Claim No: CFI 015/2025

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

WARD HOLDINGS LIMITED (TRADING AS WALDORF ASTORIA DUBAI
INTERNATIONAL FINANCIAL CENTRE HOTEL)

Claimant

and

MESHICO CORPORATION (TRADING AS PUERTO 99 MEXICAN SEAFOOD & STEAK)

Defendant

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ORDER WITH REASONS OF H.E. JUSTICE RENE LE MIERE

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UPON the Part 8 Claim dated 19 February 2025 (the “Claim”)

AND UPON the Claimant’s Application No. CFI-015-2025/1 dated 10 March 2025 seeking immediate judgment against the Defendant in respect of the entire Claim (the “Claimant’s Application”)

AND UPON the Defendant’s evidence in answer to the Claimant’s Application dated 8 April 2025

AND UPON the Claimant’s evidence in reply dated 25 April 2025

AND UPON the Defendant’s Application No. CFI-015-2024/2 dated 17 April 2025, seeking (i) an extension of time to file and serve the Acknowledgment of Service pursuant to Rule 4.2(1) of the Rules of the DIFC Courts (the “RDC”), and (ii) a transfer of proceedings from Part 8 to Part 7 (the “Extension and Transfer Application”)

AND UPON the Claimant’s evidence in answer to the Extension and Transfer Application dated 1 May 2025

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant at the hearing held on 24 June 2025 on before H.E. Justice Rene Le Miere (the “Hearing”)

IT IS HEREBY ORDERED AND DECLARED THAT:

1. The Claimant’s Application is granted.

2. The Extension and Transfer Application is dismissed.

3. The Claimant has validly terminated the Lease Agreement.

4. The Defendant is required to vacate the Property.

5. The Claimant is entitled under Article 55(4) of the Real Property Law DIFC Law No.10 of 2018 (as amended) to re-enter the Property.

6. The Defendant shall forthwith vacate the Property and give the Claimant vacant possession of the Property by way of specific performance of clause 16.5(b) of the Lease Agreement.

7. The Defendant shall pay the Claimant’s costs of the Claim, such costs to be assessed by the Registrar if not agreed.

Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 10 July 2025
Time: 12pm

SCHEDULE OF REASONS

Summary

1. The Claimant is the owner of the Waldorf Astoria Hotel in the DIFC (the “Hotel”). The Defendant is a restaurant operator.

2. On 3 June 2022, the Claimant and the Defendant entered into the Lease Agreement, pursuant to which the Defendant leased the area of the Hotel known as “Podium 5”, which comprises 6966.62 sq ft of indoor space and an outdoor terrace (the “Property”). From the Property, the Defendant began to operate a Mexican restaurant under the name “Puerto 99”.

3. The Defendant failed to pay rent in accordance with the Lease Agreement.

4. The Claimant terminated the lease and re-entered the Property.

5. The Defendant retook and remains in occupation of the Property.

6. The Claimant has commenced proceedings under Part 8 for possession of the Property

7. The Claimant has applied for immediate judgment on its Claim for possession of the Property (the “Claimant’s Application”).

8. The Defendant applied for orders to retrospectively extend the time for filing and serving an Acknowledgment of Service and to transfer the proceedings from Part 8 to Part 7 because there is a substantial dispute of fact (the "Extension and Transfer Application").

9. For the reasons below, the Court will order:

The Lease Agreement

10. The Hotel (and the Property within it) are in the high-rise mixed-use building called the Burj Daman (the “Building”). In his second witness statement, Ayman Almohamad, the director of operations of the Claimant, states that the Building is owned by Burj Daman Principal Body Corporate, an entity established under the Strata Title Law (DIFC Law No. 5 of 2007) (the “Body Corporate”).

11. Although the Defendant did not contest that contention, it appears unlikely. Under the DIFC Strata Title Law (DIFC Law No. 5 of 2007), a body corporate is automatically established upon the registration of a strata plan. It comprises all the lot owners within the strata scheme and acts as the legal entity responsible for managing the common property and enforcing the rules of the scheme. Under the DIFC Strata Title Law, the body corporate does not own the entire strata building. Instead, its ownership and responsibilities are limited to the common property within the building.

12. The Hotel occupies only part of the Building, with the remaining space divided among other residential, commercial, office, and retail units. The Building is managed by Strata Global (“Strata”), an owners’ association and management company appointed by the Body Corporate to act on its behalf. The property owners across the Building elect the members of Strata.

13. The Lease Agreement was scheduled to commence on 6 June 2022 and expire on 31 December 2027.

14. Rent was payable in the following amounts (Schedule 2, Part 1, paragraph 1.1 of the Lease Agreement):

15. The total minimum rent payable for the duration of the Lease Agreement was AED 7,735,884.

16. The rent was payable in the following way (Schedule 2, Part 1, paragraph 1.2 of the Lease Agreement).

17. The Defendant was also required to pay a deposit of AED 350,000 at the start of the Lease Agreement (paragraph 1.7).

18. Clause 16.3 gives the Claimant the right to terminate the Lease Agreement with immediate effect:

Defendant’s failure to pay rent

19. The Defendant made the following payments to the Claimant for a total of AED1,281,000:

20. The Defendant has made no further payments of rent under the Lease Agreement.

21. On 14 August 2023, the Claimant was informed that a cheque provided by the Defendant for AED 332,500 had been returned due to an irregular signature.

22. The Claimant continued to follow up with the Defendant on several occasions to demand that this be rectified and payment made.

23. On 27 September 2023, the Defendant informed the Claimant that it was facing tough times. This message conflicted with the previous assurances given by the Defendant that it faced no financial difficulties. Nonetheless, the Defendant continued to operate and paid its suppliers and staff.

24. On 31 October 2023, the Defendant informed the Claimant that it was experiencing financial difficulties and was seeking to reschedule payment dates under the Lease Agreement or to enter a payment arrangement plan. The reasons given by the Defendant were:

Claimant re-enters the Property

25. On 21 November 2023, the Claimant issued a notice of default to the Defendant, which was served on 24 November 2023. Relying on clause 16.3 of the Lease Agreement, the Claimant exercised its right to terminate the Lease Agreement due to the Defendant’s non-payment of rent. No response was received from the Defendant.

26. On 4 January 2024, members of the Claimant’s security and engineering teams attended the Property. They changed the locks to the restaurant doors (having previously informed the Defendant that from this date, it would no longer have access to the Property).

Defendant retakes possession

27. On 5 January 2024, the Defendant requested access to the Property, stating it needed to collect food supplies. The Claimant permitted the Defendant to do so.

28. Fifteen people from the Defendant’s team then arrived. Instead of collecting unused food supplies as they had claimed, they forcibly re-entered the Property, changed the locks back, and refused to leave.

29. Since 5 January 2024:

This proceeding

30. On 19 February 2025, the Claimant filed a Part 8 claim. The Claimant claims:

31. In its claim form, the Claimant claims against the Defendant:

32. On 10 March 2025, the Claimant applied for immediate judgment because the Claimant believes that, on the evidence, the Defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the case or issue should be disposed of at a trial.

33. On 10 April 2025, BSA Ahmad Bin Hezeem & Associates LLP, on behalf of the Defendant, filed an Acknowledgement of Service in which it contended that the Part 8 procedure should not be used because there is a substantial dispute of fact.

34. On 17 April 2025, the Defendant applied for orders to retrospectively extend the time for filing and serving an Acknowledgment of Service and to transfer the proceedings from Part 8 to Part 7 because there is a substantial dispute of fact. (the “Extension and Transfer Application”).

35. On 2 June 2025, BSA Ahmad Bin Hezeem & Associates LLP filed an application for an order that it has ceased to act for the Defendant in these proceedings because there is no realistic prospect of being paid its professional fees for representing the Defendant. On 11 June 2025, the Court ordered that BSA Ahmad Bin Hezeem & Associates LLP is no longer the legal representative of the Defendant in this proceeding.

Defendant’s arguments

36. The Defendant argues that it has reasonable prospects of successfully defending the claim by the Claimant. The Defendant contends that numerous complex factual and legal disputes make the case inappropriate for immediate judgment and necessitate a trial. These disputes include issues related to the chilled water system's performance, justification for rent suspension, lease construction, and alleged re-entry conduct.

37. The Defendant argues that the Claimant breached an essential implied term of the lease by failing to provide the required chilled water flow, which is necessary for the Property's operational viability. This failure rendered the Property commercially unusable, undermining the purpose of the Lease Agreement and depriving the Defendant of a substantial benefit.

38. The Defendant claims that its financial distress was directly caused by the failure of the chilled water system, as evidenced by certified engineering and audit reports. The Defendant contends that it withheld rent only after enduring significant hardship and failed negotiation attempts.

39. On the eve of the immediate judgment Hearing, the Defendant filed a document entitled Puerto DIFC Legal Expert Report dated 12 June 2025 and authored by a firm called NBN Auditing of Accounts (“NBN”). NBN is not identified or described beyond its name, which suggests that it is a firm of auditors or accountants. The document is not an expert legal report. Its contents disclose that it is not an independent expert report but a document advocating the Defendant’s case. I treat it as a submission by the Defendant.

40. The NBN report states that the restaurant had been operating, but the temperatures inside the restaurant and bar were around 25/26 degrees Celsius, rising to 28/29 °c in the evenings. This temperature increase was attributed to two primary reasons: the kitchen operated at a higher intensity in the evenings, and there were consistently more customers after 5 pm, when evening service began. The report states that the number of customers was below the restaurant's capacity, which prevented it from earning enough income.

41. The report contains tables said to be the sales history and the average annual profit and loss of the restaurant business. The report does not state whether or how the figures in the tables have been verified, nor does it specify the source of the figures in the tables. Therefore, the information in the tables has limited, if any, evidential value beyond acknowledging that the Defendant has continued operating a restaurant from the Property and its alleged losses.

42. The sales history table shows the net sales for each month from June 2023 to May 2025. Monthly net sales reached a peak in December 2023 at AED 301,675. Sales have fallen since July 2024. Average annual sales are AED 1,440,090. The average yearly P&L table states a gross revenue of AED 1,440,090, gross profit of AED 1,008,063, and a cash loss of AED 1,320,795. The costs include rent of AED 1,400,000, despite the Defendant not paying rent from July 2023. After deducting depreciation, the report asserts a net annual loss of AED 8,320,795. The report concludes with the assertion that, based on the above number, sales are far below expectations due to the air conditioning issue.

43. The Defendant asserts that the Claimant's fundamental breach nullifies its obligation to pay rent. Alternatively, if both parties are in breach, a set-off may be conditionally applied pending determination of liability.

44. The Defendant denies unlawfully re-entering, stating that any entry was peaceful and based on the rights of inspection and retrieval.

45. The Defendant provides various forms of evidence to support its position, including witness statements, engineering reports, the NBN report, and communications with the Claimant and utilities.

Claimant’s arguments

46. The Claimant argues that the Defendant has no real prospect of successfully defending the Claim.

47. The Claimant’s central argument is that the Defendant has failed to make further rent payments under the Lease Agreement, which is undisputed. The Claimant exercised its right to terminate the lease due to non-payment, as per Clause 16.3 of the Lease Agreement, which allows for immediate termination if rent is not paid and the failure is not cured within three days after notice.

48. The Defendant's team forcibly re-entered the Property after being allowed access to collect food supplies, changed the locks, and refused to leave. This conduct is not disputed by the Defendant and is considered egregious by the Claimant.

49. The Claimant contends that the defence of equitable set-off is not available under DIFC law in this case, as it is inconsistent with Articles 51 and 53(c) of the Leasing Law. The Claimant further argues that even if equitable set-off were available, the Defendant's defence would fail due to a lack of a close connection between the possession claim and the air-conditioning issue, and the absence of factual support for alleged losses.

50. The Defendant suggests that the name on the Lease is incorrect and should be Puerto 99 Restaurant and Bar Ltd. The Claimant argues that this is either inconsequential or problematic for the Defendant, as it could imply trespassing if a different entity is occupying the Property.

51. The Claimant highlights procedural deficiencies, including the Defendant's late filing of the Acknowledgment of Service and the lack of a good reason for the Relief Application to convert the proceedings from Part 8 to Part 7.

52. To avoid technical difficulties with enforcement, the Claimant has amended the draft Order to require the Defendant or anyone else occupying the Property to vacate, addressing potential issues with the correct tenant.

Breach of lease by failure to provide adequate chilled water

53. The Defendant argues that under DIFC law, commercial premises must be fit for their intended use. The Defendant contends that the Claimant, as the landlord, is under an implied obligation to provide the required chilled water flow, which is necessary for the Property's operational viability.

54. When considering whether the Lease Agreement contains an implied obligation relating to the operational viability of the premises, the Court applies the principles of English common law, as permitted under Article 8A (2) of the DIFC Law on the Application of Civil and Commercial Laws 2004.

55. Under English and Australian common law, commercial leases generally do not include an implied warranty of operational viability. Courts have consistently found that commercial tenants are considered sophisticated parties who can negotiate express terms to cover maintenance, repair, and operational standards. As a result, there is no automatic implication of a clause requiring the landlord to ensure the premises remain operationally viable throughout the lease period.

56. Nevertheless, English common law does recognise specific implied terms that may support operational viability, including the principle of non-derogation from grant, which prohibits the landlord from acting in a manner that frustrates the purpose of the lease;

57. Additionally, while English law does not impose a general implied warranty of suitability, courts may imply such a term where the premises are rendered unfit for the tenant’s intended commercial use due to failure to provide essential services, and where the lease is silent on such matters.

58. These principles, where consistent with DIFC law, may be applied to supplement the statutory framework under the Leasing Law 2020 pursuant to Article 8A of the Law on the Application of Civil and Commercial Laws 2024.

59. The Court finds that while no general operational viability obligation is implied, the common law principles cited above may be relevant in determining whether the landlord’s conduct or omissions have breached the lease.

60. Accordingly, the Court finds it is arguable that the Defendant bears an implied obligation to provide the required chilled water flow, which is necessary for the Property's operational viability, and that failure to do so constitutes a breach of the lease.

61. The Defendant alleges that the Claimant failed to deliver chilled water flow at the specified rate of 17.5 litres per second (L/s), which may constitute a breach of implied lease terms relating to habitability and operational viability.

62. In support of this contention, the Defendant has submitted a range of evidence, including:

 

63. The Defendant asserts a direct causal link between the Claimant’s alleged nonperformance and substantial operational and financial harm, including compromised business viability.

64. The Claimant argues that fixing the air-conditioning issue was not its responsibility. The Defendant had been liaising with Strata and Logic Utilities, who manage the building's utilities. The Claimant attempted to assist but was not responsible for the issue.

65. The Court finds it arguable that the Defendant failed to provide the required chilled water flow, which is essential for the Property's operational viability, and that this failure amounts to a breach of the lease.

Relief from rent obligations

66. The Defendant contends that this alleged breach rendered the Property commercially unusable, thereby depriving it of the substantial benefit of the lease and justifying the withholding of rent.

67. In its written submissions, the Defendant submitted that a fundamental breach nullifies the obligation to perform. The Defendant cites no authority in support of that assertion and did not elaborate upon it.

68. Generally, when a landlord commits a fundamental breach of a lease agreement, the tenant can sue for damages or terminate the lease and claim damages. In some cases, the tenant might be entitled to a rent reduction equal to the difference between the rental value of the premises in their current condition and the value if the landlord’s breach had been rectified.

69. The Defendant describes ongoing losses due to the inability to attract and retain customers, primarily attributed to high temperatures, with explicit references up to May 2024, when additional fan units were installed to improve cooling.

70. The Defendant does not claim that the Claimant’s alleged breach of the Lease Agreement prevents it from using the Property for its intended purpose—running a restaurant. It has, and continues to, operate a restaurant on the Property. The Defendant’s case, summarised in the NBN report, is that the number of customers was below the restaurant's capacity, which prevented it from earning its planned and expected income.

71. Even if the Defendant is entitled to a rent reduction, it is not legally entitled to possession of the Property and to conduct its restaurant business from the premises without payment of any rent. The Property is not unable to be used for its intended purpose. To the contrary, the Defendant has operated and continues to operate a restaurant business on the premises, although allegedly less profitably than if the Claimant had provided the required chilled water, due to the reduced number of customers caused by the inadequate air conditioning.

Set-off

72. The Defendant raises a defence of equitable set-off in response to the Claimant’s possession claim.

73. The Claimant argues that the Leasing Law 2020, particularly Articles 51 and 53, provides an exclusive and mandatory framework for lease termination and possession, thereby precluding the application of equitable set-off. The Claimant further submits that the Law on the Application of Civil and Commercial Laws 2024 permits common law principles only insofar as they are not inconsistent with DIFC statutory provisions.

74. Article 51 of the Leasing Law mandates that a lease may only be terminated in accordance with Part 9 of the statute, and Article 53 enumerates the permissible grounds for termination. However, the defence of equitable set-off does not seek to terminate the lease but rather to resist a claim for possession based on rent arrears. The doctrine operates as a defensive mechanism, allowing a tenant to assert a closely connected counterclaim that may reduce or extinguish the arrears forming the basis of the possession claim.

75. Equitable set-off is a well-established principle under the common law of England, Australia, Singapore and other common law jurisdictions. Equitable set-off forms part of the DIFC’s legal framework unless expressly excluded or rendered inconsistent by statute.

76. The Leasing Law 2020 does not prohibit equitable set-off nor provide a detailed framework for resolving rent disputes beyond termination procedures. Its exclusivity applies only to the grounds and process for lease termination, not to defences against possession claims.

77. Equitable set-off remains compatible with the Leasing Law. Although termination grounds are statutorily defined, the law does not exclude equitable defences in possession proceedings. Therefore, the Defendant may invoke equitable set-off, subject to proving the Claimant’s breach and resulting damages.

78. In England, equitable set-off is a firmly established legal principle. The leading case, Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667, confirms that equitable set-off applies when:

79. The English law of equitable set-off has been applied by the DIFC Court of Appeal: Investment Group Private Limited v Standard Chartered Bank DIFC CA-002-2018, (July 17, 2018), [169].

80. The statement by Justice Sir Richard Field in The Industrial >Group Ltd v Abdelazim El Shikh El Fadil Hamid [2018] CFI 029 (25 October 2018) at [5] that “there can only be a set-off where there is a very close relationship between A’s claim against B and B’s claim against A” does not establish a different test. Justice Sir Richard Field, who was a member of the Appeal Court in the Investment Group case, simply indicated that a very close relationship was required and was not met in that case. However, he did not provide an exhaustive list of the requirements for establishing an equitable set-off.

81. The Defendant may claim a set-off if its damages claim is sufficiently connected and substantial to justify the set-off, and if the rent arrears, once adjusted, fall below the threshold needed for possession, and it would be manifestly unjust to enforce the Claimant’s possession claim without considering the Defendant’s damages.

82. The Defendant has presented no substantial factual support for its alleged losses due to the air-conditioning issue. The only quantitative evidence provided by the Defendant is the unsourced figures in the NBN report. It is insufficient to establish that the Defendant’s losses due to the Claimant’s failure to provide the required chilled water flow equal or exceed the unpaid rent at the time the Claimant terminated the lease.

83. Critically, the Defendant has no real prospect of establishing that it would be manifestly unjust to enforce the Claimant’s possession claim without considering the Defendant’s damages claim. That is so for several reasons:

84. For those reasons, the Defendant has no real prospect of successfully defending the Claimant’s claim for possession. There is no other compelling reason why the case should be disposed of at a trial. The Defendant has had a proper opportunity to present any evidence and arguments in support of its defence.

Defendant’s applications

85. Having regard to these findings, it is not necessary to consider the Defendant’s Extension and Transfer Application. It should be formally dismissed without any consideration of its merits.

Conclusion

86. The Claimant seeks orders as follows:

87. Those orders are appropriate to give effect to these reasons, except for order b (ii). If, which I doubt, the Court has the power to make an order directed to non-parties, it is not appropriate to do so.