What were the primary factual and legal disputes between Alawwal Capital JSC and Rasmala Investment Bank in CFI 038/2023?
The litigation centers on a claim of negligent misrepresentation arising from an investment transaction. Alawwal Capital JSC (the Claimant) alleged that Rasmala Investment Bank (the Defendant) made oral representations regarding the suitability of a specific fund for the Claimant’s investment objectives. The core of the dispute involved whether these "Oral Suitability Representations" were made, whether they were false, and whether the Defendant acted negligently in making them.
The Defendant’s defense strategy focused on denying the existence of such representations, arguing instead that the high-risk nature of the investment was clearly communicated. The dispute also turned on the legal effect of various disclaimers found in the Offering Memorandum versus those in the Request for Proposal (RFP) and PowerPoint presentations. As noted in the court's reasoning:
The Defendant’s main case at trial was that the suitability representation was never made – because, on its case, it was made clear that the investment was high-risk.
The Claimant sought to characterize the suitability representation as a statement of fact, a position the court ultimately rejected, though it maintained the claim that the statement was made negligently. The stakes involved the liability of an investment bank for oral statements made to induce investment, testing the boundaries of professional duty of care within the DIFC regulatory and legal framework.
Which judge presided over the PTA application in CFI 038/2023 and in what division of the DIFC Courts was it heard?
The application for permission to appeal (PTA) was heard by H.E. Justice Roger Stewart KC, sitting in the Court of First Instance. The order was issued on 13 August 2025, following the Defendant’s appeal notice filed on 3 July 2025, which sought to challenge the substantive judgment delivered by the same judge on 12 June 2025.
How did the parties frame their arguments regarding the suitability representations and the scope of the Defendant’s liability?
The Defendant argued that the Court erred in its findings on the pleadings, specifically contending that there was no basis for finding that the Defendant lacked reasonable grounds to support the suitability statement. The Defendant attempted to assert that it was denied the opportunity to present evidence regarding the reasonableness of its statements. However, the Court rejected this, highlighting that the Defendant was well aware of the case it had to meet.
The Claimant maintained that the oral representations were false and made negligently. The Court noted that the Defendant’s own closing submissions acknowledged the necessity of defending against a claim that the statement was made without reasonable grounds. As the Court observed:
The Defendant did not assert that such a case was not open to the Claimant on the pleadings or that it was unable to meet such a case.
Furthermore, the Claimant resisted the Defendant’s attempt to rely on disclaimers in the Offering Memorandum, arguing that these were distinct from the representations made by the Defendant itself. The Court agreed, noting that the Defendant was "anxious to make clear the difference between itself and the Fund" throughout the proceedings.
What was the precise legal question the Court had to answer regarding the PTA application under RDC 44.19?
The Court was tasked with determining whether the Defendant’s proposed grounds of appeal met the threshold for permission to appeal as set out in RDC 44.19. Specifically, the Court had to decide if the appeal had a "real prospect of success" or if there existed "some other compelling reason" for the appeal to be heard. This required a rigorous assessment of whether the trial judge had committed a reversible error in interpreting the pleadings, the effect of specific disclaimers, or the legal test for establishing a duty of care under the Law of Obligations.
How did H.E. Justice Roger Stewart KC apply the "real prospect of success" test to the Defendant’s grounds of appeal?
In evaluating the application, the Court systematically dismantled the three grounds of appeal. Regarding the first ground, the Court clarified that the issue of "negligent misrepresentation" was clearly pleaded and that the Defendant had ample opportunity to address it. Regarding the second ground, the Court distinguished between disclaimers in the Offering Memorandum (for which the Fund’s directors were responsible) and those in the RFP/PowerPoint (for which the Defendant was responsible). The Court emphasized:
The disclaimer sought to be relied on in the proposed grounds was contained in the Offering Memorandum for which the directors of the Fund (and not the Defendant) were responsible.
Regarding the third ground, which alleged an error in the analysis of the duty of care, the Court found the argument factually incorrect. It pointed to the specific findings in the original judgment that satisfied the requirements for an assumption of responsibility. The Court concluded that the grounds, whether viewed individually or collectively, failed to meet the threshold for an appeal.
Which specific statutes and RDC rules were central to the Court’s determination in CFI 038/2023?
The Court’s reasoning was anchored in the Law of Obligations in DIFC Law No. 5 of 2005, specifically Articles 17 and 20-21, which govern the requirements for establishing liability for negligent misrepresentation and the imposition of a duty of care. Procedurally, the application was governed by Part 44.6(2) of the Rules of the DIFC Courts (RDC), which outlines the requirements for an appeal notice, and RDC 44.19, which provides the substantive test for granting permission to appeal.
How did the Court utilize the cited authorities to address the Defendant's arguments on disclaimers and duty of care?
The Court utilized the cited authorities and the trial record to correct the Defendant’s mischaracterizations of the judgment. For instance, the Court corrected the Defendant’s reliance on sub-paragraph 6(4) of the Grounds, noting:
The error is shown in sub-paragraph 6(4) of the Grounds where it is said that the disclaimer had the effect that the Defendant did not assume responsibility for and Alawwal did not reasonably rely upon the Oral Suitability Representation.
The Court also addressed the Defendant’s claim that the analysis of negligence was too narrow by referencing the specific legal requirements for an assumption of responsibility as established in the original judgment. By citing the specific paragraphs of the judgment (paragraph 78) that identified the legal requirements for the claim, the Court demonstrated that it had applied the correct legal test, thereby nullifying the Defendant’s argument that the Court had erred in its analytical scope.
What was the final disposition of the PTA application and the associated costs order?
H.E. Justice Roger Stewart KC refused the PTA application in its entirety. Consequently, the original judgment dated 12 June 2025 stands. The Court further ordered that the Defendant shall pay the Claimant’s costs of responding to the PTA application, reinforcing the finality of the initial ruling.
What are the wider implications for DIFC practitioners regarding negligent misrepresentation and the use of disclaimers in investment banking?
This case serves as a reminder that practitioners must be precise when drafting and relying upon disclaimers. The Court’s refusal to allow a "blanket" application of disclaimers found in an Offering Memorandum to oral representations made by a separate entity (the bank) underscores the importance of distinguishing between the roles of fund directors and investment advisors. Furthermore, the case highlights that the DIFC Courts will not entertain appeals based on a misinterpretation of the trial record or the pleadings. Practitioners should note that:
The Defendant knew that it was meeting such a case - see paragraph 20 of its Outline Closing Submissions where it said that the Claimant would have to prove that the statement was either dishonest or made without reasonable grounds but could not do so in the light of various matters which it put forward.
Litigants must ensure that their trial strategy is consistent with the pleadings from the outset, as the Court will strictly enforce the "real prospect of success" test for appeals, particularly where the grounds of appeal attempt to re-litigate issues of fact that were clearly addressed at trial.
Where can I read the full judgment in Alawwal Capital JSC v Rasmala Investment Bank Limited [CFI 038/2023]?
The full order can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0382023-alawwal-capital-jsc-v-rasmala-investment-bank-limited-7 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/DIFC_CFI-038-2023_20250813.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- Law of Obligations in DIFC Law No. 5 of 2005, Articles 17, 20-21
- Rules of the DIFC Courts (RDC), Part 44.6(2)
- Rules of the DIFC Courts (RDC), Rule 44.19