In brief:
The case we handled relates to:
- validity of contract;
- the court’s discretion to disregard court appointed expert report; and
- the use of advisory expert report in court proceedings.
Background
The dispute involved two individuals who had a long-term friendship: Person A, a foreign national (now deceased); and Person B, a UAE national. Hadef & Partners represented Person B.
A plot of land was acquired in the UAE for AED 15m for which Person A paid the full price. Person A requested Person B to register the plot under his name. Subsequently, a hotel was built on the land (Hotel). Person A further contributed AED 77m towards the cost of construction of the Hotel and Person B obtained a loan under a mortgage arrangement for AED 85m to also fund the construction cost. The business was registered as a sole establishment in the name of Person B because Person A, not being a UAE national, could not hold legal ownership of the land / hotel.
Person A passed away and the heirs of his estate filed a case against both Person B and the Hotel entity in order to seek nullification of the verbal investment and partnership agreement in relation to the business structure. They claimed that AED 81m must be returned to them by Person B in addition to AED 10m in compensation.
Hadef & Partners argued that Person B was acting as an agent for Person A and, accordingly, did not have a proprietary or equitable interest in the Hotel and there was no agreement to the contrary. As such, Person B should not be liable towards the heirs of Person A or the bank in respect of funds advanced under the mortgage arrangement. Instead, any funds which Person B had arranged in respect of the Hotel were advanced by way of loan to Person A and such funds should be repaid to Person B. Therefore, the case should be dismissed.
Expert Report
The expert report was in favour of the heirs of Person A. The expert concluded that there was a partnership arrangement between Person A and Person B.
Hadef & Partners obtained an advisory expert report prior to the court appointment of an expert.
Court of First Instance and Court of Appeal
The Court of First Instance dismissed the case and on appeal, the Court of Appeal issued a decision in favour of the heirs of Person A and ordered Person B to return AED 74m to the heirs of Person A in addition to AED 10m as compensation in respect of profits.
Court of Cassation
Hadef & Partners appealed to the Court of Cassation and argued that the expert report was defective as the expert’s conclusions could not be supported by the facts and documents. Hadef & Partners also raised other arguments in relation to rescission and nullification of contracts (which Person A had argued) and provided important legal arguments in addition to the assertions of matters relating to fictitious contracts.
The Court of Cassation overturned the judgment in favour of the client of Hadef & Partners, Person B.
Legal Significance
The Court of Cassation stated that the Court of the Matter has an obligation to provide a judgment based on the evidence, documents and proper understanding and analysis of this information. Further, the Court of the Matter must examine the contents of the expert report within which the expert must clarify the basis of his arguments and rationale for the conclusion of the report. The Court of Cassation further stated that the Court of the Matter must respond to objections raised by the parties in respect of the expert report and the Court of the Matter cannot forgo the obligation to address such objections by purely referring to the conclusions reached in the expert report.
Conclusion
If you would like more information or have any question on the above, please contact Khalid El Sherif, Senior Legal Consultant or Howrey Kamal, Trainee Solicitor.