DIFC Courts

Aaron v Abela [2010] DIFC SCT 004

September 22, 2010 SCT - Judgments and Orders

THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS

BEFORE JUSTICE H.E. OMAR ALMUHAIRI

Between

AARON

Claimant

-v-

ABELA

Defendant

JUDGMENT

Background

1. The Claim was issued on 2 June 2010, seeking AED 100, 000 as a compensation for his Company's loss, in respect of an agreement which was entered with Defendant on February 2008 to design, print and package a tenant's handbook for 3 projects which are villa 1, villa 2 and villa 3.
2. A cost estimate was made by the Claimant who had demonstrated the project into two phases. The first is to concept and design the tenant handbook with a fee of AED 122,000. This phase includes live photo shoots of the sites mentioned (villa 1, villa 2 and villa 3). The second phase is to printing and packaging with leather folder with a fee of AED 70,000. The total cost of the whole project is AED 192,000.
3. The Defendant paid the 50% of the first Phase which is AED 61000.
4. Both parties verbally agreed the delivery of phase one by end of 2008. The delivery was not completed by the end of 2008 as the Claimant did not do the live photo shoots for the project.
5. The Defendant received the final handbook presentation on March 2009 and he did some changes.
6. The Defendant terminated the whole contract (phase 1 and phase 2) on December 2009 because the Claimant delayed the completion of the project and failed to perform the Contract even phase 1, and has not done some of the tasks including the photo shoots of the projects per the contract.

The Consultation

7. Following the notice of service, a Consultation between the Claimant and the Defendant was held on before H.E. Justice Ali Al Madhani. During the Consultation, the parties failed to reach an agreement and the case was sent to trial.

The Hearing

8. On 13th July 2010, the Court heard the arguments of parties.

The Claimant Stated that:

9. The Claimant reiterated his original Claim, and further highlighted that the Defendant did many amendments and changes to the tenant handbook which has caused the delay.

10. In regards the photo shoot of the projects when the Defendant saw the current images in the draft of the handbook no comments were made nor any requests to change them, which meant that they were approved.

11. The Claimant has completed the design phase in October of 2009 and sent it for printing; however the Defendant had terminated the whole project in November 2009.

12. The Claimant is requesting payment of the second 50% of the first phase one AED 61,000 plus value of the work carried out prior to termination (printing - packaging) which is a total of AED 100,000.

13. The Claimant refused the Defendant's offer and asked the SCT permission to provide more documents as evidence and witnesses' written statements to prove his case.

The Defendant Stated that:

14. The Defendant reiterated his original Defense, and further highlighted that the Claimant promised verbally to deliver the phase one to the Defendant by end of 2008. But he did not. However the Claimant has not done some of the tasks including live photo shoot of the 3 Projects. As Claimant had no capability to take professional stills of actual site, he had incorporated only pictures obtained from different websites which is not related to the Projects and not agreeable by the Defendant. Till today the Claimant has not completed the agreed tasks which caused huge loss to the Defendant.

15. The Defendant argues that the DIFC Courts should not exercise its Jurisdiction as the Claimant was not authorized by its DIFC license to provide service outside of the DIFC District according to the federal Law No 8 of 2004 in respect of Financial free zone in UAE.

16. The Defendant argues that the Claimant had a major problem of high labour turnover without any proper handover. The Defendant had to explain the project to the Claimant's new staff with regards to how to handle the project every time which caused delays.

17. The Defendant received the final Handbook presentation on March 2009 and he did some changes because of the poor work of the Claimant and due to the capability or skills set to execute the contracted task.

18. The Defendant terminated the whole contract (phase 1 and phase 2) on December 2009 because the Claimant breached the contract by delay in completion of the project and fail to perform the Contract, even the Phase1, and has not done some of the tasks including photo shoot of the 3 Projects as per the contract which had been quoted by Claimant for AED 24000.

19. The Defendant is willing to pay an AED37000 only 50% as balance of the phase 1 after deducting the photo shoot fee which is AED 24000, which was rejected by Claimant.

20. Finally, the Defendant argued that the Claimant should refund the 50% payment of AED 61000.

21. The Court held the second hearing on 23 August 2010 so that the parties may submit further supporting arguments. The Claimant has not filed any alternative evidence.

22. The Defendant submitted alternative defence which is mentioned above. The Court announced that the judgment will be handed down on 22nd September 2010.

The Issue

23. Following a review of all arguments and submissions in front of the Court, the Court's position is that there are three main points of contention to which it will respond:

1. The DIFC Courts Jurisdiction.
2. The Termination of the Contract.
3. The Damages.
24. Jurisdiction: the relevant provisions of DIFC Law identifying the scope of the Court's jurisdiction are set out in Article 5(A) of the judicial authority law (No. 12 of 2004) which provides as follows:

"(1) without prejudice to paragraph 2 of this Article, the Court of First Instances shall have the exclusive jurisdiction over:

(a) Civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments.
(b) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre.
(c) Objections filed against decisions made by the Centre's Bodies, which are subject to objection in accordance with the Centre's Laws and Regulations.
(d) any application over which the Courts have jurisdiction in accordance with the Centre's Laws and Regulations;"
(e) any application over which the Courts have jurisdiction in accordance with the Centre's Laws and Regulations;"

 

And Article 19(1) of DIFC Law No 10 of 2004 which provides as follows:

 

"The DIFC Courts of First Instance has original jurisdiction pursuant to Article 5(A) of the Judicial Authority Law to hear any of the following:

(a) civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments;
(b) civil or commercial cases and disputes arising from or related to a contract concluded or a transaction concluded by any of the Centre's Establishments or the Centre's Bodies;
(c) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre; and
(d) Any application over which the DIFC Courts has jurisdiction in accordance with DIFC Laws and Regulations."
25. In the present case as stated in Clamant License which is issued by DIFCA that the Claimant ABC is a registered Company within DIFC since 28 February 2007 as non-regulated. Also, the Claimant is a registered company and located at a Building in the DIFC. By applying the above Article 5A of the Judicial Authority law No.12 2004, I find that there is no doubt that this Court has exclusive jurisdiction to hear and determine this Claim.
26. Termination of the Contract, is set out in the Article 86 of the DIFC Contract law No.(6) 2004 stated that the Right to Terminate the Contract which provide as follow:
(1) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.

 

(2) In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether:

(a) The non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract;
(b) Strict compliance with the obligation which has not been performed is of essence under the contract;
(c) The non-performance is intentional or reckless;
(d) The non-performance gives the aggrieved party reason to believe that it cannot rely on the other party's future performance.
(3) In the case of delay the aggrieved party may also terminate the contract if the other party fails to perform before the time allowed under Article 81 has expired.

And

27. Article 90 of the DIFC Contract law No.(6) 2004 stated that:
(1) On termination of contract pursuant to Articles 86 or 88 either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money whenever reasonable.

(2) However, if performance of the contract has extended over a period of time and the contract is divisible; such restitution can only be claimed for the period after termination has taken effect.

28. When reading this provision with due consideration to the evidence brought by both parties before the Court, specifically the cost estimate for the projects quoted by the Claimant dated February 2008 and the email sent from the Defendant to the Claimant dated January 2010, I find that the Cost Estimate was made by the Claimant had demonstrated the project into two phases. The first is to Concept and Design the Tenant Handbook with fee of AED 122,000. This phase includes live photo shoot of the sites mentioned (villa 1, villa 2 and villa 3). The second phase is printing and packaging with leather folder with fee of AED 70,000. The total cost of the whole project is AED 192,000.

29. Also, both parties verbally agreed (not in writing) the delivery of the Phase 1 to the Defendant by end of the 2008. But it was not delivered. However the Claimant has not done some of the tasks including photo shoot of the 3 Projects. Moreover the Defendant paid the 50% of the first Phase which is AED 61,000. However, it shows from the emails between the Claimant and Defendant that the Defendant was not satisfied about Claimant's work for 3 reasons. Firstly, delay in completion of the project and failure to perform the Contract even the Phase 1, and uncompleted tasks including photo shoot of the 3 Projects as per the contract which had been quoted by Claimant for AED 24,000. Secondly, as Claimant had no capability to take professional stills of actual site, he had incorporated only pictures obtained from different websites which is not related to the Projects and not agreeable by the Defendant. However the Claimant failed to provide any evidence that the Defendant agreed with the photos produced by the Claimant. Thirdly, the poor work of the Claimant and the incapability or skills set to execute the contracted task, because he had a major problem of high labour turnover without proper handover. However the Claimant did not deny this issue, also he failed to provide any evidence to prove his argument which is mentioned above.
30. In my judgment I am satisfied that the Defendant has right to terminate the contract under Article 86 of the Contract law of the DIFC. So it means that the performance of the future obligations under the contract is no longer required.
31. According to the Article 90 of the contract law which state as follow:
(1) On termination of contract pursuant to Articles 86 or 88 either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money whenever reasonable.
(2) However, if performance of the contract has extended over a period of time and the contract is divisible; such restitution can only be claimed for the period after termination has taken effect.
32. As the Court concludes that the Defendant had terminated the contract with justification, so the Defendant must pay the outstanding amount as per the contract which is AED 37,000 only 50% as balance of the phase one (1) after deducting the live photo shoot fee which is AED 24,000 as per cost estimate.
33. With regard to the Claimant's request for compensation for damages because of the termination of the contract, the burden of proof is upon the Claimant to prove that he has incurred such damage as a result of the termination of the contract. No evidence was submitted to the Court to prove such damage.

FOR THE ABOVE MENTIONED REASONS IT IS ORDERED:

1) The Defendant pays the Claimant AED 37,000.00 as 50% of the balance of the phase one (1) after deducting the live photo shoot fee.
2) Execution of this Judgment is to be within 30 days from today.
3) Both Parties pay their own cost.
4) Failing of which the Claimant or the Defendant may enforce the Order accordingly.

 

H.E. Justice Omar Almuhairi

Date of Issue: 22 September 2010

At: 3pm