Dubai Court of Cassation Recognises "Without Prejudice" Principle

The common law concept of "without prejudice" – where communications representing a genuine attempt to settle a dispute cannot be admitted as evidence in court – has not historically been recognised in the UAE Courts.  However, in the case of DCC 486/2024, the Dubai Court of Cassation (the "DCC") refused to admit evidence of alleged concessions made by the defendant during unsuccessful settlement negotiations on the basis that the defendant made the statements without prejudice to its rights. 

Background

The dispute arose out of an arrangement between the claimant, a Dubai-based businessman (the "Claimant"), who had entrusted the defendant (the "Defendant") with purchasing amounts of a cryptocurrency called Tether ("USDT") on his behalf. The Claimant accordingly transferred AED 24,416,714.514 to the Defendant, who in turn only transferred AED 22,808,330.53 worth of USDT while keeping the difference of AED 1,610,383.984. The Claimant filed a claim against the Defendant for the entirety of the difference and AED 500,000 in damages, in addition to interest, legal fees and costs.

Court of First Instance

The court of first instance (the "CFI") appointed two experts whose report (the "Expert Report") made conclusions based on two scenarios. The first scenario considered witness testimony adduced by the Claimant and concluded that the Defendant owed the Claimant AED 1,386,283. The second scenario relied on the Defendant's evidence and concluded that the Defendant owed the Claimant AED 136,283.

The CFI issued a judgment on 13 December 2023 ordering the Defendant to pay the Claimant AED 136,283, 5% interest from the date of filing of the claim, a proportionate share of the CFI's fees and expenses and AED 500 for attorney's fees.

Dubai Court of Appeal

The Claimant appealed the CFI's decision to the Dubai Court of Appeal (the "DCOA"), arguing that the judgment should be modified so that the Defendant is ordered to pay AED 1,610,383, AED 500,000 in compensation, 12% interest from 18 November 2021 (being the date of the final payment from the Defendant) and all associated fees, expenses and attorneys' fees in relation to the dispute under both levels of litigation.

The Claimant's appeal was based on various grounds, but most importantly, in the context of the “without prejudice” principle, the Claimant argued that:

1. the Court erred in improperly relying on the Expert Report, in which the expert had exceeded the expert role by interpreting legal matters and failing to consider settlement attempts where the Defendant had acknowledged the full debt; and
2. the Court had itself failed to assess the evidence that the Respondent acknowledged the debt owed and inappropriately applied limitations on witness testimony.

The DCOA issued its judgment on 3 March 2024. It held that the Court had the authority to: (a) assess evidence and place more weighting on certain pieces of evidence over others; and (b) assess expert reports with which it is satisfied without having to address challenges and objections to the expert report that are raised by a party to the dispute. Importantly, the DCOA rejected the Claimant's argument that the Defendant had acknowledged the claimed amount during unsuccessful settlement discussions, deciding that such statements are made without prejudice to rights ("دون المساس بالحقوق") and are consequently protected from being used as evidence in court.

Dubai Court of Cassation

The Claimant subsequently appealed to the DCC, which issued its judgment on 22 October 2024.

The DCC dismissed the appeal upheld the decision of the DCOA, confirming (among other things) that the "without prejudice" principle means that such statements are immune from being used as evidence in court.

Comment

This decision appears to be the first time in which the DCC has recognised the without prejudice principle. In common law jurisdictions, the without prejudice principle is essential in ensuring that parties to a dispute are able to speak freely during settlement negotiations.

However, UAE law does not explicitly recognise the without prejudice principle, and parties are therefore advised to apply caution when making written statements during settlement discussions.  Such an approach means that parties to a dispute often feel that they are not be able to be fully open about their position during any negotiations.

This decision by the DCC is therefore an important step and has the potential to transform the approach to settlement discussions within the UAE.  While it remains to be seen whether the decision will be followed by any legislative framework formally recognising the without prejudice principle, the decision is encouraging and should be welcomed as providing parties to a dispute with an environment in which they will be able to attempt to resolve their disputes amicably without fear that those attempts could later be used against them in court.