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Claim No. SCT 165/2022

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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

IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE MAHA AL MHEIRI

BETWEEN

LAELA

Claimant

and

(1) LADESSA LUFAK
(2) LAKSHMANA

Defendants

JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI

UPON the Claim Form being filed on 20 May 2022

AND UPON a Hearing having been held before H.E. Justice Maha Al Mheiri on 29 June 2022, with the Claimant’s representative and the Second Defendant in attendance

AND UPON considering all documents and evidence submitted on the Court file

IT IS HEREBY ORDERED THAT:

1. The Second Defendant shall vacate the Premises on 22 January 2023.

2. The possession of the premises is reverted to the Claimant as of 22 January 2023.

3. In light of the aforementioned, I find that the First Defendant shall pay the Claimant the amount of AED 71,314.73 in accordance with the below:

4. The First Defendant shall be liable for the costs for the maintenance and damages on the Premises.

5. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,892.44

Issued by:
Ayesha Bin Kalban
SCT Judge and Registrar
Date of issue: 12 July 2022
At: 2pm

THE REASONS

The Parties

1. The Claimant is Laela (the “Claimant”), the Landlord of unit 001 (the “Premises”).

2. The First Defendant is Ladessa, represented by its manager, Lufak, a holiday home company located in the DIFC (the “First Defendant”).

3. The Second Defendant is Lamariya, an individual leasing the Premises (the “Second Defendant”).

Background, Preceding History and the Claim

4. On 11 January 2021, the Claimant and the First Defendant entered into an agreement to lease the Claimant’s Premises for one year (the “First Lease Agreement”), starting from 17 January 2021 to 16 January 2022 (plus a conditional rent-free period from 17 January 2022 until 16 February 2022). The Claimant allowed the First Defendant to sub lease the Premises to third parties for the period of the First Lease Agreement.

5. The First Defendant and the Second Defendant entered into a sub-tenancy contract on 5 January 2021 (the “Second Lease Agreement”) for the period of 1 year starting from 22 January 2021 until 22 January 2022. The Second Defendant paid the full amount of AED 58,000 for the rent and AED 5,000 as a security deposit for the Premises. The Second Lease Agreement was then extended for another year until 22 January 2023, and the Second Defendant paid the full amount of AED 52,300 for the rent.

6. On 20 May 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”), seeking an order that the Defendants jointly and severally pay the total amount of AED 37,823.23, in addition to 10% legal Interest from its due date until full payment of the amount as per clause (12) of First Lease Agreement, as follows:

7. The Claimant also sought an order for the following terms:

8. The matter was called for a Consultation before SCT Judge Hayley Norton on 20 June 2022. Although the Claimant and the Second Defendant were in attendance, they failed to reach a settlement. The First Defendant was absent although served with notice of the Claim.

9. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Hearing held on 29 June 2022, with the Claimant and the Second Defendant in attendance. The First Defendant was also absent in the Hearing although served with notice of the Claim.

The Claim

10. The Claimant’s case is that they entered into the First Lease Agreement with the First Defendant for a period of one year, from 17 January 2021 to 16 January 2022, plus a rent-free period from 17 January 2021 until 16 January 2022, which was granted to the First Defendant conditionally upon the fulfillment of all its obligations pursuant to clause 29 of the First Lease Agreement.

11. The Claimant submits that the First Lease Agreement expired on 16 February 2022, and that the First Defendant failed to renew the First Lease Agreement. Therefore, the Claimant submits that the First Defendant is still occupying the Premises illegally without having entered into a new tenancy contract or paying any amount towards the rent.

12. The Claimant states that it now has come to their notice that the Premises is currently occupied by the Second Defendant.

13. The Claimant sent various email correspondences to the First Defendant, informing the First Defendant of the terms of the new tenancy period, however, the First Defendant failed to respond to any such correspondence.

14. The Claimant now seeks an order against all Defendants for the remedies as set out above.

The Defence

15. The First Defendant failed to file an acknowledgement of Service nor did the First Defendant appear at the Hearing, although served with notice of the Claim.

16. The Second Defendant is currently occupying the Premises and he submits the following in support of his defence.

17. As stated above, the Second Defendant entered into the Second Lease Agreement with the First Defendant in partnership with Luite (the entity responsible for the maintenance of the Premises), with the end date of 22 January 2023. The Second Defendant submits that he has fulfilled his obligations in terms of paying the full rent amount to the First Defendant until 22 January 2023.

18. The Second Defendant submits that he should not be impacted in any way by the fact that the First Defendant has not renewed the First Lease Agreement and/or has not met its obligations towards the Claimant. The Second Defendant also states that he was not aware of the NOC signed between the Claimant and the First Defendant.

Jurisdiction

19. First and foremost, the relevant Lease Agreements are in relation to a unit in the DIFC, therefore by default, any agreement shall be governed by the prevailing law of the DIFC, United Arab Emirates and that upon failure to resolve any disputes connected to the Lease Agreements, the dispute shall be referred to the DIFC Courts. Therefore, it is clear and undisputed that the DIFC Courts have jurisdiction to decide this matter. As the claim value is less than AED 500,000, this claim is properly before the SCT.

Discussion

20. Firstly, as the First Defendant failed to appear at the Hearing, I note that RDC 53.61 of the Rules of the DIFC Courts stipulates that “if a defendant does not attend the hearing and the claimant does attend the hearing, the SCT may decide the claim on basis of the evidence of the Claimant only”.

21. Clause 1 of the First Lease Agreement states the following in relation to the sublease of the Premises:

22. The Claimant and the First Defendant then signed an NOC, dated 11 January 2021, for the sublease of the Premises which states the following (the “NOC”):

23. The wording of the NOC is clear as to the term of the sublease of the Premises, which the Claimant allowed the First Defendant for the period of the First Lease Agreement, dated from 17 January 2021 to 16 January 2022.

24. Despite various email correspondences from the Claimant to the First Defendant, reminding the First Defendant that the First Lease Agreement is due to expire and requesting that the First Defendant to confirm whether it wishes to renew the First Lease Agreement, the First Defendant categorically ignored the Claimant’s emails. Therefore, on 24 February 2022, the Claimant wrote to the First Defendant the following:

25. Pursuant to clause 14 of the First Lease Agreement, and as the First Defendant failed to renew the First Lease Agreement, the First Defendant was obligated to immediately vacate the Premises. The relevant Clause reads as follows:

“'At the expiry of this tenancy contract or its termination, the Tenant undertakes to evict the Premise immediately and hand it over to the Landlord in a clean condition as received from Landlord on commencement date of this contract. The Tenant undertakes not to make any holes in the ...”

26. However, as it now appears, the First Defendant has subleased the Premises to the Second Defendant until 22 January 2023. The Second Defendant claims that he entered into the Second Lease Agreement on 22 January 2021 (and consequently renewed it) with the First Defendant in good faith.

27. As unfortunate as it may be for the Second Defendant, the First Defendant had no (contractual) right to sublease the Premises after 16 February 2022, in the absence of a renewed First Lease Agreement and NOC.

28. As the Second Defendant entered into the Second Lease Agreement in good faith and was unaware of the expired NOC, the First Defendant should be held liable for this amount accrued.

29. Therefore, I find that the Second Defendant shall occupy the Premises until the expiry of the Second Lease Agreement. Nonetheless, the Second Defendant has met his obligations towards the First Defendant pursuant to the Second Lease Agreement, and the full rent amount has been paid until 22 January 2023. Therefore, I find that the Claimant is not entitled to Claim any amounts from the Second Defendant.

30. It is due to the conduct of the First Defendant that the Premises were subleased in the absence of the relevant agreements and currently are still being occupied. Therefore, I find that the First Defendant shall be held liable for the Claims as filed by the Claimant as set out below in my Judgment.

Overstay Rent

31. Clause 14 of the First Lease Agreement reads as follows:

“…If the Tenant fails to vacate the premise on expiry date of this contract or its termination, the tenant should pay the rent of overstay plus a penalty equal to 25% of the rent amount for that period.”

32. Clause 14 of the First Lease Agreement clearly indicates that in the event that the First Defendant does not evacuate the Premises on the expiry date, it shall pay the Claimant overstay charges. Therefore, I find that the Claimant shall be entitled to receive from the First Defendant the amount of AED 55,889.20 in respect of the overstay from 17 February 2022 until to 22 January 2023, as the yearly rent of the Premises is AED 60,000 and therefore the daily rental rate is AED 164.38. The Court will not add the rent-free period as the condition pursuant to which the First Defendant would be entitled to said period has not been fulfilled.

340 days x 164.38 daily rate = 55,889.20

25% Compensation

33. Clause 14 of the First Lease Agreement, as mentioned above in paragraph 34 of this Judgment, is clear as to the penalty that may be imposed in case the First Defendant failed to evacuate the Premises on the expiry date. Therefore, I find that the Claimant shall be entitled to the amount of AED 13,972.3 from the First Defendant as 25% of rent value for the overstay period from 17 January 2022 until to 22 January 2023.

10% Legal Interest

34. Clause 12 of the First Lease Agreement reads as follows:

“Without prejudice to the rights and remedies of the Landlord under this Tenancy Contract or under applicable law if the Tenant fails to make any payments to the landlord of the rent or any sums whatsoever due to the Landlord under this Tenancy at the time or times or within the periods specified in this tenancy contract, the Landlord may charge the Tenant a penalty thereon in addition to the owed amount calculated at a rate of ten percent (10%) per annuum on which the payment is due in accordance with this tenancy contract until the date of full payment as mutual agreed compensation.”

35. In review of clause 12, I find that this clause relates to cases wherein the First Lease Agreement would have been extended and the First Defendant had failed to pay the required rent amount in accordance with the First Lease Agreement. The Claimant would then have been entitled to rely on this clause and avail of the 10% penalty, in addition to the rent amount. However, I note that the Claimant has also invoked the penalties as stated in clause 14 of the First Lease Agreement, as mentioned above of this Judgment, which I have subsequently granted. Therefore, I find that the Claimant’s claim in relation to the 10% legal Interest from its due date until full payment of the amount as per clause 12 of the First Lease Agreement shall be dismissed.

Dewa and District Cooling bills

36. Clause 24 and 25 of the First Lease Agreement reads as follows:

37. The Second Lease Agreement states the following in regard to DEWA and chiller:

“Utility Charges (DEWA & Chiller) related to the apartment are included with the usage limit of AED 1,700 monthly and the exceeded amount shall be chargeable to the tenant on monthly basis in the noted rental amounts, as agreed upon during commercial negotiations and mentioned in this contract”

38. Pursuant to the above, I find that the First Defendant shall pay for any outstanding amounts for the DEWA and District Cooling bills. The First Defendant has not submitted any proof or payment demonstrating that the outstanding amount exceed the amount as mentioned above. Therefore, the First Defendant shall pay the Claimant the amount of AED 1,453.23.50 for DEWA and District Cooling and any other service charges until the date of evacuation.

Conclusion

39. The Second Defendant shall vacate the Premises on 22 January 2023.

40. The possession of the premises is reverted to the Claimant as of 22 January 2023.

41. In light of the aforementioned, I find that the First Defendant shall pay the Claimant the amount of AED 71,314.73 in accordance with the below:

42. The First Defendant shall be liable for the costs for the maintenance and damages on the Premises.

43. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,892.44.