Claim No: CA 010/2021
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the Name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF APPEAL
BEFORE CHIEF JUSTICE ZAKI AMI, H.E. JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE LORD ANGUS GLENNIE
BETWEEN
NS INVESTMENTS LIMITED
Claimant/Respondent
and
AJAY SETHI
Defendant/Appellant
JUDGMENT
| Hearing : | 25 October 2021 |
|---|---|
| Counsel : | Ms Sophia Hurst instructed by Holman Fenwick Willan Middle East LLP for the Appellant Mr Michael Patchett-Joyce instructed by M.B. Kemp (ME) LLP for the Respondent |
| Judgment : | 18 November 2021 |
UPONthe Default Judgment of Judicial Officer Nassir Al Nasser (as he then was) dated 1 September 2020
AND UPONthe Defendant’s Application No. CFI-55-2020/1 dated 21 September 2020 requesting to set aside the default judgment
AND UPONthe Order of H.E. Justice Ali Al Madhani dated 29 April 2021 refusing that application (the “Order”)
AND UPONreviewing the Defendant’s Appeal Notice filed on 18 May 2021
AND UPONreviewing the skeleton arguments of the Defendant/Appellant dated 18 May 2021 and 18 October 2021
AND UPONreviewing the third Witness Statement of the Defendant/Appellant dated 18 May 2021
AND UPONreviewing the skeleton arguments of the Claimant/Respondent dated 8 June 2021 and 18 October 2021
IT IS HEREBY ORDERED THAT:
1. The appeal against the Order of H.E. Justice Ali Al Madhani dated 29 April 2021 is accepted.
2. The default judgment entered against the Appellant/Defendant dated 1 September 2020 is set aside.
3. The case is remitted to the Registrar to give directions with a view to further progress the case.
4. The Respondent/Claimant shall pay to the Appellant/Defendant his costs of the application to set aside the default judgment and of this appeal, to be assessed by the Registrar if not agreed.
Issued by:
Nour Hineidi
Registrar
Date of issue: 18 November 2021
Time: 2.30pm
JUDGMENT
CHIEF JUSTICE ZAKI AMI, H.E. JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE LORD ANGUS GLENNIE IN AGREEMENT:
Introduction
1. This is an appeal by the Appellant, Ajay Sethi, against the Order of H.E. Justice Ali Al Madhani refusing his application to set aside a default judgment entered in action CFI-055-2020, brought against him at the suit of the Respondent NS Investments Limited.
2. Since a substantial part of the appeal requires a consideration of certain aspects of the Rules of the Dubai Court (“RDC") as applied at first instance in this case, it is convenient throughout this judgment to refer to the Appellant as the Defendant and to the Respondent as the Claimant. References to Part and Rule are references to Parts and Rules of the RDC.
Outline Facts
3. For the purposes of this appeal, the outline facts can be taken from the papers before the court as supplemented by the parties’ legal representatives in the course of the hearing.
4. The claim arises out of a Loan Agreement dated 2 July 2019 (“Loan Agreement”) in terms of which the Claimant, as “Lender”, lent to the Defendant, as “Borrower”, the sum of USD 1,298,977 (the “Loan”), on terms that the Loan would be repaid within 60 days of drawdown (the “Loan Period”), i.e. by 3 September 2019, and that the Defendant would pay interest thereon at the rate of 24% per annum during the loan period and thereafter Default Interest at the rate of 36% per annum (“Default Interest”) until actual repayment of the Loan and outstanding interest, with provision for the Default Interest to be added to the outstanding Loan each month and, in effect, compounded with monthly rests (the “Claim”).
5. Some repayments were made during the Loan Period and/or after the expiry of the Loan Period, but these were insufficient to discharge the indebtedness. Whether such payments were of principal or interest or a mixture of the two may be in dispute and does not matter for present purposes.
6. On 28 June 2020, the Claimant issued a claim form in action CFI-055-2020 accompanied by particulars of claim. The relief sought included a declaration that the Loan Agreement was terminated; and payment of the Loan plus interest and Default Interest until payment was received.
7. On 6 July 2020, the claim form and accompanying particulars of claim were served on the Defendant personally in Dubai under cover of a letter (as required by Rule 7.35) indicating that a form for defending the Claim, a form for admitting the Claim or a form for acknowledging service must now be filed by the Defendant using the DIFC Courts e-filing system within the timeframe prescribed by the RDC. A certificate of service filed on behalf of the Claimant in terms of Rule 9.43 set out the relevant details about time, date and manner of service, but wrongly identified the “acknowledgment due date”, i.e. the date by which acknowledgment of service had to be filed with the Court, as 20 July 2020, 14 days after the date of service. In fact, as is made clear by Rule 9.57, the date for filing an Acknowledgment of Service (if one is required – as to which see below) where a claim form is served out of the DIFC, as it was here, is 28 days from the date of service, which in this case, would be 3 August 2020. Nothing turns on this error in the present case, but accuracy is important in a case such as this where much can turn on a perceived or alleged failure to comply with the RDC.
8. On 8 July 2020, the Claimant’s lawyers, Clyde & Co sent to the Defendant’s lawyers in Dubai, Zayed AlShamsi Advocates & Legal Consultants (“AlShamsi”), a copy of their letter to the Defendant together with the particulars of claim.
9. As noted above, the date for filing an acknowledgment of service, if that was required (as to which, see below), was 3 August 2020, that being 28 days from the date of service.
10. No acknowledgment of service was filed by that date or at all.
11. On 4 August 2020, the Defendant emailed Clyde & Co stating that “we have agreed the dates and time schedule specified by DIFC and our law firm shall be submitting as per procedures.” It is not clear precisely what meaning is to be given to this – it is not suggested that there was any discussion between the Defendant and Clyde & Co resulting in an agreement as such – but in general terms it clearly indicates an intention on the part of the Defendant to engage with the process and to file the appropriate documents in response to the Claim against him as per the DIFC Court “procedures”.
12. The next day, 5 August 2020, AlShamsi emailed Clyde & Co referring to the case against the Defendant and asking them to note that “we have acknowledged receipt of the claim documents and accept to represent [the Defendant] in aforementioned case subject.”
13. Four days later, on 9 August 2020, AlShamsi emailed Clyde & Co, copied in to the “DIFC Courts’ Registry”, in the following terms:
“Subject: RE: CFI-055-2020 – NS INVESTMENTS LIMITED v AJAY SETHI …
Dear sirs/ Mesdames
Kindly find the attached reply memo on the above mentioned case No.
Regards”
14. The “attached reply memo” (the “Memo”) is an important document in this case. Its terms require detailed consideration. We do not propose to set it out in full, but the following points can usefully be made:
(a) It is set out as a formal document. It is headed:
“IN DIFC COURTS
COURT OF FIRST INSTANCE
REPLY MEMO IN THE CASE: CFI-055-2020”
and it then goes on, after the date (9/8/2020), to set out the name and address of the Defendant, the name of the lawyers representing him (AlShamsi), and the name and address of the Claimant.
(b) After the sub-heading “SUB: REPLY MEMO”, the first sentence of the Memo reads as follows:
“In response to what was stated in the Claim Statement the Defendant denies what contained in it altogether”.
(c) There follow a number of specific points made in answer to the Claim.
i. The first point relates to a cheque given by the Defendant to the Claimant as a guarantee under the fifth clause of the Loan Agreement.
ii. The second point questions the calculation of the amounts said to be outstanding under the Loan Agreement.
iii. The third point raises the issue of “usurious interest” under reference to the interest rates of 24% and 36% charged in the Loan Agreement, which is said to be forbidden in Shari’a and in law, to be punishable under Article 409 of the Federal Penal Code, and to be in violation of the provisions of UAE law which, it is said, do not permit interest rates in excess of 9%.
iv. The fourth and fifth points make allegations about the activities of the Claimant in other business dealings with the Defendant which, it is said, are dishonest and deceitful and have caused the Defendant to suffer loss and damage, which he is entitled to set off against any sums otherwise owing to the Claimant under the Loan Agreement.
v. It is unnecessary for present purposes to assess the strength or otherwise of the points made in this Memo – it is sufficient to note that the points were made in that document, clearly and forcefully, and were clearly intended as a response to the Claim.
(d) The Memo ends by setting out the relief sought by the Defendant in the following way (with square brackets where letters/words are added for clarification):
“Relief sough[t]
The defendant requests your Hon’ble [Court] for the followings:
First: originally: dismiss the claim of the claimant
Secondly: Substitute:
1. Appointment of an account expert to estimate the damages sustained to the defendant from the deceit of the claimant.
2. Make clearance [i.e. set off] between the losses sustained a defendant against the Loan amount subject matter of this claim.
3. Obligate the claimant by the expenses, fees and advocacy fees.”
(e) The Memo is then “respectfully submitted” and signed by Mr. AlShamsi.
15. Although the email attaching the Memo was copied to the DIFC Courts Registry, it was not “e-filed”, i.e. it was not filed using the electronic filing facility available on the DIFC Courts website used for the electronic submission of documents to the Registry: see the Definition of “E-Filing” in the Schedule to Part 2 of the RDC.
16. On 10 August 2020, the DIFC Courts’ Registry emailed AlShamsi and others involved in the case saying: “Please ensure that you file all submissions online via the eRegistry portal.” It is not clear whether the reference there to “submissions” is intended as a reference to the Memo which had been emailed to the Registry or as a reference to future legal documents which would in due course require to be lodged by the parties.
17. Whatever may have been the meaning or understanding of that email from the Registry, no steps were taken on behalf of the Defendant to file the Memo online via the eRegistry portal; and the Registry did not place the document on the Court file.
18. Time for filing a defence to the Claim expired on 20 August 2020, that being 45 days after the claim form accompanied by the particulars of claim were served on the Defendant out of the DIFC: see Rule 9.58(1).
19. On 27 August 2020 the Claimant, taking the view that the Defendant had not filed an acknowledgment of service when it ought to have done, and that it had not filed a Defence within the time allowed by the RDC, issued an application notice requesting a Default Judgment in terms of Rule 13.4. The application notice was accompanied by an affidavit from Nick Braganza, a solicitor within Clyde & Co who had the conduct of the Claim against the Defendant, in which Mr. Braganza, amongst other matters, stated that in accordance with Rule 9.57, the deadline for filing the acknowledgment of service was 3 August 2020 and the deadline for filing a defence was 20 August 2020. Both deadlines had passed without either an acknowledgment of service or a defence having been filed. So far as concerns the Memo, in paras. 25-26 of his affidavit Mr. Braganza said this:
“25. The Defendant’s legal representatives did however submit a ‘reply memorandum’ by email to me and the DIFC Court’s Registry. This was not submitted in accordance with the correct procedure or through the DIFC Court e-portal nor was it submitted in the correct format as it did not contain a Statement of Truth in accordance with RDC 16.6 and 16.7. The DIFC Courts’ Registry have responded by email dated 10 August 2020 requesting that the reply be submitted through the Court’s e-portal …. However as of the date of this affidavit this has not been done.
26. Therefore, I submit that the Defendant has failed to file an acknowledgment of service or a defence within the time and as per the format and procedures required by the RDC.”
20. The Claimant’s application for default judgment was granted on 1 September 2020.
21. On 21 September 2020 the Defendant issued an application to set aside the default judgment under Part 14. The application notice was accompanied by a written application to set aside the default judgment (in accordance with Rule 14.3) and a “Defense Statement”. It is not necessary for present purposes to go into the details of those documents, except to note three points. First, although the Defendant’s argument and evidence referred only to Rule 14.2 (discretionary set aside where the Defendant can show he has a real prospect of defending the claim), the application to set aside the default judgment was formally presented also under Rule 14.1 (mandatory set aside where the conditions for granting default judgment were not satisfied). Second, the Defense Statement advanced substantially the same defences as had been set out in the Memo, including the averments as to the usurious nature of the interest provisions in the Loan Agreement. Third, the application to set aside gave a reason (psychological depression) for the Defendant not having been able to instruct lawyers to file an acknowledgment of service or defence but explained that he did manage to contact his lawyers and brief them so that on 9 August 2020 the Memo was prepared by his lawyers and “sent to the DIFC Court Registry and the Opposite Party …, which was not acted upon.”
22. On 29 April 2021 the Court (H.E. Justice Ali Al Madhani) refused the Defendant’s application to set aside the default judgment. The Court noted that no submissions had been made to support the application to set aside in so far as it was based on Rule 14.1. So far as concerned Rule 14.2, the judge went through the arguments advanced by the Defendant with great care and concluded that the Defendant had no real prospect of successfully defending the Claim. He expressed the view (in para. 55) that:
“Mr Sethi and/or his legal representatives have wilfully neglected these proceedings and the reasons given by Mr Sethi for missing the relevant deadlines do not in fact explain why they were missed.”
23. The Defendant sought permission to appeal. That application was dealt with by H.E. Justice Ali Al Madhani, who had refused the application to set aside the default judgment. He granted permission on the basis that the appeal would have a real prospect of success (Rule 44.19(1)) and that there was some other compelling reason why the appeal should be heard (Rule 44.19(2)). He did so on the basis (expressed in para. 3 of his judgment) that having considered the matter with some care he was now “less certain” that the conditions stipulated in Rule 13.4 for entering judgment in default of acknowledgement of service were in fact satisfied in this case. He gave detailed reasons for his decision to grant permission which we, and (we believe) the parties, have found of assistance. Although his reasoning related entirely to the question of whether the Court must for that reason set aside judgment in terms of Rule 14.1, his order did not limit the appeal to this point.
The Appeal
24. The appeal was presented to this court on two grounds: first, that the conditions stipulated in Rule 13.4 for entering judgment in default of acknowledgement of service were not satisfied in this case and that therefore the default judgment must be set aside in terms of Rule 14.1(1); and second, that the Defendant had a real prospect (realistic as opposed to fanciful) of successfully defending the claim and that therefore the default judgment should be set aside as a matter of discretion in terms of Rule 14.2.
25. Ms. Sophia Hurst, who appeared on behalf of the Claimant in resisting this appeal, argued that neither ground of appeal was properly brought before this court.
(a) So far as concerned the first ground of appeal, she pointed out that H.E. Justice Ali Al Madhani had noted (in refusing the original set aside application) that no submissions had been made to support the application in so far as it was based on Rule 14.1 – that was therefore a new point which ought not to be allowed to be taken into account for the first time in the Court of Appeal. She referred to the summary of the law on this issue in the judgment of Hwang CJ in Damac Park Towers Company Limited v Youssef Issa Ward [2015] DIFC CA 006 at paras. 65-70. We accept that summary without reservation, but it does not lead to the conclusion for which Ms. Hurst was contending, for two reasons: first, because the Rule 14.1 argument was clearly raised on the set aside application here, albeit that the argument in support was not developed in submissions before the judge; and second, as the Court emphasised at para. 66 of the decision in Damac Park Towers, where the new question sought to be raised “is one of pure law which involves no further factual investigation, then a court has no reason to preclude admission of the new point.” The Rule 14.1 point is a pure point of law, involving consideration of various Rules within the RDC and the application of those Rules to the events which happened in this case. No evidence – certainly no disputed or disputable evidence – is involved in that exercise.
(b) As to the second ground, Ms. Hurst submitted that, in granting permission to appeal, H.E. Justice Ali Al Madhani had focussed exclusively on the difficulties of interpretation of the RDC in relation to the Rule 14.1 point. He had said nothing to indicate that, contrary to his decision on the set aside application, he now thought the Rule 14.2 argument was arguable or had any real prospect of success. His grant of permission to appeal should therefore be understood as limited to the Rule 14.1 point. We cannot accept this argument. While it is true that a judge may give limited permission to appeal, limiting the issues to be heard (see Rule 42.22), the limits of the permission in such a case should be set out on the face of the order granting permission. We have referred to the terms of the order granting permission in para. 23. The order does not limit the grounds of appeal or the arguments which might be advanced in support of the appeal.
It follows, in our view, that both grounds of appeal are before us for decision.
Ground 1 – the Rule 14.1 point
26. In terms of Rule 14.1(1), the Court must set aside a judgment in default of acknowledgment of service entered under Part 13 if that judgment was wrongly entered because any of the conditions in Rules 13.4 and 13.6 were not satisfied. Rule14.1(2) deals in a similar manner to judgments in default of defence under reference to the conditions in Rules 13.5 and 13.6, but we are here concerned with judgment entered in default of appearance.
27. The relevant Rules fall within RDC Part 13. The term “default judgment” is defined in Rule 13.1 as meaning “judgment without trial where a defendant (1) has failed to file an acknowledgment of service; or (2) has failed to file a defence.” There is an important qualification in Rule 13.2. This provides that for the purposes of Part 13, “a defence includes any document purporting to be a defence”. The conditions to be satisfied before default judgment can be obtained are set out in Rule 13.4 (default of acknowledgement of service) and Rule 13.5 (default of defence). Judgment in default of defence may be obtained only where an acknowledgement of service has been filed but a defence has not been filed: Rule 13.5(1). It is not in dispute in this case that no acknowledgment of service was ever filed. It follows that judgment in default of defence could not be obtained (Rule 13.5(1)) and therefore the relevant rule is Rule 13.4. This provides as follows:
“13.4 The claimant may obtain judgment in default of an acknowledgement of service only if –
(1) the defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and
(2) the relevant time for doing so has expired.”
The overall scheme of a provision such as this is straightforward. In certain cases, a defendant is required to file an acknowledgment of service and must do so within a certain time limit. Once that time has expired without an acknowledgment of service having been filed, and provided that an acknowledgement of service has still not been filed at the date of the application, the claimant may file a request for default judgment. It is not sufficient for the grant of default judgment that the acknowledgment of service was filed late; it must still not have been filed at the date of the request – this is the effect of the words “has not filed” in Rule 13.4(1). A similar point applies to any request for judgment in default of defence under Rule 13.5 – default judgment cannot be entered once the defence is filed, even if it is filed late.
Was the Defendant required to file Acknowledgment of Service?
28. In terms of Rule 13.4(1) as it applies to this case, there are two questions to be answered: first, whether the defendant was required to file an acknowledgement of service; and second, if so, by what time? The second question is, in fact, easy to answer. In the ordinary case the period for filing an acknowledgement of service is 14 days after service of the claim form (Rule 11.5); but in terms of Rule 9.57, where a claim form has been served out of the DIFC (or out of Dubai) the period for filing an acknowledgement of service is 28 days after the service of the claim form. Similar provision is made in Rule 9.58 for an extended period of 45 days for filing a defence where the claim form is served out of the jurisdiction. Here, the claim form was served on the Defendant out of the DIFC on 6 July 2020. Accordingly, the period for filing an acknowledgment of service, if one was required, expired on 3 August 2020.
29. The important question, however, is whether an acknowledgment of service was required in this case at any time before the Claimant filed the request for default judgment under Rule 13.4. The short answer to that question is: no acknowledgment of service is dealt with in Part 11. The circumstances in which an acknowledgment of service is required are set out in Rule 11.2, which provides as follows:
“11.2 A defendant shall file an acknowledgement of service if:
(1) the claimant serves a claim form without serving particulars of claim;
(2) the defendant is unable to serve a defence within the period specified in rule 16.9; or
(3) the defendant wishes to dispute the Court’s jurisdiction.”
Dealing with each of those paragraphs, the Claimant served the claim form on the Defendant accompanied by particulars of claim, so para. (1) does not apply. The Defendant does not wish to dispute the Court’s jurisdiction, so para. (3) does not apply. Para. (2) is more problematic but, for reasons which We explain below, does not give rise to an obligation on the Defendant to file an acknowledgment of service in a case such as this.
30. In its terms Rule 11.2(2) is limited to a situation where the defendant is unable to serve a defence within the period specified in Rule 16.9, that is to say within 14 days after service of the particulars of claim. It does not refer to any other rule, such as Rule 16.10, which in turn refers to a longer period for filing a defence where the claim form is served out of the jurisdiction (Rule 16.10 wrongly refers in this context to Rule 9.57, whereas the correct reference should be to Rule 9.58). And there is good reason to limit para. (2) of Rule 11.2 to this situation. Reference to Rule 16.9 in this context makes sense: a defence should, as a general rule, be filed 14 days after service of the particular claim, but if acknowledgment of service is filed under Rule 11, then the Defendant has a further 14 days within which to file his defence. Putting it colloquially, by filing acknowledgment of service the Defendant can “buy” a bit more time for preparing and filing his defence. The position is very different when the provisions of Rule 9.57 and 9.58 are triggered by service of the claim form out of the jurisdiction. Where these Rules apply, time for service of a defence under Rule 9.58 (45 days) is already extended not only beyond the normal time for service of a defence in Rule 16.9, but also beyond the time allowed for acknowledgment of service under Rule 9.57 (28 days). Filing an acknowledgment of service at the end of the time allowed for service of the defence would achieve nothing. It would not buy the Defendant any more time for filing his defence. Nor would the Defendant’s failure to file acknowledgment of service by the time when the defence should have been served give the Claimant any additional grounds for entering default judgment, since Rule 13.4(1) allows judgment to be entered in default of acknowledgment of service not only where there has been no acknowledgment of service within the time allowed but also where a defence has not been served. So there would be no sense in reading Rule 11.2(2) as though it applied to the case of filing acknowledgment of service and a defence where the claim form was served out of the jurisdiction. Rule 11.2(2) should be limited, as its wording suggests, to cases covered by the provisions of Rule 16.9.
31. If that is right, it follows that the Defendant in this case was under no obligation to file acknowledgment of service. The first step required of him was for him to file a defence, and to do that by 20 August 2020, that being 45 days after service of the claim form on him out of the jurisdiction.
32. We should add that there is nothing surprising in the conclusion that a Defendant is not always bound to file an acknowledgment of service. Rule 10.1(3) requires a Defendant who is served with a claim form which is not accompanied by particulars of claim to file acknowledgment of service where he does not admit any part of the claim. By contrast, where particulars of claim have been served with the claim form, the Defendant may file an acknowledgment of service: Rule 10.2(3). He does not have to do so: Rule 11.2. He can move directly to filing a defence without acknowledging service: Rule16.9(1). Moreover, Rule 17.23 specifically covers the case where a defendant files a defence without having filed an acknowledgment of service.
Failure to File a Defence?
33. It follows from the above that Rule 13.4 has no application to this case in so far as it is concerned with the failure to file acknowledgment of service. The absence of acknowledgment of service does not entitle the Claimant to enter default judgment, since no acknowledgment of service was required. But the same rule allows default judgment to be entered in circumstances where (there having been no acknowledgment of service) no defence has been filed and the relevant time for filing a defence has expired. The Claimant contends that the default judgment entered on its behalf was justified on this basis, so we turn to consider this aspect of the case.
34. In terms of Rule 9.58 the time allowed for filing a defence is 45 days. It expired on 20 August 2020. The Claimant contends that no defence was filed within that time and that he was therefore entitled to enter judgment in default. The Claimant, for his part, relies on the Memo sent to the Claimant and to the DIFC Court Registry on 9 August 2020. It is fair to point out that this argument does not appear to have been advanced with great force on the hearing of the application to set aside the default judgment, but that is by the way. If the point is a good one it matters not at what stage that was appreciated by the parties.
35. As the argument developed, it became clear that there were two separate strands to this argument, two separate questions requiring an answer: first, was the Memo a defence or “a document purporting to be a defence” in terms of Rule 13.2; and second, was the Memo “filed” when it was emailed to the Claimant and the DIFC Court Registry on 9 August 2020.
Was the Reply Memo a Defence or “a Document Purporting to be a Defence”?
36. We have summarised the terms of the Memo in paragraph 14 above. The Claimant argues that it was not a defence, nor was it a document purporting to be a defence. It was not in the correct form for a defence in DIFC Court proceedings; it gave the appearance of being akin to a written submission rather than a defence; and it was not verified by a Statement of Truth as required by Rules 16.6, 17.48 and 22.1(1). However, as the Defendant submits, it was not suggested that the Memo was a defence – which it would be if it had got all those things right – but rather that it was a “document purporting to be a defence”. Whatever its form, it was clearly intended as an answer to the Claim as advanced in the particulars of claim. If it had defects – and it was acknowledged that it did have defects, otherwise it would have been a defence rather than a document purporting to be a defence – those defects could have been dealt with in the course of the proceedings, by amendment (RDC Part 18), by an order for further information (RDC Part 19) or, in an extreme case, by an application to strike out the defence (RDC Part 4, particularly Rule 4.16).
37. The expression “purporting to be [something]” is an expression much used and well understood. In the context of a document, it conveys the meaning of that document professing or pretending to be a particular thing, or having the appearance of being that thing, when it is not in fact what it professes, pretends, or appears to be. There is an element of intention involved, but that intention must appear from the document itself or the context in which it is produced or presented; a private intention, not expressed to anyone or appearing from the document or the circumstances in which it comes to be produced, is irrelevant for this purpose. In the context of a document “purporting to be a defence”, as that expression is used in Rule 13.2, it clearly includes a document which is served or filed in the Court process and which is, objectively, intended to answer the claim. What degree of precision or particularity is required may be a matter of debate, to be determined on a case-by-case basis – it is best not to be too prescriptive, since the question of whether a particular document falls within that wording may arise in many different situations and require to be answered in respect of a wide range of documents.
38. It is important, however, to note the context in which those words appear in the RDC. Rule 13.1 identifies a “default judgment” as meaning a judgment without trial where a defendant has failed to file an acknowledgement of service or “has failed to file a defence.” Rule 13.2 then mitigates the risk to the defendant by emphasising that “a defence”, for these purposes, “includes any document purporting to be a defence.” The clear intent of this provision is that a defendant who has engaged with the process and has endeavoured to serve a defence should not have default judgement entered against him simply because he has got it wrong in terms of form, content, or the like. It follows that a generous interpretation should be given to this expression in the context of the default judgment provisions of the Rules – too restrictive an interpretation would risk undermining the very purpose of the provision.
39. In the present case, we have no doubt that the Memo was a document purporting to be a defence for the purposes of Rule 13.2. It bears all the appearances of being directed to the Claim presented against the Defendant and of being the Defendant’s response to that Claim. It bears to be a formal document: it is headed with a reference to the DIFC Courts, Court of First Instance, and it identifies the case number, the name and address of the Defendant and the Claimant, and the Defendant’s lawyers. The first substantive part of the document begins with the words: “in response to what was stated in the Claims Statement, the Defendant denies what contained in it altogether”. The document then goes on to make specific points by way of defence, counterclaim and set off. It concludes by requesting the Court to dismiss the Claim, to make other directions relevant to the assessment of damages sustained by the Defendant as a result of the Claimant’s actions, and to award the Defendant his costs, including advocacy fees.
40. The RDC sets out in Rule 17.23 – 17.32 (“contents of defence”) a list of what a defence is required to contain. This is supplemented by Rule 17.36 – 17.50 which sets out “General rules about statements of case”. While the Memo does not comply perfectly in all respects with what is required by these provisions in the RDC – if it did it would be a defence – it contains most of the relevant information. Indeed, the main thing that prevents it being a defence is form and style. In the course of argument H.E. Justice Shamlan Al Sawalehi pointed out, without contradiction from counsel, that the form of the Memo was in keeping with the style of defence used in the Dubai Courts. While that style may be different from that used in pleadings in the DIFC Courts, it would be odd – we would go further and say “perverse” – if the DIFC Courts were not prepared to recognise the Memo as, at the very least, a document purporting to be a defence.
41. We would add this further point. The context in which the Memo came to be sent to the Claimant and to the DIFC Court Registry is itself informative as to its purpose. On 4 August 2020, the Defendant emailed Clyde & Co saying that he (or they) had agreed the dates and time schedule specified by the DIFC and that his law firm would be “submitting as per procedures”. That clearly means that they would be engaging with the process and submitting documents as required by the DIFC Court rules. On 5 August 2020, the Defendant’s lawyers emailed Clyde & Co asking them to note that they had acknowledged receipt of the claim documents and had agreed to represent the Defendant in the case. The impression conveyed by those communications was that the Defendant’s lawyers were aware of the need to submit a defence in accordance with the RDC. When on 9 August the Defendant’s lawyers sent the Reply Memo, which in terms consisted of a denial of the Claim, the obvious interpretation would surely be that they were intending to file a defence in accordance with the Rules. So the context in which the Memo was emailed to the Claimants and to the DIFC Court Registry made it plain that that Memo was intended to be a defence to the Claim and, at the very least, was a document purporting to be a defence.
Was the Memo filed?
42. The Memo was sent under cover of an email addressed to Clyde & Co, copied to the DIFC Courts’ Registry, with the action number and the name of the parties in the subject line of the email. The Claimant contends that the document was not “filed” for the purpose of the Rules, in particular Rule 13.4, and that accordingly, even if it was a document purporting to be a defence, sending that document to the Claimant and the Registry was not sufficient to prevent default judgment being entered against the Defendant under Rule 13.4(1). The Claimant contends that the document should have been e-filed using the eRegistry portal.
43. The requirement in the RDC is that the defence must be “filed” within the time prescribed by the Rules. The Schedule to Part 2 of the Rules contains a definition of “filing” which is the meaning to be given to the word unless the context otherwise requires: Rule 2.5: “’Filing’ in relation to a document, means delivering it, by post or otherwise, to the Registry.” There is no requirement there for E-Filing, which is defined separately as “The Electronic Filing facility available on the DIFC Courts website used for the electronic submission of documents to the Registry”. On the face of it, the requirement in RDC that a defence be filed does not import a requirement that it be e-filed. In the present case the Memo was send by e-mail to the Claimant’s lawyers and to the Registry. In terms of the definition in the Schedule to RDC Part 2, that constitutes filing the document for the purpose of the relevant Rules.
44. In the course of argument reference was made to other provisions of the RDC dealing with the question of filing. These are to be found in Part 6, and particularly Rules 6.20 and 6.21. Rule 6.20 states that, with the exception of bundles prepared for hearings, “all documents to be filed in the DIFC Courts should be submitted to the Court in electronic form only preferablythrough the E-Filing facility available on the DIFC Courts website” (emphasis added). Rule 6.21 states that “electronic documents may be filed with the Courts by: (1) The E-Filing facility – this shouldbe used unless it is impossiblein the circumstances; or (2) Emailing the documents to the Registry email account at registry@difccourts.ae; or (3) Delivering any form of data storage media containing the electronic files to the Registry” (emphasis added). The language of Rule 6.20 (“preferably”) is not suggestive of a firm rule that the E-Filing Facility must be used. It was submitted on behalf of the Claimant that the language of Rule 6.21 (“should … unless it is impossible”) was indicative of a mandatory rule. I disagree. The word “should” suggests strong encouragement but not a command, and the word “may” in the introductory part of the Rule reinforces this construction. In our view neither Rule makes the use of the Electronic Filing facility or eRegistry portal mandatory.
45. It follows that the Memo was filed when it was sent by email to the DIFC Courts Registry. The fact that it was not placed on the Court file is of no consequence. The Registry was and is still anxious to encourage parties to make use of the Electronic Filing facility on the website as a means of increasing efficiency within the system. That justifies the exhortation in the email from the Registry on 10 August 2020 to “please ensure that you file all submissions online via the eRegistry portal.” But in terms of the Rules that is not yet mandatory, and the Registry should place on the court file all relevant documents submitted by email.
Conclusion on Ground 1 – the Rule 14.1 point
46. No acknowledgment of service was required in this case. A defence, or a document purporting to be a defence, was filed on 9 August 2020. It follows that the conditions in Rule 13.4 (and 13.6, though no separate point arises on this Rule) for the grant of judgment in default of acknowledgment of service were not satisfied. The default judgment must therefore be set aside in terms on Rule 14.1. The appeal succeeds on this point.
47. We are conscious, as was H.E. Justice Ali Al Madhani when granting leave to appeal from his refusal of the set aside application, that our interpretation of the Rules differs from that of Justice Sir Jeremy Cooke in Abu Adas & Al Bargouthi v Bankmed (SAL) [2019] DIFC CA 001, in particular his remark at para. 27 of his judgment to the effect that the Rules do not envisage any circumstance where a defence is to be filed without an acknowledgment of service. Those remarks are, of course, entitled to the greatest respect, but they were obiter, since the court ruled that the appeal was incompetent (and therefore the court did not have jurisdiction to hear it), and were not directed to the point that is presently before this court. For the reasons set out in this judgment, we are not persuaded that we should follow them. However, we concur with the sentiment expressed in those remarks that the Rules are not a model of clarity and would benefit from some reconsideration by the Rules Committee.
Ground 2 – the Rule 14.2 point
48. Rule 14.2 provides that the court may, on such conditions as it sees fit, set aside or vary a judgment entered under Part 13 if: (1) the defendant has a real prospect of successfully defending the claim; or (2) it appears to the court that there is some other good reason why (a) the judgment should be set aside or varied; or (b) the defendant should be allowed to defend the claim.
49. The Defendant has raised a number of potential defences. For our part, having decided the first ground of appeal in favour of the defendant, with the consequence that the default judgment will be set aside, we would prefer to say nothing about the underlying merits or otherwise of the claim or the defence to it. All points are open to the parties and there can be no issue estoppel arising from the judgment below which has now been set aside.
Disposal
50. We shall allow the appeal. The Defendant/Appellant should have his costs here and below, to be assessed by the Registrar if not agreed. The case will be remitted to the Registrar for further directions for the future conduct of the action.