April 29, 2021 court of first instance - Orders
Claim No: CFI 055/2020
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
AJAY SETHI
Applicant/Defendant
and
NS INVESTMENTS LIMITED
Respondent/Claimant
ORDER WITH REASONS OF H.E JUSTICE ALI AL MADHANI
UPON the Claimant’s claim filed on 28 June 2020
AND UPON the Claimant serving the Claim Form on the Defendant at his residential address on 6 July 2020 and on his lawyers on 8 July 2020
AND UPON the Defendant failing to file and serve an Acknowledgment of Service
AND UPON the Claimant’s request for default judgment filed on 27 August 2020
AND UPON the Order Judicial Officer Nassir Al Nasser dated 1 September 2020 granting default judgment (the “Judgment”)
AND UPON reviewing the Defendant’s Application No. CFI-055-2020/1 dated 21 September 2020 requesting to set aside the Judgment (the “Application”)
AND UPON hearing counsel for the Claimant and counsel for the Defendant at a hearing on 9 December 2020
AND UPON reviewing the submissions of the parties in respect of the Application
AND UPON reviewing the relevant documents on the Court’s file
IT IS HEREBY ORDERED:
1. The Application is denied.
2. The Judgment is upheld.
3. The Defendant to pay the Claimant its costs of the Application on the standard basis, to be assessed by a Registrar, if not agreed.
Issued by:
Nour Hineidi
Registrar
Date of issue: 29 April 2021
At: 2pm
SCHEDULE OF REASONS
Introduction
1. The Defendant (“Mr Sethi”) made the Application to set aside the Judgment entered against him on 1 September 2020.
Background
2. On 2 July 2019, the Claimant (“NS Investments”) entered into a loan agreement with Mr Sethi to advance the sum of USD 1,298,977 (the “Loan Agreement”) (the “Loan”). Mr Sethi acknowledged receipt of the loan amount in the Loan Agreement and by way of an email of 4 July 2019.
4. Interest during the Loan Period was to be charged at 24% per annum (clause 1(b)) (the “Loan Period Interest”). In the event that the Loan and Loan Period Interest were not repaid at the end of the Loan Period, the parties agreed that default interest would be charged at the rate of 36% from 3 September 2019 until payment in full (clause 1(b)) (the “Default Interest”).
5. As is reflected in clause 5 of the Loan Agreement, Mr Sethi issued a security cheque in the sum of AED 5,000,000 and provided this to NS Investments (the “Security Cheque”): in the event that payment in full was not made by 3 September 2019, the parties agreed that the cheque could be presented and, upon encashment, the outstanding sums reduced accordingly.
6. The parties agreed that the Loan Agreement was subject to the exclusive jurisdiction of the DIFC Courts (clause 3). There is no express choice of law.
7. On 3 September 2019, Mr Sethi made a payment of AED 150,000 to NS Investments. The purpose of the payment was recorded on the transfer documents as “[t]owards interest payments.” Other than this amount, Mr Sethi failed to repay the Loan in accordance with the terms of the Loan Agreement.
8. On 3 September 2019, Mr Sethi made a payment of AED 35,000 to NS Investments. The purpose of the payment was recorded on the transfer documents as “[t]owards balance amount of interest payments.”
9. Other than these amount, Mr Sethi failed to repay the Loan in accordance with the terms of the Loan Agreement.
10. On 29 September 2019, NS Investments deposited the Security Cheque at Emirates NBD Bank. The Security Cheque was returned to NS Investments because Mr Sethi had insufficient funds in his bank account. NS Investments wrote to inform Mr Sethi that the Security Cheque had been dishonoured and demanded payment within five days from the date of the notice.
11. No payment was made by Mr Sethi.
12. Criminal proceedings followed in which Mr Sethi was fined for issuing a security cheque which was dishonoured.
Procedural History
13. On 26 June 2020, following pre-action correspondence, NS Investments filed this claim.
14. The Claim Form was served on 6 July 2020 on Mr Sethi at his residential address in Dubai, UAE. Mr Sethi apparently refused to accept delivery by the courier, but the claim form and supporting documents were left at his last known address by a messenger from NS Investments’ solicitors, Clyde & Co.
15. On 7 July 2020, a Certificate of Service was filed by NS Investments in accordance with RDC 9.43.
16. On 8 July 2020, Clyde & Co also arranged for the claim documents to be served on Mr Sethi’s law firm, Zayed Al Shamsi Advocates and Legal Consultants.
17. Mr Sethi has not challenged valid service.
18. Mr Sethi wrote to Clyde & Co to state that “we have agreed the dates and time schedule specified by DIFC and our law firm shall be submitting as per procedures.”
19. In accordance with RDC 9.57, the period for acknowledgment of service where the Claim Form was served outside DIFC is 28 days after service. The deadline for filing an Acknowledgment of Service was therefore 3 August 2020. Under RDC 9.57, where Particulars of Claim are included with the claim form, the period for filing a defence is 45 days. The deadline for filing a defence was therefore 20 August 2020.
20. On 9 August 2020, Mr Sethi’s legal representatives submitted a “Reply Memo” by email to Clyde & Co and to the DIFC Courts Registry. This was not submitted through the e-portal or otherwise in accordance with the correct procedure, and, further, did not contain a Statement of Truth as required by RDCs 16.6 and 16.7.
21. On 10 August 2020, the DIFC Courts Registry responded, requesting that the reply be correctly submitted through the Court’s e-portal.
22. On 26 August 2020, NS Investments applied for the Default Judgment, which was granted on 1 September 2020.
23. On 20 September 2020, Mr Sethi, through his legal representatives, made this Application.
Discussion
24. By RDC 13.4:
The claimant may obtain judgment in default of an acknowledgment of service only if—
(1) the defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and
(2) the relevant time for doing so has expired.
25. By RDC 13.6(4), the claimant may not obtain a default judgment unless he has filed a certificate of service under RDC 9.43.
26. The Court’s power to set aside a default judgment is governed by RDCs 14.1 and 14.2. By RDC 14.1, the Court must set aside a judgment that was wrongly entered because any of the conditions in RDCs 13.6 and 13.4 were not satisfied. In all other cases, RDC r. 14.2 provides that the Court’s power to set aside a default judgment is discretionary, having regard to the following factors:
RDC 14.2
In any other case, the Court may, on such conditions as it sees fit, set aside or vary a judgment entered under Part 13 if:
(1) the defendant has a real prospect of successfully defending the claim; or
(2) it appears to the Court that there is some other good reason why:
(a) the judgment should be set aside or varied; or
(b) the defendant should be allowed to defend the claim.
27. So long as RDCs 13.4 and 13.6 have been complied with, a default judgment is a regular judgment of the Court. Accordingly, the Court is not obliged to set aside a judgment under Part 14.2, but may do so in its discretion. In Al Tamimi v Jorum Ltd & Anor [2016] DIFC CFI 028 (16 July 2017), the Court found that a “real prospect of success” meant that the Defendant must show that he has a “realistic” rather than a “fanciful” chance of success in order to justify setting aside the default judgment.
The Application
28. The Application is purported to be made under RDCs 14.1 and 14.2 i.e. Mr Sethi avers that the Judgment must be set aside and that it should be set aside, respectively.
The Judgment must be set aside (RDC r. 14.1)
29. No submissions have been made by Mr Sethi that support the Application insofar as it is made under RDC r. 14.1.
The Judgment should be set aside (RDC r. 14.2)
Does Mr Sethi have a real prospect of successfully defending the claim (RDC r. 14.2(1))
30. Mr Sethi submits that he has a “very cogent and Valid Defense against the claim made by the Claimant.” His defence is set out in a document entitled “Statement of Defence/Case by the Defendant” and dated 20 September 2020 (the “Defence”) which was filed with the Application. In the Defence, Mr Sethi advances four principal defences against the claim (“Defences 1, 2, 3 and 4”).
Defence 1
31. Mr Sethi’s first defence concerns the Security Cheque. In the Defence, he submits:
3. … The [cheque] no 401620 dated 09/03/2019 for 5 million dirhams drawn on Bank of Baroda in UAE subject to the agreement dated 20/07/2019 was submitted to the claimant as a guarantee and trust under the fifth clause of the loan agreement, which the claimant has acknowledged in the claim statement and Particulars of Claim. The said cheque was a security cheque.
4. This cheque for the amount of the loan plus the alleged default interest was based on a standing condition which is non- payment of the loan amount as per the above referred Clause 5 of the Loan Agreement. A copy of the said Agreement is produced herewith. (Please Soc Exhibit 1 - Loan Agreement dated 20:07/2019)
32. In written submissions, NS Investments has replied to Defence 1 as follows:
As to the cheque, it is recorded at clause 5 of the Loan Agreement that the cheque would be received by way of security and if full payment was not received within 60 days, the cheque would be deposited and the loan amount shall stand reduced by the amount shown on the cheque (VS1 page 3). The cheque was not honoured, as set out in the Particulars of Claim at paragraphs 15 to 18. Accordingly, the cheque has not satisfied all or any of the outstanding sums and NS Investments is entitled to pursue Mr Sethi for those (see further Surana 1 para 23). He has no real prospect of successfully defending the claim on this ground.
33. Defence 1 is not understood. By Defence 1, Mr Sethi appears to be describing the purpose of the Security Cheque, which is not itself a defence, and which is therefore dismissed. Indeed, to the extent the Security Cheque is of relevance, it is against Mr Sethi: in apparent breach of the Loan Agreement, the Security Cheque was not honoured.
Defence 2
34. Defence 2 concerns partial repayment of the Loan. In his Defence, Mr Sethi has pleaded:
5. … The defendant had paid substantial sums towards the loan account and such payments were transferred to the claimant's account, but they were not earmarked by the claimant in the Loan Account, and the loan amount was not reduced against the cheque amount in accordance with Clause (5) of the agreement.
6. The Defendant paid the Claimant large sums of the loan amount. On 3/9/2019, the Defendant paid from the account of his company (Channel 2) an amount of one hundred and fifty thousand dirhams (150,000) dirhams. Transfer confirmation slip of AED 150,000/- dated 3.9.2019 is produced. On 18/09/2019 the Appellant paid to the Appellee an amount of AED. 33,500/-. Transfer confirmation slip of AED 33,500/- dated 18.9.2019 is produced. In addition to the above other sums were also paid. Defendant submits that the Defendant has repaid total amount of AED 183500 /- , Court may appoint an Accounting Expert to verify the accounts.
(Please See Exhibit 2 - Transfer confirmation slip of AED 150,000- dated 3.9.2019 and Exhibit 3 - Transfer confirmation slip of AED 33,500- dated 18.9.2019)
7. It should be noted that as per the Loan Agreement the original amount of the loan is (1,298,977) dollars, which is equivalent to (4,760,750) Emirati dirhams, and the amount of (5) million dirhams in which the cheque was drawn up includes interest paying in advance with an amount of AED.239250. The amounts paid were not deducted also.
35. As to Defence 2, NS Investments has submitted as follows:
As to the sums paid, these are again expressly accounted for in the Particulars of Claim, at paragraph 14.2. Mr Sethi has paid a total of AED 183,500/USD 49,595. The sum claimed by way of Loan Period Interest (a total off USD 53,691 at 24% for the period 3 July – 3 September 2019) has been reduced to USD 4,096 in order to give credit to Mr Sethi for the sums paid. His own evidence shows that these sums were paid towards interest payment (see exhibit 2 to Defense Statement). In fact, Mr Sethi’s position in correspondence now appears to be that these sums were paid under a separate agreement which is subject to a claim in the English Courts (see Surana 1 para 25 and VS1 pg.7). If that was right, far from being a defence to this claim, Mr Sethi would in fact owe more than is being claimed. He therefore has no real prospect of successfully defending the claim on this ground.
36. By Defence 2, Mr Sethi submits that the claim against him has not been reduced to reflect repayments he has made against the Loan. He mentions and evidences two payments (totalling AED 185,500) and mentions without evidencing “other sums,” altogether totalling, he says, AED 185,500 (it has not been explained how the two evidenced payments and the other sums together total AED 185,500, in circumstances where the two evidence payments alone total AED 185,500).
37. In any event, as NS Investments has stated, the sums paid have been accounted for.
38. This defence is dismissed. I do not think Mr Sethi has a real prospect of successfully defending the claim with this defence.
Defence 3
39. As to Defence 3, Mr Sethi submits:
8. … The amount of the loan includes usurious interest that violates the laws of the United Arab Emirates, and it is obscene usury, which is forbidden in Shari's and law, and is punishable under Article 409 of the Federal Penal Code, where the claimant acknowledged in its lawsuit that the interest of the loan period is 24%, the default interest is 36%. Interest in violation of the legal interest in the UAE, which does not exceed 9%.
9. "It is judicially established that it is not permissible to calculate the compound interest, whatever the method of its calculation, and this prohibition is related to the public order as it is a form of usury that is forbidden according to Sharia"
10. Since that the dealing between the Parties in the loan agreement is a relationship of a personal loan and not a commercial one, thereby calculating the interest percentage included in the agreement is forbidden by law and is illegitimate and contrary to the public order, and therefore it is not permissible and it cannot exceed 9%.
11. The Claimant had previously submitted a request of "Performance Order" No. (3260/2019) before the Dubai First Instance Court, in relation to the cheque No. 401620 dated 03/09/2019 in the amount of 5 million dirhams (1,298,977 US dollars) drawn on Bank of Baroda in the United Arab Emirates, the subject of the loan agreement dated 20/7/2019, its claim was limited to the principal amount and the legal interest of 9% . The Copy of the Performance Order is produced.
(Please See Exhibit 4 Copy of the Performance Order dated)
12. Failure of the Claimant to claim the unlawful interests included in the loan agreement, when it applied for the "Performance Order", is waiver from the Appellee for these interests, which bars the Claimant from claiming the same before the Court of First Instance of the Courts of the Dubai International Financial Center.
40. In respect of Defence 3, NS Investments has submitted as follows:
Mr Sethi’s third complaint is as to the interest rate applied under the loan. Firstly, the law governing the Loan Agreement is DIFC law (see paragraph 11 of the Particulars of Claim) and so Mr Sethi has no real prospect of arguing that principles of Sharia forbid the interest claimed. In any event, Mr Sethi freely agreed to the interest rates in the Loan Agreement, which he negotiated and signed. Further, when Mr Sethi made payments to NS Investments as outlined in paragraph b above, he expressly did so “Towards interest payment” – see Exhibit 2 to Defense Statement. He has agreed and acknowledged that the interest rate is due and payable under the Loan Agreement and has already paid USD 49,595 towards the same. This alleged defence is therefore entirely inconsistent with Mr Sethi’s conduct, and he does not now have a real prospect of arguing it.
41. Mr Sethi’s defence in respect of the Loan Period Interest and the Default Interest relies on UAE law. Mr Sethi does not explain, however, the route by which UAE law applies in the DIFC. And he also avers that NS Investments has waived its right to the interest in question, having failed to claim it as part of a performance order sought from the Dubai Court. It is unclear whether Mr Sethi takes the position that, had NS Investments’ claim for Interest been included in its request for the performance order, its claim for the interest would have thereby been rendered permissible.
42. In any event, as NS Investments has submitted, Mr Sethi agreed to the interest rates and, moreover, he appears to have made partial payment of interest that had accrued. If any right has been waived, in my view it is Mr Sethi’s right to dispute the interest.
43. I note in passing that, had the Security Cheque been honoured, significantly less interest would have accrued and be continuing to accrue.
Defence 4
44. In respect of Defence 4, Mr Sethi avers:
13. … The defendant is entitled to the Right to Set off to the tune of AED. 10116000/- Equivalent to USD 2760163/- on account of the following [non-payment] of due payments to the defendant and deception practiced by the Claimant:
A;
1. ZILLI - USD. 1 Million- Equivalent to AED. 3678090/-
2. CVM - USD. 85000/- Equivalent to AED.3115250/-
3. RENT LOSS-AED. 3800000-.
4. FREE RENT- Equivalent to AED. 1400000-
5. VILLA- W43- DAMAGE LOSS- AED.2700000/-.
TOTLAL LOSS AED. 14693250/-
B:Interset paid in advance:
1. AED. 150090/-
2. AED. 33500-
3. AED. 239250/-
Total AED. 422750/- + AED. 14693250/- = AED. 15116000/-
( Please See the exhibit 5)
14. The claimant represented by its Manger Mr. Nirmal Sethia deceived the defendant by falsely representing and agreeing with the defendant to enter into a partnership in the business project for selling the products of the trade mark ( Zilli ) France brand in Abu Dhabi, up on condition that the claimant would pay an amount of 2 million US Dollars.
15. Claimant's manager Nirmal Sethia, took on rent the villa (villa No. W43, Emirates Hills) belonging to the defendant at an annual rent amount of 2.8 million dirhams (two million eight hundred thousand dirhams) . Up on the promise that Claimant would be his partner in Zilli project Abu Dhabi as aforementioned, the defendant did not receive from him rent for a period of 6 month for the aforementioned villa, and therefore that defendant is entitled to an amount of (1.4) million - (one million and four hundred thousand dirhams ), on this account.
16. The defendant also reduced the claimant's manger's rent for the villa for two years by an amount of (2.4) million dirhams - two million four hundred thousand dirhams. Therefore, the aggregate loss of the defendant as the result of the aforesaid false promises made to him by the claimant's manager was: 1.4+2.4=3.8 million dirhams - three million eight hundred dirhams.
17. In addition to amounts referred to above the manager of the claimant, Nirmal Sethia promised him that the partnership between them would take place on an investment project through CVM CO. with ADNOC Company- Abu Dhabi- and convinced him that his profits were 600% but he breached his promises and the project was not completed and Mr.Ziad Barakat their proposed third partner in this project shall be a witness to the all matters relating to this and Zilli, rent losses. The director of Nirmal Sethia Office Mr.Sanjay Maheshwari, also could be a witness to testify that the claimant's manager had promised and deceived the defendant as aforementioned. In addition to the defendant reducing his villa rent and providing free 6 months to the claimant's manager based on false promises and deceit made by the claimant's manager and the defendant is ready to retrieve and produce copies of the relevant emails and communications in this regard for verification of the Honorable Court.
18. The defendant also lost an amount equivalent to one million dollars to obtain the (Zilli) agency, but this amount has also gone unheeded as a result of the claimant's breach of promises and deception upon the defendant. The defendant had travelled a few times and met the owner of (Zilli) company in Paris and London which corroborates the case of the defendant.
19. There are emails and SMS messages exchanged between the defendant and the manager of the claimant Nirmal Sethia, to prove the repeated promises by the manager of the claimant to the defendant that the partnership between them would take place in several projects, including the (Zilli) project and the (CVM) ADNOC project, and also regarding providing free months and reduced payment of rent for the above mentioned villa to the manager of the claimant based on the false promises and deceit made by the manager of the claimant, and the defendant is ready to Produce copies of these letters and emails.
20. It would be in the interest of Justice to appoint an accounting expert to aid the Honorable Court in ascertaining the precise amounts which are to be set off against the loan amount.
45. In response to Defence 4, NS Investments submits:
These points are entirely irrelevant, incoherent and unevidenced (and on that ground alone, should be rejected). Insofar as NS Investments is able to understand and respond to them:
i. The allegation of alleged partnership relating to the Zilli brand, even if those facts were properly pleaded and evidenced, is manifestly nothing to do with the Loan Agreement. Paragraphs 13 to 19 do not even mention the Loan Agreement. Instead, it is alleged that NS Investments might owe sums relating to rent not charged on a villa, expenses outlaid in anticipation of the alleged partnership and, possibly, lost profits. That is an entirely separate set of facts and issues.
ii. NS Investments strongly denies such facts as are outlined in this section (see Surana 1, para 27). Mr Surana has made his own enquiries of Mr Sanjay Maheshwari, who is mentioned at paragraph 17 of the Defense Statement, who has confirmed in writing that the facts stated referring to him are incorrect (VS1 pg.8-10). The Court is entitled to reject Mr Sethi’s account.
iii. In any event, even were they true, the facts alleged do not disclose a defence to this claim. There is no plea that the Loan Agreement is not due and owing. Rather, Mr Sethi makes an entirely independent set of allegations which have nothing to do with this claim and appear to have been included simply to distract attention from the lack of defence to the Loan Agreement.
iv. Taken at their highest, at best paragraphs 13 to 17 advance an entirely separate potential claim against NS Investments, which as yet is unpleaded and unparticularised.
v. In Investment Group Private Ltd v Standard Chartered Bank [2018] DIFC CA 002 (17 July 2018), the Court of Appeal held that there must be an independent claim or counterclaim pleaded for judicial set-off to apply and that set-off is not otherwise a defence to a claim (in that case, the alleged set-off was no defence to an application for immediate judgment, in which a similar test of ‘no real prospect of successfully defending the claim’ applies). The Court of Appeal also observed that there can be no set-off if the counterclaim is not quantified and therefore not “indisputable, payable and known”.
vi. Likewise here, there is no independent claim or counterclaim put forward by Mr Sethi, still less one that is ‘undisputable, payable, and known’, and so the alleged set-off is no defence in law. Accordingly, he has no real prospects of successfully defending the claim on this ground.
vii. There is no injustice to Mr Sethi in this conclusion: if the matters alleged at paragraphs 13 to 19 of the Defense Statement do give him grounds to bring a claim against NS Investments in the DIFC Courts, that is a claim that he may (if advised) advance and the Default Judgment would not prevent him from doing so.
46. With respect, NS Investments’ reliance on Investment Group is misplaced. In that case, the requirement for a counterclaim or an independent claim arose under UAE law. In this case, DIFC law applies by way of Article 30 of DIFC Law No. 10 of 2004 which requires the DIFC Court to apply DIFC law ((1)(b)) in the absence, implicitly, of another law as agreed by the parties ((1)(d)), as is in the instant matter. DIFC law also applies by way of Article 6 of Dubai Law No. 12 of 2004, as amended, and Article 10 of DIFC Law No. 10 of 2005.
47. As to DIFC law, pursuant to RDC r. 17.33:
Where a defendant:
(1) contends he is entitled to money from the claimant ; and
(2) relies on this as a defence to the whole or part of the claim,
the contention may be included in the defence and set off against the claim, whether or not it is also a counterclaim. (emphasis added)
It was therefore unnecessary for Mr Sethi to have an independent claim in respect of the monies he alleges are owed to him by NS Investments in order for those amounts to be set off against NS Investments’ claim.
48. With that said, I agree with NS Investments when it says that the claims under Defence 4 are unevidenced and, on that ground, I reject them. Mr Sethi can of course make appropriate claims for the amounts he says are due to him from NS Investments. I do not see that there will be injustice if the instant claim is decided independently of any other claims that might be justified. Indeed, Mr Sethi has invited this approach.
Is there some good reason why the Judgment should be set aside or Mr Sethi should be allowed to defend the claim? (RDC r. 14.2(2))
49. Mr Sethi advances three arguments which speak to the proposition that there is some good reason why the Judgment should be set aside or that he should be allowed to defend the claim. These are as follows.
50. As to the first, in written submissions, in a document entitled “Application… For Setting Aside the Default Judgment” and dated 11 November 2020, Mr Sethi has argued:
4. The Defendant was suffering from a psychological depression owing to huge business losses and was struggling to cope with the setbacks especially in the wake of corona outbreak and therefore was not in a position and able to communicate with his Lawyers well in advance to arrange to file an Acknowledgment of Service or Defense. Still, in order to defend the false and distorted claim of the Claimant this Defendant managed to contact his Lawyers and brief them on and on 9:8:2020 a Memo was prepared by the Lawyers and the same was sent to the DIFC Court Registry and the Opposite Party at 6.15 pom, which was not acted upon.
5. As a matter of fact the above failure to file Acknowledgment of Service happened not because of any willful negligence or laches on the part of the Defendant but due to facts beyond his control. The Defendant has got strong and valid contentions in the Claim and, there is every chance of passing a Judgment in favour of the Defendant, in the event of the Defendant getting an opportunity to put forth his Defense and adduce Evidence.
51. As to the second and third argument, in his skeleton argument for the Application, Mr Sethi averred:
i) Suppression/Non-disclosure by the Claimant of the fact of receipt of Defense Statement of 9.8.2020
10. In an attempt to somehow procure a default judgment behind the back of the Defendant as stated above the Claimant suppressed the fact of receipt of Defense Statement of 9.8.2020 sent on behalf of the Defendant.
11. If at all such Defense was out of time, it showed Defendant's attempts to engage with the process and his bonafides. Any inadvertent defect/deficiencies in form, at the nascent stage of the proceeding and not prejudicial to the Claimant should not be fatal to the valuable right of the Defendant to put forth his legally available defenses against the claim. In this regard, In Moshreq Al Isiami Finance Company Pist v Bobar Rehman (CF1 016/2017) DIFC Court Speaking through H.E. Justice Omar Al Muhairi, in paragraphs 14 and 15 held as under:
"14. First, I must address the timeliness of the Application, pursuant to RDC 14.3. While It does seem that the Defendant took a considerable amount of time from discovering the proceedings until filing his Application, I do not find this time significant enough to preclude the Defendant from being successful on his Application. As was apparent from the Hearing held on 27 April 2018, his counsel had not properly sought audience rights before the DIFC Courts, seems unfamiliar with the rules of the DIFC Courts, and the Defendant lives at considerable distance. Furthermore, the Defendant did attempt to file a Defence in December 2017. While such Defence was out of time, it showed his attempts to engage with the process. Thus, it is my view that the delay should not bar further consideration of the Defendant's Application."
"15. Second, I will address the Defendant's alleged failure to support his Application with evidence, pursuant to RDC 14.4. It is true that the Defendant's Application does not take usual form. However, the Application Notice is accompanied by a signed Statement of Truth and the appended documents, while objected to in their form of submission by the Claimant, are not alleged false in any way. Therefore, I will accept the Defendant's Application in its current form with a note to Defendant's counsel to properly adhere to the DIFC Courts' rules in future."
Further, after review of the circumstances of the case the Learned Court found it appropriate to grant the Defendant's Application to Set Aside the Default Judgment observing that the Defendant had a real prospect of successfully defending the claim…
ii) The Claim Is filled promptly and No prejudice is caused to the Claimant
12. This Application is filed promptly. There is no malatides [sic] on the part of the Defendant. No delay would be caused and the Court could dispose off [sic] the case within the usual timeliness. Hence, no prejudice would be caused to the Claimant.
13. Natural Justice and the right to defend cannot be lightly denied to the Defendant. If this Application is not allowed, it would result in grave illegality and denial of Justice…
52. In written response to these submissions, NS Investments has argued:
27. Mr Sethi asserts, in paragraph 4 of his application, that he was not in a position to communicate with his lawyers to file an acknowledgment of service or defence because he was suffering from depression. However:
a. No medical evidence has been provided to support this contention, and Mr Surana’s evidence is that he met with Mr Sethi several times during that period, and Mr Sethi appeared to be in good health (Surana 1 para 18).
b. Even if it were true, Mr Sethi’s difficulties manifestly did not stop him from communicating with his lawyers as he managed to put together the ‘reply memorandum’ and send the same to the Registry. Mr Sethi also wrote to Mr Braganza of Clyde & Co to state that “we have agreed the dates and time schedule specified by DIFC and our law firm shall be submitting as per procedures” (page 6 of exhibit VS1). Mr Sethi was therefore not only well aware of the deadline and the need to comply with the Rules, he also represented to the Claimant that he would so comply. No explanation has been given by Mr Sethi or his lawyers as to why, in fact, they did not comply with the Registry’s directions.
c. Mr Sethi states, without explanation, that his failure to file an Acknowledgement of Service was “not because of willful negligence or laches on the part of the Defendant but due to facts beyond his control”. He has not provided any explanation of what those facts are, absent which, and in light of his previous communications with Clyde & Co, it does indeed appear that he wilfully [sic] neglected to do so.
d. He has not given any explanation, let alone a good one, as to why he did not comply with the Registrar’s directions to e-file his ‘reply memorandum’.
28. Accordingly, Mr Sethi has not acted with all due haste to comply with the Court’s rules and procedures; on the contrary, he has knowingly flouted them. It is respectfully submitted that he has not put forward any good reason why the Court should exercise its discretion in his favour.
53. Mr Sethi has accused NS Investments of failing to disclose that it had received its defence statement dated 9 August 2020 (in fact entitled “Reply Memo”) when applying for judgment in default of acknowledgment of service and defence. This is incorrect. NS Investments drew the Court’s attention to this submission at [25] of the First Affidavit of Nicholas Adam Braganza dated 26 August 2020, submitted in support of the said application.
54. As to Mr Sethi’s psychological condition during the relevant period, this may have meant that Mr Sethi was unable to fully engage with these proceedings, but the fact of the matter is that Mr Sethi had instructed lawyers at some time before the Reply Memo was completed on 9 August 2020. An acknowledgment of service was due on 3 August 2020. No explanation has been given as to why Mr Sethi was unable to file an acknowledgment of service by 3 August 2020 but his legal representatives were able to circulate the Reply Memo by 9 August 2020. Nor has any explanation been given as to why, notwithstanding the Registry’s request for him/his legal representatives to do so, the Reply Memo was not filed on the e-Registry.
55. In my view, Mr Sethi and/or his legal representatives have wilfully neglected these proceedings and the reasons given by Mr Sethi for missing the relevant deadlines do not in fact explain why they were missed. As such, along with my view that Mr Sethi has no reasonable prospect of successfully defending the claim, I also find that there is no other good reason why the Judgment should be set aside or Mr Sethi should be allowed to defend the claim. For me, Mr Sethi’s conduct warrants upholding the Judgment, and so I will do just that. And nor will this decision prevent Mr Sethi from making, if so advised, any claims against NS Investments that he decides that he should.
Conclusion
56. For the reasons given above, the Application is denied.
Costs
57. The general rule is that the unsuccessful party pays the costs of the successful party. I see no reason to depart from this rule. Mr Sethi is therefore ordered to pay NS Investments its costs of the Application, on the standard basis, to be assessed by a Registrar, if not agreed.
