Investors win Dh5 million after court uncovers asset diversion plot

Dubai: A Dubai court has ordered a group of defendants to jointly pay Dh5 million in compensation, along with legal interest and court costs, after finding that they plotted to divert assets and obstruct the recovery of investors’ funds in a real estate investment dispute dating back to 2008.

In its recent ruling, the Dubai Courts of First Instance concluded that the defendants engaged in fraud and deception by transferring valuable assets to related parties without consideration, effectively preventing the enforcement of final court judgments previously issued in favour of a group of Danish investors.

The case relates to two investment agreements signed in 2008, under which the plaintiffs invested in real estate projects through a brokerage company. The projects later faltered, leading to disputes over unpaid investment amounts and returns.

In 2012, the investors reached a settlement with two of the defendants, under which one defendant provided a personal guarantee for the repayment of the invested sums. However, the court found that subsequent actions taken by the defendants undermined this settlement.

Court records showed that in 2013, the brokerage company entered into a settlement with the project developer, under which it received real estate units valued at Dh27 million as final settlement of its claims. In 2014, those units were transferred to another company owned by a third defendant.

According to the court, there was no evidence that the transfer was made for value, reinforcing the conclusion that the move was intended to shield assets from creditors, including the investors.

The investors had previously secured a final commercial judgment in 2019, upheld by the Court of Cassation in 2021, ordering the first and second defendants to pay more than Dh25.4 million, plus 9 per cent annual interest.

Despite initiating enforcement proceedings, court records revealed that only around Dh3 million was recovered out of more than Dh35 million due, prompting the investors to file the present claim for damages.

The defendants attempted to block the case by challenging the validity of the investors’ powers of attorney and their legal standing, and by filing counterclaims and requests to add new parties.

The court rejected all such arguments, ruling that the investors had proper legal standing, that their representation was valid, and that the procedural applications were unfounded.

Relying on an expert report, the court held that the defendants’ actions amounted to fraudulent conduct that caused direct harm to the investors by depriving them of their funds for more than a decade.

Although the investors claimed Dh85 million in damages, the court assessed the evidence and awarded Dh5 million in compensation, holding the defendants jointly and severally liable.

In addition to the compensation, the court ordered the defendants to pay 5 per cent annual legal interest from the date the judgment becomes final until full payment, as well as court costs and Dh3,000 in legal fees.