This order marks the finality of the Claimant’s attempt to challenge a procedural refusal to strike out a counterclaim, underscoring the high threshold for appellate intervention in interlocutory construction disputes.
Did Five Real Estate Development have a real prospect of success in appealing the refusal to strike out Reem Emirates Aluminium’s counterclaim in TCD 009/2020?
The dispute centers on a construction contract between Five Real Estate Development (the Claimant) and Reem Emirates Aluminium (the Defendant). The Claimant sought to strike out the Defendant’s counterclaim, arguing that the claims were legally unsustainable. When Justice Sir Richard Field refused the strike-out application on 31 May 2021, and subsequently refused permission to appeal on 22 August 2021, the Claimant filed a "Second Permission Application" to the Court of Appeal.
The core of the dispute at this stage was not the merits of the underlying construction claims, but the procedural viability of the counterclaim. The Claimant argued that the counterclaim was fundamentally flawed, while the Defendant maintained its right to have the dispute heard on its merits. Justice Lord Angus Glennie, in reviewing the second application, focused on the high bar required to overturn an interlocutory decision regarding strike-outs. As noted in the judgment:
To succeed on that application, it would have had to show that the Defendant had no reasonable grounds for bringing the counterclaim (RDC 4.16), in other words, as applied to this case, that the counterclaim was bound to fail.
The Claimant’s failure to clear this hurdle meant that the counterclaim remained a live issue, and the court found no error in the previous judge’s assessment. For further context on the procedural history of this case, see the deep editorial analysis at: Five Real Estate Development v Reem Emirates Aluminium [2023] DIFC TCD 009: The High Cost of Procedural Overreach in Construction Disputes.
Which judge presided over the Second Permission Application in the Technology and Construction Division?
The Second Permission Application was heard and determined by Justice Lord Angus Glennie of the Technology and Construction Division of the DIFC Courts. The order was issued on 24 October 2021, following the Claimant's filing of grounds of appeal and skeleton arguments on 28 September 2021, and the Defendant's written submissions in opposition filed on 14 October 2021.
What were the specific legal arguments advanced by Five Real Estate Development and Reem Emirates Aluminium regarding the strike-out application?
The Claimant argued that the counterclaim brought by Reem Emirates Aluminium was legally unsustainable and should be struck out under RDC 4.16. They contended that the legal arguments supporting the counterclaim were so weak that they warranted immediate dismissal. Furthermore, in the second application for permission to appeal, the Claimant attempted to elevate the matter by arguing that the case raised significant public interest issues regarding the status of an engineer’s determinations under FIDIC-based construction contracts.
Conversely, the Defendant argued that the counterclaim was not bound to fail and that the Claimant’s attempt to strike it out was a premature effort to avoid a full trial on the merits. The Defendant maintained that the previous rulings by Justice Field were correct in identifying that the counterclaim had a real prospect of success, and that the Claimant’s procedural maneuvers were an attempt to bypass the standard trial process.
What was the precise doctrinal issue the Court had to answer regarding the refusal of the strike-out application?
The Court had to determine whether the Claimant had met the criteria for permission to appeal under RDC 44.9 and 44.19. Specifically, the Court needed to decide if the Claimant had demonstrated that the appeal had a "real prospect of success" or if there existed a "compelling reason" for the appeal to be heard. The doctrinal issue was whether an interlocutory refusal to strike out a claim—which is essentially a finding that a claim is not "bound to fail"—can be elevated to an appealable point of law regarding the substantive interpretation of FIDIC-governed engineer determinations.
How did Justice Lord Angus Glennie apply the test for permission to appeal to the Claimant’s arguments?
Justice Glennie applied a rigorous two-part test to the application. First, he assessed whether the appeal had a real prospect of success, finding that the Claimant’s arguments had already been thoroughly considered and rejected by Justice Field. Second, he examined whether there was a "compelling reason" for the appeal, specifically addressing the Claimant's assertion that the case involved public interest regarding FIDIC contracts. He concluded that the previous order did not establish any binding precedent on the substantive interpretation of engineer’s certificates. As the court stated:
The refusal of the strike out application did not amount to a ruling that the Defendant’s counterclaim was bound to succeed, it was simply a ruling that it was not bound to fail.
Justice Glennie emphasized that the Claimant had missed an opportunity to resolve the matter through a preliminary issue hearing, choosing instead to persist with a strike-out application that lacked the necessary legal foundation to succeed.
Which RDC rules and specific legal tests were applied by the Court in TCD 009/2020?
The Court relied heavily on the Rules of the DIFC Courts (RDC) to govern the application. Specifically, the Court cited:
* RDC 4.16: Regarding the threshold for striking out a statement of case, requiring the applicant to show that the opposing party has no reasonable grounds for bringing the claim.
* RDC 44.9: Governing the procedure for second applications for permission to appeal to the Court of Appeal.
* RDC 44.19: Setting the criteria for granting permission to appeal, namely that the appeal must have a "real prospect of success" or that there is a "compelling reason" for the appeal to be heard.
How did the Court distinguish the Claimant’s procedural choices from the substantive merits of the FIDIC-based claims?
The Court clarified that the Claimant’s procedural strategy was flawed because it conflated a strike-out application with a trial on the merits. Justice Glennie noted that the Claimant had failed to utilize the correct procedural mechanism to resolve the dispute over the engineer's determinations. The Court observed:
The Claimant might have sought to have a preliminary issue decided, at which the rival arguments might have been canvassed in full and decided by the Court, but it did not seek to take this course, preferring, for whatever reason, to persist with its strike out application.
By choosing the strike-out route, the Claimant limited its own ability to argue the merits, as the court only needed to find that the counterclaim was not "bound to fail" to dismiss the application.
What was the final disposition of the Second Permission Application and the associated costs order?
The Court dismissed the Second Permission Application in its entirety, confirming that the proposed appeal was unarguable and lacked any prospect of success. Consequently, the Claimant was ordered to bear the costs of the application. The order stated:
The Claimant shall pay the Defendant’s costs of the Second Permission Application to be assessed by the Registrar on the standard basis, if not agreed.
This decision effectively ended the Claimant's attempt to appeal the refusal of the strike-out application, leaving the counterclaim to proceed toward trial.
What are the practical takeaways for practitioners regarding strike-out applications in the DIFC?
Practitioners must recognize that the DIFC Courts maintain a very high threshold for strike-out applications under RDC 4.16. A strike-out is not a substitute for a trial on the merits, and the court will only grant such an application if the claim is "bound to fail." If a party wishes to resolve a specific point of law or contractual interpretation, such as the effect of an engineer’s determination under a FIDIC contract, they should consider applying for a "preliminary issue" hearing rather than attempting to strike out the entire counterclaim.
As the court noted, the arguments raised by the Claimant remain available for use in their defense to the counterclaim, meaning that the strike-out application was ultimately a costly procedural detour. For further reading on the implications of this case, see the sibling orders:
* FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Leave to file counterclaim (02 February 2021)
* FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Immediate judgment on FIDIC-based claims (04 May 2021)
* FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Dismissal of strike-out application regarding FIDIC determination (31 May 2021)
* FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Dismissal of appeal against strike out and amendment nullification (08 June 2021)
* FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINIUM [2021] DIFC TCD 009 — Default Costs Certificate (28 July 2021)
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-009-2020-five-real-estate-development-llc-v-reem-emirates-aluminium-llc-7 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/DIFC_TCD-009-2020_20211024.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external case law cited in this order. |
Legislation referenced:
- RDC 4.16 (Strike out)
- RDC 44.9 (Second appeal procedure)
- RDC 44.19 (Grounds for permission to appeal)