Claim No: CFI 038/2023

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

 

BETWEEN

ALAWWAL CAPITAL JSC

Claimant

and

RASMALA INVESTMENT BANK LIMITED

Defendant

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JUDGMENT OF H.E. JUSTICE ROGER STEWART KC

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UPON the Part 7 Claim Form filed on 19 May 2023

AND UPON the Case Management Order of H.E. Justice Nassir Al Nasser dated 17 May 2024

AND UPON hearing counsel for the Claimant and counsel for the Defendant at the Pre-Trial Review on 7 February 2025, held before H.E. Justice Roger Stewart KC

AND UPON hearing counsel for the Claimant and counsel for the Defendant at the in-person Trial on 10 to 18 March 2025 before H.E. Justice Roger Stewart KC

AND UPON review of the parties’ submissions on the Court file

IT IS HEREBY ORDERED THAT:

1. The Claimant has succeeded in establishing liability on the part of the Defendant for the losses it has suffered, amounting to USD 4,199,519.22, taking into account the investments made, redemptions received, and dividends paid. The Claimant shall also be entitled to interest.

2. The parties are to agree the appropriate figures, with recourse to the Court in the event of any dispute. The parties are also to agree, or alternatively set out their respective positions, in relation to costs, with such positions to be filed by no later than4pm on Friday, 20 June 2025.

Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 12 June 2025
At: 2pm

SCHEDULE OF REASONS

Part A - Introduction

1. The provision of trade finance is at the heart of national and, especially, international trade. Shariah compliant investment in trade finance is growing very substantially due to demand from both Islamic investors and others given that such investment should be more predictable and less risky than conventional alternatives as a result of its focus on real assets and risk-sharing. Dubai is one of the world’s leading centres for the trade.

2. At the heart of this case are a series of particular alleged misrepresentations of importance to the parties but the case also raises a number of issues of general public importance notably:

3. This Judgment is organised as follows:

Part B - The Parties and the Case in Outline

4. The Claimant, Alawwal Capital JSC, (“Alawwal”), a private company incorporated in the Kingdom of Saudi Arabia and licensed by the Saudi Arabian Capital Markets Authority, seeks compensation from Rasmala Investment Bank Limited (“RIBL”), a company incorporated in the DIFC, as a result of losses flowing from investment in the Rasmala Trade Finance Fund (the “Fund”), a mutual company in the Cayman Islands, which specialised in Shariah compliant trade finance investment.

5. RIBL is regulated by the Dubai Financial Services Authority (“DFSA”) in accordance with the DFSA handbook and is said to be liable to Alawwal for damages sustained as a result of alleged misrepresentations, breach of fiduciary duty, breach of statutory duty and negligence.

6. Alawwal invested a total of USD 10,069,855 in order to purchase shares in the Fund between 28 March 2019 and 26 December 2019. Dealings in the Fund and all redemptions were suspended with effect from 31 March 2020. Redemptions of some USD 4,830,639.05 having been made, Alawwal claims damages of some USD 7.6m made up of its net losses plus what it says is the opportunity cost of investing in the fund as compared with a particular alternative investment.

7. The parties originally agreed a total of thirty issues under seven headings in the Case Memorandum and List of Issues. Some of those have fallen away or are no longer pursued. It is convenient to divide up those that remain into five main areas:

Part C - The Evidence and the Witnesses

8. The Court heard evidence from four witnesses of fact:

9. I consider all of the witnesses were honest and seeking to assist the Court. However, they were largely seeking to recollect matters which took place over six years ago. Moreover, much of their evidence related to meetings where they had inevitably looked carefully and repeatedly at the documents which survived from or relating to those meetings and had considered what they thought had occurred. Alawwal’s witnesses sought to comment on documents which they had not seen at the time. In those circumstances it is very hard to be clear as to what, if anything, was genuine recollection and what was the product of reconstruction.

10. As is common in almost every case now brought before common law courts, I was reminded of the observations of Leggatt J in Gestmin SGPSA v Credit Suisse Ltd [2013] EWHC 3650 (Comm) at [15]-[22] as to the proper approach to oral evidence and the fallibility of memory which can be demonstrated to occur in respect of even the most honest of witnesses. The consequence of those observations as added to and explained in subsequent cases is that it is usually the case that reliance will be principally placed on contemporaneous documents together with known or probable facts.

11. I fully accept the validity of the above observations. I would observe, however, that there is something of a tension between the need to rely upon documentary records and the modern approach to document production which has tended to restrict the documents and records that a party will be entitled to obtain from the other party.

12. There are, of course, very good reasons for taking a restrictive approach to document production:

13. In this case, the position can be illustrated by reference to two different sets of factual issues which the Court is required to consider namely:

14. In relation to the first set of issues there is a broad equality of arms:

15. In relation to the second set of issues, there is no such equality of arms:

Part D - The Set Up of the Fund and its Relationship with RIBL

16. The way in which the Fund was set up and operated is partly agreed, apparent partly from relevant documents and partly from the oral evidence given to the Court. The Respondent’s case is that the documents demonstrate that the Fund was run by its directors in accordance with its Articles of Association and that the Directors properly exercised their functions by entering into contracts with professional service providers which performed various functions on behalf of the Fund. The Respondent also contends that this was properly described to potential investors in the relevant Offering Memorandum.

17. The Claimant does not dispute that the relevant agreements were entered into but contends that the reality was that the Fund had no real existence independent from RIBL. It is accordingly appropriate to identify what the documents show as to the setting up and operation of the Fund before identifying the matters relied on by the Claimant in support of its case.

18. The Fund was incorporated in the Cayman Islands on 9 October 2013 and is an openended, exempted company with limited liability. As is apparent from its Certificates of Incorporation and of Registration, it is registered as a mutual fund under Cayman Islands law (the Mutual Funds Law (2013 Revision)). It is common ground that the Fund satisfies the requirements of a collective investment scheme set out in Article 11 of the CI Law.

19. The Fund was established by Rasmala Managers Limited (“RML”), a Cayman Islands company. RML was the sole shareholder of shares in the Fund, which confer the right upon RML to receive notice of, and to attend and vote at any general meeting of the Fund, but not to participate in the Fund’s profits and losses.¹

20. Under the Articles of the Fund, the business of the Fund was required to be managed by its Board of Directors - see the Fund’s Articles of Association dated 12 June 2014, the Amended and Restated Articles of Association dated 20 May 2020 and the Offering Memorandum dated 7 May 2018 (the “Offering Memorandum”).²

21. The Directors were empowered to appoint service providers to provide services to the Fund, and to delegate functions to such service providers.³ The service providers appointed by the Directors in respect of the Fund included:

22. RIBL was appointed as the Investment Manager under the terms of an Investment Management Agreement between RIBL and the Fund dated 23 January 2014 (the “IMA”) {F/1/1}. Under the IMA, the Fund engaged RIBL to provide: (i) marketing services in relation to the Fund (see IMA, Clause 4 {F/1/4}); and (ii) discretionary investment management services in relation to the Fund’s portfolio of investments, principally in trade finance transactions (see IMA, Clause 6 {F/1/5}). All of the services provided by RIBL to the Fund under the IMA remained subject to the overall supervision of the Directors (see IMA, Clauses 4.1 {F/1/4} and 6.1 {F/1/5}).

23. Despite the content of the relevant documents, Alawwal relies on the following matters in support of its case that RIBL was not merely the Investment Manager but also the Fund Manager:

24. Under Article 20(2) of the CI Law, the person who manages the Fund is the person who, subject to Article 20(3) (which has no application here):

25. Alawwal put forward no pleaded basis for asserting that RIBL was legally accountable to the Unitholders in the Fund for the management of the Fund ⁹ but suggested in closing that RIBL was the de facto director of the Fund and liable to the Unitholder as such. I do not consider that Alawwal is entitled to run such an unpleaded case at trial. The matter was not anticipated or explored in the evidence. In any event, I do not consider that Alawwal has established that RIBL established, managed or otherwise operated or wound up the Fund.

26. There is no dispute but that the Fund was established by RML, a Cayman company and a subsidiary of Rasmala Investment Holdings (DIFC) Ltd which was the sole shareholder of management shares in the Fund and entitled to vote at general meetings. Furthermore, the formal documents set out above as referenced in the Offering Memorandum established the Directors of the Fund as being those responsible for the Fund and its Property. I do not consider that Alawwal has established any respects in which RIBL supplanted the Directors. It follows that RIBL is not the Fund Manager of the Fund for the purposes of the CI Law. It follows from this conclusion:

Part E - The History of the Fund and Its Losses

27. The Fund incepted on 14 September 2014 with a target return of 3 month LIBOR plus 5% ¹⁰ . The Fund reported its performance on a monthly basis and by November 2018 had reported 49 consecutive months (i.e. from November 2014 to October 2018) of positive returns with a cumulative net return to investors of 20.06% ¹¹. Although it had not achieved its target of exceeding 3 months US LIBOR by 5%, it had consistently reported returns in excess of LIBOR (by 2.2% in the year to October 2018 and by 15.59% since inception). By December 2019, the Fund had reported 62 consecutive months of positive returns with a cumulative net return to investors of 27.63%. ¹²

28. The apparent success of the Fund was reflected by substantial increases in Funds under management. This increase was particularly marked in the period from April 2017 (approximately USD 50m) to May 2018 (approximately USD 300m). By October 2018, the total funds under management were USD 306.48m. ¹³

29. The reported performance of the Fund was, however, critically dependent on the validity of the valuations of the assets of the Fund. Only some 5% of the Fund’s assets were cash or deposits with some 28% being co-investments and 67% being direct investments¹⁴. Most of these investments were short term in nature with only 13.34% having a duration of more than 6 months. Over 85% of these investments (excluding cash and deposits) were held with only 24 counter-parties including:

30. The Claimant originally sought extremely extensive document production orders as to the causes of losses suffered by the Fund. These orders were, for the most part, refused on the basis that RIBL declined to produce them and the documents sought did not fall within the permissible scope of the RDC.¹⁶ Somewhat surprisingly it appears that there is no comprehensive report identifying the causes of the losses suffered by the Fund. It is, however, possible to reach conclusions from public documents and the documents that have been produced. The starting point is the Fund’s own published and audited accounts.

31. The Fund’s accounts for the year to 31 December 2017 were audited by KPMG and signed on 27 September 2018. The accounts show:

32. The Fund’s Financial Statements for the year ending 31 December 2018 were signed on 27 June 2019 and showed:

33. The Fund’s financial statements for the year ending 31 December 2019 were signed on 30 June 2020.²⁵ These showed:

34. The Fund’s Financial Statements for the year ended 31 December 2020 were not signed until 11 May 2022 and only had the benefit of a qualified audit opinion from KPMG. The qualification related to USD 71.756m of non-performing Murabaha contracts as at 31 December 2020 where KPMG said that the contracts were non-performing assets and were subject to the outcome of recovery efforts including legal and enforcement proceedings where there was “limited insight into the financial viability of the guarantees, or the existence and ownership of pledged collateral and outcomes of credit insurance claims as part of the recovery efforts”²⁷. KPMG also noted that the audited accounts of Tricon were qualified and that management were unable to determine the recoverability of USD 8.729m of USD 30.523m at which the Fund held Tricon assets. The accounts themselves disclosed:

35. Aside from the Fund accounts, other documents cast light upon the cause of the losses suffered by the Fund as follows:

36. Taking the evidence as a whole I consider that the following conclusions can fairly be drawn:

37. No doubt the Covid epidemic worsened the position of the Fund but I do not consider that, against the above position, it can be said that it caused the Fund’s problems. Given that the Fund had very substantial question marks against at least 25% of its assets, it was extremely exposed. If it made provisions against all or a substantial part of the questioned assets, it was vulnerable to withdrawals and the consequent need to limit withdrawals. Further its track record of apparent uninterrupted growth would not exist and further investment would be unlikely. Its cost base would, however, remain.

38. I have considered carefully what conclusions I can properly draw from the information which I have set out taking into account:

(a) The observations that I have made as to the documents made available to the Court by each party;

(b) The respective knowledge of each party as to the losses suffered by the Fund; and

(c) The inherent probabilities.

39. I consider that six conclusions can properly be drawn.

40. First, I reject RIBL’s case that the cause or even a substantive cause of the Fund’s losses was the Covid epidemic. As to this:

41. Secondly, during the course of 2017 and 2018, I consider it likely that the Fund lessened its standards in relation to the making of new trades. I draw this conclusion from:

42. Thirdly, I consider that the Directors of the Fund and RIBL, as the Investment Manager of the Fund, were unwilling to make provision for possible bad debts or delays in receipt of funds even where funds were well overdue and credit insurers or guarantors were unwilling or unable to comply with their own obligations. This was despite the fact that trade finance was meant to be relatively short term and that obligations were, in many respects, very substantially overdue. The likely reason for not making such provisions was straight-forward – if provisions were made they would very substantially imperil the long-term steady performance of the Fund and put off future investors.

43. Fourthly, by the end of 2018, the extent of problems “baked into” the Fund meant that, viewed objectively, the Fund’s assets were over-valued. This is not to make a judgment as to whether or not the audited accounts for 2017 or 2018 were or were not proper accounts (in the sense that the Directors were entitled to value the assets as they did and the auditors were entitled to provide an unqualified audit opinion). Rather it is that, given the extent of the problems that I have identified in respect of more than a quarter of the Fund’s assets, a seller of units in the Fund with full knowledge of the problems would expect to have to dispose of his assets at a discount to a buyer who also had full knowledge of the same.

44. Fifthly, that if the Fund were to be faced with calls for substantial redemptions without other inward purchasers, this might well cause problems given the limited cash held and the fact that a substantial amount of assets were, at best, illiquid.

45. Sixthly I consider it that RIBL, as the Investment Manager of the Fund, was aware of at least the majority of the issues which I have identified. No doubt it was not aware of the frauds apparently perpetrated on the Fund and it may not have been aware of some of the details but it was aware of the existence of failures to pay and legal proceedings which called into question the recovery of substantial parts of the relevant assets. No doubt it was hoping, like Mr Micawber, that something would turn up.

Part F – Factual Findings Concerning The Alleged Misrepresentations

46. As set out below, Alawwal’s case in respect of misrepresentation is complex and is said to arise from a mixture of oral and written representations as a result of correspondence and meetings between November 2018 and February 2019. In the circumstances I will consider the evidence and make findings as to what occurred at those meetings before considering whether Alawwal has established its case as to representations and, if so, in what respects.

47. In October 2018 Alawwal decided to set up multi-asset funds which would invest in other Islamic funds³⁹ and accordingly began to gather information about Islamic funds in which assets of the Alawwal Fund might suitably be invested⁴⁰. The minutes of Alawwal’s Business Development Committee for 28 October 2018 identify at Item 5 that investment in one fund known as AGC Capital “and similar strategic funds with a long history of stable performance, which are global Shariah funds, be considered”. At a meeting on 4 November, it was said that all of the proposed fund’s operations should be secured by “easy-liquidation goods and the presence of additional guarantees covering any decrease in the sale price of goods”.⁴¹

48. There was quite a lot of evidence and discussion at trial as to what was meant by terms such as “low risk” or “high risk” in the context of discussions. Having heard the evidence and submissions, I consider that, from the outset, Alawwal was interested in investing in one or more funds which had the following characteristics:

49. The terms “low risk” and “high risk” are to be evaluated in this context. No-one would consider that investment in very high risk investments such as “out of the money” options would be appropriate. The comparison with 3 month LIBOR in relation to investment targets showed that comparison was being made with bank investments with (by most standards) low risk of capital loss rather than with, for example, shares on even a “main board” of a stock exchange.

50. All of the parties to this case are experienced and understand that there is no such thing as a “no risk” investment. Nevertheless, the context in which Alawwal was seeking to invest was as set out above. Further, as set out below, I am satisfied that RIBL would have understood this context and been aware of the importance of stability and steady performance.

51. One of the funds for which Alawwal obtained information was the Fund where Alawwal obtained the Confidential Private Offering Memorandum dated 7 May 2018 (“the Offering Memorandum”) together with a fact sheet and flyer⁴²

52. The fact sheet was issued by RIBL and was said, in the small print at the bottom of the second page to be for information purposes only. Prospective investors were told in the small print to obtain and carefully read the Fund’s most recent Term sheet, Offering Memorandum/ Prospectus, Supplement (if any) and financial statements as well as to seek independent financial advice. The fact sheet:

53. The flyer was also issued by RIBL and was 7 pages long⁴³ and stated, amongst other things:

54. The Offering Memorandum was prepared with the sole purpose, as stated in the opening paragraph, of enabling the person to whom it was delivered by the Fund to evaluate an investment in participating non-voting shares of the Fund. The Offering Memorandum stated inter alia:

55. Another fund for which Alawwal obtained information was the AGC fund which appeared to have been marketed on a similar basis to the Fund with a target return of LIBOR plus 550 basis points, low volatility and no negative months ever recorded.⁴⁶

56. Following a telephone conversation on 8 November 2018 between Mr Haroon Ahmed of RIBL and Mr AlEbraheem, Mr Haroon Ahmed sent documents to Mr AlEbraheem and arranged a meeting with Mr Dimitris Zografos of RIBL for 14 November in Jeddah.⁴⁷

57. Mr Zografos was then described as the “Head of International Business” for RIBL and did not appear to give evidence at trial. It appears that he no longer works for RIBL. Alawwal has urged me to draw inferences arising from his not having appeared to give evidence despite being at the relevant meetings. I decline to do so. I do not consider that there is a proper basis for drawing such inferences, Nevertheless the fact that he did not give evidence means that his evidence is not available to gainsay that of the Claimant’s representatives. Furthermore, it seems to me:

58. The 14 November Meeting duly took place at Alawwal’s offices in Jeddah attended by Mr Zografos on behalf of RIBL, and Messrs Fahad, AlEbraheem and Alturki, on behalf of Alawwal. Mr Alawwal asserts that at that meeting he told Mr Zografos:

59. Subject to the fact that I am not certain that Mr AlEbraheem would have used the words “low risk”, I accept the above evidence. Nevertheless, Mr AlEbraheem would have made clear and Mr Zografos would have understood, as was the case, that Alawwal was looking to invest in a Shariah compliant fund with low volatility where a cautious approach to investment was taken. Furthermore, unless the Fund matched these objectives, Alawwal would not invest in it.

60. Mr AlEbraheem says that Mr Zografos provided information about the Fund by reference to a printed copy of the PowerPoint presentation and fact sheet comparing its profit to moneymarket funds, deposits and Sukuks. He then says that Mr Zografos represented:

61. I consider that Mr Zografos did make statements in accordance with the first and third alleged representations. Such statements are inherently likely to have been made – indeed Mr Zografos would have known that no investments would be made if the Fund did not meet Alawwal’s objectives and there would be no reason for him not to make statements equivalent to those in the PowerPoint. I reject the evidence that Mr Zografos said there was a 0% possibility of losses:

62. I consider it is likely that Mr Zografos said that the Fund used a variety of risk mitigation strategies so as to minimize the risk of losses but consider that he would have made it plain that he was talking in general terms and that what was appropriate would vary from case to case. It is some statement such as this which is likely to have led Alawwal to refer to a 3 layered hedging strategy on 9 December.

63. On 22 November, Mr Zografos sent Alawwal the PowerPoint presentation, the Offering Memorandum and the most recent factsheet and suggested a call the following week with the fund manager to “further clarify any queries you may have”. No such call took place. Alawwal did however prepare its own “teaser” for its own fund which highlighted a 5-6% target return with very low volatility (less than 1%) and 100% positive monthly returns since inception.⁴⁹ Following a telephone call on 29 November 2018, Mr Zografos sent the necessary forms for “onboarding” Alawwal as a client of RIBL and said he would confirm his next visit to Saudi.

64. Thereafter:

65. As discussed above although there are no impairment provisions the 2017 accounts do contain references (specifically in Notes 3.1 and 16) to the facts:

66. I am in no doubt that had those notes been read by representatives of Alawwal, they would have caused concern and, at the very least, occasioned further questions – including, in particular as to the up to date position. Mr AlEbraheem asserts that he did not read the notes at the time. Although I consider this to be surprising, I accept that he did not do so – as it is plain that he did not cause follow up questions to be made of the sort which could be expected if he had read them.

67. On 22 January, Mr AlEbraheem circulated four fact sheets for various funds including the Fund to two of his colleagues in advance of a meeting the following day between himself, Mr Alturki and Mr Al Sharif on behalf of Alawwal and Messrs Zografos and Lmonaco on behalf of RIBL which was, again, held at Alawwal’s offices in Jeddah.

68. In advance of the meeting, according to Mr AlEbraheem, Mr Al Sharif undertook some analysis of the funds which is referred to in the minutes of the meeting. It also appears that he did some fairly basic comparison of returns for different investments on the following day. ⁵³ The minutes record:

69. Although the minutes were clearly prepared after the meeting as they were in the form of a draft recommendation for investment approval, I see no reason not to accept their content as a summary of the meeting. They demonstrate what I consider to be a consistent theme – namely emphasis on low risk and volatility – even at the expense of possibly greater profits.

70. By this time, I am satisfied that Mr AlEbraheem had decided to recommend investment in the Fund to his superiors. This does not, of course, mean that the decision had been made to make the investment but it does reflect the fact that Mr AlEbraheem had satisfied himself that the Fund best represented the values in which Alawwal wished to invest.

71. Before the meeting on 23 January, steps had already been taken to arrange a visit by Mr AlEbraheem’s superior, Mr Malaikah to RIBL’s offices in the DIFC in Dubai on 6 February. ⁵⁴ Mr Malaikah attended with his colleague Mr Awan whilst the meeting was attended by Messrs Swats, Ahmad, Bitcon and Jones as well as Messrs Zografos and Lomonaco on behalf of RIBL. The purpose of the meeting was to enable Mr Malaikah to form his own assessment of the people running the Fund and, in effect, to sign off on the recommendation which Mr AlEbraheem and his team had made.

72. Although Mr Malaikah gives quite a lengthy account of the meeting in his witness statement I do not consider that he actually has any real recollection of the meeting – other than in the most general terms. It was plain that the meeting was more general than simply one to discuss investment in the Fund⁵⁵ . Furthermore, although I am sure that the PowerPoint presentation which had previously been provided was discussed, I do not consider that Mr Malaikah has any real recollection of who said what in relation to it. I am quite certain that Mr Malaikah was assured that the Fund met Alawwal’s own investment objectives which were, by then, well known to RIBL but I do not consider that Mr Malaikah asked any specific questions about defaults or was given any assurances about the same. It seems to me that if there had been any such questions or answers, there would have been considerable discussion and debate about the same. There plainly was discussion, as previously, as to how the Fund’s asset management policy decreased the risk of losses together with the mechanisms for assessing risks and guarantees against debtor obligations.⁵⁶

73. Following the 6 February meeting:

74. I do not consider that there was any basis for Mr Zografos to make this statement. He had attended all meetings and knew that the Fund was being chosen because it was being sold as having lower risks than its competitors. I consider this indicates that Mr Zografos knew that the risks were, in fact, higher, than they had been presented to Alawwal.

75. At Alawwal’s business development committee meeting of 24 February 2025, it was minuted that investment in the “lower risk funds” (that is the Fund and the AGC fund) be initiated on the basis that they were the lowest risk funds.⁵⁸

76. The final meeting took place the following day attended by Mr Zografos and Mr Naseer Aka on behalf of RIBL and Mr AlEbraheem and Mr Alturki, on behalf of Alawwal. By then the investment decision had been made by Alawwal in respect of the trade finance fund. The meeting was primarily to discuss possible investment in real estate projects. Mr AlEbraheem stated that Mr Zografos re-iterated and emphasised statements that had already been made. I do not accept this evidence. I see no reason why there should have been discussion in relation to an investment decision which had already been made. Further Mr AlEbraheem accepted that the meeting took only 10 minutes. I do not consider that any discussion in relation to the Fund amounted to much more than pleasantries at that stage.

Part G – Conclusions as to Misrepresentations Taking into Account the Disclaimers

77. The pleaded structure of the misrepresentations relied on by Alawwal is complex. In summary Alawwal alleges:

78. There does not appear to be any dispute as to the applicable legal regime within the DIFC which are codified under Articles 17 and 20-21 of the Law of Obligations in DIFC Law No 5 of 2005. A claim that a defendant made misrepresentations in order to induce a claimant to enter into a transaction is a tortious claim in which the claimant must prove:

79. RIBL further relies upon the following principles ⁵⁹ which I accept:

80. It is common ground that Alawwal is a sophisticated commercial party and, as such, can be expected to understand that documents such as Offering Memoranda, Presentations and fact-sheets are expected to and do contain disclaimers of the sort which are present in this case. Indeed, the documents show that documents prepared by other funds had similar disclaimers as well as those prepared by Alawwal itself.

81. It is something of an irony that in the modern commercial world, where precedence is normally given to the written word, that written sales documents are often designed to achieve two purposes which might be thought to be incompatible:

82. As explained below, one of the consequences of bringing a claim for breach of statutory duty in the DIFC is to preclude reliance on disclaimers. This is not the occasion to consider whether the law otherwise takes a realistic approach to such documents (for example where signatures whether real or electronic are required to be placed in respect of statements which no-one reads). However, it does mean that there is real value for an experienced potential purchaser of investment products in having face to face meetings with someone seeking to sell such products. Thus, in the present case it is clear:

83. It is one thing for representatives of RIBL to distribute standard form documents with disclaimers which can be blamed on lawyers. It is quite another for a representative to start a meeting by saying words to the effect of “I should make it quite clear that you are not entitled to rely on a word I say in the course of this meeting and would like you to agree that from the outset”. Such a statement would be likely to lead to a rapid end to the meeting and any prospect of an investment being made.

84. Thus, a careful and prudent investor will often be well advised to have meetings in a situation such as that in this case. Those seeking to sell investments are not, of course, obliged to make any statements, but if they do there is no unfairness in holding them to the statements that they make and obliging them to accept responsibility if the statements are incorrect or have no proper basis. It should be remembered that in relation to most investments, including this case, a seller is likely to have access to far greater information than any potential buyer. Furthermore, financial transactions are, ultimately, dependent on trust which is more likely to arise from one or more meetings than endless pages of legal disclaimers.

85. Applying the principles which I have set out, I consider it plain that Alawwal has not established the following representations for the following reasons:

86. So far as the remaining oral representations are concerned, I consider the critical representation to be the representation that the Fund was a suitable investment for Alawwal having regard to the Alawwal Investment Objectives. I have found that Alawwal made clear to RIBL’s representatives that Alawwal was looking to invest in a Shariah compliant fund with low volatility where a cautious approach to investment was taken.

87. The Oral Client Representations, the Oral Lower Growth Representation and the alleged statement that the Fund’s risk was adequately covered by risk mitigation measures seem to me to be statements going towards the question of suitability. I have doubts as to whether the alleged representations, by themselves, would be actionable. They are not precise statements and they would not have been intended to be understood or taken alone. Rather they were overall aspects of the way in which it is said that the Fund was being run which, taken together, meant that it was being said that the Fund was a suitable investment for Alawwal.

88. I consider that RIBL did represent that the Fund was a suitable investment for Alawwal having regard to Alawwal’s investment objectives as set out above – namely a Shariah compliant fund with low volatility and a cautious approach to investment.

89. RIBL is, of course, correct to state that this was a statement of opinion with the consequence that it is not to be taken to be false unless it was made dishonestly or without reasonable grounds to support it. No dishonesty is alleged so the question is whether Alawwal have established that there were not reasonable grounds to support the expressed opinion.

90. I consider that Alawwal have established this. I have set out my conclusions as to the position in which the Fund was in at the end of 2018 in paragraphs 36 to 45 above. Those conclusions establish that there was not a proper factual basis for asserting that the Fund was a suitable investment for Alawwal at the end of 2018 or the beginning of 2019. In particular:

91. Alawwal would be investing into a Fund where a full recovery would have to be made in respect of all outstanding matters to support the assets in the balance sheet. If there was even a relatively small shortfall, the write off in respect of assets would lead to a loss of capital and the end of the Fund’s much vaunted slow but steady investment record. Alawwal was investing into a Fund where there were “baked in” substantial problems with no upside if those problems were resolved but substantial downside if they were not.

92. It follows that, as at the end of 2018 and beginning of 2019, the Fund was not a suitable investment for Alawwal and RIBL had no reasonable basis for saying that it was. The likelihood was that future write-offs would be made leading to losses and ending the long run of continuous returns.

93. I am in no doubt that Alawwal relied on this representation when investing in the Fund. It was important to Alawwal that they meet and discuss their objectives and the suitability of the Fund to meet those objectives directly with RIBL. After Mr AlEbraheem’s initial meetings it was important to Alawwal that Mr Malakiah travelled to the DIFC and met directly with senior representatives of RIBL. It is clear that Alawwal eschewed investing in other Funds with apparently greater returns because of the supposed safety of the Fund. It is further clear that the misrepresentation was an effective cause of the losses suffered. Alawwal bought into the Fund at an overvalue and then became trapped in the Fund when the problems which were already substantially in existence at the time of their investments came to fruition. I reject the suggestion that a settled conclusion had been made to invest in the Fund by 2 January 2019.

94. The above conclusion makes it unnecessary to reach conclusions in relation to the written representations. I consider that, absent the oral suitability representation which I have found to be established, it is unlikely that Alawwal could successfully have relied on the written representations – contained as they were in generic marketing documents with disclaimers. It also means that I do not have to consider the reasonableness of the disclaimers which applied and applied only to the written representations.

Part H – The Remaining Claims

95. My conclusions as to the position in relation to misrepresentation as set out above means that I can deal with the remaining claims relatively shortly.

96. At paragraph 46 of the Amended Particulars of Claim, Alawwal asserts that RIBL assumed responsibility for advising Alawwal in relation to its investments generally. I consider this claim to be quite unsustainable:

97. At paragraph 47 of the Amended Particulars of Claim, Alawwal asserts that RIBL assumed fiduciary duties to Alawwal. This is similarly unsustainable. To the extent that the case was maintained I reject it. The distinguishing obligation of a fiduciary is loyalty. RIBL was not and was not understood to be in a position where it owed obligations of loyalty to Alawwal. It would receive financial benefit from Alawwal’s investments.

98. Alawwal also makes five claims for breach of statutory duty against RIBL:

99. The claims for breach of statutory duty are of some significance in that to the extent that they are made out, Conduct of Business Rule 3.2.2 precludes disclaimers being relied on so as to exclude liability for breach of statutory duty.

100. In relation to the first claim pursuant to COB 3.2.1, I consider that to the extent that Alawwal has established misrepresentation it follows that RIBL did not take reasonable steps to ensure that the communication was clear, fair and not misleading.

101. The second claim fails as I have found that RIBL was not the Fund Manager of the Fund which is a pre-requisite for liability under Article 22(2) of the CI Law. It also seems likely that liability is only for acts carried out as Fund Manager which would not be the case here.

102. The third claim in relation to the RFP Legal Action Representation also fails as it plainly only applies to action by RIBL and was not breached.

103. The fourth claim fails as Article 52 only applies to the marketing of a Domestic Fund and the Fund is not a Domestic Fund.

104. I consider the fifth claim to raise some potentially difficult issues upon which, if necessary, I would want to hear further argument. This is, however, unnecessary given the other conclusions that I have reached.

Part I - The Claimed Loss of Opportunity

105. Alawwal finally claims that, as a result of investing in the Fund, it lost the opportunity of investing in an alternative fund, the Derayah Fund where it would have received a substantial return which it claims to have been at least 6.5% per annum. The basis of this claim is evidence from Mr AlEbraheem.

106. I do not consider that Alawwal has established this claim. In particular:

107. I also consider that there is no satisfactory evidence supporting the claimed rate of return. In the circumstances, Alawwal is entitled to receive its capital losses and interest but not the claimed loss of opportunity cost.

Part J – Conclusion

108. For the reasons set out Alawwal has succeeded in establishing liability on the part of RIBL for the losses it has suffered. Those losses are set out at paragraphs 98 and 99 of Alawwal’s closing submissions as amounting to USD 4,199,519.22 taking into account investments made, redemptions and dividends. Alawwal will also be entitled to interest.

109. The parties are invited to agree the appropriate figures with recourse to the Court for any dispute. The are also invited to agree or set out rival positions in relation to costs, with such positions to be filed by no later than 4pm on Friday, 20 June 2025.

110. I would like to thank the parties and their representatives for their very considerable assistance with this case.