Claim No. CFI 034/2012
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE THE CHIEF JUSTICE MICHAEL HWANG
BETWEEN
(1) MR AMIT DATTANI
(2) MR NITIN JOBANPUTRA
(3) MR MASOOD UR RAHMAN
(4) MR SHEMHON IFTAKHAR
Claimants
and
DAMAC PARK TOWERS COMPANY LIMITED
(Previously trading as DAMAC REAL ESTATE ASSET MANAGEMENT COMPANY LIMITED)
Defendant
Hearing: 17-21 November 2013
Counsel: Ms Bushra Ahmed and Mr Luke Blane (KBH Kaanuun) for the Claimants
Mr Drew Baiter and Mr Chong Ven Seng (Damac Properties Co LLC) for the Defendant
Judgment: 20 July 2014
JUDGMENT OF THE CHIEF JUSTICE MICHAEL HWANG
Summary of Judgment
(1) This is a consolidated claim of two actions commenced by:—
(a) the Purchasers of an Apartment in Park Towers (“the Apartment Purchasers”)
(b) the Purchasers of a Retail Unit in Park Towers (“the Retail Unit Purchasers”)
(2) The Defendant is the developer of Park Towers.
(3) The two Sale & Purchase Agreements (“SPAs”) were on virtually identical terms except for Clause 13.1 of the SPAs. Clause 13.1 of the Apartment SPA gave the Purchaser the right to terminate the SPA if possession and occupation were not given within 12 months of the Anticipated Completion Date (“ACD”) but with a right to the Defendant to extend the ACD by a period of up to 12 months (which right was exercised). While the obligation to give possession and occupation by the ACD was also contained in the Retail Unit SPA, there was no similar express right of termination granted to the Purchasers of the Retail Unit under the Retail SPA. The original ACD was 3 years from the date of the handover by the Master Developer (“ DIFCA”) of the land (“the Land”) on which Park Towers was to be built. In the Sale and Purchase Agreement between DIFCA and the Defendant (“the Plot SPA”) the Anticipated Hand-over Date (“AHD”) of the Land was fixed at 30 June 2006, but DIFCA had the power to extend the date unilaterally for up to 6 months. The Plot SPA also provided for DIFCA to give a notice of handover so as to fix the actual date of handover, but the Defendant asserted that no such notice was given by DIFCA. The Court found that the handover date must be taken to be 30 June 2006. The ACD was therefore 30 June 2009, which was extended by the Defendant to the latest date possible, i.e. to 30 June 2010. The Apartment Purchasers’ right of termination therefore arose after 30 June 2011. The Defendant offered possession of the Apartment to the Apartment Purchasers on 4 August 2011 and offered possession and occupation of the Retail Unit to the Retail Unit Purchaser on 21 August 2011.
(4) This Court found that:—
(a) Although the Defendant claimed that it had been unable to commence work on the Land because of obstruction by DEWA cables this did not mean that the handover of the Land under the Plot SPA did not occur until after the removal of the cables.
(b) It was difficult to accept the Defendant’s assertions that:—
(i) DIFCA had never formally handed over the Land to the Defendant; and
(ii) There was correspondence between DIFCA and the Defendant about the handover of the land.
(5) As the Defendant adduced no documentary evidence in support of either assertion, the Court was not prepared to accept such oral evidence, and instead found that the Defendant had not displaced the inference that the handover of the Land took place on or before the contractual date of 30 June 2006. Other alternative dates for fixing he actual date of Plot handover advanced by the Parties were rejected in favour of the contractual date of 30 June 2006.
(6) This would mean that the date of the ACD for the Apartment and the Retail Unit would have been 30 June 2009 and, if the Defendant did not deliver possession and occupation to the Purchasers by that date, it would be in default (as explained in (3) above).
(7) Based on the evidence of the Purchasers’ expert after he had conducted a physical inspection of the two units (and the common area of Park Towers), the Court was satisfied that the Defendant did not meet the conditions for possession and occupation of the Apartment Unit and the Retail Unit to be given by the date of its offer to the two sets of Purchasers to take possession and occupation in August 2011.
(8) Prior to the termination notices used by the two sets of Purchasers, each set had issued notices to the Defendant to cure the defects in the two properties within 30 days, but the Defendants refused or failed to do so.
(9) Accordingly, the Apartment Purchasers had the right under the Apartment SPA to terminate the Apartment SPA 12 months after the ACD i.e. by 30 June 2011 and their termination on 5 October 2011 was therefore lawful.
(10) In the case of the Retail Unit, while there was no express right of termination for delay in handover, Article 81 of the DIFC Contract Law entitled the Retail Unit Purchasers to terminate the Retail Unit SPA for delay in performance, even if the delay did not amount to a fundamental non-performance so long as an additional period of time of reasonable length for performance had been given to the non-performing party. Accordingly, the termination on 6 October 2011 by the Retail Unit Purchasers was valid.
(11) The Defendant also alleged that the claim of the Apartment Purchasers had been the subject of a concluded compromise agreement, either as a Part 32 settlement or as a simple contract. The Court found that the elements of a compromise had not been fulfilled and, accordingly the Apartment Purchasers were entitled to pursue their claim.
(12) The Court therefore ordered that the Defendant repay to both sets of Purchasers all sums they had paid for the two properties. The Purchasers’ claims for interest and costs have been reserved to a further phase of hearing.
|
This summary is not part of the Judgment and should not be cited as such.
THE COURT HEREBY DECLARES AND ORDERS AS FOLLOWS:
(A) The Court declares that the Sale and Purchase Agreement (“the Apartment SPA”) made between:—
(1) The 1st and 2nd Claimants; and
(2) The Defendant
dated 1 November 2004 for the sale and purchase of Unit B-1406 in Park Towers, DIFC, Dubai (“the Apartment”) was lawfully terminated by the 1st and 2nd Claimants by their Notice of Termination of 5 October 2011, and orders that the Defendant pay the 1st and 2nd Claimants AED 1,806,400, being repayment of the aggregate sums they have paid to account of the purchase price of the Apartment under Clause 13.1 of the Apartment SPA.
(B) The Court declares that the Sale and Purchase Agreement (“the Retail Unit SPA”) made between:—
(1) The 3rd and 4th Claimants; and
(2) The Defendant dated 16 January 2006 for the sale and purchase of Unit P4-6 in Park Towers, DIFC, Dubai (“the Retail Unit”) was lawfully terminated by the 3rd and 4th Claimants by their Notice of Termination of 6 October 2011, and orders that the Defendant repay the 3rd and 4th Claimants AED 1,807,700, being restitution of the aggregate sums they have paid to account of the purchase price of the Retail Unit.
(C) The Court makes no further order for additional damages under Article 40 (2) of the DIFC Law of Damages and Remedies.
(D) The Court reserves all claims by the Four Claimants for interest and costs to a further inquiry.
(E) The Court dismisses all other claims and counterclaims.
Introduction
1. These proceedings comprise two claims that have been consolidated, CFI 034/2012 Amit Dattani & another v Damac Park Towers Company Limited (“the Dattani Claim“) and CFI 046/2012 Masood Ur Rahman & another v Damac Park Towers Company Limited (“the Rahman Claim“) (collectively, “the Claims“). The Claimants seek to recover money paid to the Defendant under two Sale and Purchase Agreements (“SPAs”) for the purchase of units in the Defendant’s development, Park Towers.
The Parties
2. There are two groups of claimants — Mr Amit Dattani and Mr Nitin Jobanputra constitute the first group (“the Dattani Claimants”); while Mr Masood Ur Rahman and Mr Shamhon Iftikhar constitute the second group (“the Rahman Claimants“) (the Dattani Claimants and the Rahman Claimants collectively, “the Four Claimants“). They are represented by Ms Bushra Ahmed of KBH Kaanuun Ltd (“KBH“).
3. The
defendant is Damac Park Towers Company Limited (previously trading as Damac Real Estate Asset Management Company Limited) (“
Damac” or “
the Defendant“). Damac is a property developer in the DIFC and is the developer of the Park Towers development. The Defendant is represented by its in-house counsel Mr Drew Baiter.
The Parties
4. Under a Sale and Purchase Agreement dated 1 November 2004 (“the Apartment SPA“), the Dattani Claimants agreed to purchase a residential apartment, B-1406, in Park Towers (“the Apartment“) from the Defendant at a price of AED 1,996,000.
5. Similarly, under a Sale and Purchase Agreement dated 16 January 2006 (“the Retail Unit SPA“), the Rahman Claimants agreed to purchase a retail unit, P 4-6, also in Park Towers (“the Retail Unit“), from the Defendant, at a price of AED 2,103,000.
6. Both the Apartment and the Retail Unit SPAs provide, in material part (at Clause 1.1), as follows:
“Anticipated Completion Date means a date, which is 36 months after the handover of the Plot by the Master Developer to the Seller.
[…]
Completion Date means the date upon which the Property is completed as per the Drawing as certified by the Project Consultant, whose decision as to such date shall be final and binding upon the Parties.
[…]
Master Developer means the Dubai International Financial Centre Authority, the developer of the Master Community or any other entity that may assume responsibility for the development and/or management of the Master Community.
[…]
Penalty Rate means the percentage quoted at the United States Dollar ninety (90) day London Inter-bank Offered Rates (LIBOR) as computed by the British Bankers Association (BBA) to be in effect on the day payment becomes payable; the percentage rate shall be reset and compounded quarterly on the 1st of every January, April, July and October.
Plot means the land occupied by the Building and its associated grounds shown on the Master Plan as Plot number PB-02.
[…]
Property means the Unit together with an undivided share in the Common Property apportioned to the Unit in accordance with the Participation Quota.
[…]”
Both SPAs do not provide a definition of either “the handover of the Plot” or “Plot handover”. “Hand-Over Date” is explained (but not defined) in Clause 1.1 of the Plot Sale and Purchase Agreement (“Plot SPA“) between the DIFC Authority (“DIFCA“) and the Defendant (see paragraph 16 below).
7. Clause 6 of the Apartment SPA provides as follows:
“6. Possession and risk
6.1 It is recorded that the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation. The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months, provided that the Seller shall advise the Purchaser of such extension at least three (3) months beforehand.
6.2 The Purchaser acknowledges that it is possible that the Completion Date may fall on a date before the stipulated Anticipated Completion Date. The Seller shall in any event give the Purchaser not less than thirty (30) days’ notice in writing of the Completion Date and the Completion Date shall only be deemed to have been determined when the Project Consultant has so certified by signing off on the Drawings.
6.3 Possession and occupation shall be given to and taken by the Purchaser on the Completion Date, from which date all risk in and benefit in respect of the Property shall pass to the Purchaser. The Seller shall be entitled to decline to hand over possession and occupation to the Purchaser if the Purchaser has failed to make the payments referred to in Clause 5.1 or has failed to comply with any other of the provisions of this Agreement.
6.4 The Purchaser acknowledges being aware of the fact that on the Completion Date, the Common Property, other Units in the Park Towers and/or the Master Community as a whole may be incomplete and that inconvenience may be suffered as a result of the building activities which shall be in progress. The Purchaser shall have no claim against the Seller for such inconvenience, the Seller, however, shall use its best endeavours to keep such inconvenience to a minimum.”
8. Clause 6 of the Retail Unit SPA is almost identical to that of the Apartment SPA, save for clause 6.1, which instead provides as follows:
“6.1 It is recorded that the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation. The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months.”
9. Clause 11.4 of each SPA provides as follows:
“11.4 During the abovementioned inspection the Seller and the Purchaser shall together complete a comprehensive list detailing any deficiencies, incomplete items or defects (the “Deficiencies”) in the Property. The Seller shall promptly attend to any and all remedial work required by an agreed date provided that the Purchaser shall not be entitled to hold back any portion of the Purchase Price in respect of the Deficiencies. In the event of any dispute arising in connection with the Deficiencies, a decision by the Seller’s Project Consultant shall be final and binding on the Parties.”
10. Clause 13 of the Apartment SPA provides as follows:
“13. Defaults and Termination
13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser. If possession and occupation of the Unit continues to be delayed beyond 12 months after the Anticipated Completion Date, the Purchaser shall have the right on thirty (30) days written notice to the Seller to call upon the Seller to remedy the breach and then to terminate this Agreement if the Seller remains in breach after the expiry of the said period of thirty (30) days. Upon termination of this Agreement, the Seller shall refund all amounts paid by the Purchaser on account of the Purchase Price including a penalty calculated on the amounts paid at the Penalty Rate for the period after the Anticipated Completion Date until the date the refund is made to the Purchaser, which is to take place within sixty (60) days of receipt of the above mentioned written notice. The Purchaser shall have no other claims against the Seller in respect of damages, compensation or costs.
[…]
13.3 In the event that the Purchaser fails to fulfil on the due date any of the terms and conditions of this Agreement, then the Seller shall give the Purchaser fourteen (14) days notice in writing calling on the Purchaser to remedy such notice, OR, in the event, prior to the payment of the full purchase price, the Purchaser becomes bankrupt, enters into liquidation, makes a general assignment for the benefit of creditors, takes the benefit of any act of insolvency, or if any similar proceedings are instituted by or against the Purchaser, or if a permanent receiver or trustee in bankruptcy shall be appointed for the Purchaser’s property and not discharged within fourteen (14) days, then in any such event, the Seller shall be entitled, without further notice and without prejudice to any other right available in law:
(i) to terminate this Agreement; and
(ii) to claim compensation from the Purchaser for the direct loss suffered by the Seller as a result of the default by the Purchaser to perform his obligations pursuant to this Agreement (including any shortfall in the purchase price upon re-sale of the Property, the legal and other expenses incurred by the Seller on the termination of the Agreement, the costs incurred by the Seller and the expenses related to the re-sale of Property). The Seller shall, pursuant to the above-mentioned provisions, be entitled to retain an amount equivalent to 40% of the Purchase Price, as pre-estimated liquidated damages, which the Purchaser expressly agrees is true and reasonable pre-estimate of the damages that will be suffered by the Seller as a result of the Purchaser’s default. The Purchaser however understands and agrees that if the amounts so retained are insufficient to meet the Seller’s losses, then the Purchaser shall remain liable to pay to the Seller the amount of the shortfall on demand.”
11. Clause 13 of the Retail Unit SPA is almost identical to that of the Apartment SPA, save for Clause 13.1, which instead provides as follows:
“13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date, without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period starting twelve months from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser.”
12. Clause 14 of each SPA provides as follows:
“14. Force Majeure
The Seller shall not be liable for any failure or delay to perform its obligations under this Agreement due to causes beyond its reasonable control including but not limited to acts of war, terrorism, flood, strike, earthquake, accidents, riots, non-delivery of the Plot by the Master Developer or any decisions of government provided the Seller gives to the Purchaser a written notice within thirty (30) days indicating the beginning of such circumstances. Where such circumstances occur, a certificate issued by a competent authority shall be sufficient proof of the existence of such circumstances and their duration. The Anticipated Completion Date shall be extended for a period equal to that during which such circumstances exist.”
13. Clause 19 of each SPA provides as follows:
“19. Notices
Any notice given under this Agreement shall be in writing in the English language and shall be served by delivering it personally or sending it or faxing it to the address or fax numbers as set out in this Agreement. Any such notices shall be deemed to have been received:
(i) If delivered personally, at the time of delivery;
(ii) If mailed by registered prepaid post to this address at the introduction of this Agreement, it shall be deemed to have been sufficiently served ten (10) days after it was made;
(iii) In the case of a fax, at the time of transmission.”
14. Clause 20 of each SPA provides as follows:
“20. Governing Law and Jurisdiction
This Agreement in the English language and the rights of the Parties hereunder shall be governed by the Laws of the United Arab Emirates and the Laws of Dubai and the Parties agree that any legal action or proceedings with respect to this Agreement shall be subject to the non-exclusive
jurisdiction of the
Courts of Dubai, United Arab Emirates.” Regardless of Clause 20, it is common ground that DIFC law governs both the Apartment and the Retail Unit SPAs and that this Court has jurisdiction over the current dispute.
The Plot SPA
15. DIFCA and the Defendant are parties to the Plot SPA, which is dated 31 May 2004. The Plot SPA provides the basis upon which the land used for Park Towers (i.e. the Plot as defined in the Apartment and Retail Unit SPAs) was sold by the DIFC (acting through DIFCA) to the Defendant.
16. Clause 1 of the Plot SPA provides definitions of the various terms used in the SPA. I reproduce the material part of Clause 1 below:
“Anticipated Hand-over Date means June 30, 2006 a date
[…]
Completion Date means June 30, 2006 or such other date as may be mutually agreed to by the parties
[…]
Hand-Over Date means the date upon which the Purchaser shall be given possession of the Property as determined pursuant to clause 4.
[…]
Property means that piece of land in the Master Community consisting of 127,660 square feet more or less […], BUT EXPRESSLY EXCLUDING all mines and minerals, all other rights whatsoever in the land situated below ground, and all air rights above.”
17. Clause 4 of the Plot SPA provides as follows:
“4. Hand-Over of Property
4.1 It is recorded that the Anticipated Hand-Over Date represents the date upon which it is presently expected that the Master Developer will hand over possession of the Property to the Purchaser. The Master Developer reserves the right to extend the Anticipated Hand-Over Date by a period of up to six months, provided that the Master Developer shall advise the Purchaser of such extension at least three months beforehand.
4.2 The Master Developer shall in any event give the Purchaser not less than 30 days’ notice in writing of the Hand-Over Date and the Hand-Over Date shall only be deemed to have been determined when such notice has been given.
4.3 Possession and occupation shall be given to and taken by the Purchaser on the Hand-Over Date, from which date all risk in and benefit in respect of the Property shall pass to the Purchaser. The Master Developer shall be entitled to decline to hand over possession and occupation to the Purchaser if the Purchaser has failed to make the payments referred to in Clause 3 which have accrued due or has failed to comply with any other of the provisions of this Agreement.
4.4 Except where the Master Developer and/or its agents or contractors are contributorily responsible for the same, and then only to that extent, the Purchaser shall from the Hand-Over Date indemnify and hold the Master Developer and its agents and contractors harmless against all claims, proceedings, costs, damages, expenses and losses arising out of any damage to property or injury or fatality caused to any person (whether directly or indirectly) through:
4.4.1 the defective or damaged condition of any part of the Property or any other structure constructed thereon and any fixtures, fittings or
electrical wiring therein; or
4.4.2 the spread of fire or smoke or the flow of water from any part of the Property; or
4.4.3 the act, default or neglect of the Purchaser or the Purchaser’s Occupiers;
to the extent that coverage for same is not provided in the Master Insurance Policy.”
Agreed facts (relating to the Dattani Claim)
18. The following facts that relate to the Dattani Claim are agreed by the Parties.
18.1 On 17 October 2006, the Defendant wrote to Mr Dattani, stating that “the enabling works at the Park Towers site has [sic] now commenced” and that it “anticipate[d] delivery of the property for possession by December 2009.”
18.2 On 12 September 2007, the Defendant wrote to Mr Dattani, stating, in relevant part, as follows:
“[…]
Please be advised that, work is well underway on the site and the proposed completion date for the project is end of 2009.
[…]”
18.3 From 18 February 2009 to 5 October 2009, there was some dispute between the Defendant and Mr Dattani in relation to payments according to the instalment plan set out in the Apartment SPA. This dispute has been resolved between the Parties and is immaterial to the current proceedings.
18.4 On 13 September 2010, the Defendant wrote an email to Mr. Dattani, informing him of the progress with the construction works. The email also stated, in relevant part, as follows.
“[…]
The anticipated date of completion of this building is Q2 (Quarter) 2011.
[…]”
18.5 On 23 January 2011, the Defendant wrote an email to Mr Dattani, informing him of the progress with the construction works. The email also stated, in relevant part, as follows.
“[…]
Anticipation completion date [sic] — Q2 2011
[…]”
18.6 On 14 July 2011, Mr Dattani instructed his lawyers KBH to issue a Notice to Remedy Breach against the Defendant. The Notice stated that the Defendant was in breach of its contractual obligations to complete the Apartment and give possession and occupation to Mr Dattani, and that Mr Dattani was exercising his rights under Clause 13.1 of the Apartment SPA, giving the Defendant 30 days’ notice to remedy the breach of the terms of the SPA. The Notice also stated that it was intended to act as the requisite notice pursuant to Article 87 of the DIFC Contract Law.
18.7 On 17 July 2011, the Defendant informed both Claimants that it was now in possession of the Building Completion Certificate and that it was undertaking the fit-out of the common areas.
18.8 On 4 August 2011, the Defendant sent a letter to Mr Dattani, the material part of which I reproduce below:
“Re: Notice of Completion and Possession of Park Towers Unit No. DFB/14/B1406
We are pleased to confirm to you that your Unit has been ready for handover subject to completion by you of a number of formalities which we detail below.
[…]”
18.9 On 20 August 2011, Mr Dattani inspected the Development for the first time.
18.10 On 15 September 2011, Mr Dattani, Mr Robert Pickering (a professional surveyor engaged by Mr Dattani), together with Ms Helen Lavin (a representative from KBH), attended the Development for a second inspection.
18.11 On 5 October 2011, Mr Dattani instructed KBH to issue a Notice of Termination based upon the observations made by him and Mr Pickering during the second inspection. The Notice stated, in relevant part, the following.
“[…]
On further enquiry, which has include [sic] a physical visit to the Property, an opinion from an independent expert surveyor and status insofar as the relevant supervisory department at TECOM is concerned, our client has discovered that in reality the Property is not in fact complete and ready for handover.
[…]
As such, you have failed to comply with the Notice to Cure by remedying your breach within the timeframe set out in the Sale & Purchase Agreement for the Property dated 1 November 2004. Accordingly, we are instructed to formally notify you that pursuant to Clause 13.1, the SPA is to be considered terminated with immediate effect.
[…]”
18.12 On 16 November 2011, the Defendant wrote to KBH in response to the Notice of Termination and denied the allegations made in the Notice of Termination. The Defendant’s letter, in relevant part, stated the following.
“[…] The fact is that the Local Authority Building Completion Certificate has been issued on 28th June 2011; on this basis your unsubstantiated allegations would appear to be unwarranted. We have, and will continue to comply with the terms of the Unit SPA.
Your client’s Unit was ready for handover by 4th August 2011. […]”
18.13 On 27 February 2012, KBH, on behalf of Mr Dattani, made a Part 32 Offer (pursuant to RDC Part 321) to the Defendant offering a full and final settlement of the dispute for AED 1,009,000. This offer was open until 19 March 2012 for the Defendant’s acceptance. It is disputed as to whether settlement was eventually reached.
18.14 On 2 April 2012 the Defendant wrote to Mr Dattani, stating, in relevant part, as follows.
“You have failed to adhere to the payment terms contained in your contract for the above Unit despite our written notification dated 4 August 2011 in which we notified you of the Completion and Possession and we asked you to pay all outstanding sums under the Contract and to regularize your account.
You continue to be in default of the relevant clauses of the Contract. Accordingly, we hereby notify you that if you fail to pay all outstanding amounts within no later than 14 days pursuant to the provisions of the Contract, then your Contract shall immediately terminate on the date falling 14 days, without the need for any further form of notice from us, we hereby reserve all our rights to retain compensation and claim damages as provided for under the contract. […]
[…]”
19. These proceedings in respect of the Dattani Claim were commenced by the Dattani Claimants by way of a Claim Form filed on 19 September 2012 pursuant to RDC Part 7.
Agreed facts (relating to the Rahman Claim)
20. The following facts that relate to the Rahman Claim are agreed by both parties.
20.1 On 8 December 2008, the Defendant wrote an email to Mr Rahman, stating, in material part, as follows.
“[…]
The completion date has been anticipated for August 2009.
[…]”
20.2 On 27 August 2009, the Defendant wrote another email to Mr. Rahman, informing him of the progress with the construction works. The email also stated, in relevant part, as follows.
“[…]
Anticipated Completion date is 2nd Quarter 2010.
[…]”
20.3 On 10 February 2010, the Defendant, in an email to Mr. Rahman, informed him of the construction progress, and also stated, in relevant part, as follows.
“[…]
Anticipated completion:
Q1 2011
[…]”
20.4 On 30 March 2010, the Defendant, in an email to Mr. Rahman, informed him of the construction progress, and also stated, in relevant part, as follows.
“[…]
Anticipated completion date is first quarter 2011 […]”
20.5 On 5 July 2010, the Defendant, in response to a query as to the “expected completion date” for Park Towers from Mr Rahman, sent him an email stating, in relevant part, as follows.
“[…]
We would not be in a position to give you the exact date but its [sic] anticipated as Q1(Quarter) 2011.
[…]”
20.6 On 20 October 2010, 27 February 2011, and 24 April 2011, the Defendant wrote several further emails to Mr Rahman. The emails are substantially similar to the previous ones mentioned at paragraphs 20.1 to 20.5 above, but were to the effect that the “Anticipated Completion” or “anticipated completion” was the second quarter of 2011.
20.7 On 18 August 2011, Mr Rahman instructed KBH to issue a Notice to Remedy Breach on the Defendant. The Notice stated that the Defendant had failed to comply with its contractual obligations in that the Retail Unit had not been completed, and that possession and occupation of the Retail Unit had not been given to Mr Rahman, and it gave notice that the Defendant had 30 days to remedy this breach. The Notice also stated that it was intended, insofar as was required, to act as the requisite notice pursuant to Article 87 of the DIFC Contract Law (see paragraph 33 below).
20.8 On 21 August 2011, the Defendant sent a letter to Mr Rahman, the material part of which is reproduced below.
“Re: Notice of Completion and Possession of Park Towers, Unit No. DFR/P4/6
We are pleased to confirm to you that your Unit is ready for handover subject to completion by you of a number of formalities which we detail below.
[…]”
20.9 On 6 October 2011, Mr Rahman instructed KBH to issue a Notice of Termination based on observations made during the inspection on 15 September 2011 (Mr Dattani’s inspection, mentioned in paragraph 18.10 above). The Notice, in relevant part, stated as follows.
“[…]
On further enquiry, which has include [sic] a physical visit to the premises, an opinion from an independent expert surveyor and status insofar as the relevant supervisory department at TECOM is concerned, our client has discovered that in reality the Property is not in fact complete and ready for handover.
[…]
In particular, and despite requests, you have failed to provide a certified drawing from the Project Consultant evidencing Completion. In any event, and again despite requests, you have failed to provide the necessary certifications to prove that the Building as a whole and Property in particular meet all necessary approvals not least from DIFC and TECOM.
As such you have failed to comply with the Notice to Cure by remedying your breach within the requisite timeframe set out in the Sale & Purchase Agreement for the Property dated 16 January 2006. Accordingly, we are instructed to formally notify you that pursuant to Clause 13.1, the SPA is to be considered terminated with immediate effect.
[…]”
20.10 On 12 October 2011, the Defendant wrote to KBH in response to the Notice of Termination on Mr Rahman’s behalf denying the allegations made in the Notice of Termination. The Defendant’s letter, in relevant part, stated as follows.
“[…]
We note that Clause 13.1 does not give your client any right of termination. We also note from your letter of reference KB/HL/D1104 that in requesting inspection, your client intends to continue performance of the SPA. For these reasons, we consider your letter of reference KB/HL/OK/R1101 to have been issued in error.
[…]”
20.11 On 13 October 2011, KBH wrote to the Defendant, stating that Mr Rahman’s termination of the SPA was effective as of 6 October 2011.
20.12 On 12 December 2011, the Defendant wrote to Mr Rahman, informing him that the Retail Unit was ready for handover notwithstanding the Notice of Termination, and requested Mr Rahman to settle his outstanding balance.
20.13 On 2 April 2012 the Defendant wrote to Mr Dattani, stating, in relevant part, as follows.
“You have failed to adhere to the payment terms contained in your contract for the above Unit despite our written notification dated 21 August 2011 in which we notified you of the Completion and Possession and we asked you to pay all outstanding sums under the Contract and to regularize your account.
You continue to be in default of the relevant clauses of the Contract. Accordingly, we hereby notify you that if you fail to pay all outstanding amounts pursuant to the provisions of the Contract, within no later than 14 days from the date of this notice then your Contract shall immediately terminate on the date falling 14 days after the date of this notice, without the need for any further form of notice from us, we hereby reserve all our rights to retain compensation and claim damages as provided for under the Contract. […]
[…]”
21. These proceedings in respect of the Rahman Claim were commenced by the Rahman Claimants by way of a Claim Form filed on 27 December 2012 pursuant to RDC Part 7.
Procedural history
22. The cases CFI 034/2012 (the Dattani Claim) and CFI 046/2012 (the Rahman Claim) were consolidated by an Order of Court issued on 6 January 2013.
23. The Four Claimants applied for immediate judgment in respect of part of the Claim pursuant to RDC Part 24 on 24 March. This application was heard on 10 April 2013 before Justice Tan Sri Siti Norma Yaakob.
24. Justice Yaakob considered that this was not a case to which RDC Part 24 was applicable, and thus dismissed the claim with costs to be paid by the Four Claimants to the Defendant in a judgment dated 20 October 2013. She found the case unsuitable for immediate judgment under RDC 24 because each party’s case was that its own Notice of Termination was valid and that the other party’s Notice was invalid, and there was evidence that the Four Claimants had failed to fulfil their obligations under the two agreements by defaulting on their last instalment payments.
25. The trial before this Court was held on the 17th to 21st of November 2013.
26. On 12 June 2014 I directed that the parties make further submissions as to why the Retail Unit was not ready for possession and occupation (see paragraphs 146 to 156 below), along with the parties’ quantification of the interest due with their working and reasoning. This Court received the Four Claimants’ submissions as to the above on 19 June 2014, the Defendant’s reply to the Four Claimants’ submissions on
26 June 2014, and each party’s quantification of the interest due on 26 June 2014.
27. The Dattani Claimants submit that the Defendant failed to complete and hand over the Apartment by the Anticipated Completion Date (“ACD“). The Rahman Claimants submit that the Defendant failed to complete and hand over the Retail Unit by the ACD. The ACD is defined in Clause 1.1 of the SPAs with reference to the “handover of the Plot from the Master Developer to the Seller”. The exact date of the ACD is ambiguous as there is no documentary evidence relating to the date of the handover of the Plot, which is the reference date from which to calculate the ACD.
28. The Four Claimants submit that the date of handover of the Plot should be 30 June 2006, as that was the date originally anticipated in the Plot Sale and Purchase Agreement between the Master Developer and the Defendant, which would make the ACD 30 June 2009.
29. The Four Claimants’ position is that, at the time of the ACD, although possession and occupation of both units had been offered to the Four Claimants by the Defendant,
the state of the units could not be described as complete.
30. Owing to this failure by the Defendant to give possession and occupation of completed units to the Four Claimants by the ACD, the Dattani Claimants claim to have been entitled to terminate the Apartment SPA pursuant to Clause 13.1 of the Apartment SPA or, in the alternative, Articles 86 and 87 of the DIFC Contract Law. The Rahman Claimants claim to have been entitled to terminate the Retail Unit SPA under Articles 86 and 87 of the DIFC Contract Law.
31. For ease of reference, Clause 13.1 of the Apartment SPA provides as follows.
“13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser. If possession and occupation of the Unit continues to be delayed beyond 12 months after the Anticipated Completion Date, the Purchaser shall have the right on thirty (30) days written notice to the Seller to call upon the Seller to remedy the breach and then to terminate this Agreement if the Seller remains in breach after the expiry of the said period of thirty (30) days. Upon termination of this Agreement, the Seller shall refund all amounts paid by the Purchaser on account of the Purchase Price including a penalty calculated on the amounts paid at the Penalty Rate for the period after the Anticipated Completion Date until the date the refund is made to the Purchaser, which is to take place within sixty (60) days of receipt of the above mentioned written notice. The Purchaser shall have no other claims against the Seller in respect of damages, compensation or costs.
[…]”
32. The Four Claimants claim that they were entitled to terminate both SPAs pursuant to Articles 86 and 87 of the DIFC Contract Law on the basis that the Defendant’s failure to perform its obligations under the SPAs amounted to a fundamental non-performance.
33. Articles 86 and 87 of the DIFC Contract Law provide as follows.
“86. Right to terminate the contract
(a) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.
(b) In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether:
(a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract;
(b) strict compliance with the obligation which has not been performed is of essence under the contract;
(c) the non-performance is intentional or reckless;
(d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.
87. Notice of termination
(1) The right of a party to terminate the contract is exercised by notice to the other party.
(2) If performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the non-conforming performance.”
34. The Dattani Claimants and the Rahman Claimants seek the relief described below.
34.1 They seek a declaration that both the SPAs were lawfully terminated owing to the Defendant’s breach of contract and/or the Defendant’s anticipated breach of contract.
34.2 In relation to the Dattani SPA, on the basis of breach of contract, the Dattani Claimants seek repayment of the sum of all payments made towards the purchase of the Apartment pursuant to Clause 13.1 of the Dattani SPA or, in the alternative, Article 86 of the DIFC Contract Law (such payments amounting to AED 1,806,400 in aggregate). The Dattani Claimants also seek penalty interest on this sum in respect of the instalment period amounting to AED 184,064, amounting to a total sum of AED 1,990,464.
34.3 The Dattani Claimants also seek the payment of interest on the above sum from the Notice of Termination (5 October 2011) to the date of payment at the average bank short term lending rate to prime borrowers in AED.
34.4 Additionally, the Dattani Claimants also seek the award of discretionary additional damages as provided for in Article 40(2) of the DIFC Law of Damages and Remedies, which provides as follows:
“40. (2) The Court may in its discretion on application of a
claimant, and where warranted in the circumstances, award damages to an aggrieved party in an amount no greater than three (3) times the actual damages where it appears to the Court that the defendant’s conduct producing actual damages was deliberate and particularly egregious or offensive.”
34.5 In relation to the Rahman SPA, on the basis of breach of contract, the Rahman Claimants seek repayment of the sum of all payments made towards the purchase of the Retail Unit pursuant to Article 86 of the DIFC Contract Law (such payments amounting to AED 1,807,700 in aggregate). The Rahman Claimants also seek penalty interest on this sum in respect of the instalment period amounting to AED 133,887.20, amounting to a total sum of AED 1,941,587.20.
34.6 The Rahman Claimants also seek the payment of interest on the above sum from the notice of termination (6 October 2011) to the date of payment at the average bank short term lending rate to prime borrowers in AED.
34.7 Following the example of the Dattani Claimants, the Rahman Claimants also seek the award of discretionary additional damages as provided for in Article 40(2) of the DIFC Law of Damages and Remedies.
34.8 The Dattani Claimants and the Rahman Claimants also seek their legal costs, as well as the costs of engaging their expert witnesses.
35. I now turn to the Four Claimants’ position on the issues raised in defence by the Defendant. The position of the Four Claimants is that they had validly terminated the SPAs before the Defendant purported to terminate the contract; hence, at the time the Defendant purported to terminate the SPAs, there was nothing left to terminate.
36. With regard to the alleged settlement agreement in relation to the Dattani claim, the Dattani Claimants’ position is that there was no binding settlement agreement. They submit that the purported agreement the Defendant relies on is incomplete and uncertain as not all the material terms had been agreed upon.
37. The Four Claimants also submit that, on the premise that the Defendant terminated both SPAs validly, Clause 13.3 of each SPA (which provides that the Defendant can retain 40% of the purchase price on termination of the SPA) is, on its true construction, a penalty clause and is therefore not enforceable.
Outline of the Defendant’s submissions
38. The Defendant’s submissions in relation to the above claims are set out below.
39. First, the Dattani claim is barred by a binding settlement agreement between Mr. Dattani and the Defendant pursuant to RDC Part 32, and/or in the alternative, Article 14 of the DIFC Contract Law, which provides that “[a] contract is concluded by the acceptance of an offer”.
40. Second, the date of handover of the Plot is properly 7 January 2007 or, in the alternative, 17 October 2006, as the handover of the Plot was delayed by the presence of certain Dubai Electricity and Water Authority (“DEWA“) cables running under the plot. This would mean that the ACD was 7 January 2010, or 17 October 2009. The effect of this is that the Dattani Claimants were not entitled to terminate the Apartment SPA pursuant to Clause 13.1, as the requirements of Clause 13.1 had not been fulfilled. Clause 13.1 of the Apartment SPA contains the following requirements: (i) the Dattani Claimants must have fulfilled all their obligations under the SPA; (ii) they must provide 30 days written notice of termination after the expiration of a 12 month period after the ACD; and (iii) the Apartment is not ready for possession and occupation after the expiration of the 30 day notice period in (ii) above. The Defendant submits that the Dattani Claimants have not fulfilled any of the above requirements.
41. Third, the Four Claimants were not entitled to terminate either SPA pursuant to Article 86 of the DIFC Contract Law, as both the Apartment and Retail Unit were ready for handover prior to each of the purported terminations of the agreements.
42. Fourth, the Defendant submits that it was entitled to terminate both the Apartment and Retail Unit SPAs when it did, and is therefore entitled to retain 40% of the purchase price of both the Apartment and the Retail Unit, as provided in Clause 13.3 of each SPA. In relation to the Claimant’s submission that Clause 13.3 is, on its true construction, a penalty clause and is thus unenforceable, the Defendant submits that pre-estimated liquidated damages are perfectly acceptable under DIFC law. In support of this proposition it cites Part 2 Section 21 of the DIFC Law of Damages and Remedies, which is reproduced below.
“21. Agreed payment for non-performance
(a) Where the contract provides that a party who does not perform is to pay a specified sum to the aggrieved party for such non-performance, the aggrieved party is entitled to that sum irrespective of its actual loss.
(b) However, notwithstanding any agreement to the contrary the specified sum may be reduced to a reasonable amount where it is manifestly disproportionate to the loss envisaged as capable of resulting in relation to the loss resulting from the non-performance and to the other circumstances.”
43. In relation to Clause 13.3, the Defendant also submits that pre-estimated liquidated damages equal to 40% of the purchase price in a real estate sale and purchase agreement have been expressly endorsed by law in Dubai as an acceptable sum. In support of this, they cite Article 15 of Executive Council Resolution No. 6 of 2010 Approving the Executive Regulations of Law No. 13 of 2008 Regulating the Interim Real Estate Register in the Emirate of Dubai, the relevant part of which is reproduced below.
“Executive Council Resolution No. 6 of 2010 Approving the Executive Regulations of Law No. 13 of 2008 Regulating the Interim Real Estate Register in the Emirate of Dubai
Article 15
In the event that a purchase breaches any terms or conditions of the real estate sale contract be made with a developer, then the following procedures shall be followed:
(a) The developer shall notify the purchaser requesting him to abide by his contractual obligations, either in person before the Department or in writing by registered post or email provided the developer provides the Department with a copy of such notice.
(b) The Department shall give the purchaser 30 days’ notice to fulfil his contractual obligations commencing from the date of sending such notice by the developer.
(c) If at the end of the period referred to in paragraph (b) of this Article, the purchaser has not fulfilled his contractual obligations, the developer may:
1. Retain the entire sum he received from the purchase and demand either to sell the real estate at an auction so as to receive the remainder of his entitlements, or to deduct no more than 40% of the value of the real estate unit and cancel the contract on condition that the developer has completed a minimum of 80% of the project.
2. Deduct no more than 40% of the value of the real estate unit stipulated in the contract and cancel the contract on the condition that the developer has completed a minimum of 60% of the project; […]”
44. On this basis, the Defendant seeks a declaration that it is entitled to retain an amount equal to 40% of the purchase price of the Apartment as provided by Clause 13.3 of the Apartment SPA, being AED 798,400, from the payments made by the Dattani Claimants toward the purchase price of the Apartment. The Defendant also seeks a declaration that it is entitled to retain at least an amount equal to 40% of the purchase price of the Retail Unit as provided by Clause 13.3 of the Retail Unit SPA, being AED 841,200, from the payments made by the Rahman Claimants toward the purchase price of the Retail Unit. In relation to the Retail Unit specifically, the Defendant further submits that the Rahman Claimants are liable for losses in excess of the pre-estimated liquidated damages of 40% that have been sustained by the Defendant, as provided by Clause 13.3 of the Retail Unit SPA. The Defendant thus seeks a declaration that it is entitled to retain an increased sum of AED 1,282,830 in payments made by the Rahman Claimants, the sum being the difference in price between a similar retail unit it sold recently and the price the Rahman Claimants bought the Retail Unit for.
45. The Defendant also seeks its legal costs, to be determined at a detailed assessment hearing.
46. I now make my findings in this case.
The Settlement Agreement — Discussion
47. The Defendant submits that the Dattani Claim is barred by a settlement agreement pursuant to RDC Part 32 or, in the alternative, the DIFC Contract Law.
48. As a preliminary point, it is common ground that Mr Dattani was authorised by his co-purchaser, Mr Jobanputra, to enter into a settlement agreement on his behalf, and that it was understood to be so by the parties at all material times.
RDC Part 32
49. On 27 February 2012, KBH, on Mr Dattani’s instructions, sent to the Defendant a letter titled “Revised Part 32 Offer” (the “Settlement Offer“) which stated (in relevant part):
“Our client agrees to accept a payment from you in the amount of AED 1,009,000 […] in full and final settlement of any and all potential claims which he may have in respect of the Property. This amount represents the minimum balance repayable of the monies paid by our client to you to date together with interest on that amount calculated by reference to the United States Dollar 3-month LIBOR from the date our client terminated the SPA. This Offer will remain open until 19 March 2012 […]”
50. RDC Rule 32.4 sets out the requirements of a Part 32 offer which have to be followed in order for the offer to have the consequences of such an offer. RDC Rule 32.4 provides:
“32.4 A Part 32 offer must:
(1) be in writing;
(2) state on its face that it is intended to have the consequences of Part 32;
(3) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with
Rules 32.28 to 32.33 if the offer is accepted;
(4) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and
51. Prima facie, the Settlement Offer appears to fulfil the requirements of RDC 32.4, as it:
(a) is in writing;
(b) states that it is intended to have the consequences of Part 32 (as referred to in its title);
(c) specifies a period of 21 days for the acceptance of the offer;
(d) states that it relates to the whole claim; and
(e) accounts for any potential counterclaim.
However, there is nothing in the Settlement Offer dealing with the costs consequences of the proposed settlement.
52. The Defendant contends that it accepted the Settlement Offer (pursuant to Part 32) by way of a phone call between its employee, Ms Cherise Peireira (“Ms. Peirera“), and Mr Dattani on 18 March 2012. However, it appears that the value of the settlement was varied by the parties — AED 76,000 was added to the original figure of AED 1,009,000 (for a total of AED 1,085,000) “as settlement for the attorneys’ fees claim” (in the Defendant’s words, from its closing submissions).
53. The Defendant then drew up a new written agreement to settle all claims for AED 1,085,000, which it contends is both a record of the agreement reached over the phone, and a written acceptance of the Settlement Offer. It submits that Mr. Dattani then refused to sign or honour this agreement.
54. RDC Rule 32.24 is relevant to the determination of whether there was a Part 32 Agreement to Settle, as it sets out the requirements for an acceptance of a Part 32 Offer. It provides:
“32.24 A Part 32 offer is accepted by serving written notice of the acceptance on the offeror and
filing the notice with the Court.”
55. It is clear that any oral agreement reached during the phone conversation between Ms Peirera and Mr Dattani cannot constitute
acceptance of the Settlement Offer under Part 32, as Part 32 requires written notice of the acceptance to be served on the offeror.
56. The Defendant submits that it has served written notice of the acceptance on Mr Dattani by way of its new written agreement. It
concedes that written notice of its acceptance was not filed with the Court until 30 December 2012 (the second requirement under RDC Part 32.24, at paragraph 54 above), but it submits that RDC Rule 32 does not stipulate when the acceptance must be filed with the Court. I do not agree. The natural reading of RDC Rule 32.24 is that a Part 32 offer is only accepted when the written notice of the acceptance is served on the offeror, and also filed with the Court. The Settlement Offer had lapsed long before 30 December 2012; hence, this new agreement could not be an acceptance of the Settlement Offer pursuant to RDC Rule 32.
57. In the context of Part 32, the proper analysis of the new written agreement, which the Defendant describes to be a “written agreement recording the agreement to settle all claims for AED 1,085,000” is that it was a counter-offer, which neither bound the Dattani Claimants to accept, nor constituted a valid acceptance of the Settlement Offer. This counter-offer did not constitute a valid acceptance of the Settlement Offer as the value of the settlement contained in the former (AED 1,085,000) did not correspond to the value of the settlement (AED 1,009,000) in the Settlement Offer. Notwithstanding that the counter-offer was for a higher figure than the Settlement Offer, the latter also contained a provision for the Dattani Claimants’ legal costs (on Ms Peirera’s evidence, although the Dattani Claimants’ letter itself is silent on the issue) which had therefore to be agreed before a valid acceptance of the Part 32 Offer could be made. Further, nowhere in the new agreement drawn up by the Defendant does it say that it is an acceptance of the Settlement Offer. It does not reference the Settlement Offer at all. For these reasons, I find that no binding Part 32 Agreement to Settle was made between the Dattani Claimants and the Defendant.
DIFC Contract Law
58. In the alternative to the above argument, the Defendant submits that the Dattani Claim is barred by an agreement to settle pursuant to
the DIFC Contract Law. It submits that a binding agreement to settle was reached during the phone conversation between Ms Peirera and Mr Dattani, and that this agreement was not subject to contract. The written agreement the Defendant later drawn up was merely to be a record of the agreement already reached during the phone conversation. Mr Baiter has submitted that the facts in the current case are similar to those in Malcolm Newbury v. Sun Microsystems [2013] EWHC 2180 (QB).
59. In Newbury, counsel for the defendant sent a letter to the claimant’s counsel setting out an offer to settle all claims for the sum stated.
The offer letter stated that the “settlement [was] to be recorded in a suitably worded agreement.” Counsel for the claimant responded by email with an acceptance prior to the expiration of the offer. Shortly afterwards, the parties disagreed with the wording of the deed of waiver and draft consent order, and no written settlement agreement was signed.
60. The claimant sought a declaration from the
court that a binding compromise agreement had been reached, contending that a binding
compromise was concluded when the claimant accepted the defendant’s settlement offer. The defendant asserted that the agreement reached was merely an agreement in principle, subject to contract.
61. Lewis J, giving judgment in Newbury, held that the reference to the written settlement agreement was not a condition of the agreement, but simply expressed the parties’ wishes that there be a formal record of what was agreed. He therefore found that a binding compromise agreement was concluded on the claimant’s acceptance of the defendant’s offer, and that this agreement was not subject to contract.
62. I disagree with Mr Baiter’s suggestion that the current case is factually similar to Newbury. There is one factor in the present case (which was not present in Newbury) that suggests that the agreement that the Defendant contends was reached over the phone between Ms Peirera and Mr Dattani was still subject to contract.
63. This factor is the confidentiality provision to which (according to Ms Peirera’s evidence at trial) Mr Dattani purportedly agreed. Confidentiality provisions are complex clauses; the scope of the duty of confidentiality (i.e. to what documents/people does the duty extend) has to be precisely set out, along with the permitted exceptions to the duty. Given the specificity and precision required in the drafting of a confidentiality clause, I find that what was agreed on the telephone by Mr Dattani (if anything was agreed at all) was subject to contract, as the evidence is that the specifics of the confidentiality provision were not addressed in the phone conversation, nor when Mr Dattani was at the Defendant’s office.
64. Further, there are a number of factual differences between Newbury and the current case. In Newbury, what was particularly decisive was the statement “the settlement [was] to be recorded in a suitably worded agreement”, as this statement was predicated on there already being a settlement, and that the use of the word “recorded” reinforced this notion. In the current case there is no evidence that a similar statement, or a statement with similar effect, was made during the phone conversation between Ms Peirera and Mr Dattani.
65. This evidential problem foreshadows the next difference. In Newbury, the agreement was corroborated by correspondence in writing, which made it easy objectively to verify exactly what was said by the parties. In the current case the (purported) agreement was reached over a phone conversation, and the evidence as to the exact words said by Ms Peirera or Mr Dattani is imprecise, as well as disputed.
66. For the reasons given above at paragraphs 62 to 65, I am unable to reach the same conclusion the English High Court reached in Newbury. The agreement reached over the phone conversation between Ms Peirera and Mr Dattani, if there had been any, would have been an agreement in principle that was subject to contract, and ultimately the contract of settlement failed to materialise. As there was no binding agreement to settle between the parties, the Dattani Claim has not been compromised by a settlement agreement.
Repudiation
67. At the trial, I put the point to Mr Baiter that, even if an agreement to settle had been reached during the phone conversation between Ms Peirera and Mr Dattani (as is the Defendant’s case) the Defendant cannot rely upon this agreement now, as it had accepted the Dattani Claimants’ repudiation of the agreement to settle by attempting to enforce the terms of the Apartment SPA in its letter of 2 April 2012 (set out at paragraph 18.14 above) demanding payment in respect of the last instalment from the Dattani Claimants. When the Defendant was faced with Mr Dattani’s refusal to sign or honour the settlement agreement i.e. a repudiatory breach of the settlement agreement, the Defendant had two options — it could either treat the settlement agreement as continuing (and sue upon it), or accept the Dattani Claimants’ repudiation of the settlement agreement and treat itself as discharged. Its attempt to collect payment under the Apartment SPA leads to the conclusion that the Defendant chose the latter option.
68. I understand the Defendant’s response to this point (in its closing submissions) to be as follows. First, the Apartment SPA and settlement agreement are two separate agreements, and asserting rights under one does not mean an acceptance of a repudiation of the other. Second, the Defendant was uncertain as to the enforceability of the settlement agreement, and chose to terminate the Apartment SPA to protect its position should the settlement agreement prove unenforceable. For this reason, the Defendant would be greatly prejudiced if it had to commit itself to the settlement agreement, which was of questionable enforceability.
69. It is not strictly necessary for me to consider this submission, given my earlier finding at paragraph 66 above. Nevertheless, an additional reason for my conclusions on the alleged concluded settlement is that I do not find the Defendant’s response persuasive. I disagree with the Defendant’s first submission viz. that asserting rights under the Apartment SPA does not mean an acceptance of the repudiation of the settlement agreement, as they are two separate agreements. The enforcement of the Apartment SPA is clearly incompatible with the continuing existence of the settlement agreement, as the essence of the alleged settlement agreement is that both parties agree to drop their claims under the Apartment SPA. As for the Defendant’s second submission, I note that the Defendant did not even attempt to enforce a settlement agreement until the Dattani Claim was filed. It filed its notice of acceptance of the Settlement Offer on 30 December 2012, and only asserted its rights under a settlement agreement in response to the Dattani Claim. As asserting its right under the settlement agreement early would have allowed the Defendant to avoid any prejudice to its rights under the Apartment SPA (as it could have reacted accordingly at an earlier stage), the lack of action on the Defendant’s part suggests that it did not consider that there was a settlement agreement at all. This inaction explains why I am not persuaded by the Defendant’s submission that it would have been greatly prejudiced if it had to commit itself to an uncertain settlement agreement. For these reasons, even if the alleged settlement agreement did exist at law, the Defendant had, by attempting to enforce the terms of the Apartment SPA by its letter of 2 April 2012 (set out at paragraph 18.14 above), accepted the Dattani Claimants’ repudiation of the settlement agreement, and thereby terminated the settlement agreement.
Handover of the Plot and the ACD
70. I now turn to the next issue of the ACD. As the parties observe, many issues in this case turn upon the date of the ACD. This is because Clause 13.1 of each of the SPAs provides that the Purchaser will be entitled to certain remedies if possession and occupation of the unit is not given to him by the ACD. The ACD is defined in Clause 1.1 of both the Apartment and Retail Unit SPAs as “a date, which is 36 months after the handover of the Plot by the Master Developer to the Seller.”
The Plot SPA
71. The Plot SPA was entered into on 31 May 2004, prior to the Apartment or the Retail Unit SPAs, which were entered into on 1 November 2004 and 16 January 2006 respectively. It is common ground that the “handover of the Plot” specified in the definition of the ACD in the Apartment and Retail Unit SPAs refers to the “Hand-Over Date” which is to be determined by Clause 4.2 of the Plot SPA. I will subsequently refer to both “handover of the Plot” and “Hand-Over Date” as “handover of the Plot” or “Plot handover”.
72. Clauses 4.1 and 4.2 of the Plot SPA provide as follows.
“4.1 It is recorded that the Anticipated Hand-Over Date represents the date upon which it is presently expected that the Master Developer will hand over possession of the Property to the Purchaser. The Master Developer reserves the right to extend the Anticipated Hand-Over Date by a period of up to six months, provided that the Master Developer shall advise the Purchaser of such extension at least three months beforehand.
4.2 The Master Developer shall in any event give the Purchaser not less than thirty (30) days [sic] notice in writing of the Hand-Over Date and the Hand-Over Date shall only be deemed to have been determined when such notice has been given.”
73. The Anticipated Hand-Over Date was 30 June 2006, as provided in Clause 1.1 of the Plot SPA. Clause 4.1 provides that the Anticipated Hand-Over Date represents the date upon which it was expected that DIFCA would hand over possession of the Plot to the Defendant.
74. Clause 4.2 of the Plot SPA provides that the actual Hand-Over Date (the date of “handover of the Plot” for the purposes of the Apartment and Retail Unit SPAs) would be determined upon DIFCA giving notice of the date to the Defendant.
The Parties’ submissions
75. It is not disputed that the Defendant commenced enabling works on the Plot on or about 17 October 2006, as mentioned in its letter of the same date to the Dattani Claimants (set out in paragraph 18.1 above). It is also not disputed that that certain construction works (“contiguous pile works” and “balance I-beam”) could not be completed because of pre-existing DEWA cables running underneath the Plot, and also that these cables were only removed on 8 January 2007, as mentioned in the Defendant’s various internal Weekly Reports submitted to the Court.
76. The Defendant has submitted that DIFCA never issued a notice pursuant to Clause 4.2 of the Plot SPA to the Defendant2 and, for this reason, there was no handover of the Plot under Clause 4.2 of the Plot SPA. Handover of the Plot would therefore have to be determined in another way by the Court.
77. The Defendant submits that handover of the Plot would only occur when the entirety of the Plot (as defined in the Plot SPA) was released to the Defendant free from obstruction, and as the DEWA cables were an obstruction on the Plot, the date of handover of the Plot should be taken to be the date when the cables were removed
viz. 8 January 2007. The Defendant further relies on an exchange during
cross-examination between its counsel, Mr Baiter, and the Four Claimants’ expert witness, Mr Loh Yew Hone (“
Mr Loh“), an expert on construction, in which Mr Loh appears to agree with Mr Baiter that Plot handover would only occur when the Defendant has “access to the whole land”. The Defendant submits that Mr Loh subsequently revised his testimony in a re-examination “replete with leading questions”; however, on closer examination of the exchange, I find that Mr Loh’s initial appearance of agreement with Mr Baiter was only because he misunderstood Mr Baiter’s question. Mr Loh subsequently clarified his position during the re-examination.
78. In the alternative, the Defendant submits that Plot handover should be taken to be no earlier than 17 October 2006, which is when it was able to commence limited enabling works on the Plot. It submits that it was not able to commence construction before this date, relying on an email it sent to Mr Dattani which stated, in relevant part:
“[…]
I would like to inform you that due to rectification of terminal cabling problems in the Dubai International Financial Center (DIFC) which ran right under our Park Towers site we were unable to start with the construction on the site.
[…]”
79. In these proceedings, the Four Claimants’ response to the Defendant’s submissions is, in essence, that the Defendant has failed to produce any relevant and convincing evidence to support its claim that Plot handover did not take place on 30 June 2006, the date originally anticipated for handover in the Plot SPA. The Four Claimants submit that, in the absence of any direct evidence to the contrary, the Court should determine the date of Plot handover to be 30 June 2006, as was anticipated in the Plot SPA.
80. Alternatively, the Four Claimants submit that the date of Plot handover should be determined to be May 2006, as estimated by Mr Loh. Mr Loh’s estimate is based on a critical path analysis that he conducted, on the premise that enabling works on the Plot commenced on 17 October 2006, as the Defendant’s letter of that date (set out at paragraph 18.1 above) states.
81. The Defendant’s response is that Mr Loh’s estimate should be disregarded, because Mr Loh applied a procedure familiar to him from working on projects outside the DIFC, without consideration for the Plot SPA terms, the procedures unique to the DIFC, and the undisputed facts surrounding the obstructions on the Plot. The date of handover of the Plot
The date of handover of the Plot
82. I will first set out the reasons why I am not satisfied with the various alternative methods to determine the date of Plot handover submitted by both the Four Claimants and the Defendant.
83. I am not satisfied with the Defendant’s basis of determining the date of Plot handover to be 17 October 2006, viz. that this date was the date it commenced enabling works on the Plot. This is because, whether or not works had actually commenced on the Plot does not conclusively determine whether handover of the Plot had taken place. While an argument can be made that the commencement of works is highly indicative of handover of the Plot having already taken place, the reverse argument does not follow as an inevitable consequence, i.e. the absence of such works does not necessarily show that handover had not already taken place. Delays in the commencement of works could have been attributable to many reasons that did not involve a delay in handover of the Plot, for example, a lack of finance or resources, or simply a downturn in the economy affecting the developer’s commercial plans for the commencement of works.
84. I also am not satisfied with the Defendant’s basis of determining Plot handover to be 8 January 2007, viz. that this date was the date the Defendant had access to the whole Plot, as the DEWA cables running under the Plot were removed on this date because handover of the Plot (or the “Hand-Over Date”), for the purposes of the Plot SPA and the Apartment and Retail Unit SPAs, and actual access to the Plot are two separate matters which are not necessarily correlated. The date of handover of the Plot is a factual question to be determined by the operation of the Plot SPA, while access to the Plot is the intended consequence of handover of the Plot. The Defendant’s lack of access to the entire Plot, as is its case, does not necessarily show that handover of the Plot had not already taken place. A failure by DIFCA to give the Defendant access to the entire Plot by the Hand-Over Date is at most a breach of the Plot SPA by DIFCA, and this would allow the Defendant to sue on the Plot SPA against DIFCA (assuming that the lack of access amounts to a breach of the Plot SPA), and also to invoke the Force Majeure clauses in the Apartment and Retail Unit SPAs, but the handover of the Plot, for the purposes of the Plot SPA or the Apartment and Retail Unit SPAs, would have occurred despite the Defendant’s failure to obtain access to the entire Plot.
85. I am not satisfied with Mr Loh’s methodology for similar reasons to those given at paragraphs 83 and 84. Further, in the preparation of his expert report, Mr Loh made no reference to primary documentation i.e. the Plot SPA. The date of May 2006 was an estimate by Mr Loh, who worked backwards from the limited information he had at that time he prepared his report (which did not include the Plot SPA).
86. I am certain that the Parties are aware of the shortcomings of their submitted methods of determining the date of Plot handover which I have set out above. These alternative methods have only been proposed because it is the Defendant’s position that there was no notice by DIFCA to the Defendant for the purposes of Clause 4.2 of the Plot SPA and thus there was no handover of the Plot under Clause 4.2 of the Plot SPA, a position which the Four Claimants are challenging. For reasons which I will explain below, the Defendant has not sufficiently persuaded me that I should proceed to determine the date of handover of the Plot by an alternative method.
The lack of evidence
87. I will first elucidate two categories of evidence which would assist me in establishing the date of handover of the Plot.
88. The first type of evidence would comprise notices under Clauses 4.1 and 4.2 of the Plot SPA. Clause 4.2 requires DIFCA to issue a notice of the Hand-Over Date to the Defendant, the Hand-Over Date being determined by such a notice upon its issuance. Clause 4.1 requires DIFCA to give the Defendant notice of any extension of the Anticipated Hand-Over Date. A notice under Clause 4.2 will conclusively establish the date of handover of the Plot, while a notice under Clause 4.1 will establish that there was an extension to the anticipated date of handover of the Plot, along with the duration of such an extension. As I have explained above, the Defendant’s position is that no such notices exist.
89. The second type of evidence would comprise other documents that make direct reference to the handover of the Plot as such. These could be internal documents generated by the Defendant, or communications with other parties related to the handover of the Plot. While evidence in the second category would not be as useful toward establishing the date of handover of the Plot as evidence in the first category, it would still be of value, particularly if (as is the Defendant’s case) evidence in the first category was not available. The absence of evidence of the first type could potentially be corroborated by evidence of the second type, for example, an internal memorandum of the Defendant stating that a notice of the Hand-Over Date was not received from DIFCA. The evidence the Defendant has submitted does not constitute evidence of the second type because there is no reference to handover of the Plot in the evidence that the Defendant has submitted (mentioned at paragraph 75 above).
90. DIFCA’s experience as a developer within the DIFC and its position as a government body strongly suggest that it would (absent evidence to the contrary), exercise its rights and perform its obligations under the Plot SPA in accordance with its terms. It is therefore difficult for me to accept the Defendant’s position (as set out at paragraph 86 above) that notices under Clause 4.2 (or Clause 4.1 if applicable) were not issued to the Defendant at all. If DIFCA had been unable to effect Handover of the Plot by 30 June 2006, it would surely have extended the Anticipated Hand-Over Date by a period of six months, as it was entitled to do under Clause 4.1 with three months’ notice but without having to justify such extension. And, if it did in fact purport to effect Handover of the Plot after 30 June 2006 for whatever reason, there would surely have been correspondence and other documentation to evidence such Handover pursuant to Clause
4.2, leaving the Defendant to accept or challenge the date referred to in the correspondence and/or documents as the Anticipated Hand-Over Date for purposes of the Plot SPA. Further, the Defendant is itself an experienced property developer (as Mr. Loh observes at paragraph 91 below) and I also find it difficult to accept that:-
(a) it was not cognizant of the significance of the notices under Clauses 4.1 and 4.2 of the Plot SPA; and
(b) it did not press DIFCA to issue a Clause 4.2 notice (if indeed it had not been issued) or to challenge such a notice if the Defendant believed that it had been prematurely or otherwise wrongly issued.
91. Assuming that notices under Clauses 4.1 and 4.2 were actually not issued, I also find it difficult to accept that the Defendant took no measures to rectify the lack of documentation, e.g. writing to DIFCA requesting for proper documentation or memorialising the date when the Plot handover in fact took place in some contemporaneous communication. This would generate some documentation that would constitute the second type of evidence I describe at paragraph 89 above. Mr Loh had to confront this issue in the preparation of his expert report and came to a similar conclusion, as can be seen from this exchange during cross examination.
“MR BAITER: Mr El Chaer has testified that:
“DIFC never issued to Damac a notice letter pursuant to clause 4.2 of the plot SPA and as explained handover of the plot did not occur on the anticipated handover date of 30 June 2006.” Do you see that?
MR LOH: Yes.
MR BAITER: You have no factual evidence whatsoever to dispute that claim. Correct?
MR LOH: No. No factual evidence.
MR BAITER: Did you consider that testimony when you opined that the handover occurred in May 2006?
MR LOH: Oh yes, indeed.
MR BAITER: You chose to discount that testimony?
MR LOH: To a certain extent, yes. It is a statement because it is a statement that is basically, how do I put it? Which I challenged in as far as my opinion because of the procedures. Mainly because that (a) if says here, you know, “No records, have made a statement, DIFC never issued Damac”. Let me put it this way. Damac is not a small player in this country. You know, they are a major developer and they would have appointed, I would anticipate, you know, reasonable good people to make records.
I am a project manager in my various positions and if a party as important, something as important as a handover is not issued by DIFC, the least the defendant should do, whoever represents him in the project development should at least acknowledge back to DIFC that, “We acknowledge this date as the handover”. Based on my assumption, my opinion is that all these documents being not there, conveniently not there, which I find it very difficult to, as a professional absorb because Damac is no small inexperienced developer.
They are a very experienced developer and I would expect that, you know, in this, and my justification in not just say totally ignore it. It is a statement I have read. I am aware of it but I still stick by my opinion based on my experience.”
92. At trial there was some discussion related to documents that referenced handover of the Plot. The Defendant’s witness, Mr Wadih El Chaer (“Mr El Chaer“), Vice-President of the Park Towers project, in answering a question during cross-examination as to how he knew that the Plot handover date was not 30 June 2006 (since he had no first-hand knowledge of the event as he only joined the Defendant in 2010), made reference to documentation with the Master Developer (DIFCA) related to the date of handover of the Plot. His response is reproduced below.
“MR EL CHAAR: We have lots of documentation with DIFC that the plot handover should be revised to January 2007 due to the obstruction. We have huge documents about that between Damac and DIFC, and evidence. We had a major DEWA cable which obstructed the plot handing over, which had to be removed.
MS AHMED: I am afraid we do not have that correspondence in front of us, Mr El Chaer.
MR EL CHAAR: It is there.
CHIEF JUSTICE HWANG [addressing Ms Ahmed]: That is as far as you can take it, is it not?
MS AHMED: Yes”
However, in his witness statement Mr El Chaer stated that DIFCA never issued a notice under Clause 4.2 of the Plot SPA to the Defendant (as was mentioned in the exchange with Mr Loh at paragraph 91). One of two conclusions can be drawn. The first is that Mr El Chaer’s evidence is inconsistent. The second is that Mr El Chaer was referring to evidence of the second type (e.g. an internal note documenting the date of handover of the Plot, or a letter to DIFCA memorialising the date of handover of the Plot), as opposed to actual notices under Clauses 4.1 and 4.2 from DIFCA, in his response during cross-examination.
93. In any case, the Defendant has not submitted any documents that directly reference handover of the Plot, in line with Mr El Chaer’s response at paragraph 92 above. The Defendant’s assertion that there was no official handover of the Plot under Clause 4.2 of the Plot SPA (which is inherently incredible) remains uncorroborated by any other evidence.
94. The Plot SPA contains an Anticipated Hand-Over Date, which is the starting point of any enquiry into the date of handover of the Plot. The burden of proof is therefore on the Defendant to show when the handover of the Plot took place, if not on the date anticipated in the Plot SPA or, alternatively, to show that handover of the Plot under Clause 4.2 of the Plot SPA did not take place at all. In my judgment, the Defendant has not discharged that burden. I regard the Defendant’s failure to produce any evidence directly referencing handover of the Plot (e.g. correspondence with DIFCA as Mr Loh mentioned, or evidence fitting Mr El Chaer’s description, as opposed to its evidence as to the difficulties with the site) as seriously undermining the reliability of its assertion that there was no handover of the Plot under Clause 4.2 of the Plot SPA.
95. It might be argued that it is unfair to place the burden of proving a negative i.e. the non-existence of these notices on the Defendant. I have several observations to make about this argument. First, as the Four Claimants have pointed out, the date of handover of the Plot is (or should be) a matter uniquely within the knowledge of the Defendant, and the Four Claimants have not been informed of the date of handover of the Plot up till the present day. Second, this burden is a very easy one to discharge. Assuming that these notices were in fact not provided to the Defendant by DIFCA, DIFCA would then have been in breach of its obligations under the Plot SPA, and the Defendant could, and should, have adduced evidence of any dispute between it and DIFCA. Alternatively, the Defendant could, and should, have provided to the Court documents that directly reference the difficulties with the handover of the Plot (mentioned at paragraph 89 above, and also by Mr Loh in paragraph 91 above). If it had been the case that was absolutely no documentation on the handover of the Plot (which would also be inherently incredible) the very least that could be expected of Mr El Chaer would have been testimony from him that there was no such documentation, but he testified to the opposite effect (see paragraph 92 above).
96. Further, Mr El Chaer’s assertion (at paragraph 92 above) sits strangely with both the Defendant’s assertion that no notices were given to the Defendant by DIFCA (see paragraph 76 above) and the Defendant’s failure to submit any documentary evidence directly referencing handover of the Plot.
Determining the date of handover of the Plot
97. Having already explained why I am not satisfied with the alternative methods proposed by the parties at paragraphs 83 to 85 above, I now turn to the question of the date of handover of the Plot. The evidence as to the date of the handover of the Plot is incomplete. The only tangible evidence as to the date of handover of the Plot is the Anticipated Hand-Over Date defined in the Plot SPA, 30 June 2006, and the Defendant has failed to produce any evidence showing that handover of the Plot did not occur on this date (aside from Mr. El Chaer’s unsubstantiated assertion that the handover date was postponed, and the Defendant’s unsubstantiated assertion that there was no handover of the Plot under Clause 4.2). Determining the date of handover of the Plot might therefore depend upon what presumptions may properly be made against the Defendant.
98. I have already explained why I do not accept that there are no documents pertaining to the handover of the Plot at paragraphs 87 to 96 above. In my judgment, the only reasonable conclusion I can draw from the facts in this case is that there is documentary evidence directly referencing the handover of the Plot, but the Defendant has consciously chosen not to produce this evidence. This is because Clause 4.1 of the Plot SPA provides that DIFCA may at its discretion extend the Anticipated Hand-Over Date, which DIFCA would have no reason to not rely on if it were unable to complete handover of the Plot by the Anticipated Hand-Over Date, 30 June 2006. If a notice under Clause 4.1 had been given, I would expect the Defendant to have relied on that notice. Since it has not done so, the reasonable conclusion is that the Anticipated Hand-Over Date was not extended. Alternatively, in the event that DIFCA did not issue any notices under Clauses 4.1 and 4.2 (which is inherently incredible, as I have said at paragraph 95 above), I would expect that the Defendant would have taken steps to protect its position by either carrying out the measures I have described at paragraphs at 89, 91 and 95 above, or invoking Clause 14 of the SPAs, the Force Majeure clause (at paragraph 12 above). The Defendant then could rely on the documentation generated by such measures, especially since the issue was brought up during the cross-examination of Mr El Chaer. Since the Defendant has not done so, the reasonable conclusion is that DIFCA must have issued a notice of the Hand-Over Date to the Defendant under Clause 4.2.
99. There is a line of authority for the type of inference that I make at paragraph 98 above. This is encapsulated in the view expressed in the English House of Lords by Lord Lowry, with the support of the rest of the court in R v Inland Revenue Commissioners, Ex p TC Coombs & Co [1991] 2 AC 283, 300 (also adopted in Prest v Petrodel [2013] UKSC 34):
“In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified.” (emphasis added)
(see also Wisniewski v Central Manchester Health Authority [1998] EWCA Civ 596)
In my judgment, because handover of the Plot had to be within the knowledge of the Defendant, and because there is no credible explanation for the lack of documentary evidence as to handover of the Plot, the Defendant’s failure to produce the relevant documentary evidence inevitably leads to the inferences that I have made at paragraph 98 above. The further inference I draw is that such documents, if they had been produced, would have been (contrary to the assertion of Mr El Chaer at paragraph 92 above) detrimental to the Defendant’s position.
100. For the above reasons, I find that the date of the handover of the Plot is (as was originally anticipated in the Plot SPA) 30 June 2006.
101. As the Four Claimants have pointed out, the date of 30 June 2006 is not too far off from the date of May 2006 estimated without any reference to the Plot SPA by Mr. Loh.
102. This would mean that the ACD, for the purposes of the Apartment and Retail Unit SPAs, was 30 June 2009, 36 months after this date.
Extension of the ACD
103. Clause 6.1 of the Apartment SPA provides that the Seller can extend the ACD by a period of up to 12 months, provided that the Seller advises the Purchaser of such extension at least three months beforehand. Clause 6.1 of the Retail Unit SPA provides that the Seller can extend the ACD by a period of up to 12 months. The issue I have to address now is whether the Defendant had validly extended the ACD under the Apartment SPA as well as the Retail Unit SPA. For reasons which will be apparent upon reading, I will address the extension of the ACD under each SPA separately.
Extension of the ACD under the Apartment SPA
104. For the sake of convenience, Clause 6.1 of the Apartment SPA is reproduced below.
“6.1 It is recorded that the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation. The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months, provided that the Seller shall advise the Purchaser of such extension at least three (3) months beforehand.”
105. The Dattani Claimants’ submissions on this issue are as follows. As the ACD was a material term of the Apartment SPA, the Defendant was required not just to “advise” the Dattani Claimants (as Clause 6.1 above provides) but to provide the Dattani Claimants with a specific written notice that satisfied the requirements of Clause 19 of the SPA (set out at paragraph 13 above), which it did not. In the alternative, the Dattani Claimants submit that the Defendant’s advice did not meet the requirements of Clause 6.1 as it was not at least three months before the original ACD. They further submit that the correspondence from the Defendant advising Mr Dattani of the extension was not valid, as Mr Dattani was not informed of the date of the original ACD from the outset and therefore was not able to assess the period the ACD was extended by.
106. The Defendant’s response is as follows. Clause 6.1 of the Apartment SPA does not require the Defendant to give any notice; it merely requires the Defendant to “advise” the Dattani Claimants, which it did in its emails to the Dattani Claimants. The Defendant did not specify exactly which emails it was relying on, but it submits that it validly extended the ACD by the maximum period of 12 months.
Discussion
107. I do not agree with the Dattani Claimants’ suggestion that the Defendant must have given the Dattani Claimants a notice satisfying the requirements of Clause 19 for the ACD to be extended under Clause 6.1 of the Apartment SPA. This is because the word “advise” is used in Clause 6.1, rather than “notice”, which is used in other parts of the SPA e.g. Clause 13.1.
108. I have set out the material parts of all the correspondence that can possibly be relevant at paragraphs 18.1, 18.2, 18.4 and 18.5 above. I do not find that they had the effect of extending the ACD, as is the Defendant’s case.
109. I begin my reasoning for this proposition with several observations regarding the correspondence. First, none of the Defendant’s letters uses the exact term “Anticipated Completion Date”. Second, none of the Defendant’s letters references Clause 6.1 of the Apartment SPA, or the Apartment SPA at all. Third, none of the letters explicitly indicates or acknowledges that an extension of the ACD was taking place. The overall sense an objective reader of the letters is given by the correspondence is that the letters were merely advising the purchaser of the estimated date of completion, and were not intended to have any legal effect, including extending the ACD pursuant to Clause 6.1 of the Apartment SPA. The Defendant’s correspondence therefore cannot be regarded as “advice” concerning an extension of the ACD for the purpose of Clause 6.1.
110. Further, the Defendant’s emails of 13 September 2010 and 23 January 2011 (set out at paragraphs 18.4 and 18.5) were not dispatched at least three months prior to the extended ACD, even on the Defendant’s case, and therefore do not satisfy the requirements of Clause 6.1 of the Apartment SPA.
111. For the reasons given at paragraphs 109 and 110 above, I find that the ACD, for the purposes of the Apartment SPA, was not extended from 30 June 2009 (the date I have found at paragraph 102 above as the date of the handover of the Plot).
Extension of the ACD under the Retail Unit SPA
112. For the sake of convenience, I reproduce Clause 6.1 of the Retail Unit SPA below.
“6.1 It is recorded that the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation. The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months.”
113. The Rahman Claimants’ submission on this issue is as follows. As the ACD is a fundamental term of the Retail Unit SPA, it is implicit that any extension of the ACD must comply with the notice requirements in Clause 19. They submit that the Court should imply into the Retail Unit SPA a term requiring that the Defendant notify the Rahman Claimants of any extension of the ACD.
114. The Defendant’s response to this is to assert that nothing in the Retail Unit SPA required it to give notice to, or even advise the Rahman Claimants, of an extension to the ACD. The Defendant submits that it nevertheless advised the Rahman Claimants of the extensions to the ACD on numerous occasions.
Discussion
115. I disagree with the Rahman Claimants’ submission and reject their suggestion that a term requiring the Defendant to give notice of any extension to the ACD should be implied into the Retail Unit SPA. Clause 6.1 clearly does not require any notice of an extension of the ACD to be given, and I fail to see the basis on which the Rahman Claimants seek to imply such a requirement into the Retail Unit SPA, as the function of Clause 19 (of the Retail Unit SPA) is merely to set out the form any notices given under the Retail Unit SPA must take.
116. For the reason given above, I find that the ACD, for the purposes of the Retail Unit SPA, was extended by the maximum of 12 months from the original date of 30 June 2009 to 30 June 2010.
Clause 13.1 of the Apartment SPA
117. I now turn to the issue of whether the Dattani Claimants were entitled to terminate the Apartment SPA pursuant to Clause 13.1 of the Apartment SPA, as the Dattani Claimants submit they are. This issue does not arise in the Rahman Claim, as Clause 13.1 of the Retail Unit SPA does not provide an equivalent mechanism for termination.
118. The relevant part of Clause 13.1 of the Apartment SPA provides as follows.
“13. Defaults and Termination
13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser. If possession and occupation of the Unit continues to be delayed beyond 12 months after the Anticipated Completion Date, the Purchaser shall have the right on thirty (30) days written notice to the Seller to call upon the Seller to remedy the breach and then to terminate this Agreement if the Seller remains in breach after the expiry of the said period of thirty (30) days.
[…]”
119. The Defendant has pleaded that the Dattani Claimants are not entitled to terminate the Apartment SPA for the following reasons: (a) the Dattani Claimants have failed to fulfil their payment obligations; (b) the notice issued by the Dattani Claimants in relation to the Clause 13.1 termination (issued by KBH on 14 July 2011, at paragraph 18.6) was premature; and (c) the Apartment was ready for possession and occupation prior to the purported termination of the Apartment SPA.
120. The first reason advanced by the Defendant turns on essentially the same point as the third reason, viz. whether the Apartment was ready for possession and occupation at the time of the purported termination. This is because the Schedule of Payments in the Apartment SPA provides that the final 10% of the purchase price, which the Dattani Claimants have not paid, would be payable upon completion and delivery of the apartment unit. For this reason, the question of whether or not the Dattani Claimants have fulfilled their payment obligations is contingent on the factual question of whether the apartment unit was completed, which I will address in the next section of this judgment.
121. The remaining issue which the Defendant has raised relates to the problem of whether the Notice of Termination of 14 July 2011 was premature. The issue is whether the “Anticipated Completion Date” referred to in Clause 13.1 of the Apartment SPA refers to the original ACD (as defined in Clause 1.1 of the Apartment SPA), or whether it takes into account extensions of the ACD made pursuant to Clause 6.1 of the Apartment SPA. The Defendant has submitted that it should mean the latter, because it would make no commercial sense otherwise, as there would be no reason for it to seek an extension of the ACD pursuant to Clause 6.1 if the penalty for delay were to be the same as that if the ACD was not extended.
122. It is unnecessary for me to consider this issue in detail as I have found that the ACD for the purposes of the Apartment SPA was not validly extended from the original date of 30 June 2009 (see paragraph 111 above). The Dattani Claimants were entitled to issue the Notice of Termination from 30 June 2010 and their notice of 14 July 2011 was therefore not premature.
123. Had there been a valid extension of the ACD for the purposes of the Apartment SPA I would have agreed with the Defendant’s submission, viz. that the ACD referred to in Clause 13.1 of the Apartment SPA should take into account extensions of the ACD made under Clause 6.1, for the reason the Defendant gives, viz. that it would make no commercial sense otherwise. However, even if there had been a valid extension of the ACD, the Notice of Termination issued by the Dattani Claimants would still not have been premature. Working from my earlier finding at paragraph 102 that the original ACD was 30 June 2009, the Defendant was entitled to extend the ACD by 12 months (pursuant to Clause 6.1 of the Apartment SPA). Supposing it did so validly, the extended ACD would have been, at the latest, 30 June 2010, and the Dattani Claimants would have been entitled to issue the Notice of Termination from 30 June 2011, which would still be before the notice was actually issued.
124. Under Clause 13.1 of the Apartment SPA, the Purchaser is entitled to terminate the agreement if the Seller remains in breach, i.e. the Seller does not hand over possession and occupation of the Apartment within 30 days of the Notice of Termination, which was issued on 14 July 2011.
Completion of the units
125. As whether the Apartment was completed determines whether the Dattani Claimants were entitled to terminate the Apartment SPA (as I explained at paragraph 124), and whether the Retail Unit was completed is highly significant in deciding whether the Rahman Claimants were entitled to terminate the Retail Unit SPA (for reasons I explain below), the question at the heart of this case is whether both the Apartment and the Retail Unit were completed for the purposes of the respective SPAs at the times the Defendant purported to effect a handover of the units, i.e. 4 August 2011 for the Apartment, and 21 August 2011 for the Retail Unit.
126. I will first set out the regulatory framework that is applicable in this case. The parties agree that
the law governing the SPAs is DIFC law. From the evidence of Mr. Robert Pickering (the Four Claimants’ expert witness), along with the submissions of both counsel, I understand that the DIFC system in relation to the completion of buildings involves several inspections by various authorities, which will then issue compliance certificates if the building meets the required standards.
127. One of these inspections would be carried out by the Dubai Technology and Media Free Zone Authority (referred to subsequently as “TECOM“) on behalf of the DIFCA which would issue a Building Completion Certificate (“TECOM certificate“) upon a satisfactory TECOM inspection. I accept the Defendant’s submission at trial that the BCC certifies that a building is fit for occupation.
128. The other of these inspections is carried out by the Dubai Civil Defence, which also issues a building completion certificate (“DCD certificate“). This certificate certifies that the building has been “substantially completed in compliance with applicable local and international regulations.”
129. However, unlike in certain other legal regimes, there is no mechanism in DIFC law that renders any of these completion certificates conclusive for the purposes of determining whether the units are fit for possession and occupation. The SPAs themselves also do not explicitly define possession and occupation of the units with reference to these certificates.
130. In the absence of any legally conclusive tests as to fitness for occupation and possession, what is to be decided here is a factual question of whether the units were actually fit for possession and occupation at the material time. These certificates can be relevant to that factual question, but are not conclusive, because they merely show that the relevant authority was satisfied with the building, whereas the question of whether the units were fit for possession and occupation is governed by the SPAs, which, using the terminology of the SPAs (see paragraph 6 above), are between the Seller, i.e. the Defendant, and the Purchaser, i.e. the Dattani Claimants, or the Rahman Claimants.
131. For reasons that will be apparent later, I will consider the questions of (a) whether the Apartment was completed, and (b) whether the Retail Unit was completed separately in the next two sections.
Completion of the Apartment
The Parties’ submissions
132. In relation to the project as a whole, the Defendant submits that, on 23 June 2011, the Dubai Civil Defence had certified that “[t]he building has been completed in accordance with the approved drawings”, and that, on 26 June 2011, TECOM, on behalf of the DIFCA, issued a Building Completion Certificate in respect of Park Towers. Its argument is that a TECOM certificate certifies that a building is fit for occupation and that this is of great significance and is “the critical benchmark”. I disagree with the Defendant’s argument that these certificates are conclusive in determining whether the Apartment and the Retail Unit are completed under the respective SPAs, and repeat what I say at paragraph 130 above, that these certificates can be relevant, but are not conclusive, to that determination.
133. It is common ground that the Apartment itself was in a sufficiently complete state at the time of the inspection. The Dattani Claimants’ submission is that the state of the common areas at that time was such that the Apartment could not be said to be ready for possession and occupation.
134. At this stage it would be useful for me first to explain the ownership of the common property in Park Towers. The definition of “Property” in Clause 1.1 of the Apartment SPA (set out at paragraph 6 above) suggests that the common property is owned in pro rata shares (in accordance with a participation quota in a separate schedule), by the owners of the individual units. However, Clause 13.1 of each SPA is only concerned with the Seller handing over possession and occupation of the respective unit itself, excluding the common property, to the Purchaser. Clause 6.4 of each SPA (set out at paragraph 7 above) also provides that the common property might be incomplete at that time and that the Purchaser shall have no claim against the Seller for any associated inconvenience.
135. The Defendant has acknowledged that, even after the issuance of these certificates, work still remained to be done in respect of Park Towers. The outstanding works that had to be done primarily pertained to the fit-out of the common areas such as lift lobbies and car parks. I understand their submissions in relation to these remaining works to be as follows: (a) the works required were of a minor nature; (b) Clause 11.4 of the Apartment SPA (set out at paragraph 9 above) envisioned that such minor remedial works would be carried out post-handover; and (c) Clause 6.4 of the Apartment SPA allows for the common property and other units in the development to be incomplete upon handover of the Apartment. The Defendant’s position is that, notwithstanding the outstanding works, the Apartment was fit for possession and occupation at the time of handover.
136. The Four Claimants’ expert witness, Mr Pickering, together with Mr Dattani, inspected the Development on 15 September 2011. Photographs and a video clip of the premises were submitted in evidence at the trial.
137. The points I find to be particularly significant in Mr Pickering’s observations are as follows.
(1) Access into the building was via an uncontrolled car park ramp entrance.
(2) Access into the building was not restricted, potentially compromising the security and safety of visitors to the building (especially in view of the hazards further detailed below).
(3) Exposed electrical cables were hanging from the ceiling in the main lobby, and there was no exit or fire exit signage.
(4) There were live electrical cables running under temporary carpet pieces in the elevator lobby.
(5) The elevator lobby was dark and unlit.
(6) The elevators had to be operated manually by a construction worker (a hazard in the event of fire, as Mr Pickering has pointed out).
(7) The overall route from the road to the building and into the elevator was unsafe and unsecure, with an absence of signage and lighting, making it very difficult for a visitor to navigate unescorted.
(8) A main electrical cable was hanging through the full length of the tower in the fire escape.
138. The Defendant submits that Mr Pickering’s inspection was highly limited in its duration, and also that Mr Pickering was only allowed access to a limited part of the development. Further, it submits that Mr Pickering’s evidence focuses only on a few select areas where construction was ongoing. It relies on Mr El Chaer’s testimony in relation to the points mentioned at paragraph 137 above.
139. Mr El Chaer, in his witness statements and at trial, has responded to these points. The Defendant’s submissions in response to Mr Pickering’s observations are as follows.
(a) Mr El Chaer stated that all fire exit and emergency signage had been installed in accordance with the local authority’s regulations prior to the issuance of the TECOM certificate. Further, these would have had to be installed to obtain the DCD certificate, and this certificate was duly obtained.
(b) Mr El Chaer stated that the building was secure and safe for possession and occupation, and that all necessary safety measures were in place to protect residents and visitors when they entered the building through the temporary passage. Had this not been the case, the TECOM and DCD certificates would not have been issued.
(c) Mr El Chaer stated that there were numerous security guards working in the building.
(d) Mr El Chaer stated that the electrical cables did not create a hazard for residents, and were temporary cables for the tools used in the ongoing works.
(e) Mr El Chaer stated that the main electrical cable in the fire escape was not live and was removed shortly after Mr Pickering’s inspection.
(f) Mr El Chaer stated that all lights had been fitted prior to the issuance of the TECOM certificate.
(g) Mr El Chaer stated that the elevators were functional. There were four elevators, and two would remain open for use while works on the other two were being carried out. Discussion
140. I do not find the Defendant’s submissions in relation to Mr Pickering’s inspection persuasive. Where there is a dispute as to the factual position, the Defendant relies on Mr El Chaer’s testimony, which I do not find convincing, as Mr El Chaer’s testimony is replete with sweeping statements that are not corroborated. By contrast, Mr Pickering’s observations are, for the most part, supported by the submitted photographs. Also, where there is a dispute as to the factual position, I do not accept the Defendant’s argument that certain things in respect of the development must have been done, as the TECOM and/or DCD certificate had been issued. The issuance of the TECOM or DCD certificate, at best, leads to a presumption that certain things in respect of the development were completed, which Mr Pickering’s evidence successfully rebuts.
141. Where there is a dispute as to the interpretation of the observations, for example, at the places where Mr El Chaer states that all necessary safety measures were in place, or where Mr El Chaer states that the main electrical cable was not live, the Defendant’s interpretation does not add much to the overall picture, as the facts speak for themselves.
142. In my judgment, the state of the common areas was such that the Apartment could not be said to be ready for possession and occupation. Although the Apartment itself was fit for occupation, the state of the common areas at the time of Mr Pickering’s inspection was such there was an insufficient level of safety for people traversing the common areas, which was necessary to access the Apartment. This is particularly so considering that the residents of the Apartment might include young children (a concern Mr Dattani articulated at trial). While the Apartment SPA envisages that there might still be ongoing works in the development, and that the common areas might be incomplete at the time of handover (Clauses 6.4 and 11.4, at paragraphs 7 and 9 above), safe ingress and egress is a necessary prerequisite for almost any usage of the Apartment; to that extent, the common areas and fittings must be complete enough such as to guarantee a minimum standard of safety for the residents. Further, on the evidence of Mr El Chaer, occupants (of the other apartment units) only started moving in in mid-October 2011, at which time the condition of the common areas had presumably improved to such an extent that there was a tolerable standard of safety for these residents.
143. For the above reasons, I find that the Apartment was not ready for possession and occupation as of the date of Mr Pickering’s inspection, 15 September 2011. Given the state of the Apartment Block as a whole on that date, I find that the Apartment was in fact not ready for possession and occupation when the Defendant purported to hand over possession of the Apartment on 4 August 2011. As Clause 13.1 of the Apartment SPA (at paragraph 118 above) allows the Purchaser to terminate the agreement if the Seller fails to deliver possession and occupation by 12 months after the ACD i.e. 30 June 2010, the Dattani Claimants were entitled to, and did, terminate the Apartment SPA by their letter of 5 October 2011 pursuant to Clause 13.1.
144. It is therefore unnecessary for me to deal with the rest of the submissions that relate to the Apartment and the Apartment SPA.
Completion of the Retail Unit
145. I now address the question of whether the Retail Unit was completed when the Defendant purported to effect a handover of the Retail Unit on 21 August 2011.
The Parties’ submissions
146. The arguments and evidence submitted by both the Rahman Claimants and the Defendant in relation to whether the Retail Unit was completed are substantially similar to the arguments and evidence submitted in relation to whether the Apartment was completed.
147. It is common ground that the Defendant is only obligated to deliver the Retail Unit in “shell and core”, i.e. the interior of the unit would not be finished, meaning that a lower standard of readiness would have been required for the Retail Unit, as compared to the Apartment Unit. This is because generally, units such as these would require further fit-out works specific to their intended use. It is common practice for these further works to be carried out by the purchaser, which in this case is the Rahman Claimants. It is also common ground that the Retail Unit itself was fit for its intended use i.e., further fit-out works, when the Defendant purported to hand over possession to the Rahman Claimants.
148. The Rahman Claimants make the same submission the Dattani Claimants make in relation to the Apartment, viz. that safe ingress to and egress from the Retail Unit were not possible, given the state of the Development at that time. They also submit that the standard of readiness required of the Retail Unit was no less than that required of the Apartment, as Mr Rahman’s contractors would require safe ingress to and egress from to the unit.
149. The Rahman Claimants’ further submissions specific to the Retail Unit are as follows. First, access to the Retail Unit was problematic in September 2011 (the time of Mr Pickering’s inspection) as the access to the building was via basement three, and the cargo lift within the building did not serve that floor. The cargo lift was required to move equipment and construction materials for the fit-out works to the Retail Unit. Second, it was not possible to obtain insurance in respect of the required further fit-out works until the take-over certificate was available. The take-over certificate in respect of Park Towers was only issued in January 2012. Third, at that time the common areas were of such a state that access to the Retail Unit would not be possible for potential customers. This would presumably make operating the Retail Unit unprofitable, and consequently it would be difficult for Mr Rahman to find a tenant.
150. The Rahman Claimants did not visit the development themselves. At trial Mr Rahman explained that his friend, Mr Haroon Iftakhar, visited the site on his behalf on 17 August 2011, and was not satisfied with the state of the building. Mr Rahman also explained that, at a later stage (after Mr Pickering’s inspection), he had received advice from Mr Pickering as to the completeness of the development, and viewed the photos that Mr Pickering took during his inspection. Based off this information, Mr Rahman decided to terminate the Retail Unit SPA.
151. Regarding Mr Pickering’s inspection, I note that, at trial, Mr Pickering himself acknowledged that his evidence was of limited value in relation to the Retail Unit, as he did not inspect the Retail Unit itself, and was not allowed to deviate from the prescribed route to the Apartment.
152. The Defendant makes the same argument as it made in relation to the Apartment (at paragraph 132 above) viz. that TECOM had issued a building completion certificate, and that this was significant in a determination of whether the building was fit for occupation. I have already addressed this argument and the reasons why I do not find it persuasive can be found at paragraph 130 above.
153. In relation to the Retail Unit, the Defendant has acknowledged that, even after the issuance of these certificates, work still remained to be done in respect of Park Towers. The outstanding works that had to be done primarily pertained to the fit-out of the common areas, such as lift lobbies and car parks. The Defendant’s submissions in relation to the remaining works, in the context of the Retail Unit SPA, are that:
(a) the works required were of a minor nature; (b) Clause 11.4 of the Retail Unit SPA envisioned that such minor remedial works would be carried out post-handover; and (c) Clause 6.4 of the Retail Unit SPA allows for the common property and other units in the development to be incomplete upon handover of the Retail Unit. The Defendant’s position is that, notwithstanding the outstanding works, the Retail Unit was fit for possession and occupation at the time of handover.
154. As the Retail Unit would have required further fit-out work prior to it being fit for retail use, the Defendant submits that the ongoing works that were being carried out in the common areas would cause less disruption to the Rahman Claimants’ use of the Retail Unit, as the only people who would require a significant amount of access to the Retail Unit for the first few months would be Mr Rahman’s contractors. For this reason the Defendant also submits that the Rahman Claimants’ concern about access to the Retail Unit for potential customers is not valid.
155. The Defendant submits that the Rahman Claimants’ concern about the lack of cargo lift access is completely groundless. As Mr Dattani and Mr Pickering did not testify about the cargo lift access, the Defendant submits that Mr Rahman’s testimony on the cargo lift is not credible and should be disregarded by the Court.
156. The Defendant submits that the Rahman Claimants’ complaint that they could not obtain insurance for their fit-out contractor for the Retail Unit is a bald assertion, and the Rahman Claimants have not provided any evidence that they had attempted to obtain insurance but were unable to do so.
Discussion
157. The reservations I had concerning safe ingress to and egress from the Apartment (set out at paragraph 142 above) do not apply to the Retail Unit. This is because, unlike the Apartment, the Retail Unit would be accessed only by contractors at that stage, as it would still need months of further fit-out work before the commencement of any retail activity. I reject the Rahman Claimants’ submission that the same standard of readiness was required of the Retail Unit as of the Apartment. This is because the incompleteness of the common areas would not overly inconvenience contractors (such contractors would know their way around a construction site), nor would it pose a significant safety hazard to them.
158. However, I find the Rahman Claimants’ complaint regarding the lack of cargo lift access to be a legitimate complaint. For further works to be carried out on the Retail Unit by Mr. Rahman’s contractors, a minimum degree of infrastructure would be required, as workers and materials would need to be transported to the unit itself. Without the use of the cargo lift, it would not be feasible to transport heavy and bulky construction materials to the Retail Unit. The Defendant’s response is that Mr Rahman’s testimony on the lack of cargo lift access is not credible, but Mr Rahman testified on this point in court and his testimony was not challenged.
159. I also find the Rahman Claimants’ complaint regarding insurance in respect of the further fit-out works to be a legitimate complaint. In court Mr Rahman testified that insurance in respect of the further fit-out works could only be obtained after the take-over certificate was available. The take-over certificate in respect of the whole development was only issued in January 2012. This is consistent with Mr El Chaer’s evidence that the owners of the other retail units only started taking occupation in January 2012. I find that being able to obtain insurance in respect of the further fit-out works is a legitimate requirement for fit-out works to be carried out. The Defendant’s response is that the Rahman Claimants have failed to provide any evidence as to their inability to obtain insurance, but Mr Rahman testified as to this in court and his testimony was not challenged.
160. I do not find the Rahman Claimants’ complaint about the state of the common areas to be legitimate.
The state of the common areas are only of concern to the Rahman Claimants when the Retail Unit could commence operation as a shop, and this would only have been possible after Mr Rahman fitted out the Retail Unit appropriately, a process that would take a few months, by which time the state of the common areas might have been very different.
161. For the reasons given at paragraphs 158 and 159 above, I find that the Retail Unit was not ready for what it was intended for, i.e. further fit-out works. Accordingly, I find that the Retail Unit was not in a sufficient state of readiness for handover to the Rahman Claimants when the Defendant purported to give possession and occupation to the Rahman Claimants on 21 August 2011.
162. I now go on to address the other submissions relating to whether the Rahman Claimants were entitled to terminate the Retail Unit SPA.
The DIFC Contract Law
The Parties’ submissions
163. The Rahman Claimants submit that they are entitled to terminate the Retail Unit SPA pursuant to Articles 86 and 87 of the DIFC Contract Law.
164. For ease of reference, I reproduce Articles 86 and 87 of the DIFC Contract Law below.
“86. Right to terminate the contract
(1) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.
(2) In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether:
(a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract;
(b) strict compliance with the obligation which has not been performed is of essence under the contract;
(c) the non-performance is intentional or reckless;
(d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.
(3) In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed under Article 81 has expired.
87. Notice of termination
(1) The right of a party to terminate the contract is exercised by notice to the other party.
(2) If performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the non-conforming performance.”
165. The Rahman Claimants submit that they were substantially deprived of what they were entitled to expect under the Retail Unit SPA, i.e. delivery of a completed Retail Unit by the ACD, by the Defendant’s non-performance of the Retail Unit SPA. Further, they submit that their Notice to Remedy Breach of 18 August 2011 made time of the essence. For these reasons the Defendant’s failure to perform its obligation under the SPAs amounted to a fundamental non-performance as of 6 October 2011, which is when the Rahman Claimants purported to terminate the Retail Unit SPA.
166. The Defendant submits that there was no fundamental non-performance of the Retail Unit SPA. It first submits that the Retail Unit was ready for possession and occupation prior to the purported termination of the Retail Unit SPA by the Rahman Claimants. This position is untenable as I have found otherwise at paragraph 161 above. The Defendant’s next submission is that time was not of the essence under the Retail Unit SPA as, under common law, time is not of the essence in a contract for the sale of real property.
167. The Defendant’s other submission is that time is not of the essence in a contract for the sale of real property. It however acknowledges that the common law allows a party to make time of the essence by notice, but it points out that the notice must provide a reasonable time to perform. The Defendant submits that the 30-day period given to it to remedy the breach was not reasonable under the circumstances, and that the Rahman Claimants bear the burden of proving that this period was reasonable under the circumstances.
Discussion
168. I agree with the Defendant that time is not inherently of the essence in the Retail Unit SPA. The next issue therefore is whether time was made of the essence by the Rahman Claimants’ Notice to Remedy Breach, so that the Defendant’s non-performance amounted to a fundamental non-performance.
169. The Rahman Claimants seek to establish that time was of the essence to the Retail Unit SPA (by way of a notice) so as to show that there was a fundamental non-performance on the part of the Defendant, for the purposes of Articles 86 and 87 of the DIFC Contract Law. The DIFC Contract Law adopts the categorisation of breaches of contract into fundamental and non-fundamental breaches in the UNIDROIT Principles of International Commercial Contracts (“UNIDROIT Principles“). Articles 86 and 87 of the DIFC Contract Law are actually identical to Article 7.3.1 and 7.3.2. of the UNIDROIT Principles.
170. Within the UNIDROIT Principles, the issue of a delay in performance is addressed by Article 7.1.5, which is identical to Article 81 of the DIFC Contract Law. Article 7.1.5/Article 81 sets out a procedure in which a reasonable grace period can be granted to the non-performing party, and it provides that the aggrieved party may terminate the contract at the end of this grace period if the non-performing party still fails to perform its obligation, regardless of whether the non-performance amounts to a fundamental non-performance. This regime has the same function as the common law doctrine of a notice that makes time of the essence (on which the Rahman Claimants rely), and the same result is reached either way — the aggrieved party can terminate the contract at the end of the notice period. In my judgment, Article 81 of the DIFC Contract Law is the appropriate way to address the current issue of a delay in performance (as opposed to addressing it under Articles 86 and 87 via the common law doctrine of a notice that makes time of the essence) because, as the Defendant has submitted, time is generally not of the essence in contracts involving real property, and the function performed by the common law doctrine of a notice that makes time of the essence is duplicated in Article 81. As the Rahman Claimants’ submission should be addressed under Article 81, I find that the Defendant’s non-performance did not constitute a fundamental non-performance for the purposes of Articles 86 and 87 and will instead address the Rahman Claimants’ submission under Article 81.
171. Article 81 of the DIFC Contract Law provides as follows.
“81. Additional period for performance
(1) In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.
(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under this Part 8 of this Law.
(3) Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.
(4) Article 81(3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party.”
172. Article 81(3) allows for termination of the contract for a delay in performance, even if the delay does not amount to a fundamental non-performance, so long as an additional period of time of reasonable length for performance is given to the non-performing party.
173. It is clear that the exception provided in Article 81(4) above does not apply in the current case, as the obligation to deliver possession and occupation of a completed Retail Unit was a major part of the contractual obligation of the Defendant. The question I thus have to consider is the one posed by Article 81(3), i.e. whether the period of 30 days the Rahman Claimants gave the Defendant to remedy its breach was an additional period of time of reasonable length. The reasonableness of the length of time given is to be judged objectively i.e. without reference to the aggrieved party’s position; and what is reasonable depends on the facts and circumstances of each case.
174. I find that the period of 30 days given by the Rahman Claimants was a reasonable length of time for the purposes of Article 81(3) of the DIFC Contract Law, primarily because delivery of the Retail Unit was already more than one year overdue at the time of the Rahman Claimants’ notice, as the ACD was 30 June 2010 (taking into account a 12-month discretionary extension under Clause 6.1 of the Retail Unit SPA; see paragraph 116). Further, the Apartment SPA provides for the same notice period of 30 days, which suggests that the Defendant considered 30 days a reasonable length of notice.
175. Consequently, I find that the Rahman Claimants validly terminated the Retail Unit SPA by their Notice of Termination of 6 October 2011. I therefore need not consider the submissions relating to Clause 13.3 of the Retail Unit SPA, and will now consider the effects of the termination of the Retail Unit SPA.
Effects of termination of the Retail Unit SPA
176. Article 81(2) of the DIFC Contract Law (at paragraph 171 above) provides that the aggrieved party may resort to any of the remedies specified in Part 8 of the DIFC Contract Law should performance of the obligation not be carried out by the end of the additional period it grants. I find that this applies to the current case, i.e. a termination under Article 81(3).
177. Article 90 of the DIFC Contract Law provides as follows.
90. Restitution
(1) On termination of contract pursuant to Articles 86 or 88 either party may claim restitution of whatever it has supplied, provided that such part concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money where appropriate.
(2) However, if performance of the contract has extended over a period of time and the contract is divisible, such restitution can only be claimed for the period after termination has taken effect.
178. Article 90 allows either party to claim restitution for whatever it has supplied. The Rahman Claimants can rely on Article 90, on account of Article 81(2). The Rahman Claimants are therefore entitled to restitution of the sums they have paid to the Defendant, as this would be the most appropriate remedy for me to grant in this case.
Interest
The Penalty Rate
179. Clause 13.1 of each of the SPAs provides for the Defendant to pay interest at the Penalty Rate on all the payments made by the Purchaser toward the Purchase Price for the period from the Anticipated Completion Date to the date when possession and occupation is offered to the Purchaser. “Penalty Rate” is defined in Clause 1.1 of each SPA to be:
“the percentage quoted at the United States Dollar ninety (90) day London Inter-bank Offered Rates [sic] (LIBOR) as computed by the British Bankers Association (BBA) to be in effect on the day payment becomes payable; the percentage rate shall be reset and compounded quarterly on the 1st of every January, April, July and October.”
180. Clause 13.1 of the Apartment SPA also provides that the Purchaser may terminate the agreement if possession and occupation of the Apartment is delayed for more than 12 months past the ACD. It provides that interest at the Penalty Rate would be due on termination of the agreement in respect of the period from the ACD (30 June 2009) to the date when the agreement was terminated (5 October 2011).
181. As the Rahman Claimants terminated the contract and are seeking restitution, they are not entitled to interest at the Penalty Rate on the sums they paid to the Defendant, as this interest is a contractual benefit granted by Clause 13.1 and the essence of restitution is to put the parties back in the position they were at before the contract. Even if interest at the Penalty Rate were paid out, it would be subject to Article 90 of the DIFC Contract Law, and the Defendant can claim restitution of the interest paid to the Rahman Claimants, the interest being part of what the Defendant supplied under the contract.
Post-termination interest
182. The interest rate applicable for the period from the time each SPA was terminated to the date of judgment is provided in Article 17 of the DIFC Law of Damages and Remedies. Article 17 provides, in relevant part, as follows.
“17. Interest for failure to pay money
(1) If a party does not pay a sum of money when it falls due the aggrieved party is entitled to interest upon that sum from the time when payment is due to the time of payment whether or not the non-payment is excused.
(2) The rate of interest shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment.
[…]”
183. As I have mentioned at paragraph 26 above, the parties have submitted their separate quantifications of the interest payable by the Defendant. As the parties are unable to reach any agreement as to the amount of interest payable and have submitted quantifications on the basis of conflicting assumptions, I reserve judgment on this point and will issue directions for further submissions from the Parties taking into account my findings above.
Article 40 (2)
184. The Four Claimants seek additional damages from the Defendant, as provided in Article 40 (2) of the DIFC Law of Damages and Remedies, which provides the following.
“40 (2) The Court may in its discretion on application of a claimant, and where warranted in the circumstances, award damages to an aggrieved party in an amount no greater than three times the actual damages where it appears to the Court that the defendant’s conduct producing actual damages was deliberate and particularly egregious and offensive.”
185. In my judgment, the Defendant’s conduct has not been particularly egregious and offensive so as to trigger the application of Article 40 (2). If any criticism can be made of the Defendant’s conduct, it would only be that the Defendant was somewhat misguided in maintaining its position that the Apartment and Retail Unit were ready for possession and occupation at the time the Defendant claimed it was, but such conduct would not sufficiently justify the imposition of additional damages under Article 40(2).
186. I therefore give judgment in terms of the declarations and orders set out at the beginning of this Judgment.
Issued by:
Amna Al Owais
Deputy Registrar
Date: 20 July 2014
At: 12pm
