Claim No. CFI 034/2021
THE DUBAI INTERNATIONAL FINANCE CENTRE COURT
IN THE COURT OF FIRST INSTANCE
BETWEEN
AL EATESAM MODERN MARKETING CO LTD (SECUTRONIC)
Claimant
and
SEED MENA BUSINESSMEN SERVICES LLC
Defendant
JUDGMENT OF JUSTICE LORD ANGUS GLENNIE
| Hearing : | 25, 26, and 28 July 2022 |
|---|---|
| Counsels : | Ms. Asha Treesa Bejoy instructed by ARAA Group Advocates & Legal Consultants for the Claimant Mr. Syed Mujtaba Hussain instructed by Emirates Legal FZE for the Defendant |
| Judgment : | 28 November 2022 |
UPON the Part 7 Claim dated 4 March 2021 and amended on 9 March 2021 (the “Claim”)
AND UPON the Claimant’s Particulars of Claim dated 6 May 2021 (the “Particulars of Claim”)
AND UPON the Defendant’s Defence with Counterclaim dated 3 June 2021 (the “Counterclaim”)
AND UPON the Claimant’s Reply to the Defense dated 14 July 2021 (the “Reply”)
AND UPON hearing counsel for the Claimant and counsel for the Defendant at the Trial on 25, 26, and 28 July 2022 (the “Trial”)
AND UPON reviewing the documents and submissions on the Court file
IT IS HEREBY ORDERED THAT:
1. The Counterclaim succeeds to the extent set out in paragraphs (2), (3) and (4) below.
2. The Claimant shall pay the Defendant AED 500,000, plus interest thereon in the sum of AED 109,999.98 (that being interest from 3 September 2019 until 21 June 2021 at the rate of 12% per annum).
3. The Claimant shall pay the Defendant AED 700, plus interest thereon in the sum of AED 160 (that being interest from 3 September 2019 until 21 June 2021 at the rate of 12% per annum).
4. The Claimant shall pay the Defendant interest on the sums identified in paragraphs (2) and (3) above until payment at the rate of 12% per annum;
5. The Claimant shall have liberty to apply to the Court for such further Order as may be appropriate to achieve the result contemplated in paragraph 72 of this judgment.
6. In all other respects the Claimant’s Claim is dismissed.
7. The Claimant shall pay the Defendant its costs of this action on the standard basis, to be assessed by the Registrar if not agreed.
Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 28 November 2022
At: 9am
SCHEDULE OF REASONS
Introduction
1. The Claimant (“Secutronic”) is a company incorporated in Saudi Arabia. It offers a wide range of integrated physical security systems for business and domestic premises, including management, consultancy, installation and design. It has been carrying on business in Saudi Arabia since 2008; and during that time it has also carried on business in the UAE through a Free Zone Company (Secutronic FZE) established in the Dubai Silicon Oasis freezone. The Respondent (“SEED”) is part of a diversified group of companies incorporated in the UAE and owned by His Highness Sheikh Saeed Bin Ahmed Al Maktoum (known as the “Private Office”). It is in the business of assisting foreign companies to establish their presence and develop their business in the UAE.
2. In July 2018, SEED approached Secutronic with a business collaboration proposal to promote and substantially grow the Secutronic's business in the UAE. During the discussions, it was suggested that through mutual collaboration a target of AED 30 million revenue might be achievable within the first year – I put it neutrally, since there is a dispute (which I shall come back to consider) about how that target figure was set and what was its status. It was agreed that Secutronic would choose SEED as its sponsor and strategic partner and that SEED would assist in opening up business opportunities for Secutronic in the UAE, all with the aim of generating more business for Secutronic and helping it achieve the targeted revenue.
3. The relationship between the parties was set out in four separate agreements, viz: (a) a Memorandum of Understanding (“MOU”) dated 18 October 2018 but not signed until 7 November 2018; (b) a Side Share Holder Agreement (“SSA”) dated 12 November 2018; (c) a Cooperation Agreement (“CA”) dated 17 December 2018; and (d) a Revenue Sharing Agreement (“RSA”) dated 17 December 2018. Relevant details of these agreements are set out below. Although the SSA, the CA and the RSA each covered a different aspect of the relationship, it is generally convenient to refer to them as “the agreements” or (to adopt the terminology of Mr Hisham Al Gurg, the CEO of SEED) “the Definitive Agreements”.
4. The relationship did not achieve the desired success. There is a live issue between the parties as to how the relationship progressed and as to who was at fault for the (undisputed) failure to achieve the anticipated results. The bare outline of events is, however, not significantly in dispute and is summarised below:
(a) The agreements provided for an annual fee of AED 1,200,000, payable by Secutronic to SEED in three instalments. On 24 December 2018 and 10 February 2019 Secutronic paid the first and second instalments or AED 200,000 and AED 500,000 respectively. The third instalment of 500,000, originally due on 10 July 2019, but subsequently extended (see below), has not been paid.
(b) In March 2019, SEED notified Secutronic that the team of employees which had been working on the project was no longer involved and a new team would be working on it instead. Secutronic raised concerns about the impact that this was having on progress and asked for the commencement date of the Cooperation Agreement (“CA”), originally 15 November 2018, to be delayed to 1 April 2019. Agreement was in due course reached, as set out in a letter from SEED dated 2 May 2019, to extend the commencement of the CA by 55 days.
(c) On 9 April 2019, Secutronic paid AED 10,500 to SEED towards the cost of Businessman Service Registration fees.
(d) The new company, Secutronic Middle East LLC (“Secutronic LLC”) was incorporated in the Dubai on 15 April 2019, with Licence No. 832701. Its trade licence permitted it to do only limited business. To do the complete range of business to which it aspired it needed an additional activity to be included in the license, which was possible only with Security Industry Regulatory Agency (“SIRA”) approval.
(e) On 12 May 2019, Secutronic paid AED 4,725 towards the cost of producing business cards and related matters.
(f) On 25 June 2019, SEED requested payment of the third instalment of the annual fee, originally due on 10 July 2019. Secutronic pointed out that an extension of 55 days had been agreed and payment was therefore due only on 2 September 2019. This was accepted by SEED (see below).
(g) Over the course of 2019, there were training sessions arranged by SEED, and meetings and introductions to potential customers. There was a distinct lack of success in attracting new business for Secutronic. Each party blamed the other. SEED criticised Secutronic’s presentation at introductory meetings with potential customers. Secutronic complained that SEED was not introducing them to the right people within the relevant organisations. In addition there were difficulties in procuring SIRA approval for Secutronic, for which each held the other responsible. I shall deal with these matters in more detail below.
(h) In June 2019, the King’s School in Dubai made it known that they wanted to install a high security system for all their schools in Dubai and also to improve their existing CCTV systems. Secutronic and SEED approached the school together. Secutronic was not awarded this contract, because without SIRA approval it could not contract to install security systems in school premises, but it was invited to carry out work installing a security system for the Villa Project, a domestic property which belonged to the owner of the King’s School. Secutronic invoiced the King’s School in the sum of AED 14,700 – fifty percent of that was paid in advance, with the balance due to be paid within 30 days of the completion of the works. The installation of the security system on the Villa Project was completed by August 2019. This is the only project accepted by Secutronic as having been achieved with the assistance of SEED, and it forms the basis for a small part of SEED’s Counterclaim.
(i) On 12 September 2019, SEED wrote to Secutronic noting that despite several reminders the third instalment of the annual fee in the sum of AED 500,000, due on the revised date of 2 September 2019 (see above) had still not been paid; and that failure by Secutronic to pay that amount by 18 September would leave SEED “with no choice but to cease all services rendered”.
(j) On 17 September 2019, Secutronic replied to that letter raising a number of complaints about SEED’s performance of its role under the agreements, viz. the lack of substantial progress in terms of achieving new business; the fact that they were nowhere near achieving the target revenue of AED 30 million by the year end; SEED’s failure to use its “influence or charisma” in approaching decision makers at potential clients; SEED’s failure to assist Secutronic in its attempts to open bank credit facilities; SEED’s failure to take effective steps to obtain SIRA and other certification in time or at all; SEED’s failure to assist with private or public tenders; and inadequate service by SEED in terms of the promised Business Workshops for Business Development Plans.
(k) On receipt of that letter, SEED informed Secutronic that they were freezing all services to them on account of Secutronic’s non-payment of the balance of the fees then due under the agreements.
(l) On 11 November 2019, Secutronic wrote to SEED expressing its disappointment with the SEED’s contractual performance, complaining about SEED’s decision to “freeze” all services under the agreements, and informing SEED that it would not be renewing its relationship with SEED for another year.
(m) On 19 November 2019, SEED accepted Secutronic’s decision not to renew the agreement and sought confirmation from Secutronic “on the status of the current agreement to proceed accordingly”.
(n) On 1 December 2019, Secutronic responded to the effect that it was SEED which had frozen its service under the agreements, ignoring Secutronic’s efforts to improve the relationship between the parties, and requesting a meeting to resolve the differences between them.
(o) There was no response to the request for a meeting and no such meeting took place.
(p) On 13 February 2020, Secutronic issued a legal notice to SEED seeking a refund of the AED 700,000 which it had paid as the first two instalments of the annual fee (see above) along with interest. It sent another legal notice on 23 November 2020, claiming the like amount and also requiring SEED to transfer to Secutronic its 51% shareholding in the new company established in Dubai for purposes of the agreements.
(q) On 4 March 2021 Secutronic commenced these proceedings against SEED. It is unnecessary to set out the further steps taken by parties in the action to date.
The various agreements
5. As already set out (in paragraph 3 above), the parties’ relationship was set out in four separate agreements. I summarise the terms and effect of each of them in the following paragraphs.
The Memorandum of Understanding (the “MOU”)
6. The MOU was the first in time to be agreed. There is a dispute between the parties as to its continued status in light of the parties having thereafter entered into the other three agreements, but I put this to one side for the moment.
7. The MOU is a short two page document entered into between SEED and Secutronic on 18 October 2018. In the PREFACE the parties record that “By virtue of this MOU” they intend to reflect all points of agreement they have reached “concerning their future collaboration and combination of respective capabilities towards having ‘SEED’ as a local sponsor for a new company to be formed in Dubai, UAE.” The new company (“NewCo”) will be registered by Secutronic and will have the additional business support of the SEED team members.
8. Two matters set out in the MOU should be mentioned.
(a) The first relates to the Annual Fee for year 1 which is set at AED 1,200,000 and is payable in three instalments, viz. AED 200,000 due upon signing the agreements referred to in the MOU, AED 500,000 due on 10 January 2019 and the remaining AED 500,000 due on 10 July 2019. The fee includes SEED Sponsorship, the cost of the licence, initial government fee and PRO services, business workshops for business development plans, business development meetings, SEED logo business card, SEED and The Private Office website presence, and office space “TBD” (presumably meaning “to be discussed or decided”).
(b) The second matter relates to the “Target for year 1” which is set at AED 30 million “(to be achieved together)”. I understood this figure to be for revenue, not profit, but nothing turns on this. It is stated in terms that the parties agreed on a target of AED 30 million for the first year of their collaboration. Once that target is reached, a sum of AED 600,000 “will be fully deducted from the revenue share owed by Secutronic to SEED on revenues that are achieved together.” It should be noted, however, that earlier in the MOU the “Revenue share” is described as “TBD (on activities involving SEED)”, “TBD” presumably again standing for “to be discussed” or “to be decided”.
9. The MOU concludes with a paragraph in the following terms:
“The Parties will describe the details of this collaboration in a separate agreement, i.e. “Cooperation Agreement, Side Shareholder Agreement and Revenue Sharing Agreement” which will specify in depth the terms and conditions of the collaboration between the parties. These formal agreements will be drafted within 3 working days from the date of signing this MOU and must be signed within 7 days from the date of receiving the agreements; otherwise this MOU and the Committee Approval Letter will be null and void.”
I have already mentioned that, although dated 18 October 2018, the MOU was not in fact signed until 7 November 2018. Accordingly, the time limits of 3 and 7 days referred to in that paragraph ran from that date.
The Side Shareholders Agreement (the “SSA”)
10. The SSA is dated 12 November 2018. Its purpose can be taken from the PREAMBLE which is stated to be an “integral part of this Agreement”. The PREAMBLE recites that Secutronic (in this Agreement referred to as “the Second Party”) wishes to carry out its business activities in the UAE by registering a limited liability company in Dubai under the commercial name of Secutronic Middle East LLC (or some other approved name), which company is to have an authorised and paid up share capital of AED 300,000. This is the “NewCo” referred to in the MOU. It goes on to refer to the requirement under UAE law for such a company to be constituted with UAE nationals holding not less than 51% of its total share capital. It notes that SEED (referred to as “the First Party”) has willingly cooperated with Secutronic to enable Secutronic to register and maintain the new company in the commercial register in Dubai, notes that SEED has not contributed its share of AED 153,000 (i.e. its 51%) to the paid-up capital of the company, and confirms that Secutronic will control, manage and run the company under its own responsibility, in its own manner, and at its sole discretion without causing any liability to SEED.
11. Details of the arrangements are then set out. The following should be noted:
(a) In Article 2, it is declared (a) that SEED has not paid the value of its 153 shares (its 51% of the shares) and is the holder of those shares in name only and (b) that the relationship between the parties is not a partnership but rather one in which SEED acts only as a sponsor in consideration of an annual fee (or “Sponsorship Fee”) to be outlined in the CA and to take effect on the “Effective Date” of the CA.
(b) Article 3 sets out various Covenants on the part of SEED in relation in particular to the provision of assistance to the new company to help it comply with local laws and formalities. The following paragraphs are of importance to this dispute:
“1. The First Party hereby undertakes to provide the company with all the assistance required for the carrying on of the activities of the company in accordance with the local authorities’ requirements, including but not limited to, signing all the necessary papers, documents, forms, visas, residence permits etc. In general, to assist the company in getting any permit or license necessary for its business, employees and its property.
2. The First Party undertakes to help the Second Party to renew annually the company’s license with the Department of Economic Development, Chamber of Commerce, Commercial register, or any other governmental or official department or ministries ...
...
4. The First Party shall, upon 30 days notice placed by the Second Party, transfer his 51% in the share capital of the company to any third-party nominated by the Second Party without any objection or claim for consideration, whatsoever & for whatsoever reason against such transfer. ...”
I need not set out other provisions of the SSA. It should be noted, however, that it is expressly stipulated in Article 1 that the SSA and the CA should be read in conjunction with each other.
The Cooperation Agreement (the “CA”)
12. The CA is dated 17 December 2018. It begins in its PREFACE with the following statement:
“By virtue of this Agreement, the Parties intend to reflect all points of the Memorandum of Understanding they reached on the 1st October 2018 concerning the collaboration and towards supporting and launching the Complete range of ETE ELV, Smart Solutions i.e. PSIM (Physical Security Integrated Management), Consultancy, Design and Physical Security and System Integrator SERVICE across the United Arab Emirates.”
Although the date given for the Memorandum of Understanding (1 October 2018) is incorrect, it was not in dispute that the reference is to the MOU dated 18 October 2018 discussed above.
13. In the CA, SEED and Secutronic are again sometimes referred to respectively as “the First Party” and “the Second Party”. For present purposes the kernel of the CA is to be found in Article 2. Other Articles deal in the main with Intellectual Property, Confidential Information and the like, which are not relevant to this dispute.
14. I set out the material parts of Article 2 below:
“ARTICLE 2 - TERMS OF THE BUSINESS AND STRUCTURE
This Agreement shall be the general framework for the conduct of joint operations between the Parties. However, it is already set forth that the Parties will describe the details which will specify in details and in depth the terms and condition of the parties collaboration.
The parties agreed on the following:
1. SEED agrees to be the Sponsor and Strategic partner for The Second Party in the United Arab Emirates and agrees to provide the following services to The Second Party;
a. The Second Party shall be allowed to capitalise on SEED’s existing network and contacts in the private and public sector in the United Arab Emirates.
b. To assist with any legal or financial requirements (Does not include any form of Legal fees required).
c. To assist the staff with private or public tenders.
d. Business Workshops for Business Development Plans.
e. Ability to have the SEED logo on the company business card.
2. The Second Party agrees to have SEED as a sponsor and strategic partner in the United Arab Emirates.
3. The Parties agree to collaborate with the objective of providing support to promote Secutronic services to any organisation (private or public) interested within the United Arab Emirates.
4. The First Party acknowledges that the Second Party requires their assistance in the marketing and selling of products and services in the United Arab Emirates and agrees to introduce the Second Party to potential clients and partners as part of this Cooperation Agreement.
5. The Second Party agrees to pay the First Party a mutually agreed ongoing percentage of the gross revenue generated for any clients or partners introduced to the Second Party by the First Party. This percentage and term shall be articulated in a separate Agreement known as the Revenue Sharing Agreement.
6. This Agreement is drafted between SEED as a sponsor and strategic partner, of which the Second Party agrees to pay an annual fee in the amount of AED 1,200,000 ...
7. The Second Party agrees to make three payments to The First Party on the day of signing the agreements; the initial payment of AED 200,000 ..., the second payment of AED 500,000 by January 10th 2019, and the third payment of AED 500,000 by July 10th 2019. The initial payment is due on the date of signing this agreement.
8. The Second Party agrees to pay for the PRO service fee and drafting of related legal documents and initial government fees at a cost of AED 80,000 …”
Three definitions are relevant here in the context of endeavouring to understand the legal relationship between the parties under this agreement. First, “PRO” is an abbreviation for Public Relations Officer “and is a term used for the area of business that is responsible for any government related paperwork and company setup”. Second, “Sponsor” is defined as “the Individual that shall legally allow a new company to be formed in the United Arab Emirates (UAE) and shall be a shareholder required as per UAE law.” And third, the term “Strategic Partner” is defined as “an individual or company that will provide a collaborative approach to source new business.” In terms of the CA, SEED agreed to be the Sponsor and Strategic Partner of Secutronic in relation to its new and expanded business in the UAE.
15. I need not set out paragraphs 9-13 of Article 2. However paragraph 14 is relevant. It is in the form of a table headed “Summary Financial Information”. Included within the Table are details of the Annual Fee of AED 1,200,000 and the terms of payment, the figure of AED 80,000 for PRO Services, the contract start date of 15 November 2018, the Agreed Revenue Share of 5% of gross revenue “for all projects introduced and worked on by SEED”. There is also reference to the Annual Target of AED 30 million and, under the heading “Deductibles”, the statement that upon reaching the annual revenue target the sum of AED 600,000 inclusive of VAT shall be deducted from the revenue share owed from Secutronic to SEED.
16. I should just mention two other Articles of the CA.
(a) Article 6 “TERM AND TERMINATION” provides that the CA is effective for 12 months from the date it is signed unless otherwise terminated pursuant to the terms of the agreement, and might be extended by mutual written agreement of the parties.
(b) Article 8 (“OTHER”) provides in paragraph 3 that “this Agreement [i.e. the CA] contains the entire agreement between the Parties with respect to the subject matter here of, and supersedes any prior or contemporaneous oral or written agreements, commitments, understandings, or communications between the Parties regarding the subject matter hereof.”
The Revenue Sharing Agreement (the “RSA”)
17. The RSA is also dated 17 December 2018. Recitals B and C set out the nature and purpose of the relationship between the parties as formed by the various agreements. They are in the following terms:
18. Articles 2 and 11 of the RSA are relevant and are in the following terms:
“ARTICLE 2 – REVENUE SHARING ARRANGEMENT
1. In consideration of mutual promises contained in Recitals of this Agreement, the Second Party hereby agrees to the Revenue Sharing Arrangement with SEED in accordance with the terms and conditions set out hereinafter.
2. The Second Party hereby agrees to share 5% (Five Percent) of the gross revenue from the company for all projects introduced and worked upon by SEED.
3. The Revenue Sharing Arrangement, commencing from the date of this Agreement, shall be subject to the timely disbursement, reimbursements and intangible support, as laid out in the Business Plan and in this Agreement.
ARTICLE 11 – ENTIRE AGREEMENT
This Agreement and any other documents attached hereto or referred to herein, integrate all the terms and conditions mentioned herein or incidental hereto and supersedes all oral organisations and prior writings with respect to the subject matter hereof.”
19. The substance of the intended arrangement is set out in Appendix A to the RSA, in the following terms:
“APPENDIX A – PROJECT PLAN
Below is an outline of the SEED Action Plan for Strategic Partnership with SECUTRONIC. This is not a comprehensive and will be updated as necessary in conjunction with the Project Plan, completed in the Workshops.
| Tasks | Tasks Responsibility |
| Review Project Plan & Set Up Introduction Session | SEED |
| CEO Introduction Session | |
| Workshop 1 | |
| Review Company Wish List | SEED/Partner |
| Review Target Criteria | SEED/Partner |
| Agree on Next Steps | SEED/Partner |
| Workshop 2 | |
| Present compiled information & insights | SEED/Partner |
| Create clear strategy for Discovery Meeting | SEED/Partner |
| Aligning Sales Process with Prospects Buying Journey: | Partner |
| Agree on when meeting setup will start | SEED/Partner |
| Workshop 3 | |
| Create forward plan/road map with Partner | SEED |
| Ongoing Execute Strategy & Review Results to Refine Strategy | SEED/Partner” |
20. Finally the Addendum sets out the “key deliverables” by SEED for Business Development for Secutronic:
“ADDENDUM
This Addendum outlines the key deliverables by SEED for Business Development Services for SECUTRONIC (“Partner”). This document is not comprehensive and is intended to outline the scope and deliverables of the cooperation between SEED and Partner solely with respect to Business Development Services. The details of the activities of each party (“Activities”) are set out in the “Project Plan”.
SEED RESPONSIBILITIES
SEED agrees to provide the benefits to the Partner as outlined in the Project Plan. These activities will include, but are not [to] be limited to:
STAGE ONE – Introduction workshop/s:
Coordinating joint strategy, planning, and sales initiatives which are current and planned.
Duration: No time constraint and could vary in duration based on progression of workshops
- Conducting pre-analysis with a potential customer as part of the overall sales effort
- Comprehend, localise and enhance positioning, pitch and presentation
- Gather intelligence jointly & share knowledge and experience through workshops
- Assess needs & opportunities of target accounts through discovery meetings attended by SEED
STAGE TWO – Meeting Set Up
SEED will identify and introduce the Partner to Prospective Clients for the Services supplied by the Partner, pursuant to the terms and conditions of the Project Plan.
Duration: Will commence after the conclusion of stage one
- Engaging in the recommendation and promotion of Partner’s services to Prospective Clients
- Conducting wish list and network outreach to arrange meetings and calls with Prospective Clients
- Scheduling & attending introduction meetings with Partner
- Assisting and advising on bidding for Prospective Client opportunities.
- In Addition;
- SEED will not negotiate or conclude terms for the supply of Partner’s services to Prospective clients
- SEED will provide support with target accounts throughout the sales process from the first meeting until collection. However, SEED will not be responsible for following up with target accounts past the first meeting.
- It is not the mandate of SEED to sell on behalf of the Partner. SEED will introduce and promote the Partner to Prospective Clients.
- SEED will not start Stage Two until the Partner completes and satisfies Stage One.
PARTNER RESPONSIBILITIES
- It is the Partner’s responsibility to provide all the items required and set out on the Project Plan to conclude stage one and progress to Stage Two.
- It is the Partner’s responsibility to provide a detailed Wish List of Prospect Clients. However, once the Partner completes Stage One and satisfies the requirements, SEED may compensate [i.e. expand] the wish list with its own network outreach.
...
Additional notes
SEED will use its best efforts, skill and experience in rendering the Services described under “SEED responsibilities,” however, our Business Development efforts focus on the preparation & quality of opportunities and not the number of meetings.
...
... in the event that the Partner delays due payments, we will seize [i.e. cease] services until such a time as the outstanding amount is paid.”
The overall effect of the agreements – in summary
21. It is convenient at this stage to summarise the combined effect of these agreements. I do so in the following paragraphs.
22. The relationship of the MOU to the other agreements (i.e. the SSA, the CA and the RSA), and its continued existence or validity after the coming into force of those other agreements, has been a matter of some controversy, though it is unclear to me that it is of any materiality to the resolution of the issues between the parties. For what it is worth, it seems to me to be clear that those later agreements entirely supersede the MOU. This is clear both from the terms of the MOU itself and from the express provisions of the CA and the RSA. Thus, the MOU concludes with the statement that the parties will describe the details of their collaboration “in a separate agreement”, and then specifies the three agreements “which will specify in depth the terms and conditions of the collaboration between the parties.” The link between those agreements and the MOU is made clear in the following sentence which sets a time limit within which those other agreements must be concluded, otherwise the MOU will be null and void. The other agreements were not in fact concluded within that time limit, but that sentence clearly anticipates that the MOU will either be superseded by the other agreements, if concluded within the specified time, or will simply become null and void. It was not the intention that the MOU would continue in force as a contractual document setting out the subsisting agreement between the parties. The CA provides in Article 2 that it, i.e. the CA, is to be “the general framework for the conduct of joint operations between the Parties.” Further, both the CA (in Article 8.3) and the RSA (in Article 11) contain variants of “entire agreement” clauses, providing that the CA or RSA, as the case may be, contains the entire agreement between the parties and supersedes all prior writings with respect to the subject matter of that agreement. It is, I suppose, conceivable that the MOU contains some matters which are not the subject of the CA or RSA and that, to that extent, the MOU continues to exist in an emasculated form; but nothing relevant has been drawn to my attention, and the better view is that the MOU is entirely superseded by the subsequent agreements.
23. SEED’s role was to act as Secutronic’s Sponsor and Strategic Partner. As is made clear in the CA, these are quite separate roles. The role of a Sponsor is to take such steps as are necessary to enable the new company to be formed in the UAE and to act as a shareholder in the company to the extent required by UAE law. Many of the details of that Sponsorship role are set out in the SSA. The role of a Strategic Partner is quite different. A Strategic Partner assists the client company, i.e. Secutronic, by helping Secutronic understand and break into the UAE market, which had been hitherto closed to them, introducing Secutronic to potential clients and partners, and generally assisting Secutronic in growing its business in the UAE. It is, by its very nature, a collaborative role, and the nature of that collaboration, and some of the intended detail, is set out in the RSA, and particularly in Appendix A and the Addendum thereto.
24. The “Annual Target” of AED 30 million mentioned in the MOU is repeated in tabular form in Article 2 paragraph 14 of the CA. But it is important to be clear: this is a target to be aimed at, not a figure for revenue which puts one party or the other automatically in breach if it is not achieved. The clue is in the word “target”. The way in which the target was agreed, as described by Ali Zyadat in evidence – and I come back to this point below – makes it clear that the AED 30 million “target” was simply based upon an aspiration that the new agreement between Secutronic and SEED would result in a three or fourfold increase in Secutronic’s business in Dubai. Neither party could have been agreeing that failure to achieve that target without more would automatically result in that party being in breach. And it is also clear from the nature of the “collaborative” relationship between the parties. Ultimately it was up to SEED to assist Secutronic in its introductions to potential clients and for Secutronic to decide whether or not to do a deal with parties identified as potential clients – it would be absurd to construe the provision for an AED 30 million annual target as a provision putting either party in breach simply because the target was not achieved when the failure to achieve the target might be due to the failure of either one of them or neither or both. At times during the submissions on behalf of Secutronic it was suggested that SEED was in breach of the agreements simply by reason of that target not having been met. Any such suggestion is without substance.
25. In return for its dual role as sponsor and strategic partner, SEED was to be paid an annual fee of AED 1,200,000, payable in three instalments, viz. AED 200,000 on signing the agreements, AED 500,000 on 10 January 2019 and AED 500,000 on 2 September 2019 (extended by agreement from 10 July 2019).
26. It was contended on behalf of Secutronic that SEED’s entitlement to be paid the annual fee of AED 1,200,000, or alternatively the third instalment of that fee, in the sum of AED 500,000, was contingent upon the target of AED 30 million having been achieved. That is wrong. The same points as are mentioned in paragraph 24 above also militate against this contention. But the fallacy of the argument can also be demonstrated by an analysis of the timetable for payment of the three instalments. Each instalment was to be paid prior to the year end, at a time when (clearly) it could not be said for certain whether or not the target would be achieved. It would also mean that SEED’s entitlement to be paid the agreed annual fee could, in some cases, be contingent upon Secutronic’s performance in expanding its business and its decisions on whether or not to conclude a deal with a potential client. One example, admittedly extreme, shows the absurdity of the submission. Assume that Secutronic’s business had expanded successfully during the first year, so that revenue had reached the level of AED 29 million close to the year end, within range of the annual target of AED 30 million, and Secutronic was then offered the possibility of concluding another deal which, if concluded within the same year, would bring the figure for revenue during that year to in excess of AED 30 million. In those circumstances, if this argument were correct, Secutronic could deprive SEED of its entitlement to the whole of its fee by declining to enter into that new deal or by delaying the negotiations so that it was not concluded until into the following year. This would not make sense.
27. In addition, SEED was also to receive a 5% share of gross revenue earned by Secutronic from any project introduced and worked upon by SEED. It appears to be a matter of concession by Secutronic that that the project for installing a security system for the Villa Project at the King’s School, for which Secutronic was paid AED 14,000 plus VAT, was introduced or worked upon by SEED. On that basis SEED is entitled to 5% of that fee, in the sum of AED 700.
28. It was made clear in the Addendum to the RSA that if Secutronic was in default by failing to make payments when due, then SEED would cease the provision of services to Secutronic until the outstanding amounts were paid. This is relevant to Secutronic’s complaint that SEED had ceased all services in September after the final instalment, due on 2 September 2019, had not been paid by Secutronic. The short answer to that complaint is that, if Secutronic had withheld an amount due to SEED without any lawful excuse, then in terms of the Addendum to the RSA, SEED was entitled to cease provision of services to Secutronic until the outstanding amount was paid. So the question whether SEED was entitled in September to notify Secutronic that it would cease the provision of services to Secutronic under the agreements turns on whether Secutronic had any lawful basis for not paying SEED the third instalment of the annual fee by 2 September 2019.
The evidence
29. I heard evidence from Ali Zyadat (“AZ”), the Regional Manager of Secutronic FZE, an entity affiliated with Secutronic, and from Hisham Al Gurg (“HAG”), the CEO of SEED. Each gave his evidence under reference to witness statements filed in process before the Trial; and both were cross-examined on their evidence. They were each impressive witnesses, with a good grasp of the material filed in court. I formed the view that both were honest, attempting to put before the court their genuine belief and understanding of the events under discussion. But where they differed in their account of events, I generally had no difficulty in preferring the evidence of HAG. It was more consistent with the documents. His understanding of what was going on at material times, and what parties should have been doing, was more consistent with a proper understanding of the agreements and what they did or did not require by way of performance. By contrast, I considered AZ’s evidence to be more aspirational, judging SEED’s conduct not by reference to what the agreements required of them but by reference to what Secutronic believed it was getting when it signed up to enlist the developmental assistance of “the Ruler’s Office”, coming close to a complaint that SEED had, on occasions, not sufficiently used its influence – meaning its status as the Ruler’s Office rather than by making some illicit payments – to advance Secutronic’s cause with a particular potential client. Other illustrations of this appear from the discussion below of three particular topics: (a) how the parties came to agree a target of AED 30 million per year for the first year; (b) the problems encountered in obtaining SIRA approval; and (iii) the parties’ understandings as to how the Agreements would work in practice.
(a) How the parties came to agree a target of AED 30 million
30. At times during Secutronic’s case it appeared to be suggested that the target of AED 30 million was a target proposed by SEED and that SEED accepted responsibility for achieving it. For example, in his witness statement, after stating that SEED specifically represented that “they could easily introduce new clients and secure their business”, AZ added that SEED “even convinced us that with their assistance we could easily achieve a target of AED 30,000,000 in the first year of collaboration.” And again, around the time of concluding the MOU, SEED was “very keen on setting the target of AED 30 million and the ways to achieve it.” The true position, as it emerged in documentary and oral evidence, was rather more nuanced.
31. At a very early stage of the potential relationship, in anticipation of presenting the proposed cooperation between the parties to SEED’s executive committee on 3 September 2019 for their initial approval, Osama Smadi of SEED emailed AZ asking him to “share with us your expectations regarding the yearly financial targets after partnering with The Private Office.” AZ’s response to that enquiry was in the following terms:
“Dear Mr Osama
Thank you for your email. We normally close around 110 million SAR in Saudi. For UAE, we do 7-10 Million AED as we are in Free Zone and work mainly as a technical support arm to our Saudi branches. Initially, we expect to raise the targets by 3–4 times in UAE after the partnership with the Private Office. For the coming years the expectations will be more accurate as we will see the strength of the partnership, and the capabilities we will have. ...”
In cross-examination by Mr Hussein, AZ was asked: who proposed the figure of 30 million? His answer was straightforward:
“This was a question from the Private Office to us as to discuss what is the expectation target that we can close together here in UAE? So we suggested to them that if we are closing the 4 to 7 million, we assume that we will have treble of that or something so we agreed together on 30 million.”
He answered a follow up question in this way:
“... so we told them that we are closing in Saudi around 110 million. In Dubai we are about 4 to 7 million so we are expecting from your side to help us to achieve around 30 million.”
It is clear from this that the target of AED 30 million was largely of Secutronic’s making – it was not something pressed upon them by SEED. In this passage in his evidence AZ also confirmed that the target figure was not simply for Secutronic’s benefit. It was also of importance to SEED since, in addition to the annual fee, SEED anticipated that they were to get a share – originally discussed at the level of 10% but ultimately agreed at 5% – of the revenue earned by Secutronic as a result of the collaboration between the parties. It was in Secutronic’s interest to show SEED that they could realistically expect to achieve the stated target.
32. The target of AED 30 million, first articulated by Secutronic, quickly became established as an agreed part of the proposed agreements. At an early stage SEED delivered a presentation showing that figure as the target. On 10 October 2019 Mr Osama (of SEED) emailed AZ about a number of points still under discussion. He said: “Target is at least 30M AED for year 1 and will be discussed for year 2.” He went on to say that as soon as they reached that 30 million target, AED 600,000 would be deducted from shared revenue/ commission. This too found its way into the Agreements (viz. the Table in Article 9 paragraph 14 of the CA).
33. As was to be expected, negotiations continued into November 2019. On 25 November 2019, Nathalie Barakeh of SEED emailed Yasser Nagadi of Secutronic responding to his suggestion that the annual target should be “a SEED target and not Secutronic”, since it was SEED who was taking fees and revenue sharing to generate business and raising the question of what would be the impact on the agreement if Secutronic failed to achieve it in the first year. Ms Barakeh responded to the effect that the annual target “is a mutual target for both parties to work hand in hand to achieve”. The impact of not achieving the target would be renewal or termination of the agreement depending on parties’ evaluation of the situation.
34. In summary, therefore, the target of AED 30 million originated from Secutronic. As a target it was, on the part of Secutronic, both aspirational and, in their view, realistic, being based on their sales figures in the UAE before any assistance from SEED and guesstimating – they had no material on the basis of which to make a reliable estimate – that the proposed partnership with SEED would boost their sales by a factor of 3 or 4; and, on the part of SEED, the target was based entirely on Secutronic’s representations as to pre-agreement business in the UAE and Secutronic’s guesstimate that partnership with SEED would enable that business to expand by that factor. I am satisfied that the target figure of AED 30 million was in no sense a figure deriving from SEED or forced upon Secutronic by SEED. Given the manner in which the issue developed, it could not be said that achieving this target figure by the end of the first year was an obligation on either party, but specifically an obligation placed on SEED. Nor, given that the figures for past performance underpinning the target figure of AED 30 million all came from Secutronic, does it seem likely that SEED would have been willing to make their entitlement to be paid the fee of AED 1,200,000 contingent upon that target figure being achieved.
(b) The problems encountered in obtaining SIRA approval
35. There is no dispute that SEED was under an obligation to provide NewCo (i.e. Secutronic LLC) with all necessary assistance for carrying out its business, including assisting the company in getting necessary permits or licences: see Article 3 of the SSA. The evidence (from AZ) was that the initial licence was obtained with the incorporation of Secutronic LLC in April 2019. But that only permitted the company to do a limited range of business. In order to carry out the full range of business the company required SIRA approval. SIRA stands for Security Industry Regulatory Agency. AZ explained that it was responsible for certifying companies for security and it regulated the market, setting standards; without SIRA approval a company such as Secutronic will not get a licence for certain types of work and cannot do that work. That was not challenged. Secutronic complain – and this was supported by AZ in his evidence – that despite constant reminders from them, SEED never obtained SIRA approval for these additional activities. It was, in short, SEED’s fault.
36. It is not in dispute that SIRA approval was not obtained by the time the Agreements came to an end – but the reason for that is very much in dispute.
37. HAG gave evidence about SIRA’s requirements for granting SIRA approval. He said this:
“... as far as I'm aware with SIRA's requirements, they require three engineers who are employees of the company who is applying for the licence to be certified by SIRA. To my knowledge, in order to be certified by SIRA, you have to do certain training by SIRA and after training and only then SIRA could give you their approval, subject that you meet any other requirements that they have at the time of application.”
I did not understand this to be challenged.
38. Starting at the beginning, in March 2019 there was an email exchange between AZ and Suheil Rabeh of SEED concerning the company formation process for the NewCo. So far as concerned the activity of the company, to be entered on the trade licence for the company, Mr Rabeh suggested that they should “start with a normal activity that does not require Sira’s approval, and change it later on.” It was suggested that the activity could be “electronics trading”. AZ’s response to this suggestion was: “Ok, please do it like this, and later you add the activities.”
39. Thereafter, once the company was formed, the parties addressed the question of how to obtain SIRA approval. On 1 May 2019 AZ sent an email to Suheil Rabeh of SEED attaching Secutronic’s “current SIRA Approval”, i.e. the SIRA approval already obtained and made use of by Secutronic FZE. He said this:
“Please find attached our current SIRA Approval. We need to convince them [i.e. SIRA] that this is on [one] company to avoid doing SIRA again for the new License. It is a long process of having three visas under the new license, training, exams, registration (2-3 months process).”
40. Efforts were made by SEED to get SIRA approval on this basis. On 18 June 2019, Norainah Hashim of SEED emailed AZ telling him that efforts to get SIRA approval on this basis had failed. She wrote:
“... please be advised that we have tried to get the approval based on the Free Zone License but it turned out that it is impossible.
However, to avoid any complications to the Free Zone, we have to proceed with separate & proper SIRA approval for the LLC.
And in order to get the approval, you are kindly requested for the following:
A member from Secutronic must attend a 2–3 hours training (keeping in mind that the training is only on Saturdays) and after the training, the attendee will receive a username and password of SIRA
Provide the username and password to us, and we will apply online for the undertaking letter.
Once the undertaking letter is approved by SIRA, we will proceed with Economic Department for the License Issuance.
Should you have any questions, please do not hesitate to contact us.”
41. AZ was asked about this in cross-examination. After some exchanges which are not relevant for present purposes, he was referred to an email which he sent to Nada Bashir of SEED on 25 June 2019. In that email he said this:
“As discussed, please find attached our engineers certificates (Thomas and Subia) ... [For] Rajeev we applied and his training is next month ...
Please inform SIRA that our engineers already have SIRA certificate. Can’t we use them for the new trade licence as we are one company?
If this is not working, we will have to certify some three guys from Saudi and this will be costly. Please try to avoid it.”
Nada Bashir responded by email the following day, 26 June 2019, in the following terms:
“As per my discussion with SEED PRO Team, we need only one of your engineers to attend the training since it is different company in front of the government. The one which they did it is for the free zone company (offshore), but the one we will be doing it is for LLC.
At this stage it is not required to allocate resources from KSA, we need just one of your current team in UAE to attend even if they did the training previously.”
42. This appears to contradict what was said about SIRA’s requirements in previous emails. HAG suggested that SEED may have persuaded SIRA to make an exception and to be more flexible. That seems a credible explanation and I accept it.
43. On 26 June, Norainah Hashim emailed AZ as follows:
“We got the verbal confirmation from SIRA officer that the attendee does not need to be under the LCC’s visa (it is not possible to get a written confirmation on this and it probably work with no issues).
Therefore, please suggest any of your team members to attend the training as per my previous email.“
HAG suggested that this was a further indication that SIRA was prepared to be flexible with both SEED and Secutronic. I find that credible.
44. The next email filed in court was an email from Nada Bashir to Thomas Cherian, an employee of Secutronic, sent on 7 July 2019, asking Mr Cherian to “kindly advise what happened with SIRA, and if any of your colleagues visit SIRA to do the training or not yet.”
45. On 30 July 2019, the CEO of Secutronic FZE wrote to SIRA stating that as Secutronic LLC wished to add the activities of installing security systems and equipment and trading in security systems and equipment to its current trade licence, “therefore, we kindly request your esteemed agency to give us a time limit for 60 days, we undertake to comply with all your applicable procedures.”
46. That application was submitted to SIRA (via SEED) at the beginning of August 2019. Secutronic LLC was given a time limit of up to 18 September 2019 to meet certain requirements. It appears – though the dates on the relevant letter from SIRA are slightly confusing – that Secutronic LLC failed to satisfy those requirements, namely to appoint engineers and technicians, by the required time, for which they were fined AED 2,020.
47. HAG explained it in his evidence in this way:
“after the training of the engineers, SIRA requested that Secutronic sign a memorandum of association for the trade licence, which asked the Economics Department to add activities to their licence, which Secutronic failed to do and as a result SIRA issued a warning stating that since they had failed to complete all the procedures of the trade licence and to appoint engineers and the technicians, they had not fulfilled their requirements and, therefore, they issued a fine of AED 2,020 for the violation of the previous commitment letter and failing to meet SIRA's requirements.”
48. It is difficult to know precisely what to make of all this. SEED’s obligation under the SSA was to assist Secutronic in its attempts to get SIRA approval. It cannot be said that SEED undertook that they would be successful in obtaining SIRA approval – the obligation was to use its best endeavours. This involved co-operating with Secutronic. This is what they did. Secutronic wanted to avoid the time and expense of starting from scratch. They wanted to persuade SIRA that they should be treated as the same company as Secutronic FZE. It was apparent from mid-June 2002 that this was not going to work. Further attempts were made, apparently at Secutronic’s request, but to no avail. In all of this I find it difficult to say that SEED failed to assist to the best of their ability. It is true that SIRA approval was not obtained by the time if the breakdown in relations in September 2019, but I do not find it established that this was something for which SEED was responsible.
(c) the parties’ understandings as to how the agreements would work in practice
49. SEED’s obligations under the agreements are spelled out in particular in the CA and in the Appendix and Addendum to the RSA. In terms of Article 2.4 of the CA, SEED was to provide assistance in marketing and sales and to make introductions to potential clients and partners. In terms of the RSA, SEED was to conduct workshops as set out in the Appendix and help identify prospective clients and make introductions. But it was no part of SEED’s obligations under the agreements to negotiate on behalf of Secutronic – that was for Secutronic alone. Secutronic appear to have taken a different view, as identified by HAG in this passage in his witness statement:
“The grievance of the Claimant [i.e. Secutronic] seems to be that SEED did not influence and/or coerce the independent businesses that it introduced to the Claimant to accept the deals. In this regard, reference is invited to notice dated 17 September 2019 addressed to SEED by the Claimant, wherein the Claimant seems to suggest that SEED was required to do more than merely introduce the parties. SEED could not have in any way transgressed its mandate and influenced its potential clients to accept the commercial terms of the offer, especially when the sole authority of negotiation and acceptance vested with the Claimant. SEED could only assist in introducing the clients to the Claimant and assist the Claimant with the marketing of the product to the clients introduced by it. SEED could not have in any way unreasonably influenced the commercial terms of the Claimants offer ... “
50. I consider that this passage from HAG’s evidence neatly summarises the difference between the parties on this aspect. Secutronic was hoping that SEED would use its influence, whatever precisely may have been meant by that, to persuade potential clients to do business with Secutronic. This emerged clearly from AZ’s evidence on behalf of Secutronic. But that seeks to place upon SEED obligations greater than those to which they agreed. In terms of the agreements, SEED’s role, so far as relevant to this issue, was simply to make introductions.
Secutronic’s claims against SEED
51. Secutronic’s claims against SEED are difficult to pin down. I summarise them here as they have been advanced by Secutronic at different stages of the case before setting out more succinctly my understanding of the real issues in the case.
52. In the Particulars of Claim, complaint is made about the change in SEED’s team delaying any meaningful progress in the early months, but this dispute was compromised and goes nowhere, because agreement was reached between the parties to extend the start date under the agreements until some 55 days after the date of signing the CA. There is a complaint that SEED stopped providing services in September 2019 when Secutronic failed to pay the third instalment, which Secutronic characterised as a “repudiatory breach” by SEED, but this again goes nowhere unless, for the reasons explained above, Secutronic can justify their own failure to pay that instalment (which remains unpaid).
53. Under reference to a letter from Secutronic dated 17 September 2019, there is a more general complaint that despite having paid the first two instalments of the fee, in the sum of AED 700,000, no progress appeared to have been made and the AED 30 million target was, as at that date, looking implausible. SEED had not used its influence in arranging meetings which were likely to generate business for Secutronic; it had not assisted with certain legal and financial matters as required under the terms of the CA, including the obtaining of SIRA certification; although it completed a number of workshops, SEED wrongly attributed the lack of ensuing business to Secutronic’s poor presentation and marketing; and SEED spent time looking for Secutronic to provide obscure services for which there was no demand in the market and thereby lost good business opportunities.
54. In summary, Secutronic’s case appears to be that SEED was in “fundamental breach” of the agreements, especially the CA, by failing to act in good faith and failing to perform its obligations thereunder to act as both sponsor and strategic partner, despite having received payments for this. The consequence, according to Secutronic in this pleading, is that the agreements were automatically terminated or came to an end when Secutronic accepted the breaches as having this effect in their letter of 17 September 2019.
55. In its Reply (in paragraph 7.13) Secutronic refers to SEED’s “sole obligation” being “to endeavour to make its best efforts to provide introductions that will enable both parties to achieve the projected sales target of AED 30 million which is ... the main reason of collaboration between the parties” and complains that “no effort has been provided by [SEED] and [SEED] has failed to support [Secutronic] to achieve the goal of the business ..."
56. In its skeleton argument for Trial, Secutronic sought to simplify matters. It identified the following five issues as critical to its case against SEED: (i) whether the parties have fulfilled their obligations under the MOU, the CA, the RSA and the SSA; (ii) whether achieving the AED 30 million target is a binding obligation and whether SEED’s right to receive the annual fee was contingent on parties meeting the AED 30 million target; (iii) whether Secutronic is bound to pay the balance of AED 500,000 as the third and final tranche of sums due under the agreements; (iv) whether SEED is entitled to payment of AED 700 from Secutronic, that sum being 5% of revenue from King’s School project, plus interest thereon; and (v) whether Secutronic is entitled to have the 51% share of NewCo transferred back to it?
57. In its written Opening Statement lodged in advance of the Trial, Secutronic complained that SEED had failed to comply with its obligations under the agreements in generating business deals and achieving the shared annual target and also in getting the SIRA approval – instead, it kept blaming Secutronic for its own failures.
58. In its oral Opening Submissions at Trial, Secutronic identified the following alleged breaches by SEED: (i) it failed to arrange meetings for Secutronic with the right key players (in breach of the RSA); (ii) it failed to obtain a commercial licence for Secutronic with the relevant business activities, viz security service systems and equipment installation services, security systems and equipment trading services (in breach of Article 3(1) and (2) of the SSA); (iii) it failed to obtain SIRA certification for Secutronic, which was a prerequisite for conducting relevant business activity i.e. security systems equipment installation and security systems equipment trading services (again, in breach of Article 3(1) and (2) of the SSA); (iv) it failed to open a credit facility for Secutronic (in breach of Article 2(1) of the CA); (v) it failed to submit any public or private tenders (in breach of Article 2(1) of the CA); and (vi) it delayed in conducting workshops (in breach of Article 2(1) of the CA). As a result of some or all of these failures, it is said, Secutronic could not launch its services in the UAE.
59. Finally, in its Closing Submissions after the evidence at Trial, the following submissions were made: (i) the AED 30 million target was a joint responsibility – both parties have to cooperate and perform their part in trying to achieve it – but, nevertheless, the mere fact of not achieving that target puts SEED in breach of the agreements; and (ii) Secutronic is a GCC national and as such did not require a local sponsor for it to be able to conduct business and provide services within the UAE – it had all the licences and approvals it needed to conduct the business and the only reason for Secutronic coming to SEED for assistance was to expand and grow their business within the UAE to reach expected target of 30 million – but the fact was that neither the (expanded) trade licence nor the SIRA certificate were in place by the time that SEED ceased to provide its services to Secutronic in September 2019.
The issues to be decided
60. In light of the above it seems to me that the following issues fall to be decided:
(1) What were the parties’ respective obligations under the SSA, the CA and the RSA;
(2) Whether the parties have fulfilled those obligations and, if not, in what respects they have failed to do so;
(3) Whether achieving the AED 30 million annual target was a binding obligation and whether SEED’s entitlement to receive the annual fee was contingent on that target being achieved;
(4) Whether Secutronic is bound to pay the sum of AED 500,000, being the third and final instalment of the annual fee payable under the agreements;
(5) Whether SEED is entitled to be paid the sum of AED 700, that being 5% of revenue earned by Secutronic from the King’s School project;
(6) Whether Secutronic is entitled to have the 51% share of NewCo, presently held by SEED, transferred back to it?
I have dealt with most of these questions in the earlier parts of this judgment. Nonetheless I shall address each issue in the discussion which follows.
Discussion
61. Although spread over three separate agreements, the parties’ mutual obligations are relatively uncomplicated. I have attempted a brief summary in paragraphs 21-28 above. Of particular importance is SEED’s dual role as Sponsor and Strategic Partner.
62. Before turning to consider whether SEED fulfilled its obligations under the agreements, I should note one very important point. In her closing submissions on behalf of Secutronic, in answer to a question from the bench Ms Bejoy explained that she wasnotadvancing a case that Secutronic had suffered particular losses as a result of particular breaches by SEED of their obligations under the agreements; and no evidence was led by Secutronic to quantify any particular losses. Her case was quite different. Her case was that SEED had failed altogether to perform its obligations under the agreements, and as a result of that failure Secutronic was entitled to cancel the agreements, make no further payments to SEED and, indeed, recover all the money it had already paid to SEED. It is a case, in effect, of repudiatory breach by SEED accepted by Secutronic; or, put another way, a case of total failure of consideration.
63. One problem with this approach, on the facts of this case, is that Secutronic took no steps during the currency of the agreements to accept the repudiation, if that is what it was, and bring the agreements to an end. Instead Secutronic took steps throughout which were consistent with the agreements remaining in force. In June 2019, in answer to a demand for payment of the third instalment of the fee, Secutronic pointed out that, because of the extension that had been given earlier on, the third instalment was not due until 2 September 2019. The parties continued to work together in the meantime. In September 2019, when pressed to make the payment which had been outstanding since 2 September 2019, and when told by SEED that if payment was not received by 18 September SEED would have no choice but to cease all services under the agreements, Secutronic complained about SEED’s performance under the agreements; but they followed that up with a letter in November 2019 complaining about SEED’s decision to freeze all services under the agreement. Secutronic informed SEED that it would not be renewing the agreement for a further year; but nothing was said to suggest that the agreement then in force was being terminated. In those circumstances, having affirmed the agreements and done nothing to bring them to an end, it is not open to Secutronic after the event to say that they have rescinded the agreements on account of SEED’s alleged failure to perform and to claim to be excused from payment of the instalment due on 2 September 2019 and to be repaid the instalments paid by them in December 2018 and January 2019.
64. The two main grounds of complaint, putting the matter compendiously, are: (i) SEED’s alleged failure properly to perform its obligations as strategic partner to Secutronic; and (ii) SEED’s alleged failure to obtain necessary licences and certification for Secutronic. I propose to deal briefly with each in turn.
65. The allegation that SEED failed properly to perform its obligations as strategic partner to Secutronic must be informed by what those obligations were. I have identified the main difference between the parties in paragraphs 49 and 50 above. It was no part of SEED’s obligations under the agreements to negotiate on behalf of Secutronic. SEED was to provide workshops and help to effect introductions to potential clients. I am satisfied that they did this. In his evidence HAG gave a number of examples of introductions made by SEED during the currency of the agreements. This evidence was not seriously challenged and I accept it. I emphasise again that Secutronic’s case is not to the effect that on any particular deal SEED failed to make the appropriate introduction as a result of which they (Secutronic) lost the opportunity of doing a particular deal and suffered loss in consequence. Secutronic’s case, in broad terms, is that SEED did nothing. The evidence does not support that and I reject that part of Secutronic’s case.
66. The allegation that SEED failed to obtain necessary licences and certification for Secutronic comes down, in the end, to the criticism of SEED’s efforts to obtain SIRA approval. I have already discussed this in some detail. I am not persuaded that SEED was to blame for the failure to obtain SIRA approval by the time the agreements effectively came to an end in September 2019. A significant contributory reason, perhaps the main reason, for the lack of progress was Secutronic’s desire to avoid the time and expense of making a fresh application to SIRA on behalf of Secutronic LLC. The attempt to cut corners, encouraged by Secutronic, backfired. That was not SEED’s fault.
67. I have already discussed the status of the AED 30 million target set out originally in the MOU and carried over into the CA. It was a target, not a binding obligation (on either party) and not a condition precedent to SEED’s entitlement to be paid the annual fee specified in the agreements.
68. It follows that Secutronic’s claim to recover the first two instalments of the fee (AED 200,000 paid in December 2018 and AED 500,000 paid in February 2019) fails. It also follows that Secutronic is bound to pay SEED AED 500,000, that being the third instalment of the annual fee payable under the agreements. That sum should have been paid on 2 September 2019. Secutronic’s defence to that claim fails.
69. In light of those findings, it follows that as at 2 September 2019, or the following day, in default of such payment from Secutronic, SEED was entitled to cease the provision of services under the agreements. That was expressly provided for in the Addendum to the RSA. SEED was not in breach of the agreements by taking that position.
70. There is no doubt that SEED was involved in assisting Secutronic in obtaining the contract for the King’s School project. Secutronic was paid AED 14,000 plus VAT for that work. SEED is entitled to 5% of that sum, i.e. AED 700 (excluding VAT). It is a small sum, but there is no defence to this claim.
71. In summary, therefore, subject to the point discussed in the next paragraph, Secutronic’s claims fail and must be dismissed. SEED is entitled to succeed on its Counterclaim (a) in the sum AED 500,000 and (b) in the sum of AED 700. I shall award interest on those sums as set out below.
72. I turn, finally, to an entirely separate point. Secutronic claims to be entitled to have the 51% share of NewCo, presently held by SEED, transferred back to it so that it can dissolve the company. The SSA makes it clear that the 51% shareholding is held by SEED solely for the purposes of complying with UAE law. Article 3 paragraph 4 of the SSA provides that SEED will, upon 30 days’ notice given by Secutronic, transfer its 51% in the share capital “to any third-party nominated by [Secutronic] without any objection or claim for consideration, whatsoever & for whatsoever reason against such transfer.” This provision does not in terms say that SEED will transfer the shareholding back to Secutronic, and there may be difficulties in UAE law about a transfer of the majority shareholding into a non-UAE company. I was not addressed in detail on this point. It seems to me that Secutronic must be entitled to take steps to dissolve the company, but the precise mechanism may require some careful consideration.
73. What I propose to do is to indicate in this judgment that a means should be found to enable this to be achieved and require the parties to attempt to agree the appropriate mechanism. If for some reason no agreement can be reached it will be open to Secutronic to apply to the court for a further order to facilitate the dissolution of the company. I shall in the formal Order disposing of this case expressly provide that Secutronic shall have liberty to apply in respect of this matter.