April 05, 2021 Court of Appeal - Judgments
Claim No: CA 006/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF APPEAL
BEFORE CHIEF JUSTICE ZAKI AZMI, JUSTICE WAYNE MARTIN AND H.E JUSTICE ALI AL MADHANI
AL RIHAB REAL ESTATE COMPANY LLC
EMIRATES NBD BANK PJSC
|Hearing :||7 January 2021|
|Counsel :||Vernon Flynn QC instructed by King & Wood Mallesons (Mena) LLP on behalf of the Appellant
Tom Montagu-Smith QC instructed by DLA Piper Middle East LLP on behalf of the Respondent
|Judgment :||5 April 2021|
UPON the Order of the Chief Justice Zaki Azmi granting the Appellant permission to Appeal issued on 28 July 2020 (“Appeal”)
AND UPON hearing counsel for the Appellant and counsel for the Respondent at a hearing on 7 January 2021
AND UPON reading the submissions and evidence filed and recorded in the Court file
IT IS HEREBY ORDERED THAT:
1. The Appeal is dismissed.
2. Al Rihab is ordered to pay ENBD’s costs of the Appeal and of the application for a reference to the Union Supreme Court, with such costs to be assessed by a Registrar of this Court, if not agreed within 28 days of the date of this Order.
Date of issue: 5 April 2021
JUDGMENT OF THE COURT
1. Al Rihab Real Estate Company LLC (“Al Rihab”) appeals from a decision of a Judge of the Court of First Instance in which he ordered foreclosure of all of Al Rihab’s inter-est in a parcel of land situated within the Dubai International Financial Centre (“DIFC”) in favour of Emirate NBD Bank PJSC (“ENBD”) as mortgagee, and from a supplemen-tary decision in which the Judge refused to vary the order which he had made. For the reasons which follow, the appeal must be dismissed, and the judgment of the Court of First Instance affirmed. Al Rihab’s application to refer certain issues to the Union Su-preme Court will also be refused.
2. The evidence before the Court is not contentious, although in some areas that evi-dence is sparse, and in other areas non-existent. Such evidence as there is estab-lishes the following facts.
3. Al Rihab is a company incorporated in Abu Dhabi which is licensed to manage and invest in real estate. It is part of an extensive group of companies engaged in con-struction and the development of real estate known as the Al Jaber Group of Compa-nies (“Al Jaber Group”). The Al Jaber Group has its headquarters in Abu Dhabi. Be-fore it encountered financial difficulties it was engaged in very substantial commercial transactions and had tens of thousands of employees, including qualified lawyers working in a legal department.
4. In March 2006, Al Rihab obtained a facility from National Bank of Dubai PJSC (“NBD Bank”), pursuant to which NBD Bank advanced Al Rihab a loan of AED201 million re-payable on 31 December 2010.
5. On 11 May 2008, Al Rihab granted security to NBD Bank in respect of the funds which had been advanced by way of a mortgage over a parcel of undeveloped land owned by Al Rihab being Plot PA-05 Zaabeel Second (the “Lot”). The Lot is situated within the precincts of the DIFC and is said to be the largest remaining undeveloped parcel of land within the DIFC. It is common ground that Al Rihab acquired the land from DIFC Investments (“DIFCI”), an agency of the DIFC described as the “Master Developer” and which is responsible for the development of land within the DIFC, on terms which involve continuing obligations as between Al Rihab and DIFCI. Those obligations in-clude a prohibition upon the sale of the land prior to its development without the prior consent of DIFCI, and the obligation to pay a substantial sum of money to DIFCI in the event of the sale of the land in an undeveloped state, although this is one of those ar-eas in which the evidence is sparse to be the point of being non-existent.
6. The mortgage had a term from the date of its execution until 31 December 2012. In due course it was registered on the DIFC Real Property Register (the “Register”).
7. On 21 November 2009, following the merger of NBD Bank and ENBD, NBD Bank’s rights and obligations under the mortgage passed to ENBD.
8. By agreement dated 22 November 2010, the term of the mortgage was extended to 30 June 2016.
9. During 2014, the liabilities of and the financial support provided to a number of mem-bers of the Al Jaber Group, including Al Rihab, were restructured. On 12 June 2014, a number of documents were executed to give effect to that restructure including docu-ments entitled:
(a) the Common Terms Agreement;
(b) the Intercreditor Deed;
(c) the Conventional Facility Restructuring Agreement; and
(d) the Priority Deed.
These documents will be described collectively as the “Finance Documents”.
10. Al Rihab, ENBD and a number of other financiers, including Abu Dhabi Central Bank (“ADCB”) are all parties to the Finance Documents. Although this is another topic up-on which the evidence is sparse, it seems more likely than not that the mortgage the subject of these proceedings falls within the scope of the Finance Documents, be-cause it falls within the definition of the expressions “Finance Security Document” and “Existing Security” in the Common Terms Agreement.
11. The Finance Documents also include provisions under which the various financiers providing credit to members of the Al Jaber Group undertake obligations inter se, in-cluding obligations to account to the group of financiers in respect of amounts received in excess of their secured interest in the event of the exercise of their securities. It al-so appears to be common ground that, pursuant to these provisions, if ENBD realizes an amount from the sale of the land foreclosed which exceeds the sum of the amount of its debt from Al Rihab, the amount due to DIFCI and the costs of sale, under the Fi-nance Documents it will be obliged to account to the various financiers of the Al Jaber Group, including ADCB in respect of the excess. It also seems to be common ground that in such a circumstance, some of the excess would flow back to ENBD as a con-sequence of the indebtedness of the other members of the Al Jaber Group to ENBD. However, this topic is another area in which the evidence is sparse to the point of non-existence.
12. On 8 June 2016 an agreement was executed extending the term of the mortgage until 30 June 2020. The debt secured by the mortgage was to be repaid in full by 31 March 2018. The Register was amended to reflect the changed terms of the Mortgage Agreement.1
13. Following the execution of the Finance Documents, Al Rihab made various repay-ments of the principal due under the loan from ENBD. However, the last such pay-ment was made on 5 January 2016. Following that date Al Rihab and other members of the Al Jaber Group were in default of their obligations under the Finance Docu-ments, including the mortgage the subject of these proceedings. However, interest due under the facilities was paid on a quarterly basis until 30 June 2017, following which those payments also ceased. 2
14. During 2016 and 2017, there were discussions between the Al Jaber Group and its financiers with respect to its continuing defaults.3 In the latter part of 2017, the Al Ja-ber Group requested another restructure of its indebtedness to its creditors. While ENBD supported that proposal, it did not receive sufficient support from other creditors to proceed. 4
15. On 12 January 2020, ENBD wrote to Al Rihab and to the Al Jaber Group demanding that the outstanding debt be paid within 30 days.
16. Al Rihab failed to make any payment in response to the 30 day notice. As a conse-quence, on 13 February 2020 ENBD wrote again to Al Rihab and the Al Jaber Group requiring payment of the debt due and served formal notice of default on Al Rihab pur-suant to Article 63(3) of the DIFC Real Property Law5 (the “Law”), requiring Al Rihab to remedy its default under the mortgage within 60 days failing which ENBD might exer-cise any of its rights over the Lot the subject of the mortgage.
17. Neither Al Rihab nor the Al Jaber Group made any payment or provided any response to the demands issued in February 2020, with the result that proceedings were com-menced in the Court of First Instance on 21 April 2020, following the expiry of the 60 day notice.
The proceedings in the Court of First Instance
18. ENBD commenced proceedings against Al Rihab under Part 8 of RDC, on the ground that the proceedings were unlikely to involve a substantial dispute of fact.
19. In the Claim Form ENBD sought relief in two alternative formats, later described as “packages”. By the first package, ENBD sought a declaration that it was entitled to exercise its power of sale over the land, an order that it might exercise its power of sale within 18 months from the date of the order notwithstanding the expiry of the mortgage, an order that the terms stipulated in the mortgage agreement be extended by 18 months to 30 December 2021, and various consequential orders.
20. In the event that such orders were not available, ENBD sought an order for foreclosure and consequential orders requiring the DIFC Registrar of Real Property to note the or-der for foreclosure on the Register, and transfer the title to a subsidiary of ENBD, be-ing a property holding entity.
21. ENBD’s claim was supported by a witness statement from Mr Jeetendra Wadhwani in which Mr Wadhwani gave evidence of various matters to which we have already re-ferred. In that statement, under the heading “Other interests in the property” Mr Wadhwani stated:
I am aware that, on or around the date of the Priority Deed, ADCB (in its ca-pacity as security agent for certain lenders who are party to the Intercreditor Deed) intended to take a second ranking mortgage over the Property and indeed, the terms of the Priority Deed specifically envisaged such a mort-gage being entered into. However, to my knowledge ADCB’s mortgage (to the extent it was ever entered into) has not been registered upon the DIFC Real Property Register and does not appear upon a title search of the Prop-erty (or did not appear as at 5 March 2020). Notwithstanding the apparent lack of a second mortgage in favour of ADCB, ENBD has still sought to abide by the terms of the Priority Deed in giving notice to ADCB.6
22. Mr Wadhwani states that ENBD provided ADCB with a copy of the 30 day notice is-sued in January and the 60 day notices issued in February 2020, and also gave ADCB notice that ENBD proposed to proceed with enforcement action against Al Rihab un-der its mortgage. Mr Wadhwani also states that so far as he was aware ADCB did not intend to enforce any mortgage over the property which it might have but which re-mains unregistered.7
23. ENBD served the 60 day notice upon each of Al Rihab, the guarantors of Al Rihab, ADCB and the DIFC Registrar of Real Property by email and either courier or hand de-livery.8
24. On 13 February 2020, Mr Wadhwani had a telephone conversation with Mr Omar Ras-sas, Group Treasury Director of the Al Jaber Group in which he confirmed receipt of the email and the 60 day notices which were delivered physically.
25. ENBD took the same approach in relation to service of the legal proceedings. The rel-evant documents were served by email sent to various individuals within the Al Jaber Group with whom ENBD had been dealing, and by hard copy sent by courier to the corporate office of Al Rihab which is at the corporate office of the Al Jaber Group in Abu Dhabi.
26. Mr Wadhwani further states that on 11 February 2020, he met with the Vice-Chairman of the Al Jaber Group, Mr Mohammad Al Jaber, and Mr Rassas. During that meeting Mr Wadhwani advised that the 60 day notice of default would be served on them short-ly. According to Mr Wadhwani, at that meeting Mr Mohammad Al Jaber indicated that Al Rihab would repay the debt in full before the expiry of the 60 day notice or else would provide ENBD with full authority to sell the property. Neither in fact occurred.
27. Mr Wadhwani further states that between 7 and 14 April 2020 he had a number of conversations with Mr Rassas by telephone. During those conversations Mr Rassas requested additional time in which Al Rihab might try and find a buyer for the property. Mr Wadhwani advised Mr Rassas that ENBD was not prepared to grant further time, given the extensive period of default.
28. On 19 April 2020, Mr Rassas sent an email to Mr Wadhwani requesting an extension of three months in which to propose a solution. Mr Wadhwani states that ENBD formed the view that the grant of an extension for a further three months would have made no material difference to Al Rihab’s ability to repay the loan and would instead have increased Al Rihab’s liability through the accrual of additional interest.9
29. Mr Wadhwani asserted in his statement that attempting to sell the land on or prior to 30 June 2020 would result in a significant discount being applied to the sale, and that in order to obtain a reasonable market value for the land, the marketing and sale pro-cess might take up to 18 months. He gave reasons for that view, which included the impact of COVID-19 and the fact that any prospective developer of the property would need to go through a detailed due diligence process as part of any acquisition. For those reasons Mr Wadhwani expressed the view:
..that it would not be realistic nor practically possible to effect a sale of the Property in a period of less than 18 months.10
30. Mr Wadhwani also asserted that ENBD sought relief on an urgent basis, due to the expiry of its security interest on 30 June 2020.
31. Mr Wadhwani further asserted that the proceedings would be served in accordance with the relevant requirements of both the DIFC Court Rules, and the procedural rules applicable in Abu Dhabi.11 As we have noted, service was effected by email to senior executives within the Al Jaber Group identified by Mr Wadhwani and with whom ENBD had been dealing with in relation to Al Rihab’s debt, and by delivering hard cop-ies of the documents by courier to the registered corporate address of Al Rihab in Abu Dhabi.
32. Ms Fatima Al Jaber has provided a witness statement in support of Al Rihab’s appeal. Ms Al Jaber is the daughter of Mr Obaid Khaleefa Al Jaber Al Marri, who is described by Ms Al Jaber as the majority shareholder of Al Rihab. According to Ms Al Jaber’s statement, the shareholders of Al Rihab are her father and Omniyat One Limited (“Omniyat”). According to Ms Al Jaber, her father and Mr Mahdi Jawad Amjad, a nominee of Omniyat, are the nominated directors of Al Rihab and jointly have power and authority to manage the company.
33. Ms Al Jaber gives evidence in relation to a number of aspects of the proceedings in the Court of First Instance. She states that on 21 April 2020, Al Rihab received an email from the lawyers acting on behalf of ENBD enclosing the Claim Form in English and in Arabic with a covering letter written in English stating:
Al Rihab must acknowledge service of ENBD’s claim in accordance with the Rules of the DIFC Court, within 14 days of service of the sealed Claim Form.12
34. Ms Al Jaber asserts in her statement that on 28 May 2020 Al Rihab was copied to an email from DLA Piper which related to a hearing listed before the DIFC Court on 4 June 2020. She asserts in her statement that this was the first time Al Rihab became aware of the hearing, although there are reasons to doubt the accuracy of this asser-tion.
35. In the course of her submissions to the Judge at first instance at the hearing on 4 June 2020, Ms Al Jaber stated that her father “has been notified during the last week of Ramadan”.13 In her statement Ms Al Jaber confirmed that the Eid El Fitr public holi-days began on 22 May 2020. Those holidays marked the end of the holy month of Ramadan. It follows that if her father received notice of the hearing in the last week of Ramadan, he must have received that notice between 15 and 22 May 2020. Further, because notice of the proceedings had been served almost a month earlier, the rele-vant “notice” which he received must have been notice of the hearing on 4 June 2020.
36. That inference is also consistent with the terms of an email sent by Mr Obaid Al Jaber to the Registry of this Court at 3.20pm on 3 June 2020. The email was in the following terms:
Following your email of 20 May 2020 setting thereby the hearing date for the 4th of June 2020, and due to the fact that we are still deliberating the final with the appointed law firm whom will be representing us for this case, espe-cially with the lockdown we are facing in Abu Dhabi due to the pandemic and having just finished with the Eid El Fitr holidays, which have caused this de-lay in the appointment process, we seek your kind consideration of the same and respectfully appreciate granting us an extension of two weeks and as such adjourning the hearing of 4 June 2020 for two weeks to enable us to finish our discussions with the law firm and finalise the procedures for issu-ing a notarized power of attorney in this respect.
37. Part of the email trail preceding this email is an email from the Registry of the Court advising the lawyers for ENBD that the claim would be listed for hearing on 4 June 2020. It is of course possible that this email did not come to the attention of Mr Al Ja-ber or Al Rihab until 28 May 2020 (contrary to Ms Al Jaber’s statement to the Judge at first instance), although if that is the case, it is surprising that no mention was made of this in the email of 3 June requesting an adjournment of two weeks.
38. In summary, it is clear that Al Rihab received notice of the hearing to take place on 4 June 2020 no later than 28 May 2020, and quite possibly approximately a week earlier. It must also be remembered that if Al Rihab had filed an Acknowledgement of Service, In accordance with the information provided in the covering letter which it received on 21 April 2020, there can be no doubt that it would have been notified of the date of the hearing at the time it was fixed by the Court.
39. At all events, after referring the request for an adjournment to the Judge, by email sent at 4.10pm on 3 June 2020, the Registry of the Court advised Mr Al Jaber, and others within the Al Jaber Group, that the hearing would proceed at 10.00am on 4 June 2020.
The hearing at first instance
40. As we have noted, Ms Al Jaber participated in the hearing. She commenced her statement to the Court with a reference to RDC 8.16 and 8.17. Those Rules provide:
(1) the defendant has failed to file an acknowledgement of service; and
(2) the time period for doing so has expired;
the defendant may attend the hearing of the claim but may not take part in the hearing unless the Court gives permission.
8.17 Where the defendant contends that the Part 8 procedure should not be used because:
(1) there is a substantial dispute of facts; …
he must state his reasons when he files his acknowledgement of service …
41. Ms Al Jaber asserted to the Judge:
…that Part 8 should not be used because there is a substantial dispute of fact in this case and the use of Part 8 procedure will harm my case and my position. So I am asking you for an extended adjournment of this hearing to take place at least a month from today.14
42. Ms Al Jaber later confirmed to the Judge that she is not a lawyer. We digress to ob-serve that a fair inference arises from her reference to the Rules of Court that she had received legal advice with respect to the position which should be taken prior to at-tending the hearing. However, although she refers in her statement to the difficulty which Al Rihab had experienced in obtaining legal advice, no reference is made to the legal advice which she appears to have received preceding the hearing.
43. Ms Al Jaber then referred to her father’s receipt of notice during the last week of Ram-adan, to which we have already referred, and the lockdown in Abu Dhabi which was said to make it difficult to “sort out the legal representation”.15
44. In answer to a question from the Judge, Ms Al Jaber confirmed that Al Rihab had been provided with the court documents on 21 April 2020. She went on to state:
But at that time we had also some urgency situations here in Abu Dhabi, the situation in COVID-19, and as you know our group, Al Jaber Group, we were dealing with other situations which had a priority to really dealing with this matter. We really regret it but that was the situation and it made a lot of pressure on us, on Mr Obaid Al Jaber, to deal with the other matters.16
45. In answer to another question from the Judge, Ms Al Jaber confirmed that Al Rihab were talking to lawyers but had not completed their engagement. When asked why it was only then that Al Rihab had spoken to people about legal representation, when they had been served with court documents a little over six weeks earlier, Ms Al Jaber stated:
We have a lawyer but our lawyer is not registered with DIFC so that is why we need the time. We took some time to just try to see who is the best for to serve us in this case.17
46. After hearing from counsel for ENBD, the Judge advised Ms Al Jaber that an adjourn-ment for a month was entirely out of the question and in that context observed:
Anyone with any understanding of the material served on the defendant would be aware of that and I am afraid that your application does cast something of a pall over its bona fides. The only thing I might possibly con-sider is an adjournment for perhaps a week …18
47. No doubt the Judge was referring to the fact that if the hearing was adjourned for a month, the mortgage would have expired and ENBD would have lost its security over the Lot.
48. Ms Al Jaber responded by asserting that she hoped to be able to finalise legal repre-sentation within a week.
49. The Judge heard again from counsel for ENBD and advised Ms Al Jaber that he con-sidered there was validity in counsel’s submission that the discrepancy between the request for at least a month followed by the apparent willingness to proceed in a week’s time cast doubt over the bona fides of the application for an adjournment.19
50. In response, Ms Al Jaber advised that they were in the last stage of finalizing the law-yers, and would try to do their best in a week’s time. She stated that she had “been on this thing since a week’s time”.
51. The Judge then stated that the assertion that she had been working on the case for a week did not persuade him of the bona fides of her application, after which he ob-served:
I am afraid, Ms Al Jaber, it is not going well for you because the distinct im-pression that I am having is that this is an application brought solely in order to avoid the trial proceeding today and not with any proper prospect of the defendant defending, nor have you told me what kind of defence might be being put forward.
So just one last chance please to tell me, at the moment I am not inclined to grant an adjournment and that should be plain. So you can address it. 20
52. Ms Al Jaber replied by stating that she was not a legal person and that she wanted to be able to bring a lawyer to the next hearing.
53. The Judge then declined the application for adjournment stating:
I do not consider that a basis for adjourning it has been made out. More than that, I am gravely suspicious of the bona fides of the application. … Ms Al Jaber, you are of course most welcome to remain as an observer but without any participation in the hearing.21
54. As it is relevant to the grounds of appeal, we digress to observe that:
(a) during her remarks to the Court Ms Al Jaber gave no indication whatever of any defence which Al Rihab might have to the claim, despite a specific invitation from the Judge to provide such an indication;
(b) despite presumably being aware of the provisions of RDC 8.16, to which she referred, Ms Al Jaber made no application for the grant of leave to participate in the substantive hearing;
(c) Ms Al Jaber made no application for the grant of time within which to endeav-our to secure a sale of the land – the only application was for an adjournment to enable legal representation to be obtained;
(d) no reference was made to any possible reference to arbitration, not was any “dispute” which might be referred to arbitration identified; and
(e) although reference was made to the pandemic in the context of the delay in se-curing legal representation, Ms Al Jaber did not suggest that the pandemic had affected Al Rihab’s capacity to comply with the terms of the mortgage.
55. Following the interchange between the Judge and Ms Al Jaber to which we have re-ferred, the substantive hearing proceeded. In the course of that hearing, the Judge in-dicated to counsel for ENBD that he was disposed to make an order for foreclosure but “to take effect … on 23 June in case there is this negligible possibility of a sale”.22 At the conclusion of the hearing, the Judge reserved his decision.
The decision at first instance
56. The decision was published, with reasons, on 15 June 2020. No application to reopen the hearing was made by lawyers representing Al Rihab during the period between the refusal of the adjournment on 4 June and the delivery of judgment on 15 June 2020.
57. In his reasons the Judge referred to the facts which I have set out above relating to the security documents and Al Rihab’s default.
58. In the course of his reasons the Judge referred to his refusal of Ms Al Jaber’s applica-tion for an adjournment. He observed:
That it was made in the face of the reason for urgency in Mr Wadhwani’s witness statement reflected adversely on its bona fides. … Ms Al Jaber acknowledged that the Defendant had been served on 21 April 2020, and her astonishing explanation for failure to act sooner to engage legal assis-tance was that there had been more important things to attend to. When initially asking for an adjournment Ms Al Jaber said that the defendant op-posed the Part 8 procedural because there was a factual dispute, but my later invitation to indicate what the dispute was went unanswered. The re-sponse to a possible short adjournment was to the effect that the defendant could instruct its legal representatives if it had to, which was not consistent with the initial requirement of at least one month. I consider that, particularly in the absence of any indication of a defence to the Defendant’s claim, the application was not genuinely made with a view to defending the claim but was a spoiling application in the hope of deferring and prejudicing its out-come.23
59. The Judge then gave his reasons for declining to grant the package of relief relating to the power of sale.
60. In relation to the relief sought by way of foreclosure, the Judge referred to the difficul-ties which arise attempting to apply English principles of property law to a Torrens sys-tem of title by registration of the kind that had been implemented in the DIFC by the Law.24
61. After referring to the provisions of the Law the Judge observed that foreclosure under the terms of that law was different from foreclosure in traditional English real property law. However, he considered that some matters arising under that traditional law should nevertheless be borne in mind. He observed:
If the mortgaged land is worth more than the amount of the debt it secures, by foreclosure the mortgagee will gain a windfall at the expense of the mort-gagor. Since the mortgagee will take the land free from subsequent security interests, again if the land is worth more than the amount of the debt it se-cures, the holder of a subsequent security interest will be prejudiced – it will lose its security. Hence in a foreclosure suit in equity, it was necessary for the holder of a subsequent security interest to be joined in the proceedings: at the least, it had an interest in whether the mortgagee was entitled to fore-closure. A foreclosure order nisi was made, directing the taking of any nec-essary accounts and giving to the mortgagor time to pay the money due and the holder of any subsequent security interest an opportunity to redeem the prior mortgage and so preserve its security. If there was neither payment nor redeeming up, a foreclosure order absolute followed. But the order was not necessarily final: equity would “open” the foreclosure in some circum-stances …
Unfortunately the Law is silent on these matters. When the Law is silent, what is brought into the making of an order for foreclosure by application to the Court? The claimant submitted that the Law gave it an absolute right to foreclosure, so long as it established default and service of the notices re-quired … I do not think that is correct. Textually, Article 70 provides that the Court “may” make an order for foreclosure … On ordinary principles joinder of any holder of a subsequent security interest is necessary, as someone who will be affected by an order for foreclosure. There remains the need to consider any windfall and any prejudicial effect of foreclosure upon subsequent security holders, and in giving the Court a jurisdiction equivalent to that of an equity court, the Law cannot sensibly be taken to have put these established considerations aside …
In my view, on an application for foreclosure under Article 70 it is open to the Court to mould the grant of the order having regard to such considerations; by no means necessarily by following entrenched procedures of English law and practice, but by measures with a view to just recognition of the mort-gagor’s “equity” in the sense of the excess of the value of the land over the amount of the debt it secures, and of the security interest of a subsequent security holder. That may be by giving time to repay or sell (in some cir-cumstances no time at all may be warranted) or the opportunity to redeem up, or by imposing conditions on the order or requiring an undertaking; the Law leaves flexibility to the Court.25
62. On the subject of subsequent security, the Judge noted that there was no registered security interest other than the mortgage, but also noted that the Register records a caveat against the property lodged by DIFCI. The Judge noted that ENBD believed that the caveat related to fees payable under the agreement for purchase of the land as a result of Al Rihab’s failure to develop the property, and that DIFCI claims in the order of AED 40 million.
63. The Judge noted that DIFCI had not been joined as a party, and that ENBD had in-stead offered an undertaking that after sale of the property, it would retain any excess over and above the debt and costs of sale for 30 days after DIFCI was notified of the sale. The Judge noted evidence to the effect that DIFCI considered such an undertak-ing satisfactory and that it supported the foreclosure orders with such an undertaking, and on that basis considered that to be a sufficient accommodation of DIFCI’s inter-ests.
64. The Judge went on to observe that although initially inclined to require similar accom-modation against a windfall to ENBD at the expense of Al Rihab, he had decided not to require such an undertaking, given Al Rihab’s lengthy default and its failure to re-spond to the exercise of ENBD’ rights as mortgagee. In that context the Judge ob-served “the defendant cannot reasonably complain if it is not given more time”.26
65. As foreshadowed in discussions with Counsel during the hearing, the Judge ordered that foreclosure take effect on 23 June 2020, and directed the Registrar to note the or-der for foreclosure on the Folio for the Property on or after that date. The Judge also granted liberty to apply to set aside those orders in the event that Al Rihab paid the amount of the debt together with costs prior to 23 June 2020.
The post judgment application
66. On 21 June 2020, six days after judgment and 17 days after the hearing, Al Rihab ap-plied for orders:
(a) extending the time for filing an Acknowledgement of Service to enable Al Rihab to file such a document;
(b) amending the orders made by the Judge by providing that foreclosure take ef-fect on 31 January 2021;
(c) providing that the foreclosure order is subject to any further order of the Court or of an Arbitral Tribunal appointed in connection with the Finance Documents; and
(d) providing for an undertaking by Al Rihab to co-operate with ENBD to enter into an agreement to extend the duration of the mortgage until 31 January 2021.
67. The application was supported by a witness statement provided by Mr Mario Merhy, who describes himself as a Legal Adviser employed by Al Jaber Group and whose po-sition required him to carry out work for Al Rihab.
68. In his statement Mr Merhy referred to the Finance Documents and in particular to an arbitration agreement contained within clause 39.2 of the Common Terms Agreement.
69. Mr Merhy also asserted that Al Rihab was currently in discussions with Select Group Limited (“Select Group”) for sale of the Lot. He produced a Non-Disclosure Agree-ment between Al Rihab and Select Group relating to the provision of information relat-ing to the Lot, under which Al Rihab had granted Select Group a period of exclusivity of three months in respect of the purchase of the Lot, with a preemptive right to match any offer received in the following three months.
70. Apart from referring to the Arbitration Agreement, Mr Merhy did not identify any ground of defence or any dispute between the parties appropriately referred to arbitration. Ra-ther, Mr Merhy asserted that it was Al Rihab’s wish for an amicable solution to be found by way of a mutually beneficial sale to Select Group or another third party.27
71. Mr Merhy’s statement is silent on the question of whether he provided legal advice to Al Rihab following service of the legal proceedings in April 2020, and if not, why not. Nor does Mr Merhy address the question of why it was left to Ms Al Jaber to represent Al Rihab in the hearing on 4 June 2020, when he describes himself as the Legal Ad-viser to Al Rihab.
72. The application was heard on 22 June 2020. The Judge gave reasons for dismissing the application ex tempore. Those reasons were converted into written reasons for decision in a judgment published on 7 July 2020.
73. In relation to the Arbitration Agreement the Judge observed that when judgment was entered on 15 June 2020, there was no enunciated dispute between the parties, nor any request to stay the proceedings pending a reference to arbitration. The Court had jurisdiction, and made final orders in the exercise of that jurisdiction. In his Honour’s view, there was no power to reopen those orders.
74. The Judge rejected the application for postponement of the order for foreclosure until 31 January 2021 on the ground that ENBD’s interest would not be sufficiently protect-ed, given that its mortgage was to terminate on 30 June 2020.
75. This appeal was instituted on 25 June 2020, shortly after the Judge had dismissed the application to vary the terms of the order of foreclosure. There were four grounds of appeal, being the first four grounds we consider below. Those grounds assert defec-tive service, an error by the Judge in refusing adjournment of the hearing, an error by refusing to allow Al Rihab to seek a stay on the basis of the arbitration agreement in the Common Terms Agreement, and an assertion to the effect that the Court should have considered, of its own motion, the effect of the pandemic pursuant to Article 249 of the Civil Procedure Code. No ground asserted that the Judge erred by failing to al-low Al Rihab more time in which to raise the funds to satisfy the debt due to ENBD by selling the property.
76. The appeal was supported by the witness statement of Ms Al Jaber, to which we have already referred in part. In that statement Ms Al Jaber also refers to the agreement be-tween Al Rihab and Select Group, under which the latter was given the exclusive right to negotiate for the purchase of the land – an agreement which lapsed in the event of Al Rihab’s interest in the land being lost be reason of foreclosure. Ms Al Jaber also asserted that Al Rihab was willing to agree to amend the mortgage to amend its term until 31 July 2020 “or such other date as ENBD might request”.
77. In addition to the grounds of appeal, Al Rihab requested that the Court refer a number of aspects of the matter to the Union Supreme Court. We will deal with that request later in these reasons.
78. During August 2020 Al Rihab applied for a stay of the judgment under appeal and for an order directing the parties to proceed to mediation. That application was supported by another witness statement from Mr Merhy. Mr Merhy attached what he described as an “informal valuation” of the land provided by Knight Frank. In that valuation, Mr Jonathan Jeffrey, a partner in the valuations section of Knight Frank stated:
In the current market assuming sold as one plot … then the price of the plot probably should be in the region of AED 170,000,000 – AED 205,000,000.
Assuming that the plot is subdivided in three/four plots with a revised land use then we consider that an aggregate price … would equate to AED 305,000,000 – AED 340,000,000.
Note this scenario excludes any associated costs of subdividing the plot …
The figures provided above are not formal valuations, there (sic they) are broad ranges as to where pricing may be under certain circumstances.
79. As there was evidence that Al Rihab had no assets other than the Lot the subject of the foreclosure order, orders were made for the provision of security for ENBD’s costs of the appeal as a condition of the prosecution of the appeal. Those orders, and the need to allow for time for compliance with them delayed the hearing of the appeal, which was eventually listed to take place on 22 November 2020.
80. Six days before the appeal was listed to be heard, Al Rihab served amended grounds of appeal and a supplemental skeleton in support of the appeal. The additional grounds proposed are the last three we address below, being an assertion that the proceedings miscarried because ADCB should have been joined as a party, an asser-tion that the Judge erred by making an immediate order for foreclosure, instead of an order nisi followed by an order absolute six months later, and an assertion that the Judge erred by failing to advise Ms Al Jaber that she could apply for permission to be heard at the hearing.
81. Senior Counsel for Al Rihab moved to amend the grounds of appeal at the first hearing of the appeal on 22 November 2020. In the course of his submissions, Senior Coun-sel advised the Court that:
Just before this hearing, a third party purchaser called Omniyat reached an agreement with my clients to purchase the property, subject to contract and subject to ENBD’s consent. Omniyat has offered to discharge the monies owed to Emirate Bank secured on the property.28
82. Senior Counsel for ENBD advised the Court that understandably, he was not in a posi-tion to deal with the amendments given the brevity of notice. Notwithstanding the late-ness of the amendments, the Court determined that it was in the interests of justice that they be allowed, subject to the adjournment of the hearing, and to an order that Al Rihab pay any costs thrown away by reason of the amendment and adjournment.
The application to adduce fresh evidence
83. Following the adjournment of the hearing, Al Rihab applied to adduce fresh evidence in the hearing of the appeal. Amongst the evidence tendered in that application is a Memorandum of Agreement (“MoA”) dated 15 November 2020 between ODIFC De-velopments Limited (“ODIFC”) and Al Rihab.
84. The MoA briefly recites the history of the acquisition of the land by Al Rihab from DIFCI, the order of foreclosure, and the appeal against that order. The MoA expressly states that the parties intend its provisions to be legally binding, and obliges the parties to negotiate to enter into the Transaction Documents described in the MoA as soon as practicable. By clause 1 of the MoA, ODIFC agrees to buy the land the subject of these proceedings from Al Rihab under the terms of the conditions of the MoA, subject to satisfaction of the conditions specified in clause 2.
85. Those conditions are:
(a) a successful outcome to the Appeal enabling Al Rihab to complete the Trans-action;
(b) approval and consent from DIFCI in accordance with the terms of the agree-ment under which Al Rihab acquired the land;
(c) receipt of a letter of release from ENBD confirming release of the bank’s secu-rity over the land; and
(d) advice as to the accounts into which the purchase price is to be paid.
86. Clause 4 of the MoA provides that the purchase price is AED 108,000,000 to be paid first by such amount as is required to satisfy the debt due to ENBD, and the balance into an account nominated by ADCB as agent for the Al Jaber Group financiers. Clause 4 further provides that in addition to payment of the purchase price, subject to successful completion of the Transaction, ODIFC will assume the liabilities specified in clauses 5, 6 and 7 of the MoA.
87. Under clause 5 of the MoA, subject to successful completion of the Transaction, ODIFC undertakes to assume all obligations under the agreement by which Al Rihab acquired the land from DIFCI.
88. By clause 6 of the MoA, as soon as practicable after successful completion of the Transaction, ODIFC is obliged to register the Transaction with the DIFC Registrar of Real Property, and pay all costs and fees associated therewith.
89. By clause 7 of the MoA, ODIFC agrees to take responsibility for all costs related to the appeal, including the obligation to provide security for ENBD’s costs of the appeal. The clause further records that ODIFC has agreed to pay the professional and other fees payable to professionals retained in relation to the conduct of the appeal, includ-ing an outstanding invoice to Al Rihab’s solicitors in the amount of USD 25,000.
90. By clause 8 of the MoA, Al Rihab agrees that ODIFC “shall have sole and exclusive conduct and control of the Appeal and shall be entitled to instruct and engage legal professionals and other advisers at its sole discretion”. Although the clause obliges ODIFC to provide information to Al Rihab in relation to the conduct of the appeal, the clause expressly provides that ODIFC “is under no obligation to consult or take direc-tions from the Seller in respect thereof, except for matters that would be contrary to the terms of the Transaction as contemplated under this MoA or is materially adverse to the Seller’s interests”.
91. The same clause provides that ODIFC is entitled to compromise or settle any aspect of the Appeal at any time without the prior consent of Al Rihab.29
92. Under clause 8 of the MoA, ODIFC also agrees to indemnify Al Rihab against any losses which may be incurred or suffered arising out of or in connection with the ap-peal, ODIFC’s conduct of the appeal, or the outcome of the appeal, including any fur-ther costs awarded against Al Rihab in excess of the security amount.
93. Clause 9 of the MoA provides that it becomes effective from the date which it bears – namely 15 November 2020, and further obliges the parties to enter into a formal sale and purchase agreement relating to the land on the terms of the MoA.
94. Clause 11 of the MoA provides that ODIFC has the right to terminate the MoA if, in its opinion, any of the conditions specified in clause 2 are not, or are unlikely to be satis-fied in full. The clause further provides that the MoA is to be deemed automatically terminated if the appeal is unsuccessful.
95. Clause 12 of the MoA provides that for a period commencing upon the date of its exe-cution and the date five calendar months after the success of the Appeal, Al Rihab will not commence or continue negotiations for the sale of the land to any other party.
96. Also tendered pursuant to the application to adduce fresh evidence is a letter from Omniyat to ENBD dated 19 November 2020. The letter commences by referring to recent discussions, and confirms that “we have reached an agreement with Al Rihab … for the purchase of the Plot”. There is a clear inference from this assertion, which was not disputed by Senior Counsel conducting the appeal in the name of Al Rihab on instructions from Omniyat, to the effect that ODIFC is an entity controlled by Omniyat.
97. The letter contains an offer to ENBD to the effect that if it consents to the sale of the land by Al Rihab, the debt due from Al Rihab to the bank will be paid, together with the costs incurred in the foreclosure proceedings. The letter also provides that completion of the Transaction is subject to due diligence by Omniyat within two months of signing a formal contract in the terms of the offer contained in the letter, during which time Omniyat was to have exclusivity in respect of any sale or other transfer of the Lot.
98. The fresh evidence also sought to be adduced includes various undertakings given by Al Rihab between June 2014 and December 2017 relating to the disposition of the proceeds of sale of the land under which, in general terms, Al Rihab undertook to remit any net proceeds of sale to the Group financiers in accordance with the restructuring arrangements.
99. In response to the application to adduce fresh evidence, ENBD tendered a further statement from Mr Wadhwani. Mr Wadhwani states that in a conference call with sen-ior representatives of ADCB which took place on 25 November 2020, he was advised that although a second mortgage over the land in favour of ADCB was contemplated, it was never executed – apparently because DIFCI had not consented to a second mort-gage over the property.
100. Mr Wadhwani states that in a further conference call which took place on 14 Decem-ber 2020, he was advised by senior representatives of ADCB that they agreed with ENBD’s proposal that the proceeds of any sale of the land should be distributed first to ENBD to clear its debt, accrued interest and costs, then to DIFCI, and then to ADCB as Restructuring Agent under the Finance Documents. Mr Wadhwani further states that he believes ENBD is obliged to deal with the proceeds of sale in this way, pursu-ant to the provisions of the Finance Documents by which it is bound.
101. Mr Wadhwani further states that he has received expressions of interest from potential purchasers of the land.
102. Mr Wadhwani further states he was advised by a representative of ADCB that the overall debt of the Al Jaber Group under the various finance arrangements was just under AED 8.05 billion.
103. Mr Wadhwani also states that on 15 December 2020, he participated in a conference call with senior representatives and legal advisers of DIFCI. During that call the repre-sentatives of DIFCI indicated that they were not in favour of a sale of the land in the manner proposed in the MoA and the Letter of Offer from Omniyat to ENBD. The rep-resentatives of DIFCI expressed concern that the sale price specified in those docu-ments appeared to be artificial, and the transaction was not at arm’s length, because Omniyat and Al Rihab were associates. DIFCI representatives also expressed con-cern that in the course of discussions involving Omniyat and Al Rihab in late 2018 and early 2019, despite requests Omniyat showed no willingness to make any commitment to develop the property.
104. Mr Wadhwani also states that DIFCI indicated that it would not consent to a transac-tion under which the purchaser simply assumed Al Rihab’s responsibilities to DIFCI – rather, it would require those obligations to be satisfied before any transaction took place. DIFCI also drew Mr Wadhwani’s attention to the existence of a pre-emptive right in the sale agreement between DIFCI and Al Rihab, under which DIFCI have a right of first refusal before any sale of the property can take place.
105. Mr Wadhwani further states that the portion of his witness statement dealing with his conversations with representatives of DIFCI has been reviewed by them, and they have confirmed its accuracy. An email exchange confirming that assertion is attached to Mr Wadhwani’s statement.
106. This evidence should all be received in the appeal, as it provides very important con-text to the consideration of the various grounds of appeal. In summary, the evidence establishes that:
(a) pursuant to the undertakings given by Al Rihab to ADCB as agent for the fi-nanciers, there has never been any prospect that any proceeds from the sale of the Lot after payment of the debt due to ENBD would be retained by Al Rihab – rather, any surplus must be provided to ADCB by way of contribution to the debt due under the Finance Documents;
(b) the total debt due from the Al Jaber Group to the various financiers party to the Finance Documents is in the vicinity of AED 8 billion;
(c) it follows that the application of any net proceeds from the sale of the Lot after payment of the debt due to ENBD and the monies due to DIFCI, would only make a small and insignificant contribution to the satisfaction of the Al Jaber Group debt – which may explain the lack of any meaningful response to the no-tices issued by ENBD in January and February 2020, and Al Rihab’s disinter-est following the commencement of legal proceedings in April 2020;
(d) no second mortgage in favour of ADCB was ever executed;
(e) Al Rihab and Omniyat are related parties – according to Ms Al Jaber, Omniyat and her father are the only shareholders in Al Rihab, and her father and a di-rector nominated by Omniyat are the only directors of Al Rihab. Although Sen-ior Counsel conducting the appeal in the name of Al Rihab asserted that this evidence no longer reflected the current position, there is no evidence to sup-port that assertion, and this Court must act on the evidence rather than upon assertions from Counsel;
(f) Al Rihab has entered into a binding agreement for the sale of the land to an en-tity under the control of Omniyat subject to the success of the appeal brought in its name. Under the terms of that agreement, Al Rihab is precluded from nego-tiating with any other prospective purchaser for a period of five months after the success of the appeal;
(g) the purchase price proposed for the land, of AED 108,000,000, is well below the range of values attributed to the land in August 2020 in the informal valua-tion provided by Knight Frank, even if one brings to account the value of the obligation undertaken in relation to DIFCI at, say, approximately AED 40,000,000;
(h) DIFC’s consent is required before Al Rihab could sell its interest in the land, and DIFC will not consent to the transaction reflected in the agreement be-tween Al Rihab and Omniyat through its subsidiary for a number of reasons, not least being its requirement to be paid in full before any transaction takes place;
(i) although the appeal is brought in the name of Al Rihab, Al Rihab’s involvement in the appeal is purely nominal. All legal representatives conducting the appeal in Al Rihab’s name are engaged and paid by Omniyat, which has full power to give instructions in relation to the conduct of the appeal and to settle it on any terms it considers appropriate. Further, Omniyat has agreed to meet all costs associated with the appeal, and to indemnify Al Rihab in respect of any losses it might suffer by reason of the appeal;
(j) no evidence has been adduced of any contemporary valuation of the land, or of any attempts made to attract a purchaser of the land in an arms length transac-tion (apart from that given by Mr Wadhwani); in the absence of that evidence it is reasonable to infer, and we do infer, that Omniyat has assumed all responsi-bilities and costs relating to the appeal because it sees financial advantage in being able to purchase the land on the terms set out in the MoA with Al Rihab, rather than acquiring the land by participating in a market based sale on arms length terms facilitated by ENBD;
(k) apart from the evidence of Ms Al Jaber, there is no evidence as to the nature of the relationship between Al Rihab and Omniyat, nor of the circumstances in which the sale of the Lot to Omniyat was negotiated, nor as to how the price was arrived at; and
(l) further, sale of the land to a shareholder of Al Rihab would contravene prohibi-tions to that effect in the Common Terms Agreement .30
107. In summary, this appeal has, for all practical purposes, been taken over by a related party of the nominal appellant in an attempt to enforce an agreement for the purchase of the land. However, even if the appeal is successful the purchase agreement will not be completed for at least two reasons – firstly, DIFCI’s consent is essential and will not be forthcoming, and secondly, the sale would constitute a breach of the Finance Doc-uments. If those obstacles could somehow be overcome, and the transaction pro-ceeded, the third party which has taken over the appeal would thereby acquire the land for a price which, on the evidence, is below market value, without there having been any attempt to secure a market-based arm’s length sale. If the transaction were to proceed, the third party would thereby obtain a financial benefit at the expense of the creditors of the Al Jaber Group, being particularly the financiers to that Group.
108. Viewed in this context, many if not all of the grounds of appeal ring hollow indeed. Nevertheless, we will now turn to the consideration of those grounds.
The grounds of appeal
Ground 1 - service
109. The first ground of appeal asserts that service of the proceedings was not lawfully ef-fected as required by RDC 9.54. That rule provides:
Where a claim form is to be served out of the DIFC or Dubai, it may be served by any method permitted by the law of the place in which it is to be served.
110. The reference to RDC 9.54 in this ground of appeal is inexplicable, because there is no submission in support of this ground to the effect that any of the various methods of service which were utilised during April 2020 did not accord with the law of Abu Dhabi. To the contrary, the only argument advanced in support of this ground is to the effect that service was not effected in accordance with the requirements of the Rules of this Court because “a form for defending the claim” was not served with the initiating pro-cess. It is asserted that such a form was necessary in order to comply with RDC 7.36 which provides:
Where the claimant is using the procedure set out in Part 8 (alternative pro-cedure for claims), the claimant must serve with the claim form a cover let-ter indicating that a form for defending the claim, a form for admitting the claim, or a form acknowledging service must subsequently be filed by the defendant using the court’s e-filing system.
111. As we have noted, when the initiating process was served on Al Rihab by email and hard copy, it was accompanied by a covering letter notifying the recipient that Al Rihab was obliged to file an Acknowledge of Service in response to ENBD’s claim in ac-cordance with the Rules of the DIFC Court, within 14 days of service of the sealed Claim Form. On its face that letter satisfied the requirements of RDC 7.36, by advising the party served that a form acknowledging service must be filed. RDC 7.36 refers to various forms disjunctively, so that advice in a covering letter with respect to the most appropriate form will suffice for compliance. There is no form for defending a Part 8 claim and RDC 8.6(1)(d) specifically provides that, in the case of claims under Part 8:
The requirement under Rule 7.35 to serve on the defendant a form for de-fending the claim does not apply.
112. In that context the reference in RDC 7.36 to “a form for defending the claim” in the let-ter accompanying service of a Part 8 claim is inexplicable. However, as we have al-ready noted, nothing turns upon that reference, as the requirements of RDC 7.36 were sufficiently satisfied by the letter’s reference to the requirement to file an acknowl-edgement of service.
113. As we have noted, Ms Al Jaber expressly acknowledged that service had been effect-ed in April 2020 in an answer to a question from the Judge. In those circumstances, an appeal would only be allowed on the ground of defective service if service was wholly irregular, and the irregularity had occasioned significant prejudice to the party served.
114. For the reasons we have given, service was not irregular in any respect, let alone wholly irregular. On the evidence, there is no room for any inference to the effect that if some other information had been provided in the covering letter at the time of ser-vice, some different course would have been followed by Al Rihab. Al Rihab was ex-pressly advised in the covering letter that it must file an acknowledgement of service within 14 days, and yet it took no action. Ms Al Jaber told the Judge that the reason no action was taken was because the Al Jaber Group was focusing its attention on other matters. On that evidence, there is no room for an inference to the effect that advice in any different terms in the covering letter would have had any effect upon the complete inaction which appears to have followed service.
115. Further, as we have noted above, in light of the evidence available to this court there is a clear inference to the effect that Al Rihab’s failure to respond to the various docu-ments issued by ENBD during 2020, including the legal proceedings, can be attributed to the fact that Al Rihab had very little, if anything to gain, in practical terms, by selling the land itself as compared to allowing the bank to exercise its security.
116. Ground 1 is entirely without substance and must be dismissed.
Ground 2 – refusal of the adjournment
117. Ground 2 asserts that the Judge erred in the exercise of his discretion by failing to grant the adjournment requested by Ms Al Jaber.
118. The decision to refuse the adjournment was a procedural decision made by the Judge in the course of managing the case. In Fidel v Felecia31 Hwang CJ enunciated the well established principle to the effect that case management decisions should not be interfered with by an appellate court:
unless it is satisfied that the Judge below had:
(a) erred in principle;
(b) taken into account some irrelevant matters;
(c) failed to take into account relevant matters; and/or
(d) come to a decision so plainly wrong it was outside the ambit of the discretion entrusted to the Judge.
119. These observations apply the more general principles which apply to appeals from the exercise of judicial discretion generally to case management decisions. Those princi-ples are well established by many decisions and for present purposes can be taken from the convenient enunciation by Lord Woolf MR in AEI Rediffusion Music Ltd v Phonographic Performance Ltd:32
Before the Court can interfere it must be shown that the Judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should or should not, have considered, or that his decision was wholly wrong because the Court is forced to the conclusion that he has not balanced the various factors fairly in the scale.33
120. More particular considerations apply to the adjournment of a hearing on the basis of an application made at the last minute. In such a case, Steel J observed in Corinth Pipe-works SA v Barclays Bank PLC:34
Unquestionably, the Court approaches an application for an adjournment in the circumstances with a considerable degree of caution if not scepticism.35
121. Reference should also be made to RDC 26.90 which provides that the adjournment of a trial is an order of last resort.
122. It is submitted that the Judge failed to take into account the matters to which Ms Al Ja-ber referred. That submission flies in the face of the interchange between Ms Al Jaber and the Judge to which we have referred. It is clear that the Judge listened carefully and intently to everything which Ms Al Jaber had to say, and questioned her in relation to other matters which he considered to be relevant.
123. Ms Al Jaber told the Judge that service had been effected on 21 April 2020, but that no action had been taken to respond to the documents, or obtain external legal represen-tation because there were other things to do. The Judge was entitled to take that statement into account as weighing very heavily against the application for an ad-journment. Further, as we have noted, although it is clear that Mr Merhy was providing legal advice to Al Rihab, there is a gap in the evidence relating to the question of whether he gave any such advice following service of the documents, and if not, why not.
124. It is also submitted that the Judge erred by entertaining grave doubts with respect to the bona fides of the application. However, that view was well within the range of views reasonably open to the Judge on the materials before him. No reasonable ex-planation had been given for the failure to take any action in response to service of the proceedings, viewed in a context in which the evidence established that there had been no meaningful response to notices served on Al Rihab in January and February 2020 which are themselves to be viewed in a context in which Al Rihab had been in default of repayment of principal for more than four years, and in default of payment of interest for more than three years. As the Judge noted, the submissions made by Ms Al Jaber were inconsistent – first she stated that a month was required to properly pre-sent Al Rihab’s case, but she then indicated a week would be sufficient.
125. It is also significant that when the Judge expressly requested Ms Al Jaber to advise the Court of the nature of Al Rihab’s defence to the claim, no meaningful response was provided. There was nothing on the papers before the Judge to suggest that there was any possible line of defence open to Al Rihab, and indeed, two appeal hear-ings and many months later there has never been any indication of any defence to ENBD’s claim under the mortgage – the most that has been said, more than six months after the hearing before the Judge, is that the Court should have given ENBD more time before ordering foreclosure - a proposition not advanced by Ms Al Jaber.
126. The Judge was also obliged to take into account the need to deal with the proceedings on an urgent basis, because of the expiry of the mortgage on 30 June 2020.
127. In all the circumstances the Judge was quite entitled to view the last-minute applica-tion for an adjournment with considerable scepticism, and to entertain serious doubts with respect to its bona fides. The Judge does not say so expressly, but we would ex-pect that he also took into account the policy evident in RDC 29.60, to the effect that adjournment of hearings is a last resort. If this Court were to adopt a practice of con-doning complete inaction following service of legal proceedings, without any cogent reason or justification, and then reward such inaction with the grant of an adjournment of a listed hearing following an application brought at the last minute, the orderly busi-ness of the Court would become shambolic, to the detriment of all litigants before the Court and to the detriment of the efficient utilization of the limited resources of the Court. Irrespective of whether the Judge took this aspect of this matter into account, it is amongst the reasons why we consider this ground of appeal is entirely without sub-stance.
128. The evidence establishes that the Judge took all relevant considerations into account, did not take any irrelevant considerations into account, and formed views that were open to him on the basis of the information before him. His decision to refuse the ad-journment was well within the range of the sound exercise of his discretion and no ba-sis for appellate interference with the exercise of that discretion has been established.
129. For these reasons ground 2 must be dismissed.
Ground 3 – the post judgment application
130. Ground 3 asserts that the Judge erred in two respects in dismissing the application made by Al Rihab after judgment had been entered, namely:
(a) by wrongly concluding that the inability to seek a stay of proceedings pending arbitration was not a sanction from which relief could be granted pursuant to RDC 4.46; and
(b) by failing to vary the terms of the judgment to provide that foreclosure would take place on 31 January 2021,
Both assertions are misconceived.
131. RDC 4.46 provides:
Where a party has failed to comply with a Rule Practice Direction or Court order, any sanction for failure to comply imposed by the Rule Practice Direc-tion or Court order has effect unless the party in default applies for and ob-tains relief from the sanction.
132. The right to apply to the Court for an order staying proceedings before the Court in or-der that an arbitration agreement may be enforced is a right conferred by Article 13 of the DIFC Arbitration Law.36 The right is not governed by any “Rule, Practice Direction or Court order” within the meaning of RDC 4.46.
133. Further, consistently with the provisions of the New York Convention to which it gives effect, any request for a stay of proceedings the subject of an arbitration agreement can be made by a party “not later than when submitting his first statement on the sub-stance of the dispute”. Of course a party is not obliged to apply for a stay, and if no party to the arbitration agreement asserts the right to request a stay within the time specified by the New York Convention, and in the DIFC, by Article 13 of the Arbitration Law, the parties will be taken to have waived their right to enforce the arbitration agreement, and the Court has the duty to proceed to resolve their dispute.37
134. In this case Al Rihab did not enter an Acknowledgement of Service or take any mean-ingful part in the proceedings. It had the opportunity to assert an entitlement to stay proceedings pending arbitration, but failed to take that opportunity. A final judgment was entered. Final judgment cannot be described as a “sanction for failure to comply with a Rule, Practice Direction or Court order” from which relief can be granted pursu-ant to RDC 4.46. Once final judgment has been entered, absent the application of the slip rule (RDC 36.41), the only way the judgment can be set aside is by way of appeal.
135. Moreover, there is no basis for appellate intervention based upon the arbitration agreement in any event. As we have noted, Al Rihab had every opportunity to raise an issue in relation to the arbitration agreement in the period of almost two months be-tween service of the legal proceedings and entry of judgment. It failed to do so. There is no reason why the Judge should have permitted it to raise this argument after judg-ment, nor any reason why this Court should now permit Al Rihab to take a position which wasn’t taken at first instance.
136. Al Rihab submits that it has unjustly been deprived of its entitlement to proceed to arbi-tration. The first obvious answer to that submission is that Al Rihab’s failure to take any action at all in response to notices served in January and February 2020, or to the legal proceedings served in April 2020, is the reason why it lost any opportunity to in-voke the arbitration agreement. However, it is very doubtful that even if the arbitration agreement had been raised prior to judgment, it would have made any difference to the outcome.
137. It can be supposed for the sake of argument (without being taken to decide) that the arbitration agreement in the Common Terms Agreement was potentially applicable even though it was not in the mortgage itself. However, foreclosure is not a right con-ferred by the terms of the mortgage agreement. Rather, it is a statutory remedy con-ferred by Article 70 of the Law. It is a remedy which can only be granted by a Court. Accordingly, as the relief which ENBD sought was not available from an arbitral tribu-nal, it is strongly arguable that its claim for foreclosure fell outside the terms of any ar-bitration agreement, with the consequence that the Court would not grant a stay of proceedings pending arbitration.
138. Further, Al Rihab has only ever identified one dispute or difference between the parties which could have been susceptible to resolution by arbitration. That dispute or differ-ence related to the precise amount due from Al Rihab to ENBD. However, Al Rihab didn’t refer that matter to arbitration – rather, it commenced court proceedings in Dubai in relation to that issue, which of course amounts to waiver of any right to refer that is-sue to arbitration. No issue or dispute falling within the scope of the arbitration agree-ment in the Common Terms Agreement has ever been identified by Al Rihab, either before the Judge or this Court. In particular, Al Rihab has never asserted that it has a defence to ENBDs claim. Al Rihab has taken a number of technical procedural points relating to the litigation process, but the only substantive issue which it has ever raised is the proposition that the Court should give it more time to try and satisfy the debt due under the mortgage by selling the property itself. Obviously that is a proposition which can only be put to a Court having power to order foreclosure. It is not a proposition which could have been referred to an arbitral tribunal.
139. As noted, the ground of appeal also asserts that the Judge erred by not varying the orders made to provide that foreclosure would not take place until 31 January 2021. Although the proposition is reiterated in Al Rihab’s skeleton, no argument is advanced in support of it and no oral argument was advanced in relation to it. It will be apparent from the observations we have already made that the application made to the Judge was misconceived – as judgment had been entered there was no power to vary its terms, and the ground of appeal, which alleges error on the part of the Judge by failing to do something which he had no power to do, is obviously misconceived. Nor does the ground address the obvious obstacle that the mortgage expired on 30 June 2020, after which there was no power to order foreclosure pursuant to the Law.
140. Al Rihab also submits, in ground 6, that this Court should vary the judgment below by extending the date upon which foreclosure takes place, on grounds rather different to those advanced to the Judge. We consider that ground below.
141. For these reasons, ground 3 is misconceived and must be dismissed.
Ground 4 – pandemic
142. Ground 4 asserts that the Judge erred by failing to consider, of his own motion, wheth-er “unforeseen exceptional events of a public nature”, namely the pandemic, required the Court to amend the obligations under the mortgage pursuant to Article 249 of the Civil Procedure Code.
143. Article 249 of the Civil Procedure Code provides:
If exceptional events of a public nature which could not have been foreseen occur as a result of which the performance of the contractual obligation, even if not impossible, becomes onerous for the obligor so as to threaten him with grave loss, it shall be permissible for the Judge in accordance with the circumstances and after weighing up the interests of each party, to re-duce the onerous obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.
144. A series of decisions of this Court have established beyond doubt that the Civil Proce-dure Code does not apply to proceedings in this Court.38 However, Al Rihab contends that Article 249 of the Code applies to this case via Article 31 of the Dubai Mortgage Law39 which provides that the Code applies in respect of “any matter for which no pro-vision is made in this Law”.
145. There are a number of reasons why this ground is doomed to fail. First, the mortgage is over land within the DIFC, and subject to DIFC Law. The only reference to the Du-bai Mortgage Law is in an amendment to the mortgage agreement dated 8 June 2016. That amendment does not provide that the mortgage agreement generally is to be sub-ject to Dubai Law, but rather provides that:
The mortgagee shall have the right to take legal actions to recover the debt in full during the mortgage term or thereafter in accordance with Dubai Mortgage Law no. 14 of 2008.
146. So, the amendment agreement provided that the mortgagee was entitled to exercise one remedy available under the Dubai Mortgage Law – it did not provide that the mort-gage agreement was generally subject to that Law. It follows that the Civil Procedure Code generally, and Article 249 in particular, have no application to the mortgage.
147. Second, although Al Rihab’s submissions in support of this ground are sparse indeed, being limited essentially to the recitation of the statutory provisions to which we have referred, presumably it is intended that the Judge should have considered whether Al Rihab should have been granted relief from the obligation to repay the debt secured by the mortgage by reason of the pandemic. However, Al Rihab’s obligation to repay the debt due to ENBD does not arise under the mortgage, which simply grants security to ENBD in respect of that debt, but under the Common Terms Agreement, which is gov-erned by English law. It follows that the Civil Procedure Code has no application to Al Rihab’s obligation to repay its debt to ENBD.
148. Third, Al Rihab made no submission to the Judge either before or after judgment, nor has it advanced any submission to this Court to the effect that its capacity to perform its obligations under the financing arrangements with ENBD was affected by the pan-demic. It can be reasonably inferred that such a submission has not been made be-cause it would invite incredulity, given that Al Rihab had been in default in the repay-ment of principal for more than four years, and in default in the payment of interest for more than 3 years prior to the commencement of the pandemic. In this circumstances, it is impossible to contend that either the Judge or this Court should infer, in the ab-sence of either submission or evidence, that Al Rihab’s inability to fulfil its obligations ENBD was somehow affected by the pandemic.
149. Fourth, as we have noted, Al Rihab would derive no benefit from the success of this appeal. The only beneficiary of the success of this appeal would be Omniyat which has taken over the appeal for all practical purposes. The Court has no information in relation to the impact which the pandemic has had upon Omniyat, although it can be inferred that the company still has the financial capacity to undertake significant finan-cial obligations, of the kind that it has undertaken by its agreement with Al Rihab. However, the short point is that it would be quite wrong for this Court to allow an ap-peal on the ground of supposed hardship to Al Rihab caused by the pandemic, when Al Rihab has nothing to gain from the success of the appeal.
150. For these reasons ground 4 is entirely baseless and must be dismissed.
Ground 5 – non-joinder of ADCB
151. Ground 5 asserts that the Judge erred by ordering foreclosure without requiring ADCB to be joined as a party to the proceedings “having held that (Al Rihab) … consented to the grant of a second mortgage over the Property in favour of ADCB.”
152. The ground correctly records the Judge’s finding – namely, that Al Rihab consented to the grant of a second mortgage over the property in favour of ADCB. The Judge made no finding as to whether such a mortgage was in fact granted, and there was no evi-dence before him, one way or the other, on that issue40 However, the Judge did find that there was no registered security interest other than the mortgage to ENBD and a caveat lodged by DFCI. For reasons which we will develop in relation to the next ground of appeal, even if ADCB held an unregistered second mortgage, ENBD, as the Registered Owner of a Real Property Interest held that interest “free from all other un-registered Real Property Interests or Real Property Rights”.41
153. It follows that it was unnecessary for the Judge to enquire into or consider whether ADCB had in fact obtained a second mortgage pursuant to the consent granted by Al Rihab. Any such enquiry would have been irrelevant, because even if there was such a mortgage, it was not registered in the Register. So, while it can be accepted that the holders of any subsequent registered security should ordinarily be joined to proceed-ings by a mortgagee seeking relief by way of foreclosure, that principle had no poten-tial application to the joinder of ADCB because without a registered interest it had no rights capable of affecting Al Rihab’s exercise of its rights as a Registered Owner of its mortgage interest.
154. But in any event, it is now known that a second mortgage over the land was never granted to ADCB. In the course of argument, Senior Counsel conducting the appeal in the name of Al Rihab42 accepted that no such mortgage had ever been executed.43 Notwithstanding that acceptance, Senior Counsel nevertheless pressed this ground of appeal by submitting that the Judge had a duty to insist upon credible positive evi-dence to the effect that there were no third party interests which had to be taken into account.
155. The short answer to this submission44 , is that for reasons which we will explain, the only credible evidence relating to third party interests in real property in DIFC is the Register, and the Judge had evidence of that.
156. More fundamentally this ground of appeal essentially comes down to the proposition that the judgment entered should be set aside because, at the time it was entered there was a possibility that ADCB had an unregistered interest in the land even though we now know that it never had any such interest. The proposition only needs to be stated to be rejected.
157. For these reasons ground 5 must be dismissed.
Ground 6 – failure to proceed by way of order nisi
158. Ground 6 asserts that the Judge erred by making an order of foreclosure to take effect immediately instead of proceeding by way of a grant of an order nisi, which would only be made absolute six months later if Al Rihab had not redeemed the mortgage by then.
159. It should first be observed that this ground was raised for the first time a few days be-fore this appeal was listed for hearing, and at about the time Omniyat entered into the conditional agreement to acquire the land from Al Rihab and took over the conduct of this appeal. As we have noted, Ms Al Jaber did not suggest to the Judge that more time was needed to enable Al Rihab to redeem the mortgage – she simply asked for an adjournment in order to instruct external lawyers, having done nothing in that regard until immediately prior to the scheduled hearing. The application made to the Judge after judgment had been entered sought a variation to that judgment to defer foreclo-sure to enable a possible sale to Select Group, but there was no submission that the Judge should have proceeded by way of order nisi.
160. This is an inauspicious context for this ground of appeal. However, as this ground of appeal was the focus of almost all oral argument advanced in the name of Al Rihab on the hearing of the appeal, it merits detailed consideration.
161. The essence of the ground is that the Judge erred by not adopting a practice reflected in old English authorities to the effect that, in general, before granting an order for fore-closure, the Court should ordinarily grant an order nisi, to be made absolute six months later if the mortgage has not been redeemed during the intervening period. The English authorities supporting this practice are all decisions of many years ago, because it is common ground that foreclosure is now an extremely rare remedy in England and Wales.
162. Senior Counsel acting in the name of Al Rihab accepted that the cases did not sug-gest that this was a rule of substantive law, but rather a rule of practice. However, he submitted that the Judge erred by not adopting that practice45 because of RDC 2.10 which provides, in effect, that a gap in the Rules and the Guide issued by this Court may be filled by the Civil Procedure Rules (“CPR”) of England and Wales in the form in which they exist from time to time. However, the difficulty with this submission is that there is no provision in the CPR to the effect that the Court should ordinarily grant an order nisi for a period of six months before ordering foreclosure. Although there is apparently an English form relating to foreclosure which refers to the grant of an order nisi, it is drawing a very long bow indeed to extract from such a form the proposition that the Judge in this case erred by not proceeding by way of order nisi.
163. The many reasons why this ground must be rejected may be conveniently separated into the reasons why the old English practice should not be adopted in DIFC, and the reasons why it would be entirely inappropriate to adopt such a practice in this case.
The old English practice should not be adopted in DIFC
164. The English practice operates, of course, in the context of English real property law which was, at least at the time of the cases relied upon in support of this ground, es-sentially common law. At common law, a mortgage operates as a provisional assign-ment of title from the mortgagor to the mortgagee – provisional in the sense that it is subject to the equity of redemption. The expression “equity of redemption” is used to describe the mortgagor’s right to re-acquire title from the mortgagee by discharging the debt secured by the mortgage.
DIFC real property law
165. The Law, which governs real property law in DIFC, is very different to common law. It embodies a system of law generally known as Torrens Title, from its origins in South Australia. It is a system which has been adopted by all Australian jurisdictions (and others) and the Judge, an experienced Australian Judge, was obviously familiar with the general operations of such a system.
166. The essence of the Torrens system is that it is not a system of registration of title – rather, it is a system of title by registration. In other words, in order to obtain title to any interest in real property good as against the world, that title must be registered. Once title has been registered, it is, with very limited exceptions, indefeasible. It fol-lows that parties are able to deal with parties shown as Registered Owners in the Real Property Register confident that such an Owner can pass good title.
167. The fundamental elements of the Torrens system are very evident in the Law. One of the express purposes of the Law includes “to guarantee title to Real Property”.46
168. The Law applies to all real property within the jurisdiction of the DIFC.47 The Law cre-ates the office of the Registrar, who has the obligation of establishing and keeping the Register.48 Part 3 of the Law imposes duties on persons acquiring or transferring a Real Property Interest to create and register an instrument in relation to such transac-tions. Registration of an instrument is conclusive evidence of its contents.49
169. This system of title by registration is established by the following Articles:
26. Subject to this Law an Instrument does not transfer or create a Real Property Interest in the Real Property until the Instrument is Regis-tered.
27. On registration of a Transfer of a Real Property Interest, the Real Property Interest:
(a) is transferred or created in accordance with the terms of the Transfer Instrument; and
(b) vests in the person identified in the Transfer Instrument as being entitled to the Real Property Interest.
29. Subject to this Law, the Registration of a person as the owner of a Real Property Interest is conclusive evidence that:
(a) the person is the owner of that Real Property; and
(b) the person’s title to that Real Property Interest is indefeasible un-der the principles of English common law and equity.
(1) Subject to this Law, a Registered Owner holds its Real Property Interest subject to all prior Real Property Rights Registered in the Folio for the Lot but free from all other unregistered Real Property Interests or Real Property Rights.
(2) In particular, the Registered Owner:
(a) is not affected by actual or constructive notice of any trust or unregistered Real Property Interest or Real Property Rights affecting the Real Property;
(b) is not affected by any Real Property Interest or Real Prop-erty Right that, but for this Law, might be held to be paramount or to have priority;
(d) is not liable to proceedings for possession unless the pro-ceedings are brought by a person claiming a Registered Real Property Interest or a Real Property Right.
(3) However, Articles 30(1) and 30(2) do not apply:
(b) if there has been Fraud by the Registered Owner in acquir-ing or holding the Real Property Interest.
(4) For the purposes of this Article 30, knowledge that a trust or unregistered Real Property Interest or Real Property Right is in existence is not of itself to be regarded as Fraud.
33. Nothing prevents an unregistered Instrument from operating as a con-tract between the parties or being otherwise enforceable according to its terms.
170. So, while unregistered Instruments can give rise to legally enforceable rights as be-tween the parties to such an instrument, they cannot and do not give rise to any rights enforceable against any Registered Owner of a Real Property Interest or Real Proper-ty Right, in the absence of fraud. Knowledge of the existence of the unregistered inter-est is not, of itself, sufficient to establish fraud.50
171. It is evident from these provisions that the expressions “Real Property Interest” and “Real Property Right” are central to the operation of the Law. Those expressions are defined by the Law in the following terms as follows:
Real Property Interest
Any ownership interest in Real Property, including any ownership interest in any per-manent structure or improvement (known in English Law as a fixture) forming part of the Real Property.
Real Property Right
Any statutory or contractual right in respect of Real Property, including any statutory or contractual right in respect of any permanent structure or improvement (known in English Law as a fixture) forming part of the Real Property.51
172. Different types of proprietary interest are dealt with in different Parts of the Law. Part 9 deals with mortgages. Its provisions include the grant of a right to mortgage, and the requirements that must be met by an instrument registered as a mortgage.
173. Article 58 provides:
(1) A mortgage operates only as a charge on the Lot for the debt or lia-bility secured by the Mortgage.
(2) For the avoidance of doubt, the Mortgagor is taken to have an equi-ty of redemption under the principles of English common law and equity.
174. This approach is common to many Australian jurisdictions, but it has the potential to confuse. That is because, as we have mentioned, under the principles of English common law and equity, the “equity of redemption” is the right to re-acquire title to the mortgaged land by satisfying the debt secured by the mortgage. However, Article 58 expressly provides that the mortgage does not operate as an assignment of title to the mortgagee, from which it follows that the “equity of redemption” known to English common law cannot apply. However, the intention of the Article is clear and it should be construed as providing that if the mortgagor discharges the debt secured by the mortgage, it is entitled to insist upon removal of the mortgage from the Register, so that title is clear of the mortgage.
175. Part 9 of the Law also contains provisions relating to the discharge of mortgages and the mortgagee’s powers. The latter topic is addressed in Article 63 which provides that a Registered Mortgagee has a number of powers on default by the Mortgagor in-cluding the power of sale and the power to obtain an order of the Court for foreclosure under Article 70. Article 63(3) provides that before exercising any of those powers, the mortgagee must first give the mortgagor notice requiring the default to be remedied within 60 days. As we have noted, in this case, such a notice was served on Al Rihab in February 2020, and the proceedings were commenced following the expiry of the 60 day period.
176. Other provisions within Part 9 include the imposition of an obligation on a mortgagee exercising the power of sale to take reasonable care to obtain market value, and other provisions relating to the disposition of the proceeds of sale.52
177. Article 70 provides:
(1) On application by a Registered Mortgagee, the Court may make an order for foreclosure.
(2) If the Court makes an order for foreclosure, the Registrar shall no-tate the order on the Folio to which it relates if requested by a party to the proceedings or directed by the Court.
(3) On notation of the order, the Mortgagor’s Real Property Interest in the Lot vests in the Mortgagee, free from all liability under Mortgag-es or other Real Property Interests Registered after the Mortgagee, except for Leases and other Real Property Rights that bind the Mortgagee under this Law or contractually with the respective par-ties.
178. We digress to observe that under this Article, an order for foreclosure may only be made in favour of a Registered Mortgagee. Similarly, the various rights conferred by Article 63 can only be exercised by a Registered Mortgagee. In the circumstances of this case, it is significant that ENBD was going to lose that status, and thereby the ca-pacity to obtain an order for foreclosure, or indeed any other remedy under the mort-gage, on 30 June 2020.
179. Because of submissions made in the name of Al Rihab, it is necessary to consider the provisions of the Law relating to caveats. “Caveat” is defined by the Law to mean:
A notice to the Registrar in the Approved Form that the Caveator purports to have a Real Property Interest or Real Property Right in the Real Property (or part thereof) Registered under Part 17 of this Law.
So, a caveat is nothing more than notice of a claim to a proprietary interest or proprie-tary right in registered land. It is to be clearly distinguished from registration of the rel-evant interest.
180. This is put beyond doubt by Article 108, which provides:
(1) To the extent that a Real Property Interest or a Real Property Right may not be Registered in respect of the affected Lot, a Caveat may be Registered in relation to such Real Property Interest or Real Prop-erty Right by any of the following persons:
(a) a person claiming a Real Property Interest or a Real Proper-ty Right in respect of the Lot;
(b) the Registered Owner;
(c) a person who has the benefit of an injunction from the Court restraining a Registered Owner from dealing with the Lot.
181. Because of submissions made in the name of Al Rihab, it is significant to note that a caveat may only be Registered in relation to a claim for a Real Property Interest or Real Property Right, to the extent that such interest or right is not registered. Although a person who has the benefit of an injunction from the Court has standing to lodge no-tice of a claim to a Real Property Interest or a Real Property Right by way of caveat, it must nevertheless be a claim in respect of a Real Property Interest or a Real Property Right. Put another way, the grant of an injunction does not obviate the need to identify the Real Property Interest or the Real Property Right which is claimed.
182. Once lodged, a caveat prevents the registration of an instrument affecting the Lot to which it pertains until the caveat lapses or is withdrawn, removed or cancelled.53 A person affected by the lodgment of a caveat may give notice to the caveator requiring the caveator to start proceedings in the DIFC Courts to establish the proprietary inter-est or proprietary right claimed under the caveat. Unless the caveator commences such proceedings within 60 days of receiving such a notice, the caveat lapses.54
183. A person affected by a caveat may also apply to the Court for an order that the caveat be removed.55
184. So, a caveat is nothing more than notice of a claim to a proprietary interest or a propri-etary right. If there is a dispute with respect to the existence of the interest or right claimed, proceedings must be commenced for the resolution of that dispute by the Court.
185. A primary policy objective evident in these provisions is the objective of creating a completely transparent and publicly accessible register which provides incontrovertible evidence of ownership of all proprietary rights and interests in land within the DIFC. Unregistered interests are incapable of giving rise to anything more than contractual rights as between the parties to a contract. The caveat system also enables parties claiming unregistered proprietary rights or interests to give notice of that claim. If a ca-veat is not lodged to protect such a claim, the claim might be lost by the registration of an instrument which would have the effect of extinguishing that claim.
186. The Law contains no provisions which would accommodate conditional or provisional interests in proprietary rights or interests. Under the Law the question of whether a person has a proprietary interest good against the world is only capable of a binary answer – either they have such an interest or they don’t, and that answer is provided by reference to the public Register and, in the absence of fraud, nothing else.
187. The practice reflected in the old English authorities of granting foreclosure by a two stage process – of firstly granting an order nisi which will then be made absolute six months later if certain conditions are not met, is a form of provisional or conditional dealing with the title to the land. The grant of the order nisi diminishes the interest of the mortgagor because it is a formal declaration by the Court that the mortgagor’s eq-uity of redemption will be lost unless certain conditions are satisfied within the period specified. The interest of the mortgagee is enhanced to the same extent. During the period of the grant of the order nisi and the order absolute, any person dealing with the mortgagor would need to scrutinize the terms of the orders made by the Court in order to ascertain whether any dealing with the mortgagor was permitted by those orders. Further, the position under English law is further complicated by the cases which es-tablish that even after an order absolute for foreclosure has been made, it remains open to the mortgagor to apply to a Court to set aside the order so as to enable the equity of redemption to be exercised.
188. In our view the old English procedure relating to the grant of foreclosure in stages is entirely antithetical to the transparency and certainty of the system of title by registra-tion established by the Law. For that reason, it would be wrong in principle for this Court to adopt such a practice.
189. Under the Law, the grant of an order nisi would not confer upon the mortgagee a pro-prietary right or interest capable of registration or protection by caveat. The mortga-gee’s interest would be nothing more than an expectation that if certain conditions are not satisfied, title will be acquired. The position of the mortgagee is quite different to that of a common law mortgagee, as such a mortgagee acquires title immediately up-on the grant of the mortgage, subject to the equity of redemption. Under DIFC law, if an order nisi is granted and the debt is discharged before the order is made absolute, title would never pass to the mortgagee. Under the Law, there is simply no mechanism by which the possibility that the mortgagee might acquire title at some time in the fu-ture could be reflected in the Register or notified to persons who might be considering dealing with the mortgagor.
190. In our respectful view, the Judge’s enunciation of the approach which should be taken by this Court in relation to an application for foreclosure was entirely correct and should be endorsed and applied in any subsequent cases. He was right to reject the notion of following “entrenched procedures of English law and practice”. He was also right to emphasize the importance of recognizing the value of the mortgagor’s equity, in the sense of the excess of the value of the land over the amount of the debt, alt-hough of course in this case, as we have noted, any such “equity” is illusory because, under the Finance Documents, any excess passes to the financiers. In other cases however it may be appropriate to require undertakings from the mortgagee to prevent the prospect of a windfall gain. As the judge observed, the security interest of any sub-sequent security holder should also be recognized, and in some circumstances, the grant of time to repay or sell may, or may not, be warranted. If the Court decides that further time is warranted by the circumstances of the case, it would usually be prefera-ble to adjourn the case for the relevant period, rather than adopt some bifurcated pro-cedure such as the grant of an order nisi.
191. The rejection of the fundamental proposition which underpins ground 6 of the appeal is sufficient to dispose of that ground. However, for completeness we will deal with the additional reasons why the ground must be rejected in the circumstances of this case.
The circumstances of this case
192. There are a number of reasons why the particular circumstances of this case militate strongly against the acceptance of ground 6.
193. First, as we have noted in the context of the other grounds, when the matter came be-fore the Judge:
(a) Al Rihab had been in default in the payment of principal for more than four years;
(b) Al Rihab had been in default of payment of interest for more than three years;
(c) Al Rihab had failed to respond in any meaningful way to the notices served in January and February 2020;
(d) Al Rihab had failed to enter an Acknowledgment of Service or to attempt to ob-tain external legal advice until just before the hearing;
(e) Ms Al Jaber did not suggest that the Court should grant further time to enable Al Rihab to redeem the mortgage; and
(f) the term of the mortgage was due to expire in less than one month, after which ENBD would lose all its rights under the mortgage, including the right to re-quest or obtain an order of foreclosure.
194. In these circumstances there can be no basis whatever for any contention to the effect that the Judge should have taken it upon himself to grant Al Rihab a period of six months within which to attempt to redeem the mortgage, whether by way of the arcane order nisi process followed in the old English cases, or by any other means. In fact the judge gave Al Rihab until 23 June 2020 to redeem the mortgage prior to disclosure, and in the circumstances of the case, including the imminent expiry of the mortgage on 30 June 2020, it cannot be credibly contended that any longer period was warranted.
195. Second, the circumstances revealed by the evidence adduced prior to the second ap-peal hearing count strongly against the exercise of any discretion the Court might have with respect to the extension of the time at which foreclosure would take effect. As we have noted, the only beneficiary of any such discretion would be Omniyat, not Al Ri-hab. Further, the effect of upholding the appeal on this ground would be to, in effect, condone a transaction between related parties, in apparent contravention of the provi-sions of the Common Terms Agreement, at a sale price which appears to be below the evidence of market value adduced by Al Rihab before it entered into the agreement with one of its shareholders. We cannot conceive of any possible reason why the Court would take any steps to facilitate such a transaction, which appears to be con-trary to the interests of justice in a number of respects.
196. Third, and by contrast, if the appeal is dismissed ENBD has proffered undertakings to the Court with respect to the manner in which it will exercise its rights under the order of foreclosure. In particular, it has undertaken to use reasonable endeavours to sell the land, and to obtain a market price for the land and, after meeting the costs of sale, its debt, and the debt due to DIFCI, will deal with any surplus proceeds in accordance with the Finance Documents. The interests of justice clearly favour this outcome as compared to the Omniyat transaction.
197. Fourth, on the evidence, the grant of the relief sought by Omniyat would be futile, be-cause, as Counsel instructed by Omniyat conceded during argument,56 the sale to Omniyat can only proceed with the consent of DIFCI. However, DIFCI has clearly in-dicated that it will not consent to the proposed transaction. Nevertheless, the provi-sions of the agreement with Omniyat give Omniyat the exclusive right of negotiation with Al Rihab for a period almost equal to the period of the extension of time sought. So, the Omniyat transaction could not proceed, and Al Rihab would not be in a posi-tion to negotiate with any other party for most of the relevant period of deferral.
198. Finally, there is no way that this ground of appeal could be upheld without destroying ENBD’s interest as mortgagee – a course which is plainly not justified. When this proposition was put to Senior Counsel acting in the name of Al Rihab during the ap-peal hearing, he asserted in somewhat general terms that the Court could fashion or-ders which would protect ENBD’s interest as mortgagee. However, during the hearing Senior Counsel was unable to enunciate precisely what those orders were, or how they would operate and so liberty was granted to permit draft orders to be provided following the completion of the hearing. Unfortunately, that process turned into a somewhat protracted exchange of detailed submissions which prolonged the debate and the resolution of this appeal.
199. The fundamental problem is that the mortgage has expired, and ENBD is no longer a Registered Mortgagee in respect of the land. If the foreclosure order made by the Judge is set aside by this Court, there is no power under the Law to make another or-der in its place either now or at any time in the future, nor does ENBD have any other rights as mortgagee.
200. Nevertheless, following the hearing a draft order was provided in the name of Al Rihab proposing the discharge of the foreclosure order made by the Judge, and an order that unless the amount of the debt plus interest was paid into Court within six months of the date of the order, the foreclosure would then occur. Leaving to one side the apparent lack of power to make any further order of foreclosure, another obvious problem with this proposal is that during the six month period, as the mortgage has now lapsed, there would be nothing to prevent Al Rihab from selling the land on whatever terms it chose, including selling the land at a price less than the amount required to satisfy ENBD’s debt.
201. In support of this apparently fraught proposal it is submitted that:
It is possible for the DIFC Courts to order the Registrar to note the order nisi giving six months to pay in the Folio of the Property, allowing the order nisi to bind subsequent Registered Owners.
A conditional right to acquire rights by foreclosure is a contingent proprietary interest, which is a right in REM. The order nisi is therefore an order in REM capable of binding third parties.
202. No authority whatever is cited in support of these propositions, which are entirely con-trary to the provisions of the Law to which we have referred. The only matters which can be registered on the Folio relating to any piece of land are Real Property Interests or Real Property Rights. The definitions of those terms in the Law do not include con-tingent interests. In the case of Interests, the nature of the Interest must be an owner-ship interest and in the case of Rights, only statutory or contractual rights fall within the term. The expectation which ENBD might have if an order in the form sought was made is clearly not an ownership interest in real property, nor does it give rise to any statutory or contractual right in favour of ENBD. The submission to the contrary stead-fastly avoids engagement with the relevant provisions of the Law and must be reject-ed.
203. Against the contingency that the Court might arrive at this conclusion, an alternative form of order was proposed, under which the order for foreclosure was left in place, but on terms whereby ENBD was prohibited from creating any interest in the land or oth-erwise dealing with the property for a period of six months and, if the debt due to ENBD was discharged in full during that period, the order of foreclosure was dis-charged and the Registrar directed to transfer title to the land to Al Rihab. It is further proposed that the Court direct the Registrar to register the order as a caveat on the Fo-lio relating to the Land.
204. The submissions in support of this alternative proposal also fail to engage with the rel-evant provisions of the Law. As we have noted, under Article 70 of the Law, when an order of foreclosure is made, the Registrar is obliged to notate the order on the rele-vant Folio, whereupon title “in the Lot vests in the Mortgagee, free from all liability …”.57 The words used in Article 70 are clear and unequivocal and leave no room whatever for the implicit assertion that the mortgagor retains some right following reg-istration of the order of foreclosure. Put another way, the Law expressly excludes the operation of those old English cases which suggest that even after foreclosure, a party might apply to the Court to set aside the order to enable the mortgagor to redeem the mortgage. There is authority in an analogous Torrens system jurisdiction to the effect that the right of redemption is lost entirely upon the entry of an order for foreclosure in the Register – see Rowe v National Australia Bank Ltd58.
205. Further, it is submitted that “Al Rihab’s claw back right” provides a caveatable interest. However, the argument advanced fails to engage at all with the relevant provisions of the Law. As we have noted, a caveat can only be registered in respect of a claim for a Real Property Interest or a Real Property Right. Even if, which we do not accept, there is some basis for recognizing a so called “claw back right”, it clearly falls outside the rights and interests capable of protection by a caveat under the Law.
206. In the course of argument reference was made to the portion of Article 108 which re-fers to a caveat being registered on the application of a party entitled to the benefit of an injunction. However, no basis for suggesting that this Court should issue an injunc-tion against anybody is advanced, and in any event, as we have noted, the grant of an injunction does not, of itself, create a right or interest capable of protection by caveat – it merely identifies a person who might lodge a caveat in order to give notice of their claim to a proprietary right or interest as defined by the Law.
207. In summary, ground 6 must be dismissed not only because the fundamental premise of the ground, to the effect that this Court should consider itself bound to follow an old English practice is antithetical to the principles of real property law in the DIFC and must, for that reason be rejected, but also because in the particular circumstances of this case there are many reasons why it would be entirely inappropriate to apply any such practice.
Ground 7 – not advising Ms Al Jaber that she could apply for permission to participate in the hearing
208. Ground 7 asserts that the Judge erred by not advising Ms Al Jaber that under RDC 8.16 she could apply to the Court for permission to participate in the hearing which took place after her application for an adjournment had been refused.
209. This ground of appeal is entirely unsupported by any evidence from Ms Al Jaber. In particular, there is no evidence that she was unaware of RDC 8.16. To the contrary, there is a clear inference to the effect that she was aware of its terms because she re-ferred to it in the course of her observations to the Judge.
210. Nor does Ms Al Jaber state that if she had been specifically advised of an entitlement to apply to participate in the remainder of the hearing, she would have exercised that right and made such an application nor is there any indication of what she might have said during the course of the remainder of the hearing which could in any way have al-tered or affected the outcome.
211. Ms Al Jaber was given every opportunity to put before the Judge anything which could be relevant to Al Rihab’s interests. The Judge endeavoured to stimulate Ms Al Jaber to provide further information through the number of questions which he asked. Those questions included an express invitation to indicate any defence which Al Rihab might have to the claim. There was no response to that request. In particular, Ms Al Jaber did not request more time in which Al Rihab might endeavor to redeem the mortgage. Further, as we have noted, at no point during the proceedings, right up to and including the appeal hearings, has any defence to ENBD’s claim been identified.
212. In summary such evidence as there is, is contrary to the implicit assertion that Ms Al Jaber was unaware of the provisions of RDC 8.16 or wished to exercise a right to par-ticipate in the substantive hearing. Nor is there any basis for an inference that if she had been granted that right, the outcome of the hearing would have been any different.
213. There was no irregularity in the course adopted by the Judge and this ground must be dismissed.
214. For these reasons, all grounds of appeal must be dismissed and it only remains to consider the application for a reference to the Union Supreme Court.
Application for a reference to the Union Supreme Court
215. The submissions in support of Al Rihab’s application for a reference to the Union Su-preme Court remind the Court that Article 58 of Federal Law No. 10 of 1973 (the “USC Law”) requires that any reference to the USC from another Court must be supported by a “grounded (reasoned) decision” from that Court and that, similarly, any refusal to refer a case to the USC should also be based upon a reasoned judgment. However, in this case the Court’s capacity to comply with that requirement is significantly imped-ed by the obscure and confusing way in which the application for a reference has been presented.
216. Despite extensive consideration of cases involving conflicts between decisions of dif-ferent Court’s in the submissions, it seems clear that the application for a reference is not based upon any such conflict, but rather upon Article 33 of the USC Law which provides the Supreme Court with jurisdiction to adjudicate upon the constitutionality of laws, legislation and regulations. However, the submissions do not identify the laws, legislation or regulations said to be unconstitutional, or why. Rather, the submissions contain five rhetorical and convoluted questions from which the reader is presumably supposed to deduce the law or regulation which is said to be unconstitutional and the reason for it. Nor do the submissions identify the way in which the answers to the five rhetorical questions would or could have an impact upon the outcome of the appeal.
217. Any reader of the submissions is further confused by significant portions which appear to be irrelevant to any issue of constitutionality. For example, the submissions start with an assertion that the notice given to Al Rihab of the date of hearing was defective because it did not comply with RDC 2.4, which requires documents to be served out-side the DIFC in the UAE to be accompanied by an Arabic translation. Clearly an as-sertion of non-compliance with this Court’s Rules doesn’t give rise to any issue which ought to be referred to the USC.
218. Further, as noted, the ground of appeal relating to service of the proceedings on Al Ri-hab is concerned exclusively with the service of the initiating proceedings in April 2020, whereas the submissions in support of the reference to the USC appear to refer only to the notice of the hearing. There is no ground of appeal raising any issue with respect to the adequacy of service of notice of the hearing. Had such a ground been raised, no doubt it would have been answered by the observation that as Al Rihab did not file an Acknowledgement of Service identifying any address for the communication of notices from the Court, there is no obligation under the RDC or any other source of applicable law for the Court to give notice to Al Rihab of the date of hearing.
219. To take another example, the submissions contain an historical treatise in relation to the negotiation of the Constitution of the Union, without identifying any way in which that history could be relevant to any issue in this case.
220. Question 1 provides a good example of the obscurity of the application for a reference. It is in the following terms:
Whether the DIFC Courts are an “establishment” within the meaning of Arti-cle 3(3) of the Cabinet Resolution no. 28 of 2007 On the Implementing Reg-ulations of Federal Law no. 8 of 2004 Concerning Financial Free Zones such that in carrying out activities (including notification of its proceedings, either directly by the DIFC Courts or by persons authorized by the RDC to notify the same) within the State of the United Arab Emirates but outside the DIFC (alternatively outside the Emirate of Dubai), the DIFC Courts shall be subject to the Federal Laws applicable in the State, including the Federal civil and commercial laws and the implementing resolutions thereof, and the proce-dures applicable in this respect.
221. The thrust of the question is extremely difficult to identify or comprehend. The submis-sions do not assist. The submissions don’t identify the way in which Al Rihab con-tends the question should be answered. The closest one gets to an indication of the relevance of this question to the outcome of the appeal is an assertion that the ques-tion concerns whether the DIFC Courts are required to observe the rules of service applicable in another Emirate.59 Conceivably that question could be relevant if there had been some contention in the appeal to the effect that service of the proceedings in Abu Dhabi was contrary to the laws of that Emirate. However, there has never been any contention to that effect.
222. The next three questions, which apparently all relate to some issue with respect to service which is not clearly identified, are all cast in equally obscure terms. The sub-missions do not clearly identify the way in which those questions should be answered, or their relevance to any issue in the appeal, or any issue of constitutionality requiring the consideration of the Union Supreme Court.
223. It seems from the oral submissions made by Senior Counsel appearing in the name of Al Rihab on this issue, that all of the first four questions proposed are directed only to some issue pertaining to the service of notice of the hearing, and not to any issue with respect to service of the initiating proceedings.60 If that is correct, it follows that all the questions are irrelevant for the reasons we have already given – namely, there is no ground of appeal relating to any alleged deficiency in the service of notice of the hear-ing and if there were, it would undoubtedly fail because Al Rihab had failed to file an Acknowledgement of Service after which there was no obligation to give Al Rihab no-tice of the hearing.
224. ENBD’s submissions attempt to elucidate the propositions which it apprehends are being advanced in Al Rihab’s submissions in terms which are comprehensible. If that enunciation of Al Rihab’s contentions is accurate, it is clear that there are inherent flaws in a number of the propositions which appear to underlie Al Rihab’s contentions.
225. First, Al Rihab contends that Article 119 of the UAE Constitution provides that only Federal law can apply to service as between Emirates. This proposition is not correct. Article 122 of the Constitution makes clear that the Union has exclusive legislative ju-risdiction in respect of the matters set out in Articles 120 and 121. There is no equiva-lent provision relating to Article 119.
226. Further, Al Rihab hasn’t identified any inconsistency between Federal law relating to service, and the laws of this Court with respect to service, such that the laws of this Court would thereby infringe the Constitution. To the contrary, in this case, the pro-ceedings were served in a manner which satisfied both sets of laws.
227. Al Rihab contends that this Court might not be a court for the purposes of Federal Law relating to service, although no basis for that extraordinary proposition is identified. It is a proposition which is directly contrary to authority in this Court to the effect that the DIFC Courts are both “Courts of Dubai” and “Courts of the UAE”.61
228. Within Al Rihab’s submissions on this issue is an assertion that Dubai Law 14 of 2008 imports an obligation that notice be served by a Notary Public. This is another one of those issues which appears to have no constitutional relevance or significance, and which is therefore irrelevant to the application for a reference to the Union Supreme Court. Nor is there any ground of appeal raising this point. The argument is fallacious in any event. Service by Notary Public is only required when the mortgagee seeks a remedy prescribed in the Dubai Mortgage Law, which is not the case here. Further, and in any event, Article 25 is not concerned with service of proceedings, but rather with the giving of notice prior to the commencement of proceedings. In this case the requirement of notice prior to exercise of the remedies conferred upon the mortgagee was covered by the provisions of the Law to which we have referred, and which were satisfied.
229. Question 5 deals with a different topic to the topics addressed by the first four ques-tions. It is concerned with Article 249 of the Civil Procedure Code and asks the ques-tion of whether that Article is “a rule of Public Order such that a judge or arbitrator in the UAE is bound to consider the matter in his ruling if he is made aware of any cir-cumstance of hardship”.
230. The first difficulty with this question, in common with many of the propositions asserted in Al Rihab’s submissions, is identifying any issue of constitutionality appropriate for reference to the Supreme Court.
231. The second problem is that the assertion that Article 249 sets out “rules of public or-der” is entirely unsupported by authority and, on its face, wrong. The Article gives cer-tain powers to a Judge in certain limited circumstances. We can see no basis for the assertion that it is a rule of “public order”.
232. The third problem is that even if it were to be construed as a “rule of public order”, it is clearly a rule which relates to civil and commercial matters. Federal laws on those subjects are excluded from operation within the DIFC by Article 3(2) of Federal Law No. 8 of 2004.
233. The fourth problem is that for the reasons we have already given, even if, contrary to our view, Article 249 is potentially applicable to this case, there is no evidence what-ever to enliven its operation. Al Rihab was in default under the mortgage for four years prior to the commencement of the pandemic. Ms Al Jaber did not submit to the Court that the pandemic was the reason why Al Jaber was in default, and any such proposi-tion would have been untenable. As we have noted Al Rihab has never submitted ei-ther to the Judge or to this Court that the pandemic has had any impact whatsoever upon its capacity to meet its obligations under the Finance Documents, and there is no evidence capable of sustaining any inference to that effect. Obviously there would be no point in referring a question to the Union Supreme Court relating to the potential applicability of Article 249 in circumstances in which the applicability of that Article would have no bearing on the outcome of the case before the Court.
234. For these reasons the application for a reference to the Union Supreme Court is entire-ly without substance and must be dismissed.
235. For the reasons we have given, all grounds of appeal and the application for a refer-ence to the Union Supreme Court:
(a) must be dismissed; and
(b) Al Rihab is ordered to pay ENBD’s costs of the appeal and of the application for a reference to the Union Supreme Court, with such costs to be assessed by a Registrar of the Court if not agreed within 28 days of the date of this Order.
Date of issue: 5 April 2021
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