This judgment resolves a complex, multi-year construction dispute concerning the FIVE JVC Hotel project, focusing on the allocation of liability for delay, the validity of indemnity claims under UAE law, and the interpretation of FIDIC-based contractual obligations.
What were the primary claims advanced by FIVE Real Estate Development against Reem Emirates Aluminium in TCD 009/2020?
The dispute arose from the development of the FIVE JVC Hotel, where Reem Emirates Aluminium was engaged to perform aluminium and glazing works under a Work Order valued at AED 47,000,000. Following significant project delays and a major fire incident on-site in August 2016, the relationship between the parties deteriorated, leading to litigation in the DIFC Courts. The Claimant, FIVE, sought to recover damages based on three distinct legal theories. As noted in the judgment:
FIVE, as the Claimant in this action, advances three claims: Claim 1, a claim for an indemnity; Claim 2, a delay claim; and Claim 3, a defects claim.
The litigation was further complicated by the consolidation of proceedings with case TCD-003-2021. The core of the dispute involved whether Reem was liable for the project's failure to meet the completion date of 30 September 2018 and whether FIVE could recover costs associated with the fire damage and subsequent remedial works. The full procedural history and the court's analysis of these claims can be reviewed at Five Real Estate Development v Reem Emirates Aluminium [2020] DIFC TCD 009.
Which judge presided over the trial of Five Real Estate Development v Reem Emirates Aluminium in the Technology and Construction Division?
The trial was presided over by Justice Lord Angus Glennie of the DIFC Court of First Instance, Technology and Construction Division. The proceedings took place over five days, from 27 June 2022 to 1 July 2022, with final closing submissions served on 23 August 2022. The judgment was subsequently issued on 3 March 2023.
What specific legal arguments did Martin Khoshdel and Thanos Karvelis advance regarding the indemnity and prolongation claims?
Mr. Martin Khoshdel, representing FIVE, argued that the Claimant was entitled to an indemnity under the contract for losses incurred during the project, particularly those linked to the fire incident and subsequent delays. Conversely, Mr. Thanos Karvelis, representing Reem, challenged the legal basis of the indemnity claim, asserting that under UAE law, an indemnity cannot be claimed in the abstract without establishing a specific underlying breach of contract.
Furthermore, the parties clashed over the interpretation of the FIDIC-based contract. Reem argued that they were entitled to prolongation costs due to delays caused by FIVE and other contractors on site. The court found that the Claimant’s attempt to characterize these losses as simple indemnities failed to account for the statutory requirements of proof under the applicable civil law framework. As the court observed:
Second, I accept the submission that an indemnity as such is unknown under UAE law; there must be proof of breach.
What was the central doctrinal issue the court had to resolve regarding the interplay between FIDIC clauses and the settlement of claims?
The court was tasked with determining whether a settlement agreement reached between the parties regarding material damage from the fire incident also served as a comprehensive release of other claims, specifically Reem’s claims for prolongation costs. The legal question centered on whether the Engineer’s determination—or the correspondence between the parties—effectively extinguished the right to seek further compensation for delays that occurred concurrently with or subsequent to the fire. The court had to interpret the scope of the settlement figure of AED 850,000 and whether it was intended to be a global settlement or limited strictly to the physical damage caused by the fire.
How did Justice Lord Angus Glennie apply the test for contractual breach and delay analysis to the claims?
Justice Lord Angus Glennie conducted a rigorous review of the evidence, ultimately finding that FIVE’s delay analysis was fundamentally flawed and unsupported by the contemporaneous site records. The judge emphasized that a party seeking to recover damages for delay must provide a robust, evidence-based analysis that accounts for the actual progress of works on site. In rejecting the Claimant's position, the court noted:
For the reasons set out above, I am satisfied that if the Engineer determined that the agreed settlement figure (whether AED 750,000 or AED 850,000 does not matter for this purpose) settled not only Reem’s material damage claim but also its claim for prolongation costs, he was wrong so to determine.
The court further clarified the relationship between indemnity clauses and breach, noting that a claim under clause 4.10 could not bypass the requirement to prove a breach by the defendant. The judge concluded that:
It follows, in my opinion, that, at least in the circumstances of the present case, a successful claim to an indemnity under clause 4.10 necessarily involves proof of breach by Reem – in which case the claim would be excluded by clause 8.7.
Which specific statutes and FIDIC clauses were central to the court's determination of interest and liability?
The court relied heavily on the provisions of the FIDIC contract governing the project, specifically Clause 14.8 regarding the recovery of interest on delayed payments. The court determined that interest was recoverable, but strictly limited the scope of this recovery to Interim Payment Applications (IPAs) issued after the date the Sub-Contract Agreement (SCA) came into force, which was 4 June 2018. Additionally, the court examined the interaction between these contractual clauses and the general principles of UAE law regarding indemnities and the burden of proof for contractual breaches.
How did the court utilize the cited authorities to reach its decision on prolongation costs?
The court utilized the cited authorities to establish the boundaries of contractual recovery. Regarding the calculation of prolongation costs, the court relied on the evidence provided by the expert, Mr. Craig, to quantify the recovery for the period between 8 November 2017 and 2 September 2019. The court held:
I hold, therefore, that interest is recoverable in accordance with FIDIC clause 14.8 as calculated by Mr Craig, but limited to IPAs issued after the date of the SCA coming into force, i.e. 4 June 2018.
This application of FIDIC principles ensured that the recovery was tethered to the specific timeline of the contractual relationship, preventing the Claimant from asserting broader, unsubstantiated claims.
What was the final disposition of the claims and the court's order regarding costs?
The court dismissed all of the Claimant’s claims and granted the Defendant’s claims, including the recovery of prolongation costs. The court ordered the parties to attempt to agree on a Final Account based on the findings within 28 days. Regarding the financial recovery for Reem, the court stated:
I hold that Reem are entitled to recover prolongation costs for the period from 8 November 2017 to 2 September 2019 in the sum of AED 6,898,245.88.
Furthermore, the court ordered that the Claimant bear the costs of the proceedings:
The Claimant shall pay the Defendant’s costs of these proceedings, to be assessed by the Registrar on the standard basis if not agreed.
What are the wider implications of this judgment for construction practitioners in the DIFC?
This judgment serves as a stern reminder that the DIFC Courts will not accept expert delay analysis that is disconnected from the reality of site records. Practitioners must ensure that claims for prolongation and indemnity are backed by clear evidence of breach and that settlement agreements are drafted with extreme precision to avoid ambiguity regarding which claims are being released. The deep editorial analysis of this case is at: Five Real Estate Development v Reem Emirates Aluminium [2023] DIFC TCD 009: The High Cost of Procedural Overreach in Construction Disputes. Litigants should also note the court’s reliance on the following 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), and FIVE REAL ESTATE DEVELOPMENT v REEM EMIRATES ALUMINUM [2021] DIFC TCD 003 — Default judgment request denied following timely service acknowledgment (21 September 2021).
Where can I read the full judgment in Five Real Estate Development v Reem Emirates Aluminium [2020] DIFC TCD 009?
The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/five-real-estate-development-llc-v-reem-emirates-aluminium-llc-2020-difc-tcd-009-1 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/technology-and-construction-division/five-real-estate-development-llc-v-reem-emirates-aluminium-llc-2020-difc-tcd-009-1.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Five Real Estate Development v Reem Emirates Aluminium | [2020] DIFC TCD 009 | Primary proceedings |
| Five Real Estate Development v Reem Emirates Aluminium | [2021] DIFC TCD 003 | Consolidated proceedings |
Legislation referenced:
- FIDIC Clause 14.8 (Interest on delayed payments)
- FIDIC Clause 4.10
- FIDIC Clause 8.7
- Rules of the DIFC Courts (RDC)