In Lara Khoury v Mashreq Bank PSC  DIFC CA 007 (28 November 2022), the DIFC Court of Appeal, comprising Chief Justice Zaki Azmi, H.E. Justice Shamlan Al Sawalehi and Justice Sir Peter Gross, upheld the dismissal of a claim by Ms Khoury against her bank on service and jurisdiction grounds, clarifying several important issues for practitioners.
Ms Khoury sued Mashreq Bank in the DIFC Courts for damages totalling US$5.9m alleging that the bank had negligently advised her to subscribe for loss-making investments. Mashreq had already defeated an identical claim in the Dubai Courts on the ground that Ms Khoury’s account was execution only and the bank had not advised Ms Khoury to make any of the investments she did.
Mashreq applied to have the claim dismissed on the grounds that the claim form was served out of time and that, in any event, the DIFC Court had no jurisdiction to hear the claim. Mashreq was successful at first instance before Justice Lord Angus Glennie: see  DIFC CFI 046 (21 February 2022). Ms Khoury appealed but the Court of Appeal dismissed the appeal.
The Court of Appeal first considered whether Ms Khoury had served the claim form in time.
Ms Khoury’s primary ground relied on RDC 7.20 which provides that a claim form must be served “within 4 months after the date of issue where the claim form is to be served within the DIFC or Dubai” and “within 6 months after the date of issue where the claim form is to be served out of the DIFC or Dubai.” She contended that, as she was serving in onshore Dubai, she was entitled to the longer six month period. The Court disagreed, explaining that the “or” in the second limb had to be read conjunctively in order to make the rule intelligible. RDC 7.20 provided a binary regime: a claimant has four months to serve a claim form in the DIFC or onshore Dubai and six months if service is effected anywhere outside the Emirate.
Ms Khoury also contended that even if she was subject to the four-month period, she had served in time. That failed because, as the Court held, RDC 9.27 provided for a deemed service regime. A claim form sent by courier (as Ms Khoury had done) was deemed served the second business day after it was sent, which in this case was too late. A claimant was not permitted to adduce evidence of the date of actual service to displace the deemed date of service. In reaching that conclusion, the Court of Appeal relied on English authorities to the same effect about the equivalent rules in England. In any event, the Court of Appeal held that even if she could adduce evidence to challenge the deemed date of service, that evidence did not show Ms Khoury had served in time.
The claim therefore failed because the claim form had been served late. There had been, and was, no retrospective application to extend time under RDC 7.23. The Court of Appeal confirmed that this rule was the only relevant rule where a claim form was served late and a party could not ask the court simply to exercise general case management powers to waive the failure to serve in time.
Even though the claim failed on service grounds, the Court of Appeal went on to consider the jurisdiction challenge. Ms Khoury contended that the DIFC Courts had jurisdiction under Article 5(A)(2) of the Judicial Authority Law because clause 22 of the contract between the parties was an agreement in favour of the DIFC Courts.
The Court of Appeal held that there was no agreement on jurisdiction. Clause 22 was an asymmetric jurisdiction clause. It did not confer equal rights and obligations on the parties. Such clauses are a well-established feature of international banking agreements. The Court of Appeal held that asymmetric jurisdiction clauses are enforceable in the DIFC in accordance with their terms, consistent with the approach in common law commercial courts around the world.
Although in clause 22 Ms Khoury agreed that she could be sued in the DIFC Courts by Mashreq, there was on the true construction of the clause no corresponding agreement by the bank that it could be sued in the DIFC Courts. Consequently, there was no agreement by both parties that the DIFC Courts could determine Ms Khoury’s claim, as required by Article 5(A)(2). So even if the claim form had been served in time, the DIFC Courts would not have had jurisdiction to determine it.
The case is a useful reminder of the perils of leaving the service of a claim form to the last minute. The Court’s decisions on RDC 7.20, 9.27 and 7.23 are to be welcomed for ensuring certainty and predictability in the DIFC Court’s service regime. Also, as might be expected from a significant commercial court, the DIFC Court has shown by its decision to uphold asymmetric jurisdiction clauses that it will not defeat the well-established expectations of the international banking market.
Tom Montagu-Smith KC and Matthew Watson acted for Mashreq Bank on the appeal, and Matthew Watson appeared as sole counsel at first instance, instructed by Rita Jaballah and Jonathan Brooks of Al Tamimi and Company.