Claim No. CA 007/2021
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 AZMI, H.E JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE SIR JEREMY COOKE
RADA TRADING LLC FZC
(1) WEALTH BRIDGE TRADING CRUDE OIL AND REFINED PRODUCTS ABROAD LLC
(2) COHENRICH ENERGY FZE
|Hearing :||23 August 2021|
|Counsel :||Alexander Burrell instructed by Horizons & Co on behalf of the Appellant|
Dr Rassan Azhari instructed by Azhari Legal Consultancy on behalf of the Respondent
|Judgment :||7 September 2021|
UPONthe Judgment of H.E Omar Al Muhairi issued on 11 April 2021 (the“Judgment”)
AND UPONthe Order H.E Omar Al Muhairi granting the Appellant permission to Appeal against the Judgment issued on17 June 2021 (“Appeal”)
AND UPONhearing counsel for the Appellant and counsel for the Respondent at a hearing on 23 August 2021
AND UPONreading the submissions and evidence filed and recorded in the Court file
IT IS HEREBY ORDERED THAT:
1. The Appeal is allowed with costs.
2. Costs to be assessed by the Registrar if not agreed.
Date of issue: 7 September 2021
CHIEF JUSTICE ZAKI AZMI, H.E JUSTICE SHAMLAN AL SAWALEHI AND JUSTICE SIR JEREMY COOKE IN AGREEMENT:
1. On 11 April 2021, H.E Justice Omar Al Muhairi (the“Judge”) struck out the Claimant’s claim against the First and Second Defendants and the counterclaim of the Second Defendant (“Cohenrich)”. Cohenrich appeals against the latter decision. There is no appeal by the Claimant, but it is common ground between the parties that Cohenrich owes the Claimant a sum in excess of USD 8 million. The Court was informed that in the absence of a negotiated settlement (and the parties have been in serious negotiations) a fresh claim would be brought by the Claimant against Cohenrich and the parties appeared to agree that, should this appeal succeed, the fresh claim brought by the Claimant and the counterclaim would then be joined in order to be heard together. That would make obvious sense.
2. The narrow point which arises on the appeal is whether or not Cohenrich properly and adequately pleaded the counterclaim in question which asserted a variation of the Settlement Agreement dated 30 March 2020 which itself provided for repayment by Cohenrich of an assigned debt of USD 11,028.338 by the delivery of cargoes of gasoil on dates between August 2020 and March 2021. The variation which is put forward by Cohenrich is that, in August 2020, it was agreed that the sum would be repaid by the provision of monthly deliveries of oil related products other than gasoline. It is accepted that factual questions do not arise on this appeal in relation to that variation, since the basis of the strike out was a failure properly to plead the variation rather than a failure to adduce evidence in support of it, although it is common ground that one cargo of gasoil (in March April 2020) and one cargo or kerosene (In August/September) were in fact provided.
3. The Settlement Agreement included a clause upon which reliance is placed by the Claimant on this appeal, although in the Court below reliance was placed on clause 4 as well as this clause 13:
“13. Any variation of this Agreement shall be in writing and signed by or on behalf of each Party….”
4. The essence of the Judge’s decision appears at paragraph 25 and 26 of the Schedule of Reasons where the Judge held that:
“25….. The Second Defendant’s counterclaim relies solely on the variation of the Settlement Agreement. Having considered the counterclaim in some detail, I do not accept that it sets out a proper basis for variation. Under clause 4 of the Settlement Agreement the terms therein formed the entire agreement. Therefore, no ancillary agreement could have been formed regarding supply of alternative oil products. However, more importantly at clause 13, it states that any variation to the Settlement Agreement should be in writing and signed by on behalf of the parties.
26. The counterclaim does not seek to plead that any written variation occurred and certainly not that such variation was signed by the parties. As a result, I do not find that there is any legal basis, in the circumstances for the Settlement Agreement having in fact been varied. Therefore, the Claimant was not obliged to accept the alternative product and no liability for the Second Defendant’s alleged losses can arise. As a result, I also strike out the counterclaim on the basis that it discloses no reasonable grounds for bringing the counterclaim.”
5. Cohenrich contends that the Judge erred:
(a) in finding that Cohenrich had not pleaded a written variation;
(b) in finding that if a written variation had not taken place there were no reasonable grounds for the counterclaim;
(c) in finding that, because there was an entire agreement clause, this meant that no variation could occur; and
(d) in determining the application on grounds which had not been relied on by the Claimant (in relation to clause 13).
6. The relevant pleading is the Defence and Counterclaim. In it, Cohenrich pleaded, at paragraphs 22 (b), 57 (b) – (c) and 59, as follows:
“22(b)… However, as detailed in paragraph 57(b)-(c) below, in or around August 2020, the Second Defendant agreed with the Claimant that it would repay the balance of the Additional Sum by providing monthly deliveries of other oil related products (“Varied Settlement Agreement”).
(i) This was a variation confirmed in writing (by email) and signed by the parties (by way of the email signatures).
(ii) In the alternative, if it is found that this variation was not in writing and/or not signed by both parties, it is averred that by expressly agreeing to be provided with this delivery without qualification, and/or buyer’s conduct in accepting the delivery without qualification, the Claimant waived any right it had to rely upon the formalities stipulated within the Settlement Agreement.
(iii) In the alternative, it would be unjust if the Settlement Agreement were not affected having regard to the Claimant’s conduct in accepting the delivery of Kerosene in September 2020.
57(b). As evidenced by emails exchanged between Mr Aurelian Panc (representing the Claimant) and Araa Group Advocates and Legal Consultants (representing the Second Defendant) on 12 August 2020 and 18 August 2020, in or around August 2020, as a result of the Covid of – 19 pandemic and the issues the Second Defendant faced since March 2020, the Claimant and Second Defendant agreed to vary the Settlement Agreement (Varied Settlement Agreement). In particular, they agreed that the Second Defendant’s obligations to provide monthly deliveries of Gas all in the value of USD 1 million would be suspended, provided that the Second Defendant continued to pay off the liability assigned pursuant to the Settlement Agreement, including by making monthly deliveries of other petroleum related products, which may be of a lower value then USD 1 million. Alternatively, it was agreed that the Second Defendant’s obligations to make monthly deliveries of Gasoil in the value of USD 1 million would be varied to a requirement to make monthly deliveries of other petroleum related products (which may be of a value of less than USD 1 million). In respect of any formality requirements of variation, paragraph 22 (b) above is repeated here.
57(c) Further and alternatively, pursuant to Article 365 of the Civil Code, the Claimant in satisfaction of its right to receive monthly deliveries of Gasoil in the value of USD 1 million accepted “something else” from the Second Defendant in substituted settlement, namely monthly deliveries of other oil related products of a lower value than USD 1 million. Accordingly, pursuant to Article 367 of the Civil Code, any debts the Second Defendant owed the Claimant under the Settlement Agreement were extinguished together with its securities, as a result of this substituted settlement, and the rights of the Claimant were transferred to the provision of the substitute.…
Second Defendant’s Counterclaim
59. “Paragraphs 1-58 above are repeated here.”
7. Whilst this pleading was the subject of criticism on a number of grounds, we consider that it was not deficient and adequately set out the nature of the case put forward by Cohenrich. It was submitted that, for the purposes of the counterclaim, it was insufficient merely to repeat paragraphs 1 to 58 of the Defence without specifying the parts of the defence relied on. Since the ensuing paragraphs of the counterclaim referred specifically to the Varied Settlement Agreement and to breaches of it, it cannot properly be said that there was any difficulty in understanding the nature of the case brought on the basis of the alleged variation. Moreover, the Varied Settlement Agreement was defined in paragraph 22 (b) by reference to paragraph 57 of the Defence. It is clear, as Cohenrich submitted, that a variation of the Settlement Agreement had been pleaded and that the counterclaim was based upon it.
8. Furthermore, it is clear, contrary to the conclusions of the Judge, that the counterclaim pleaded a written variation that had been signed by the parties, as appears from paragraph 22(b) of the Defence, to which the Counterclaim referred. Whilst the Judge had relied upon clause 4 of the Settlement agreement (the“Entire Agreement”clause) this was rightly not relied on by the Claimant on appeal. A clause of this kind cannot impact upon the existence of any subsequent variation of the contract, whether made orally or in writing. Clause 13 was however relied on both by the Claimant and the Judge but it is clear that reliance was placed in the Defence and Counterclaim on an exchange of emails of 12 and 18 August 2020 which was said to be signed by the parties. Those emails were not attached to the pleading nor produced to the Court but there was no requirement for this to be done under the Rules which permits the attachment of documents but does not require them to be served with the statement of case. The general principle is that a contract or a variation must be pleaded with sufficient particularity but the evidence in support of it is to be produced at a later stage in the proceedings.
9. Moreover, whether or not the emails constitute a valid variation which complies with clause 13 (“in writing and signed by on behalf of each Party”), Cohenrich also pleaded, in the alternative that the Claimant had waived any right to rely upon the formality requirements set out in the Settlement Agreement, which could only be a reference to the requirements of clause 13. This Court reaches no conclusion as to the validity of the alleged Varied Settlement Agreement, as to whether the emails could constitute a variation which complied with clause 13, or whether the requirements of clause 13 were waived with specificity so that they no longer applied. These are matters of evidence to be investigated as any subsequent trial.
10. The Claimant also submits that because the Defence and Counterclaim contained alternative pleas as to what was agreed, those pleas themselves were recognised as being inadequate and failed to set out the necessary requirements for a contract of offer and acceptance. Those were not matters which formed part of the judgment of the Judge and there was no cross-appeal or Respondent’s Notice relying on those grounds. Even if there had been such a cross-appeal or Notice, that would not have advanced the position of the Claimant. Alternative pleas of fact may cast doubt upon the existence of the alleged variation, showing, as they would appear to do, a lack of certainty on the part of the pleader as to what had been agreed, but any conclusion must depend upon the evidence which is ultimately adduced.
11. In the circumstances, we accepted the submission that a written variation signed by the parties had been adequately pleaded by Cohenrich and that, without exploration of the evidence, it could not be said that there were no reasonable grounds for such a plea to be made. The governing law of the Settlement Agreement is the law of the UAE and under Article 468 of Federal Law No 5, the effect of the willing discharge of a debtor extinguishes the right. It was submitted that, as a matter of UAE law, it is possible to vary a contract orally and for a party to waive its contractual rights under Article 468, including the rights under clause 13 for any variation be concluded in writing. Such a plea was made in paragraph 22(b)(iii) of the Defence and incorporated in the Counterclaim by paragraph 59. Grounds 1 and 2 of the appeal are thus established.
12. As to Ground 3, we have already found that the Entire agreement Clause is irrelevant to the debate. Ground 4 also appears to be well-founded because the basis of the decision of the Judge was that variation was only possible if in writing and signed by the parties, which was not a point taken by the Claimant. It is said that Cohenrich was deprived of the opportunity to respond to this point in the Court below and that there was therefore a procedural irregularity. Whether or not that is the case is of no consequence given our earlier conclusions.
13. As to the other points which were at one time taken by the Claimant, we do not consider that they have any weight. Reliance was placed, on the appeal, upon the E Transaction Law, Federal Law No. 1 of 2006, to argue that an exchange of emails could not constitute an electronic signature within the meaning of that statute. There was debate as to whether or not this Law was of any application and as to the definitions therein of an Electronic Signature, a Secure Electronic Signature and a Data Message. This statute was, once again, not a reason given by the Judge for striking out the counterclaim and there was no cross-appeal or Respondent’s Notice. Whether or not the August 2020 emails relied on by Cohenrich can constitute a variation of the Settlement Agreement is a matter of evidence, whether or not the statute is applicable. The nature and quality of the signature fall to be considered in the light of both clause 13 and the statute if, ultimately, the latter is found to apply.
14. In the circumstances and for the above reasons, Cohenrich’s appeal must be allowed and the order for costs must follow the event.
15. As we have made plain, the Court forms no view as to the merits of the arguments about any valid variation of the Settlement Agreement which will depend upon the evidence to be heard and a determination made in relation to it at any trial. It is clear that in the current circumstances, where there have been no further deliveries, following the delivery of the kerosene, whether the Settlement Agreement was varied or not, there remains a debt owing by Cohenrich to the Claimant which significantly outweighs the pleaded counterclaim. If the parties cannot see their way to an agreed settlement, any new claim brought by the Claimant on the basis of the Settlement Agreement (which would not be barred by the doctrine of res judicata because no decision on the merits of such a claim has yet been made) should be determined at the same time as the counterclaim by an order that there be consolidation or a concurrent hearing of the claim and the counterclaim.