Claim No: CA-007-2014
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 DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK, JUSTICE ROGER GILES AND H.E. JUSTICE ALI AL MADHANI
BETWEEN
(1) AMIT DATTANI
(2) NITIN JOBANPUTRA
(3) MASOOD UR RAHMAN
(4) SHEMHON IFTAKHAR
Claimants/Respondents
and
DAMAC PARK TOWERS COMPANY LIMITED
(formerly known as DAMAC REAL ESTATE ASSET MANAGEMENT COMPANY LIMITED)
Defendant/Appellant
Hearing: 4 March 2015
Counsel: Rupert Reed QC with Christopher Bourke as in-house counsel for the Appellant
William McCormick QC with Bushra Ahmed of KBH Kaanuun for the Respondents
Judgment: 10 November 2015
JUDGMENT
Summary of Judgment
| This is the Court of Appeal’s judgment in the appeal against the Chief Justice’s 20 July 2014 decision in CFI 034-2012. On 1 December 2014 limited permission to appeal was granted by Justice Roger Giles as a single judge of the Court of Appeal.
As regards the Dattani Claimants’ purchase from Damac of a residential apartment in Park Towers (“the Apartment Appeal”) the sole issue before the Court of Appeal was whether, on the true construction of the Apartment SPA (sale and purchase agreement) and given the Chief Justice’s finding of fact that ingress to and egress from the Apartment was unsafe at the time of the inspection on 15 September 2011, the Chief Justice was wrong to conclude that the Apartment was not ready for occupation at the time when Notice of Termination was served on 5 October 2011. The Court of Appeal held that, given that the Chief Justice had found as a fact that ingress to and egress from the Apartment (by which, in context, he must be taken to have meant the Unit) was unsafe at the time of the inspection (from which there was no permission to appeal), the Chief Justice was plainly entitled to hold – indeed, was bound to hold – that the Unit was not ready for occupation at the time when notice under Clause 13.1 of the SAP requiring the Seller to remedy the breach was served on 14 July 2011; and was entitled to hold that the Seller had failed to comply with that notice on the date (5 October 2011) when Notice of Termination under that clause was served. The Apartment Appeal was therefore dismissed As regards the Rahman Claimants’ purchase from Damac of a retail unit, P4-6, in Park Towers (“the Retail Unit Appeal”) the issues before the Court of Appeal were (i) whether, on the true construction of the Retail Unit SPA and given his findings of fact that the cargo lift was not operational and that the Rahman Claimants could not obtain insurance for the fit-out works, the Chief Justice was wrong to conclude that the Retail Unit was not ready for occupation on 6 October 2011; and (ii) whether the Chief Justice reached his conclusion that Article 81(3) of the DIFC Contract Law entitled the Rahman Claimants to terminate the Retail Unit in a manner which was procedurally unfair. The Court of Appeal held that, given the Chief Justice’s findings of fact (which were not open to challenge on the appeal) the Chief Justice was plainly entitled to hold that the Retail Unit was not ready for occupation – in that it could not be occupied for the purposes (further fit-out works) for which occupation was intended – at the date (21 August 2011) when the Appellant purported to give possession and occupation of that Unit to the Rahman Claimants. Moreover, the Appellant had failed to establish procedural unfairness for the following reasons: Article 87 of the DIFC Contract Law does not, of itself, confer any right to terminate: rather, it provides, in sub-article (1), how a right to terminate (where it has arisen) is to be exercised and, in sub-article (2), for circumstances in which a right to terminate (where it has arisen) may be lost. A right to terminate arises under Article 86 of the DIFC Contract Law: in particular, it arises under sub-article (1) – where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance – and under sub-article (3) – where there has been a failure by the other party to perform before the time allowed by Article 81 has expired. There was no doubt that Article 86(3) confers a right to terminate in cases where the delay in performance does not, of itself, constitute fundamental non-performance (provided, of course, that notice under Article 81, allowing additional time of reasonable length has been given by the aggrieved party): that follows from the inclusion of the word “also” in Article 86(3). The right to terminate which arises under Article 86(3) is indistinguishable (at least in the circumstances of the present case) from the right to terminate which arises under Article 81(3). Under each of those provisions the right to terminate arises in cases where the delay in performance does not, of itself, constitute fundamental non-performance; and, under each of those provisions, the right to terminate arises if, but only if, notice allowing an additional period of time has been given under Article 81(1) and the additional time allowed is of a reasonable length or is extended to a reasonable length. In those circumstances, a party who has given notice of intention to terminate the contract at the end of an additional time for performance can rely on either Article 86(3) or Article 81(3) of the Contract Law. In either case it will need to establish (i) that the additional time allowed (or the time which has, in fact, elapsed) was of reasonable length and (ii) that the right to terminate was, itself, exercised by notice (as required by Article 87(1)) unless the notice of intention to terminated had specified that, if the other party failed to perform within the period allowed by that notice, the contract should automatically terminate (as provided by the third sentence of Article 81(3)). Further, in a case where a party who has given notice of intention to terminate the contract at the end of an additional time for performance does rely on that notice of intention (and any subsequent notice of termination given on or after the expiry of that additional period) in proceedings seeking a declaration that the contract has been validly terminated under the provisions of the DIFC Contract Law, the other party must be taken to know that the issues in those proceedings will be the same whether the right to terminate is said to have arisen under Article 86(3) of that Law or under Article 81(3) of that Law; and that those issues will include the issue whether the additional time for performance was of reasonable length. Damac plainly did appreciate that it needed to address the issue whether the additional time for performance was of reasonable length. Damac was not misled by the contention (advanced on behalf of the Rahman Claimants at trial) that the case was founded on fundamental non-performance. In those circumstances there was no procedural unfairness in the Chief Justice founding his decision that the contract had been validly terminated in reliance on Article 81 of the Contract Law rather than on Article 86. The Rahman Claimants were correct to submit that the course of the trial and the outcome would not have been different if reliance on Article 81(3) of the Contract Law had been pleaded. |
This summary is not part of the Judgment and should not be cited as such
ORDER
UPON hearing Counsel for the Appellant and Counsel for the Respondents on 22 July 2014
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
- The Appellant’s appeals are dismissed.
- The Appellant shall pay the Respondents’ costs of the appeal within 14 days of the date of this order, the amount of which shall be assessed, if not agreed, by the Registrar.
Issued by:
Natasha Bakirci
Assistant Registrar
Date of Issue: 10 November 2015
At: 3pm
JUDGMENT
Deputy Chief Justice Sir John Chadwick:
1. This is an appeal from the Order made by the Chief Justice on 20 July 2014 in proceedings brought against the Appellant, Damac Park Towers Company Limited (formerly known as Damac Real Estate Asset Management Company Limited and, hereafter, “Damac”).
2. The first and second named Claimants/Respondents, Amit Dattani and Nitin Jobanputra (together “the Dattani Claimants”), were the purchasers from Damac of an apartment (“the Apartment”) known as Unit B-1046, Damac Park Towers, under a sale and purchase agreement dated 1 November 2004 (“the Apartment SPA”). On 5 October 2011 the Dattani Claimants gave notice of termination under that agreement. In proceedings commenced on 19 September 2012 by the issue of a claim form under reference CFI 034/2012 they sought a declaration that the agreement had been validly terminated, and orders for repayment of monies which they had paid to Damac on account of the purchase price and payment of interest.
3. The third and fourth named Claimants/Respondents, Masood Ur Rahman and Shemhon Iftakhar (together “the Rahman Claimants”), were the purchasers of a retail unit (“the Retail Unit”) known as Unit P4-6, Damac Park Towers, under a sale and purchase agreement dated 16 January 2006 (“the Retail Unit SPA”). On 6 October 2011 the Rahman Claimants gave notice to terminate that agreement. In proceedings commenced on 27 December 2012 by the issue of a claim form under reference CFI 046/2012 they sought a declaration that that agreement had been validly terminated, and orders for repayment of monies which they had paid to Damac on account of the purchase price and payment of interest.
4. By an order dated 6 January 2013 proceedings CFI 034/2012 and CFI 046/2012 were consolidated under reference CFI 034/2012. The consolidated proceedings came before the Chief Justice for trial on 17 to 21 November 2013. For the reasons set out in his judgment issued on 20 July 2014 the Chief Justice held that both the Apartment SPA and the Retail Unit SPA had been validly terminated and that (i) Damac should repay to the Dattani Claimants AED 1,806,400, (being the aggregate of the sums paid by them on account of the purchase price of the Apartment) and (ii) Damac should repay to the Rahman Claimants AED 1,807,700, (being the aggregate of the sums paid by them on account of the purchase price of the Retail Unit). Effect was given to that judgment by the Order made on 20 July 2014. By an Appeal Notice, issued on 7 September 2014, Damac sought permission to appeal from the Order of 20 July 2014. By an Order issued on 1 December 2014, limited permission to appeal was granted by Justice Roger Giles as a single judge of the Court of Appeal.
5. Subsequently, by an Order dated 30 December 2014 (which, on its face, is stated to have been made by consent), the Chief Justice directed that, in addition to the sums to be repaid by Damac under the Order of 20 July 2014, Damac should pay (i) to the Dattani Claimants contractual penalty interest assessed in the sum of AED 76,412.72 and statutory interest in the sum of AED 87,100.86 as of 30 December 2014 and thereafter at the daily rate of AED 77.63 until payment and (ii) to the Rahman Claimants contractual penalty interest assessed in the sum of AED 60,871.72 and statutory interest in the sum of AED 89,938.38 as of 30 December 2014 and thereafter at the daily rate of AED 09 until payment. There has been no appeal, or application for permission to appeal, from the Order of 30 December 2014.
6. Damac’s appeal from the Order made on 20 July 2014 came before this Court for oral hearing on 4 March 2015. At the conclusion of the oral hearing this Court indicated that, for reasons that would be put in writing and handed down in due course, it would dismiss the appeal from so much of the Order of 20 July 2014 as declared that the Apartment SPA had been validly terminated and ordered repayment of AED 1,806,400 to the Dattani Claimants (“the Apartment Appeal”); and that it would take time to consider its decision in relation to the appeal from so much of the Order as declared that the Retail Unit SPA had been validly terminated and ordered repayment of AED 1,807,700 to the Rahman Claimants (“the Retail Unit Appeal”).
The Apartment Appeal
7. As I have said, the Dattani Claimants were purchasers from Damac of a residential apartment in Park Towers. The price payable under the Apartment SPA was AED 1,996,000, to be paid by instalments. Clause 3.1 of the Apartment SPA was in these terms:
“3.1 The Seller sells to the Purchaser who hereby purchases the Property on the terms and conditions contained in this Agreement.”
It is pertinent to have in mind that the subject matter of the sale and purchase was the “Property”. That term and other related terms were defined in Clause 1.1 of the Apartment SPA. As so defined, the “Property” was more extensive than the “Unit”: it comprised “the Unit together with an undivided share in the Common Property apportioned to the Unit in accordance with the Participation Quota”. The “Unit” meant the Unit as described on page 1 of the Agreement: that is to say Unit B-1046. The “Common Property” meant “those parts of the Plot and the Building (excluding the parking bays attached to the specific units) not physically forming part of the Units in Park Towers and intended for benefit or use in common by all Owners in Park Towers”. The “Plot” meant “the land occupied by the Building and its associated grounds shown on the Master Plan as Plot number PB-02”. The “Building” meant “the building(s) to be constructed on the Plot as shown on Park Towers Plan”.
8. Other terms defined in Clause 1.1 of the Apartment SPA included “Completion Date” and “Anticipated Completion Date”:
“‘Completion Date’ means the date upon which the Property is completed as per the Drawing as certified by the Project Consultant, whose decision as to such date shall be final and binding upon the Parties”.
“Anticipated Completion Date’ means a date, which is 36 months after the handover of the Plot to the Seller…”
Clause 6.1 recorded that “the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation…”
9. Clause 6.3 of the Apartment SPA provided that the Seller should give possession and occupation of the Property on the Completion Date, “…from which date all risk in and benefit in respect of the Property shall pass to the Purchaser…” But that obligation must be read with Clause 6.4, which was in these terms:
“6.4 The Purchaser acknowledges being aware of the fact that on the Completion Date, the Common Property, other Units in the Park Towers and/or the Master Community as a whole may be incomplete and that inconvenience may be suffered as a result of the building activities which shall be in progress. The Purchaser shall have no claim against the Seller for such inconvenience, the Seller, however, shall use its best endeavours to keep such inconvenience to a minimum.”
10. Clause 7.1 of the Apartment SPA was in these terms:
“7.1 Provided the Purchaser has fulfilled his obligations in terms of this Agreement, and the Seller is the registered Owner of the clear and unencumbered title in respect of the Property at the Land Registry, the Seller shall transfer a clear and unencumbered title in respect of the Property to the Purchaser at the Land Registry as soon as is reasonably possible after the Completion Date.”
It can be seen that the Seller’s obligation to give possession and occupation of the Property (pursuant to Clause 6.3) might arise before the obligation to transfer title (pursuant to Clause 7.1).
11. As I have said, Clause 6.1 of the Apartment SPA recorded that the Anticipated Completion Date (the “ACD”) was the date upon which it was expected that the Unit would be ready for occupation. It went on to provide that:
“6.1 …The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months, provided that the Seller shall advise the Purchaser of such extension at least three (3) months beforehand.”
Clause 6.2 recorded that the Purchaser acknowledges that the Completion Date may fall on a date before the ACD. That clause went on to provide that:
“6.2 …The Seller shall in any event give the Purchaser not less than thirty (30) days’ notice in writing of the Completion Date and the Completion Date shall only be deemed to have been determined when the Project Consultant has so certified by signing off on the Drawings.”
12. Clause 8.1 of the Apartment SPA provided that, without prejudice to the condition stipulated in Clause 6.2, the Seller undertook to take all reasonable steps necessary to procure that the Completion Date would be on, or as soon as possible after, the ACD.
13. Clause 13.1 of the Apartment SPA was in these terms:
“13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser. If possession and occupation of the Unit continues to be delayed beyond 12 months after the Anticipated Completion Date, the Purchaser shall have the right on thirty (30) days written notice to the Seller to call upon the Seller to remedy the breach and then to terminate this Agreement if the Seller remains in breach after the expiry of the said period of thirty (30) days. Upon termination of this Agreement, the Seller shall refund all amounts paid by the Purchaser on account of the Purchase Price including a penalty calculated on the amounts paid at the Penalty Rate for the period after the Anticipated Completion Date until the date the refund is made to the Purchaser, which is to take place within sixty (60) days of receipt of the above mentioned written notice. The Purchaser shall have no other claims against the Seller in respect of damages, compensation or costs.”
Clause 14 contained a force majeure provision which is not material in the context of the appeal.
14. The Chief Justice found (at paragraph 102 of his judgment) that, in the events which happened and subject to the valid exercise by Damac of its right to extend pursuant to Clause 6.1 of the Apartment SPA, the ACD was 30 June 2009. There has been no appeal against that finding. He also found (at paragraph 111 of his judgment) that, in relation to the Apartment SPA, the ACD was not extended beyond that date. Although Damac sought to challenge that latter finding in a document described, confusingly, as “Appeal Notice & Skeleton Argument” submitted to the Court on 7 September 2014, permission to appeal on that ground was not granted. The position in this Court, therefore, is that 30 June 2009 was the date from which time began to run for the purposes of both (i) the payment of a penalty under the first and third sentences of Clause 13.1 of the Apartment SPA and (ii) the giving of notices under the second sentence of that clause.
15. The right to terminate the Apartment SPA under the provisions in the second sentence of Clause 13.1 arose if, but only if, (i) possession and occupation of the Unit was delayed beyond 12 months after the ACD (that is to say, in the events which happened, beyond 30 June 2010), (ii) the Purchaser had given written notice to the Seller calling for that breach to be remedied within thirty days and (iii) the Seller remained in breach after the expiry of that period of thirty days. At paragraph 18 of his judgment the Chief Justice recorded the facts that were agreed between the parties. So far as material, those facts included the following:
(1) On 14 July 2011, the first named Claimant/Respondent, Mr Dattani, instructed his lawyers, KBH Kaanuun, to issue a Notice to Remedy Breach. The Notice stated that Damac was in breach of its contractual obligations to complete the Apartment and give possession and occupation to Mr Dattani, and that Mr Dattani was exercising his rights under Clause 13.1 of the Apartment SPA, giving the Defendant 30 days’ notice to remedy the breach of the terms of the SPA.
(2) On 4 August 2011, Damac wrote to Mr Dattani “to confirm to you that your Unit has been ready for handover subject to completion by you of a number of formalities which we detail below”.
(3) On 5 October 2011, Mr Dattani instructed KBH Kaanuun to issue a Notice of Termination based upon the observations made by him and a surveyor (Mr Robert Pickering) during an inspection made on 15 September 2015. The Notice of Termination stated that, on inspection by “an independent expert surveyor”, it had been found that “the Property is not in fact complete and ready for handover”; and that:
“As such, you have failed to comply with the Notice to Cure by remedying your breach within the timeframe set out in the Sale & Purchase Agreement for the Property dated 1 November 2004. Accordingly, we are instructed to formally notify you that pursuant to Clause 13.1, the SPA is to be considered terminated with immediate effect”.
(4) On 16 November 2011, Damac wrote to KBH Kaanuun in response to the Notice of Termination, denying the allegations made in that notice and stating that:
“…The fact is that the Local Authority Building Completion Certificate has been issued on 28th June 2011; on this basis your unsubstantiated allegations would appear to be unwarranted. We have, and will continue to comply with the terms of the Unit SPA.
Your client’s Unit was ready for handover by 4th August 2011…”
16. The Chief Justice addressed the question whether the Dattani Claimants were entitled to terminate the Apartment SPA pursuant to Clause 13.1 of the Apartment SPA at paragraphs 117 to 142 of his judgment. At paragraph 119 he noted that Damac’s pleaded case was that the Dattani Claimants were not entitled to terminate the Apartment SPA in that (i) they had failed to fulfil their payment obligations, (ii) the Notice to Terminate Breach, issued on 14 July 2011, was premature and (iii) the Apartment was ready for possession and occupation prior to the purported termination of the Apartment SPA. At paragraph 120 he pointed out that, in the circumstances that the schedule of payments in the Apartment SPA provided that payment of the final 10% of the purchase price (which the Dattani Claimants had not paid) would be payable upon completion and delivery of possession and occupation, the first of those grounds turned on the same issue as the third: whether the Apartment was ready for possession and occupation at the time of the purported termination. As he put it, whether or not the Dattani Claimants had fulfilled their payment obligations turned on the factual question whether the apartment unit was completed. He explained, at paragraph 122, that he did not find it necessary to address the second of those grounds – whether the Notice of Termination issued on 14 July 2011 was premature – at any length; given that he had already held that, for the purposes of the Apartment SPA, the ACD was not validly extended from the original date of 30 June 2009. The issue for decision, therefore, (as he identified at paragraphs 124 and 125) was whether Damac remained in breach in that it did not hand over possession and occupation of the Apartment within 30 days of the Notice of Termination issued on 14 July 2011; or, to put the point another way, whether the Apartment was completed for the purposes of the Apartment SPA at the time Damac purported to effect a handover of that Unit on 4 August 2011.
17. At paragraphs 126 to 129 of his judgment the Chief Justice referred to the regulatory framework applicable to the completion of the development at Damac Park Towers. He concluded that the various completion certificates that had been issued by authorities having the functions of inspection and approval were not conclusive of the factual question whether the units were fit for possession and occupation. There is no challenge to that conclusion on this appeal.
18. At paragraph 133 of his judgment, the Chief Justice recorded that it was common ground that the Apartment itself was in a sufficiently complete state at the time of the inspection: the Dattani Claimants’ submission, he said, was that the state of the common areas at that time was such that the Apartment could not be said to be ready for possession and occupation. He went on to say this:
“134. At this stage it would be useful for me first to explain the ownership of the common property in Park Towers. The definition of “Property” in Clause 1.1 of the Apartment SPA…suggests that the common property is owned in pro rata shares (in accordance with a participation quota in a separate schedule), by the owners of the individual units. However, Clause 13.1 of each SPA is only concerned with the Seller handing over possession and occupation of the respective unit itself, excluding the common property, to the Purchaser. Clause 6.4 of each SPA…also provides that the common property might be incomplete at that time and that the Purchaser shall have no claim against the Seller for any associated inconvenience.
135 The Defendant has acknowledged that, even after the issuance of these certificates, work still remained to be done in respect of Park Towers. The outstanding works that had to be done primarily pertained to the fit-out of the common areas such as lift lobbies and car parks. I understand their submissions in relation to these remaining works to be as follows: (a) the works required were of a minor nature; (b) Clause 11.4 of the Apartment SPA…envisioned that such minor remedial works would be carried out post-handover; and (c) Clause 6.4 of the Apartment SPA allows for the common property and other units in the development to be incomplete upon handover of the Apartment. The Defendant’s position is that, notwithstanding the outstanding works, the Apartment was fit for possession and occupation at the time of handover.”
19. The Chief Justice set out, at paragraph 137 of his judgment, the features in the evidence of Mr Pickering which, as he said, he had found of particular significance: (i) access into the Building was via an uncontrolled car park ramp entrance; (ii) access into the Building was not restricted, potentially compromising the security and safety of visitors to the Building; (iii) exposed electrical cables were hanging from the ceiling in the main lobby and there was no exit or fire exit signage; (iv) there were live electrical cables running under temporary carpet pieces in the elevator lobby; (v) the elevator lobby was dark and unlit; (vi) the elevators had to be operated manually by a construction worker; (vii) the overall route from the road to the Building and into the elevator was unsafe and unsecure, with an absence of signage and lighting, making it very difficult for a visitor to navigate unescorted; and (viii) a main electrical cable was hanging through the full length of the tower in the fire escape. He referred to the evidence of Mr El Chaer, a surveyor, on which Damac relied in order to counter Mr Pickering’s observations. He described Mr Chaer’s evidence as “replete with sweeping statements that are not corroborated”. He went on to say this (at paragraphs 142 and 143 of his judgment):
“142 In my judgment, the state of the common areas was such that the Apartment could not be said to be ready for possession and occupation. Although the Apartment itself was fit for occupation, the state of the common areas at the time of Mr Pickering’s inspection was such there was an insufficient level of safety for people traversing the common areas, which was necessary to access the Apartment. This is particularly so considering that the residents of the Apartment might include young children (a concern Mr Dattani articulated at trial). While the Apartment SPA envisages that there might still be ongoing works in the development, and that the common areas might be incomplete at the time of handover…safe ingress and egress is a necessary prerequisite for almost any usage of the Apartment; to that extent, the common areas and fittings must be complete enough such as to guarantee a minimum standard of safety for the residents…
143 For the above reasons, I find that the Apartment was not ready for possession and occupation as of the date of Mr Pickering’s inspection, 15 September 2011. Given the state of the Apartment Block as a whole on that date, I find that the Apartment was in fact not ready for possession and occupation when the Defendant purported to hand over possession of the Apartment on 4 August 2011. As Clause 13.1 of the Apartment SPA…allows the Purchaser to terminate the agreement if the Seller fails to deliver possession and occupation by 12 months after the ACD i.e. 30 June 2010, the Dattani Claimants were entitled to, and did, terminate the Apartment SPA by their letter of 5 October 2011 pursuant to Clause 13.1.”
144 As I have said, an Appeal Notice, seeking permission to appeal from the Order of 20 July 2014, was issued on 7 September 2014. It was accompanied by the Appeal Notice & Skeleton Argument to which I have referred. In granting permission to appeal, on limited grounds, Justice Roger Giles said this:
“An appeal notice ‘must set out the grounds of appeal relied on’ (RDC 44.34), and the grounds of appeal must set out the reasons why the decision was wrong or unjust because of serious irregularity (RDC 44.35 (1)). While there may be intersecting content, grounds of appeal and a skeleton argument are not the same thing; the former should be a formulation in as concise terms as possible of the error or injustice in the decision of the lower Court and the reasons therefor, which may then be supported by the latter. The Defendant’s appeal notice does not well identify the grounds of appeal. It and the skeleton argument are an amalgam; grounds of appeal are not formulated, and must be distilled from the narrative in the skeleton argument.”
He identified from the narrative in the skeleton argument three grounds on which Damac relied in advancing the Apartment Appeal: (i) that the Chief Justice was wrong in holding that the ACD was not extended from 20 June 2009; (ii) that he was wrong in finding that ingress and egress to the Apartment was unsafe; and (iii) that he was wrong in holding that, because of that finding, the Apartment was not ready for occupation.
21. Permission to appeal was limited to an appeal on the third of those grounds: that the Chief Justice was wrong in holding that – in the light of his finding that ingress to and egress from the Apartment was unsafe at the time of the inspection by Mr Pickering on 15 September 2011– the Apartment was not ready for occupation on 5 October 2011. In refusing permission to appeal on the other two grounds, Justice Roger Giles said this (at paragraphs 7 and 8 of the reasons set out in the schedule to his Order dated 1 December 2012:
“7. Permission to appeal is refused on ground 1 because, as the trial judge pointed out at para 123 of his judgment, if the ACD was extended from 20 June 2009 the Dattani Claimants…would still have been entitled to issue their notice. Even if the ground were upheld, it would make no difference to the result.
8. Permission to appeal on ground 2 is refused because an appeal on that issue does not have a real prospect of success. As to particular matters in the skeleton argument, I do not regard the exhibits to which the Defendant refers as materially supporting the evidence of Mr El Chaer, nor do I regard the evidence to which the Defendant refers as undermining the trial judge’s acceptance of and reliance on the evidence of Mr Pickering; nor do the authorities’ certificates provide conclusive evidence that the building was safe and fit for occupation. I do not think that there is a real prospect of overturning the trial judge’s factual findings.”
He went on to observe (at paragraph 10 of those reasons) that there was no other compelling reason for granting permission to appeal on these issues; and (at paragraph 11) that the ground on which he had granted permission, ground 3, was a question of construction, to be determined on the facts found by the Chief Justice.
22. At the oral hearing of the appeal before the full Court in March 2015, Counsel for the Appellant stated that there was no application to seek permission to appeal on grounds other than those for which permission was given in the Order of 1 December 2012. In those circumstances, it is that Order – and the observations made by Justice Roger Giles as a single judge of this Court in the schedule of reasons set out in that Order – that defines the scope of the Apartment Appeal. The sole issue before this Court in relation to the Apartment Appeal is whether, on the true construction of the Apartment SPA and given his finding of fact that ingress to and egress from the Apartment was unsafe at the time of the inspection by Mr Pickering on 15 September 2011, the Chief Justice was wrong to conclude that the Apartment was not ready for occupation at the time when Notice of Termination was served on 5 October 2011.
23. At the completion of the oral hearing in March 2015 this Court was satisfied that – notwithstanding the Appellant’s submissions in relation to that issue – as they appear in Notice of Appeal & Skeleton Argument and were developed at the oral hearing – the Chief Justice was entitled to conclude that, given his finding of fact that ingress to and egress from the Apartment was unsafe at the time of the inspection by Mr Pickering on 15 September 2011, the Apartment was not ready for occupation at the time when the Notice of Termination was served. The reasons which led me to reject the Appellant’s challenge to that conclusion may be stated shortly.
(1) As I have said, the obligation of the Seller under the Apartment SPA, imposed by Clause 6.3, is to give possession and occupation of the Property on the Completion Date. The date which is the “Completion Date” in that context is a defined term: it is “the date upon which the Property is completed as per the Drawing as certified by the Project Consultant”. It can only be determined “when the Project Consultant has so certified by signing off on the Drawings”: Clause 6.2. The decision of the Project Consultant “shall be final and binding upon the Parties”: Clause 1.1.
(2) “Project Consultant” is a defined term: it means “the project consultant for Park Towers as may be appointed by the Seller from time to time”. The Chief Justice made no finding that the Project Consultant had been appointed; nor that (if appointed) he had certified a Completion Date in relation to the Property which was the subject of the Apartment SPA; nor that the Seller had given to the Dattani Claimants the thirty days’ notice of the Completion Date required by Clause 6.2 of the Apartment SPA. There was no suggestion in the skeleton argument – or at the oral hearing of the appeal – that the Chief Justice had erred in failing to make such findings. The appeal was conducted on behalf of the Appellant on the basis that no Completion Date in relation to the Apartment had been certified by the Project Consultant.
(3) In those circumstances, there is no finding – and no evidence to support a finding – that there was a breach by the Seller of its obligation (under Clause 6.3 of the Apartment SPA) to give possession and occupation of the Property on the Completion Date. But Clause 13.1 of the Apartment SPA is not concerned with the failure of the Seller to give possession and occupation of the Property on the Completion Date. The first sentence of the clause is concerned with the inability of the Seller to give possession and occupation of the Unit (not the Property) by the ACD (not the Completion Date). The second sentence of the clause is concerned with (i) continued delay on the part of the Seller in giving possession and occupation of the Unit beyond the expiry of 12 months after the ACD; (ii) the right of the Purchaser then to serve a notice (described, perhaps inaptly, as a notice calling on the Seller to remedy the breach) requiring the Seller to give possession and occupation of the Unit within the period of thirty days; and (iii) the right of the Purchaser to terminate the Apartment SPA in the event that the Seller fails to comply with the requirement in that notice.
(4) In determining, as a matter of construction, what constitutes inability to give possession and occupation of the Unit by a date which is (or is determined by reference to) the ACD, it is important, as it seems to me, to have in mind that Clause 6.1 of the Apartment SPA describes the “Anticipated Completion Date” as “the date upon which it is presently expected that the Unit will be ready for occupation”: Clause 6.1 does not (as it might well have done, given the terms of Clause 8.1) describe “the Anticipated Completion Date” as “the date which is presently expected to be the Completion Date”.
(5) Given that, as I have said, Clause 13.1 is concerned with the Seller’s inability to give possession and occupation of the Unit by the ACD (or by a date determined by reference to the ACD) – and not with either the Seller’s breach of the obligation imposed by Clause 6.3 (to deliver possession and occupation of the Property on the Completion Date) or the Seller’s breach of the obligation imposed by Clause 8.1 (to take all reasonable steps necessary to procure that the Completion Date will be on, or as soon as possible after, the ACD), the description of the ACD, in Clause 6.1, points to the conclusion that – for the purposes of Clause 13.1 – the Seller will be unable to give occupation of the Unit if the circumstances are such that the Unit is not “ready for occupation”; and that, for so long as the Unit is not ready for occupation, there is “continued delay on the part of the Seller in giving…occupation of the Unit” and failure on the part of the Seller to comply with a notice requiring it to give occupation of the Unit.
(6) The Chief Justice found as a fact that ingress to and egress from the Apartment (by which, in context, he must be taken to have meant the Unit) was unsafe at the time of the inspection by Mr Pickering on 15 September 2011. Given that finding of fact (from which there is no permission to appeal), the Chief Justice was plainly entitled to hold – indeed, I would say, was bound to hold – that the Unit was not ready for occupation at the time when the notice requiring the Seller to remedy the breach was served on 14 July 2011; and was entitled to hold that the Seller had failed to comply with that notice on the date (5 October 2011) when Notice of Termination was served.
24. As I have said, the Apartment Appeal was dismissed.
The Retail Unit Appeal
25. The Rahman Claimants were purchasers from Damac of a retail unit, P4-6, in Park Towers at a price of AED 2,103,000. The provisions of Clauses 3.1, 6.3, 6.4, 7.1 of the Retail Unit SPA – and the defined terms to which I have referred in the previous section of this judgment – were the same as in those clauses of the Apartment SPA.
26. Clause 6.1 of the Retail Unit SPA was in these terms:
“6.1 It is recorded that the Anticipated Completion Date represents the date upon which it is presently expected that the Unit will be ready for occupation. The Seller reserves the right to extend the Anticipated Completion Date by a period of up to twelve (12) months.”
It can be seen that the clause in those terms differed from Clause 6.1 of the Apartment SPA; in that, unlike the latter, it did not include the proviso requiring the Seller to “advise the Purchaser of such extension at least three (3) months beforehand”.
27. Clause 13.1 of the Retail Unit SPA was in these terms:
“13.1 If the Purchaser has fulfilled all his obligations in terms of this Agreement and the Seller is unable to give possession and occupation of the Unit by the Anticipated Completion Date without prejudice to the provisions of Clause 14, the Seller shall pay a penalty at the Penalty Rate to the Purchaser on all the payments made by the Purchaser towards the Purchase Price for the period from the Anticipated Completion Date until the date when possession and occupation is offered to the Purchaser. Upon termination of this Agreement, the Seller shall refund all amounts paid by the Purchaser on account of the Purchase Price including a penalty calculated on the amounts paid at the Penalty Rate for the period after the Anticipated Completion Date until the date the refund is made to the Purchaser, which is to take place within sixty (60) days of receipt of the above mentioned written notice. The Purchaser shall have no other claims against the Seller in respect of damages, compensation or costs.”
The second sentence of Clause 13.1 of the Apartment SPA – under which the Purchaser may terminate the agreement by notice if possession and occupation of the Unit continues to be delayed beyond 12 months after the ACD – was not included in the Retail Unit SPA (either in Clause 13.1 of that agreement or at all).
28. As I have said, in the previous section of this judgment, the Chief Justice found (at paragraph 102 of his judgment) that, in the events which happened and subject to the valid exercise by Damac of its right to extend pursuant to Clause 6.1 of the SPAs, the ACD was 30 June 2009. Although, in relation to the Apartment SPA, the Chief Justice had held that there had been no valid exercise of the power to extend the ACD, the different terms of Clause 6.1 of the Retail Unit SPA led him to a different conclusion: he held (at paragraph 116 of his judgment) that, in relation to the Retail Unit SPA, the ACD was extended by the maximum of 12 months from the original date of 30 June 2009 to 30 June 2010.
29. At paragraph 20 of his judgment the Chief Justice recorded the facts that were agreed between Damac and the Rahman Claimants. So far as material, those facts included the following:
(1) In emails sent to Mr Rahman on 20 October 2010, 27 February 2011, and 24 April 2011, Damac informed him that anticipated completion of the Retail Unit was in the second quarter of 2011.
(2) On 18 August 2011, KBH Kaanuun, acting on behalf of the Rahman Claimants, sent to Damac a Notice to Remedy Breach in respect of the Retail Unit SPA. It was stated in the Notice that Damac had failed to comply with its contractual obligations: in that the Retail Unit had not been completed and that possession and occupation of the Retail Unit had not been given to Mr Rahman. The Notice required the stated breach to be remedied within 30 days. It was stated in the Notice that it was be treated, insofar as was required, as the requisite notice pursuant to Article 87 of the DIFC Contract Law.
(3) By a letter dated 21 August 2011, Damac informed Mr Rahman that the Retail Unit was “ready for handover subject to completion by you of a number of formalities which we detail below”.
(4) On 6 October 2011, KBH Kaanuun issued a Notice of Termination in respect of the Retail Unit based on observations made during the inspection on 15 September 2011: that is to say, the inspection by Mr Dattani and Mr Pickering, to which reference has been in the previous section of this judgment. The Notice was in these terms, so far as material:
“…On further enquiry, which has [included] a physical visit to the premises, an opinion from an independent expert surveyor and status insofar as the relevant supervisory department at TECOM is concerned, our client has discovered that in reality the Property is not in fact complete and ready for handover.
…
In particular, and despite requests, you have failed to provide a certified drawing from the Project Consultant evidencing Completion. In any event, and again despite requests, you have failed to provide the necessary certifications to prove that the Building as a whole and Property in particular meet all necessary approvals not least from DIFC and TECOM.
As such you have failed to comply with the Notice to Cure by remedying your breach within the requisite timeframe set out in the Sale & Purchase Agreement for the Property dated 16 January 2006. Accordingly, we are instructed to formally notify you that pursuant to Clause 13.1, the SPA is to be considered terminated with immediate effect”.
(1) On 12 October 2011, Damac wrote to KBH Kaanuun denying the allegations made in the Notice of Termination and pointing out that Clause 13.1 of the Retail Unit SPA did not confer a right of termination.
(2) On 13 October 2011, KBH Kaanuun wrote to Damac, asserting that termination of the Retail Unit SPA was effective as of 6 October 2011.
(3) On 12 December 2011, Damac wrote to Mr Rahman, informing him that the Retail Unit was ready for handover notwithstanding the Notice of Termination, and requested Mr Rahman to settle his outstanding balance.
30. At paragraphs 145 to 161 of his judgment the Chief Justice addressed the question whether the Retail Unit was completed when Damac purported to effect a handover of that unit on 21 August 2011 At paragraph 147 he observed that it was common ground that Damac’s obligation was limited to the delivery of the Retail Unit in “shell and core”: that is to say, “the interior of the unit would not be finished, meaning that a lower standard of readiness would have been required for the Retail Unit, as compared to the Apartment Unit”. That, he explained was because “…generally, units such as these would require further fit-out works specific to their intended use” and that it was common practice for such further works to be carried out by the purchaser. Further, he observed that it was also common ground that the Retail Unit itself was fit for its intended use – that is to say, for further fit-out works – when Damac purported to hand over possession to the Rahman Claimants. He went on (at paragraphs 148 and 149 of his judgment) to say this:
“148. The Rahman Claimants make the same submission the Dattani Claimants make in relation to the Apartment, viz. that safe ingress to and egress from the Retail Unit were not possible, given the state of the Development at that time. They also submit that the standard of readiness required of the Retail Unit was no less than that required of the Apartment, as Mr Rahman’s contractors would require safe ingress to and egress from to the unit.
149. The Rahman Claimants’ further submissions specific to the Retail Unit are as follows. First, access to the Retail Unit was problematic in September 2011 (the time of Mr Pickering’s inspection) as the access to the building was via basement three, and the cargo lift within the building did not serve that floor. The cargo lift was required to move equipment and construction materials for the fit-out works to the Retail Unit. Second, it was not possible to obtain insurance in respect of the required further fit-out works until the take-over certificate was available. The take-over certificate in respect of Park Towers was only issued in January 2012. Third, at that time the common areas were of such a state that access to the Retail Unit would not be possible for potential customers. This would presumably make operating the Retail Unit unprofitable, and consequently it would be difficult for Mr Rahman to find a tenant.”
31. At paragraph 157 of his judgment the Chief Justice rejected the submission that the absence of safe ingress and egress had the effect that the Retail Unit was not ready for handover in August 2011. Although he had accepted a similar submission in relation to the Apartment, he distinguished the position in relation to the Retail Unit on the grounds that “unlike the Apartment, the Retail Unit would be accessed only by contractors at that stage, as it would still need months of further fit-out work before the commencement of any retail activity” and that “the same standard of readiness was [not] required of the Retail Unit as of the Apartment…because the incompleteness of the common areas would not overly inconvenience contractors (such contractors would know their way around a construction site), nor would it pose a significant safety hazard to them”. At paragraph 160 he rejected the submission that the common areas were of such a state that access to the Retail Unit would not be possible for potential customers. He observed that the state of the common areas were only of concern to the Rahman Claimants when the Retail Unit could commence operation as a shop; and that (in any event) the commencement of operation as a shop would only have been possible after Mr Rahman fitted out the Retail Unit appropriately (a process which, he said, would take a few months, by which time the state of the common areas might have been very different). But he accepted the submissions founded upon the lack of a cargo lift and the Rahman Claimants’ inability to obtain insurance. At paragraphs 158 and 159 of his judgment he said this:
“158. However, I find the Rahman Claimants’ complaint regarding the lack of cargo lift access to be a legitimate complaint. For further works to be carried out on the Retail Unit by Mr Rahman’s contractors, a minimum degree of infrastructure would be required, as workers and materials would need to be transported to the unit itself. Without the use of the cargo lift, it would not be feasible to transport heavy and bulky construction materials to the Retail Unit. The Defendant’s response is that Mr Rahman’s testimony on the lack of cargo lift access is not credible, but Mr Rahman testified on this point in court and his testimony was not challenged.
159. I also find the Rahman Claimants’ complaint regarding insurance in respect of the further fit-out works to be a legitimate complaint. In court Mr Rahman testified that insurance in respect of the further fit-out works could only be obtained after the take-over certificate was available. The take-over certificate in respect of the whole development was only issued in January 2012. This is consistent with Mr El Chaer’s evidence that the owners of the other retail units only started taking occupation in January 2012. I find that being able to obtain insurance in respect of the further fit-out works is a legitimate requirement for fit-out works to be carried out. The Defendant’s response is that the Rahman Claimants have failed to provide any evidence as to their inability to obtain insurance, but Mr Rahman testified as to this in court and his testimony was not challenged.”
And he went on, at paragraph 161, to hold:
“161. For the reasons given at paragraphs 158 and 159 above, I find that the Retail Unit was not ready for what it was intended for, i.e. further fit-out works. Accordingly, I find that the Retail Unit was not in a sufficient state of readiness for handover to the Rahman Claimants when the Defendant purported to give possession and occupation to the Rahman Claimants on 21 August 2011.”
32. The Chief Justice then turned to the question whether the Rahman Claimants were entitled to terminate the Retail Unit SPA pursuant to Articles 86 and 87 of the DIFC Contract Law (DIFC Law No 6 of 2004). Those articles are in these terms:
“86. Right to terminate the contract
(1) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.
(2) In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether:
(3) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract;
(4) strict compliance with the obligation which has not been performed is of essence under the contract;(5) the non-performance is intentional or reckless;
(5) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.
(6) In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed under Article 81 has expired.
Notice of termination
(1) The right of a party to terminate the contract is exercised by notice to the other party.
(2) If performance has been offered late or otherwise does not conform to the contract the aggrieved party will lose its right to terminate the contract unless it gives notice to the other party within a reasonable time after it has or ought to have become aware of the non-conforming performance.”
33. At paragraph 170 of his judgment the Chief Justice rejected the submission, advanced on behalf of the Rahman Claimants, that Damac’s failure to give possession and occupation of the Retail Unit on 21 August 2011 in a sufficient state of readiness for handover was, of itself, a fundamental non-performance of the Retail Unit SPA for the purposes of Article 86(1) of the Contract Law. He took the view that the relevant question for determination was whether the Rahman Claimants had become entitled to terminate the agreement under Article 81 of the Contract Law.
34. Article 81 of the Contract Law is in these terms:
“81. Additional period for performance
(1) In a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance.
(2) During the additional period the aggrieved party may withhold performance of its own reciprocal obligations and may claim damages but may not resort to any other remedy. If it receives notice from the other party that the latter will not perform within that period, or if upon expiry of that period due performance has not been made, the aggrieved party may resort to any of the remedies that may be available under this Part 8 of this Law.
(3) Where in a case of delay in performance which is not fundamental the aggrieved party has given notice allowing an additional period of time of reasonable length, it may terminate the contract at the end of that period. If the additional period allowed is not of reasonable length it shall be extended to a reasonable length. The aggrieved party may in its notice provide that if the other party fails to perform within the period allowed by the notice the contract shall automatically terminate.
(4) Article 81(3) does not apply where the obligation which has not been performed is only a minor part of the contractual obligation of the non-performing party.”
35. The Chief Justice observed (at paragraph 172 of his judgment) that Article 81(3) allowed for termination of the contract for a delay in performance, even if the delay did not amount to fundamental non-performance, so long as an additional period of time of reasonable length for performance has been given to the non-performing party; and (at paragraph 173) that it was clear that the exception for which Article 81(4) provided did not apply in the current case, as the obligation to deliver possession and occupation of the completed Retail Unit was a major part of the Seller’s contractual obligation. In those circumstances he identified the question for determination as whether the period of 30 days – given on behalf of the Rahman Claimants in the Notice to Remedy Breach send on 18 August 2011 – was an additional period of time of reasonable length. He said that the reasonableness of the length of time given was to be judged objectively – that is to say, without reference to the aggrieved party’s position – and that what was reasonable depended on the facts and circumstances of each case. He went on (at paragraphs 174 and 175 of his judgment) to say this:
“174. I find that the period of 30 days given by the Rahman Claimants was a reasonable length of time for the purposes of Article 81(3) of the DIFC Contract Law, primarily because delivery of the Retail Unit was already more than one year overdue at the time of the Rahman Claimants’ notice, as the ACD was 30 June 2010 (taking into account a 12-month discretionary extension under Clause 6.1 of the Retail Unit SPA; see paragraph 116). Further, the Apartment SPA provides for the same notice period of 30 days, which suggests that the Defendant considered 30 days a reasonable length of notice.
175. Consequently, I find that the Rahman Claimants validly terminated the Retail Unit SPA by their Notice of Termination of 6 October 2011…”
176. At paragraphs 176 to 178 of his judgment the Chief Justice considered the consequences of a valid termination of the Retail Unit SPA. He referred to Article 81(2) of the Contract Law – which, as he said, provided that the aggrieved party might resort to any of the remedies specified in Part 8 of that Law should performance of the obligation not be carried out by the end of the additional period granted for performance – and held that that article applied in the present case. He set out the provisions of Article 90 of the Contract Law, which are in these terms:
“90. Restitution
(1) On termination of contract pursuant to Articles 86 or 88 either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money where appropriate.
(2) However, if performance of the contract has extended over a period of time and the contract is divisible, such restitution can only be claimed for the period after termination has taken effect.”
And he went on to say this:
“178. Article 90 allows either party to claim restitution for whatever it has supplied. The Rahman Claimants can rely on Article 90, on account of Article 81(2). The Rahman Claimants are therefore entitled to restitution of the sums they have paid to the Defendant, as this would be the most appropriate remedy for me to grant in this case.”
37. As I have said an Appeal Notice, seeking permission to appeal from the order of 20 July 2014, and the “Appeal Notice & Skeleton Argument” were issued on 7 September 2014. In granting permission to appeal Justice Roger Giles identified from the narrative in the skeleton argument three grounds upon which Damac relied in support of the Retail Unit Appeal: (i) that the Chief Justice was wrong in finding that the cargo lift was not operational and that the Rahman Claimants could not obtain insurance for the fit-out works; (ii) that he was wrong in holding that, because of those findings, the Retail Unit was not ready for occupation; and (iii) that he acted in a manner that was procedurally unfair in holding that Article 81 of the Contract Law entitled the Rahman Claimants to terminate the Retail Unit SPA in the circumstances that that article had not been relied upon at the time of termination, or pleaded or relied upon at the Trial.
38. Permission to appeal in respect of the Retail Unit Appeal was limited to an appeal on the second and third of those grounds: that the Chief Justice was wrong in holding that – in the light of his findings that the cargo lift was not operational and that the Rahman Claimants could not obtain insurance for the fit-out works – the Retail Unit was not ready for occupation on 6 October 2011 (ground 5) and that that he acted in a manner that was procedurally unfair in holding that Article 81 of the Contract Law entitled the Rahman Claimants to terminate the Retail Unit SPA (ground 6). In refusing permission to appeal on the first of the three grounds (ground 4), Justice Roger Giles said this (at paragraph 9 of the reasons set out in the schedule to his Order dated 1 December 2014).
“9. Permission to appeal on ground 4 is refused because, again, an appeal on that issue does not have a real prospect of success. As to particular matters in the skeleton argument, there was evidence, albeit hearsay, that the cargo lift was not available for use, which the trial judge was entitled to regard as reliable and act upon; and the trial judge’s statement that the evidence was not challenged is not inconsistent with the Defendant’s submission that it should not be accepted, the statement meaning that there was no evidence to the contrary. There was clear evidence as to inability to obtain insurance, similarly not challenged. Again, I do not think that there is a real prospect of overturning the trial judge’s findings.”
He went on to observe (at paragraph 11) that, of the grounds on which he had granted permission, one (ground 5) was a question of construction, to be determined on the facts found by the Chief Justice and the other (ground 6) concerned questions of law and procedural fairness, to be determined on the facts found and any necessary material going to reliance on Article 81.
39. As in the case of the Apartment Appeal, given that there was no application to seek permission to appeal on grounds other than those for which permission was given in the Order of 1 December 2014, it is that Order – and the observations made by Justice Roger Giles as a single judge of this Court in the schedule of reasons set out in that Order – that defines the scope of the Retail Unit Appeal. The issues before this Court, in relation to the Retail Unit Appeal are (i) whether, on the true construction of the Retail Unit SPA and given his findings of fact that the cargo lift was not operational and that the Rahman Claimants could not obtain insurance for the fit-out works, the Chief Justice was wrong to conclude that the Retail Unit was not ready for occupation on 6 October 2011; and (ii) whether the Chief Justice reached his conclusion that Article 81 of the Contract Law entitled the Rahman Claimants to terminate the Retail Unit in a manner which was procedurally unfair.
40. In relation to the first of those issues, it was submitted on behalf of the Appellant that the Chief Justice’s conclusion (in paragraph 161 of his judgment) that the Retail Unit was not fit for what it was intended for was based on the wrong findings of fact “and therefore it is wrong”. But, as I have said, permission to appeal from the Chief Justice’s findings that the cargo lift was not operational and that the Rahman Claimants could not obtain insurance for fit-out works was refused by this Court for the reasons set out in its Order of 1 December 2014. In my view, given those findings of fact (which are not now open to challenge in this Court) the Chief Justice was plainly entitled to hold that the Retail Unit was not ready for occupation – in that it could not be occupied for the purposes (further fit-out works) for which occupation was intended – at the date (21 August 2011) when the Appellant purported to give possession and occupation of that Unit to the Rahman Claimants.
41. In relation to the second of those issues – procedural unfairness – it was pointed out on behalf of the Appellant (i) that (in contrast to Clause 13.1 of the Apartment SPA) Clause 13.1 of the Retail Unit SPA contained no provision for termination; (ii) that the Notice to Remedy Breach (or Notice to Cure) issued on 18 August 2012 contained the statement that it was intended, “…in so far as required, to act as the requisite notice pursuant to Article 87 of the DIFC Contract Law…”; and (iii) that the Notice to Terminate issued on 6 October 2011 purported to terminate the Retail Unit SPA “pursuant to Clause 13.1”. Reference was made to the statement of the Chief Justice at paragraph 170 of his judgment that “the Defendant’s non-performance did not constitute a fundamental non-performance for the purposes of Articles 86 and 87”. In those circumstances it was said that – the Rahman Claimants having issued a notice to cure pursuant to Article 87 (which the Chief Justice had stated to be inappropriate) and having then purported to terminate the Retail Unit SPA pursuant to Clause 1 of the Retail Unit SPA (which did not provide a right of termination) – there was no basis on which the Chief Justice could determine that it would have been appropriate for the Rahman Claimants to proceed under Article 81 of the DIFC Contract Law (which they did not); and no basis on which he could proceed to find that the Rahman Claimants were entitled to terminate the Retail Unit SPA and that the termination was effective.
42. Further, it was said that the Chief Justice’s approach to the notice of termination in relation to the Retail Unit SPA was inconsistent with his approach, earlier in his judgment, to notices given in relation to the Apartment SPA. It was pointed out on behalf of the Appellant that the Chief Justice had held (at paragraph 109 of his judgment) that letters sent by Damac advising the Dattani Claimants that the ACD had been extended could not have any legal effect because they contained no express reference to Clause 6.1 of the Apartment SPA; did not use the term “Anticipated Completion Date”; and did not state that that they were to have the effect of extending the ACD. Nevertheless, it was said, “when it came to determining whether the Retail Unit SPA had been validly terminated by the Rahman Claimants, the [Chief Justice] was quite happy to disregard his own reasoning in paragraph 109 and conclude that to terminate a contract (a much more significant step than advising that the ACD had been extended) it was sufficient to refer to and rely on Articles of the DIFC Contract Law which were not appropriate, purport to give notice of the termination by relying on a clause in the Retail Unit SPA which did not exist and then proceed to determine the matter relying on an Article of DIFC Contract Law which was neither relied upon in the purported termination nor pleaded in the case”.
43. In response to those submissions it is said on behalf of the Rahman Claimants that there was no irregularity (or no serious irregularity) in the Chief Justice’s approach; and that, in any event, that approach did not lead to injustice. In particular, it is said, the Appellant had the opportunity to address what the Chief Justice identified (at paragraph 173 of his judgment) as the relevant factual issue: whether the thirty day period specified in the notice of 18 August 2011 had been reasonable in the circumstances.
44. The Rahman Claimants submit that, although Articles 81, 86 and 87 of the Contract Law may contain distinct provisions leading to the right to terminate an agreement, “more or less the same arguments need to be made and the same facts…relied on” whichever route is chosen. It is said that, in the present case, “submissions made in relation to Articles 86 and 87 were the same as those necessary for Article 81”; so that “whilst not specifically pleaded, the [court below] had before it the necessary arguments and submissions, which allowed it to make the finding that it did applying Article 81”. Further, it is said that the Appellant has failed to identify, in its appeal to this Court, what other arguments or submissions it would have made, had it been asked to address Article 81 in the court below. It is submitted that there has been no injustice: in that there could have been no further argument made by Damac which would have changed the outcome; that the submissions made on behalf of Damac in the court below were equally applicable to Article 81 as they were to Articles 86 and 87; and that, even if Damac had made submissions and arguments directed specifically to Article 81, the finding of the court below would have been the same. In particular, it is said, the Chief Justice having identified that the question which he had to consider was the one posed by Article 81(3) – “whether the period of 30 days which the Rahman Claimants gave [Damac] to remedy its breach was an additional period of time of reasonable length” – the only question which Damac would have needed to address (had reliance on Article 81 been pleaded) was whether the thirty day notice period was a reasonable length of time for the purposes of Article 81(3). But, in the events which happened, Damac did address that question: it made submissions upon it at paragraphs 199 to 204 of its Closing Submission, dated 19 December 2013, contending that the thirty day notice period was unreasonable. In the circumstances that Damac was able to advance (and did in fact advance) submissions directed to the relevant question (notwithstanding that reliance on Article 81 was not pleaded), it is not now able to say that the failure to plead reliance on Article 81 has led to injustice in this case.
45. It was pointed out on behalf of the Rahman Claimants that Article 86(3) of the Contract Law provides that:
“86(3) In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed under Article 81 has expired.”
It was submitted that Article 86(3) itself provides a context in which a court must consider the application of Article 81. An aggrieved party who pleads reliance on Article 86 is entitled to rely on Article 81(3) – notwithstanding that it has not pleaded reliance on that article – provided that it has pleaded (and can establish) facts which bring the case within Article 81(3): that is to say, provided it has pleaded and proved that notice allowing an additional period of time of reasonable length has been given, the aggrieved party may terminate the contract at the end of that period.
46. In my view the Appellant fails on the second of the two issues which it has been permitted to advance in this Court in support of the Retail Unit Appeal. It has failed to establish procedural unfairness. I am led to that conclusion for the following reasons:
(1) As the Chief Justice recorded (at paragraphs 30 and 32 of his judgment) the issue whether the Rahman Claimants were entitled to terminate the Retail Unit SPA in reliance on Articles 86 and 87 of the Contract Law was before him at trial.
(2) Article 87 does not, of itself, confer any right to terminate: rather, it provides, in sub-article (1), how a right to terminate (where it has arisen) is to be exercised and, in sub-article (2), for circumstances in which a right to terminate (where it has arisen) may be lost.
(3) A right to terminate arises under Article 86: in particular, it arises under sub-article (1) – where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance – and under sub-article 86(3) – where there has been a failure by the other party to perform before the time allowed by Article 81 has expired. There is, I think, no doubt that Article 86(3) confers a right to terminate in cases where the delay in performance does not, of itself, constitute fundamental non-performance (provided, of course, that notice under Article 81, allowing additional time of reasonable length has been given by the aggrieved party): that follows from the inclusion of the word “also” in Article 86(3).
(4) The right to terminate which arises under Article 86(3) is, as it seems to me, indistinguishable (at least in the circumstances of the present case) from the right to terminate which arises under Article 81(3). Under each of those provisions the right to terminate arises in cases where the delay in performance does not, of itself, constitute fundamental non-performance; and, under each of those provisions, the right to terminate arises if, but only if, notice allowing an additional period of time has been given under Article 81(1) and the additional time allowed is of a reasonable length or is extended to a reasonable length.
(5) In those circumstances, a party who has given notice of intention to terminate the contract at the end of an additional time for performance can rely on either Article 86(3) or on Article 81(3) of the Contract Law. In either case it will need to establish (i) that the additional time allowed (or the time which has, in fact, elapsed) was of reasonable length and (ii) that the right to terminate was, itself, exercised by notice (as required by Article 87(1)) unless the notice of intention to terminate had specified that, if the other party failed to perform within the period allowed by that notice, the contract should automatically terminate (as provided by the third sentence of Article 81(3).
(6) Further, in a case where a party who has given notice of intention to terminate the contract at the end of an additional time for performance does rely on that notice of intention (and any subsequent notice of termination given on or after the expiry of that additional period) in proceedings seeking a declaration that the contract has been validly terminated under the provisions of the Contract Law, the other party must be taken to know that the issues in those proceedings will be the same whether the right to terminate is said to have arisen under Article 86(3) of that Law or under Article 81(3) of that Law; and that those issues will include the issue whether the additional time for performance was of reasonable length.
(7) In the present case – as appears from paragraphs 199 to 204 of its Closing Submissions – Damac plainly did appreciate that it needed to address the issue whether the additional time for performance was of reasonable length. Damac was not misled by the contention (advanced on behalf of the Rahman Claimants at trial) that the case was founded on fundamental non-performance.
(8) In those circumstances there was no procedural unfairness in the Chief Justice founding his decision that the contract had been validly terminated on Article 81 of the Contract Law rather than on Article 86. The Rahman Claimants are correct to submit that the course of the trial and the outcome would not have been different if reliance on Article 81(3) of the Contract Law had been pleaded.
Conclusions
47. As I have said, this Court has already dismissed the Apartment Appeal. I would dismiss the Retail Unit Appeal also.
48. My provisional view is that there is no reason to depart from the usual practice that the unsuccessful appellant should pay the costs incurred by the successful respondents. Subject to further consideration in the light of such representations as to costs as the parties may wish to put before the Court – such representations to be made in writing and filed with the Court within fourteen days of the delivery of judgments – I would order that Damac pay to the Dattani Claimants their costs of the Apartment Appeal and to the Rahman Claimants their costs of the Retail Unit Appeal; such costs to be assessed (if not agreed) on the standard basis.
H.E. Justice Ali Al Madhani
49. I agree with the judgment of the Deputy Chief Justice and have nothing to add.
Justice Roger Giles
50. I have had the advantage of reading the reasons of the Deputy Chief Justice in draft. Gratefully drawing on and assuming familiarity with them, I am able briefly to explain my agreement with dismissal of both appeals.
The Apartment Appeal
51. The question is whether Damac was in a position to give possession and occupation of the Apartment when, although the Apartment itself was in a sufficiently complete state, access to it through the common areas was unsafe.
52. In answering the question, it must be remembered that Damac was selling to the Dattani Claimants not the Unit but the Property, that is, the Unit plus an undivided share in the Common Property; and so the subject of the sale was the Unit as reached through the common areas provided by Damac as part of the sale. On an ordinary understanding of language, the answer to the question is no. Damac correctly accepted that possession and occupation could not be given if no access was possible. Equally, possession and occupation entails not just ability to access the Unit through the common areas provided as part of the sale, but ability safely to do so.
53. There was a toehold for departing from this understanding in Clause 6.4 of the Apartment SPA, in that the Common Property might be incomplete on the Completion Date and any claim for inconvenience from building activities in progress was excluded; so, it could be said, that the common areas were incomplete was consistent with ability to give possession and occupation of the Unit. Damac invoked this clause, submitting that the Apartment SPA “plainly envisaged significant disruption of access and egress by the Common Property”.
54. In my opinion, Clause 6.4 does not assist Damac. Inconvenience is less than lack of safety, and of a different character, and the clause does not support that the common areas could be so incomplete that access could not safely be had consistently with ability to give possession and occupation.
55. Damac otherwise sought to submit that the facts found by the Chief Justice did not support the conclusion that access to the Apartment through the common areas was unsafe. As the Deputy Chief Justice has recorded, the permission to appeal did not extend to challenging the finding that ingress to and egress from the Apartment was unsafe. The submissions morphed into suggesting that there were degrees of lack of safety and on the facts found there was only a low degree, in effect, no more than inconvenience, so that Clause 6.4 came into play.
56. I do not accept this supplement to Damac’s invocation of the clause. Unsafe is unsafe, more than a matter of inconvenience, and in any event the impediments to safe access as found were significant for residents of the Apartment and their visitors.
The Retail Unit Appeal
57. One question, similar to that in the Apartment Appeal, is whether Damac was in a position to give possession and occupation of the Retail Unit when, notwithstanding that the Retail Unit itself was in a sufficiently complete state (for further fit-out works), cargo lift access was not available and insurance could not be obtained.
58. Damac relied on Clause 6.4 of the Retail Unit SPA, submitting that it was envisaged that the common property might be incomplete with consequences for use of the Retail Unit; and further, that the Retail Unit SPA did not address the particular use for fit-out works and, when there could be safe access for contractors, it was wrong to imply the further requirements particular to the Rahman Claimants of cargo lift availability and ability to insure.
59. However, the sale of the Retails Unit for retail purposes entailed fit-out works, and so that the common property part of the subject of the sale, and the development as a whole, would be such that fit-out works could proceed. On the Chief Justice’s findings, they could not, and those findings (that it was not feasible to transport heavy and bulky materials to the Retail Unit and insurance for the fit-out works could not be obtained) are not able to be challenged. These are more than matters of inconvenience which might give some operation to Clause 6.4. Damac submitted that there was access otherwise than by the cargo lift and that insurance was a matter of choice for the purchaser of the Retail Unit, but taking heavy and bulky materials to the site and insurance in respect of the works are ordinary incidents of fitting out. In my opinion, on the findings made the answer to the question is again no.
60. The other question is whether there was procedural unfairness in the Chief Justice taking Article 81 of the Contract Law as the basis for the entitlement to terminate the Retail Unit SPA.
61. The Rahman Claimants terminated in purported reliance on a contractual right in Clause 13.1 of the Retail Unit SPA, although the clause gave no such right. But the Chief Justice recorded that termination in reliance on Articles 86 and 87 of the Contract Law was before him. Article 87 is concerned with how a right to terminate is exercised or may be lost, and is not the source of a right to terminate; but Article 86 expresses a right to terminate in the case of fundamental non-performance (Article 86 (1)) or where there has been failure to perform in the time allowed under Article 81 (Article 86 (3)). The latter takes up the right to terminate in Article 81 (3), where there has been non-fundamental delay in performance and notice giving a reasonable time for performance. Thus reliance on Article 86 could include that a contract was terminated for non-fundamental delay in performance after notice giving a reasonable time for performance.
62. At trial the Rahman Claimants did not clearly take this course. They submitted that time had been made of the essence by the giving of notice, and that failure to give possession and occupation of the Retail Unit was fundamental non-performance entitling them to terminate. In response, Damac submitted that the Rahman Claimants had failed to give reasonable notice making time of the essence, so that there had not been “fundamental breach”. While referring generally to Articles 86 and 87, the Rahman Claimants did not expressly submit that they had terminated for failure to perform in the time allowed under Article 81.
63. The Chief Justice observed that the provision in Article 81 for termination after reasonable notice “serves the same function as the common law doctrine of notice making time of the essence”; hence he “address[ed] the Rahman Claimants’ submission under Article 81”. With respect, it would have been better if the operation of Article 81 had been flagged for the parties’ consideration. But Damac accepted that procedural unfairness was “only relevant if a different result would have been achieved”. As an extension of this, any denial of procedural fairness leads nowhere if Damac would not have lead different or additional evidence and the appeal court can consider whether Article 81 was given a correct application.
64. Damac did not suggest that its evidence would have differed had there been express reliance on Article 81. Nor did it challenge the Chief Justice’s decision that Article 81 was satisfied, that is, that the exclusion in Article 81 (4) did not apply and the additional period of time allowed by notice prior to termination had been reasonable. Rather, it is submitted that termination in reliance on Article 81 could not be upheld because the notice of termination had been said to be “pursuant to Clause 13.1”. This was ill-founded because Clause 13.1 did not give a right of termination, and, it was said, as a purported exercise of one right it could not be construed or regarded as a termination in the exercise of the different right expressed in Article 81.
65. Whatever the merit of this submission, and I should not be taken to favour it, the difficulty is that it is unrelated to any want of procedural fairness in the Chief Justice taking up Article 81 as the basis for the entitlement to terminate the Retail Unit SPA. The same submission was available in relation the Rahman Claimants’ undoubted reliance on Article 86 (1) as a basis for termination. It was not made. In my opinion, it should be concluded that the same result would have been achieved if Article 81 had clearly been in the ring from the beginning. At trial Damac addressed whether the time allowed for performance was reasonable, as an issue arising in relation to making time of the essence, and it did not seek to reopen that matter on appeal. The denial of procedural fairness of which it complains does not provide a fortuitous opportunity to raise a new argument which could have been made at trial.
Conclusions
66. I agree with the dismissal of both appeals, and with what the Deputy Chief Justice has said in relation to costs.
Issued by:
Natasha Bakirci
Deputy Registrar
Date of Issue: 10 November 2015
At: 3pm
The post CA 007/2014 (1) Amit Dattani (2) Nitin Jobanputra (3) Masood ur Rahman (4) Shemhon Iftakhar v DAMAC Park Towers Company Limited appeared first on DIFC Courts.