Dubai Court of Cassation, Commercial Appeal No. 79 of 2025, judgment of 26 March 2025
Under Dubai Law No. 14 of 2008 on mortgages, a mortgage gives the creditor a real right over the property to be paid from its price ahead of ordinary and later creditors. Applying to sell the mortgaged property is only an option: the creditor may instead sue the debtor for the whole debt, and is not liable for choosing not to sell. The rule in Article 1417 of the Civil Transactions Law that a third-party mortgagor cannot be pursued before the mortgaged property applies only where the mortgage is the sole security; if he also gave a personal guarantee, the creditor may sue him personally first. A mortgage and guarantee given for present and future facilities remain until all those debts are paid.
In 2016 a bank agreed to finance a cold-storage project of a company in Dubai Industrial City with AED 25 million under an ijara facility. Besides personal guarantees, an investor in the project mortgaged twenty-one office units in Business Bay towers under three portfolio mortgage contracts, and later a second owner mortgaged a further unit in substitution for one of them; the investor also signed a personal guarantee for AED 25 million. In 2020 the ijara facility was repaid early, but the bank refused to release the mortgages because about AED 6.2 million remained due from the company under murabaha facilities. The mortgagors sued to have the mortgages declared extinguished, one contract annulled for fraud, and damages; the bank counterclaimed for the AED 6.2 million and the right to enforce against the units. The courts below dismissed the claim and ordered the investor, the company, a co-partner and the co-partner's company to pay the AED 6.2 million jointly.
The Court of Cassation dismissed the mortgagors' appeal. It restated the nature of a registered mortgage under Dubai Law No. 14 of 2008 and Article 1419 of the Civil Transactions Law, and that seeking a sale is an option that does not prevent a personal claim for the whole debt under the loan and other facilities, even if it exceeds the secured amount. Article 1417 protects a third-party mortgagor only where no other security exists; because the investor had also signed a personal guarantee, the bank could pursue him personally before selling the units. A guarantee may be agreed to continue until full repayment, and its scope is for the trial court. The expert found that the mortgages and guarantee expressly secured facilities granted and to be granted to the company, that nothing released the mortgagors or the debtor, and that the company still owed AED 6.2 million. The contracts were therefore valid and binding. The refusal to direct a decisive oath to the bank and to return the case to the expert was also upheld.
Owners who pledge property for a business they invest in often assume the security ends with the project loan. The judgment shows that all-facilities wording keeps the mortgages and guarantees alive for later facilities of the borrower, including Islamic financing, until everything is paid. A mortgagor who also signs a personal guarantee loses the protection of being pursued only through the property.
| Articles 2, 3, 4, 5, 7, 10, 18, 19, 20, 25 and 26 of Dubai Law No. 14 of 2008 on Mortgages in the Emirate of Dubai |
| Articles 1417 and 1419 of Federal Law No. 5 of 1985 (Civil Transactions Law) on the third-party mortgagor and enforcement of a mortgage — text of articles 1417, 1419 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
“لجوء الدائن المرتهن لاقتضاء دينه من العقار المرهون بأن يطلب من قاضى التنفيذ بيعه هو مجرد رخصة وخيار منحه له القانون”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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