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CFI 044/2018 Grand Valley General Trading LLC vs GGICO Sunteck Limited & Sunteck Lifestyles Limited

CFI 044/2018 Grand Valley General Trading LLC vs GGICO Sunteck Limited & Sunteck Lifestyles Limited

May 19, 2019

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Claim No. CFI 044-2018 

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE SHAMLAN AL SAWALEHI

BETWEEN:

GRAND VALLEY GENERAL TRADING LLC

Claimant/Respondent

and

GGICO SUNTECK LIMITED

Defendant

and

SUNTECK LIFESTYLES LIMITED

Third Party/Applicant


 ORDER OF H.E. JUSTICE SHAMLAN AL SAWALEHI


UPON the Third Party’s/Applicant’s (the “Applicant”) Application dated 24 January 2019 (the “Application”), seeking (1) to be joined as a defendant to the proceedings pursuant to RDC 20.11 and (2) a determination that the DIFC Courts have no jurisdiction to hear the claim

AND UPON reading the documents submitted in the Court file

AND UPON hearing the Claimant’s and Applicant’s submissions at the Hearing of 25 April 2019

IT IS HEREBY ORDERED THAT:

1.The Applicant’s Application to be joined as a defendant in these proceedings is granted. The Applicant shall be added to the case CFI-044-2018 as the Second Defendant, with the Claimant required to file a Re-Amended Claim Form no later than 14 days from the issuance of this Order.

2. The Claimant shall serve the Re-Amended Claim Form on the Defendant and the Applicant/Second Defendant by no later than 13 June 2019.

3. The Applicant/Second Defendant shall have 28 days from service to file its defence.

4. The Applicant’s application to contest jurisdiction is not determined at this time.

5. Costs shall be costs in the case.

Issued by:

Maha Al Mehairi

Judicial Officer

Date of issue: 19 May 2019

Time: 11am

 

SCHEDULE OF REASONS

Procedural History

1.The Claimant/Respondent (the “Claimant”) filed its claim on 13 June 2018 seeking declarations (1) for the dissolution of GGICO Sunteck Limited (the “Defendant”) in accordance with Article 295(6) and/or Article 298 of the UAE Federal Law No. 2 of 2015 concerning Commercial Companies, (2) interest on the monies the Claimant contributed to the Defendant, and (3) to be entitled to be paid out of the Defendant’s proceeds upon its dissolution its costs of these proceedings. The Claimant filed a Certificate of Service on 15 July 2018 stating that it had served the Defendant in care of Al Tamimi and Company as registered agent, at Al Tamimi’s DIFC office.

2. On 13 August 2018 the Claimant filed a Request for Default Judgment. This request was granted via the Order of Judicial Officer Maha Al Mehairi dated 16 September 2018 (the “Default Judgment”). On 19 September 2018, Sunteck Lifestyles Limited (the “Applicant”) being a shareholder, along with the Claimant, in the Defendant company, filed an Application to set aside the Default Judgment (the “Set Aside Application”). The Set Aside Application also included requests that the Applicant be joined as a defendant to the proceedings and that the claim be dismissed for lack of jurisdiction.

3. The Claimant and the Applicant provided submissions regarding the Set Aside Application in advance of the Hearing of 4 December 2018, at which both the Claimant and Applicant presented their arguments. At no time did the Defendant make any filing or otherwise participate in the proceedings. After the Hearing, I issued the Order of H.E. Justice Shamlan Al Sawalehi dated 27 December 2018 (the “Set Aside Order”), which stated:

“1. The [Set Aside] Application to set aside the Default Judgment of Judicial Officer Maha Al Mehairi dated 16 September 2018 is granted and the Default Judgment is set aside.

2. The [Respondent’s] remaining requests are not determined in this decision.

3. The [Appellant] shall serve the Claim Form on the Defendant pursuant to Part 9 of the RDC or otherwise make an application as to service within 14 days of the issuance of this Order.

4. The [Respondent] may apply to be joined as a defendant in this case within 28 days of the issuance of this Order.

5. Costs in the case. Should the [Respondent] not be joined as a party to this case, it may apply for its costs as to this Application, if not agreed, and such Application may be determined by the Registrar of the DIFC Courts.”

4. The Claimant filed its First Appeal Notice and Permission Application on 17 January 2019. I denied permission to appeal via the Order of H.E. Justice Shamlan Al Sawalehi dated 13 March 2019. The Claimant has subsequently filed its Second Appeal Notice and Permission Application, pursuant to RDC Part 44, on 3 April 2019. This Second Permission Application remains pending at this time, however there is no reason to and no request has been filed to stay these proceedings at this time.

5. Pursuant to the Set Aside Order, the Applicant filed this Application on 24 January 2019. The Claimant and Applicant made submissions and were both heard at the Hearing of 25 April 2019. The Defendant has still not made any submissions or otherwise participated in the proceedings. Sufficient summary of the background of this case is included within the Set Aside Order for further reference.

Summary of Arguments

6. While the Applicant and Claimant have submitted lengthy arguments both in written and oral form, I have included here a summary only to the extent that those arguments are relevant to the below decision.

7. In summary, the Applicant argues that it is a party directly affected by these proceedings without a right to be heard on the merits of the case. It is desirable, pursuant to RDC 20.7 for the Applicant to be joined as a defendant in the matter in order to contest the Court’s jurisdiction. Furthermore, the Court should determine both the joinder application and the jurisdiction application in the interest of the Overriding Objective and efficient case management.

8. The Applicant argues that RDC 20.7 allows the Court to order a party to be added to the case if it is “desirable” to do so. In considering this standard under RDC 20.7, the Court should have reference to “two lodestars” including the “policy objective of enabling parties to be heard if their rights may be affected by a decision in the case” and the “Overriding Objective.”

9. Seeing as the Claimant’s pleaded case states that the Applicant “has failed to adhere to its financial and non-financial obligations” and seeing as the Claimant contends that its “partnership with [the Applicant] in the Defendant company is frustrated such that the continuation of the partnership no longer remains viable”, the Applicant should be able to join the proceedings as a defendant. The Applicant denies that it is in breach of obligations owed to the Claimant and the Applicant’s alleged breach is clearly an issue raised in the current matter. Furthermore, the question of the Applicant’s alleged breach falls within an arbitration agreement contained within the Joint Venture Agreement executed between the Claimant and the Applicant, clearly showing that the DIFC Courts do not have jurisdiction to determine this matter.

10. In light of this, joinder of the Applicant would be “desirable” in order to determine the issue of jurisdiction and, in the event that the Court finds that the DIFC Courts have jurisdiction over the matter, the issue of the Applicant’s alleged breach.

11. The Applicant argues that issues of jurisdiction are clearly “connected to the matters in dispute in these proceedings” pursuant to RDC 20.7(2). This issue of jurisdiction is between the Applicant and Claimant considering that the Claimant has disregarded the jurisdiction provisions of the Joint Venture Agreement, the ongoing LCIA arbitration proceedings, and the Anti-suit injunction issued by the Singapore Court. In the alternative, the issue of the Applicant’s alleged breach is also central to the dispute.

12. Furthermore, the Set Aside Order acknowledges that it would be desirable for the Applicant to be heard on this claim as an interested party that successfully had the Default Judgment set aside.

13. The Applicant responds to the Claimant’s arguments in turn. First, the Applicant argues that its Application is properly pleaded. Second, the Applicant argues that the Claimant’s consent to the Applicant’s joinder is not required pursuant to RDC 20.7. Third, meeting the test of desirability is all that is required for the Court to order joinder of a party.

14. The Applicant also argues that its seeking joinder to the dispute does not constitute a submission to the jurisdiction of the DIFC Courts. The Applicant has, since its first application, made clear that it seeks to contest the jurisdiction of the DIFC Courts. Furthermore, a party appearing solely for the purpose of contesting jurisdiction does not submit to jurisdiction.

15. The Claimant contends that the Applicant’s Application is misconceived for a number of reasons:

a. The Claimant does not consent to the joinder of the Applicant. The Claimant cannot be forced to issue proceedings against a party against which it does not consider itself to have a dispute.

b. There is no justifiable reason for joinder specified and the Application does not meet the requirements of RDC 20.7(2). The Applicant must also establish a justifiable reason for joinder pursuant to RDC 20.7(2) and it has not done so. The Applicant would need to show what the issue is between it and an existing party to the claim, how the issue is connected to the matters in dispute in the proceedings, and what authority the Court has to resolve the issues between the parties. Furthermore, the issues raised in the Applicant’s request for Arbitration are not the same as the issues raised in this case.

c. It is not in the interest of justice to permit joinder. The Claimant contends that this test is not relevant to the Application, however it if is, the Claimant argues that the interest of justice requires that the dispute between the Claimant and Defendant be expeditiously concluded without the further delay caused by joinder.

d. Joinder solely to contest jurisdiction is not permissible.

16. Furthermore, the Claimant argues that the Application is procedurally deficient for a number of reasons:

a. The Applicant is seeking to be joined in a claim that it maintains has not been properly served and must now accept that service has been effected in order to apply to be joined (see RDC 20.11).

b. The Set Aside Order required that separate applications be made for joinder and jurisdiction. This Application includes both issues and thus disregards the orders of the Court. This is an abuse of process which serves to undermine the Court.

c. As such, the current Application must only be heard on the issue of joinder. Only if the Applicant is joined, may matters of jurisdiction later be relevant to the proceedings. An application to contest jurisdiction must be properly made by a defendant in the case, not a third-party applicant. In any event, jurisdiction for this case is found pursuant to gateway Article 5(A)(1) of the Judicial Authority Law, considering that share certificates of the Defendant company are physically located within the DIFC.

17. The Claimant argues that certain principles of interpretation relevant to RDC 20.7 should be considered in this matter:

a. The test is “not so wide as to permit joinder of a person who is merely interested in the case in so far as it determines a question of law”.

b. In considering whether or not it is desirable to add a new party the “two lodestars” are “the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case” and the “Overriding Objective.”

c. “The existence of some strong economic interest in the proceedings may not by itself justify joinder. Especially in complex proceedings, the court should be reluctant to increase the overall burden of the proceedings by adding persons who have the same perspective of legal interest as an existing party.”

18. At the Hearing, both parties reiterated and expanded on their arguments. The relevant points are included in the discussion below.

Discussion

19. Firstly, as discussed in the Hearing, I have determined that this Application may be decided as to joinder only. The issue of jurisdiction is not properly brought in this current Application as the Applicant is not a party to the dispute and therefore does not have grounds to contest the jurisdiction of the DIFC Courts. I also find that the issue of jurisdiction requires much more robust pleading than has occurred at this juncture, especially from the Claimant. Thus, this Order with Reasons will be as to the issue of joinder only.

20. The portion of the DIFC Courts’ Rules as to joinder of a party is Part 20, which states in relevant part:

“I ADDITION AND SUBSTITUTION OF PARTIES

Change of Parties – General

20.6

Rules 20.6 to 20.9 apply where a party is to be added or substituted . . .

20.7

The Court may order a person to be added as a new party if:

(1) it is desirable to add the new party so that the Court can resolve all the matters in dispute in the proceedings; or

(2) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the Court can resolve that issue.

20.11

The Court’s permission is required to remove, add or substitute a party, unless the claim form has not been served.

Addition Or Substitution Of Defendant

20.21

These Rules apply to a new defendant who has been added or substituted as they apply to any other defendant.

20.22

Where the Court has made an order adding or substituting a defendant whether on its own initiative or on an application, the Court may direct:

(1) the claimant to file with the Court within 14 days (or as ordered) an amended claim form and particulars of claim for the Court file;

(2) a copy of the order to be served on all parties to the proceedings and any other person affected by it;

(3) the amended claim form and particulars of claim, forms for admitting, defending and acknowledging the claim and copies of the statements of case and any other documents referred to in any statement of case to be served on the new defendant; and

(4) unless the Court orders otherwise, the amended claim form and particulars of claim to be served on any other defendants.

20.23

A new defendant does not become a party to the proceedings until the amended claim form has been served on him.”

21. The parties agree that when determining whether it is desirable to add a new party, two lodestars are the “policy objective of enabling parties to be heard if their rights may be affected by a decision in the case” and the “Overriding Objective.” The Claimant has also argued that certain principles of interpretation relevant to RDC 20.7 should be considered in this matter. Firstly, that the relevant test is “not so wide as to permit joinder of a person who is merely interested in the case in so far as it determines a question of law”. Secondly, “[t]he existence of some strong economic interest in the proceedings may not by itself justify joinder. Especially in complex proceedings, the court should be reluctant to increase the overall burden of the proceedings by adding persons who have the same perspective of legal interest as an existing party.” I find that the parties’ representation of the relevant standard of review for an application for joinder is correct.

22.In reviewing the circumstances of this case, based upon the above articulated standard, I find that it is desirable to join the Applicant as a defendant in the proceedings in order to resolve all the matters in dispute in the proceedings. I find this to be the case for the following reasons:

a. As articulated in the Set Aside Order, the Applicant is an interested party, being a 50% shareholder in the Defendant company. The relevant claim is seeking dissolution of the Defendant company, an action that will certainly affect the legal rights of the Applicant. The Applicant seeks to intervene in this case not merely as regards a question of law, but as regards its real legal rights in the Defendant company. Thus, the Applicant’s legal rights will be significantly affected by the outcome of this case, such that it should be heard.

b. Joinder of the Applicant is also desirable to resolve all the matters in dispute in the proceedings, including the issue of jurisdiction and the issue of breach.

i. The Claimant argues that it is paradoxical and impermissible for a party to seek to be joined in order to contest jurisdiction. I cannot agree with this statement. As the Applicant has validly pointed out, a party appearing before a court solely to contest jurisdiction does not somehow submit to jurisdiction. Furthermore, as stated in the Set Aside Order, there are potentially real issues related to jurisdiction in the case that have not been fully pleaded. Finally, it is relevant that the Applicant seeks to contest jurisdiction but also, in the alternative, seeks to defend against the substantive claim for dissolution should jurisdiction over the matter be found.

ii. The Claimant seeks dissolution of the Defendant company because “the objects and purpose of the Claimant’s partnership with [the Applicant] in the Defendant company is frustrated such that the continuation of the partnership no longer remains viable.” This is allegedly because the Applicant has “failed to adhere to its financial and non-financial obligations.” However, the Applicant contends that it has met its obligations. Certainly, both the Claimant and Applicant seem to agree that the partnership is “frustrated” however it is not agreed that this frustration has made it such that the “partnership no longer remains viable.” As the premise of the Claimant’s case is based upon the Applicant’s alleged breach, it is desirable to hear the Applicant on that issue.

c. As to the Overriding Objective and case management, the addition of the Applicant will not cause sufficient delay to justify denying the Applicant an opportunity to be heard. Certainly, the Claimant is entitled to speedy remedy of its claim, but this cannot be provided at the expense of the Applicant’s legal rights. It is true that the Applicant could become involved in the winding-up portion of the legal proceedings, when that time arrives. However, should the Applicant be successful at that juncture, significant proceedings would have occurred in waste. At this earlier juncture, the Applicant, if successful, will prevent wasted costs and time. For this reason, I find that in looking towards the Overriding Objective, it remains desirable to join the Applicant at this time.

d. Finally, I am persuaded by both the Claimant and Applicant that the Defendant company is deadlocked and therefore unable to act or instruct counsel to participate in the proceedings. This fact contributes to the desirability to join the Applicant in the dispute. While the Claimant will argue that the Applicant cannot be joined in the Defendant’s place in order to assert the Defendant’s legal interest, this will not occur here. While the Applicant and Defendant might hypothetically take the same legal strategy (although this is not certain as we have heard nothing from the Defendant), they do not have the same legal interest. Furthermore, the Applicant is not seeming to intervene on behalf of the Defendant but rather on its own behalf as an interested party to the dispute, a party that would be adversely affected by the dissolution of the Defendant company on the terms requested by the Claimant. If the Defendant was making arguments in its defence (or even in consent of dissolution), the matter would sit in a different light. However, as the Defendant is unable to make any comment as to its potential dissolution, the input of its shareholder, accused of breaching its obligations and causing frustration of the partnership, should be heard.

23. Therefore, for the above-mentioned reasons, I find that it is desirable to join the Applicant as a defendant to this dispute in order to resolve all the matters in dispute in the proceedings. The Claimant has made a number of arguments against joinder, as to why it is both impermissible and undesirable. I will address each of those arguments in turn.

24. Firstly, as explained above, the Applicant is not “merely interested in the case in so far as it determines a question of law.” The Applicant does not just have a strong economic interest in the proceedings, its legal rights are intrinsically affected by the proceedings. Adding the Applicant to these proceedings does not increase the overall burden of the proceedings seeing as the goal of the claim is to dissolve a company in which the Applicant has a significant stake. While the proceedings may take longer with an active party added to the case, this increase in time does not add to the overall burden of the proceedings.

25. Furthermore, I do not find that the Applicant has the “same perspective of legal interest” as the Defendant. The Defendant and Applicant sit in significantly different positions as both the Applicant and Claimant admit that the Defendant company is deadlocked and unable to act. Although the Applicant and Defendant may presumably oppose dissolution, having the same legal position is not the same as having the same legal interest. Furthermore, there is no indication of the position of the Defendant company, which has not participated in the proceedings thus far. The Claimant is arguing that the Applicant and Defendant have the same legal interest without any input form the Defendant as to its legal interest. The legal outcome for failure to dissolve the Defendant company is not the same for both the Defendant and Applicant.

26. The Claimant has also argued that the Applicant cannot be joined in order to run the Defendant’s defence. However, as mentioned above, the Applicant and the Defendant do not have the same legal interest. Instead, the Applicant is seeking to be joined as a defendant to a dispute in which it has an interest, and it will then seek to run its own defence against the remedy sought.

27. The Claimant does not consent to the joinder of the Applicant. The Claimant argues that it cannot be forced to issue proceedings against a party against which it does not consider itself to have a dispute. I do not find this argument or the authorities cited in support of it convincing. RDC 20.7 is clear on the required standard for the Court to order joinder of a party and there is no reference to a requirement of the Claimant’s consent. Certainly, consent may be a factor in assessing the application to join but it is not a requirement. Instead, if the requirements of RDC 20.7 are met, the Court is able to join a party in opposition to the Claimant’s desire.

28.The Claimant also argues that there is no justifiable reason for joinder specified and the Application does not meet the requirements of RDC 20.7(2). However, the test contained in RDC 20.7 is an “or” test, rather than an “and” test. It is clear from the wording that the Court may order a person to be added if “it is desirable . . .” or if “there is an issuing involving the new party . . .” There is no requirement that both RDC 20.7(1) and (2) be met in the same application.

Costs

29.At this juncture, it is appropriate to assign costs of this Application to the case.

Conclusion

30. In sum, the Applicant’s Application to be Joined in the Proceedings is granted, with costs in the case. I decline to determine the remaining issues set out in the Applicant’s Ap

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