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Claim No. CFI 085/2023

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

(1)DAIKAN DMCC
(2)SALIH ELMASCAN

Claimants

and

(1) POKE AND CO RESTAURANT LTD
(2) KHALED MOHAMED ABDEL MAGEED
(3) RANNIA EL-BASYUNI

Defendants

ORDER WITH REASONS OF JUSTICE SIR JEREMY COOKE

UPON the Part 8 Claim Form dated 29 November 2023

AND UPON the Second and Third Defendants’ reply to defence dated 9 January 2024, the Application No. CFI-085-2023/2 dated 9 January 2024 and the acknowledgement of service dated 9 February 2024 seeking to contest the jurisdiction of the DIFC Courts (the “Second and Third Defendants’ Jurisdictional Applications”)

AND UPON the Claimants’ Application No. CFI-085-2023/3 dated 24 January 2024 seeking an order for immediate judgment (the “Immediate Judgment Application”)

AND UPON hearing counsel for the Claimants and counsel for the Defendants at a hearing held on 27 February 2024 (the “Hearing”)

AND UPON reviewing all relevant material added onto the Court file

AND UPON reviewing the Rules of the DIFC Courts

IT IS HEREBY ORDERED THAT:

1. The Second Defendant shall forthwith pay the Second Claimant the sum of AED 1 million.

2. The Second Defendant shall forthwith pay the Second Claimant interest on the said sum at the rate of 9% per annum and pro rata until full payment.

3. Second Defendant shall pay the Second Claimant the costs of the Immediate Judgment Application and the costs of the Second and Third Defendants’ Jurisdictional Applications, to be the subject of assessment by the Registrar if not agreed.

Issued By:
Delvin Sumo
Assistant Registrar
Date of issue: 28 February 2024
At: 10am

SCHEDULE OF REASONS

1. The Claimants seek to recover the total of AED 1.3 million by way of immediate judgement as repayment agreed under a loan arrangement made by WhatsApp messages and telephone between the Second Claimant and the Second Defendant who were friends. There are issues as to who was party to the loan and whether the Second Defendant was acting for himself alone or for himself and the Frist Defendant, a DIFC Company of which he was a director and shareholder.

2. There are procedural issues which the Court is prepared to overlook in order to deal with the matter substantively and to do justice between the parties. The Defendants filed Acknowledgements of Service out of time in which the Second and Third Defendants stated that they would challenge the jurisdiction of the Court. They issued applications within 14 days of the late acknowledgements of service. There are issues about the date of service though I have no reason to doubt the accuracy of the Certificates of Service. The First Defendant has filed a Defence. The Defendant’s representative is not a registered practitioner with the DIFC Courts, though after many reminders he applied for registration last night.

3. Whether the Claim was rightly pursued under Part 8 or 7, was not a point taken by the Defendants but in any event, I am treating this as an application for immediate judgement to which the ordinary principles apply. Is there any realistic defence which can be advanced to the claims made or any other reason why this matter should go to trial.

4. The essential substantive issues which the Court need to determine relate first to the jurisdiction of the Court and secondly as to the identity of the parties to the loan which was undoubtedly made in the sum of AED 1.1 million, of which AED 100,000 has been repaid. As part of the second issue, the question arises as to whether there was agreement for a payment of AED1.3 million because of the delay in repayment in consideration of the Claimants’ forbearance to sue.

Jurisdiction

5. There can be no dispute about the jurisdiction of this Court over the First Defendant company which is incorporated in the DIFC and is therefore an entity covered specifically by Article 5 (A) (1) (a) of the Judicial Authority Law, Dubai Law No. 12 of 2004, as amended (the “JAL”),. An acknowledgement of service was filed by the First Defendant, albeit out of time, and no jurisdictional point was taken. It is, however, the Defendants’ case that the First Defendant was not party to any loan contract.

6. Both the Second and Third Defendant are not resident in the DIFC and maintain that the onshore Dubai Courts are the appropriate jurisdiction for determination of any issues between them and the Claimants. The Claimants maintain that their claims fall within the ambit of Article 5(A) (1) (c) of the JAL as civil claims arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and its related to DIFC activities.

7. It is common ground between the parties that loan monies were paid into the bank account of the First Defendant in the DIFC in the sum of AED 200,000 at the request of the Second Defendant, who, with the Third Defendant (his wife), was both a director and shareholder. AED 900,00 was paid into the account of the First Defendant on the directions of the First Defendant’s Financial Officer at the Second Defendant’s request. The sums were to be used by the DIFC company as working capital and were sought because of liquidity problems encountered by it whilst seeking bank finance. Insofar as the Second and/or Third Defendants are shown to have been involved in this loan transaction, jurisdiction is therefore established. The loan transaction was partly performed in the DIFC and related to the activities of the DIFC Company.

8. Additionally, in an application dated 9 January 2024, the Second Defendant stated that he wished to apply for an order that the DIFC Courts had no jurisdiction on the grounds that “Defendant 2 has consented in writing to submit dispute to DIFC Courts and Defendant 2 is not a licensed body.” The Claimants rely on this as a submission to the Court’s jurisdiction, as on its face the Second Defendant states that he had consented to jurisdiction. However, it would be entirely anomalous for an application to be made for an order that the Court had no jurisdiction whilst at the same time stating that the applicant had consented in writing to submit the dispute to its jurisdiction and I was told that there was a typographical error in omitting the word “not”. No amendment was sought but I would be nonetheless inclined to disregard this as an error and need make no decision about it because I am satisfied as to the Court’s jurisdiction on the basis of Article 5(A) (1) (c) of the JAL.

9. On the face of it, Article 5(A) (1) (b) would be equally applicable.

The Substantive Dispute

10. The Defendants’ case was that the loan arrangements were personal only and had been made between the Second Claimant and the Second Defendant and that that there was no contract for the loan with the First Defendant despite the latter’s receipt of AED 200,000 into its bank account. The Claimants maintained that all three Defendants were jointly and severally liable for the loan which was originally for AED 1.1 million, of which AED 100,000 only had been repaid. The Claimant’s case was that the Second Defendant, in his capacity as director and shareholder of the First Defendant had, in reliance upon his friendship with the Second Claimant, and that between their respective wives (the Third Defendant being the Second Defendant’s wife) sought and procured the loan on behalf of the First Defendant. There were no formal documents of loan and the basis of the arrangement appeared only from the evidence given by the First Claimant in an affidavit and some 80 pages of messages passing between the First Claimant and the Second Defendant, with one exchange between their respective wives.

11. I have examined the exchanges with care and come to the clear conclusion that the original loan was the result of an agreement between the Second Claimant and the Second Defendant, which the latter was to utilise in the business of the First Defendant which was having liquidity problems. The idea was that the monies loaned would tide the First Defendant over until such time as a bank loan could be finalised, which never happened. The personal nature of the dealings between them appears from the regular use of the singular personal pronoun by both sender and recipient. I am unable to spell out from the exchanges between the Third Defendant and the Second Claimant’s wife any commitment on her part, whether by way of primary liability or as a guarantor. It is, to my mind clear, that the original arrangement for a loan of AED 1.1 million, which is shown to have been paid in four payments was a personal arrangement between the Second Claimant and the Second Defendant. On 8 June 2022, AED 200,000 was paid directly into the First Defendant’s bank account and on 23rd, 24th and 26th June 2022, three payments of AED 300,000 were made to the Second Defendant bank account. The idea was for repayment to take place between a period of 3 to 6 months once the bank loan had been obtained, but earlier if possible. On the evidence of the Second Claimant that loan was expected within the next month and then, the Second Defendant said, by October. On 19 October, the Second Defendant offered a repayment plan with repayments of AED 100,000 - AED 200,000 per month with an initial payment in November which was not forthcoming until 24 November 2022, when AED 100,000 only was repaid by the Second Defendant. No further payments have been made. The WhatsApp messages between them do not show clear agreement, but there is reference in them to telephone conversations which appears to have been the Second Claimant’s favoured way of communication. He says that on 29 October 2022, he agreed to that plan but when no further payments were made, the Second Claimant asked him to forego receiving any more payments until a merger with a new investor occurred.

12. The WhatsApp exchanges show however a series of assurances of repayment which were never met. The Second Defendant, according to his messages, was unable to obtain the bank loan or to sell his shares in the First Defendant or to effect a merger of it with another entity, all of which were said to be the source of future repayment which never occurred. The Second Claimant pressed for repayment particularly after assurances were made of monthly repayments which were not met. The Second Claimant requested the Second Defendant to provide signed personal postdated cheques, as a form of security but the Second Defendant refused to do so, notwithstanding the Second Claimant’s assurance that he would not seek to cash them if the Second Defendant stated in advance that they would bounce.

13. As a result of the forbearance of the Second Claimant in not pursuing a recovery of the sums due, by April 2023, the Second Defendant was promising to repay the loan in instalments of AED 100,000, with an additional AED 300,000 on top of the AED 1 million which was outstanding at the end of that month. The Second Claimant wanted repayment in instalments of AED 200,000 and personal postdated cheques but the Second Defendant would not agree to this. Various other possibilities were discussed but the Second Defendant was assuring the Second Claimant that 13 further payments were to be made in a total of AED 1.3 million. It is the Claimant’s case that there was agreement to this, albeit no agreement to the postdated cheques. At various stages in the discussions, the Second Defendant was saying that the matter could be documented as a loan between the First or Second Claimant and the First Defendant but this was never the subject of agreement by the Second Claimant and was never effected. On the evidence before me, I am unable to find that there was a clear agreement on the part of the Second Defendant to bind the First Defendant, with the result that, on this evidence, the agreement was with the Second Defendant alone.

14. On 29 April 2023, the Second Defendant was still assuring the Second Claimant that he would transfer AED 100,000 per month for 13 months, starting from June, which would mean that Second Claimant would receive AED 1.4 million in total. It is the Second Claimant’s evidence that he agreed to accept AED 1.3 million in respect of the outstanding debt but required postdated cheques which the Second Defendant remained unwilling to give as, if one bounced, his position as director of the First Defendant would be jeopardized. Negotiations continued, including exchanges via lawyers, but came to a standstill in October 2023. The Claimants, in due course, brought proceedings in this court on 29 November 2023.

15. In these circumstances, whilst there might be room for argument about the additional sums in addition to the original loan of AED 1.1 million or as to the First Defendant being bound by the arrangements made, or otherwise liable for the return of the funds advanced, on the documents there can be no defence to the claim for repayment of the loan of AED 1.1million, less the AED 100,000 paid. The Second Claimant is entitled to recover all of this loan from the Second Defendant together with interest from the date when it should have been repaid. Erring on the side of generosity to the Second Defendant, repayment should have been made by the end of 2022 and any later agreement reached as to payment in monthly instalments was repudiated by the Second Defendant by making no payments after November 2022 and that repudiation was accepted when proceedings were issued.

16. The Second Claimant is therefore entitled to judgement in the sum of AED 1 million with interest to run from the date when the original loan should have been repaid, which for practical purposes can be taken as 31 December 2022. The Second Defendant had effectively recognised the need for compensation for the Second Claimant being kept out of its money by offering the additional AED 300,000, but as this cannot at this stage be said to be part of any enforceable contract, interest must be payable instead as from 1 January 2023. I assess the appropriate rate as being 9% per annum and pro rata.

17. The Second Claimant is also entitled to his reasonable costs of the Applications by the Claimants and the Defendants, such costs to be the subject of assessment by the Registrar if not agreed.