What was the nature of the dispute between Mashreq Al Islami Finance Company and Mr Babar Rehman regarding the Liberty House unit?
The dispute centered on the enforcement of an Ijara Mosufa Agreement—an Islamic finance lease-to-own arrangement—concerning a property located at Unit 1513, Liberty House, within the DIFC. The Claimant, Mashreq Al Islami Finance Company (formerly Al Badr Islamic Finance Company), sought to recover significant arrears in rental payments and obtain a formal declaration that the agreement had been validly terminated. The core of the conflict involved the Defendant’s failure to maintain payment obligations, which the Claimant argued necessitated the termination of the lease and the reversion of the property interest to the financier.
The factual background of the financial arrangement was established early in the proceedings:
The Defendant had already entered into a sale and purchase agreement with the Unit developer and he approached the Claimant for a loan to fund the remaining purchase price after he had paid a deposit of AED 80,424.
This initial funding arrangement evolved into the Ijara Agreement, which eventually collapsed due to the Defendant’s payment defaults. The Claimant sought not only the outstanding financial sums but also the removal of the Defendant’s name from the DIFC Real Property Register to clear the title for the unit.
Which judge presided over the final trial of Mashreq Al Islami Finance Company v Mr Babar Rehman in the Court of First Instance?
The matter was heard before H.E. Justice Omar Al Muhairi in the DIFC Court of First Instance. The trial took place on 12 March 2019, with the final judgment issued on 24 March 2019, following the Defendant’s failure to attend the proceedings.
What were the respective positions of Mashreq Al Islami Finance Company and Mr Babar Rehman regarding the validity of the Ijara Agreement?
The Claimant, represented by Mr. Peter Smith and Mr. Jonathan Brooks, maintained that the Ijara Agreement was validly terminated on 25 September 2016 due to the Defendant's persistent breach of payment obligations. They argued that the DIFC Courts possessed clear jurisdiction to adjudicate the matter and grant the requested declaratory relief regarding the property title. The Claimant relied heavily on the statutory authority of the DIFC to govern property interests within its jurisdiction.
Conversely, while the Defendant had previously participated in the proceedings—notably by filing a defence and successfully applying to set aside an earlier default judgment—he failed to appear at the trial. His earlier position, which had successfully argued for the setting aside of the initial default judgment, was that he had a "real prospect of successfully defending the claim." However, by failing to attend the trial, the Defendant effectively abandoned these arguments, leaving the Claimant’s case uncontested before the Court.
What was the jurisdictional question the Court had to resolve regarding the application of DIFC Law to the Ijara Agreement?
The Court was required to determine whether it possessed the requisite jurisdiction to adjudicate a dispute involving an Ijara Agreement for a property located within the DIFC, and whether DIFC Law was the governing legal framework. This involved confirming that the subject matter—a real estate interest within the Centre—fell squarely within the ambit of the DIFC’s legislative reach, notwithstanding the Defendant's previous attempts to challenge the claim. The Court had to verify that the procedural requirements for the termination of the agreement were consistent with the contractual terms and the applicable DIFC statutes.
How did H.E. Justice Omar Al Muhairi justify the decision to strike out the Defendant’s defence?
Justice Al Muhairi’s reasoning was predicated on the Defendant’s failure to appear at the scheduled trial, which rendered the continued maintenance of the defence untenable. Under the Rules of the DIFC Courts (RDC), the Court possesses the authority to strike out a defence when a party fails to participate in the trial process, thereby obstructing the administration of justice. The Judge applied this procedural power to ensure the finality of the dispute.
Regarding the merits of the claim, the Court found that the Claimant had satisfied the burden of proof required to establish the termination of the Ijara Agreement and the resulting financial liability. The Court’s findings were summarized as follows:
I find that the DIFC Courts have jurisdiction over this dispute and that DIFC Law governs the matter
By striking out the defence, the Court was able to proceed to a final determination on the merits, confirming the Claimant’s ownership of the Liberty House unit and the specific monetary sums owed by the Defendant.
Which specific DIFC statutes and RDC rules were applied by the Court in this judgment?
The Court relied on several key legislative instruments to affirm its jurisdiction and the validity of the Claimant’s actions. Specifically, the Court cited Article 8 of DIFC Law No. 3 of 2004, which establishes the jurisdiction of the DIFC Courts. Furthermore, the Court applied Article 3 of the DIFC Real Property Law (No. 10 of 2018) to address the property title issues. The procedural framework for the judgment was governed by Articles 14 and 15 of the DIFC Law Relating to the Application of DIFC Laws (Law No. 10 of 2005), which dictate the application of laws within the Centre.
How did the Court utilize the Rules of the DIFC Courts (RDC) to manage the proceedings?
The Court utilized RDC 35.14(3) as the primary mechanism for striking out the Defendant’s defence due to his non-attendance at the trial. This rule provides the Court with the necessary discretion to penalize a party for failing to appear, thereby preventing the litigation from being indefinitely delayed. Additionally, the Court referenced RDC Part 13, which had been the basis for the earlier default judgment proceedings, to ensure that the procedural history of the case remained consistent with the Court's rules on service and default.
What was the final outcome and the specific relief granted to Mashreq Al Islami Finance Company?
The Court entered judgment in favor of the Claimant, ordering the Defendant to pay a total sum of AED 321,427.12. This amount was broken down into specific categories of arrears:
Judgment is hereby entered in favour of the Claimant as against the Defendant in the sum of AED 321,427.12 (the “Judgment Sum”), comprising: a.
The Court further declared that the Ijara Agreement was validly terminated, that the Defendant held no interest in the unit, and that the Claimant was the sole legal and beneficial owner. The DIFC Real Property Registrar was authorized to deregister the Defendant’s interest and issue a new title deed. Regarding costs, the Court ordered:
The Defendant shall pay the Claimant’s costs of these proceedings on such a basis and in such specific amount or amounts as this Court shall determine following consideration of the Claimant’s costs submissions to be filed.
What are the wider implications of this ruling for practitioners dealing with Ijara disputes in the DIFC?
This judgment serves as a clear reminder that the DIFC Courts will strictly enforce trial attendance and will not hesitate to strike out defences where a party fails to appear. For practitioners, it confirms that the Court is willing to grant comprehensive relief in Ijara disputes, including the deregistration of property interests, provided the Claimant can demonstrate valid termination of the underlying agreement. Litigants must be prepared to substantiate their claims with clear evidence of notice and default, as the Court will rely on these to issue final declarations of ownership. This case also highlights the importance of the procedural history in a case, as seen in the previous orders: MASHREQ AL ISLAMI FINANCE COMPANY v BABAR REHMAN [2018] DIFC CFI 016 — Setting aside default judgment (05 April 2018), MASHREQ AL ISLAMI FINANCE COMPANY v BABAR REHMAN [2018] DIFC CFI 016 — Setting aside default judgment in Ijara disputes (15 April 2018), MASHREQ AL ISLAMI FINANCE COMPANY v BABAR REHMAN [2018] DIFC CFI 016 — Case management directions for trial (19 September 2018), MASHREQ AL ISLAMI FINANCE COMPANY v BABAR REHMAN [2018] DIFC CFI 016 — Compelling document production via Redfern Schedule (25 October 2018), and MASHREQ AL ISLAMI FINANCE COMPANY v BABAR REHMAN [2019] DIFC CFI 016 — Denial of adjournment application (07 March 2019).
Where can I read the full judgment in Mashreq Al Islami Finance Company v Mr Babar Rehman [2017] DIFC CFI 016?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/mashreq-al-islami-finance-company-pjsc-v-mr-babar-rehman-2017-difc-cfi-016 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI_Mashreq_Al_Islami_Finance_Company_Pjsc_v_Mr_Babar_Rehman_2017_DIFC_CFI_016_20190324.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- DIFC Law No. 3 of 2004 (Courts Law), Article 8
- DIFC Real Property Law (No. 10 of 2018), Article 3
- DIFC Law Relating to the Application of DIFC Laws (Law No. 10 of 2005), Articles 14 and 15
- Rules of the DIFC Courts (RDC), RDC 35.14(3)
- Rules of the DIFC Courts (RDC), RDC Part 13
- Practice Direction No. 4 of 2017