May 31, 2021 Technology and construction division - Orders
Claim No. TCD 009/2020
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
FIVE REAL ESTATE DEVELOPMENT LLC
REEM EMIRATES ALUMINIUM LLC
ORDER WITH REASONS OF JUSTICE SIR RICHARD FIELD
UPON considering the Claimant’s Application to strike out the Defendant’s Counterclaim dated 2 February 2021 in whole or, in the alternative, for immediate judgment against the Counterclaim dated 9 May 2021 (the “Claimant’s Strike Out Application”)
AND UPON reviewing the Defendant’s Application dated 15 March 2021 to strike out the Counterclaim (the “Defendant’s Strike Out Application”)
AND UPON reading the Witness Statement of Athanasious Karvelis dated 10 March 2021 in support of the Defendant’s Strike Out Application
AND UPON reviewing the Order with Reasons of Justice Sir Richard Field dated 4 May 2021 (the “4 May Order”) made in response to the Defendant’s Strike Out Application
AND UPON reviewing the Defendant’s submissions opposing the Claimant’s Strike Out Application
AND UPON reviewing the Witness Statements of Raj Kumar dated 9 and 16 May 2021
IT IS HEREBY ORDERED THAT:
1. The Claimant’s Strike Out Application is dismissed.
2. The Claimant shall pay the Defendant’s costs of the said application to be assessed by the Registrar unless agreed.
Date of issue: 31 May 2021
SCHEDULE OF REASONS
1. The Claimant’s claim against the Defendant when it was struck out in its entirety by the 4 May Order was for AED 7,744,388.00, comprising “the descoping/cost savings, liquidated damages and contra charges” as confirmed by the Engineer of the Project by way of the Engineer’s Determination dated 5 March 2020 (“the “Determination”). The claim was predicated on the incorporation into the Sub-Contract Agreement dated 29 May 2018 (the “Sub-Contract”) of the 1999 FIDIC Conditions of Contract which provide for determinations to be made by an appointed Engineer of sums due by or from the parties. In his witness statement of 10th March 2021 made in support of the Defendant’s Strike Out Application, Mr Athanasious Karvelis accepted on behalf of the Defendant that the 1999 FIDIC Conditions had indeed been incorporated in the Sub-Contract.
2. The Claimant’s claim was struck out for two free-standing but related reasons. First, the legal basis of the claim relied on was the Engineer’s Determination pursuant to the 1999 FIDIC Conditions which stated that the Defendant was entitled to be paid AED 41,334,961.90, of which AED 1,811,884.48 remained outstanding, which left no room for the claim of AED 7,744,388.00. Second, it was manifest that that the AED 7,744,388.00 claimed by the Claimant was in fact the total of three sums awarded against the Defendant in the Determination, namely (AED 3,162,901.82) (Disputed Variations), (AED 4,516,644.88) (Delay Penalty) and (AED 64,842.00) (Contra Charges), all of which items were taken into account by the Engineer when arriving at the figure of AED 41,334, 961.90 that was due to the Defendant.
3. In its Counterclaim, the Defendant claims:
(1) The AED 1,811,884.48 which remains outstanding on the basis of the Determination.
(2) The following sums that were deducted by the Engineer allegedly in breach of the Sub-Contract in arriving at the sum of AED 41,334,961.90, namely: (a) AED 3,162,901.82 (Disputed Variations); (b) AED 4,516,644.88 (Delay Penalty); (c) AED 64,842.00) (Contra Charges); (d) AED 2,195,040.22 (Descoping of Stick Curtain Glass scope of works in mechanical floors, level 18, 19, 39 & 40); (e) AED 570,803.76 (Descope works (Glazing Doors, balustrade and SCW panels)); (f) AED 4,516,644.88 (Deduction of delay damages); AED 34,507.50 (Housekeeping Charges [forming part of the section related to “Contra Charges”]); (g) AED 30,334.50 (Supply and installation of aluminium door handles); and (h) AED 750,000 (Fire incident charges).
(3) Damages suffered by the prolongation of the works by the Claimant and the Main Contractor.
(4) Damages for the financial loss suffered by the Defendant in consequence of the Claimant failing to make due and timely payments to the Defendant on the basis that these deductions were made in breach of the terms of the Sub-Contract.
4. The Claimant contends that the claims summarised in sub-paragraph (2) above are bound to fail because, following the striking out of the Claimant’s claim, the Defendant is stuck with the Determination that was made pursuant to the 1999 FIDIC Conditions. In short, the Claimant says that, since the Defendant has had the benefit of the strike out order which succeeded in part on the basis of the Determination relied on by the Claimant, the Defendant cannot now contest the binding validity of the Determination.
5. The Claimant also submits that the finding made in paragraph 5 of the Reasons given for the 4 May Order that “on 21 February 2021, the Defendant served a Counterclaim claiming, inter alia: (i) AED 1,811,844.48 …” amounts to a res judicata on the Counterclaim. As to this submission, I say at once that I regard it as a hopeless and misconceived. Paragraph 5 of the Reasons given for the 4 May Order continued: “(ii) damages for loss caused by the delay on the part of the Claimant in progressing the Works; (iii) damages for loss caused by the Claimant’s failure: (a) to make timely payment of sums due to the Defendant; (b) to extend the performance guarantee; (iv) an order for the issuance of the Taking Over Certificate and the Defects Liability Certificate both deemed to have been issued on 16 September 2020; and (vii) an order that the performance guarantee AHLG1800329, and the advance payment guarantees AHLG1600217 and AHLG1600218, be released”. Thus, all that paragraph 5 was doing was setting out a summary of the claims made in the Counterclaim. It was not determining the validity or invalidity of any of the claims identified in the summary.
6. Surprisingly, the Claimant has made no reference to the common law doctrine of election which is concerned to delineate when a party to an action is to be taken to have adopted a position from which it cannot subsequently resile. Instead, in advancing its strike out and immediate judgment case based on the 4 May Order, the Claimant simply asserts res judicata and that it would be “unfair” if the Defendant could dispute the Determination when advancing its Counterclaim given the stance it took in striking out the Claimant’s claim.
7. The Defendant submits that the Claimant’s Strike Out Application is misconceived. It is argued that it does not follow from the fact it was common ground and beyond challenge that the Determination made the statements and set out the monetary values contained therein, that the Defendant is disabled from contesting in its Counterclaim the deductions the Engineer made against the Defendant.
8. It is important to note that the Claimant’s Strike Out Application (including the immediate judgment application) is just that; it cannot be converted into a trial of a preliminary issue in circumstances, such as those obtaining here, where the court has not ordered such a trial.
9. In my opinion, on the material before the Court, the Defendant has a reasonable argument with a real prospect of success1 that, although in applying to strike out the Claimant’s claim it held the Claimant to its (the Claimant’s) contention that the Determination was binding, the Defendant is nonetheless entitled in pursuing its Counterclaim to contest a range of deductions made by the Engineer in the Determination. Unlike the position where there is a trial of a preliminary issue, if a party advances a legal contention that has a real prospect of success in opposing a strike out or immediate judgment application, the Court will dismiss the application and allow that contention to be advanced at a trial on the merits. Here, as I have said above, I find that the Defendant’s contention that it is entitled for the purpose of its Counterclaim to challenge the validity of various of the deductions made by the Engineer, notwithstanding that, in applying to strike out the Claimant’s claim, it held the Claimant to the premise of its claim that the Determination was binding on both parties, has a real prospect of success.
10. The effect of the 4 May Order is that the Claimant has no valid claim on its pleading for the AED 7,744,388.00 prayed for because that total sum had manifestly already been taken into account in the Claimant’s favour by the Engineer when he deducted AED 3,162,901.82 (Disputed Variations), AED 4,516,644.88 (Delay Penalty) and AED 64,842.00 (Contra Charges) against the Defendant (see the 3rd sentence of paragraph 10 of the 4 May Reasons). The 4 May Order does not prevent the Claimant from contending that the Determination is binding on the Defendant pursuant to the 1999 FIDIC Conditions as to all matters save for the claim for AED 7,744,388.00. Moreover, since I am making no final determination in respect of the Claimant’s contention that the Defendant is now disentitled from challenging the Determination, given the stance it took in striking out the Claimant’s claim, it will be open to the Claimant to advance this contention at the trial of the Counterclaim.
11. The Claimant next contends that the Counterclaim should be struck out for breach of RDC 21.28 on the ground that the Defendant failed to verify its Counterclaim in its statement of truth in that sought to verify “this Defence” by way of its statement of truth at the end of its Particulars of Counterclaim.
12. In his witness statement of 10 May 2021, Mr Karvelis, a partner in Russell Speechlys LLP, who executed the statement of truth in question, states and I accept, that the word “Defence” in the verification was a typographical error; instead, the word “Document” should have been used. I accept Mr Karvelis’ offer to correct this error and re-execute the statement of truth in the Particulars of Counterclaim and I dismiss this paltry ground for striking out the pleading in question.
13. Finally, in his Reply Witness Statement, Mr Raj Kumar contends that, to the extent that the Counterclaim challenges the Determination, it is brought in the wrong forum, since Clause 3.5 of the 1999 FIDIC Conditions provides (he contends) that a challenge to the Engineer’s Determination can only be made in accordance with a “separate multi-tiered procedure” provided in Clause 20 of the 1999 FIDIC Conditions.
14. Since this contention is only made in Mr Kumar’s Reply Witness Statement, the Court has received no submissions on this part of the Claimant’s Strike Out Application. In my judgment, if the Claimant is going to attempt to enforce Clauses 3.5 and 20 of the 1999 FIDIC Conditions it must make a full Part 23 application under Article 13 of the DIFC Arbitration Law (No. 1 of 2008)2 , supported by detailed evidence which should include but not be limited to the full text of the Sub-Contract and the 1999 FIDIC Conditions.
15. For the reasons given above, the Claimant’s Strike Out Application (including the application of immediate judgment on the Counterclaim) is dismissed with costs to be assessed by the Registrar on the standard basis if not agreed.