The DIFC Court of First Instance issued a significant default judgment against Mashreq Bank PSC, mandating the payment of nearly USD 6 million plus substantial interest following the bank's failure to engage with the court process.
Why did Lara Basem Musa Khoury initiate proceedings against Mashreq Bank PSC in CFI 046/2021 for a sum of USD 5,998,935.67?
The dispute centers on a substantial financial claim brought by Lara Basem Musa Khoury against Mashreq Bank PSC. The litigation was initiated to recover a specific judgment sum of USD 5,998,935.67. The underlying nature of the claim, while not detailed in the procedural order, resulted in the Claimant seeking the intervention of the DIFC Courts to enforce the recovery of these funds after the Defendant failed to respond to the formal service of the claim.
The procedural validity of the claim was established through the Claimant’s adherence to the Rules of the DIFC Courts (RDC) regarding service. As noted in the court’s findings:
The Claimant filed a Certificate of Service in respect of service on the Defendant, under RDC 9.43, on 10 May 2021.
The failure of Mashreq Bank PSC to acknowledge the service or provide a defense left the court with no alternative but to address the Claimant’s request for a default judgment to resolve the outstanding financial liability.
Which judge presided over the default judgment hearing for Lara Basem Musa Khoury v Mashreq Bank PSC on 30 June 2021?
H.E. Justice Maha Al Mheiri presided over the Court of First Instance in this matter. The order was issued on 30 June 2021, following the Claimant’s request for default judgment filed on 15 June 2021. The proceedings were conducted within the DIFC Court of First Instance, which exercised its jurisdiction to grant the relief sought due to the Defendant's procedural default.
What specific procedural failures by Mashreq Bank PSC allowed the DIFC Court to grant the default judgment request?
The Claimant argued that the Defendant had failed to meet its obligations under the RDC, specifically regarding the timeline for responding to a claim. The Claimant’s position was that the Defendant had been properly served and had subsequently failed to file an Acknowledgment of Service or a Defence within the prescribed time limits.
The court accepted this position, noting that the request for judgment was procedurally sound and not prohibited by the rules. As the court stated:
The Request is one permitted by RDC 13.4 on the basis that the Defendant has failed to file an Acknowledgment of Service or a Defence to the claim (or any part of the claim), with the DIFC Courts, and the relevant time for so doing has expired.
By failing to participate, the Defendant effectively waived its opportunity to contest the merits of the claim, leading the court to grant the Claimant’s request in its entirety.
What was the precise jurisdictional and procedural question the court had to answer regarding the application of RDC 13.4?
The court was tasked with determining whether the Claimant had satisfied all mandatory procedural prerequisites to be entitled to a default judgment under the RDC. The primary legal question was whether the Defendant’s silence constituted a sufficient basis for the court to enter a judgment without a trial on the merits.
The court had to verify that the request was not prohibited under RDC 13.3 (1) or (2) and that the Claimant had strictly followed the procedural requirements for service and notification. The court’s inquiry focused on whether the "relevant time" for the Defendant to file a response had indeed expired, thereby triggering the court's authority to grant the default judgment under RDC 13.4.
How did H.E. Justice Maha Al Mheiri apply the RDC 13.7 and 13.8 requirements to the Claimant’s request?
Justice Al Mheiri conducted a review of the procedural history to ensure that the Claimant had complied with the strict requirements of the RDC. The court confirmed that the Claimant had fulfilled the necessary steps to move for a default judgment, ensuring that the process was transparent and compliant with the court's rules.
The court’s reasoning was explicitly documented in the order:
The Claimant has followed the required procedure for obtaining Default Judgment (RDC 13.7, 13.8).
By confirming this compliance, the court established that the Claimant had met the burden of proof required to secure a judgment in the absence of the Defendant. This procedural rigor ensures that default judgments are only granted when the Claimant has demonstrated full adherence to the rules of service and notification.
Which specific RDC rules and federal laws were applied to determine the interest and costs in CFI 046/2021?
The court relied on a combination of DIFC procedural rules and UAE federal legislation to calculate the final award. Specifically, RDC 13.14 was cited as the authority for the Claimant’s request for interest. Furthermore, the court applied UAE Federal Law No. 18 of 1993 concerning Commercial Transactions to determine the interest rate applicable to the judgment sum.
The court’s application of these laws ensured that the Claimant was compensated not only for the principal amount but also for the time value of money dating back to 2009. The inclusion of interest and legal costs was handled in accordance with the court's power to award such sums upon the entry of a default judgment.
How did the court justify the application of the 12% annual interest rate under UAE Federal Law No. 18 of 1993?
The court utilized the provisions of the UAE Commercial Transactions Law to provide a legal basis for the interest calculation. This was a critical component of the judgment, as it addressed the long-standing nature of the debt, which originated in 2009.
The court’s order regarding interest was explicit:
In addition, pursuant to UAE Federal Law No. 18 of 1993 concerning Commercial Transactions Law of the United Arab Emirates the Defendant shall pay interest on the Judgment Sum to the Claimant from 19 October 2009, until the date of full payment, at the rate of 12% annually.
This application of federal law serves as a standard mechanism within the DIFC Courts to ensure that claimants are made whole, reflecting the statutory interest rates applicable to commercial debts within the jurisdiction.
What was the final disposition and the specific monetary relief ordered by the DIFC Court?
The court granted the Claimant’s request in full. The order mandated that Mashreq Bank PSC pay the judgment sum of USD 5,998,935.67 within 14 days of the order. Additionally, the court ordered the payment of interest at a rate of 12% per annum, calculated from 19 October 2009 until the date of full payment.
Regarding the costs of the proceedings, the court ordered the Defendant to cover the Claimant’s legal costs and the court filing fees. As stated in the order:
The Defendant shall also pay the Claimant’s costs of these proceedings comprising: (1) the Claimant’s legal costs up until the date this Request was fully pleaded; and (2) the Court filing fee (as a disbursement) paid by the Claimant in this Claim.
This comprehensive order ensures that the Claimant is fully reimbursed for the costs incurred in pursuing the claim through the DIFC Court system.
What are the practical implications for litigants who fail to file an Acknowledgment of Service in the DIFC?
This case serves as a stark reminder of the consequences of ignoring formal court processes within the DIFC. Litigants who fail to file an Acknowledgment of Service or a Defence within the prescribed time limits risk the entry of a significant default judgment. The court’s willingness to grant such judgments, including substantial interest and costs, underscores the importance of active participation in the litigation process.
Practitioners must ensure that their clients are aware of the strict timelines imposed by the RDC. Failure to engage with the court not only results in a loss of the opportunity to present a defense but also exposes the party to immediate financial liability, including the accrual of interest over long periods, as demonstrated by the 2009 start date for interest in this matter.
Where can I read the full judgment in Lara Basem Musa Khoury v Mashreq Bank PSC [2021] DIFC CFI 046?
The full judgment can be accessed via the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-046-2021-lara-basem-musa-khoury-v-mashreq-bank-psc
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- Rules of the DIFC Courts (RDC): 9.43, 13.1(1), 13.1(2), 13.3(1), 13.3(2), 13.4, 13.7, 13.8, 13.14
- UAE Federal Law No. 18 of 1993 concerning Commercial Transactions Law of the United Arab Emirates