What was the core factual dispute in Five Real Estate Development v Reem Emirates Aluminium regarding the Engineer’s Determination?
The dispute centers on the fallout from a construction sub-contract governed by the 1999 FIDIC Conditions. The Claimant, Five Real Estate Development, originally sought to recover AED 7,744,388.00 from the Defendant, Reem Emirates Aluminium, based on an Engineer’s Determination dated 5 March 2020. That initial claim was struck out in its entirety by the Court on 4 May 2021 because the Determination actually indicated that the Defendant was owed money, not the Claimant.
Following the strike-out of its own claim, the Claimant attempted to prevent the Defendant from pursuing a Counterclaim that sought to recover specific sums deducted by the Engineer. The Claimant argued that because the Defendant had successfully used the Determination to defeat the Claimant’s action, it was now "stuck" with the entirety of that Determination and could not challenge the individual deductions contained within it.
The Claimant’s claim against the Defendant when it was struck out in its entirety by the 4 May Order was for AED 7,744,388.00, comprising “the descoping/cost savings, liquidated damages and contra charges” as confirmed by the Engineer of the Project by way of the Engineer’s Determination dated 5 March 2020 (“the
“Determination”
).
See the full judgment here: TCD 009/2020
Which judge presided over the TCD 009/2020 proceedings in the Technology and Construction Division?
Justice Sir Richard Field presided over this matter in the Technology and Construction Division of the DIFC Court of First Instance. The order with reasons was issued on 31 May 2021, following the Court’s earlier intervention in the case on 4 May 2021.
What arguments did Five Real Estate Development advance to strike out the Counterclaim filed by Reem Emirates Aluminium?
The Claimant, Five Real Estate Development, advanced two primary arguments. First, it contended that the Defendant was effectively estopped from challenging the Engineer’s Determination because the Defendant had previously relied upon that same Determination to secure the strike-out of the Claimant’s original action. The Claimant argued that the Defendant could not "cherry-pick" the favorable parts of the Determination while contesting the unfavorable deductions.
Second, the Claimant argued that the Court’s previous findings in the 4 May Order created a res judicata effect that barred the Counterclaim. Additionally, the Claimant raised a procedural objection, asserting that the Defendant failed to comply with RDC 21.28 regarding the statement of truth, alleging that the Defendant improperly verified its Counterclaim by referencing "this Defence" in its statement of truth.
Did the Court’s previous 4 May Order create a res judicata effect on the Counterclaim in TCD 009/2020?
The central legal question was whether the Court’s prior dismissal of the Claimant’s action—which relied on the Engineer’s Determination—precluded the Defendant from subsequently challenging the validity of specific deductions made within that same Determination. The Court had to determine if the Defendant’s previous reliance on the document for defensive purposes created a binding legal bar (res judicata) that prevented it from later seeking damages for what it alleged were breaches of the sub-contract regarding those specific deductions.
How did Justice Sir Richard Field apply the doctrine of res judicata to the Defendant’s Counterclaim?
Justice Sir Richard Field rejected the Claimant’s res judicata argument as "hopeless and misconceived." The Court reasoned that the 4 May Order merely struck out the Claimant’s claim because that claim was mathematically inconsistent with the Engineer’s Determination. It did not adjudicate the underlying merits of the deductions themselves, nor did it prevent the Defendant from arguing that those deductions were made in breach of the sub-contract.
The Claimant also submits that the finding made in paragraph 5 of the Reasons given for the 4 May Order that “on 21 February 2021, the Defendant served a Counterclaim claiming, inter alia: (i) AED 1,811,844.48 …” amounts to a res judicata on the Counterclaim.
The Court clarified that the Defendant’s Counterclaim for damages—specifically for financial loss caused by the Claimant’s failure to make timely payments—remained a live issue. The Court emphasized that the previous order did not immunize the Determination from future challenge regarding the specific items deducted by the Engineer.
Which specific DIFC rules and FIDIC provisions were central to the Court’s reasoning?
The Court’s analysis was heavily influenced by the 1999 FIDIC Conditions of Contract, which were incorporated into the Sub-Contract Agreement dated 29 May 2018. These conditions govern the Engineer’s power to make determinations regarding sums due between parties. Additionally, the Court addressed the procedural requirements under RDC 21.28 regarding the verification of statements of truth.
The Claimant next contends that the Counterclaim should be struck out for breach of RDC 21.28 on the ground that the Defendant failed to verify its Counterclaim in its statement of truth in that sought to verify “this Defence” by way of its statement of truth at the end of its Particulars of Counterclaim.
How did the Court distinguish the previous case law and the 4 May Order in this dispute?
The Court distinguished the 4 May Order by clarifying its limited scope. The 4 May Order was a response to the Claimant’s attempt to claim sums that were already accounted for in the Engineer’s Determination. The Court noted that the 4 May Order did not address the validity of the deductions themselves, but rather the inconsistency of the Claimant's position.
The 4 May Order does not prevent the Claimant from contending that the Determination is binding on the Defendant pursuant to the 1999 FIDIC Conditions as to all matters save for the claim for AED 7,744,388.00.
The Court further noted that the Claimant’s claim was struck out because it was manifest that the AED 7,744,388.00 sought by the Claimant was comprised of items already factored into the Engineer’s final figure of AED 41,334,961.90. The Court held that the Defendant’s current Counterclaim, which seeks to recover those specific deducted items, is a distinct legal exercise.
What was the final disposition of the Claimant’s Strike Out Application?
Justice Sir Richard Field dismissed the Claimant’s Strike Out Application in its entirety, including the alternative request for immediate judgment against the Counterclaim. The Court ordered the Claimant to pay the Defendant’s costs of the application, to be assessed by the Registrar on the standard basis if not agreed between the parties.
For the reasons given above, the Claimant’s Strike Out Application (including the application of immediate judgment on the Counterclaim) is dismissed with costs to be assessed by the Registrar on the standard basis if not agreed.
What are the wider implications for construction practitioners in the DIFC?
This ruling confirms that parties must be cautious when relying on Engineer’s Determinations to strike out claims. While a Determination may be used to defeat a claim that is mathematically inconsistent with it, that success does not necessarily preclude the successful party from later challenging the Determination’s components in their own counterclaim. Practitioners should anticipate that the Court will distinguish between the "binding" nature of a Determination for the purposes of one claim and the ability to litigate the underlying merits of specific deductions in another.
For a deeper analysis of the procedural risks involved in this case, see: Five Real Estate Development v Reem Emirates Aluminium [2023] DIFC TCD 009: The High Cost of Procedural Overreach in Construction Disputes.
Where can I read the full judgment in Five Real Estate Development v Reem Emirates Aluminium [2021] DIFC TCD 009?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/tcd-00-92020-five-real-estate-development-llc-v-reem-emirates-aluminium-llc or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-009-2020_20210531.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Five Real Estate Development v Reem Emirates Aluminium | [2021] DIFC TCD 009 (4 May Order) | Cited as the basis for the strike out of the Claimant's original claim. |
Legislation referenced:
- DIFC Arbitration Law (No. 1 of 2008) Article 13
- DIFC Rules of the Courts (RDC) Rule 21.28
- 1999 FIDIC Conditions of Contract