Privacy Settings

Claim No. CFI 048/2017

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

SUNTECK LIFESTYLES LTD

Claimant

and

(1) AL TAMIMI & CO LTD
(2) GRAND VALLEY GENERAL TRADING LLC

Defendants

ORDER WITH REASONS OF JUSTICE SIR JEREMY COOKE

UPON reviewing the Second Defendant’s Application No. CFI-048-2017/1 dated 31 March 2021 for an order seeking the discharge or revocation of an injunction Order of Justice Sir Jeremy Cooke dated 21 October 2017 and continued on 17 January 2018 an order that the First Defendant release the Documents held by it pursuant to the Escrow Agreement dated 28 June 2015 to GV, with ancillary orders as to costs (the “Application”)

AND UPON reviewing the Claimant’s evidence in answer to the Application dated 29 April 2021

AND UPON reviewing the Second Defendant’s evidence in reply dated 19 May 2021

IT IS HEREBY ORDERED THAT:

1. The Application is refused.

2. These proceedings are stayed pending the issue of an award on liability in the Singapore Arbitration referred to in this judgment and further order of the Court, with liberty to the Parties to apply.

3. The Second Defendant shall pay the Claimant’s costs of the Application to be the subject of assessment by the Registrar if not agreed.

Issued by:
Nour Hineidi
Registrar
Date of issue: 29 August 2021
At: 2.30pm

SCHEDULE OF REASONS

Introduction

1. The Second Defendant (“GV”) by an application dated 31 March 2021, seeks the discharge or revocation of an injunction granted by me initially on 21 October 2017 and continued on 17 January 2018 and for an order that the First Defendant release the Documents held by it pursuant to the Escrow Agreement dated 28 June 2015 to GV, with ancillary orders as to costs. An application for the striking out of the Claimant’s Part 7 Claim Form dated 27 November 2017 was not pursued.

2. On 21 October 2017 I granted the Claimant an ex parte injunction against the First Defendant and GV, preventing the release of the Documents held by the First Defendant under the Escrow Agreement which had been concluded pursuant to an Addendum to a Joint Venture Agreement (“the Addendum” and “the JVA” respectively.) The First Defendant, as the Escrow Agent, has at all times maintained a neutral stance in these proceedings and has complied with and stated that it will continue to comply with any order of this Court. The return date for the original injunction was specified as 24 October but, by agreement between the parties, was adjourned to 7 November 2017. As appears from my judgment of 16 November 2017, the only issue raised by GV was a jurisdictional objection to the grant of the injunction. At paragraph 6 of the judgment, I stated;

“Beyond the question of jurisdiction there is nothing for this Court to decide since it is clear and unchallenged that the Claimant has a good strong bona fides case and that the balance of convenience lies in holding the ring and the status quo and preventing the release of the documents held in escrow.”

3. Reference should be made to my earlier judgment for a summary of the background to this matter and the JVA and Addendum. Whilst there was a one time a question as to whether or not this hearing should be held in private, as prior hearings and hearings in related litigation have been held in public and neither party took any objection to a public hearing on the grounds of the confidentiality inherent in the arbitration to which reference is made later in this judgment, I decided that the hearing would be in public and that there was no need for anonymisation in the judgment itself.

The Basis of the Application

4. GV contends that the injunction should be discharged on 3 grounds, relying on principles set out in American Cyanamid Co v Ethicon Ltd [1975] AC 396:

5. As to the first ground, GV submits that if there is truly a serious question be tried, it must proceed to a trial and the Claimant has made no effort to bring the matter to trial in this action since issuing the claim form on 21 October 2017 and obtaining the injunction. At paragraph 7 of the Claim Form, the Claimant sought injunctive relief and referred to the need for interim injunctive relief pending a final decision by the Court as to whether the First Defendant was required to retain the Documents or could release them to GV. No such final decision has yet been sought.

6. As to the second ground, GV submits that the claim pursued in arbitration in Singapore is for a declaration of rightful termination of the JVA and for damages for its breach and that no issues are raised in those proceedings in relation to the Escrow Agreement which was the subject of the injunction. The effect of the claims for damages is that the ownership of the shareholding (represented by the Documents which include the Claimant’s share certificates in the joint venture company (“the JV Company”)), is, in GV’s submission, irrelevant. The form of relief sought in the arbitration therefore demonstrates that damages are an adequate remedy and that there is no need for the injunction at all.

7. As to the third ground, it is said that there is no real prejudice to the Claimant in discharging the injunction in such circumstances, whereas GV is prejudiced by being unable to mitigate its loss by reason of its inability to progress the development of the land which was transferred to the JV Company, because the Board of Directors (50/50 appointees by the Claimant and GV) is in deadlock as a result of the dispute between the 50/50 shareholders.

8. It is said that there has been a material change of circumstances since the grant of the injunction by reason of the Claimant’s failure to prosecute any case in the DIFC in relation to issues relating to the Escrow Agreement and that this justifies the application made to discharge the injunction some 3 and three-fourth years after it was first granted. Without such a change, it is recognised by GV that its application cannot succeed because such matters should have been raised long ago. It is in this context that the terms of paragraph 6 of my judgment of 16 November fall to be considered.

Serious Issue to be in tried

9. Considered in the abstract, it is not correct to say that, because a matter has not yet proceeded to trial, there is no serious issue to be tried. The Claimant set out, at paragraph 5.3 of its Skeleton Argument for return date, the underlying issues on the merits which were said to arise as follows:

10. Whatever points of law or construction arise in relation to the Escrow Agreement, which could establish that some areas of enquiry are or were outwith the remit of the Escrow Agent and could not affect its obligation to release the Documents, there are two areas of factual issues which, on any view of the Escrow Agreement, give rise to the need for determination by the Escrow Agent and, if necessary, by this Court, if disputed; namely those set out in paragraph 9.3 and 9.5 above. As at the return date in November 2017, this must have been obvious to GV and those represented by it, which was doubtless the reason for the acceptance that there were serious issues to be tried in relation to the Escrow Agreement, even if its provisions meant that the Escrow Agent was bound to release the Documents regardless of the questions raised in paragraphs 9.1 – 9.2 and 9.4 above (for which it could be seen that there were good arguable grounds. In these circumstances it is not necessary for me to set out the terms of clauses 4.4, 5.1, 5.4, 5.7, and 9 of the Escrow Agreement upon which GV relied and which the Claimant did not address.

11. GV submitted that, whatever happened in the Singapore Arbitration, and whether or not the Arbitration Tribunal in that arbitration (the “Tribunal”) decided in favour of the Claimant on the issues set out in paragraph 9.1, 9.2 and 9.4 above, the Escrow Agent would be bound to release the Documents. Even if it was shown in the arbitration that there had been no failure on the part of the Claimant to provide funding because no “Contractor” had been appointed and no funding obligations had arisen and that, in consequence, the Notice of Default was invalid and the LSD had not passed, the Escrow Agent had been and remained obliged to release the Documents by reason of the terms of the Escrow Agreement to which I have referred in the preceding paragraph of this Judgment. As discussed with Counsel, during the course of argument, it would stick in the gullet if the Escrow Agent was bound to release the Documents even though the whole basis upon which the obligation to do so has been shown to be groundless in the Arbitration, whatever the terms of the Escrow Agreement. Because of the factual matters which arise in relation to the evidence produced to the First Defendant, as referred to in paragraph 9.3 and 9.5 above and the obvious problem which arises in providing a confirmation from a Contractor who has not been appointed, there are obviously serious issues which remained to be tried in relation to the Escrow Agreement, regardless of the points of construction which GV advances.

12. There are also plainly serious issues to be tried with regard to the breaches of the JVA which are said to give rise to the Notice of Default, the validity of which the Escrow Agent is not, on GV’s construction of the Escrow Agreement, entitled to investigate, namely those which fall outside paragraph 9.3 and 9.5 above. They are said by GV not be serious issues to be tried in relation to the Escrow Agreement and the relief sought by the Claimant in the DIFC in the Claim Form, whether or not they are serious issues in relation to the JVA. Their inter- connection with the Escrow Agreement is however apparent on a cursory examination and it must be for this reason that the parties have, in the past, recognised the need to proceed to arbitration in Singapore for the resolution of such matters, whilst the proceedings in the DIFC Courts have not been pursued by either party.

13. The fact remains that the injunction will not continue indefinitely. Only the DIFC Courts can determine issues arising under the Escrow Agreement. Only this Court can discharge the injunction already made or order the release of the Documents to GV. The Tribunal will almost inevitably determine whether or not the Claimant was in breach of its funding obligations and whether GV was entitled to trigger the operation of the Escrow Agreement, but it is this Court, based upon any such findings, which will determine whether or not the Documents should be released. If GV is vindicated in the Singapore Arbitration, then it can come back to this Court and seek discharge of the injunction and an order that the Documents be released to it, if the Claimant disputes this. A decision of the Singapore Arbitration to this effect will therefore essentially be determinative. If, however, the arbitrators decide in favour of the Claimant, the grounds for GV seeking to exercise rights under the Escrow Agreement are cut away. GV could not then say, as against the Claimant, that it was entitled to serve the Notice of Default or that the LSD had passed. The idea that it could maintain the contrary, as against the First Defendant, with the Claimant able to point to the Tribunal’s Award, is fanciful.

14. If the Tribunal should decide that the JVA is at an end, whether by reason of the breaches of it by one party or the other, but not decide on the question of breach of the funding obligations, the question then arises as to what happens under the Escrow Agreement, where there is no express provision which deals with that eventuality. As to what should then happen, there is a serious issue to be tried which this Court would have to determine.

15. GV has attempt to find a way around this Court’s order by seeking to wind up the JV Company and by ostensibly terminating the Escrow Agreement on two occasions, on 25 October 2018 and 24 August 2020, in each case seeking to persuade the First Defendant to release the Documents. The First Defendant has refused to do so without the authorisation of this Court, demonstrating the need for this Court to make a determination of the rights and liabilities of the parties under the Escrow Agreement.

16. There is therefore, inevitably, a serious issue which this Court will have to determine in due course. Moreover, the question which arose in November 2017 as to the most efficient and economic way for matters to be decided between the parties, given the different jurisdiction clauses in the JVA and the Escrow Agreement has been clarified by the passage of time. With an arbitration award in view, and an injunction granted to preserve the status quo and holding the ring, it makes no sense to do anything other than maintain the injunction until an award is published which will determine the underlying rights of the parties to the JVA and is likely to be determinative of the parties’ rights under the Escrow Agreement.

17. Moreover, as appears below, there is no change of circumstances, which would permit GV now to raise the arguments which were open to it in November 2017 in relation to the question whether or not there were serious issues to be tried (and as appears below, whether damages is an adequate remedy).

Change of Circumstances

18. GV relies upon the absence of action in the DIFC proceedings in which the injunction was obtained and on the fact that the exact form of final relief sought in the Singapore Arbitration did not emerge until September 2020. It is said that it was only at the latter date that it became clear that no relief was being sought by the Claimant in the Singapore Arbitration in relation to the Escrow Agreement. It then became clear also that whatever the outcome of the arbitration, it had no bearing upon rights under the Escrow Agreement and its terms and that the DIFC injunction served no useful purpose.

19. GV submitted that the basis upon which the injunction was first given is not the basis upon which the Claimant has proceeded because it has not pursued substantive proceedings in the DIFC in relation to the Escrow Agreement. The injunction was never sought as an interim measure in support of the Singapore Arbitration under Article 24 of the Arbitration Law and, had it been sought, it could not have been granted on that basis by reason of the decision of the Court of Appeal in Dhir v Waterfront Property Investments Ltd 2009- CFI –011, where it was held that Article 24 (3) could not apply where DIFC was not the seat of the arbitration. However, the proceedings were brought primarily against the First Defendant as the Escrow Agent, because it was a registered DIFC entity and on the basis of the jurisdiction which I found was established in my judgment of 16 November 2017. The injunction was not in aid of a foreign arbitration as such but was granted on the basis that if the Notice of Default was invalid, whether because of the absence of appointment of a Contractor or otherwise, a matter which could be decided in the DIFC by agreement or in arbitration if there was no such agreement, GV would be shown as not entitled to trigger the release of the Documents under the Escrow Agreement. The injunction was therefore granted in relation to the order which this Court would make in relation to the Escrow Agreement, whether following a finding by it or by the Tribunal. Furthermore, as a matter of history, it was never submitted to this Court by GV that Article 24(3) precluded such an injunction from being granted, all since the only challenge made to the injunction was on the basis of the argument as to the jurisdiction of the onshore Dubai Courts as opposed to the DIFC.

20. At paragraph 13.1 of the Claimant’s Skeleton argument for the return date, having identified the underlying issues on the merits (see paragraph 9 above), the Claimant stated:

“SL [the Claimant] may seek:

21. It was thus made plain to the Court and to GV that the issues which had been identified could fall to be determined in either the DIFC or in the Singapore Arbitration. At that stage, prior to this Court’s decision as to jurisdiction, the issues could be decided in arbitration or in the DIFC or on-shore Dubai Courts, as matters within the jurisdiction clause in the Escrow Agreement, or as matters within the arbitration clause in the JVA. I decided that the jurisdiction clause resulted in matters under the Escrow Agreement being determined in the DIFC Courts whilst matters under the JVA would have to be determined in arbitration. Absent the agreement of the parties that one forum should determine all such matters, it was inevitable that there would have to be two sets of proceedings, despite the overlapping or interconnecting issues. It was clear at the return date that there were issues which arose under the JVA for which the Escrow Agreement made no express provision such as the dispute over the validity of the Notice of Default, the dispute whether a Contractor had been appointed and the question as to what funding obligations arose and when, all of which were interrelated and were matters which were logically antecedent to the operation of the Escrow Agreement itself and which, arguably, the Escrow Agent could not investigate under its terms. It was always, therefore, envisaged that such underlying issues would have to be resolved in the Singapore Arbitration, unless the parties agreed that they could be resolved in the Dubai proceedings.

22. The Claimant makes the point that there was no undertaking given, nor any obligation to pursue any issue in the DIFC in priority to the resolution of issues in the Singapore Arbitration. The disputes over funding, the appointment of a Contractor and the Notice of Default were self-evidently issues under the JVA but ones which impacted on the entitlement of GV to serve a Notice of Default and trigger the operation of the Escrow Agreement. There was therefore logic in such matters being determined in the Singapore Arbitration before any determination of rights under the Escrow Agreement.

23. At no time prior to this application by GV has it ever contended that the Court should determine the parties’ rights under the Escrow Agreement in isolation from the JVA by reference to the construction of the Escrow Agreement upon which it now relies. Nor did GV argue that the DIFC Courts should proceed to determine issues prior to the determination of issues in the Singapore Arbitration. This is no doubt because it recognised that there were disputes underpinning the triggering of the Escrow agreement which arose under the JVA which were intimately connected and which it made sense to determine first. To refrain from arguing what it now argues in the DIFC Courts, when those arguments could have been raised in November 2017 and which must obviously have been considered at the time, and to seek to do so when the issues under the JVA are within sight of resolution in arbitration, with an award due within 3 months of final submissions made in July 2021, calls for explanation and requires justification.

24. This course of conduct is not explained by the absence of any issue in the Singapore Arbitration raised by the Claimant relating to the Escrow Agreement as such. That was the inevitable result of its application to the DIFC Courts and my decision on jurisdiction. Although, it is interesting to note that GV itself raised issues in its counterclaim about such matters, before withdrawing them when required to put up a deposit, the distinct jurisdiction of the Tribunal and the Court was plain to all. GV asserted in the arbitration that it had complied with clause 4.3 of the Escrow Agreement and alleged that the Claimant had frustrated the operation of clause 4.3 (b). Those matters, withdrawn from the Tribunal, are now being canvassed by GV in a second arbitration, despite the jurisdiction clause in the Escrow Agreement and the Claimant’s objection in the form of a jurisdictional challenge which is yet to be determined.

25. It must, however, have always been obvious that the jurisdiction clause in the Escrow Agreement and the arbitration clause in the JVA gave rise to potential overlapping matters which could affect the entitlement of the parties under each agreement. From the moment that the Claimant set out its statement of case in the arbitration in November 2018, the relief which it sought was plain. GV did not need to see the Claimant’s final submissions in September 2020 in order to know that the Claimant was only seeking to have issues which arose under the JVA determined in the arbitration as opposed to those which arose under the Escrow Agreement. The Claimant was obviously seeking to have its rights under the JVA determined prior to coming back to this Court to determine rights under the Escrow Agreement.

26. For the same reason, GV’s course of conduct cannot be explained by any failure on the part of the Claimant to pursue the DIFC proceedings in relation to the substantive issues arising out of the Escrow Agreement itself. It was sufficiently clear from the Court’s approach in November 2017- January 2018 and the Claimant’s conduct in doing nothing in the DIFC Courts after service of the Claim Form, whilst maintaining the injunction in January 2018, that it was not actively pursuing claims in relation to the Escrow Agreement, either at the same time as, or in priority to, seeking resolution of the claims under the JVA in the Singapore Arbitration. It was, furthermore, at all times open to GV to seek relief in the DIFC Courts and to bring the substantive issues of construction of the Escrow Agreement before it for decision. It did not do so and has failed to give a good explanation as to why the arguments it raises now were not raised before.

27. In short, it is much too late for GV to come before this Court and ask for a determination of the proper construction of the Escrow Agreement as if that was the controlling issue, or to argue that there is no serious issue to be tried or that damages are an adequate remedy for the Claimant. There has been no material change of circumstances since it was open to GV to argue these points in November 2017. Even if that was not the case, the position was clear at the very latest, in January 2018 or when the Singapore Arbitration commenced and the Claimant’s statement of case was served in that arbitration. There is no material change of circumstances which can justify making the application at this very late stage when an arbitration award is in prospect which is likely, as the Claimant says, to determine the funding obligations of the Claimant and the question of alleged breach which underlies the Notice of Default which provided the trigger for the operation of the Escrow Agreement.

28. Had the points raised now been raised any earlier, in an application by GV, it is likely that the Court would have considered staying the DIFC proceedings and any such application pending the determination of the Singapore Arbitration because the matters to be determined there are antecedent to those arising under the Escrow Agreement which caters for different contingencies. Although the Notice of Default and some other disputed matters may not have been open to enquiry by the Escrow Agent, such matters fell for determination in the Arbitration and the Court would retain a discretion, as a matter of case management, to decide whether to determine issues under the Escrow Agreement prior to any arbitration decision on the JVA or to await the decision of the Tribunal. If GV had wished to press for the former, it could, at any time in the 3 and three-fourth years since the return date, have applied for that to happen and raised the point that such a course should be followed in the light of the terms of the Escrow Agreement and its proper construction. The fact that it has failed to do so until this Application when the arbitral decision is in sight, suggests that it is seeking some tactical or forensic advantage, having previously decided that the Singapore Arbitration should take its course first.

29. In my judgment, the absence of any material change of circumstances is sufficient, in itself to dispose of GV’s applications. The injunction holds the ring pending the determination of the claim made in respect of the Escrow Agreement, which itself awaits the determination of the underlying rights by the Tribunal in the Singapore Arbitration.

Damages as an adequate remedy and Balance of Convenience/ Harm/Prejudice

30. As stated already, it cannot properly be said that there has been a material change of circumstances which entitles GV to pursue the course it has now adopted, and its reliance upon the submission that damages represent an adequate remedy is neither open to it at this stage, nor could it lead to discharge of the injunction, even if it stood alone.

31. GV submits that, because the relief sought by the Claimant is of a declaration of rightful termination of the JVA, and for damages consisting either of lost profits which would have been achieved had the joint venture proceeded to completion, or of wasted expenditure in its contributions to the JV Company, it is now clear, where it was not before, that damages are an adequate remedy. No claim is maintained in the Singapore Arbitration for specific performance of the JVA nor relief sought in relation to the shares in the JV Company. There is no proprietary claim in respect of the shareholding in the JV Company nor therefore in the land held by it which, on the evidence, is worth some AED 157.1 million as at 14 February 2021.

32. Yet the current status quo is that the Claimant owns shares in the JV Company and a claim for damages does not result in the forfeiture of those shares. As matters stand, the shares are of value, because of the value of the land, despite the evidence showing that the JV Company is indebted to the tune of approximately AED 61.1 million and has been in that situation since 2017. The real question is not whether the Claimant can be adequately compensated in damages for breach of the JVA but whether it can be adequately compensated in damages for loss of the ownership of the shares under the Escrow Agreement. The value of shares in a private company and a company of the kind in question with development potential is notoriously hard to quantify, with all the complications arising from the dispute itself to be taken into account.

33. The effect of discharging the injunction could well be that the First Defendant decides to release the Documents to GV on the basis that it is not entitled to enquire into the matters set out in paragraph 9.1 – 2 and 9.4 above and of a determination in relation to the issues set out in paragraph 9.3 and 9.5 above. In such circumstances, since the Escrow Agreement and the Addendum provide for the transfer of such shares to GV, the Claimant would lose title to the shares and potentially, subject to any order sought in the arbitration, any control, through the Board of Directors, of the JV Company which would then be free to dissipate its assets, including the disposal of the land.

34. The reality is that the Tribunal will decide which party is in breach, but the exact boundaries of the decision cannot be predicted. The award due in October 2021 is on liability alone, rather than quantum of damage and whether or not the Claimant succeeds in its claim for lost profits or its alternative claim for wasted expenditure, it cannot be said with assurance that any damages awarded would inevitably mean that it was bound to give up its shareholding in the JV Company or that such shares would be rendered valueless. As already stated, a claim for compensatory damages does not inevitably mean that the shares are forfeit.

35. Neither party has made any claim in relation to the shares themselves in the arbitration. Each has claimed that it was entitled to terminate the JVA. The Claimant abandoned a claim that the JV Company should be wound up but GV has sought that remedy in DIFC proceedings, although it ultimately failed in that attempt. Exactly what the result of any finding of the Tribunal will be in relation to the JV Company and its shares remains uncertain. It cannot simply be said that damages are an adequate remedy when the Claimant has a continuing interest in the shares of the JV Company and might continue to have such an interest after an award has been made by the Tribunal. The shares remain an asset of the Claimant and the question arises as to the result of a release of the Documents to GV and a subsequent finding that they should not have been released. At that point, seeking to quantify the damages in respect of the loss of shares in the JV Company would be fraught with difficulty.

36. Whether the point arises in the context of damages as an adequate remedy or in the context of balance of harm, it is clear that there is real difficulty in quantifying the value of the shares and, as the purpose of the injunction is to hold the ring between the parties until determination of the underlying rights under the JVA which in themselves may determine the parties’ respective rights under the Escrow Agreement, I do not consider that the Claimant’s cumulative rights under the Escrow Agreement and the JVA and necessarily be compensated by an award of damages alone. If an award of damages was to be made to the Claimant but remained unpaid, it plainly would not be compensated for the loss of the shares, even if their value was sufficiently capable of quantification.

37. On the other side of the fence, when considering the balance of convenience/harm, the prejudice to GV if the injunction is continued is nebulous. It is said that if the injunction is discharged and an order made for release of the Documents, GV could mitigate the damage which it is now suffering and would thus acquire control of the JV Company and could develop the land which it owns. Nothing specific is said by GV as to the steps it would wish to take which it cannot now take. Self-evidently, GV has only to act reasonably to mitigate and cannot claim for avoidable loss and the current situation is one in which the land cannot be developed pending the decision of the Tribunal. If any attempt were made to develop the land, it is inevitable that an application would be made to the Tribunal to prevent this pending the determination of the rights and liabilities of the parties in the Singapore Arbitration. The reality is that the land cannot be developed until the deadlock created by the parties’ dispute is resolved by the Tribunal. The loss of the shares would result in the control of the JV Company passing to GV which would pre-empt the decisions to be taken in the Singapore Arbitration in relation to the JVA and allegations of breach by each party of it, which are said to be causative of the deadlock.

38. There is therefore no real change in the balance of convenience/balance of harm/prejudice since the original injunction was made.

Conclusion

39. in the circumstances, and for these reasons, I declined to discharge the injunction or to make any order in relation to the release of the Documents. Any decision of this Court on the substantive rights of the parties under the Escrow Agreement should await the Tribunal’s decision on liability under the JVA and, in order to formalise that, these proceedings should be stayed pending the issue of the Tribunal’s Award on liability and any further order of this Court, with liberty to the parties to apply. The latter liberty enables the parties to come back before the Court in the event that the Tribunal’s award on liability does not resolve the underlying issues or to agree a consent order based on that award.

40. As GV’s application have failed, costs must follow the event which means that the Claimant is entitled to the costs of the application to be the subject of assessment if not agreed.