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Claim No. CFI 047/2019

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

CATERPILLAR FINANCIAL SERVICES (DUBAI) LIMITED

Claimant

and

(1) OMER TRANSPORT LLC
(2) CRUSHERS & QUARRIES OMER TRANSPORT LLC
(3) MR AYMAN ABDUL BAKI

Defendants

ORDER WITH REASONS OF JUSTICE ROGER GILES

UPON reviewing the Claimant’s Application No. CFI-047-2019/3 dated 30 November 2021 seeking immediate Judgment against all Defendants (the “Immediate Judgment Application”)

AND UPON reviewing the Claimant’s Application No. CFI-047-2019/5 dated 25 February 2022 seeking permission to serve the Defendants by alternative method of service via email (the “Alternative Service Application”)

AND UPON reviewing the Claimant’s skeleton argument dated 25 February 2022 and supplementary submissions dated 11 March 2022

AND UPON reviewing the Claimant’s Statement of Costs dated 1 March 2022

AND UPON hearing counsel for the Claimant at a hearing on 3 March 2022

IT IS HEREBY ORDERED THAT:

1. The Immediate Judgment Application is granted.

2. The period of notice given in accordance with RDC 24.6 be sufficient.

3. Judgment be entered for the Claimant against the First and Second Defendants jointly and severally for USD 2,495,933.69 plus interest at the daily rate of USD 681.43 from and including 8 November 2021 to the date of this judgment.

4. Judgment be entered against the Third Defendant for USD 2,495,933.69 plus interest at the daily rate of USD 681.43 from and including 8 November 2021 to the date of this judgment.

5. The judgment sums to bear interest at the rate of 18% per annum until payment.

6. The First and Second Defendants forthwith shall:

7. The Claimant by its said agent is entitled to sell the Vehicles on the condition that (1) the amount recovered from any such sale will reduce the amount due from the Defendants; and (2) should the sale result in a recovery in excess of the amount due to the Claimant, such excess will be paid to the Defendants.

8. The Claimant is entitled to be indemnified by the Defendants for all further costs incurred in enforcing its rights under or in connection with the Agreements and/or the Amending Agreement as defined in these reasons.

9. The Defendants to pay the Claimant’s costs of the claim including the costs of this application assessed at AED 450,000.

10. Service of these orders on the Defendants may be made by sending to the Defendants’ email addresses as referred to in these reasons; the orders will be considered to be served 24 hours after the sending of the email.

Issued by:
Ayesha Bin Kalban
Deputy Registrar
Date of issue: 29 March 2022
At: 11am

SCHEDULE OF REASONS

1. The Claimant (“Caterpillar“) is a DIFC company, part of the Caterpillar group of companies which manufactures construction and other heavy equipment. The First and Second Defendants (the “Omer Companies”) are UAE companies at relevant times carrying on business in the transport and quarrying industries respectively. The Third Defendant (“Mr Baki“) is a Lebanese national, at least at the time of the transactions next mentioned resident in Dubai and managing the Omer Companies.

2. In the period September 2015 – January 2016, Caterpillar financed the purchase by the Omer Companies jointly of five pieces of heavy equipment, described in the agreements as vehicles: I was informed that they were bulldozers and heavy excavators. Each transaction was by a Loan and Security Agreement by which the Omer Companies agreed to repay by monthly instalments the amount advanced together with an amount representing interest and an “Arrangement Fee“, expressed in United States dollars (the “Agreements“), and included a guarantee by Mr Baki (the “Guarantees“). In December 2016, Caterpillar, the Omer Companies and Mr Baki executed an amending agreement (the “Amending Agreement”), by which the combined repayments were to be made by a revised payment schedule and the Agreements and the Guarantees were otherwise confirmed.

3. The Omer Companies fell into default in payment according to the revised payment schedule. Under the terms of the Agreements, this was an event of default by which all outstanding payments became immediately payable and bore interest at a “Default Rate” of 1.5% per month, and under a mortgage of the vehicles to a Security Agent on its behalf Caterpillar was entitled to take possession of the vehicles and sell them.

4. In these proceedings, Caterpillar claims:

5. This is Caterpillar’s application for immediate judgment in its favour. The Defendants have not responded to the application. I am indebted to Mr Tom Roscoe of Counsel for his comprehensive submissions, including supplementary written submissions in relation to matters raised at the hearing of the application on 3 March 2022. For the reasons which follow, immediate judgment should be granted broadly as claimed.

Some Procedural History

6. The Claim Form was filed in August 2019. It was twice amended, on the second occasion by leave, reaching its present form on 18 February 2020 but taking up Particulars of Claim dated 8 January 2020.

7. A number of Acknowledgements of Service were filed by the Defendants: by the First Defendant as a litigant in person on 18 November 2019, by Mr Baki but using the SCT form on the same date, and by the Second Defendant as a litigant in person on 20 February 2020; and then by the First Defendant and Mr Baki on 5 March 2020, represented by Kanaan Advocates and Legal Consultants (“Kanaan”). On 13 April 2020, Kanaan came on the record on behalf of all the Defendants by filing a Defence on all their behalves.

8. This application was filed on 30 November 2021, accompanied by the supporting affidavit of Mishaal Abdul-Hafez and a draft order. The Application Notice and the accompanying documents were served by sending on that day to the notified email address of Kanaan.

9. On 19 December 2021, Kanaan applied for an order that it cease to be the legal representative of the Defendants, on the ground of failure to pay fees. On 20 December 2021 an order was made as asked. By RDC 37.17, where such an order is made the party formerly represented must give a new address for service. The Defendants have not done so.

Notice Of The Hearing

10. The Application Notice and accompanying documents were duly served, having been served on Kanaan while it was on the record for the Defendants. However, the Application Notice did not include a date for hearing, it being the practice that the date for hearing is fixed following service of the Application Notice and preparation by the parties’ legal representatives for a hearing.

11. In the ordinary course, RDC 24.6 next set out is readily satisfied. This application is out of the ordinary course, in that the Defendants are no longer legally represented and have not given a new address for service. It remains necessary that the Defendants be given notice in accordance with RDC 24.6:

12. In January 2022, the hearing was fixed for 24 February 2022. Due to the illness of the designated Judge, the application was then re-fixed for hearing before me on 3 March 2022. Notice of the substituted hearing date is what matters, but involves reference to notice of the original hearing date.

13. Immediately after the 24 February 2022 hearing date was fixed, Caterpillar attempted service of a letter advising of that date, with copies of all documents and instructions for joining the hearing, at the Dubai office address used by the Defendants. The office was vacant, the Defendants having been evicted for failure to pay rent. Caterpillar then sent the same letter and documents by email to the three email addresses next mentioned. There was no response from the Defendants.

14. On 18 February 2022, following the fixing of the substituted hearing date, Caterpillar sent to three email addresses a like letter, addressed to all three Defendants and advising them of the new hearing date and of the link to join the hearing: this last included reference to an email from the Registry to the same email addresses containing the link. The email addresses (partly anonymised in these reasons) were:

15. Caterpillar applied, as a without notice application, for orders pursuant to RDC 9.31 including orders whereby the sending to the email addresses be retrospectively service by an alternative method. This was misdirected. Part 9 of the Rules is concerned with service, defined in the Schedule to Part 2 as “steps required by the Rules of Court to bring documents used in court proceedings to a person’s attention“. That is not what RDC 24.6 is about. It requires notice of the hearing date and the issues to be determined; it does not require steps to bring a document to the Defendants’ attention. While the notice will no doubt usually be given in documentary form, it may be given otherwise than by a document. The proper question is whether the sending of the emails by Caterpillar constituted giving 14 days’ notice of the hearing date and the issues in accordance with RDC 24.6.

16. The answer to the question nonetheless involves considerations akin to those where service by alternative means may be appropriate; in this case, where the Defendants have failed to give a new address for service following the parting from Kanaan and are no longer at their place of business in Dubai. For RDC 24.6, giving notice means taking steps whereby knowledge of the hearing date and the issues is available to the respondent or to the parties. Sending to a person’s email address, in current use, will ordinarily suffice; evidence that the person actually read the email is not necessary (although it can sometimes be provided through a read receipt), any more than evidence that a person personally served actually read the served documents, and there will be notice unless there are particular circumstances to indicate that the person may not have done so.

17. Here the email addresses were in relatively recent use by the Defendants themselves, and more particularly were recently used by the Defendants’ legal representative in communicating with them. No reason appears whereby they should not be regarded as in use in February 2022, or why the emails should not have been read by a responsible person on behalf of the Omer Companies (probably Mr Baki) and by Mr Baki, in the same manner as they would have read communications from their legal representative. I am satisfied that notice of the hearing date and, having regard also to the sending of the notice of the initial hearing date, of the issues was given to the Defendants.

18. The notice was not at least 14 days’ notice: there are 11 clear days between 18 February 2022 and 3 March 2022. However, the Defendants were given about a month’s notice of the initial hearing date of 24 February 2022, and had ample time to prepare themselves for the hearing if they intended to participate and ample time in the 11 days to adjust to the new hearing date. There can be no prejudice to the Defendants, and the deficiency of a few days should be rectified by shortening pursuant to RDC 4.2(1), or by excusing pursuant to Article 44 of the DIFC Court Law, DIFC Law No 10 of 2004, and RDC 4.51, by ordering that the period of notice be sufficient.

Immediate Judgment

19. By RDC 24.1, the Court may give immediate judgment against a defendant if it considers that the defendant has no real prospect of successfully defending the claim, and there is no other compelling reason why the case should be disposed of at a trial. The principles on which the power thus given is exercised are well established, and it is sufficient to refer to GFH Capital Ltd v Haigh [2014] DIFC CFI 020 (10 November 2016) at [9], subsequently applied in a number of cases, and to the restatement by the Deputy Chief Justice, Justice Sir David Steel, in The estate of Christos Papadopoulos v Standard Chartered Bank [2017] DIFC CFI 004 (27 February 2018) at [16]. In a case such as the present it is appropriate to note the further principle, also taken from the reasons of Lewison J in EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 at [15] and accepted in these Courts, that it is not uncommon for an application to give rise to a short point of law or construction:

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

The Defence

20. The issues in the application are relatively narrow. The Defence filed by Kanaan on behalf of the Defendants did not contest the Agreements or the Amending Agreement, or default thereunder. It raised five matters:

The Amount

21. The Defence in relation to the amount is complicated by the Defendants’ calculation in dirhams, converted to United States Dollars at the conversion rate current at the date of the Defence, rather than in United States dollars as the currency of account.

22. In his affidavit, Mr Abdul-Hafez first explained that the amount of outstanding instalments is not the USD 1,370,827.39 claimed in the Re-Amended Claim Form, but USD 1,381,792.50: he explained that there was a typographical error in the original workings. The correction meant correction of the interest amount, and he recalculated it up to 7 November 2021 with a continuing daily interest rate. He then addressed the discrepancy asserted in the Defence. He identified a difference between an amount said in the Defence to have been paid in dirhams and the amount actually paid, from Caterpillar’s records, in United States Dollars. The difference approximated the difference between the USD 1,381,792.50 in the recalculated claim and the Defendants’ amount of USD 1,356,630.36. Mr Abdul-Hafez suggested that variation in the conversion rates used may explain the remaining discrepancy.

23. I see no reason not to accept Mr Abdul-Hafez’s figures, from Caterpillar’s records, as representing the amount outstanding; while asserting a different figure, the Defendants did not meaningfully demonstrate error. The rest is calculation, and equally I see no reason to doubt Mr Abdul-Hafez’s calculation. The interest calculation to 7 November 2021 was USD 1,114,141.19, with a daily interest rate thereafter of USD 681.43.

24. I add that the Agreements, which provide that they are to be “governed and construed in accordance with the laws of the Dubai International Financial Centre“ (cl 23), contain a conclusive evidence clause (cl 10) in the terms:

“This Agreement together with all Schedules and Lender’s statements and records shall be binding on Customer and shall constitute conclusive evidence of debt for the purpose of any court proceedings or any other proceedings in any jurisdiction“.

25. While not well worded, this includes that Caterpillar’s records stand as conclusive evidence of the Omer Companies’ indebtedness. Under the law of England and Wales, the default law applicable as the law of the DIFC, such a clause would be effective subject to fraud or manifest error: Bache & Co (London) Ltd v Banque Vernes et Commercial de Paris [1973] 2 Lloyds Rep 437, adopting Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643. Fraud is not suggested, nor does the assertion of the amount paid in dirhams make out manifest error. For this reason also, Mr Abdul-Hafez’s figures from Caterpillar’s records should be accepted.

26. There is no real prospect of success in relation to the amount outstanding at the date of default, and consequently (subject to the default interest rate) as to the amount claimed by Caterpillar.

Interest

27. In the Defence, it was said in paragraph 21 that the default interest rate amounting to 18% per annum was excessive, and was “not in line with the applicable DIFC rules and regulations”. In paragraph 22 the relevant part of Practice Direction No 4 of 2017 (“PD 4”) prescribing post-judgment interest “at the rate of 9% or such other rate as the judge may prescribe” was set out, and para 23 cited a case in which post- judgment interest was ordered at 9%. It was then said in paragraph 24 that the Omer Companies “believe that interest on the amount of AED 4,982,225 should to begin to run at a rate of 9% from the date that a judgment is issued”. These paragraphs were followed by paras 25 to 29, expressed to be “In the alternative“. Paragraph 25 set out Article 17(1) and (2) of the DIFC Law of Damages and Remedies, DIFC Law No 5 of 2007 (“the Law”), the following paragraphs asserted the rate of interest of EIBOR (three month rate) + 1% said to be required by it, and it was then said in para 29 that “the Respondent“ (no doubt meaning the Defendants) “believes that the EIBOR three month rate should apply in the event that the Court holds that interest on the amount of AED 4,982,225 shall run as of April 2017”.

28. These paragraphs are not well expressed, but the AED 4,982,225 was the Defendants’ figure expressed in dirhams for the amount of outstanding instalments and, despite the reference to interest “from the date that a judgment is issued” I take the defence to be that interest should run from the date of default not at the default rate, but either at 9% or at the EIBOR three month rate. The reasons given are PD 4 or in the alternative Article 17 of the Law.

29. PD 4 has no application to interest prior to judgment. In its application to post-judgment interest, ordinarily in the exercise of the discretion to order interest at a rate other than 9%, the Court will order interest at the contractual rate of interest (if there is one) until the date of payment, because that is the agreement between the parties. The 9% rate does not govern after judgment, let alone before judgment, in substitution for an agreed rate. There is no merit in the appeal to PD 4 and its 9% interest rate.

30. Article 17 relevantly provides:

31. The Article is in Part 2 of the Law, headed “Damages under the Law of Contract“. The entitlement to interest conferred by the Article comes into play in the absence of agreement for interest upon failure to pay. It does not deny or replace a contractually agreed rate of interest. There is also no merit in the appeal to the Article.

32. There is no real prospect of defence in relation to the default interest

The Jurisdiction For Possession

33. It is not easy to understand this part of the Defence. The vehicles are registered in Fujairah. In the Defence it is said:

34. In a perhaps more understandable translation (Westlaw), Article 31(3) provides:

“In commercial matters jurisdiction shall be vested in the court in whose area the defendant has his domicile or the court in whose area the agreement was made or was performed in whole or in part or in the court in whose area the contract should have been performed.”

35. This is a jurisdictional allocation between the Courts of the Emirates. It does not bear upon this Court’s exercise of its jurisdiction where, as the Omer Companies did in cl 23 of the Agreements, the parties have agreed to the non-exclusive jurisdiction of “the Courts of the Dubai International Financial Centre“. This Court can make an order for possession of the vehicles (and such an order was made in Caterpillar Financial Services ( Dubai) Ltd v National Gulf Constructions LLC CFI 055-2018 (13 October 2018)). How the order is executed is a separate and later matter.

36. There is no merit in this part of the Defence, and it has no reasonable prospect of success.

Credit Upon An Order For Possession

37. In paragraphs 34 and 35 of the Defence, the Defendants say that it would be unreasonable if Caterpillar obtained orders for payment of the amount claimed as well as for possession and sale of the vehicles, because they would be deprived of the vehicles after having paid for them in full; they say that if Caterpillar is to be awarded possession of the vehicles “the value of the vehicles should be deducted from the total outstanding balance due to [Caterpillar]“.

38. That is a misunderstanding of the position. The indebtedness of the Omer Companies to Caterpillar is not reduced by the value of the security held by Caterpillar simply by virtue of Caterpillar obtaining an order for possession of the security, or of it obtaining possession of the security, with a view to realisation. Upon realisation, but only upon realisation, the indebtedness should be reduced by the net proceeds of realisation; but Caterpillar is entitled both to judgment for the whole of the indebtedness and to an order for possession, with realisation and its consequences for enforcement of the judgment a later matter.

39. Caterpillar accepts that it must give credit for the net proceeds of realisation of the vehicles, and the orders it proposes so provide. There is no reasonable prospect of success in relation to credit upon an order for possession.

Demand Under The Guarantees

40. The Guarantees relevantly provide in cl 2.1 that in consideration of Caterpillar providing finance pursuant to the Agreements, Mr Baki:

41. Unlike the Agreements, the Guarantees are expressed to be “governed by the applicable laws of the United Arab Emirates”. I was not referred to any applicable laws of the Emirates, but was addressed on English authorities concerning the meaning of, and therefore effect to be given to, the language of various forms of guarantee. The Guarantees are written in English, there is no reason for their meaning and therefore effect to differ as a matter of Emirati law, and I consider that I can gain assistance from the English authorities.

42. In the summary by Patten LJ in McGuinness v Norwich and Peterborough Building Society [2012] 2 All ER (Comm) 265 at [7]:

“… a guarantee of a loan may impose one or more of the following types of liability on the guarantor. These are: (1) a ‘see to it’ obligation, i.e. an undertaking by the guarantor that the principal debtor will perform his own contract with the creditor; (2) a conditional payment obligation, i.e. a promise by the guarantor to pay the instalments of principal and interest which fall due if the principal debtor fails to make those payments; (3) an indemnity; and (4) a concurrent liability with the debtor for what is due under the contract of loan”.

43. Commonly, a guarantee specifically provides that the guarantor will be liable as if principal debtor, or that the guarantor indemnifies the creditor against default by the principal debtor, as the fourth and third types of liability identified by Patten LJ. The Guarantees do not contain a principal debtor provision, and the indemnity in cl 2.1c is only when an obligation of the Omer Companies is unenforceable, invalid or illegal. These types of liability do not arise in this case.

44. Clause 2.1a is a “see to it” obligation, from Moschi v Lep Air Services [1973] AC 331 at 347 sounding in damages for breach of contract if, relevantly, the Omer Companies do not pay. The liability for breach of contract arises immediately the Omer Companies default, and the subclause is not in its terms qualified by need for a demand to see that they perform their obligations. Clause 2.1b is a conditional payment obligation of the second type of liability, which sounds in debt and does state need for a demand. The question is whether cl 2.1a and cl 2.1b are independent sources of obligation, or whether cl 2.1a is to be read with cl 2.1b, with cl 2.1b operating as an expression of how the Guarantors are to give effect to their guarantee in cl 2.1a where the failure in performance by the Omer Companies is failure to pay, and to that extent operating as a qualification on the “see to it” obligation.

45. In my view, the answer to the question is no. The two subclauses are stated as freestanding obligations, as cl 2.1c is also a freestanding obligation in the context of an obligation of the Omer Companies being unenforceable, invalid or illegal. They are, and are stated as, obligations of different kinds, the one a secondary liability sounding in damages and the other a primary liability in debt in a particular circumstance. There is then the statement of a third separate obligation in cl 2.1c. Nothing otherwise appears in the Guarantees to require a different view.

46. While each case turns on the construction of the particular document, cl 2.1 and cl 2.2 in KfW v Singal [2020] EWHC 2214, to which Mr Roscoe drew attention, had some similarity to cll 2.1a and 2.1b in the Guarantees: Mr Christopher Hancock QC, sitting as a High Court Judge, held that they were separate sources of obligation, and I find a support for my view in this case. As set out in the judgment (at [36]), the clauses read:

47. This meaning and therefore effect of the Guarantees is a matter of their construction, to ascertain what the parties have agreed. It must hold good also as a matter of construction, arriving at what the parties agreed, under the laws of the Emirates. In my view, this is an instance in which it is appropriate to grasp the nettle and decide the question of construction in an application for immediate judgment, and there is no reasonable prospect of success in the defence that the claim against Mr Baki is premature for want of a demand. He is liable pursuant to cl 2.1a even without a demand.

48. I record three further matters. First, Caterpillar submitted that even for cl 2.1b demand was not necessary if it were regarded as a primary obligor provision. I do not enter into whether that would be so, since I am unable to accept that it is a primary obligor provision. Secondly, there was demand on Mr Baki as to USD 174,861 (but only that amount) in a pre-action letter of 17 December 2017. Thirdly, Caterpillar submitted that it was open to it to amend to rely on the service of the Re-Amended Claim Form and the accompanying Particulars of Claim as a demand, and to invite the court to dispense with the need for an actual amendment, notwithstanding that such demand was after the commencement of the proceedings, relying on Maridive & Oil Services SAE v CAN Insurance Co [2002] EWCA Civ 369 and United Trust Bank v Dohil [2012] 2 All ER (Comm) 765. In the light of my conclusion that Mr Baki is liable even without a demand, that does not arise; it is an important question for the law and practice of the DIFC Courts, not something to be unnecessarily considered in an application for immediate judgment without a contradictor, and it can remain for another day.

Other Matters

49. I have referred to Caterpillar’s entitlement to take possession of the vehicles and sell them. By cl 9.3e of the Agreements, the Omer Companies agreed to “promptly execute all documents and perform all actions reasonably requested by [Caterpillar] or its designee, and use its best endeavours, to facilitate the sale of the Vehicles by [Caterpillar] or its designee…“. Clause 21 is a further assurance clause extending to all things necessary “to enforce or facilitate any rights, authorities and discretions intended to be invested in [Caterpillar] by or pursuant to this Agreement”. By cl 20c, the Omer Companies agreed to be liable for and indemnify Caterpillar against “[a]ll costs and expenses (including any legal costs on a full indemnity basis) incurred or sustained by [Caterpillar]] or its designees in retaking possession of the Vehicles and enforcing the terms of this Agreement”. These provisions, plus in the case of Mr Baki cl 2.1a of the Guarantees, underpin orders 5 and7 below as sought at the hearing.

Conclusion

50. Neither the Omer Companies nor Mr Baki has a reasonable prospect of defending the claim against them or him. Otherwise, no compelling reason appears why the case should be disposed of at trial.

51. I have referred to Caterpillar’s without notice application for orders pursuant to RDC 9.31. It asked for more than retrospective alternative service of notice of the hearing: in generous terms, that “going forward” all documents required to be served in these proceedings be served by sending to the email addresses. I indicated at the hearing that I was not prepared to make that order, any need for and appropriate means of alternative service depending on the circumstances at the time. In the supplementary submissions, I was asked to make a specific order for alternative service for the service required by RDC 36.26, which provides that unless the Court otherwise directs, any order made otherwise that at trial must be served on (inter alia) the respondent. I will do so.

52. Caterpillar is entitled to its costs of the proceedings, which in light of cl 20c should be on the indemnity basis. Its Statement of Costs is for a total amount of AED 666,453.34. It may be accepted that service and notification added to the task of its legal representatives, but the hours set out appear to me excessive for the conduct of an undefended claim. It should not be forgotten that costs on the indemnity basis does not mean that the party is indemnified for all its costs; rather, it means that any doubt as to whether the costs were reasonably incurred or were reasonable in amount is resolved in favour of the receiving party, rather than in favour of the paying party (see RDC 38.18, 38.19). On a summary assessment, in my view costs of no more than AED 450,000 are warranted.

Orders

53. I make the following orders: