Indira LLC v Ingram LLC [2017] SCT 334

January 29, 2018 SCT - Judgments and Orders

Claim No: SCT 334/2017

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 MARIAM DEEN

BETWEEN

INDIRA LLC

Claimant

and

INGRAM LLC

Defendant

Hearing: 17 January 2018

Judgment: 29 January 2018

JUDGMENT OF SCT JUDGE MARIAM DEEN

UPON the Claim Form being filed on 27 November 2017;

AND UPON the Defendant acknowledging service of the Claim Form and indicating its intention to defend the Claim and forward a Counterclaim on 4 December 2017;

AND UPON the parties being called on 2 January 2018 for a Consultation with SCT Officer Ayesha Bin Kalban and the parties not having reached settlement;

AND UPON a Hearing having been held before SCT Judge Mariam Deen on 17 January 2018, with the Claimant’s representative Ingfred and the Defendant’s representative Inkeri both in attendance;

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

IT IS HEREBY ORDERED THAT:

1.The Claimant’s Claim is dismissed;

2. The Claimant shall pay the Defendant AED 55,221 in respect of the Defendant’s Counterclaim for unpaid rent between 7 November 2017 to 6 February 2018.

Issued by:

Nassir Al Nasser

SCT Judge and Registrar

Date of issue: 29 January 2018

At: 12pm

THE REASONS

Parties

1.The Claimant is Indira LLC, a healthy foods company incorporated in the DIFC, located in Unit 22, DIFC (the “premises”); represented by its owner Ingred (the “Claimant”).

2. The Defendant is Ingram LLC (hereafter “INGRAM”), a company incorporated in the DIFC which carries out responsibilities statutorily assigned to Ira (hereafter “IRA”); represented by IRA’s Chief Legal Officer Inkeri (the “Defendant”).

Background and the Preceding History

3.The dispute arises in relation to a lease agreement between the parties commencing on 7 February 2017 (the “Agreement”). The Agreement was for a one-year term and was preceded by two similar lease agreements for the same premises, both for three-year terms.

4. The Claimant alleges that by withholding information regarding planned redevelopment works (the “redevelopment”) at and around the premises and by misleading the Claimant as to the reasons for the one-year term, the Defendant had orchestrated the acceptance of a one-year rather than three-year lease in order to avoid paying the Claimant’s relocation costs during the redevelopment work.

5. The Defendant responded to the Claim indicating its intention to defend it and Counterclaim for payment of the final rent installment due under the terms of the Agreement.

6. On 2 January 2018, the parties participated in a Consultation with SCT Officer Ayesha Bin Kalban, however, no settlement was reached. A Hearing took place before me on 17 January 2018, with the Claimant’s and Defendant’s representatives in attendance, following which the matter was reserved for Judgment.

7. Many grievances have been raised by the Claimant in its submissions and at the Hearing. I intend to only include reference to those matters pertaining to the substantive Claim, which I will consider fully in determining the dispute below.

The Claim

8. The Claimant’s case is that since it was established in the DIFC in 2011, it entered into two three-year lease agreements for its premises from 7 February 2011 to 6 February 2014 and from 7 February 2014 to 6 February 2017. On 8 November 2016, the Claimant indicated its intention to seek renewal of the lease and assumed that this would be for another three-year period. In fact, in an email sent by Ioane on behalf of the Defendant on 25 December 2016, a three-year lease was proposed to the Claimant, with the term specified as being from 7 February 2017 to 6 February 2020.

9. Several terms of the proposed lease were questioned by the Claimant via email, resulting in a meeting between the parties on 11 January 2017. The Claimant submits that at no time in the meeting was the term of the lease raised by either party, however, on 6 February 2017 (the day of the expiry of the Claimant’s existing lease) the Defendant emailed the Claimant with a revised offer for a one-year lease.

10. During a coincidental encounter with Iosif (a representative on behalf of the Defendant), the Claimant was informed that the Defendant amended the term from three-years to one year on the basis that it would not increase the rent on this occasion. The Claimant states that he was assured that further renewals would be possible with new conditions.

11. On 7 March 2017, the Claimant received the full lease agreement and queried several items which had been added. The Claimant submits that there had been a number of delays on the part of the Defendant and a response was only received once the Claimant had explained to the Registrar of Companies why it was taking so long to renew the trade licence. The Agreement was finally signed on 22 March 2017. Due to the delays, the Claimant submits that it felt unduly pressured into the Agreement as it was at risk of losing its business.

12. On 25 July 2017, the Claimant had observed photographs being taken of the area outside of the premises and queried the purpose of them. A member of the design company present responded that redevelopment works were being planned for the area. On the same date, the Claimant emailed the Defendant to seek further information about the redevelopment and a timeline, however, no response was received. In a meeting between the parties on 16 September 2017, the Claimant states that he was informed by the Defendant that it did not answer emails on small matters.

13. On 6 August 2017, and in keeping with the terms of the Agreement, the Claimant notified the Defendant that it wished to seek renewal of the Agreement. On 10 September 2017, the Defendant informed the Claimant that the Agreement would not be renewed due to the planned redevelopment. Subsequently, the Claimant complained to the Defendant that it had been unfairly treated, however, the Defendant denied that a three-year lease was ever offered due to a change in leasing policy for smaller units and kiosks and did not make any offer of compensation. The Claimant alleges that the Defendant had already planned the redevelopment during their negotiations of the Agreement and deliberately amended the three-year term to one-year in order to save on paying the Claimant’s relocation costs.

14. The Claimant reiterated at the Hearing that it was also aggrieved by the change in reasoning that it received from the Defendant. The Claimant submitted that the first reason it received for the Agreement having a reduced term was to save on any increase in rent for the year; he was subsequently informed that the one-year term was a result of a change in policy for small units and kiosks, which are all now being offered shorter leases; and more recently, that the Defendants are seeking to rely on the Claimant’s difficult financial situation as the reason for the change in term.

15. On 7 November 2017, the Claimant requested that its cheque dated 7 November 2017, for the final installment of rent in the amount of AED 55,221 be ‘put on hold’ pending discussions regarding the dispute it had raised. At the Hearing, the Claimant explained that it had hoped some arrangement could be made, such as the premises being vacated earlier, or an alternative solution being achieved in lieu of the final rent installment, which is why it asked for the cheque not to be cashed.

16. The Claimant pursues the following remedies, amounting to the payment of AED 490,442 by the Defendant:

(i) Compensation equal to the relocation cost it would have been entitled to if it had a three-year lease agreement with the Defendant. Estimated to be AED 380,000 based on the cost of establishing the Claimant premises and taking into account inflation.

(ii) A 50% reduction/refund on the cost of the one-year lease Agreement on the basis that its value has been reduced due to the late notice of non-renewal received from the Defendant, which has adversely affected the Claimant’s future business. This equates to AED 110,442.

17. The Claimant also seeks to retain its current trade licence until it can be transferred to new premises.

The Defence and Counterclaim

18. At the Hearing, the Defendant vehemently denied what it perceived to be an allegation that it had hatched an elaborate plan to con the Claimant into entering the Agreement.

19. The Defendant submitted that there is no automatic right of renewal for tenants in the DIFC, as there is in onshore Dubai and other jurisdictions. Clause 6.17 of the Agreement requires that the Claimant notify the Defendant if it wishes to renew the lease no less than six months prior to the expiry of the Agreement. Any new lease will be subject to the Defendant’s sole discretion and there is no presumption in favour of granting one.

20. In Summary, the Defendant has broken down the Claimant’s Claim into four components which it states are not proven and do not attract damages. Firstly, it is asserted that the Claimant is not entitled to contractual damages as it has failed to show that the Defendant has not performed in accordance with the Agreement. Secondly, it is argued that the Defendant did not owe the Claimant any duty of care in Tort, therefore, there has been no corresponding breach of any duty of care which would attract damages. Thirdly, the Defendant denies that there was any misrepresentation made to the Claimant with the intention of inducing it into the Agreement. Fourthly, it is also denied that any fraudulent statement was made to the Claimant which caused the Claimant loss.

21. The Defendant’s case with respect to the term of the Agreement is that it was amended to one year in keeping with a change in policy that occurred at the end of 2016, which it accepts occurred during the time that the Agreement was being negotiated. In accordance with the new policy, all smaller units and kiosks are now offered one-year leases. An additional reason given for the amendment to the term is the financial difficulties the Defendant claims that the Claimant was facing and had mentioned in the meeting that took place on 11 January 2017. Furthermore, the Defendant states that it had access to the Claimant’s financials at the time of the negotiations and in keeping with the terms of the lease agreements which showed the Claimant to be operating at a loss. In response to the Claimants financial situation, the Defendant submits that the Agreement was reduced to a one-year term on the basis that there would be no escalation in rental costs for that year.

22. In respect of the redevelopment, the Defendant denied having knowledge of it prior to the Agreement being entered. Evidence is submitted in the form of an email from the Defendant’s design company at Appendix 1 of its submissions, in which the design company states that its understanding is that the redevelopment would be proposed at a Board meeting in March. Therefore, the Defendant intends to demonstrate that the redevelopment had not been confirmed prior to March.

23. The Defendant submits that its Commercial Leasing Department were not aware of the redevelopment prior to its being presented and approved at the Board Meeting on 19 March 2017, in which a representative on behalf of the Defendant, Mr Iren, was present. It was only after this time that the Defendant states members of Mr Iren’s team began to enquire about details of the redevelopment with respect to the renewal of another tenant’s lease. Appendix 5 is an email chain dated from 29 March 2017 onwards, which the Defendant intends to rely on in support if its contention that its Commercial Leasing Department were not aware of the redevelopment’s timeline and implications and were therefore seeking information in order to determine whether to renew a different lease within the redevelopment zone. Ultimately, the emails demonstrate that the lease was renewed for only one year, just as the Claimant’s was.

24. Appendix 6 of the Defendant’s submissions is an email dated 12 April 2017 from a representative on behalf of the Defendant to members of the Commercial Leasing Department with details of the redevelopment plan and timeline attached. The Defendant also relies on this as evidence that details of the redevelopment were not shared with the Commercial Leasing Department prior to 12 April 2017.

25. With respect to the Claimant’s assertion that inadequate notice of the Defendant’s intention not to renew the Agreement had been provided, the Defendant contends that the Claimant was first notified via email on 10 September 2017, which is almost five months prior to the expiry of the Agreement on 6 February 2018. Furthermore, the Defendant argued that the terms of the Agreement require that the Claimant notify the Defendant of its intention to renew six months before the expiry of the lease, at which time it is at the Defendant’s discretion whether to do so or not, with no corresponding deadline or timeline set out.

26. The Defendant’s Counterclaim is for the fourth and final instalment of rent relating to the period from 7 November 2017 to 6 February 2018 and amounting to AED 55,221. The cheque that had been provided by the Claimant at the commencement of the agreement was dishonoured and the Defendant seeks payment of the defaulted amount as well as interest from the date the rent amount was due on 7 November 2017, until payment is made.

Discussion

Claim

27. This dispute concerns a lease agreement for property located within the DIFC and is therefore governed by DIFC Law No. 4 of 2007 (“Real Property Law”).

28. In its submissions the Defendant has argued that there is no presumption in favour of a lease being renewed and that it is at the sole discretion of the Defendant, as lessor, as to whether the lease is renewed and according to which terms; pursuant to Clause 6.17 of the Agreement, which states:

“New Lease Term

The Tenant shall notify Ingram no less than six (6) months prior to the expiry of this Lease if it wishes to seek a new lease term. The grant of a new lease term will be strictly subject to such terms and conditions which Ingram may at its sole discretion impose and subject to the Parties formally entering into a new lease of the Premises.”

29. I am inclined to accept the Defendant’s argument that there is no presumption in favour of the Agreement being renewed, based upon Clause 6.17 of the Agreement and the absence of any contrary provision in the Real Property Law.

30. The Claimant’s core arguments relate to the Defendant’s alleged failure to disclose the redevelopment plans to it, thereby manipulating it into entering a one-year rather than three-year Agreement. Although the Claimant does not define its case as an allegation of misrepresentation, upon reading the Claimant’s written submissions and considering its arguments at the Hearing, I feel able to infer that an argument of misrepresentation is being made. In so far as it is alleged that the Defendant led the Claimant to believe that the Agreement would be renewed for 3 years following the expiry of the Agreement and that the reason for the shortened term was the delays in reaching a final Agreement, not for the reasons subsequently given by the Defendant, which include his financial circumstances and a change in policy.

31. Article 29 of the DIFC’s Law of Obligations (DIFC Law No. 5 of 2005) provides the legal definition of misrepresentation:

“(1) There is a misrepresentation if:

(a) there is an incorrect statement of fact, past or present, or a statement of opinion falling within Article 29(3);

(b) the representor or his agent makes the statement, or has notice that the statement is made; and

32. Ordinarily, it would be appropriate for the Court to consider whether there was an incorrect statement of fact or opinion made by the Defendant’s representatives. However, the Claimant was very candid during the Hearing when I questioned whether it would have entered the Agreement had it known about the planned redevelopment work and that the Agreement would not be renewed. The Claimant’s Representative’s response was “certainly” as he didn’t have any alternative, however, he stated that he would’ve found a new location sooner had he known sooner.

33. As the Claimant, by its own admission, would have entered into the Agreement irrespective of the Defendant’s alleged misrepresentation, it cannot show that it was induced into the Agreement by virtue of a false assertion by the Defendant. Therefore, I find that there has been no misrepresentation or corresponding damages.

34. Although the question of whether the Defendant had knowledge of the redevelopment prior to entering the Agreement no longer falls to be determined, it is worth noting that the Defendant’s email evidence at Appendices 5 and 6 of its submissions provide quite a clear timeline of events prior to the signing of the Agreement. The emails indicate that the Commercial Leasing Department were not aware of the redevelopment prior to it being presented and approved at the Board Meeting on 19 March 2017 and that further details regarding the timeline were only shared from 29 March 2017 onwards, which is after the date that the Agreement was signed on 22 March 2017.

35. The Claimant is clearly aggrieved by the timing of the redevelopment, together with what the Defendant claims was a change in its policy for leasing smaller units and kiosks, which coincided with the timing of negotiations for the Agreement. It is argued that the Defendant manipulated these factors in order to save on paying the Claimant’s relocation costs, which the Claimant would have been able to recover from the Defendant had the Agreement been for a three-year term. However, I am not satisfied that the Claimant has proven, on the balance of probabilities, that there has been any misrepresentation or fraud committed by the Defendant.

36. With respect to the Claimant’s claim that it had been given inadequate notice of the Defendant’s intention not to renew the Agreement, I accept the Defendant’s assertion that it provided almost five months’ notice to the Claimant and in any event, the terms of the Agreement only require that the Claimant provide six months’ notice of its intention to renew and do not actually provide for any corresponding notice period for the Defendant.

37. In light of the above observations I am not persuaded by the Claimant’s arguments and dismiss the Claim in full.

Counterclaim

38. The Claimant failed to forward any defence to the Counterclaim and effectively accepted that the fourth installment of the rent due to the Defendant on 7 November 2017 was due and owing. The Claimant explained that although its cheque in the amount of AED 55,221 was dishonoured, it had only requested that the cheque be put on hold in the hope that some sort of alternative arrangement could be reached in lieu of this last payment being made and had it known the cheque would be cashed, it would have made the funds available.

39. Accordingly, AED 55,221 is awarded and is due and payable by the Claimant to the Defendant.

40. In the Hearing, the Defendant indicated that it sought interest on the outstanding amount at the usual rate of the Court. However, upon reviewing the Court file it is noted that the Counterclaim specifically seeks for interest to be calculated at the rate of 10% per annum. The Defendant did not provide any justification for this claimed rate of interest in its further submissions on the Counterclaim or at the Hearing and in the absence of any proper justification or elaboration by either party on the rate of interest in accordance with Article 118(2) of the DIFC Contract Law, interest shall not be awarded.