Hande House Residential Body Corporate v Haluk [2017] DIFC SCT 009

March 13, 2017 Judgments,SCT - Judgments and Orders

Claim No: SCT 009/2017

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS

BEFORE SCT JUDGE NASSIR AL NASSER

BETWEEN

HANDE HOUSE RESIDENTIAL BODY CORPORATE

Claimant

and

HALUK

Defendant

Hearing: 7 March 2017

Judgment: 13 March 2017

JUDGMENT OF SCT JUDGE NASSIR AL NASSER

UPON the Claim Form being filed on 11 January 2017;

AND UPON the parties being called on 6 February 2017 for a Consultation and 16 February 2017 for a Second Consultation with SCT Officer Mahika Hart, with the Claimant’s representative in attendance and the Defendant participating via telephone;

AND UPON the parties not having reached settlement;

AND UPON a Hearing having been scheduled before SCT Judge Nassir Al Nasser on 7 March 2017, with the Claimant’s representative in attendance and the Defendant participating via telephone;

AND UPON reviewing all documents and evidence submitted in the Court file;

IT IS HEREBY ORDERED THAT:

1.The Defendant shall pay the Claimant the amount AED 21,822.46 being the levy contribution charge including the penalties and interest owed for the Defendant’s Property.

2. Each party shall bear their own costs.

Issued by:

Nassir Al Nasser

SCT Judge

Date of issue: 13 March 2017

At: 10am

THE REASONS

Parties

1.Unit of Body Corporate House Residential Body Corporate (hereafter the “Claimant”) is an entity established pursuant to the Strata Title Law (DIFC Law No. 5 of 2007) and the Registered Body Corporate for Body Corporate House Residential Tower in the DIFC. The Claimant has filed a claim against the Defendant regarding the alleged non-payment of service charges associated with an apartment located therein.

2. Hakul (hereafter the “Defendant”) is the owner of Unit 1 located within Body Corporate House Residential Tower, DIFC, Dubai, UAE (the “Property”).

Background and the Preceding History

3. On 11 January 2017, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment by the Defendant of levy contribution charges and associated penalties, interest and costs amounting to AED 99,645.46, relating to the Defendant’s ownership of the Property. The Claimant also sought reimbursement of the SCT Court fee relevant to this claim.

4. The parties were called for a Consultation with SCT Officer Mahika Hart on 6 February 2017, and a Second Consultation on 16 February 2017, with the Claimant’s representative in attendance and the Defendant participating via telephone, however, a settlement could not be reached.

5. A Hearing was scheduled before SCT Judge Nassir Al Nasser on 7 March 2017, with the Claimant’s representative attending in person and the Defendant attending via telephone.

The Claim

6. The Claimant argues that this claim relates to the recovery of unpaid levy contributions due from the Defendant to the Claimant together with associated penalties, interest and costs pursuant to Article 23.3(g) of the relevant Strata Management Statement and Article 3 of the relevant Body Corporate By-Laws applicable to Body Corporate House Body Corp.

7. The dispute arising between the parties is in regards to the Defendant’s alleged failure to pay the levy contribution in relation to the Property. The Claimant contends that the Defendant, despite several follow-ups and letters, has failed to pay the levy contribution, penalties, interest and cost charges totalling an amount of AED 99,645.46 which comprises as follows: (together the “Levy Contributions”)

(a) Levy contribution in the amount of AED 56,563.49;

(b) Penalty for late payment in the amount of AED 5,444.95; and

8. The Claimant alleges that it is a not-for-profit entity and the full and timely payment of Levy Contributions by all unit owners is critical to the its ability to operate for the benefit of the owners of all units. Furthermore, Levy Contributions are set by an ordinary resolution passed by the unit owners and must be levied on and collected from all unit owner in full and on time, to ensure the operation of the residential component of the building for the benefit of unit owners. As such, a legal action for recovery is only pursued as a last resort if a unit owner has failed to pay on time and following the issuance of reminder notices by the Body Corporate.

9. The Claimant alleges that it had made various demands to the Defendant for payment of the unpaid Levy Contributions including the associated penalties, interest and costs. The Claimant alleges that the Defendant failed to make payment in full by the due dates at various times. Thus, the Claimant instructed its lawyers to prepare certain demand letters and follow-up with the Defendant, at significant cost to the Claimant.

10. This led the Claimant to file a Small Claim against the Defendant for the payment of the Levy Contributions, as well as the DIFC Courts’ Fee in the amount of AED 4,982.27.

The Defence

11. The Defendant filed the Acknowledgment of Service via email dated 31 January 2017 indicating his intention to defend the whole claim. In his argument, the Defendant contends that the claim includes exorbitant charges for legal actions that were either never taken or not in-line with any market norms. The Defendant, has no objections with regards to the core service charge included in the Levy Contributions but objects to the inclusion of legal fees incurred by the Claimant in its attempts to collect from the Defendant.

12. The Defendant disputed the payment of legal fees in a letter to the Claimant dated 12 September 2015, in particular fees of AED 45,716 and AED 6,500 in 2014/2015 for an action in the Small Claims Tribunal that was never actually filed.

13. The Defendant also referred to the fees charged against him in regards to the letters of demand. The Defendant argues that the monthly invoices sent to him did not include adequate description of what these fees entailed.

14. Furthermore, the Defendant added that the actual annual levy contribution as charged to each unit owner is much lower than the legal fees proposed by the Claimant. This discrepancy and disparity, the Defendant argues, makes it unfair to charge him, as an owner, with such exorbitant legal fees.

15. In 2015, the Defendant made significant payments towards the Levy Contributions which amounted to AED 139,455.82, and such payment was accepted by the Claimant and deducted from the Defendant’s account. The Defendant alleged that the Claimant, by accepting the 2015 payment and not claiming the whole amount at that time, accepted that the account was returned to good standing and that the past legal fees incurred should be dropped from the account, especially considering that a legal case was never actually filed in connection with the charges legal fees reflected at that time.

Hearing

16. In the Hearing the Defendant agreed to pay the base Levy Contribution, penalties and interest at the rate of 12% per annum as required in the Strata Management Statement. On the other hand, the Defendant reiterated his arguments, contending that the charges provided by the Claimant as costs and legal fees are not applicable and have no justification.

17. The Claimant argued that it is justified in charging such legal fees, pursuant to the Strata Management Statement (the “SMS”). The Claimant submitted a copy of the “Strata Management Statement for Body Corporate House” in support of its arguments.

18. The Claimant pointed out, as indicated under Article 23.3(h) of the Strata Management Statement:

“(h) Each Unit Owner must indemnify on demand the Body Corporate House Residential and the other Unit Owners with respect to any actions, claims, demands, proceedings, costs, damages, expenses and losses (including moneys in payment of professional fees relation thereto) of whatsoever nature incurred and/or suffered by the Body Corporate House Residential and/or the other Unit Owners in connection with:

(i) any violation by the Unit Owner (or any of its Occupiers) of the provision of this Strata Management Statement, the By-Laws or any other applicable rules, laws, directions and/or requirements set forth by the Body Corporate House Residential or any other Relevant Authority…”

Discussion

19. The question put before the Court is whether the Defendant is legally bound to pay the costs (legal fees) incurred by the Claimant.

20. Based on the arguments put forward at the Hearing, and based on consideration of the DIFC Strata Law and the SMS document applicable in this dispute, and after reviewing the case file and the evidence provided as regards the legal fees, I am not satisfied with the method of calculation and I do not see adequate justification for the amounts claimed as legal fees.

21. Although the Claimant provided the receipts for the amounts billed by the relevant law firm in order to prepare the demand notices, the receipts contained no justification as to how the amounts were calculated and on what basis. Many of the invoices were not separated by unit and reflected work done for multiple units. Furthermore, many of the proof payment slips submitted by the Claimant include bulk payments not separated by unit and thus there is no way to know which portions of these payments were for the Defendant’s unit.

22. In addition, the Claimant invoiced the Defendant at the end of 2014 for the payment of AED 6,500 under “debt recovery costs DIFC Small Claims Tribunal Case”, but the case was never filed and there is no record in the DIFC Courts of such a fee having been collected. The Claimant also did not provide any proof of the payment. Furthermore, the Claimant invoiced the Defendant in 2014/2015 for the payment of AED 45,716.93 under “legal fees for DIFC Small Claims Tribunal Case Plus 5% DIFC Courts filing fee” and again this claim was never filed at the DIFC Courts. I cannot justify the Claimant invoicing for proceedings that did not occur without further proof that the expenses were both reasonable and actually paid out in support of the services alleged. Being familiar with the fee collection procedure in the DIFC Courts’ Small Claims Tribunal, it is difficult to comprehend how the SCT Court fee can be claimed when there is no record of a case filed.

23. Although the SMS states at Article 23.3(h) that unit owners are to indemnify the Body Corporate for proceedings, costs and expenses incurred due to any violation by the unit owner of the SMS, the by-laws or other applicable rules, this is not a blanket invitation to charge unit owners with unreasonable and unjustified fees. While failure to pay the core Levy Contributions would likely qualify as a violation of the SMS and by-laws, any charges made against the unit owners’ accounts should be supported by sufficient documented proof of payment and justification for the costs incurred.

24. Furthermore, Rule 53.70 of the Rules of the DIFC Courts (the “RDC”) states the following:

“The SCT may not order a party to a small claim to pay a sum to another party in respect of that other party’s costs, fees, and expenses, including those relating to appeals

(1) Such party of any Court or Tribunal fees paid by that other party as the SCT may consider appropriate;

(2) Such further costs as the SCT may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.”

Therefore, it is in the Courts discretion to award costs as the SCT may consider appropriate; it is not the parties right to award themselves costs of the Court especially when there was no such case filed in the SCT.

25. In relation to the base Levy Contribution, the Defendant is obliged to pay the charges, penalties and interest. In relation to the legal fees, I am not satisfied with the evidence provided by the Claimant as it has provided no justification as to how the amounts were calculated in regards to the demand notices prepared and has not justified its attempt to charge in relation to cases that were never filed at the DIFC Courts.

26. The amount claimed by the Claimant is AED 99,645.46 which includes the core Levy Contributions, penalties, interest and legal fees and pursuant to the evidence provided the legal fees amount to a total of AED 77,823.00 from the period of 2013 to 2017. Therefore, the total legal fees of AED 77,823.00 shall be deducted from the claimed amount. In addition, the payment made by the Defendant in the amount of AED 139,455.82 in 2015 shall be applied towards only the core Levy Contributions, penalties and interest; the legal fees shall be excluded.

Conclusion

27. For the above-mentioned reasons, the Defendant is liable to pay the sum of AED 21,822.46, and each party shall bear their own costs in regards to this Claim and all other claims shall be dismissed.