DWT-0008-2010 -CDG (Construction Delivery Group) FZE v NAKHEEL PJSC & others – Ruling
December 22, 2014 | Case Updates
Claim No: DWT/0008/2010
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE SPECIAL TRIBUNAL RELATED TO DUBAI WORLD
Between
CDG (CONSTRUCTION DELIVERY GROUP) FZE
Claimant
-v-
(1) NAKHEEL PJSC
(2) NAKHEEL ASSET MANAGEMENT LLC
(3) PROPERTYCORP LLC
Defendants
RULING
(a) Pursuant to the Order of the Tribunal dated 18 September 2013 Judgment was entered for the Claimant against the First and Third Defendants jointly and severally in the sum of AED 35,961,153.18 together with interest thereon until that date amounting to AED 4,056,130.42, a total of AED 40,917,283.60 (“the judgment amount”);
(b) By Order of the Registrar dated 3 April 2014, amended on 17 June 2014, the Defendants were ordered to pay the Claimant`s costs of the proceedings and of the detailed assessment hearing totaling USD 2,730,027.60, payment to be made within 21 days of that Order;
(c) By this Application made on 21 July 2014 the Claimant seeks an Order that the Defendants shall pay post-judgment interest on the said amounts from the dates of the respective Orders;
(d) The Tribunal has received and considered written submissions from the parties, namely, Claimant`s “Evidence in support of Application No.24” dated 22 June 2014, Defendants` “Answer to Application dated 21 July 2014” and “Claimant’s Reply to Defendants` Answer to Application No.24” (it appears that these relate to Application No.25 dated 21 July 2014);
(e) The parties are agreed that the Tribunal shall consider the Application without a hearing;
THE TRIBUNAL FINDS AND HOLDS –
1. The claim is for post-judgment interest on two judgments dated respectively 18 September 2013 and 3 April 2014 in the amounts of AED 40,917,283.60 and USD 2,718,467.31 respectively.
2. The Defendants have not paid the said judgment debts nor any part thereof.
3. The Defendants have objected to enforcement of the judgments by the Dubai Courts, but that is not relevant to the present Application.
4. The claim is for interest at the rate of 6 per cent., alternatively at the three-month EIBOR rate plus 1%. There are issues as to –
(i) whether any interest should be awarded on that part of the judgment debt dated 18 September 2013 namely AED 4,956,130.42 which represents interest on the principal sum of AED 35,961,153.18 until that date;
(ii) whether the Claimant is entitled to interest at a greater rate than three-month EIBOR plus 1%; and
(iii) the commencement date for the interest rate calculation.
5. Further issues raised in the parties` Submissions will be referred to separately below.
Issue (i)
6. The Defendants` submission that to “award interest on top of interest would be akin to awarding the Claimant compound interest” is rejected. The claim is for post-judgment interest on the total sum awarded to the Claimant on 18 September 2013. The Tribunal has power to award such interest under RDWT 36 from the date judgment is given (as the Defendants accept in their Answer paras.3.4-3.5).
7. The Tribunal adopts the approach set out in DIFC Courts Practice Direction No.1/2009, namely –
“A judgment …….. shall carry interest, from the date the judgment was entered, at the rate of 1% over the [three month EIBOR Rate] or such rate as the judge may prescribe in the judgment.”
Issue (ii)
8. In Shokat Mohammed Dalal v. The World LLC and Nakheel PJSC Claim No. DWT/0023/2010 the Tribunal was concerned with pre-judgment interest. It considered that “the appropriate rate of interest to be charged should be the commercial market interest rate” and continued –
“That market rate is generally accepted as [the EIBOR rate] plus an amount of 1% (which would represent the normal spread over the cost of funds to lending institutions).” (paragraph 30)
9. The Defendants accept that the Tribunal has a discretion to set a different rate (Answer para.3.8). They contend, however, that the EIBOR rate “should usually be applied” unless the Claimant demonstrates “exceptional circumstances that necessitate a higher rate of interest being charged” (ibid.).
10. The Tribunal does not accept the Defendants` contention that “exceptional circumstances” are required to justify a departure from the EIBOR plus 1% rate. The Tribunal’s discretion may be exercised either to increase or reduce the EIBOR plus 1% rate when in its judgment it is appropriate to do so, taking all relevant circumstances into account.
11. The Claimant contends that the higher rate of 6% is appropriate in the present case because –
(i) Articles (88), (76) and (77) of the Commercial Transactions Law (Federal Law (18) of 1993) stipulates that the rate of interest on a commercial debt shall be at the prevailing market rate not exceeding 12 per cent.;
(ii) According to IMF research, the interest rate spread throughout the world is generally charged at 3-4 percentage points above the interbank offered rate (Evidence in Support para.7);
(iii) The Claimants allege that the Defendant Nakheel pays 10 per cent interest on sukuk certificates issued to its trade creditors since 2009 (Evidence para.8);
(iv) It is the “judicial custom” of the Dubai Courts that a delay penalty of 9% may be added to civil debts (Evidence para.9) and that a statutory rate of 8% above the Bank of England`s reference rate of 0.5% has been established in the United Kingdom and by European Union Regulations (Evidence para.10);
(v) The Tribunal has referred to a rate of 6% per annum in Chris O`Donnell v. Nakheel and Shokat Mohammed Dalal v. The World and Nakheel (above); and
(vi) The “economic reality” is that Nakheel obtains an “obscenely unfair benefit” by retaining the amount of the judgments due to the Claimant whilst making substantial net profits in excess of AED 500 million per quarter during the relevant period (Reply paras. 3.3.1-2).
12. The Defendants contend –
(i) that the Tribunal has adopted the rate of EIBOR plus 1% as evidence of current market rates (see Shokat Mohammed Dalal v. The World & Nakheel (above) paragraph 30);
(ii) that EIBOR plus 1% is best evidence of the market rate (Answer para.3.8); and
(iii) that sukuk or other loan rates, by definition, have been agreed by the parties (Answer para.3.12).
13. The Tribunal notes that the three-month EIBOR rate at relevant dates was as follows –
18 September 2013 0.85714%
3 April 2014 0.78857%
whereas on 19 August 2010 it was 2.3375% (Reply para.4.2) and the rate on 13 December 2010 referred to in the Shokat Mohammed Dalal judgment was 2.14375% (para.31). At that time, therefore, a rate of 6% was 3-4 per cent above the EIBOR rate.
14. In principle, where interest is awarded it is calculated at the lending rate, in other words, the rate which the judgment debtor would be required to pay to a lender of the money.
15. The Tribunal further notes that the Defendants have elected not to pay the judgment debts and there is no evidence that they have been unable to do so.
16. In the circumstances of the present case, the Tribunal finds and holds –
(i) that the rate should be greater than EIBOR plus 1% , and
(ii) that the appropriate rate is 4 (four) per cent. per annum, that being 3-4 per cent. higher than the EIBOR figure and therefore consistent with the 6 per cent. figure referred to by the Tribunal in earlier cases.
Issue (iii)
17. The Claimant contends that interest should be awarded commencing from the date of the claim (16 February 2009) until full payment, alternatively from the date on which proceedings were established (19 August 2010) (Reply paragraphs 3.12.7 and 4.2, respectively).
18. The Tribunal finds and holds that post-judgment interest commences on the date of the judgment in question. The Tribunal has power to order interest from a date earlier than the judgment but here the judgment debt includes interest until the judgment date and there is no ground on which any earlier date might be ordered.
Further issues
Currency conversion rate
19. The Claimant requests the Tribunal to order a conversion rate of AED 3.675 equals USD 1, that being “the rate offered by commercial banks” (Evidence paragraph 2.4).
20. The Defendants submit that “it is not the role of the Tribunal to set the rate of conversion to be applied between different national currencies” (Answer paragraph 6.1).
21. The Claimant in reply refers to paragraph 6 of the Registrar`s Order dated 3 April 2014 –
“6. Costs ordered as aforesaid shall be paid in US Dollars. The conversion rate, if necessary, to be ordered if not agreed.”
22. The Tribunal holds that a dispute as to conversion rate will arise only if the Claimant agrees to receive payment of the amount due under the Order dated 3 April 2014 in AED dirhams and not, as ordered, in US Dollars. In such event, the Tribunal directs as requested by the Claimant (Evidence para.24) that the conversion rate (if not agreed) shall be the mid-point between the buying and selling rates of the National Bank of Abu Dhabi on the dates of relevant payments.
Costs
23. The Claimant seeks an order that the Defendants shall pay its costs of the present Application on an indemnity basis on the ground of their “wilful disregard” of their obligations to pay the judgment debts (Evidence para.25).
24. It does appear from the evidence before the Tribunal that the Defendants have chosen deliberately to disregard their obligations to pay the judgment debts. Nevertheless they have responded to the present Application on a reasoned basis and the Tribunal considers that it would not be appropriate to order indemnity costs.
Costs of Application No. DWT-0008-2010/23
25. Application No.23 was made by the Claimants on 27 October 2013 and was discontinued by them with no order from the Tribunal on 16 April 2014 (see the Defendants` Answer paragraph 8 and the Reply para.8).
26. The Defendants claim that their costs of responding to the Application No.23 amounted to USD 37,398.91. They have agreed to accept 80% of that figure, namely USD 29,919.13, which they request shall be set off against any amount in respect of interest and/or costs awarded to the Claimant in this (sc.No.25) Application.
27. The Claimant does not dispute the Defendants` right to recover such costs but challenges the sum claimed, contending that the amount should be USD 5,600 only (Reply para.9.3).
28. The Tribunal MAKES NO ORDER on the Defendants` request. Neither the issue as to assessment nor as to the possible set-off of liabilities is appropriate for inclusion in this Order.
Conclusion
29. The Tribunal therefore DIRECTS AND ORDERS –
(i) that the First and Third Defendants shall pay post-judgment interest to the Claimant on the amount of the judgment for AED 40,917,283.60 dated 18 September 2013 calculated as simple interest at the rate of 4 (four) per cent. per annum from that date until the date of payment;
(ii) that the Defendants shall pay post-judgment interest to the Claimant on the amount of USD 2,730,027.86 ordered to be paid by the Registrar on 3 April 2014 calculated as simple interest at the rate of 4 (four) per cent. per annum from that date until payment;
(iii) that if and to the extent that the Claimant agrees that payment of the sum of USD 2,730,027.86 pursuant to the Order of the Registrar dated 3 April 2014 may be made in AED dirhams, the conversion rate from USD to AED shall be the mid-point between the buying and selling rates of the National Bank of Abu Dhabi on the dates of relevant payments;
(iv) that the Defendants shall pay the Claimant its costs of the present Application to be assessed on the standard basis if not agreed; and
(v) makes NO ORDER with regard to the Defendants` costs of Application No.23.
(Signed)
Sir Anthony Evans
Date of Issue: 22 December 2014
