the Personal Guarantee.
15. Moreover, and importantly in this regard, the guarantee clauses of the Facility Agreement and the Personal Guarantee do not cross-reference each other. And insofar as each does refer to other guarantees in general terms, it is to affirm its own independence as a guarantee. Clause 18.10 of the Facility Agreement, the final clause of the guarantee in that document, states: “this guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by the Lender.” In the Personal Guarantee at clause 6 we find: “… I agree that this Guarantee shall be in addition to and shall not be in any way prejudiced by any other guarantee or security or lien or remedy of whatsoever nature to which you may now or hereafter be entitled.” It follows that the Third Defendant, as a party to the Facility Agreement and as a guarantor under the Personal Guarantee, was liable under each document separately for the amount or amounts that may be or become due. And it follows, in turn, that the Claimant was entitled to pursue the Third Defendant on both bases. In my opinion, this is all that the Claimant did. In conclusion, I find that nothing turns on any concurrent reliance on the Facility Agreement and the Personal Guarantee on the part of the Claimant in its claim. And at any rate, if the Claimant’s claim had at first been advanced as being under the Facility Agreement and the Personal Guarantee, presently it is only pursuing the Third Defendant under the latter document. In written submissions the Claimant has said that its “claim arises not under the Facility Agreement but rather under the [Personal] Guarantee as a consequence of [the Third Defendant’s] default under the Facility Agreement.” Accordingly, this first line of argument fails for the Third Defendant.
Facility Agreement and Personal Guarantee Must Be Read Together
16. In submissions, the Third Defendant referenced the case of Deutsche Bank v Sebastian Holdings [2010] EWCA Civ 998 which, in summarising earlier authorities, is authority for the propositions that, in deciding whether a dispute is subject to an arbitration agreement, the court should adopt a broad and purposive construction and take account that business people do not normally intend that different aspects of a dispute should be decided by different tribunals (see: [39] to [41]). The Third Defendant’s position is that when this approach is applied in the instant case, it becomes clear that, firstly, the Facility Agreement is the primary overarching agreement to which the Personal Guarantee is ancillary and that, secondly, the Facility Agreement contains a detailed dispute resolution clause which covers all disputes arising under or out of the transaction between the parties. Regarding the first of these points, I do not have any trouble accepting that the Personal Guarantee is ancillary to the Facility Agreement. Accordingly, I will focus on the second point, that the dispute resolution clause of the Facility Agreement covers all disputes arising under or out of the transaction.
17. A good place to begin is with one of the Third Defendant’s written submissions. The Third Defendant has argued that the language of clause 14 of the Personal Guarantee “merely mirrors” the structure of clause 39.1 of the Facility Agreement, concluding that the former clause, like the latter clause, is, therefore, subject to clause 39.2 of the Facility Agreement, the Arbitration Agreement. I do not think that it is correct that clause 14 of the Personal Guarantee “merely mirrors” clause 39.1 of the Facility Agreement. A comparison of the jurisdiction of the DIFC Courts as conferred by each clause reveals, I think, that the draftsmen had different intentions with respect to each of the clauses and that the parties, in turn, had different intentions when agreeing to them. In clause 39.1 of the Facility Agreement we find that the DIFC Courts has jurisdiction to settle “any dispute [emphasis added] arising from or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligations arising out of or in connection with this Agreement…).” Clause 14 of the Personal Guarantee, on the other hand, provides only that the DIFC Courts has jurisdiction over “any legal action or proceedings [emphasis added] with respect to the Guarantee…” It will be noted immediately that clause 14 of the Personal Guarantee makes no reference to prospective disputes between the parties, unlike clause 39.1 of the Facility Agreement which goes to some lengths to emphasise that all disputes are encompassed by it. To me, this difference is not insignificant and is consistent with the nature of each document.
18. The Facility Agreement is the primary agreement in the relationship between the Claimant and each of the Defendants, including the Third Defendant. Most fundamentally, the Facility Agreement gave the borrower, being the First Defendant, the right to the availability of the facilities, subject to numerous conditions, and liability in terms of its eventual repayment, according to a certain schedule, while giving the lender the inverse right and liability. There are other sub-rights and sub-liabilities spread across the seventy-four-page document, too, including the guarantees given by the Second and Third Defendant within it. Moreover, there are naturally nuances pertaining to the terms of the agreement and so possible differing interpretations of the rights and liabilities that they describe. In the context of such an agreement – creating mutual and numerous rights and liabilities, not all of which will be clear-cut – disputes can and very often will arise. It follows, and it goes without saying, that a dispute resolution clause in such an agreement will invariably be catered to such eventualities. Clause 39.1 (and clause 39.2) of the Facility Agreement has been worded in this way.
19. The Personal Guarantee is a very different type of agreement, however. It is comparatively very simple. Not only does this agreement home in on only one right and one corresponding liability pertaining to the lender and the borrower, respectively – namely the right to and liability for repayment of the facilities – but also, importantly, and as a consequence of this, only one party has a right under the guarantee while the other party is charged with the only liability. Moreover, liability under the Personal Guarantee is triggered by a single circumstance: “… non-payment or non-satisfaction of any and all moneys or other liabilities now or hereafter owing to [the Claimant] by the [First Defendant] under and in connection with the Facilities…” If a guarantor under the Personal Guarantees disputes that monies or other liabilities are owed to the Claimant under the Facility Agreement at the time that the latter attempts to enforce the Personal Guarantee, such a dispute will pertain to the Facility Agreement, not the Personal Guarantee, and so will be covered by the former agreement’s dispute resolution clauses.
20. Moreover, the language of the Personal Guarantee is extremely ‘watertight’ such that it is not clear how a dispute might arise under it at all: “in the event of non-payment or non-satisfaction…”; “…of any and all moneys or other liabilities now or hereafter owing…”; “…under and in connection with the Facilities…”; “…I jointly and severally…”; “…guarantee and undertake to pay you on your first demand upon me…”; “…without protest or notifications …”; “…waiving all rights of objection and defense arising from any relationship which exists or may exist between you and the Borrower …”; “…such amount or amounts as you shall demand from time to time…”; “… you shall be at liberty at any time and from time to time …” ; “… with or without my consent [all emphases added]…”; and so on. These consecutive examples from the first few paragraphs of the Personal Guarantee suffice to demonstrate the ‘watertight’ character of the entire agreement: in the event that the triggering circumstance arises, the guarantor under the Personal Guarantee shall pay such amount as the Claimant demands, or else be in breach of the guarantee. There seems to be nothing to dispute regarding or under the Personal Guarantee, and nor has the Third Defendant made submissions to the contrary.
21. In the context of an agreement like the Personal Guarantee, there seems to me to be good reason why a lender would not chose arbitration as a means of ‘dispute’ resolution. In the event of non-payment or non-satisfaction of the monies owed to the borrower, the latter wants, on first demand, the monies owed to it from the guarantors, failing which a court order ordering the same. This construction of the Personal Guarantee seems to me to be entirely consistent with the jurisdiction clause within it which the Third Defendant had incorrectly stated “mirrored” the jurisdiction clause of the Facility Agreement:
14. This Guarantee shall be governed and construed in accordance with the law of Dubai International Financial Centre and any legal action or proceedings with respect to the Guarantee may be brought against me or on any of my assets in the courts of the Dubai International Financial Centre and the enforcement of any judgment rendered by such courts may be brought against me in any jurisdiction you may elect.
22. As a final observation, it will be noted that the Personal Guarantee does not even contemplate legal actions or proceedings being brought against the Claimant: “… any legal action or proceedings with respect to the Guarantee may be brought against me [that is, the guarantor] or on any of my assets…” As such, under the Personal Guarantee, the Third Defendant would be entitled only to a defence to any legal action or proceedings brought against him in these Courts and not even to bringing an action or proceedings himself, much less initiating arbitration proceedings.
23. With this in mind, as well as the previous observations, I find that the Third Defendant fails in his second line of argument, too. In my view, the Facility Agreement and the Personal Guarantee not only need not be read together as far as their dispute resolution clauses are concerned, but, importantly, they should not be read together and the dispute resolution clauses of the Facility Agreement do not cover any ‘disputes’ which may arise out of the Personal Guarantee. Moreover, each agreement contains its own independent obligations. As a consequence, the Personal Guarantee is a separate operative contract which, in theory, the Third Defendant can be sued under.
Deutsche Bank and Fiona Trust distinguished
24. As noted above, the Third Defendant has relied on Deutsche Bank and Fiona Trust in order to demonstrate that the parties in the instant matter should be presumed to have intended that all disputes arising out of their relationship should be settled by the same tribunal. The present case can be distinguished from Deutsche Bank and from Fiona Trust in at least one important respect, however. In both of these cases, the same parties were party to the various agreements in question. In this case, however, only the Second and Third Defendants are party to the Facility Agreement while the Second to Sixth Defendants are party to the separate Personal Guarantees. Neither the Third Defendant nor the Claimant have dealt with the difficulty that this may introduce when trying to apply the presumptions of Deutsche Bank and Fiona Trust. Applying the presumptions myself, I think that the consequence of the Third Defendant’s proposition is that either the signatories of the Personal Guarantees who were not also parties to the Arbitration Agreement contained in the Facility Agreement – namely the Fourth to Sixth Defendants – would still be captured by the Arbitration Agreement or, alternatively, that only those signatories of the Personal Guarantees who were also parties to the Arbitration Agreement would be captured by it, with the remaining guarantors being captured by clause 14 of the Personal Guarantees.
25. In the first scenario, and in the instance that legal proceedings in respect of the Personal Guarantees had been brought against the guarantors, the Fourth to Sixth Defendants would be able to object to the jurisdiction of the DIFC Courts on the basis that the dispute was subject to an arbitration agreement, despite the fact that they were not party to it and despite the fact that the only agreement they were party to explicitly confers jurisdiction on the DIFC Courts.
26. To me, to the extent that this analysis is correct, clause 14 of the Personal Guarantees becomes entirely superfluous; indeed, misleading. As partially cited above, in written submissions, the Third Defendant stated that “the Personal Guarantee does not have a different dispute resolution [to the Facility Agreement]. The language merely mirrors the structure of clause 39.1 [of the Facility Agreement]… That provision, like clause 39.1 of the Facility Agreement, is subject to the arbitration agreement in the Facility Agreement.” This begs the questions of why, if the Third Defendant is correct, clause 14 of the Personal Guarantee did not do a better job of mirroring clause 39.1 of the Facility Agreement (for example, by including “Subject to the Arbitration Agreement contained in clause 39.2 of the Facility Agreement…”) or why the Personal Guarantee did not also mirror clause 39.2 of the Facility Agreement itself. These would have been simple and reasonable steps that the parties could have taken in order to clearly convey that the Personal Guarantees were subject to the Arbitration Agreement. Next most clear, I think, would have been to say nothing of ‘dispute’ resolution at all, which may have implied that the dispute resolution provisions of the parent agreement, the Facility Agreement, apply. But to only have a portion of the dispute resolution clauses of the Facility Agreement ‘mirrored’ suggests to me that there was no mirroring happening at all and that clause 14 of the Personal Guarantee did, in all likelihood, and contrary to the Third Defendant’s submission, provide for different ‘dispute’ resolution.
27. In the second scenario, where only some of the guarantors would be captured by the Arbitration Agreement, the Claimant would only be able to pursue the Fourth, Fifth and Sixth Defendants in respect of the Personal Guarantees in the DIFC Courts (under clause 14 of the Personal Guarantees) while the Second and Third Defendants would be able to resist the same proceedings and insist on arbitration (under clause 39.2 of the Facility Agreement) but which the remaining Defendants could not be joined to. The Defendants themselves cannot be presumed to have intended to agree to this. Each of the Defendants is jointly and severally liable. It follows that the Claimant has no need to pursue all of the Defendants, much less in two sets of proceedings. According to this construction, then, the Defendants cannot be deemed to have intended to agree to making some but not all of the co-guarantors vulnerable to a suit. Moreover, this eventuality would also be entirely at odds with the Third Defendant’s position that all the disputes arising out of the relationship into which the parties entered should be decided by the same tribunal, and so I think it can be dispensed with at once.
28. In conclusion, I find that the presumptions from Deutsche Bank and Fiona Trust should not be applied in the instant case. It follows that, and in as much as it is a separate operative contract, the Personal Guarantee is not subject to the dispute resolution clauses of the Facility Agreement, including, crucially, the Arbitration Agreement contained within it. It follows, finally, that the Third Defendant’s Application under Article 13 must be dismissed.
Construction of clause 39 of the Facility Agreement
29. It is not necessary for me to continue my analysis, but for completion I will make a few further remarks about clause 39 of the Facility Agreement which has been the subject of disagreement between the parties. At a glance, clauses 39.1 and 39.2 appear to be inconsistent with each other. The relevant subclauses of clause 39 for the present purposes are as follows:
39. ENFORCEMENT
39.1 Jurisdiction
(a) Subject to Clause 39.2 (Arbitration) the courts of the Dubai International Financial Centre (the “DIFC”) shall have non-exclusive jurisdiction to settle any dispute arising from or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligations arising out of or in connection with this Agreement (a “Dispute”)).
39.2 Arbitration
(a) Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre, which Rules are deemed to be incorporated by reference into this clause.
30. As Gloster J said in the High Court of England and Wales in the case of Axa Re v Ace Global Markets [2006] EWHC 216 (Comm), “in cases of potential inconsistency between clauses, it is well settled that the contract must be read as a whole… an effort should be made to give effect to every clause in the agreement.” ([16]) Both the Claimant and Third Defendant have attempted to resolve the apparent inconsistency between these two clauses. I will discuss each construction now.
31. The Claimant contends that the beginning of clause 39.1(a) – “subject to Clause 39.2 (Arbitration)…” – is to be construed as confirming the parties’ entitlement, in the event of a dispute, to either elect the jurisdiction of the DIFC Courts or refer the dispute to arbitration. This appears to me to be a very strained interpretation of clause 39 which, amongst other things, entirely ignores the very firm language of clause 39.2(a) – “any dispute… shall [emphasis added] be referred to… arbitration…” – and the qualified nature of clause 39.1(a) – “subject to [emphasis added] Clause 39.2…” In my opinion, this construction is to be rejected immediately.
32. For his part, the Third Defendant has submitted that “clause 39 provides first for mandatory arbitration of disputes by DIFC-LCIA arbitration. That is the only interpretation which gives effect to the words ‘Subject to Clause 39.2 (Arbitration).’” I think that the Third Defendant is incorrect in his statement that this is the “only” valid interpretation. Moreover, I think that this construction is unsatisfactory because it overlooks key differences in the language of the two clauses.
33. Granted, clauses 39.1 and 39.2 are similar in subject matter. Both clauses are concerned with disputes, including those regarding ‘existence,’ ‘validity’ and ‘termination.’ However, it will be noted that clause 39.1 is concerned with disputes about the existence, validity and termination of the “Agreement” while clause 39.1 is concerned with such disputes in relation to the “contract.” In my opinion, this difference should not to be overlooked. “Contract” is not a defined term in the Facility Agreement, but when juxtaposed with “Agreement,” I think it is of a narrower scope than the latter term – in my opinion, “contract” refers to the Facility Agreement itself as a document, including but not exceeding the terms contained within it. To the extent that this is correct, it follows that “Agreement” is of a wider scope than just the Facility Agreement. Indeed, the illustrative list of types of disputes covered by clause 39.1 supports this ‘broader’ interpretation. In this list, along with existence, validity or termination of the Agreement, we find “or any non-contractual obligations arising out of or in connection with this Agreement.” Importantly, this additional category of dispute is not replicated in clause 39.2. Moreover, I think it is enough that reference is made to “non-contractual [emphasis added]” disputes, which unambiguously goes beyond the scope of the contract mentioned in clause 39.2. It follows that while there may be much overlap between clauses 39.1 and 39.2, they are by no means identical. And insofar as they are not identical, both clauses can be mutually effective without “subject to Clause 39.2…” needing to provide for mandatory arbitration of disputes in the first place. According to this construction, “subject to Clause 39.2…” instead means “unless clause 39.2 applies.”
34. The position is even stronger when consideration is given to the definition of “Agreement” in the Definitions and Interpretation section of the Facility Agreement: “Agreement: means this Agreement including its schedules as amended, supplemented [emphasis added] and varied from time to time and agreed between the Parties.” At this juncture, it is worthwhile making a final and pre-emptive point. On the Third Defendant’s own case, the obligation for the Personal Guarantees arose under clause 2.1(d) of Schedule 3 (‘Conditions Precedent’) of the Facility Agreement. It follows, in my opinion, that the Third Defendant’s Personal Guarantee can be considered to be a supplement of a schedule of the Agreement and, thereby, a part of the Agreement according to the term’s definition and also, importantly, for the purpose of clause 39.1, too. It seems unlikely, on the other hand, that the Personal Guarantee was intended to be encompassed by the term “contract” in clause 39.2. It is a separate document. In conclusion, while, again, there is a lot of overlap between clauses 39.1 and 39.2, on a true construction, and to the extent that the Personal Guarantee might be encompassed by the dispute resolution clauses of the Facility Agreement, in my opinion, the former is not to be located in their intersection, whereby clause 39.2 (arbitration) would apply, but instead in the area only subject to clause 39.1 (jurisdiction), whereby these Courts have jurisdiction. (If anything in this construction seems counterintuitive, I direct to the aforementioned case of Axa Re which conveniently collects examples, as well as providing its own, of how courts have saved and given effect to at first seemingly inconsistent provisions, and not all of which present themselves as at first intuitive; without, that is, close analysis.)
35. According to this construction, then, had the Claimant pursued the Third Defendant under the guarantee in the Facility Agreement, arbitration would have been mandatory and I would have been obliged under Article 13 to dismiss or stay this action; while in so far as the latter has been pursued under the Personal Guarantee, and supposing for argument’s sake that this document is found to not be a separate operative contract, as a part of the “Agreement,” the DIFC Courts would have been designated to finally decide the matter and, whatever their present positions are now, the parties would have been taken to have regarded, as stated in clause 39.1(b) of the Facility Agreement, “that the courts of the DIFC are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.”
36. As a final remark, I think the Claimant appropriately invoked the Overriding Objectives of the Rules of this Court, and in particular RDC 1.6 which confirms that the overriding objective of the DIFC Courts is to deal with cases justly which includes, as per RDC 1.6(4), ensuring that cases are dealt with “expeditiously.” As Justice Sir Jeremy Cooke said in June 2019, in the appeal mentioned at the start of this judgment, “it appears to me that there has been enough delay in this action already and that it should now continue following dismissal of the appeals, at a much faster rate than heretofore.” ([37]) While activity continues for some of the Defendants in this matter, the Fourth Defendant has exhausted his rights of appeal and has been found to be liable under his Personal Guarantee. In my opinion it is high time that his colleagues or former colleagues, whatever the present situation is, including the Third Defendant, honour the guarantees that they had given, so that this case, which begun in 2017, can once and for all be closed.
Cost
37. In accordance with the principle contained in RDC 38.7, that the unsuccessful party should pay the costs, the Third Defendant shall pay the Claimant’s costs of this Application on a standard basis, to be assessed by a Registrar if not agreed.
Conclusion
38. As stated above, the Third Defendant’s application is dismissed with the Cost.
