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Claim No. SCT 271/2022

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

LINARD

Claimant

and

(1) LIUF
(2) LIUST

Defendants

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JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI

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UPON the Claim Form being filed on 6 July 2022

AND UPON a Second Hearing having been held before H.E Justice Maha Al Mheiri on 19 September 2022, with the Claimant’s representative in attendance and the First and Second Defendants failing to appear although served notice of the Claim

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

IT IS HEREBY ORDERED THAT:

1. The First Defendant shall pay the Claimant the amount of AED 50,946.24 in accordance with the below:

2. The First Defendant’s security deposit in the amount of AED 4,500 shall be forfeited in favour of the Claimant.

3. The First Defendant shall be liable for the costs of the maintenance and damages of the Premises.

4. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 2,772.31.

5. The Claimant shall serve this Order upon the First Defendant.

Issued by:
Hayley Norton
SCT Judge
Date of issue: 4 October 2022
At: 12pm

THE REASONS

The Parties

1. The Claimant is Linard (the “Claimant”), the landlord of unit 001 (the “Premises”).

2. The First Defendant is Liufc, a Lent company located in the DIFC (the “First Defendant”).

3. The Second Defendant is Liust, manager of the First Defendant (the “Second Defendant”).

Background and the Preceding History

4. On 29 October 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 29 October 2021 to 28 October 2022, for the annual rent amount of AED 70,000 to be paid through 4 instalments.

5. The First Defendant failed to pay the second and third instalments by way of cheque payments in the amount of AED 35,000 due to the First Defendant’s bank account closing. The Claimant allowed the First Defendant to sub-lease the Premises to third parties for the period of the First Lease Agreement.

6. The First Defendant and Mr. Lutherentered into a sub-tenancy contract for the period of 1 year starting from 1 October 2021 until 1 November 2022. Mr. Lutherpaid the full amount of AED 60,000 as rent of the Premises to the First Defendant.

7. On 6 July 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”), seeking an order against the First and Second Defendants, and included Mr. Lutheras a third defendant. The Claimant reached a settlement with Mr. Lutherand signed a new lease agreement with him (the “Second Lease Agreement”) from 15 September 2022 to 14 March 2023 in the amount of AED 37,000.

8. On 22 September 2022, the Claimant filed an amended claim in the Small Claims Tribunal (the “SCT), seeking an order that the First and Second Defendants jointly and severally pay the total amount of AED 60,220.30, in addition to 10 % legal Interest from its due date until full payment of the amount as per clause (12) of First Lease Agreement. The claims are set out as follows:

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

10. The matter was called for a Consultation before SCT Judge Hayley Norton on 18 August 2022. Although the Claimant and Mr. Lutherwere in attendance, they failed to reach a settlement. The First and Second Defendants were absent although served with notice of the Claim.

11. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Second Hearing held on 19 September 2022, with the Claimant in attendance and the First and Second Defendants absent although served with notice of the Claim.

12. Rule 53.61 of the Rules of the DIFC Courts (“RDC”) 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”.

The Claim

13. The Claimant’s case is that it entered into the First Lease Agreement with the First Defendant for a period of one year, from 29 October 2021 to 28 October 2022.

14. The Claimant submits that the First Lease Agreement was due to expire on 28 October 2022. The Claimant and Mr. Lutherentered into a Second Lease Agreement starting on 15 September 2022 to 14 March 2023. As such, I was informed by the Claimant that it wished to amend its Claim Form to remove Mr. Lutherfrom the Claim.

15. The Claimant sent several notices to the First Defendant, requesting that it pay all of the outstanding rent. However, no payment was received, therefore, the Claimant proceeded to terminate the First Lease Agreement on 28 June 2022 and file its Claim with the SCT. I shall elaborate on each of the Claimant’s claims in the discussion below.

16. The Claimant now seeks an order against both Defendants for the remedies as set out in paragraph 8 and 9 of this Judgment.

Discussion

17. As the First and Second Defendants failed to appear at the Hearing, I note that RDC 53.61 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”.

18. First and foremost, the relevant First Lease Agreement is 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.

19. The Court will first review the calculation of the outstanding rent, and then discuss whether any penalties shall apply, and lastly determine the Defendants’ financial obligation (if any) towards the Claimant.

Unpaid Rent

20. The Claimant and Mr. Lutherentered in the Second Lease Agreement, from 15 September 2022 to 14 March 2023.

21. The Claimant submits that the First Defendant failed to pay any amounts towards the First Lease Agreement, as such, I find that the First Defendant is liable to pay the amount of AED 44,526.76, as calculated until the commencement of the Second Lease Agreement.

22. The agreed rent from 29 October 2021 to 28 October 2022 is AED 70,000, and the Second Lease Agreement commenced on 15 September 2022. As such the rent amount will be calculated from 29 January 2022 (being the date of the first bounced cheque) to 14 September 2022.

29 January 2022 to 14 September 2022 is equal to 229 days.

AED 70,000 rent per year/12 months = AED 5,833.33 per month

5,833.33/30 = 250 rent per day x 11 days = AED 194.44

194.44 x 229 days = 44,526.76

23. In accordance with the terms of the First Lease Agreement, the First Defendant is also liable to pay the amount of AED 1,000 as a result of the 2 returned cheques that were provided by the First Defendant as stated below:

Penalties

10% Legal Interest

24. The Claimant drew the Courts’ attention to a number of clauses within the First Lease Agreement, each of which are set out below:

25. Clause 12 reads as follows:

26. In review of Clause 12, the Court finds that the Clause is ambiguous as to the application of the 10% penalty. The Court is of view that such a penalty shall apply on the outstanding rent that falls due under the Lease Agreement, as such 10% of AED 44,526.76 is AED 4,452.68.

27. Clause 11 of the First Lease Agreement reads as follows:

28. Upon reviewing Clause 11, I find that there are two parts. The first deals with the penalty in the form of rent, and the second deals with the security deposit.

29. I note that the Claimant is given two options as penalty and they cannot be used at the same time, hence the word (or) that is used in the clause, set out below:

30. Since the Court has granted the Claimant the remainder of the rent as mentioned above, AED 44,526.76, an amount which is greater than 3 months of rent, the Court is satisfied that the penalty under Clause 11 has been met. Accordingly, I dismiss the Claimant’s claim for the amount of AED 17,499.99 equal to 3 months of rent as liquidated damage penalties under Clause 11.

Security Deposit

31. Clause 11 of the First Lease Agreement reads as follows:

32. Accordingly, I find that the Security Deposit of AED 4,500 shall be forfeited by the First Defendant in favour of the Claimant as liquidated damages pursuant to Clause 11 of the First Lease Agreement.

Dewa and District Cooling bills

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

34. Pursuant to the above, I find that the First Defendant shall pay 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 966.80 for DEWA and District Cooling and any other service charges until the date of evacuation.

Liability of Payment

35. As the Claimant entered into the First Lease Agreement with the First Defendant only and not the Second Defendant in his personal capacity, the Court does not find the Second Defendant to be legally responsible jointly or severally to pay any of the above-mentioned amounts. Moreover, the Second Defendant signed the First Lease Agreement on behalf of the First Defendant as a representative and employee of the company and not in his personal capacity.

36. The Claimant also submits that the Second Defendant committed fraud by signing agreements that are not under his capacity nor authority to sign. In addition, the Claimant failed to provide any document to support its claims against the Second Defendant.

37. In the situation where the Claimant wishes to file a criminal case against the Second Defendant, the DIFC Courts is not the correct forum to pursue this matter, seeing as these Courts can only determine civil and commercial cases. As such, the Claimant’s claim against the Second Defendant must be dismissed.

38. The Claimant also seeks to recover the fee that was paid to the Court for the filing of this Claim. I am of the view that, although the Claimant has been unsuccessful on some of its claims, the Court granted it an amount greater than what it claimed. As such, the Claimant can only recover the fee that it paid in respect of filing the Claim.

Conclusion

39. In light of the aforementioned, I find that the First Defendant shall pay the Claimant the amount of AED 50,946.24 in accordance with the below:

40. The First Defendant’s security deposit in the amount of AED 4,500 shall be forfeited in favour of the Claimant.

41. The First Defendant shall be liable for the costs of the maintenance and damages of the Premises.

42. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 2,772.31.

43. The Claimant shall serve this Order upon the First Defendant.