March 21, 2022 SCT - JUDGMENTS AND ORDERS
Claim No. SCT 022/2022
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
BEFORE SCT JUDGE DELVIN SUMO
BETWEEN
LATHA
Claimant
and
LAVNI
Defendant
| Hearing : | 15 March 2022 |
|---|---|
| Judgment : | 21 March 2022 |
JUDGMENT OF SCT JUDGE DELVIN SUMO
UPON this Claim Form being filed on 28 January 2022
AND UPON a Hearing having been listed before SCT Judge Delvin Sumo on 15 March 2022 with the Claimant’s and the Defendant’s representatives in attendance
AND UPON reviewing all documents submitted on the Court file
IT IS HEREBY ORDERED THAT:
1. The Claim is dismissed.
2. Each party shall bear its own costs.
Issued by:
Hayley Norton
SCT Judge
Date of issue: 21 March 2022
At: 11am
THE REASONS
The Parties
1. The Claimant is Latha (the “Claimant”), a company registered in Dubai, UAE.
2. The Defendant is Lavni (the “Defendant”), a company registered in Dubai, UAE.
Background and the Preceding History
3. The underlying dispute arises over a conflict between the parties pursuant to a tri-party agreement dated 30 June 2019 (the “Agreement”) whereby the Claimant agreed to retain the services of the Defendant and the third party named Lufti (the “Third Party”) for the purchase of the license to use lin software and the development of two software computer modules (the “Software Programme”).
4. On 28 January 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking a refund of the fees paid to the Defendant pursuant to the Agreement in the sum of AED 247,668.75.
5. The matter was called for a Consultation before SCT Judge Maitha AlShehhi on 16 February 2022. Although both of the parties were in attendance, they failed to reach a settlement.
6. In accordance with the rules and the procedures of the SCT, the matter was referred to me for determination, pursuant to a hearing held on 15 March 2022 (the “Hearing”). After considering all documents and evidence submitted on the Court file, I give my judgment below.
The Claim
7. The Claimant alleges that, on or about May 2021, the Software Programme failed to achieve the required purpose as set out within the Agreement. The Claimant submits that it informed the Defendant in August 2020 of the deficiencies with the Software Programme through a series of emails.
8. As the deficiencies continued to remain, the Claimant sent the Defendant an official notice letter dated 30 September 2021, stating that:
“Lavni failed to development and implement the software as per the agreed terms and per the {agreed} timeline. This is despite having paid Lavni an amount of AED 247,668.75 to fulfill these obligations under the Agreement”.
9. The Claimant submits that, on several occasions, it has notified the Defendant of the failures of the Software Programme, thereby, providing them time to rectify the concerned deficiencies, however, no action has been taken to rectify the concerns. Therefore, the Claimant submits that it is entitled to seek a reimbursement of the paid amount based on the following clauses within the Agreement:
“2.6 In the event of Default, the Company shall notify the Service Provider in writing about the breach and the Service Provider shall within 21 calendar days of receipt of such notice take remedial actions to rectify the breach failing which the Company shall raise a demand notice claiming the refund as mentioned in Clause 2.4 above. On receipt of the demand notice from the Company, the Service Provider agree to make the refund within 7 calendar days”.
“12.2 In the event of either party committing a material breach of this Agreement then the Party at harm may elect to terminate this Agreement by way of serving the defaulting Party with a notice of breach detailing:
12.2.1 The nature and description of the act or omission believed to be a defaulting effect; and
12.2.2 The transpired or potential adverse consequences of the committed breach”.
“12.3 In the event the Parties failing to attain an amicable resolution, or non-response by the defaulting Party within thirty (30) calendar days of the date the defaulting Party received the notice of breach; the Party at harm shall be entitled to proceed to seek termination of this Agreement”.
10. Pursuant to the Agreement, the Claimant paid the Third Party the total sum of AED 247,668.75, and the DIFC Courts’ filing fee associated with filing this Claim.
The Defence
11. The Defendant, in short, objects to refund the paid amount and contends that the Claimant is therefore not entitled to its claim.
12. The Defendant submits, firstly, that the Agreement is a tri-party Agreement, and the fees were paid to the Third Party. The Defendant alleges that since the Third Party is not a party to these proceedings, many details of the case cannot be obtained, nor can the Defendant be held responsible for such payments.
13. Nonetheless, the Defendant submits that it has fulfilled all its obligations under the Agreement and claims that the Software Programme is currently still being utilised by the Claimant. Moreover, the Defendant submits that all required trainings have been carried out and this is supported by signed certificates.
14. Furthermore, the Defendant submits that, after the Software Programme Agreement was completed, the Claimant entered into an annual maintenance contract with the Defendant which has been renewed twice since (the “AMC”). The Defendant alleges that such an AMC is normally entered into after the initial agreement has been successfully completed.
15. Therefore, the Defendant argues that the Service Programme was successfully installed and implemented, and as such, the Defendant is of the view that the Claimant should not be entitled to payment of the paid amount and the Claim should be dismissed in its entirety.
Discussion
Jurisdiction
16. The jurisdiction of the DIFC Courts is determined by Article 5(A) of the Judicial Authority Law, Dubai Law No. 12 of 2004, as amended (the “JAL”), which provides a number of limited gateways through which the DIFC Courts may exercise jurisdiction over a claim, which are, as relevant:
“(a) Civil or commercial or Employment claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial or Employment claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
(c) Civil or commercial or Employment claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities; …
(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations…
(2) …civil or commercial claims or actions where the parties agree in writing to file such claim or action with [the DIFC Courts] whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions.”
17. Pursuant to the JAL, the DIFC Courts can exercise its jurisdiction over a matter that is unrelated to the DIFC, where the parties have agreed in writing that any dispute arising between them would be referred to the DIFC Courts for adjudication. Such a provision would allow the parties to ‘opt-in’ to the DIFC Courts’ jurisdiction, provided that it clearly demonstrates the parties’ intention to do so.
18. It must be noted that by virtue of an opt-in clause found at clause 19 of the Agreement, I am of the view that the parties have opted into the DIFC Courts’ jurisdiction to hear and determine this matter. The relevant opt-in clause states as follows:
“Any dispute arising out or in connection with this Agreement shall be subject to the jurisdiction of the DIFC Courts of the Dubai International Financial Center (DIFC)”.
19. As the claim value is less than AED 500,000, this claim is properly before the SCT, pursuant to Rule 53.2 of the Rules of the DIFC Courts.
Findings
20. In essence, the disagreement between the parties pertains to whether the Claimant should be refunded the paid amount for the services rendered by the Defendant pursuant to the Agreement. It is evident to note that we are dealing with a tri-party Agreement and in order to make a fair decision, all parties named within the Agreement should have been named within these proceedings. Nevertheless, I will discuss the claim as it has been filed before me.
21. The parties entered into two transactions in accordance with clause 2 of the Agreement which reads as follows:
“2.1 The Parties would like to enter into two connected transactions. The first transaction concerns the purchase of the license to use Lint Softwares with 15 (fifteen) Lint user licenses along with the following modules listed below…
2.2 The second transaction will concern the parties working together to customize two new software modules as listed below:
i) Architectural, Engineering, Project Management Consultancy
ii) family Office Setup...”.
22. Clause 2.3 of the Agreement sets out the connection between the two transactions in terms of the fees:
“The connection between the two transactions is the understanding that the Company is making the purchaser transaction at the agreed price with the Service Provider solely on the basis of being able to enter into the second transaction at no further costs”.
23. Pursuant to clause 3.5 of the Agreement, the Claimant charged the Defendant a professional fee (the “Fees”) to perform the Software Programme as set out below:
“The purchase price for the license to use Lint Software and its modules shall be as follows …… USD 87,000.00”.
24. The Parties agreed to the following payment plan as set out within clause 3.6 of the Agreement (the “Payment Plan”):
“The payment plan for each software shall be as follows:
| Payment Amount (USD) | Milestone / Due Date |
|---|---|
| 43,500 | To be paid On Signing of This Agreement |
| 21,750 | On completion of system Installation on Server |
| 21,750 | On completion of first training session”. |
25. In total, the Claimant paid to the Third Party the sum of AED 247,668.75 in accordance with the following two invoices (the “Paid Amount”) pursuant to clause 3.6 the Agreement:
(a) Invoice dated 29 July 2019 in the amount of AED 165,112.50; and
(b) Invoice dated 21 November 2019 in the amount of AED 82,556.25.
26. The Defendant has submitted a certificate dated 11 November 2019 which is signed by both parties for the completion of the installation, and subsequently, the second invoice dated 21 November 2019 fell due upon completion of system installation on the server, in accordance with the Payment Plan. The Agreement fails to specify any further conditions that would need to be met prior to the second payment becoming due.
27. Nevertheless, the Claimant claims a refund of the Paid Amount based on clause 2.6 of the Agreement as stated in paragraph 9 of this Judgment. The refund referred to in this clause is further specified in clause 2.4 of the Agreement which reads as follows:
“In the event of the software development not being completed by the Service Provider for any reason, the Service Provider guarantees to refund the Company part of amount paid towards the purchase of the three softwares listed in clause 3.1 and amount to be refunded will be calculated as follows
1. Failure to deliver the software module relating to Architectural, Engineering, Project Management Consultancy… Amount to be refunded by Service Provider to Company USD 17,400
2. Failure to deliver the software module relating to Family Office Setup as per the BRD signed….… Amount to be refunded by Service Provider to Company USD 17,400.”
28. I note that the Claimant is claiming a refund of the Paid Amount, however, it has not claimed the amounts specified at clause 2.4 of the Agreement.
29. As submitted by the parties, the development of the software module ‘luton was never commenced. The Defendant claims that the development of this software did not take place at the wishes of the Claimant and that the Defendant has therefore not claimed the last instalment of the Payment Plan.
30. Pursuant to clause 2.3 of the Agreement, as stated in paragraph 22 of this Judgment, the development of the two software modules would be at no further cost, once the Fees had been completed, in accordance with the Payment Plan. As stated above, the Fees were not paid in full by the Claimant, therefore, I find that a refund based on clause 2.4 of the Agreement is not justified. Furthermore, the second software related to the Family Office has been completed and delivered, therefore, the refund based on clause 2.4.2 is not substantiated.
31. Moreover, even though the Claimant had sent the Defendant a notice of breach dated 30 September 2021, the Claimant failed to terminate the Agreement. In fact, it is worth nothing that the Claimant has entered into an AMC with the Defendant, which has been renewed twice and such a contract is typically entered into once a project has been completed successfully.
32. In review of the submissions made by both parties, I find that the Claimant agreed to the terms of the Agreement and acknowledged his obligation to pay the Fees in accordance with the Payment Plan. In light of the aforementioned, I find that this Claim shall be dismissed.
Conclusion
33. The Claimant’s Claim shall be dismissed.
34. Each party shall bear its own costs.
