July 07, 2020 court of first instance - Judgements
Claim No: CFI 037/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashied Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BETWEEN
EMIRATES NBD BANK PJSC
and
AL RIHAB REAL ESTATE COMPANY LLC
| Hearing | : 22 June 2020 |
|---|---|
| Counsel | : Mr Tom Montagu-Smith QC instructed by DLA Piper Middle East LLP for the Claimant Mr Tim Taylor QC instructed by King & Wood Mallesons for the Defendant |
| Judgment | : 22 June 2020 (with reasons issued on 7 July 2020) |
JUDGMENT OF JUSTICE ROGER GILES
UPON the Defendant’s application notice dated 21 June 2020 (the “Application”)
AND UPON reading the witness statement of Mario Merhy dated 21 June 2020 together with annexures, filed in support of the Application
AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a hearing on 22 June 2020
AND UPON reading the submissions and evidence filed and recorded in the Court file
AND UPON the orders of Justice Roger Giles handed down on 22 June 2020
IT IS HEREBY ORDERED THAT:
1. Pursuant to Rule 8.16 of the Rules of the DIFC Court (“RDC”), permission is granted for the Defendant to take part in the hearing.
2. Time for service of the Application is abridged to 5pm on 21 June 2020.
3. The Application is otherwise dismissed.
4. Permission to appeal from the judgment issued on 15 June 2020 and from the judgment on the Application is refused.
5. The Defendant shall pay the Claimant’s cost of the Application to be assessed by the Registrar if not agreed.
Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 7 July 2020
At: 3pm
SCHEDULE OF REASONS
1. This is an urgent Application, filed yesterday, for relief in relation to orders in a judgment issued on 15 June 2020. In the interests of time, I will not rehearse the judgment and orders, knowledge of which is assumed.
2. The first element in the Application is abridgement of time for its service. It was served on the Claimant yesterday afternoon. The orders in relation to foreclosure have effect tomorrow, and the third element in the Application involves extension of that time. Necessity drives allowing an abridgement of time. The Claimant has responded to the Application, albeit protesting that any urgency is of the Defendant’s own making. I note the Claimant’s submission that in the circumstances, the Application should be treated as having been made ex parte. It is not necessary to rule on that.1
3. The second element in the Application is the extension of the time for filing an acknowledgment of service. The Defendant did not file an acknowledgment of service following service on it on 21 April 2020. Under RDC 8.16, in such a circumstance a defendant may attend the hearing of the claim but may not take part in the hearing unless the Court gives permission.
4. In my view, it is sufficient in the present case for me to give permission to the Defendant to take part in the hearing today, as it has by making the Application and making its submissions, and I do not think it appropriate to extend the time for filing an acknowledgement of service. That is because filing an acknowledgement of service carries with it the ability to state a position concerning jurisdiction and to put forward a defence, the time for all of which has passed. I do not think that matters should be complicated by permitting those matters to occur at the present stage, when orders have been made which, as will appear later in these reasons, I regard as final orders.
5. The third element in the Application is variation of the orders made on 15 June 2020. Variation is sought in three respects. The first is that the date of 23 June 2020 in orders 1, 2 and 3 should become 31 January 2021, the effect being that the foreclosure will not take effect tomorrow but, subject to prior payment or sale, on the later date. The second is to include a proviso that the orders are subject to any further order of the court or of an arbitral tribunal under arbitration agreements said to be material to the Claimant’s claim. The third is to include an undertaking by the Defendant to co-operate with the Claimant to extend the duration of the mortgage to 31 January 2021 and to register the extended mortgage, all by 30 June 2020.
1 Note: due to a technical malfunction, the last three sentences of para 2, while pronounced, were not transmitted or recorded. In revising the transcript of the judgment, they have been included from the Judge’s notes.
6. The first question is power to vary the orders made on 15 June 2020. There is no power to vary final orders unless they were obtained by fraud, which is not here suggested, and the Claimant submitted that for that reason alone the Application in its third element must fail.
7. In the Application, the Defendant sought the variations pursuant to the Court’s case management powers in Part 4 of the Rules. At the hearing, that rather took second place to a submission concerning arbitration, which also explained the proviso part of the desired variations. It is convenient first to go to that submission.
8. The Defendant submitted that the documents restructuring the liabilities of the Al Jaber Group included arbitration clauses displacing this Court’s jurisdiction to make an order for foreclosure in favour of arbitral jurisdiction. It then relied on Article 13 of the DIFC Arbitration Law, Law No 1 of 2008, by which if an action is brought in a matter the subject of an arbitration agreement, the court:
“… shall if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action, unless it finds the arbitration agreement is null and void, inoperative, or incapable of being performed.”
9. The Defendant said, in substance, that it now requests, and submitted that, because a stay is mandatory, the orders made on 15 June 2020 were capable of variation. It was not entirely clear or fully spelled out why that was so, but as I understand it the submission was that those orders should be regarded as interlocutory orders in aid of the arbitration and, being interlocutory, could be varied again as orders in aid of the arbitration: the proviso was then in effect a recording and preserving of possible further orders of the Court or of the arbitral tribunal and of final arbitral determination.
10. I will assume, contrary to the Claimant’s submissions, that the documents do provide for arbitration of dispute over enforcement of the mortgage, and that the Claimant has not elected to litigate pursuant to a right to do so also in the documents. One reason, however, is sufficient to decline to accept the Defendant’s submissions. When the orders were made on 15 June 2020, there was no enunciated dispute and there was no request to dismiss or stay the proceedings. The Court had jurisdiction, and was not prevented from exercising it by any operation of Article 13. The orders then made were final orders, and cannot be retrospectively converted into interlocutory orders in aid of arbitration under an arbitration agreement which the Defendant did not then invoke.
11. I note, without it being necessary to deal with them, the Claimant’s other submissions to the effect that the documents do not extend to arbitration of disputes over enforcement of the mortgage; that enforcement of securities was carved out of any arbitral regime; that there was in any event not an arbitrable dispute because making an order for foreclosure pursuant to Article 70 of the DIFC Real Property Law 2018 is reserved to the Court; and finally, that the Defendant is now too late to invoke the arbitration agreement and has waived any right it might have had to do so.
12. I go then to the case management powers. They allow an extension of time for compliance, which is not in point. They allow for stay of a judgment, which is not sought: what is sought is to vary the orders. The Defendant referred also to RDC 4.2(14), by which the Court may take any other step or make any other order for the purpose of managing the case and furthering the overriding objective: but that does not apply, the case is over, final orders have been made. None permits the variations.
13. Even if the orders could be varied as sought, I would not vary the dates to 31 January 2021.
14. The Defendant submitted that it had interest from a potential purchaser of the property and wanted additional time to “take into account” that party’s interest. It offered the undertaking above-mentioned as a means of avoiding prejudice to the Claimant’s rights when the present duration of the mortgage expired.
15. The Claimant submitted that there was no material change of circumstances, and that the Defendant was doing no more than seeking to relitigate matters which it could and should have litigated at the earlier hearing. That may or may not be so: it depends on when the arrangement with the potential purchaser came into existence. Apart from that, however, I have reservations about the interest in purchasing the property. The Defendant did no more than proffer a letter of agreement dated 21 June 2020, that is, after the orders in relation to foreclosure, for the disclosure of information to the potential purchaser, with a term that for three months the Defendant will not enter into discussions to sell the property to anyone else and for a further three months will give the potential purchaser a right of first refusal. There is no evidence explaining the Defendant’s failures in promises referred to in the earlier judgment, or how the potential purchaser’s interest came about so recently, and I do not think it can be said that a real prospect of a sale has been shown.
16. In addition to that, any extension must take account of the ending of the duration of the mortgage, as the Defendant recognises by offering the undertaking. The Claimant does not regard the undertaking as acceptable. In my view, that is correct, and an undertaking to co-operate is simply not good enough. Co-operation leaves room for failure, exposing the Claimant to expiry of the duration of the mortgage with an argument over co-operation and contempt proceedings in place of its present rights to enforce the mortgage. As well, as the Claimant submitted, the extension of the duration of the mortgage might be open to challenge by other creditors of the Defendant, to which I add might also prejudice the Claimant’s rights against guarantors.
17. In the circumstances, it does not seem to me that a case has been made for variation of the orders even if there were power to do so. It follows that I decline to grant the relief sought in its third element.
Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 7 July 2020
At: 3pm
