SAM PRECIOUS METALS v SNYDER PRIME [2023] DIFC CFI 030 — Judicial enforcement of shareholder resolutions and substituted contract performance (23 January 2025)

This amended judgment resolves a complex multi-party dispute concerning a gold refinery joint venture, clarifying the legal effect of shareholder resolutions as binding contracts and the application of substituted performance under DIFC law.

How did the dispute between Sam Precious Metals and Snyder Prime escalate into a USD 10 million claim regarding gold working capital?

The litigation arises from a joint venture involving the operation of a gold refinery, where the Claimants—Sam Precious Metals FZ-LLC (SPM), Sami Riyad Mahmoud Abu Ahmad, and Rosyson FZE—alleged that the First Defendant, Snyder Prime Limited (SPL), failed to fulfill its contractual obligations. Specifically, the Claimants sought damages exceeding USD 10 million, asserting that SPL breached its duty to provide gold as working capital to the refinery and failed to cooperate with the liquidation procedures of a subsidiary, M/s. Sam Precious Metals FZE (Sharjah branch).

The dispute centers on the transition from an initial Memorandum of Understanding (MOU) to a subsequent Share Transfer Agreement (STA) and a pivotal shareholder resolution dated 31 December 2020. The Claimants argued that the Defendants’ failure to supply the agreed-upon gold caused significant operational shortfalls, necessitating the redirection of dividends and fees to compensate for the capital injection provided by the other partners. As noted in the court’s order:

The Claimant SPM’s claim for damages, by reason of SPL’s alleged failure to comply with its obligations to provide gold as working capital to SPM, is dismissed.

Further, the court addressed the liquidation claims:

The Claimant SPM’s claim for damages for SPL’s alleged failure to cooperate with the liquidation procedures of the subsidiary company named M/s. Sam Precious Metals FZE, Sharjah branch is dismissed.

For further procedural context regarding the evolution of this dispute, see SAM PRECIOUS METALS v SNYDER PRIME [2023] DIFC CFI 030 — Procedural extension for Reply to Defence (26 June 2023).

Which judge presided over the trial of Sam Precious Metals v Snyder Prime in the DIFC Court of First Instance?

The trial was presided over by Justice Andrew Moran in the DIFC Court of First Instance. The proceedings took place over several days, specifically 27–29 May 2024 and 10–11 July 2024. The final amended judgment, which solidified the court's stance on the validity of the 2020 shareholder resolution, was issued on 23 January 2025, following the initial judgment delivered on 23 December 2024.

What specific legal arguments did Asha Bejoy and Santanu Ghosh advance regarding the validity of the 31 December 2020 Resolution?

Asha Bejoy, representing the Claimants, argued that the Resolution of 31 December 2020 constituted a binding agreement that effectively recalibrated the parties' obligations following the Defendants' breach of the initial gold supply commitments. The Claimants contended that the Resolution was a valid exercise of corporate governance that provided a mechanism for compensation, specifically through the redirection of dividends and the adjustment of consultancy fees, to account for the capital shortfall caused by SPL.

Conversely, counsel for the Defendants, Santanu Ghosh, challenged the enforceability of the Resolution, attempting to characterize it as a product of coercion or an invalid instrument. The Defendants sought various declarations to negate the financial consequences imposed by the Resolution, including the forfeiture of dividends and the reduction of consultancy fees. The court ultimately rejected the Defendants' attempts to set aside the Resolution, finding that the document was a clear and voluntary record of the parties' agreement to resolve their operational disputes.

What was the doctrinal question regarding the status of the Share Transfer Agreement (STA) as a substituted contract under DIFC law?

The court was required to determine whether the STA and the subsequent 31 December 2020 Resolution operated as a "substituted contract" that discharged the original obligations set out in the MOU. The doctrinal issue turned on whether the parties intended to replace their prior obligations with new terms, thereby extinguishing the original causes of action for breach of contract. This required the court to analyze the intention of the parties at the time of the Resolution's execution and whether the document met the requirements of a binding contract under the DIFC Contract Law.

How did Justice Andrew Moran apply the principles of contractual interpretation and substituted performance to the 2020 Resolution?

Justice Moran employed a rigorous interpretive approach, emphasizing that the preliminary negotiations and the context surrounding the 2020 Resolution were essential for ascertaining the parties' true intentions. He found that the Resolution was not merely a corporate record but a substantive agreement that the parties had signed, thereby creating enforceable rights and obligations. The judge noted that the evidence provided a clear narrative for why the Resolution was created, serving as a solution to the operational impasse.

This evidence sets the scene for what next occurred leading to the agreement of the Resolution of 31 December 2020 and in my judgment, serves to explain it coming into existence and its terms.

The court concluded that the STA and the Resolution effectively superseded the original MOU obligations. By accepting the terms of the Resolution, the parties had entered into a new contractual arrangement that governed the provision of gold and the distribution of dividends, rendering the Claimants' claims for damages for the original breach moot.

Which specific sections of the DIFC Contract Law did the court rely upon to interpret the agreements between the parties?

Justice Moran explicitly grounded his reasoning in the DIFC Contract Law (DIFC Law No. 6 of 2004). He emphasized that the interpretation of all agreements in the case was conducted strictly in accordance with Part 5 of the Contract Law. Specifically, the court referenced:

• Article 5: Regarding the general application and interpretation of contracts.
• Article 100 and 101: Pertaining to the discharge of obligations and the effect of substituted contracts.
• Articles 49, 50, and 51(a): Regarding the ascertainment of intention through preliminary negotiations and relevant circumstances.

The court also cited Part 10 of the Contract Law to define the status of SPM as a third party in the context of the contractual arrangements.

How did the court utilize the cited authorities to support its findings on contractual intent?

The court utilized the cited articles to reinforce the principle that the subjective intention of the parties, when evidenced by written instruments like the 31 December 2020 Resolution, must be given effect. By invoking Article 51(a), the court justified its reliance on the history of the parties' negotiations to interpret the final agreement. The court’s approach was to treat the Resolution as a definitive settlement of the disputes that had arisen from the initial MOU.

I accept first of all, that preliminary negotiations are relevant circumstances for ascertainment of intention and in the application of Articles 49 and 50 of the Contract Law of the DIFC, by virtue of Article 51 (a).

This methodology allowed the court to bypass the need for a complex damages assessment, as the Resolution itself provided the "remedy" (the redirection of dividends) that the parties had already agreed upon.

What was the final disposition and the specific orders made regarding the redirection of dividends and mediation?

The court dismissed the Claimants' claims for damages but granted significant declaratory relief regarding the validity of the 31 December 2020 Resolution. The court ordered that:
* The Resolution is legally valid and binding.
* Defendants are ineligible for dividends until 2 May 2026, with those dividends redirected to the Claimants as compensation for the gold capital provided.
* Defendant No. 3’s consultancy fees are reduced from 10% to 5%, to be paid to Claimants No. 2 and 3.
* Pursuant to RDC 27.8, the parties are ordered to engage in mediation for all outstanding disputes, with a strict timeline for exchanging mediator lists and reporting back to the Court.

What are the wider implications of this judgment for joint venture disputes in the DIFC?

This judgment serves as a critical precedent for the enforcement of shareholder resolutions as binding contracts. Practitioners should note that the DIFC Courts will look past the "corporate" label of a resolution to determine if it functions as a substituted contract under Article 101 of the Contract Law. Litigants must anticipate that if they sign a resolution to settle operational disputes, the court will hold them to those terms, effectively replacing prior contractual claims with the new obligations set out in the resolution. Furthermore, the court’s proactive use of RDC 27.8 to mandate mediation highlights a judicial preference for resolving complex, multi-party commercial disputes outside of the courtroom.

Where can I read the full judgment in Sam Precious Metals FZ-LLC v Snyder Prime Limited [2023] DIFC CFI 030?

The full amended judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/1-sam-precious-metals-fz-llc-2-sami-riyad-mahmoud-abu-ahmad-3-rosyson-fze-v-1-snyder-prime-limited-2-phoebe-leah-tooker-3-shakti or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/1-sam-precious-metals-fz-llc-2-sami-riyad-mahmoud-abu-ahmad-3-rosyson-fze-v-1-snyder-prime-limited-2-phoebe-leah-tooker-3-shakti.txt.

Cases referred to in this judgment:

Legislation referenced:

• Contract Law, DIFC Law No. 6 of 2004 (as amended): Articles 5, 49, 50, 51(a), 100, 101
• Rules of the DIFC Courts 2014 (RDC): Part 27, RDC 27.8