Basin Supply Corporation v (1) Rouge Llc (2) Claude Barret [2018] DIFC CFI 057 (06 September 2020)

Claim No: CFI 057/2018

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

Court

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler

Ruler
of Dubai

IN THE COURT

Court
OF FIRST INSTANCE

BETWEEN

BASIN SUPPLY CORPORATION

Claimant

Claimant

and


(1) ROUGE LLC
(2) CLAUDE BARRET

Defendants


JUDGMENT OF H.E JUSTICE ALI AL MADHANI


UPONthe Claimant’s claim form issued on 8 September 2018

AND UPONthe Defendants’ application for security for costs dated 9 April 2019 (the“Security Application”)

AND UPONthe Claimant’s application for permission to adduce expert evidence dated 21 May 2019 (the“Expert Application”)

AND UPONhearing Counsel for the Claimant, the Defendants who are litigants in person and a McKenzie Friend who appeared for the Defendants at the hearing on 16 March 2019

AND UPONreviewing the documentation submitted onto the Court

Court
file

IT IS HEREBY ORDEREDThe Defendants shall pay to the Claimant USD 1,688,194.95 (One Million, Six Hundred and Eighty Eight Thousand and One Hundred and Ninety Four US Dollars and Ninety Five Cents) plus interest at the rate of 10.5% accruing from 16 March 2020 applicable to the principal sum only and costs on the indemnity

Indemnity
basis.


Issued by:
Nour Hineidi
Deputy Registrar

Deputy Registrar

Date of Issue: 6 September 2020
Time: 2pm

JUDGMENT

Introduction

1. The Claimant (“Basin”) lent USD 1,500,000 to the First Defendant

Defendant
(“Rouge”) in December 2016 (the“Loan”). There is no dispute that that sum was loaned; or rather, in my view, there is no credible dispute that the money was loaned. More will be said on this immediately below. Repayment of the Loan was guaranteed by the Second Defendant (“Mr Barret”), the Managing Director of, and a shareholder in, Rouge. Save for modest repayments totalling USD 205,000, there is no (credible) dispute that the balance of the Loan has not been repaid.

2. In their skeleton argument for the trial of this matter, submitted to the Court on 26 March 2020 – that is, more than 3 years after the Loan was given and more than 1 year after both this claim was issued on 9 August 2018 and the Defendants’ Statement of Defence was submitted on 11 September 2018 – for the first time, the Defendants have pleaded that the Loan was not a loan and was instead an investment. In taking this position, the Defendants have had no choice but to argue that the written loan agreement is wrongly drafted and that a loan repayment schedule dated 13 July 2017 and signed by Mr Barret is similarly wrongly worded. On the Defendants’ own case, Mr Barret will also have been wrong to describe in his letter to Basin dated 1 August 2017 a “release [of] USD 50,000/- to you as per our loan repayment schedule…” (emphasis added) and in his email dated 10 August 2017 an attachment as “proof of payment for USD 50,000/- that has been transferred to Basin against first instalment of the loan.” More examples could be given.

3. Indeed, the Defendants’ pleadings submitted to the Court prior to this skeleton argument – the trust of which were that the loan agreement was invalid rather than valid and that even if it was valid, Mr Barret was no longer liable as a guarantor thereunder – will also have been wrong (stronger words could of course be used). In my view, the only thing wrong in respect of this argument is that it was advanced at all. This very-belated and highly-contradictory position is summarily dismissed.

Background

4. The relevant background to this claim is limited in scope and may be summarised as follows. In late 2016, an approach was made on behalf of Rouge to Charles Laurey (“Mr Laurey”), the director of Basin, for a loan in circumstances where Rouge was experiencing cashflow difficulties. Whilst lending money does not form a core part of Basin’s business, it agreed to make a loan to Rouge following an offer by Mr Barret to give a personal guarantee in respect of the loan.

5. In the event, on 1 December 2016, the parties concluded a written loan agreement which was embodied in a document headed “Secured Promissory Note” (the“Contract”). Pursuant to the Contract, Basin proceeded to loan the sum of USD 1,500,000 to Rouge, being the Loan.

6. The terms of the Contract included the following:

a. under Clause 4, Rouge was required to repay the Loan “on the earlier of…the date that is six months following the date hereof” (i.e. 1 June 2017);

b. under Clause 19(a), the Contract “and any non-contractual obligations arising out of or in connection with it are governed by English law”;

c. under Clause 11(a), Mr Barret (defined in the Contract as “the Guarantor”) guaranteed Rouge’s obligations and assumed, among others, the following obligations:

(a) Guarantee and indemnity. The Guarantor irrevocably and unconditionally:

(i) guarantees to the Lender punctual performance by the Borrower of all the Borrower’s obligations under this Note and the other Loan Documents;

(ii) undertakes with the Lender that whenever the Borrower does not pay any amount when due under or in connection with this Note and the other Loan Documents, the Guarantor shall immediately on demand pay that amount as if it was the principal obligor…

d. under Clause 11(d), the Defendants (including Mr Barret in his capacity as Guarantor) expressly waived various defences including any defence which may arise out of a: (i) “variation [of]…any rights against…the Borrower”; (ii) “any amendment…(however fundamental and whether or not more onerous) or replacement of this [Contract]”; and (iii) “any unenforceability, illegality or invalidity of any obligation of any person under this [Contract] or any other Loan documentation”.

7. On 5 July 2017, Mr Barret indicated that Rouge was experiencing financial difficulties and invited Basin to agree to an extended repayment schedule. On 13 July 2017, Mr Barret sent a letter to Basin enclosing “our proposed loan repayment schedule.” Following further correspondence, Basin accepted a repayment schedule on terms, amongst others, that interest would be increased to 10.5% from 1 August 2017. Under the terms of the proposed repayment schedule, repayments were to be made on a monthly basis between July 2017 and June 2018.

8. On 3 August 2017, Mr Barret sent a letter to Basin which acknowledged the Defendants’ indebtedness and indicated that a part-repayment of USD 50,000 would be made: “…we will release USD 50,000/- to you as per our loan repayment schedule…”

9. On 28 August 2017, Mr Barrett wrote a letter to Basin accepting the proposed increase to the interest rate: “we accept the higher interest rate of 10.5%…”

10. The Defendants defaulted on the loan repayments due in August 2017 and September 2017, which had already been extended and re-affirmed by the Defendants.

11. On 19 October 2017, Rouge’s Finance Manager stated that a part-payment of USD 15,000 had been made by Rouge and enclosed an “updated loan repayment schedule” which effectively sought to back-load the proposed repayments. The Defendants proceeded to default on that schedule as well.

12. In the course of further correspondence, on 4 December 2017, Rouge’s Finance Manager asserted that there had been a delay in the receipt of funds from a client based in Turkey. Subsequent chasing emails from Basin to the Defendants were not replied to.

13. A letter before action was served on 13 February 2018 following further attempts to resolve the matter in the course of settlement discussions (which are subject to without prejudice privilege

Privilege
). In its response dated 27 February 2018, Rouge did not seek to dispute the sums due. On the contrary, it stated as follows:

In response to the Letter of Demand…kindly note that we are NOT refusing payment in any way. As we have not been paid by our clients (which was the basis of the payment plan we had sent over) we do not have sufficient funds to repay the loan till this date…We hope you understand our situation and you will find acceptable this new proposal, and trust that we are NOT refusing payment in any way.”

14. Following the above letter, two further payments were made by or on behalf of the Defendants on around 4 April 2018 and 29 May 2018 in the sums of USD 75,000 and USD 140,000, respectively. Thereafter, however, no further sums were paid by the Defendants. Accordingly, the sum outstanding under the Loan following the repayments was USD 1,220,000 (together with interest).

15. Basin issued this claim on 8 September 2018.

16. Following the commencement of these proceedings, the Defendants sought to deny that they were liable, raising various technical arguments. The Defendants also took the following steps.

17. The Defendants intimated in their Defence an application to strike out

Strike out
the claim solely on the basis of an alleged technical objection, namely that the claim had not been verified by a statement of truth. In the event, no such application was pursued.

18. Just 1 week in advance of the first CMC (listed on 26 November 2018), the Defendants sought a 6-month stay

Stay
of proceedings, purportedly for the purpose of mediation. In the event that request was abandoned.

19. Notwithstanding that the Contract is subject to an express choice of law in favour of English law, the Defendants have made an assertion that it is governed by UAE

UAE
law. As a consequence, foreign law experts were engaged. Moreover, and notwithstanding that they had pleaded a Defence in respect of the guarantee expressly by reference to English law, the Defendants instructed their expert to opine on whether guarantee was valid under UAE law.

20. On 9 April 2019 – a matter of weeks before trial – the Defendants filed its application for security for costs (the“Security Application”). The application was made on the ground, amongst others, of an incorrect suggestion that the Claimant had not provided its address in the Claim Form.

21. On 20 May 2019 – a matter of weeks before this claim had originally been listed for trial (12-13 June 2019) – the Defendants issued proceedings in onshore Dubai. Those proceedings, which essentially sought negative declaratory relief, were coupled with a jurisdictional dispute which led to the vacation of the trial, a stay of proceedings and, altogether, a delay of 9 months. It should be noted that the Defendants’ attempt to dispute this Court’s jurisdiction

Jurisdiction
on the eve of trial was in circumstances where the written agreement between the parties included a DIFC
DIFC
jurisdiction clause; under the terms of the written agreement, the Defendants had “irrevocably waive[d] any objection” to the DIFC Court’s jurisdiction; and the Defendants had in fact filed an acknowledgment of service
Service
without disputing the Court’s jurisdiction, filed a substantive defence, filed substantive factual and expert evidence and issued its Security Application.

22. The JJC dismissed the Defendants’ jurisdiction challenge.

23. On 3 March 2020, Mr Barrett sent an email to Basin dated 3 March 2020 which stated: “We will request for one month grace till my lawyer comeback from oversea.”

24. On 10 March 2020, Basin’s solicitors received an email from Rouge’s Admin Manager, Deena Monteiro, which stated as follows:

Apologize for the late response as Claude has not been keeping well for the last few months and has been coming to the office only once or twice a week that too for signing the documents… As Claude is undergoing treatment for his heart condition at Belhoul he won’t be in a position to attend the court

Court
hearing on 16th March.

Basin regarded that there was no proper basis for an adjournment and asked the Court to reject any attempt by the Defendants to derail the trial.

25. The trial went ahead and was heard before me on 16 March 2020.

Outstanding Applications

26. In addition to the substantive trial, there are two outstanding applications requiring determination: the Defendants’ application for security costs, being the Security Application, and Basin’s application for permission to rely upon their supplemental expert report dated 21 May 2019 (the“Expert Application”).

27. Regarding the Security Application, in my view, it is obviously inappropriate to consider ordering any security for costs at the trial of the claim in circumstances where it would be impossible to be complied with before the conclusion of the trial. Accordingly, I dismiss it with costs awarded to Basin.

28. With regards to the Expert Application, I do not consider it appropriate to grant the application as the expert report on which Basin seeks to rely was introduced without prior permission of the Court and is not, therefore, in compliance with the Rules

Rules
of the DIFC Courts
DIFC Courts
(the“RDC”). Accordingly, I make judgment without reference to this expert evidence.

Discussion

The Contract

29. The parties are in disagreement as to the law

the Law
, English or Emirati, by which the validity or otherwise of the Contract must be determined. The Defendants submit that UAE law is the relevant law and that the Contract is invalid thereunder. Basin, on the other hand, submits that UAE law is not engaged and that the parties’ choice of governing law in the Contract, English law, is the relevant law for all determinations required in relation to it.

30. Article 19 of the Contract provides, as material, as follows:

Governing Law and Enforcement

(a) Governing law. This Note and any non-contractual obligations arising out of or in connection with it are governed by English law.

(b) Courts

Court
. Each of the Borrower and the Guarantor irrevocably agrees for the benefit of the Lender that the courts
Court
of England and the Dubai International Financial Centre shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Note and, for such purposes, irrevocably submits to the jurisdiction of such courts.

31. Article 6 of Dubai Law No. 12 of 2004, being the Judicial Authorities Law, and Articles 8 and 9 of DIFC Law No. 10 of 2005, being the Law

the Law
Relating to the Application of DIFC Laws (the“Application Law”), require the DIFC Courts to give effect to an express choice of law provision in any contract concluded between parties to a dispute. By way of example, Article 8 of DIFC Law No.10 of 2005 provides as follows:

Governing law

The existence, validity, effect, interpretation and performance of a contract, or any term thereof, including any requirements as to formality, shall be determined by the law which governs it.

32. As seen above, Article 19(a) of the Contract provides that the Contract is governed by English law. The Defendants submit that, under sections 89 and 72(2) of the Bills of Exchange Act 1882 (UK), where a promissory note drawn in one country is payable in another, the rights and duties of the parties thereto and the form and validity of the promissory note are determined by the law of the place of issue. In the instant matter, the Contract was drawn in the UAE and is payable, the Defendants submit, in the Cayman Islands. As such, the Defendants contend that the Contract must be valid according to the laws of the UAE. The Contract is invalid, however, the Defendants submit, as “it does not specify an exact sum of money written in figures and letters and is instead for a varying sum of money.”

33. The Defendants here refer to the opening paragraph of the Contract which states, “…the principal sum of one million five hundred thousand dollars ($1,500,000) or, if greater or less, the aggregate outstanding principal amount of the Loan” (emphasis added) as well as Article 591(2) of Federal Law 18 of 1993 which requires that a promissory note contains an unconditional undertaking to pay a specified sum of money written in figures and in letters.

34. The Defendant concludes that the Contract is not binding upon Rouge and that no claim can therefore be brought in reliance of the Contract.

35. Basin submits that, contrary to the Defendants’ position, the Bills of Exchange Act 1882 does not preclude the parties from choosing the governing law of a negotiable instrument, including a promissory note. Basin relies on the explanation provided in Dicey, Morris and Collins on the Conflict of Laws (15th ed.) in this regard, which is as follows (at §33-332):

There is nothing in the Bills of Exchange Act 1882 which expressly prevents the parties from choosing the law to govern an instrument, but there is nothing which permits it either. However, though it may be rare or non-existent in practice for a bill or note to contain a choice of law, such a choice is not, in principle, unacceptable (at least for issues to which s.72 does not apply) if it appears on the face of the instrument. Providing anyone becoming a party to the instrument can see from the instrument itself what are going to be his rights and obligations (and these can be ascertained by reference to the law chosen on the face of it) there is no compelling reason why such a choice should not now be accepted, but such a proposition is controversial. (emphasis added)

36. Basin submits, further, that for the purposes of this claim, Basin does not need to rely upon the Contract as constituting an enforceable promissory note, but rather as embodying the terms of the parties’ written loan agreement. Basin concludes that “the Defendants’ assertion that UAE law could govern the parties’ rights and obligations under the Contract is misconceived.”

37. Dicey, Morris and Collins on the Conflict of Laws is a leading text. I do not need to look beyond it. A defence under UAE law like that the Defendants advance could only arise if English law, the governing law of the Contract, led there. I am satisfied that there is no reason why English law, and in particular the Bills of Exchange Act 1882 must or indeed should be taken to do so. The choice of governing law of the Contract appeared on the face of the Contract. In such circumstances, there is no compelling reason why this choice should not be accepted; there is nothing, as explained in Dicey, Morris and Collins on the Conflict of Laws, in the Bills of Exchange Act 1882 that would require otherwise. Nor am I aware of any policy reason why I should go beyond the express wording of the Act in order to arrive at the conclusion that the law of the place of issue rather than the law agreed by parties should prevail in such circumstances. Accordingly, I find that UAE law does not arise in the instant matter, much less any defences thereunder.

38. For completeness, I will add a further comment. In my view, even if the Defendants were correct to assert that UAE law governs the Contract, the only effect of a failure to comply with the provisions of the UAE Commercial Code (as provided by Article 592) would appear to be that the instrument “shall not be considered a promissory note.” In other words, a failure to comply with Article 591(2) renders the instrument invalid as a promissory note, but not invalid as a contract. In my judgment, therefore, this defence, at its best, would still be of no avail to the Defendants.

39. As a final remark, as an alternative argument, the Defendants have submitted that Clause 11(i) of the Contract demonstrates that the parties intended that the Contract would be governed by UAE law. Clause 11(i) provides, as material:

To the extent that a court should hold that Article 1080, 1089, 1092, 1101 and/or 1105 of the UAE Federal Law No. 5 of 1985 (as amended)…may be applicable to the obligations of the Guarantor under this Guarantee, the Guarantor expressly agrees that the provisions of the Articles shall not apply…

In written submissions, the Defendants have queried, “[i]f UAE Law was not the governing law of the [Contract] then why would the parties specifically exclude these provisions?”

40. In my view, Clause 11(i) of the Contract cannot be interpreted to imply that UAE law is the governing law of that agreement. Clause 11(i) has a precautionary and conditional tone – if a court decides, that is, itself, that these provisions apply, the guarantor agrees with Basin that they do not apply – and cannot override the express governing law provision in favour of English law.

Rouge’s obligations to repay the loan

41. It follows on from forgoing that there can be no serious argument as to Rouge’s liability to repay the loan. For completeness, Basin has submitted several alternative routes by which Rouge is liable under the Contract, even if the Contract was invalid as a loan agreement.

42. First, under Article 48 of DIFC Law No.7 of 2005, being the Law of Damages

Damages
and Remedies:

Restitution is available where the remedy is expressly provided in the DIFC Contract Law or where there has been unjust enrichment of one party at the expense of another party and there has been no subsequent change in the position of the enriched party which would render it unjust to order the enriched party to restore the benefits received.

In Damac Park Towers v Ward [2015] DIFC CA 006 (14 December 2015), the Court of Appeal recognised (at §142) that: “The notion of “unjust enrichment” comprises two elements. First, the party which restitution is sought against must have been enriched. Second, the enrichment must be tainted by an unjust factor.”

43. Basin submits that, in the present case, and insofar as the Loan was not given pursuant to a valid and enforceable agreement, there would be three applicable, albeit overlapping, unjust factors present, namely, firstly, the fact that the Loan was made by Basin on the basis of a mistake – a mistaken belief that the Loan was valid and enforceable – secondly, that the Loan was made pursuant to a “total failure of consideration” insofar as there was no contractual liability to repay it and, thirdly, that Basin paid the Loan pursuant to a void contract.

44. As for the second ground, Basin submits that where money is lent by one party to another, the Court will imply terms of a loan agreement so as to create debt which is repayable at once or, alternatively, repayable on demand (See Chitty on Contracts (33rd ed.) at §39-267).

45. Regarding the third ground, Basin argues that, consistent with general trust principles which have been recognised by the DIFC Courts (see GFH Capital Ltd v Haigh [2014] DIFC CFI 020 (4 July 2018) at §12), a disposition of property made in the absence of an intention on the part of the transferor to benefit the transferee is deemed to be held on resulting trust for the former. The position is summarised by the authors of Lewin on Trusts (19th ed.) at §9-003 as follows:

Where there is a gratuitous transfer containing no express or inferred provisions determining beneficial ownership, then the starting point is that there is a rebuttable presumption of resulting trust, in that the transferor did not intend to make a gift.

46. I agree with each of the alternative routes by which, in Basin’s submission, Rouge is liable to repay the Loan. In my judgment, Basin’s claim is heavily fortified, and Rouge’s defence is, I think, hopeless to a commensurate degree. Rouge is liable under the Contract pursuant to its contractual obligations under its terms (whether governed by English or UAE law), failing which, and insofar as the Contract is void/invalid, under an implied loan agreement, failing which, an obligation by Rouge to give restitution on account of its unjust enrichment and, failing which, by means of the imposition of a resulting trust on Rouge.

Mr Barret’s obligations under the guarantee

47. The Defendants contend that even if it is found that Rouge is liable for the amounts being claimed by Basin under the Contract, Mr Barret is not liable for any such amounts in respect of the guarantee contained in the Contract for three reasons.

48. The first of these reasons is that, the Defendants submit, there was a material variation to the underlying loan which was detrimental to Mr Barret and made without his consent, thereby discharging the guarantee by application of the rule in the old English case of Holme V Brunskill (1877) 3 Q.B.D. In that case, a lease was varied without the knowledge of the surety by the surrender of a portion of land by the tenant in return for a reduction in the rent. It was held that the ceding of land could have affected the tenant’s ability to pasture sheep and thus return them in good condition thereby prejudicing the surety’s rights.

49. In the present case, the alleged material variation concerns a change, mentioned above, to the interest rate applied to the principal from 7% per annum to 10.5% per annum. The Defendants submit that this substantially increased Mr Barret’s liability under the guarantee. They contend that Basin did not seek specific consent from Mr Barret in his capacity as guarantor to the original loan. In the Defendants’ submission, any correspondence regarding the variation sent by Mr Barret was done so in his capacity as an officer of Rouge and not in his personal capacity as guarantor of the Loan. The Defendants argue that the requirement for such specific consent in both capacities is apparent in the Contract itself which has set out separate signature lines for the borrower and guarantor to sign in their respective capacities. In the circumstances, the the Defendants argue that Mr Barret’s liability under the Guarantee has been discharged by operation of the rule in Holme v Brunskill.

50. For its part, Basin submits that the principle in Holme v Brunskill does not apply in the instant matter for four reasons.

51. First, Basin contends that the principle has no application where the surety/guarantor himself consents to the variation. In Hackney Empire Ltd v Aviva Insurance Ltd [2013] 1 WLR 3400, Jackson LJ (giving the lead judgment) held that (at §79): “The rule in Holme v Brunskill 3 QBD 495 only applies where parties to the contract guarantee have varied the terms of that contract without the consent of the surety.” Basin says that in circumstances where a person acts in both an individual capacity and as director for a company, the English High Court has recently commented that it would be “unreal to divid[e] their personal knowledge in their capacity as individuals from their knowledge as directors so that there was a Chinese wall between them as individuals and directors” (Maxted v Investec Bank Plc [2017] EWHC 1997 (Ch), at §20). Basin submits that it is clear that Mr Barret both knew of, and consented to, all the relevant amendments.

52. Second, Basin submits that under the terms of the Contract, and in particular Clause 11(d) thereof, the Defendants have expressly contracted out of the principle and/or have agreed not to rely upon any variation to the Contract as a reason for avoiding liability under the guarantee and/or to waive any defence based upon the same.

53. Third, Basin avers that the principle has no application to “demand guarantees,” which include the guarantee in the present case: see WS Tankship II BV v The Kwangju Bank Ltd [2011] EWHC 3103 (at §143-144) and The Law

the Law
of Guarantees (7th ed.) at §9- 025 and §16-001.

54. Fourth, Basin contends that the principle only applies to “material” variations.

55. For my part, I think it is clear from the correspondence (in which Mr Barret purports to act on behalf of himself as well as Rouge) that Mr Barret knew and approved of the proposed variations both in a personal capacity and on behalf of Rouge. Indeed, Mr Barret was personally instrumental both in procuring the loan in the first place and also in the negotiations resulting in the variation to its terms. Moreover, given Mr Barret’s personal interest in Rouge’s financial position – both as shareholder and Managing Director – the variations were of direct benefit to Mr Barret as well as Rouge.

56. Furthermore, on any reasonable and objective construction of the correspondence sent on behalf of the Defendants, the Defendants represented that Mr Barret had consented to the variations. On that basis, in my view, the Defendants are estopped from asserting otherwise.

57. Moreover, the Defendants have expressly waived and/or contracted out of any defence based on the rule in Holme v Brunskill and are thereby debarred from relying on it.

58. Regarding Basin’s submission that the guarantee is a demand guarantee and that the rule in Holme v Brunskill is therefore of no application, I make no determination as to whether this is correct in my view or whether the guarantee is instead a guarantee properly so called. The Court and the Defendants were not taken to the relevant clauses of the guarantee which would suggest it was an on demand guarantee nor has this submission been supported by any legal authorities. Needless to say, Basin’s case is not dependent on this submission which it made in the alternative.

59. Finally, in my view, the variations were not material. “Materiality” in respect of variations is explained in the Law of Guarantees (7th ed.) as follows: “A change is material if it has an effect on some contract or right within the transaction, either by giving a new right to one of the parties or by changing the substantive nature of the instrument itself.” According to this explanation, which I see no reason not to adopt, the increase in the interest rate applied to the principal from 7% to 10.5% coupled with an extension of time to pay did not significantly impact upon the parties’ rights or obligations under the Contract and nor did it change the substantive nature thereof.

60. The second reason that the Defendants say Mr Barret is not liable under the guarantee is that Basin granted further time for the repayment of the amounts stipulated under the Contract “outside of the purview of the conditions of the Promissory Note,” thereby discharging, the Defendants say, the guarantee under English law. The Defendants argue that by doing so, Mr Barret’s rights as a guarantor were “interfered with to his detriment” and “the financial ability of [Rouge] to make payment to the Claimant had deteriorated by the time [Basin] sought to make a demand under the Guarantee.” In the circumstances, the Defendants conclude, Mr Barret’s liability under the Guarantee has been discharged “pursuant to principles of English law.”

61. In my view, this claim is grossly unparticularised and must be summarily dismissed. To determine this claim, I would need to be taken to the principles in English law that are being referred to and to any relevant provisions in the Contract. There are references for neither. Nor is it clear how, on the Defendants’ case, English law and not UAE law applies. I regard that the Defendants have no conviction in this pleading.

62. As for the third and final reason, the Defendants have submitted that the “alleged loan,” being the Loan, does not have a maturity date and that this would discharge any liability of Mr Barret in respect of the guarantee in any event.

63. This claim has two fatal flaws. First, the Defendants have not taken the Court to any authority for their proposition. Second, the Contract does provide for a maturity date for the Loan and so the proposition, even if correct, would not apply to this case in any event. Under Clause 4 of the Contract, repayment of the Loan was required, at the latest, six months after the Contract was concluded, that is, by 1 June 2017.

64. In conclusion, I find that the variation to the Contract, the extension of time granted to Rouge to repay the Loan and anything possibly related to the Loan’s maturity date do not affect the validity of the guarantee by which Mr Barret is personally liable for repayment of the Loan.

Costs

65. In light of the Defendants’ conduct in the course of this litigation and, in particular, the spurious jurisdiction dispute which was raised, I conclude, in order to derail the trial of this matter, the Court orders the Defendants, jointly and severally, to pay Basin’s costs on the indemnity basis. This award of costs is only in respect of these DIFC Courts proceedings, however. The JJC proceedings are separate and any costs incurred therein must be borne by the parties in accordance with the JJC’s order.

Conclusion

66. For the reasons set out above, the Court gives judgment for Basin in the principal sum together with interest from 2 December 2016. Pursuant to clause 2(b) of the Contract, Basin seeks interest on the basis that repayments are to be applied against the principal sums together with interest, rather than the principal sum alone. This is granted.


Issued by:
Nour Hineidi
Deputy Registrar
Date of Issue: 6 September 2020
Time: 2pm