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Salutary Lessons In DIFC Contract Law: Hexagon Holdings (Cayman) Limited v. DIFC Authority And DIFC Investments LLC (CFI-013-2019) – Shareholders

Salutary Lessons In DIFC Contract Law: Hexagon Holdings (Cayman) Limited v. DIFC Authority And DIFC Investments LLC (CFI-013-2019) – Shareholders

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What this Articles Discusses

Termination for fundamental breach under DIFC Contract Law
– failure to give notice of termination within a reasonable
time – whether a reservation of rights extends the time
period for termination – affirmation – anticipatory
breach – agreements to agree – the importance of
cross-examining on all material issues.


On 4 August 2022, Justice Robert French, sitting in the DIFC
Court of Appeal, dismissed an application by the Claimant, Hexagon
Holdings (Cayman) Limited (“Hexagon”), for permission
to appeal against the Judgment of Justice Sir Jeremy Cooke dated 2
March 2022, which had dismissed Hexagon’s claims in full. So
ended one of the largest damages claims to reach full trial in the
DIFC Courts, with a combined claim value of US $500

The trial was the culmination of a 16-year saga between Hexagon
and the DIFC Authority and its subsidiary, DIFC Investments
(together, the “Defendants”), regarding a failed joint
venture to develop land in the Dubai International Financial Centre
(the “DIFC”). In the end, after three years of
hard-fought litigation (including an initial strike-out of
Hexagon’s claim), Hexagon’s claim proved to be entirely
unmeritorious, with the Defendants winning on every material issue
at trial. Akin Gump1(Graham Lovett, Michael Stewart and
Sophia Cafoor-Camps) and Tom Montagu-Smith QC acted for the

The case involved a number of interesting legal issues stemming
from the peculiar facts: Hexagon claimed that between 2006 and
2012, the Defendants had breached a joint venture agreement and had
also renounced the same agreement in 2012, and yet Hexagon did not
purport to terminate until 2018. The Court heard arguments
regarding agreements to agree, withdrawal of renunciation, loss of
the right to terminate under DIFC Contract Law for failure to give
timely notice, and common law affirmation. The case also serves as
a salutary reminder for practitioners that the DIFC Court requires
witnesses to be challenged in cross-examination on all material
points in dispute. 

The Claim

The claim related to a DIFC law governed joint venture agreement
entered into in 2003 and amended in 2004 (the “AJVA”).
In the AJVA, the parties agreed to take various steps to establish
a joint venture company which would develop what is now one of the
last undeveloped plots of land in the DIFC. The steps included: (i)
the execution of a shareholders’ agreement which, critically,
was to reflect the terms of the AJVA, including the terms as to how
the project would be funded; (ii) the incorporation of a joint
venture company (the “JVCo”); and (iii) the transfer of
the land to the JVCo. The parties agreed to use best endeavours in
good faith to achieve those steps as soon as reasonably

Hexagon alleged that the Defendants had breached those
obligations between 2006 and 2012. The case finally put at trial
was that Defendants had never really intended to proceed with the
joint venture and had engaged in the pretence of negotiations.

The six-year statutory limitation period under DIFC Contract Law
for breach of contract meant that only an alleged breach in 2012
was in time.  Hexagon purported to terminate in late 2018.
Hexagon’s case was that in the six-year period between the
in-time breach and purported termination, the parties had engaged
in settlement negotiations to resolve the dispute, during which
time it validly reserved its termination right.  When those
negotiations finally broke down in late 2018, Hexagon had therefore
validly elected to terminate.  

There was also a separate claim that the Defendants renounced
the AJVA in 2012.  The Defendants accepted that they had sent
a letter in 2012 stating that the AJVA was no longer binding due to
various factors (the “2012 Renunciation”). 
However, subsequently the Defendants had reconsidered their
position and unequivocally recommitted to the joint venture, and
all negotiations from then onwards proceeding on that
footing.  In 2018, when the negotiations broke down, the
Defendants had even issued a notice expressly requiring that the
parties proceed in accordance with the terms of the AJVA.  The
Defendants argued that any renunciation was therefore withdrawn as
at the date of the purported termination.

Key Issues

The key issues in dispute were:

1. Did the Defendants breach the obligation to use their best
endeavours in good faith to negotiate a shareholders’

2. Did the Defendants withdraw the 2012 Renunciation, such that
it was not clear that there would be fundamental non-performance at
the date of termination in 2018 (as required by Article 88 of the
DIFC Contract Law for termination for anticipatory breach)?

3. If there was a breach:

a)  Was it in time?

b)  Did Hexagon terminate within a reasonable time, as
required by Article 87(2) of the DIFC Contract Law?

c)  Alternatively, did Hexagon affirm the AJVA at common

d)  Would Hexagon have performed but for the breach?

e)  If there was a breach and/or renunciation and
termination was valid, had Hexagon suffered any loss of profits, or
alternatively reliance loss?

The Judgement

Justice Sir Jeremy Cooke comprehensively found for the
Defendants on all the above issues, issuing his 106-page judgment a
week after the trial finished. 

1. Breach of the AJVA

On a proper construction of the AJVA, the Judge found that the
obligation to use best endeavours in good faith to agree a
shareholders’ agreement did not require a party to vary the
terms of the AJVA. The AJVA said the shareholders’ agreement
had to comply with its terms, which in particular obliged Hexagon
to fund the development via ‘liquid finance’ –
i.e. cash. There was no obligation to agree something contrary to
those financing terms (or indeed other project details specified in
the AJVA). The Judge’s interpretation of the AJVA was
supported by the fact that any alleged obligation to reach
agreement beyond the terms of the AJVA would be an agreement to
agree, lacking an objective yardstick to adjudge the parties’
conduct and thus uncertain and unenforceable.  

His Honour found that Hexagon had sought to depart from the
terms of the AJVA from 2006 onwards, by proposing alternative terms
that limited (and eventually entirely removed) the cash investment
obligation. There was no breach by the Defendants in failing to
agree to those proposals.  Contrary to Hexagon’s
fanciful conspiracy theory that the Defendants were never committed
to the joint venture, the Judge also found that the Defendants
acted in good faith at all times and had made concessions in the
negotiations which they had no obligation to make.

The Judge further found that:

1. The allegations of breach of contract were all statute

2. Any right to terminate would in any event have been lost for
two reasons:

a) First, Hexagon failed to exercise its termination right
within a reasonable time, as required by DIFC Contract Law. 
The Judge said that a party could not retain a right to terminate
over a period in excess of six years.

b) Second, Hexagon had affirmed the AJVA as a matter of common
law.  Whether there has been an affirmation is a
multifactorial assessment.  The Judge found that affirmation
had occurred due to: (i) the passage of time, and (ii)
Hexagon’s post breach conduct, which was consistent with the
existence of the AJVA. 

The fact that Hexagon made sporadic reservations of rights in
correspondence was not enough to prevent an affirmation in the
circumstances. This aligns with recent Court of Appeal authority in
England & Wales2, which held that, while a
reservation of rights will often have the effect of preventing
subsequent conduct constituting an election, that is not an
invariable rule, and a finding of election depends on the totality
of the circumstances.  There may come a time when delay in
exercising a right will be of such a duration that, notwithstanding
a reservation of rights, a party will be held to have affirmed.

One point of interest is that the Judge found both a failure to
exercise a termination right within a reasonable time under DIFC
Contract Law, and affirmation as a matter of the common law of
England & Wales. This suggests that the DIFC Contract Law is
not a complete code, and co-exists with the common law of
contracts, although this issue was not directly argued before the
Court. This is an important question that will need to be answered
in due course.

2. Renunciation of the AJVA

The renunciation claim was also dismissed by the Judge on the
basis that the Defendants had recommitted to the AJVA following the
2012 Renunciation and would have performed its terms. Hexagon could
not rely on Article 88 of the DIFC Contract Law (termination for
anticipatory non-performance), which requires that it be clear that
there will be fundamental non-performance at the time of
termination. This is a useful reminder that an anticipatory breach
is a thing ‘writ in water’, and a party who fails to
make an election will lose a termination right where the
non-performing party resumes performance.    

3. Causation

Hexagon’s witness admitted in cross-examination that after
the Global Financial Crisis it was not “foreseeable”
that the Claimant would proceed on the original financing terms
(i.e. 100 percent cash funding). Further, the evidence produced
regarding Hexagon’s ability to fund the development in cash
was vastly inadequate and Hexagon had failed to comply with a
document production order as to its willingness and ability to
fund, leading to the Judge drawing adverse inferences. The Judge
therefore found that Hexagon would not have proceeded with the AJVA
in any event. As no project would have occurred, the alleged
breaches – even if they did occur – did not cause any

4. Quantum

The Judge also preferred the Defendants’ evidence on
quantum, concluding that Hexagon’s expert “was
wrong on nearly [all] the issues that mattered
”. The key
point of difference between the experts was discounting. 
Hexagon’s expert did not perform a discounted cash flow
analysis, whereby a discount rate based on risk and accelerated
receipt is applied to forecast profits. This was contrary to
standard practice for valuations of this nature, according to the
Defendants’ expert. The Judge agreed, finding that the
reasons given by Hexagon’s expert for not applying
discounting “made no sense”.

The Defendants’ expert’s evidence was that the
proposed project would not have been profitable for Hexagon once
cash flows were discounted, even if all of Hexagon’s other
assumptions were accepted.  If this was accepted by the Judge,
it was fatal to the quantum claim. Curiously, the Defendants’
expert was not cross-examined on the issue, and indeed on the vast
majority of the critical points of difference between the
experts.  Instead, the Defendants’ expert was largely
cross-examined on his integrity, with the apparent intention being
to try to impugn his overall evidence based on alleged
impartiality. The Judge found this approach to have been
utterly misplaced” and make a number of
pointed criticisms of the Claimant’s conduct in closing. The
result was that the Court was bound to accept the Defendants’
evidence on unchallenged matters, including discounting, unless it
was utterly incoherent. The Judge noted that he would have done so
anyway, following cross-examination of Hexagon’s

This is a further demonstration from the DIFC Court that the
standard and robustness of advocacy is high and the traditional
rules of evidence will be strictly applied. Unlike in the
international arbitration space, where tribunals sometimes take a
more informal approach to evidence, failure to challenge witnesses
can result in the DIFC Court’s hands being tied as to the
acceptance of that evidence, and have significant ramifications for
the case.

Permission to Appeal

Hexagon first applied for permission to appeal to Justice Cooke.
The grounds of appeal failed to challenge the Judge’s
findings regarding breach, time bar and causation, meaning the
application was doomed from the outset. The balance of the grounds
raised were either a gross distortion of the Judgment or
impermissible factual challenges based on a ‘cherry
picking’ of the evidence. The Judge ultimately found that
Hexagon’s case was “in part incoherent and in whole
”, and that, coupled with the flawed nature
of the appeal, meant there was no real prospect of success. 
Hexagon’s application for permission to appeal was therefore
dismissed with indemnity costs. 

Hexagon’s further application for permission to appeal to
the Court of Appeal suffered from the same defects and met with the
same fate, with Justice Robert French dismissing Hexagon’s
application, again with indemnity costs.


Ultimately, the Defendants were fully vindicated.
Hexagon’s baseless insinuations that the Defendants had
‘dragged their heels’ and failed to negotiate in good
faith were resoundingly rejected on the evidence. To the contrary,
they were found to have acted in good faith at all times. 

For commercial parties, there are several lessons:

  1. First and foremost is that, when a right to terminate is
    thought to arise, the electing party should act promptly and
    decisively. The law grants a limited grace period within which to
    make a decision.  Take too long and you may be taken to have
    affirmed (or in DIFC Contract Law parlance, the reasonable time
    period for termination will expire).  In the case of
    anticipatory breach, there is also the risk that the other party
    will resume performance. 

  2. Express reservations of right and without prejudice
    correspondence are useful tools to extend your right to make an
    election, so long all communications unequivocally proceed on that
    basis. Even then, the Courts of England & Wales, and now the
    DIFC Courts, recognise that the passage of time may overwhelm a

  3. Failure to engage with Court Orders for disclosure may well
    result in the drawing of adverse inferences which may ultimately be
    fatal to a claim or defence regardless of other factors.

  4. Alleging dishonesty is easy to do but often very hard to
    evidence – particularly in the course of commercial
    negotiations where each party is acting in its own best interests.
    If you are going to allege dishonesty, you need to make sure that
    you can prove it, or the Court is likely to take a dim view of your


1 The trial occurred while the team was at Gibson,
Dunn & Crutcher.

SK Shipping Europe Limited v Capital VLCC 3
Corp & Anor 
[2022] EWCA Civ 231.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.