This order addresses a dispute over a failed loan arrangement, clarifying the boundaries of personal versus corporate liability and the scope of DIFC Court jurisdiction over transactions partially performed within the Centre.
What was the specific factual dispute regarding the AED 1.3 million claim in Daikan DMCC v Poke and Co Restaurant?
The dispute centered on the repayment of funds provided by the Second Claimant, Salih Elmascan, to the Second Defendant, Khaled Mohamed Abdel Mageed, under an informal arrangement conducted via WhatsApp and telephone. The Claimants sought a total of AED 1.3 million, asserting that this sum represented the original loan amount plus an agreed-upon premium for the Claimants' forbearance to sue following delays in repayment.
The factual matrix involved multiple transfers. As noted in the judgment:
It is common ground between the parties that loan monies were paid into the bank account of the First Defendant in the DIFC in the sum of AED 200,000 at the request of the Second Defendant, who, with the Third Defendant (his wife), was both a director and shareholder.
The Claimants argued that the entire sum was recoverable from the Defendants collectively. However, the Court had to untangle whether the First Defendant (the DIFC-incorporated restaurant) was a party to the loan or if the arrangement was strictly a personal matter between the individuals. The Claimants further contended that a subsequent agreement existed to increase the debt to AED 1.3 million due to the Second Defendant’s failure to meet repayment timelines.
Which judge presided over the CFI 085/2023 hearing and in what capacity?
Justice Sir Jeremy Cooke presided over the Court of First Instance. The matter was heard on 27 February 2024, with the resulting order issued on 28 February 2024. The proceedings involved the determination of both jurisdictional challenges raised by the Second and Third Defendants and the Claimants' application for immediate judgment.
What were the primary legal arguments advanced by the Claimants and the Defendants regarding the loan contract?
The Claimants argued that the loan was a commercial transaction involving the First Defendant, Poke and Co Restaurant Ltd, as the funds were utilized for the company’s working capital during a period of liquidity distress. They sought to hold the Second and Third Defendants liable for the full AED 1.3 million, citing an agreement where the Second Defendant promised monthly repayments of AED 100,000 to settle the debt.
Conversely, the Second and Third Defendants challenged the jurisdiction of the DIFC Courts, arguing that they were not residents of the DIFC and that the matter was more appropriately suited for the onshore Dubai Courts. Regarding the merits, they contended that the loan was a personal arrangement between the Second Claimant and the Second Defendant, denying that the First Defendant was a party to the contract. They further disputed the enforceability of the additional AED 300,000 claimed, arguing it did not form part of a binding contractual agreement.
What was the precise jurisdictional question Justice Sir Jeremy Cooke had to resolve under the Judicial Authority Law?
The Court was tasked with determining whether it possessed jurisdiction over the Second and Third Defendants—who were not DIFC residents—under Article 5(A)(1)(c) of the Judicial Authority Law (Dubai Law No. 12 of 2004). The core issue was whether the loan transaction, which involved funds being transferred into a DIFC-based bank account for the benefit of a DIFC company, constituted a "transaction which has been wholly or partly performed within DIFC and is related to DIFC activities."
How did Justice Sir Jeremy Cooke apply the test for jurisdiction and contractual liability?
Justice Sir Jeremy Cooke held that the DIFC Court had jurisdiction because the funds were explicitly directed into the First Defendant’s DIFC bank account to resolve its liquidity issues. By linking the loan to the operational needs of the DIFC-incorporated entity, the Court satisfied the requirements of the Judicial Authority Law. Regarding the identity of the parties, the Court applied a strict evidentiary standard to the informal WhatsApp and telephone communications.
The Court found that the evidence did not support the existence of a corporate guarantee or a clear agreement binding the First Defendant. The judge reasoned:
I am unable to find that there was a clear agreement on the part of the Second Defendant to bind the First Defendant, with the result that, on this evidence, the agreement was with the Second Defendant.
Consequently, the Court rejected the claim for the additional AED 300,000, finding no enforceable contract for that premium, and limited the liability to the principal amount of the loan, minus the AED 100,000 already repaid.
Which specific statutes and rules were applied to determine the outcome of the immediate judgment application?
The Court relied heavily on Article 5(A)(1)(a) and Article 5(A)(1)(c) of the Judicial Authority Law (Dubai Law No. 12 of 2004). Article 5(A)(1)(a) confirmed jurisdiction over the First Defendant as a DIFC-incorporated entity, while Article 5(A)(1)(c) provided the basis for jurisdiction over the non-resident Second Defendant due to the partial performance of the transaction within the DIFC. The Court also applied the Rules of the DIFC Courts (RDC) regarding the standard for immediate judgment, assessing whether there was any "realistic defence" that would necessitate a full trial.
How did the Court treat the evidence of the loan transfers in its final determination?
The Court utilized the documented bank transfers to establish the timeline and quantum of the debt. The judge referenced the specific flow of funds, noting:
AED 900,00 was paid into the account of the First Defendant on the directions of the First Defendant’s Financial Officer at the Second Defendant’s request.
By aggregating the initial AED 200,000 and the subsequent AED 900,000, the Court established a principal loan of AED 1.1 million. After accounting for the AED 100,000 repayment, the Court arrived at the final judgment sum of AED 1 million. The Court also considered the Second Defendant’s own admissions regarding repayment schedules, specifically:
On 29 April 2023, the Second Defendant was still assuring the Second Claimant that he would transfer AED 100,000 per month for 13 months, starting from June, which would mean that Second Claimant would receive AED 1.4 million in total.
What was the final disposition and the specific relief granted to the Second Claimant?
The Court granted the Second Claimant immediate judgment against the Second Defendant for the sum of AED 1 million. Additionally, the Court ordered the Second Defendant to pay interest at a rate of 9% per annum, calculated from 31 December 2022, until the date of full payment. Regarding costs, the Court ordered:
Second Defendant shall pay the Second Claimant the costs of the Immediate Judgment Application and the costs of the Second and Third Defendants’ Jurisdictional Applications, to be the subject of assessment by the Registrar if not agreed.
What are the practical implications of this judgment for practitioners dealing with informal loan agreements?
This case serves as a cautionary tale for practitioners regarding the reliance on informal communications—such as WhatsApp messages—to establish corporate liability. While the DIFC Court demonstrated a willingness to exercise jurisdiction over transactions partially performed within the Centre, it maintained a high threshold for piercing the corporate veil or binding a company to a director’s personal loan. Litigants must ensure that any agreement intended to bind a DIFC entity is clearly documented as a corporate obligation rather than a personal arrangement between individuals. Furthermore, the ruling highlights that the Court will not enforce "forbearance to sue" premiums unless they are supported by clear, enforceable contractual terms.
Where can I read the full judgment in Daikan DMCC v Poke and Co Restaurant [2024] DIFC CFI 085?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0852023-1daikan-dmcc-2salih-elmascan-v-1-poke-and-co-restaurant-ltd-2-khaled-mohamed-abdel-mageed-3-rannia-el-basyuni-1
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in the provided order. |
Legislation referenced:
- Judicial Authority Law, Dubai Law No. 12 of 2004, Article 5(A)(1)(a)
- Judicial Authority Law, Dubai Law No. 12 of 2004, Article 5(A)(1)(b)
- Judicial Authority Law, Dubai Law No. 12 of 2004, Article 5(A)(1)(c)
- Rules of the DIFC Courts (RDC)