In Brief:
- Hadef & Partners successfully represented a client in a complex dispute involving multiple jurisdictional and procedural challenges, including issues with jurisdiction over a quasi-governmental entity, asset dissipation, and potential time bars.
- The Dubai Cassation Court General Assembly issued a precedent-setting decision overturning prior rulings in respect of the application of time bars under UAE law.
- In addition to securing a favourable judgment successfully nullifying a Sale & Purchase Agreement, Hadef & Partners enabled the recovery of AED 114 million through a public auction process.
Hadef & Partners was instructed to seek termination of a Sale & Purchase Agreement (“SPA”) for a building purchased from the seller (the defendant) and to recover AED 114 million paid thereunder. The case presented to the Court was based on a number of arguments, including nullity of the SPA and serious breaches committed by the seller.
A successful judgment was obtained before each of the Court of First Instance, Court of Appeal, and Court of Cassation. The final judgment issued nullified the contract and directed the seller to return to the client the AED 114 million, plus interest from the date the case was filed.
However, prior to enforcement of the judgment, the seller entered into a financial leasing contract with a third party, a quasi-governmental entity. The contract required the transfer of legal title of a tower to the third party during the contract term. This transfer of the tower’s ownership caused a legal obstacle preventing the client from enforcing against the tower and seeking its sale in a public auction through the Court to satisfy the judgment amount.
A new case was brought on behalf of the client requesting the Court to declare this disposition ineffective in accordance with Article 397 of the Federal Civil Transactions Law, which would have the effect of unwinding the transfer of the tower to the third party. However, as the third party was a quasi-governmental entity which under law was not subject to the jurisdiction of the Courts, it was not possible for the third party to be joined to the proceedings. This resulted in a deficiency as procedurally both the transferor and transferee need to be included in such claim.
However, when the Ruler of Dubai subsequently revoked the previous decision and restored the jurisdiction over the quasi-governmental entity to the Courts, Hadef & Partners filed a new case against both the seller and the third party.
The defendants argued that the claim was time barred and should not be heard in accordance with Article 400(1) of the Federal Civil Transactions Law. Hadef & Partners contended that the previous case filed solely against the seller interrupted the prescribed period. The defendants raised a counter argument that legal precedents established by the Court of Cassation indicate that the time bar is not interrupted by a case dismissed in form or in substance. The latter position was accepted by the Court of Cassation and the case was dismissed.
However, in July 2024, the Dubai Cassation Court General Assembly for the Unification of Federal and Local Judicial Principles issued decision No. 2/2024, overturning previous decisions regarding the time bar issue. The decision confirmed that, once a claim is filed in court, this interrupts the operation of the time bar referred to in Article 484 of the Federal Civil Transactions Law, irrespective of the outcome of the judgment whether accepted or dismissed either in form or in substance.
Based on this new approach adopted by the Dubai Cassation Court General Assembly, Hadef & Partners filed an application before the General Assembly seeking to revoke the previous Court of Cassation judgment and to refer the case back to the Court to re-issue a new judgment. The General Assembly accepted the application, revoked the judgment, and referred the case to the Court of Cassation for reconsideration.
The Court of Cassation re-issued a new judgment in favour of the client declaring the ineffectiveness of the contract concluded between the seller and the third party, which resulted in the seller retaining title to the property.
Based on this judgment, enforcement on the property resumed and an order for the sale of the tower in public auction is expected to be issued.
This case highlights the complex issues that can arise in legal disputes in the UAE and the expertise and persistence required to overcome such challenges. Despite jurisdictional and procedural obstacles, Hadef & Partners succeeded in securing a favourable outcome for the client by continually monitoring the case and assessing all possible avenues to victory, including changes in laws, regulations and judicial precedents. The latest ruling ensures that our client is able to recover the amount paid 10 years previously (plus interest) and that justice is achieved for the client.
For further information related to this article, please contact Salih Ahnaish, Partner and Head of Dispute Resolution, Abu Dhabi at s.ahnaish@hadefpartners.com and Ratib Al Juneidi, Associate at r.aljuneidi@hadefpartners.com