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Claim No: CFI 070/2018

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

IDBI Bank Limited

Claimant

and

(1) Mabani Delma General Contracting Co LLC
(2) Heliopolis Electric Company LLC
(3) Mariam Ahmed Khaled Almeraikhi
(4) Delma Engineering Projects Company LLC
(5) Delma Emirates Diesel
(6) Delma Emirates General Transport
(7) Ahmed Khalil Khaled Almeraikhi
(8) Sherifa Ahmed Khalil Khaled Almeraikhi

Defendants

ORDER OF H.E JUSTICE SHAMLAN AL SAWALEHI

UPON the Claim Form dated 16 October 2018

AND UPON the Claimant’s application for default judgment against the First, Third, Fourth, Fifth, Sixth, Seventh and Eighth Defendants (the “Defendants”) dated 17 September 2019

AND UPON the default judgment of Judicial Officer Maha Al Mehairi against the Defendants dated 23 October 2019 (the “Judgment”)

AND UPON the application of the Defendants for the Judgment to be set aside (the “Application”)

AND UPON hearing counsel for the Defendants and counsel for the Claimant at the hearing held by way of teleconference on 14 September 2020

IT IS HEREBY ORDERED:

1. The Application is granted and the Judgment is set aside.

2. The Defendants shall pay the Claimant its costs of the Application on the indemnity basis, to be assessed by a Registrar if not agreed.

Issued by:
Nour Hineidi
Registrar
Date of Issue: 12 November 2020
Time: 2pm

SCHEDULE OF REASONS

Introduction

1. On 23 October 2019, Judgment was entered against the Defendants. The claim form in the proceedings had been served on these Defendants but they had not filed acknowledgments of service nor defences to the claim.

2. RDC r. 14.2 provides:

3. For the brief reasons given below, the Application is granted.

The Application

4. In order for the Court’s discretion under RDC r. 14.2 to be enlivened, at least one of either the requirements of RDC r. 14.2(1) and (2) must be satisfied. I will discuss the features of the case which demonstrate, on my finding, that each of the RDC r. 14.2 requirements are satisfied before explaining why I have decided to exercise the Court’s discretion in favour of the Defendants.

A real prospect of successfully defending the claim

5. The Claimant’s claim in these proceedings is for recovery of sums allegedly due under a facility agreement concluded with the First Defendant dated 31 May 2016 (the “Facility Agreement”) and under embedded and separate guarantee agreements dated 31 May 2016 (the “Guarantee Agreements”) in respect of a loan in the amount of USD 7 million.

6. The Second, Fourth, Fifth and Sixth Defendants are alleged to be guarantors under the Facility Agreement and under the Guarantee Agreements (“Corporate Guarantors”). The Third, Seventh and Eight Defendants are individuals and the main shareholders and signatories on behalf of the Corporate Guarantors and the First Defendant. They have each also provided personal guarantees under the Facility Agreement and the Guarantee Agreements (the “Personal Guarantors”).

7. The Personal Guarantors now plead that their signatures have been forged.

8. The Defendants in this Application instructed a leading forgery expert, Dr Ahmed Obaid Al Bah, certified with the UAE Ministry of Justice and Dubai Courts, to carry out a forensic review of several documents including the personal guarantee documents.

9. Dr Al Bah studied the Third, Seventh and Eight Defendants’ i.e. the Personal Guarantors’ signatures by observing those defendants signing several sample signatures in front of him. Dr Al Bah also considered a series of sample documents spanning an extended period of time. He compared those samples with high-resolution copies of the Guarantee Agreements and arrived at the following conclusion:

…I am of the opinion that the Disputed Signatures do not match the respective signatures of AKM, MKM and SKM (the 7th, 3rd and 8th defendants) and were clearly written by someone else…

10. The Claimant has submitted its own expert evidence which supports the view that the relevant signatures are indeed the Defendants’, but, in my judgment, this Application is not the correct forum in which to probe the conflicting expert evidence. Short of the Defendants’ evidence being demonstrated to be fanciful, I would be reluctant to weigh up contradicting evidence at this stage and instead prefer to review the merits the Defendants’ evidence in isolation to the extent possible in order to determine whether the requirement of RDC r. 14.2(1) has been satisfied.

11. A “real” prospect of defence means a “realistic” rather than “fanciful” prospect: Al Tamimi v Jorum Ltd & Anor [2016] DIFC CFI 038 (16 July 2017). Dr Al Bah, who is an expert with standing, has put his name to his opinion. If his opinion is found to be correct, the Defendants will have a defence to the claim. The mere existence of the opinion means, in my view, that the Defendants have a real prospect of successfully defending the claim.

A good reason why the Judgment should be set aside and the Defendants should be allowed to defend the claim

12. The following point, I think, gives additional support to the argument that the Judgment should be set aside. Given that the claim against the Second Defendant remains underway, there is a risk of inconsistences between the Judgment and any future judgments against or in favour of the Second Defendant. For me, this constitutes a good reason why, in addition to the Defendants having a real prospect of successfully defending the claim on account of Dr Al Bah’s expert opinion, the Judgment should be set aside and the Defendants should be allowed to defend the claim.

The Court’s discretion

13. For the reasons given above, in my judgment, the Court’s discretion to set aside the Judgment is enlivened.

14. RDC r. 14.3 provides:

In considering whether to set aside or vary a judgment entered under Part 13, the matters to which the Court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.

15. There is no formal time limit for applications to set aside judgment in default. An application must none the less be made promptly. Promptly implies “not that an applicant has been guilty of no needless delay whatever, but rather that he has acted with all reasonable celerity in the circumstances”: per Simon Brown LJ in Regency Rolls Ltd, David Eric Kemp v Murat Anthony Carnall CA (Civ), October 16, 2000, unreported [45].

16. The present Application has been brought over 6 months following service of the Judgment on the Defendants and their legal representatives. As the Defendants’ own evidence demonstrates, the true culpable delay is in fact longer still, namely 7 months, and therefore pre-dates the Judgment; the Defendants had instructed their present legal representatives and were in possession of the pleadings in the case as far back as September 2019. This was around the time and possibly even before the Judgment was applied for on 17 September 2019. Yet the Defendants did not then engage with the proceedings, the Claimant’s representatives or with the Court.

17. The Claimant has noted several problems in the Defendants’ case which support the argument that the Defendants have not acted with reasonable celerity in the circumstances in making the Application, in particular at [38] of its skeleton argument. Notwithstanding them, I think that the Defendants’ delay is on the less serious side of the scale for the purposes of this Application. In coming to this conclusion, I have given particular weight to the fact that, contrary to the Claimant’s opinion, the Defendants do not seem to have been acting strategically by causing delay. By the Defendants not promptly acknowledging service and filing a defence, they ultimately invited judgment in default being entered against them, and such judgment was in fact entered. And the Defendants’ delay in bringing this Application exposed them to the difficulty they now face – particularly in light of RDC r. 14.3 – in having the Judgment set aside. These results appear to me to be inconsistent with a thought-out strategy.

18. To expand upon one point, the Claimant avers that a deliberate choice was made by the Defendants not to fund the Application and to wait for strategic reasons until they had obtained an expert report supporting the occurrence of forgery, a “fantastic new allegation, never once raised during years of commercial dealings between the Bank and the Defendants.” This may well prove to be correct. But for me the sequence of events can be looked at from another perspective. Rather than making an application to set aside the Judgment on the basis of an unsubstantiated claim that the signatures in question were forged, the Defendants made their Application with evidence of substance in hand. And as the Defendants have intimated, had the Application been predicated on a mere protestation that the Defendants did not provide personal guarantees, this would have been more open to criticism on the basis that it was unsupported by any independent evidence that a fraud upon the Defendants had taken place.

19. Moreover, the timeline of this sequence demonstrates that, upon the Judgment being handed down, the Defendants took steps more or less immediately with a view to challenging the Judgment. And even if, as the Claimant suggests, the Defendants delay is attributable to their lack of certainty about whether or not they could find an expert to corroborate their “fantastic” forgery allegation, still, this does not fully explain their delay in making this Application: the Application could have been made with promptness and then withdrawn if no expert evidence supporting the forgery allegation could be obtained and this was all they could rely on in advancing the allegation. These steps would have been relatively inexpensive and would have given greater protection, I think, to the Defendants’ position.

20. The Defendants have submitted that the causes of their delay in making this Application were the “extraordinary difficulties” affected them and in particular the “multiplicity of commercial claims and criminal allegations across the UAE” that caused “crippling financial pressures which starved the defendants of funds to bring this application on.” It remains to be seen whether this account properly explains the Defendants’ delay in bringing on this Application, but on the evidence presently before the Court, I think the account carries some plausibility.

21. For these reasons, I think the Defendants’ delay is, again, on the less serious side of the scale.

Conclusion

22. For the reasons given above, I think the Court’s discretion should be exercised in favour of the Defendants. The Claimant has made several arguments in its skeleton argument – both legal and factual – which weigh in favour of dismissing the Application, but all things considered, I think allowing the matter to proceed to trial is the preferred course of action. Judgment is default is relatively easily obtained and the relevant rules of the RDC and authorities make it relatively easily set aside, too. The Claimant will not lose any advantage it has on the basis of weaknesses in the Defendants’ case which it has alleged in this Application when continuing to pursue its claim, but unless the Judgment is set aside, the Defendants will not be afforded an opportunity to defend the claim, and this in circumstances where an independent expert has given support to their proposed defence.

Conditions

23. RDC 14.2 permits the Court to apply such conditions as it sees fit when setting aside judgment in default. The Claimant has invited the Court to order an inter partes inquiry of the Defendants’ means and assets, with a view to fixing a substantial sum for payment by way of security into Court as a condition of any order setting aside the Judgment, and failing payment of which the Judgment should be maintained.

24. I prefer that any such order – for inquiry into the Defendants’ means and subsequently for payment by way of security into the Court – should be made by way of a formal application and with the benefit detailed submissions from the parties. In as much as the Court has not heard detailed arguments on this request, I will not place the suggested condition on setting aside the Judgment.

Costs

25. An appropriate way, in my view, to sanction the Defendants’ default is to order it to pay the Claimant its costs of this Application on the indemnity basis, with such costs subject to a detailed assessment by a Registrar if not agreed.

Issued by:
Nour Hineidi
Registrar
Date of Issue: 12 November 2020
Time: 2pm