Federal Supreme Court, Commercial Appeals Nos. 562 and 574 of 2023, judgment of 11 October 2023
A company dissolved by judgment is treated as continuing, with its legal personality, for the needs of liquidation until liquidation is complete, so that its claims can be collected, its debts paid and the balance divided among the partners, and to protect third parties. Standing is a question of fact for the trial court, decided on adequate grounds. Where the court-appointed custodian of a company instructed lawyers, filed pleadings and dealt with the experts during the first-instance proceedings, he acquired standing in the case, the defect was cured, and the company's claim could not be dismissed as brought by a party without standing.
A contracting LLC sued the real estate LLC that owned a project comprising a hotel, residential buildings, a garden and beachfront villas, after the owner stopped paying certified interim payments when the works were more than 91.5 per cent complete. The contractor sought an engineering expert to establish the works done, the sums paid and the cause of delay. On 12 October 2022 the court of first instance ordered the owner to pay the contractor AED 85,236,921.69 with 5 per cent interest. It also ordered the contractor, represented by its court-appointed custodian, to pay two intervening claimants AED 108,500 and AED 39,700,691.71 respectively, and dismissed the owner's counterclaim. On 9 May 2023 the federal appeal court set aside the main award and declared the contractor's claim inadmissible as brought by a party without standing. Both companies appealed. The Federal Supreme Court restated that judgments must rest on clear and sufficient reasons; that a defendant has standing where the right claimed exists against him; and that identifying the parties' capacity is for the trial court on sound grounds. It added that a company dissolved by judgment keeps its legal personality for the purposes of liquidation until liquidation ends. The record showed that the custodian had instructed lawyers for the contractor before the court of first instance, filed memoranda and responded to the experts. He had therefore acquired standing while the case was pending, and the defect had been cured. The appeal court, which failed to notice this, reasoned unsoundly and erred in law. Its judgment was quashed and the case remitted; the second appeal, concerning the same indivisible dispute, was quashed with it.
Disputes involving companies under a court-appointed custodian or in liquidation often turn on who may act for the company. The Court confirms that dissolution does not end a company's capacity to sue and be sued for liquidation purposes, and that an objection to standing fails where the proper representative has in fact taken over the litigation. The judgment does not say why the custodian had been appointed.
| Federal Decree-Law No. 32 of 2021 (Commercial Companies Law): rule that a dissolved company keeps its personality for liquidation, stated by the Court without citing an article |
“الشركة التي يحكم بحلها تعتبر قائمة لتسوية العلاقات القانونية الخاصة بالتصفية ، وأن انتهاءها لا يمنع من اعتبارها قائمة محتفظة بشخصيتها المعنوية لحاجات التصفية حتى تنتهي تصفيتها”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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