Automated Summary
Key Facts
The Qatar Financial Centre Civil and Commercial Court, First Instance Circuit, granted an interim injunction on 7 November 2024 in favor of Thales QFZ LLC (Claimant) against AlJaber Engineering W.L.L. (Defendant) regarding a Performance Guarantee of QAR 1,325,000 issued by BNP Paribas. The injunction restrained the Defendant from demanding payment under the Guarantee, which was claimed to be valid due to alleged contract termination. The Court found the demand fraudulent because the Defendant's Defence asserted the contract was still in force (requiring Guarantee maintenance), while the demand letter claimed termination. The Court determined the Claimant made a prima facie fraud case and the balance of convenience favored the injunction to prevent irreparable reputational harm to the Claimant.
Transaction Type
Subcontract for security systems installation at New Hamad Port Project
Issues
The court determined whether the Respondent's demand for payment under the Performance Guarantee constituted fraud. The Respondent's letter of demand claimed contract termination, but their Defence asserted the contract was still valid. The court found the demand was made without honest belief in termination, as evidenced by this contradiction, and applied the fraud exception to grant the injunction.
Holdings
The Court granted an interim injunction to restrain the Respondent's demand on the Performance Guarantee, finding it fraudulent. The fraud was established by the conflict between the Respondent's letter of demand (alleging contract termination) and its Defence (claiming the contract was still in force). The Court noted the Respondent delayed making the demand until after litigation began, despite the Applicant having suspended work and terminated the contract earlier. The Court found the Applicant made a prima facie case of fraud, and the injunction was necessary to prevent irreparable harm to the Applicant's reputation and business, with the balance of convenience favoring the Applicant.
Remedies
The court granted an interim injunction to restrain the Respondent from demanding payment under the Performance Guarantee. The injunction required the Respondent to withdraw the demand and, if payment had been made, to ringfence the proceeds pending the return day. The court found the demand was fraudulently made due to conflicting allegations in the Defence and Counterclaim and the timing of the demand.
Contract Value
13250000.00
Legal Principles
The court applied the fraud exception to performance guarantees, holding that a demand under such guarantees may be restrained if made fraudulently. The court found fraud due to the Respondent's contradictory claims in its demand letter (asserting contract termination) versus its Defence (claiming the contract was still valid), indicating the demand was made without honest belief in its truth.
Precedent Name
Obayashi Qatar LLC v Qatar First Bank LLC
Key Disputed Contract Clauses
The subcontract's clause 2.6.1 required the Applicant to provide a Performance Guarantee equal to 10% of the contract price (QAR 1,325,000). The dispute centered on the Respondent's demand under this guarantee, which the court found fraudulent due to contradictory positions: the demand letter alleged contract termination while the Defence claimed the contract remained valid, requiring the guarantee to stay in force. The court granted an injunction to restrain payment under the guarantee.
Cited Statute
- Qatari Civil Code (Law No. 22 of 2004)
- Qatar Law No. 34 of 2005
Judge Name
Fritz Brand
Passage Text
- In accordance with the fraud exception, the Court will intervene to restrain a demand under the guarantee if there is evidence that the demand was fraudulently made. The Applicant's further contention was that in the present context, fraud had been established where it is shown that the demand was made with no honest belief in the truth of its contents or recklessly, in the sense of not caring whether the contents were true or false. I agree with this contention. Applying these principles to the facts, I also find myself in agreement with the Applicant's further contention that on the papers, it had been established, at least prima facie, that the demand by Respondent which the Applicant sought to restrain, had been fraudulently made. I say that mainly because of the inherent conflict between the allegations relied upon by Respondent in the letter of demand on the one hand, and in the Defence and Counterclaim on the other. According to the Defence and Counterclaim, the subcontract is still in existence and on that basis it is claimed that the Applicant be compelled to maintain the Performance Guarantee until completion of the contract. By contrast, the whole basis relied upon in the letter of demand is that the contract had been terminated by reason of the Applicant's breach.
- Mr Graeme Perry, the Applicant's senior contracts manager, explained under oath (in an affidavit) why a claim for damages will not be an adequate remedy for the loss that the Applicant will suffer if the call on the Performance Guarantee should be allowed to proceed. Amongst other things, so he said, the Applicant will suffer serious reputational harm and will find it difficult, if not impossible, to persuade banks in Doha and even in the wider region to provide it with performance or advance payment guarantees, without which it will be impossible for the Applicant to carry on with its business.
Damages / Relief Type
Interim injunction