This judgment confirms the enforceability of settlement agreements and the liability of guarantors in the DIFC, granting a money judgment of USD 10,550,000 against the defendants.
What was the nature of the dispute between Lapis and Laramie and Lash regarding the USD 10,550,000 claim?
The dispute arose from a breach of a Settlement Agreement entered into on 5 December 2019 between the Claimant, Lapis, and the Defendants, Laramie (D1) and Lash (D2). The parties had previously operated under a distribution agreement, but following payment defaults, the Claimant ceased product supply until a guarantee was secured. D2 agreed to act as a guarantor for D1’s debt to facilitate the resumption of supply. Despite the agreement, D1 failed to make the required payments, specifically the first tranche of USD 50,000 due on 1 February 2018.
The Claimant initiated proceedings to recover the outstanding debt, which totaled USD 10,550,000. The matter was brought before the Court as a Part 8 application, as the Claimant asserted there were no significant factual disputes regarding the liability of the Defendants. As noted in the judgment:
This is the Claimant’s Part 8 application (the “Application”) for permission to grant the Claimant a money judgment order (“Order”) against the First Defendant (“D1”) and the Second Defendant (“D2”).
The full details of the claim and the procedural history can be found at Lapis v Laramie and Lash [2019] DIFC CFI 086.
Which judge presided over the Lapis v Laramie and Lash hearing in the DIFC Court of First Instance?
The matter was heard by H.E. Justice Shamlan Al Sawalehi in the DIFC Court of First Instance. The oral hearing took place on 16 August 2022, following the Claimant's request for the application to be considered in open court. The final judgment was issued on 6 October 2022.
What arguments did Mr Lraft of Lenil advance on behalf of Lapis regarding the liability of Laramie and Lash?
Mr Lraft, representing the Claimant, argued that the liability of both D1 and D2 was unequivocal and unambiguous under the terms of the Settlement Agreement. Counsel emphasized that D2 had explicitly acted in the capacity of a guarantor to secure the debt of D1, and that D2 had provided a cheque as security for this obligation.
Mr Lraft further requested that the Court issue a concise, reasoned judgment to facilitate the potential enforcement of the award against the Defendants in Morocco. Counsel acknowledged the procedural implications of utilizing Part 8 proceedings, noting that it precluded the Claimant from seeking a default judgment under RDC 8.6(2), but maintained that the lack of factual dispute made this the appropriate route for a swift resolution.
Did the DIFC Court have jurisdiction to grant a money judgment under the Settlement Agreement despite the governing law being UAE law?
The Court had to determine whether it possessed the requisite jurisdiction to adjudicate a debt claim arising from a Settlement Agreement where the parties had opted into the DIFC Courts' exclusive jurisdiction, notwithstanding that the underlying governing law of the agreement was the law of the United Arab Emirates. The Court also had to determine if the Part 8 procedure was appropriate given the nature of the claim and whether the Second Defendant (D2) could be held liable as a guarantor under the same order.
How did H.E. Justice Shamlan Al Sawalehi justify the use of Part 8 proceedings for this debt claim?
Justice Al Sawalehi determined that the Part 8 procedure was suitable because the case did not involve substantial disputes of fact. The Court noted that while the Claimant was precluded from seeking a default judgment by choosing this path, the clarity of the contractual obligations made it the most efficient mechanism. As stated in the judgment:
Further, the Claimant acknowledged that pursuing this Claim under Part 8 proceedings precluded them from entering into a default judgment by virtue of RDC 8.6(2) in contrast to the applicable procedure under Part 7 proceedings. I am satisfied that the use of the Part 8 procedure has been adopted appropriately and I concede that there are no significant factual issues that needed to be dealt with in this case.
The Court further relied on its power under RDC 23.85 to proceed in the absence of the Defendants, who had been properly served but chose not to appear or contest the evidence.
Which specific DIFC Rules and statutes were applied by the Court to validate the claim?
The Court relied on the Rules of the DIFC Courts (RDC), specifically RDC 9 regarding the requirements for service of the Claim Form, and RDC 23.85, which permits the Court to proceed with a hearing if a respondent fails to attend. The Court also referenced the UAE Law No. 19/1993 on Commercial Transactions (the "Commercial Code") in its consideration of the debt claim. Additionally, the Court applied Practice Direction No. 4 of 2017 to determine the applicable interest rates on the judgment debt.
How did the Court utilize the precedent of Lahela v Lameez [2020] in this judgment?
The Court cited Lahela v Lameez [2020] to confirm that the substituted service of the Claim Form on the Defendants had been effected in accordance with RDC 9. By establishing that the Defendants had been properly served and had full notice of the proceedings, the Court was able to proceed to a substantive judgment despite the Defendants' failure to respond or appear at the hearing.
What was the final disposition and the specific monetary relief awarded to Lapis?
The Court granted a money judgment in favor of the Claimant for the full amount claimed. The Defendants were ordered to pay USD 10,550,000 within 14 days of service of the judgment. Furthermore, the Court awarded simple interest at a rate of 5% per annum from the date the first installment became due (1 February 2018) until the date of the judgment, and 9% per annum thereafter until the balance is paid. The Defendants were also ordered to pay the Claimant’s costs on an indemnity basis.
What are the wider implications of this judgment for practitioners handling guarantor liability in the DIFC?
This judgment reinforces the principle that the DIFC Courts will strictly enforce settlement agreements where the parties have opted into their jurisdiction, even if the underlying governing law is UAE law. It serves as a reminder that guarantors who participate in settlement negotiations and provide security—such as cheques—will be held liable alongside the primary debtor. Practitioners should note that the Court is willing to grant money judgments under Part 8 procedures where the liability is clear, provided that service requirements under RDC 9 are met, as demonstrated by the reliance on Lahela v Lameez.
Where can I read the full judgment in Lapis v Laramie and Lash [2019] DIFC CFI 086?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/lapis-v-laramie-and-lash-2019-difc-cfi-086. The CDN link for the text is https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/lapis-v-laramie-and-lash-2019-difc-cfi-086.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Lahela v Lameez | [2020] | Authority for substituted service of the Claim Form |
Legislation referenced:
- UAE Law No. 19/1993 on Commercial Transactions (the "Commercial Code")
- Rules of the DIFC Courts (RDC) 8.6(2)
- Rules of the DIFC Courts (RDC) 8.16
- Rules of the DIFC Courts (RDC) 9
- Rules of the DIFC Courts (RDC) 23.85
- DIFC Courts’ Practice Direction No. 4 of 2017