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Claim No. CFI 059/2020

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

FIX SENSE MANAGEMENT LLC

Claimant

and

(1) SUNSET HOSPITALITY HOLDINGS LIMITED
(2) SUNSET HOSPITALITY GROUP HOLDINGS LIMITED

Defendants

ORDER WITH REASONS OF JUSTICE SIR JEREMY COOKE

UPON the judgment of Justice Sir Jeremy Cooke dated 10 January 2021 (the “Judgment”)

AND UPON reviewing the Claimant’s Appeal Notice filed on 27 January 2021 against the Judgment (the “Permission Application”)

AND UPON reviewing the Defendants’ written submissions in opposition to the Permission Application dated 24 February 2021

AND UPON reviewing the relevant documents on the Court’s file

IT IS HEREBY OREDERED THAT:

1. The Permission Application be dismissed.

2. The Claimant shall pay the costs of the Permission Application on the standard basis, to be assessed by a registrar if not agreed.

Issued by:
Ayesha Bin Kalban
Deputy Registrar
Date of issue: 16 March 2021
At: 3pm

SCHEDULE OF REASONS

Introduction

1. This is an application for permission to appeal against my Judgment of 10 January 2021 in which I dismissed the Claimant’s application for summary judgment on part of the claim in this suit. The Claimant sought an immediate declaration that the First Defendant (“Sunset RAK”) had unlawfully terminated the HOA dated 1 July 2016, summary judgment in respect of damages for non-payment of fees, an order for the transfer of a 2.5% shareholding in Sunset RAK and the striking out of a series of paragraphs in the defence of the two Defendants on the basis that they disclosed no reasonable grounds for defending the claim and/or were an abuse of process and were likely to obstruct the fair disposal of the proceedings. At paragraph 3 of my judgment, I described this as an optimistic application because some obvious factual issues arose in relation to the payments alleged to be due and the circumstances surrounding the arrangements between the parties and the termination of the HOA. It appeared to me then, as it appears to me now, that such matters are not capable of resolution without a trial at which full evidence can be heard and tested in cross examination.

2. Under the terms of RDC 44.19, permission to appeal is to be granted where the appeal has a real prospect of success or where there is some other compelling reason why the appeal should be heard. I do not consider that the grounds of appeal advanced have any realistic prospect of success nor that there is any other compelling reason for the appeal to be heard. There is no need for me to set out the authorities which define or illustrate what is meant by “a real prospect of success”, but the effect is clear that the case advanced must be more than merely arguable with a realistic, as opposed to a fanciful, prospect of success. I can see no other compelling reason for the matter to be heard by the Court of Appeal and the public policy issues which are said to arise militate in favour of detailed findings of fact on evidence which has been fully explored at a trial in order to set the context in which any public policy considerations can be considered. In my judgment, the application for a summary disposal of part of the claim and defence should have been seen at the outset as doomed to fail because of the factual disputes which required determination, quite apart from the misguided view taken of the effect of the cross- default clause and the difficult policy issues which may fall to be decided.

3. I turn to the individual grounds of appeal.

Ground 1

4. It is contended that the Court was wrong to ignore the authority of the United States Bankruptcy Court of New York in In Re Kopel on the application and enforceability of cross default clauses in commercial agreements. Amongst the multiplicity of arguments put forward as to the construction and application of the cross- default clause in the HOA, it was argued that such a clause had no real place in anything other than security documentation. Nonetheless, it was specifically accepted by the Claimant that, in principle, such clauses could apply to other commercial contracts, albeit subject to some undefined limits. As I stated at paragraph 31 of the judgement, no relevant authority was cited in support of such a proposition in respect of a clause which, to my mind was clear and unambiguous, despite its infelicitous syntax. I referred to the reliance placed by the Claimant on New York cases relating to insolvency, which included In Re Kopel, which in itself is illustrative of the special considerations which apply in the context of insolvency when reliance is placed on cross default clauses where otherwise the bankruptcy rules of set off would not apply. That appears from the paragraph cited in paragraph 55 of the Claimant’s skeleton argument. It was suggested at the hearing by the Claimant that the clause under consideration in the HOA was in itself unconscionable and disproportionate, whereas the New York decision appear now to be cited for the proposition that the cross defaulted agreements must be interrelated or form part of a single integrated transaction. On any view, as set out in my judgment, the agreements which are the subject of dispute here are all closely interrelated although the exact nature of that relationship is in dispute. The reality is that any question of unconscionability, disproportionality and interrelationship in relation to these agreements and the cross-default provision is a fact sensitive issue and there is no clear issue of principle or law relating to such clauses which could justify a summary determination on the inapplicability of that clause in the HOA to the alleged breaches of the Nominee Agreements. This ground of appeal has no real prospect of success.

Ground 2

5. The argument put forward here is that the cross-default clause “kills” the HOA because, under the Nominee Agreements, Ms Al Herz can be directed to transfer her 51% shareholdings in Brick Oven and Black Tap whereas the HOA requires her to render nominee services and to hold such shareholdings as a nominee owner. Since the HOA is, at least on the Defendants’ case, an umbrella agreement which can apply to other shareholdings, the point as to the inconsistency of the agreements goes nowhere and the existence of the cross- default clause means, if it is valid, that a repudiation of the Nominee Agreements is likely to amount to a repudiation of the HOA. There is no “killer point” here which destroys the arguable validity of each of the agreements and the clause.

Ground 3

6. The Claimant contends that the Nominee Agreements are void for uncertainty because there was no agreement on price. This was one of a number of arguments put forward as to why the Nominee Agreements were said to be invalid. Each of the agreements is clear in its own terms as to the fees payable. There is nothing uncertain about that, whatever reliance may be placed on an email attaching a draft and stating that the figure in one of the Nominee Agreements was symbolic. Whether or not the parties envisaged a further agreement being made in the future is nothing to the point when considering whether there is any uncertainty in the existing agreements as to the fees payable. Furthermore, the fact of performance militates against any suggestion of voidness for uncertainty. Whether or not there is any inconsistency with the HOA provisions and whether or not the fees were actually paid raises different issues which can only be determined at trial. There was no basis for any summary finding here which would have assisted the Claimant.

Ground 4

7. At the root of many of the Claimant’s arguments was the surprising proposition that a cross-default clause had no application to contracts which were not between identical parties. On a proper construction of the cross default-clause in question, there can, in my mind, be no doubt as to its applicable to the Nominee agreements because of Ms Al Herz’ shareholding in the Claimant. The absence of privity between her and Sunset RAK and any guarantee by her of the Claimant’s obligations under the HOA is irrelevant and, as expressed in the judgement, this argument is doomed to fail on the basis of the cross-default clause itself, if it is valid. There is again no issue here which can be determined on a summary basis which would assist the Claimant.

Ground 5

8. The final ground advanced raises the critical question of public policy. It is self-evident that the direction to transfer the nominee shareholdings to another UAE entity does not fall foul of the policy. The fundamental issue is whether the whole or part of the arrangements constituted or contemplated by the HOA, the Shareholders Agreement and the Nominee Agreements are unenforceable by reason of Article 10 (1) of the UAE Commercial Companies Law. That is by no means a straightforward question and one which requires full evidence and findings of fact as to the true nature of the interrelationship of all the relevant entities and the different agreements in order to ascertain how any principles of public policy might apply, as set out in paragraph 16 – 18 my judgement. As appears from the terms of the HOA and the Nominee Agreements, which expressly referred to the need for compliance with the UAE laws on foreign ownership of UAE companies, difficult questions arise as to the consequences of any finding of illegality or public policy in relation to the differing provisions of the various agreements. It would be wholly inappropriate to determine any issues of illegality and public policy without full consideration of all the relevant facts and circumstances, which can only be done at trial.

Conclusion

9. In my judgment, not only was the application for summary determination optimistic and ambitious but this application for permission to appeal is even more so. The Defendants have a realistic prospect of showing that the HOA was terminated pursuant to the cross-default clause following Ms Al Herz’ failure to comply with her obligations under the Nominee Agreements and none of the grounds raised has any prospect of success on appeal. There are, additionally, compelling reasons why this matter should go to trial, subject only to whatever decisions the Court of Appeal may reach in the related litigation in CFI – 024 –2020.

10. The application must be dismissed, and the Claimant must pay the costs of the application, such costs to be the subject of assessment by a registrar if not agreed.