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Claim No. CFI 055/2018

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

CATERPILLAR FINANCIAL SERVICES (DUBAI) LIMITED

Claimant

and

(1) NATIONAL GULF CONSTRUCTIONS LLC
(2) NATIONAL GULF INVESTMENT LLC

Defendant

ORDER WITH REASONS OF H.E. JUSTICE OMAR AL MUHAIRI

UPON reviewing the Defendant’s Application Notice CFI-055-2018/2 dated 5 March 2019 (the “Application”) requesting the Court to set aside the Default Judgment of Judicial Officer Nassir Al Nasser dated 8 November 2018

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a Hearing held on 30 April 2019

AND IN ACCORDANCE WITH Rule 14.2.2 of the Rules of the DIFC Courts (the “RDC”)

IT IS HEREBY ORDERED THAT:

1. The Default Judgment of Judicial Officer Nassir Al Nasser dated 8 November 2018 be set aside.

2. The Defendant is permitted to file a Statement of Defence within 28 days of service of this Order.

3. Costs shall be costs in the case.

Issued by:
Ayesha Bin Kalban
Assistant Registrar
Date of Issue: 14 May 2019
At: 10am

SCHEDULE OF REASONS

Summary

1. Before this Court is an application made on behalf of Caterpillar Financial Services (Dubai) Limited (the “Applicant”) to request the default judgment of Judicial Officer Nassir Al Nasser dated 8 November 2018 (the “Default Judgment”) to be set aside.

2. The Default Judgment was made on the basis that National Gulf Constructions LLC and National Gulf Investments LLC (the “Defendants”) had failed to file an acknowledgement of service or a defense to the claim (or any part of the claim) within the relevant timeframe, pursuant to RDC 13.4. Subsequently, the Defendants were ordered to pay the Claimant the amount of USD 12,022,847.23 within 14 days. Now the Defendants seek to have the Default Judgment set aside.

3. I find, pursuant to RDC 14.2.2, good reasons why the Default Judgment should be set aside. The legal reasoning of my findings are set out in full below.

Background

4. This dispute concerns loans and security agreements which were entered into by the parties in order to facilitate the Defendant’s purchase of Caterpillar equipment, the purchase price of which was payable via monthly installments.

5. The Defendants are a family business in the UAE and Saudi Arabia dealing in construction, transportation, asphalt, concrete blocks and interlock manufacturing, run predominantly by a Mr Nasser Ali Yaslman Hassan and Mr Maher Ali Yaslam Hassan. The company employs over 700 people and have assets in excess of USD 220 million, however in the first quarter of 2017, it ran into financial trouble. Following the death of the founding father of the company, bank facilities and assets were frozen by the Dubai Courts.

6. Consequently, the Defendants defaulted on the agreed payment terms and problems between the two parties began. On 17 June 2017, the Claimant and the Defendants entered into a revised contract which provided for a restructuring of the Defendants’ previous payment terms, allowing for a 3-month ‘pause’ from payments between March to August 2017. However, the Defendants failed to pay the monies as per the revised agreement, or indeed make any payment, and subsequently, on 5 March 2018 the Claimant repossessed 6 vehicles from the Defendants. (Whether this was a voluntary repossession is in dispute between the parties, though of no great weight here).

7. Promptly on 6 August 2018, the Claimant filed a Claim Form against the Defendant for the sum of USD 5,047,091.11. With legal fees, the total amount claimed amounted to USD 5,383.222.48. Notably, on 8 August the claim form was amended by the Claimant to include the address of the Defendant at an address in Dubai named AI Masraf Tower. Thereafter, on 9 August 2018 the Claimant filed a certificate of service stating that the claim form was served at the office of the Defendants at AI Masraf Tower. The acknowledgment due date for the claim form was 23 August 2018 however the Defendants denied receiving the claim form.

8. On 26 August 2018 the Claimant filed an application for default judgment and on 30 August 2018 this form was amended to the sum of USD 11,512,487.26. Thereafter, on 16 October 2018, the Claimant filed a certificate of service stating that the amended claim form was served on the Defendants at AI Masraf Tower. The acknowledgment due date for the amended claim form was 30 October 2018. However, the Defendants denied ever having received the amended claim form.

9. This issue of service is of contention, as on the Defendants’ account, they never received service and therefore have never been given opportunity to properly and justly defend the claim.

10. It should also be mentioned that on 29 October 2018, the Claimant filed a claim with the Dubai Civil Court, case no. 2321/2018. Two days later, on 31 October 2018, the Claimant filed the request for default judgment in the DIFC Courts. Accordingly, on 20 January 2019, the Defendants received a summons from the Dubai Civil Court to enforce payment of the Default Judgment issued by the DIFC Courts in this Claim.

11. The Defendant’s now seek that the Default Judgement to be set aside. Both parties’ submissions in regard to this application are summarised below. Though by virtue of being summaries, such are clearly not a comprehensive reproduction of both parties’ arguments, but rather serve to outline the position of Caterpillar Financial Services (the Applicant), and National Gulf Constructions LLC and National Gulf Investments LLC (the Defendants), respectively.

The Claimant’s position

12. On the Claimant’s account, the heavy equipment vehicles and generators manufactured by Caterpillar were sold to a Mohamed Abdulrahman Al Bahar LLC (“Al Bahar LLC”), an independent dealer in the UAE of products manufactured by Caterpillar. Thereafter, Al Bahar LLC sold said vehicles to the Defendants, who were offered the option to finance the purchase(s) via monthly instalments.

13. The Claimant contends there were originally 24 loan agreements, as well as additional ancillary security agreements. The Claimant argues that out of the 24 agreements, only one has been settled in full. The Claimant states that the Defendant’s are co-borrowers in respect of 10 of the 23 loan agreements, and the First Defendant is the sole borrower in respect of the remaining 13 loan agreements, for which the Second Defendant is a cooperate guarantor.

14. Due to the failure of the Defendants to make payment, legal notices were sent to the them on 17 December 2018 and 13 February 2018. On the Claimant’s account, the Defendants then voluntarily returned 6 of the vehicles to Al Bahar LLC in a last bid to reduce its outstanding liability. This allegedly voluntary repossession took place on 11 -14 March 2018. However, the transfer of titles took place between 14 August 2018 to 14 October 2018. There is a dispute in this regard relating specifically to the valuation of the vehicles.

15. In terms of the quantum, the Claimant alleges the Defendant ‘grossly exaggerated’ the value of the vehicles in question. Indeed, at paragraph 22 of its skeleton argument the Claimant states the original purchase price in question was USD 2,571,887 and thus the Claimant infers that the Defendant’s suggestion that the vehicles should have been valued at USD 3,500,000 is nonsensical.

16. The Claimant contends that only 3 of the 6 vehicles have been sold thus far and that the Defendants owe a significant sum of USD 11,395,298.42 at the date of the first skeleton argument.

17. The Claimant dismisses the Defendant’s application to set aside the Default Judgment on the grounds that ‘it is not in the interests of justice that the Defendants be allowed to defend the claim’ as they state at paragraph 28 of their skeleton argument, the Defendants were ‘duly served in accordance with RDC 9.3’ yet failed to file an acknowledgement of service (as per RDC part 11). They argue that the Defendant’s case is without merit and is unlikely to have any real prospect of success.

18. Consequently, the Claimant requests that the application to set aside the Default Judgment is dismissed. The Claimant furthermore asks the Court to order the Defendant’s return of the remainder of the vehicles to Al Bahar LLC, as well as the transfer of the ownership subject to the loan agreements. It is the Claimant’s position that should the Defendant be required to privately sell said vehicles in order to recover the sums due, that it should do so promptly, and the sums generated be paid to the Claimant, by way of repaying the alleged amount due in the sum of USD 11,395,298.42.

The Defendant’s position

19. The Defendant’s position is that the amount and interest awarded in the Default Judgment are incorrect and do not reflect the true value of the vehicles repossessed. Pursuant to RDC 14.2, the Defendant seeks the Default Judgment to be set aside on the following grounds; it believes they have a real prospect of successfully defending the claim and/or; the Court has a good reason for the judgment to be set aside or varied and indeed they should be allowed to defend the claim - which, in their submissions was an opportunity that the Defendant contends they simply did not have in the first instance.

20. The Defendants state that the amount owed by them to the Claimant is significantly lower than the sum of USD 12,022,847.23 awarded in Default Judgment and suggest in their Application Notice that a ‘proper evaluation of the merits of the Defendants’ defence at trial will significantly reduce the amount due to the Claimant’.

21. On the Defendants’ account, they first became aware of the DIFC Courts proceedings only after they were notified of the existence of the Default Judgment. They received an execution summons from the Dubai Courts on 20 January 2019. Thereafter, on 28 January 2019 they met with lawyers and began collating documents to support an application to set aside the Default Judgment. On their account, this goes some way to explaining the gap between the date of the Default Judgment and the date of their Application Notice.

22. The Defendants argue in their application that they were ‘never on an equal footing’ with the Claimants as they allege the Claimant ‘withheld material information whilst filing the claim and in the course of the proceedings’.

23. The Defendants also challenge the jurisdiction of the DIFC Courts in hearing this dispute. They argue that the application for Default Judgment was filed on 31 October 2018 and the Claimant failed to disclose that it had begun parallel proceedings in the Dubai Courts. They allege that the Claimant specifically opted out of the jurisdiction of the DIFC Courts in accordance with Article 13(1) of DIFC Law No (10) of 2005 as is evident from clause 10 of the agreement entered into between the parties.

Discussion

24. First and foremost, when assessing an application to set aside a Default Judgment, it is imperative to keep in mind the standard of review required. As RDC 14.1 states:

25. In this case, it is clear that the requirements for RDC 14.1 are not met and therefore this is not a simple case where the Court must set aside the Default Judgment.

26. Rather, this is a case in which the Court may still set aside or vary the Default Judgment pursuant to RDC 14.2, which provides for alternative methods of recourse; in the event the Defendant has a real prospect of successfully defending the claim; there is some other good reason why the Order should be set aside or varied; or when there is some other good reason why the Defendant should be allowed to defend the claim.

27. In the application of RDC 14.2 it must be kept in mind that, when considering whether to set aside or vary a judgment entered under Part 13, pursuant to RDC 14.3, the Court must have regard as to whether the person seeking to set aside the judgment made its application promptly.

28. Therefore, the timeliness (or indeed any lack of) in the making of this Application is particularly pertinent. It is notable that on the Defendants’ account they first became aware of the DIFC Court proceedings only after they were notified of the existence of the Default Judgment. If indeed they did receive an execution summons from the Dubai Courts on 20 January 2019 and met with lawyers on 28 January 2019 to collate documents to support this Application, then on their account they have indeed made efforts to prepare for and file this Application promptly.

29. Therefore, whilst it is clear on the dates that the Defendant took a seemingly considerable amount of time from discovering the proceedings until filing its application, I do not find this timeframe significant enough to preclude the Defendant from being successful on its Application. It is my view that the delay should not bar further consideration of the Defendant’s Application, particularly in light of the Defendant’s argument that they never received service of the claim form(s).

30. If we take a close look at the timeline of events, it is notable that the original claim form was filed an on 6 August 2018, and 2 days later was amended by the Claimant to include the address of the Defendant at an address in Dubai named AI Masraf Tower. One day later, on 9 August 2018, the Claimant filed a certificate of service stating that the Claim Form had been served at the office of the Defendants at AI Masraf Tower. The acknowledgment due date for the Claim Form was 23 August 2018. On 26 August 2018, the Claimant filed a request for default judgment and on 30 August 2018, this form was amended. Thereafter, on 16 October 2018 the Claimant filed a certificate of service stating that the amended Claim Form was served on the Defendants at AI Masraf Tower. The acknowledgment due date for the amended Claim Form was 30 October 2018.

31. The Defendants denied having ever received the Claim Form(s), and therefore, on their account, never had the opportunity to defend the claim. They argue they were ‘never on an equal footing’ with the Claimant as they allege in the Application Notice that the Claimant ‘withheld material information whilst filing the claim and in the course of the proceedings’.

32. Clearly, the service of the Claim form that is of prime importance in this case. From reconsidering the timeline of events, and indeed from hearing both parties’ submissions at the hearing of 30 April 2019, I find it highly improbable that the Defendants would have entirely ignored the Claim Forms had they in fact received them. I find it much more probable that they are truthful in their account and they in fact only found out about these proceedings after the issuing of the Default Judgment. I cannot make a judgment in terms of the allegation that the Claimant’s withheld material from the Defendants, but I do find that, for whatever reason, the Defendant was unlikely served with the Claim Form(s) and therefore, by virtue of their lack of knowledge of the proceedings, was never given the chance to defend the claim.

33. Therefore, in my assessment of the Defendants’ application, pursuant to RDC 14.2.2, I find it appropriate to grant the Defendants’ Application to set aside the Default Judgment. It appears to the Court that there is a very good reason why the judgment should be set aside or varied; and/or the Defendant should be allowed to defend the claim. This reason is clear; that the Defendant should be allowed the opportunity to defend the claim.

34. Having already given my reasons in the primary case in favour of the Defendants, as an aside I would like to raise the issue of the Defendant’s brief mention that the DIFC Courts do not have jurisdiction to hear this claim, an argument which I note the Defendants have not pursued further in subsequent submissions. As I have already determined to set aside the Default Judgment based upon the above reasoning, it is unnecessary to discuss this argument further at this time, however I would like to state that in any event, it is clear to me that the DIFC Courts do in fact have jurisdiction over the matter due to both the Claimant’s geographical location within the DIFC and indeed the jurisdiction clauses in the contracts governing the dispute between the parties.

Conclusion

35. For the reasons given above, pursuant to RDC 14.2.2, I order the Default Judgment of Judicial Officer Nassir Al Nasser dated 8 November 2018 to be set aside, with costs in the case.