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With the eagerly anticipated judgment in the case of Dr. Lothar Hardt & others versus Damac (DIFC) Company Limited & others, CFI 036/2009 the DIFC Court of First Instance had an opportunity to make some ground breaking rulings on the matter of its jurisdiction and particularly to widen it for a plethora of real estate investors desperate to find a forum to voice their claims about defaulting developers. However, it did not do so and frankly, we did not expect it. The judgment does however deliver a further piece in the puzzle to define the still thin boarder between the jurisdictions of Dubai Courts and DIFC Courts and as such - though it may not satisfy real estate investors - it may offer some guidance for lawyers and legal practitioners.
The Claimant had bought a number of off-plan units in various developments from the DAMAC Group. Even though only one of these developments, the Park Towers, is situated within the DIFC premises, still the Claimants aimed to submit all contracts under the jurisdiction of the DIFC Court. The claim was directed versus Damac (DIFC) Company Limited, a DIFC registered company and a part of the Damac Group, although it had never been a party to any of the Sale & Purchase Agreements related to the real estate units in question. As the Judge put it plainly, the claims did not raise any specific allegations against Damac (DIFC) but rather versus other Damac Group companies that were parties to the Sale & Purchase Agreements. However, the claim was not formally raised against any other Damac Group company. Consequently, the Judge in making a decision solely on the question of jurisdiction decided that the claim against Damac (DIFC) should be struck out for want of jurisdiction.
Dr. Hardte’s counsel tried to make a convincing case in order to picture the various Damac Group companies as one and the same, thereby allowing the Court to consider Damac (DIFC) as a party to the contracts and assuming its jurisdiction accordingly.
The Court however did not accept these arguments, giving effect to the general principle of distinct legal personalities of different legal entities. Unfortunately, the counsel failed to confront the Court with the question as to whether jurisdiction can be assumed against the Damac subsidiary responsible for the Park Towers development, even though the same is not a DIFC establishment. The Court did not have to entertain this question, since that respective Damac subsidiary had not been made a party to the legal proceedings. It then would have been further interesting to elaborate as to whether the jurisdiction of the DIFC Court over any DIFC based property could be regarded as a statutory mandatory jurisdiction.
The Judge did however state that even if the requirements for the DIFC jurisdiction under the relevant provisions (Art. 5 Dubai Law No. 12 of 2004) had been fulfilled, the parties had opted out of it by choosing Dubai Law and Dubai Courts in their contractual jurisdiction and governing law clauses. These clauses simply state that the contracts shall be governed by Dubai law and any disputes are to be submitted to the exclusive jurisdiction of the Dubai Courts. The Judge made it clear that without any further evidence such a clause cannot be regarded as confining the Laws to DIFC Laws and the Courts to DIFC Courts.
This judgment may not be the end in the respective case as its scope was only confined to the Court’s jurisdiction to hear the claim in relation to Damac (DIFC) Company Limited, one of the defendants. The other defendants however are all individuals.
It will remain interesting to follow the further outcome of this case, but it is safe to say, that the expectations of many real estate investors to possibly be shown an avenue by the DIFC Courts to provide relief in their often one-sided relationships with developers have been disappointed.
