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Claim No: CFI 049/2022

IN THE COURTS OF DUBAI INTERNATIONAL FINANCIAL CENTRE

IN THE COURT OF FIRST INSTANCE

BETWEEN

VISION CONSTRUCTION L.L.C.

Claimant

and

BANQUE MISR UAE

Defendant

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Defendant

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UPON the Claimant filing a Claim Form dated 22 July 2022 as amended on 26 August 2022 (the “Claim”)

AND UPON the Claimant’s Application No. CFI-049-2022/4 dated 1 July 2024 and the evidence in support for an order allowing the evidence pertaining to the computation of loss to be part of the Trial Bundle (the “Application”)

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at a hearing held on 3 July 2024 (the “Trial”)

AND UPON reviewing the Court materials

AND PURSUANT TO the Rules of the DIFC Courts (the “RDC”)

IT IS HEREBY ORDERED THAT:

1. The Defendant shall pay the Claimant any difference in the sum it credited the Claimant on or about 24 March 2022 and the value of the Investments calculated based on the EGP/USD exchange rates applicable on the Investments Exit Date of 17 March 2022.

2. The Defendant shall pay the Claimant Interest on any losses calculated as having arisen from the Defendant’s failure to effect the Investments Exit by 17 March 2022 only until 12 May 2023, the date when the Claimant’s failure to comply with this Courts case management order to make standard production of documents led to delays in setting the trial date.

3. The Defendant shall pay the Claimant’s costs of the proceedings, to be assessed by the Registrar if not agreed, save for the Application in which the Claimant shall bear its own costs.

SCHEUDLE OF REASONS

Background

1. By the Claimant filing a Claim Form dated 22 July 2022, amended on 26 August 2022, Vision Construction L.L.C. (the “Claimant”) sought the sum of USD 357,116.66, representing losses resulting from a delayed investment exit, against Banque Misr U.A.E (the “Defendant”) for alleged contractual breaches. The Claimant relies on Articles 64(a) and 83 of the DIFC Contract Law No. 6 of 2005. In the alternative, the Claimant seeks recovery of the loss based on the Defendant’s alleged negligence, pursuant to Article 17(1) of the Law of Obligations in DIFC Law No. 5 of 2005.

2. While there were ancillary proceedings at the DIFC Courts related to this matter, my judgment below flows from a pre-trial hearing that was held before me on 7 June 2024, followed by a trial on 3 July 2024 (the “Trial”).

3. At the heart of the dispute are two investments the Claimant made through the Defendant, both of which relate to the purchase and sale of Egyptian Government Pound Treasury Bills (“TB”) in a 190-day Investment. The following is a summary of the undisputed facts.

4. Investment 1 was the Claimant’s purchase, in US Dollars (“USD”), of TB in the total sum of USD 999,269.05, which purchase was confirmed by the Defendant on or about 14 October 2021 and finally settled on 18 October 2021 at a USD/EGP Rate of 15.6400. The maturity date for Investment 1 was 26 April 2021.

5. Investment 2 was the Claimant’s purchase in USD of TB in the total sum of USD 1, 359,063.87, which purchase was confirmed by the Defendant on or about 2 March 2022 and finally settled on 7 March 2022 at a USD/EGP Rate of 15.6400. The maturity date for Investment 2 was 5 July 2022.

6. The Claimant does not dispute that at the time Investments 1 and 2 were initiated, the Defendant notified the Claimant of the following disclaimer:

7. The investment relationship between the parties was governed by (i) a Master Agreement for over the counter (OTC) Foreign Exchange Transactions and Call and Put Options referencing Currencies and Precious Metals (“Master Agreement”); (ii) General Risk Disclaimer; and (iii) Conditions for Multi Account Clients. Additionally, the terms of the sale of Investments 1 and 2 (collectively “Investments”) was contained in email communications exchanged between the parties, including an email dated 14 March 2022.

8. On or about 14 March 2022, the Claimant instructed the Defendant to exit from the Investments on an early redemption basis (“Investment Exit”). On the same day, the Defendant provided the Claimant with exit calculation details (“Exit Calculation”) with the exit date to be effective 17 March 2022 (“Exit Date”). In the Exit Calculation, the Defendant noted the FX exit rate was 15.74 and further contained a statement as follows: “Noting that the whole EGP TB exit calculation for early redemption are subject to change upon market conditions.” On 14 March 2022, the Claimant confirmed to the Defendant to proceed with Investment Exit, albeit the confirmation from the Claimant was sent after regular business hours.

9. It appears, a series of subsequent interactions may have ensued between the parties - the Claimant’s version of which is disputed by the Defendant, including namely that on 22 March 2022 the Defendant’s alleged confirmation that it would credit the Claimant a redemption value of USD 2,371,817.83 on the same day, and alleged meetings held between the parties which the Defendant neither confirms nor denies.

10. Ultimately, on or about 24 March 2022, after the Claimant sent a warning notice to the Defendant, the Defendant credited the Claimant a total sum of USD 2,014,701.17 in relation to the Investment Exit. The difference between the sum credited and the value provided by the Defendant in the Exit Calculation (plus interest) being the total sum the Claimant now seeks to recover from the Defendant.

Summary of Claimant’s Position

11. It is the Claimant’s case on the issue of the alleged contractual breach that the Defendant had a duty to make payment of the amount as per the Exit Calculation it provided on 14 March 2022. In addition, it appears the Claimant also asserts it was entitled to a fixed USD exchange rate for entry and exit during the investment period.

12. In support of its position, and in addition to the email communications the parties exchanged on 14 March 2022, the Claimant relies on Article 3.1 of the Master Agreement which states “Each Party shall discharge the payment-, delivery- and other obligations owed to the other party no later than on the due date(s) specified in the Confirmation” and Article 1.6 which states “Confirmation means the written notice (including telex, facsimile or other electronic means), which contains the specific terms of the Transaction entered into between the Parties.”

13. The Claimant asserts that the market norm for Treasury Bills sale execution is T+1 which makes the delay between the date the value was calculated (14 March 2022) and the value credited (24 March 2022) unreasonable. The Claimant asserts the Defendant is liable for USD 357,116.66 being the difference between the value provided by the Defendant on 14 March 2022 and the actual amount the Defendant credited to the Claimant’s account on 24 March 2022.

14. The Claimant’s case on the issue of the Defendant’s alleged negligence is that the Defendant owed a duty of care to the it by virtue of the agreements, including the Master Agreement, and to the extent that the Defendant acted negligently and/or omitted to fulfil the instructions of the Claimant in a timely manner, it suffered the losses as a direct result thereof.

Summary of the Defendant’s Position

15. In a nutshell, the Defendant denies it breached any of its contractual obligations to the Defendant, or that it acted negligently with respect to the Claimant’s Investments. It asserts the Claimant’s Investment Exit required several sequential transactions, namely that the sale of TB in US Dollars required sequential transactions for each exit, which was subject to prevailing market conditions. Put another way, that the Investment Exit from the TB was effected, first, with proceeds being generated in Egyptian Pounds; and second, the proceeds from the sale, in Egyptian Pounds, being converted into US Dollars.

16. In its defense, it primarily relies on the terms of the Master Agreement, the General Risk Disclaimer the Claimant signed at the outset of the investment transactions with the Defendant, and the specific disclaimer set out in its email of 14 March 2022 in which it provided the Claimant with the Exit Calculation to be effected on the Exit Date.

17. It is the Defendant’s position that it disclosed all material risks to the Claimant (in the context of the documents the Claimant signed at the outset pertaining to general risk factors). The Defendant’s view is that this is a case where the Claimant made its investments, made a judgment call that did not work out for it and is now seeking the court to force the Defendant to cover the Claimant’s losses.

18. According to the Defendant, the Court must reject the Claimant’s breach of contract claim, lest the Court wishes to set a precedent that all financial institutions must compensate all clients for any losses that clients suffer, even where the losses are as a result of those clients’ actions. In the alternative, the Defendant submits that the losses suffered by the Claimant, if any, are as a result of certain market risks that the Claimant acknowledged and agreed to.

19. On the issue of negligence, the Defendant’s overall position is that the Claimant has failed to demonstrate through its arguments and evidence that the Claimant is owed a duty of care by the Defendant; that the Defendant breached that duty (if one exists); and that it was the Defendant’s acts or omissions that caused the Claimant harm.

Discussion

20. As a preliminary observation, the Defendant’s position that a finding against the Defendant in this case will set a precedent that “all financial institutions must compensate all clients for any losses that clients suffer, even where the losses are as a result of those clients’ actions” is exaggerated. It is trite that allegations of contractual breaches will necessarily turn on the specific facts of each case and contractual construction is specific to the circumstances of each case. In other words, no two cases are ever alike.

21. I accept that the parties’ overall contractual relationship is governed by the Master Agreement; (ii) General Risk Disclaimer; and (iii) Conditions for Multi Account Clients. However, within that broad framework, this dispute fundamentally turns on the terms of the parties’ agreement to sell and settle the Investments as outlined in their 14 March 2022 communications. In a nutshell, the Investment Exit agreement comprises the Claimant’s instructions to the Defendant to effect the Investment Exit; the Defendant’s confirmation of the Investment Exit to take effect on the Exit Date (17 March, 2022) in accordance with the Exit Calcuation (provided the Claimant on 14 March 2022). Hence the analysis of whether the Defendant breached any contractual obligations necessarily involves consideration of all of the factors identified above. To the extent the Defendant suggests that the 14 March 2022 communications outlined above does not amount to an agreement between the parties, it is untenable.

22. I further accept that the Claimant is bound by the terms of the General Risk Disclaimer it signed at the outset when entering into the relationship with the Defendant as well as the disclaimer contained in the 14 March 2022 Exit Calculation provided by the Defendant – namely the following statement: “Noting that the whole EGP TB exit calculation for early redemption is subject to change upon market conditions.”

23. There is a divergence in the parties’ interpretation as to their respective rights and/or obligations relating to the Exit Calculation and the final sum the Claimant is owed.

24. In the Claimant’s view, at least as I understand it, the Defendant was obligated to pay it the calculation contained in the Exit Calculation which would be based on the 14 March 2022 EGP/USD exchange rate. While it is not entirely clear to the Court, it appears the Defendant’s position is that it owes the Claimant only the value of the investments’ sale transaction based on the EGP/USD exchange rate either on the day it eventually exited the investment on 28 March 2024 (the exit date according to the witness statement of Mr. Elmaghraby dated 21 March 2024) or on the date it credited the Claimant’s account, being 24 March 2022.

25. Respectfully, in my view, both interpretations are incorrect. The terms of the 14 March 2022 Exit Calculation when viewed within the parties’ overall contractual agreement and objectively construed, means that the Claimant would be liable for any variation in the Exit Calculation that may have occurred due to EGP/USD exchange rate fluctuations between 14 March 2022 and 17 March 2022 when the Defendant undertook to effect the Investment Exit.

26. Consequently, it is logical that the risk the Claimant assumed, based on the Defendant’s 14 March 2022 communications should be restricted to any difference in the EGP/USD exchange rate for 14 March 2022 and the exchange rate on 17 March 2022, the Exit Date. In my view, the Claimant had a legitimate expectation to have the Investment Exit effected on March 17, 2022, since there was no indication whatsoever from the Defendant that the Investments Exit Date was subject to any conditions, including the availability of US Dollars.

27. I do not accept the Defendant’s interpretation that the disclaimer in its 14 March 2022 Exit Calculation to the Claimant, or the General Disclaimer, or clauses 7 and 16 of the Master Agreement, absolve it of its obligations to effect the Investment Exit by 17 March 2022. Therefore, the final settlement sum the Defendant owes the Claimant ought reasonably to be calculated based on the EGP/USD exchange rate, at the latest on 17 March 2022, being the date it undertook to exit the investments on behalf of the Claimant.

28. Similarly, I do not accept that the precariousness of the Egyptian market for US Dollars at that time, which according to the Defendant was apparently known as early as 2 March 2022, is of material relevance to the outcome of this case since by the Defendant’s own argument it ought to have been aware of such precarious market conditions when it provided the Exit Calculation on 14 March 2022. If indeed this was the case, the Defendant ought reasonably to have factored it in when agreeing to the effective date of the Investment Exit and/or made the Investment Exit Date contingent on market conditions or the availability of US Dollars. It did neither. The proper construction of the Defendant’s Exit Calculation disclaimer is that the Claimant would assume any potential difference resulting from a fluctuation in the exchange rate on 14 March 2022, the date of the Exit Calculation, and 17 March, 2022, the effective date of the Investment Exit.

29. The Defendant’s reliance on Clauses 7.3 and 16 of the Master Agreement is unhelpful. These provisions relate to the Claimant’s overall agreement to assess its risk capacity prior to entering into any investment transaction, or its assumption of risk arising from any such transactions, or its financial capacity to withstand substantial losses resulting from any of its investment transactions are general risks that any customer broadly assumes regarding its investment choices.

30. For instance, the type of general risk the above noted clauses contemplate would be the type of devaluation that may have occurred in the Claimant’s Investment 2 from the time of its purchase to the time of its sale due to market and/or currency fluctuations. Clearly, the Defendant cannot be held responsible for such general losses the Claimant may have incurred as between the date Investment 2 was purchased and the Investments Exit Date of 17 March 2022 undertaken for Investment 2. The type of general losses contemplated in the above referenced clauses do not encompass or supersede, in my view, a specific agreement such as what the parties had in this instance regarding the Investments Exit Calcuation and the Investment Exit Date.

31. Similarly, the General Risk Disclaimer, namely that the Claimant agreed to “all risk associated with any decision it makes and shall have no rights against Banque Misr-UAE in connection with such decision”, upon which the Defendant relies, is also generic in scope. In the context of the parties Investments Exit Calculation and Exit Date agreement, any risk that could have been reasonably foreseeable is limited to any changes in the Exit Calculation between 14 and 17 March 2022.

32. The Defendant’s reliance on a term in the Master Agreement that “market conditions may make it impossible for an exit to be effected immediately” is equally unhelpful in advancing the Defendant’s case since by the Defendant’s own admission the Investment Exit in this case was not impossible. Even if it were so, there is an implied obligation on the Defendant to have communicated to the Claimant in the Exit Calculation that the Exit Date was also contingent on market conditions. There is no evidence the Defendant did this.

33. The Defendant also submitted that the Claimant has not provided any evidence that the Defendant failed to action its instructions and that it in fact took the Claimant’s instructions and acted upon it such that there was no breach. In my view, this is not an apt characterization of the issue that is in dispute. The issue is not whether the Defendant acted upon the Claimant’s instructions generally but rather whether it acted in breach of the agreement regarding the Investments Exit Calculation and Exit Date made on 14 March 2022. On the latter issue, for the reasons discussed previously the Defendant was in breach.

34. In conclusion, the Defendant is, in my judgment, liable to pay the Claimant any difference in the sum it credited the Claimant on or about 24 March 2022 and the value of the Investments calculated based on the EGP/USD exchange rates applicable on 17 March 2022, Investments Exit Date (the effective date it undertook to exit the Claimant’s Investments).

35. While I reviewed the expert report the Claimant submitted, I find it is unhelpful to the Court. I agree with the Defendant that the author of the report, an accountant, has not established how he is a duly qualified investments expert, and the report lacks sufficient explanation regarding the methodology that was utilized.

36. Last but not least, on 1 July 2024, the Claimant filed an application to submit a computation of loss based upon my inquiry at the pre-trial hearing (the “Application”). In addition to a witness statement, the Claimant filed its audited financial statements and reports for the year ending on 31 December 2022 as well as a letter addressed to the Court setting out its computation of losses in 2022, 2023 and 2024.

37. The Defendant opposes the Application. The Defendant submits that it is unclear how the audited financial statements of the Claimant for the year ending on 31 December 2022 are relevant to the Claimant’s quantification of supposed loss, noting that nowhere in the statements is there any reference to the subject matter of the current dispute. I agree with the Defendant and find the audited financial statements are of no assistance to the Court regarding the computation of losses that may have arisen from the Investments Exit Calculation or Exit Date.

38. Further, the Defendant also opposes the computation of loss document marked as Exhibit 14 on the basis that it does not provide any evidence or methodology of how it arrived at the figures stated therein. In addition, the Defendant opposes the inclusion of purported losses during 2023 and 2024 on the basis that it was due to the Claimant’s non-compliance with trial timetables that resulted in the delay.

39. Having reviewed and considered the parties’ submissions and evidence, I am of the view that interest on any losses calculated as having arisen from the Defendant’s failure to effect the Investments on the Exit Date of 17 March 2022 should run only until 12 May 2023, the date when the Claimant’s failure to comply with this Courts case management order to make standard production of documents led to delays in setting the trial date.

40. In a separate Order with Reasons of Justice Rene Le Miere dated 5 December 2023 in this case, the Judge also found the delay caused by the Claimant to be a serious and significant breach with no adequate explanation being provided by the Claimant.

41. It appears to me that it would not be in the interest of justice to award interest on losses incurred by the Claimant beyond 12 May 2023 in circumstances where this Court previously held the delays caused by the Complainant was an abuse of process.

42. The Defendant shall pay the Claimant’s costs of the proceedings, to be assessed by the Registrar if not agreed, save that the Claimant is not entitled to recover anything in respect of the Application. The Claimant shall bear its own costs of the Application.

Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 7 October 2024
Date of Re-issue: 8 October 2024
At: 9am