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Claim No: SCT 117/2022

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 NASSIR AL NASSER

BETWEEN

MAALIKMAALIK INVESTMENTS LIMITED

Claimant

and

(1) MABILIMABILIINTERIOR DECORATION DESIGN LLC
(2) MR MACAIR

Defendants

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JUDGMENT OF H.E. JUSTICE NASSIR AL NASSER

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UPON a Hearing having been listed before H.E Justice Nassir Al Nasser on 17 May 2022, with the Claimant and the First Defendant’s representatives in attendance, the Second Defendant was absent although was served

AND UPON reading the submissions and evidence filed and recorded on the Court file

IT IS HEREBY ORDERED THAT:

1. The First Defendant shall pay the Claimant the sum of AED 231,006.50 plus interest accruing at the rate of 9% per annum from the date of this Judgment until the date of full payment.

2. The Second Defendant shall pay the Claimant the sum of AED 5,050.90 plus interest accruing at the rate of 9% per annum from the date of this judgment until the date of full payment.

3. The First Defendant shall pay the Claimant the Court fees in the sum of AED 11,550.32

4. The Second Defendant shall pay the Claimant the Court fee in the sum of AED 252.54.

Issued by:
Ayesha Bin Kalban
SCT Judge and Registrar
Date of Issue: 26 May 2022
At: 12pm

THE REASONS

Parties

1. The Claimant is MaalikMaalik Investments Limited (the “Claimant”), a company registered in the Dubai International Financial Centre, Dubai, UAE.

2. The First Defendant is MabiliMabili Interior Decoration Design LLC (the “First Defendant”), a company registered in Dubai, UAE.

3. The Second Defendant is Mr Macair To (the “Second Defendant”), is an individual who specialises in the provision of project management services to oversee projects involving the design and fit out of office spaces.

Background and Procedural History

4. The underlying dispute arises over two Agreements, the Project Management Agreement (the “First Agreement”) signed by the Claimant and the Second Defendant on early March 2021. The Second Agreement is the Mabili Quotation dated 15 March 2021, which was subject to special terms and conditions (the “Special Terms”) accepted and signed by the First Defendant. Under the Special Terms, the First Defendant was appointed as the Main Contractor for the Project. Therefore, both the Mabili Quotation and the Special Terms collectively form an Agreement between the Claimant and the First Defendant for the office fit out work (the “Mabili Agreement”).

5. On 29 March 2022, the Claimant filed a claim for breach of Contract against the First and Second Defendants seeking payment in the amount of AED 498,854.80 from the Defendants.

6. On 13 April 2022, the First Defendant filed an Acknowledgment of Service setting out its intention to defend the entirety of the Claim.

7. The Second Defendant failed to respond to the Claim although he was served pursuant to the Certificate of Service filed on 21 April 2022.

8. The parties met for a Consultation with SCT Judge Delvin Sumo on 28 April 2022 but were unable to reach a settlement.

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 17 May 2022, at which the Claimant’s and the First Defendant’s representatives were in attendance. The Second Defendant was absent although served with notice of the Claim.

Claim

10. The Claimant submits that the Mabili Quotation provided confirmation of the proposed works, materials and costs for the Project. The Mabili Quotation confirmed the total Project quote to be AED 332,745 inclusive of VAT (the “Project Costs”) and contained the following terms:

11. The Special Terms comprised of a one page set of terms as follows:

12. The Claimant submits that, in accordance with the Mabili Agreement, the Claimant made a payment of AED 166,372.50 on 19 March 2021, being 50% of the Project costs upfront to the First Defendant.

13. The Claimant adds that the Second Defendant provided the Claimant with bi-weekly reports on the progress of the Project as follows:

14. By way of WhatsApp messages between the Second Defendant and the Claimant, the Second Defendant confirmed that the First Defendant only commenced the fit out works of the Project on 18 May 2021, almost 2 months after the works approvals for the Project were filed.

15. On or around 31 May 2021, an incident occurred at the Office allegedly caused by the fault of the First Defendant which caused a water leak which damage the furniture in office 001 (the unit below the Office).

16. The First Defendant failed to notify the Claimant of the incident, and the Claimant only became aware of the incident when notified by the management of the Emirates Towers building.

17. On 16 June 2021, by way of WhatsApp messages between the Second Defendant and the Claimant, the Second Defendant notified the Claimant that due to damage caused by the water leaking incident, building security had prevented the First Defendant from entering the building due to the First Defendant failing to pay for damages caused to the unit below the Office.

18. By 21 June 2021 (some 7 days after the scheduled Project Completion Date), on inspection of the Office, the Claimant discovered that the Project was less than 50% complete and those works which had been completed were of alleged substandard quality and comprising of substandard materials.

19. The Claimant submits that breach of the terms of the Mabili Agreement, the First Defendant therefore failed to:

20. On 21 June 2021, the Claimant issued the Second Defendant formal notice by email of the breaches of the Mabili Agreement.

21. On 22 June 2021, by email the Second Defendant responded in which it stated that:

22. On 27 June 2021, notwithstanding the communications between the parties on 21 and 22 June 2021, the First Defendant sent the Claimant an invoice for a second payment under the Mabili Agreement (20% of the Project Costs due upon 50% completion of the Project) despite being in breach of the Mabili Agreement and the Project being at less than 50% completion.

23. The Claimant requested via the Second Defendant that the invoice be amended to make deductions for the Delay Penalty charges which had accrued up to that time. However, the First Defendant refused to amend the invoice or accept that any Delay Penalty charges were due. The Claimant made payment of the First Defendant’s second invoice of AED 66,549.00 on 19 July 2021 in order to ensure that progress continued on the Project works.

24. On or around 17 August 2021, the First Defendant accused the Second Defendant of leaving a negative Google review on the First Defendant and refused to continue work on the Project as a result. The Second Defendant contacted the Claimant by WhatsApp to confirm whether the Claimant had left a Google review. The Claimant confirmed to the Second Defendant that no review had been left by the Claimant. Despite reassurances from the Second Defendant that no negative Google review had been left the First Defendant stopped provision of the Project works.

25. In view of the First Defendant’s fundamental failure to perform the Mabili Agreement, the Claimant sent (via its appointed Law Firm Kennedys Dubai LLP) to the First Defendant a letter dated 23 August 2021 confirming:

26. No response was received from the First Defendant.

27. To assess the status of the works and mitigate its losses, the Claimant promptly instructed an independent contractor, MadiPlanning Guide Engineering LLC (“MADI”) to attend the Office and conduct a survey on the Project progress and the works completed by the First Defendant. MADI conducted the survey on 9 September 2021 and produced a survey report dated 15 September 2021 (the “MADI Survey Report”). The MADI Survey Report found numerous defects in the works performed by the First Defendant and the value of the works completed by the First Defendant to amount to just AED 130,940 representing just 41.32% of the Project Costs.

28. The Claimant, having obtained quotes from three potential contractors to provide complete the Project, including remaining works to be conducted and any rectification works required on the works already conducted by the First Defendant, engaged Massa International Contracting LLC (the “New Contractor”) based on its quote dated 19 September 2021. The quote was agreed and accepted by the Claimant, who in turn signed the New Contractor contract dated 20 September 2021. The New Contractor began works to complete the Project, which was completed on 15 November 2021.

29. The Claimant also submits that the First Agreement was breached by the Second Defendant.

30. The Claimant submits he was to pay the Second Defendant 14% of the total Project Costs (the “Project Management Fees”), split into two payments of 50%. The Claimant paid the Second Defendant AED 23,382.50, being 50% of the Project Management Fees on 18 March 2021.

31. The Claimant adds that the Second Defendant failed in performance of the First Agreement as evidenced by his email of 22 June 2021.

32. In view of the defective conduct of the First Defendant as evidenced in the Second Defendant’s email of 22 June 2021, the Second Defendant failed to exercise “reasonable care and skill” to inter alia:

33. The Claimant submits that, as a result of the breaches by the First and Second Defendants under the Mabili Agreement and Project Management Agreement respectively, the Claimant has suffered the following losses:

34. Therefore, the Claimant seeks the remedies set out below:

First Defendant’s Defence

35. The First Defendant submits that the Particulars of Claim form does not contain a signed and/or dated statement of Truth and only states “Kennedys Dubai LLP”.

36. Pursuant to RDC 22.8 and RDC 22.13, a statement of truth must be signed by the Claimant, which the First Defendant submits should be applicable on the basis that the Claimant has not been granted permission to have legal representation as required by RDC 53.55.

37. On 15 March 2021, the Second Defendant received the final quotation by way of WhatsApp communication. The Defendant submits that upon sending the Quotation, the Second Defendant responded by way of WhatsApp to say, “Hi please issue an invoice for 50% payment”. The First Defendant considers this statement to be an acceptance of the quotation.

38. The First Defendant confirms that it had received a hard copy of the Special Terms from the Second Defendant which were additional terms and conditions set forth under the Mabili Quotation and supersedes any quotation, agreement and conditions agreed previously in the event of inconsistency.

39. The First Defendant adds that the Special Terms was only signed by the First Defendant.

40. The First Defendant submits that the terms and conditions of the Mabili Quotation state, “Project Completion Time :- 70 To 80 working days from date of handing over the site & after advance Payment and other payments as per schedule and after any govt or owner approval for work permit like NOC and work commencement approvals.”, “All Government fees-DDA and DCD-Dubai Civil defense. DIFC & DEWA fees to be paid by Client.” and “All Building/developer Fees to be paid by Client.” Therefore, the completion time of the project was dependent upon the required payments of the Claimant as well as the applicable approvals being obtained for the commencement of the Project.

41. Therefore, all such applicable fees pertaining to government fees as well as building and developer fees were required to be paid by the Claimant in due course to avoid any delays.

42. Further, the Second Defendant was requested on 7 April 2021 by way of WhatsApp communication from the First Defendant to notify the Claimant to make payment of the applicable fees to in respect to the building charges which included the “Office Fit Out Design Review Fee” of AED 12,000 to MAG Property Development, “Administration Fee per unit” of AED 1,200 to SG Community Management Services and “Utility consumption charges” of AED 2,000 to Emirates Financial Towers Component, totaling to an amount of AED 15,960 (inclusive of 5% VAT) (the “Building Charges”).

43. Further still, in relation to the building management charges, the Claimant was also required to make a security deposit payment of AED 15,000 (the “Security Deposit”) to Emirates Financial Towers Component.

44. Furthermore, the Second Defendant by way of WhatsApp communication responded to the First Defendant’s notification in respect to making the required payments as set forth in the above paragraph by stating that, “It’s up to you, prepare the invoice but will take longer time the boss is not here today he comes once a week only.” To this, the First Defendant responded, “But I cannot release 30k from our operations.” However, the Second Defendant insisted of make the required payments by stating that, “It’s only 16k, and deposit they don’t cash it.” the First Defendant then responded by mentioning that, “I have to procure material etc…Pls get this amount from client…For insurance and other things I can but for building you have to get from client.” The Second Defendant responded by mentioning that, “Yes I will but just bear with us the timing…”

45. On 12 April 2021, by way of WhatsApp communication, the First Defendant asked the Second Defendant, “When will the payment be released for building approvals??” to which the Second Defendant responded with, “There are 4 payments altogether, 2 of them will be transferred tomorrow, 1 of them on Wednesday and last one deposit is on you.” On 3 May 2021, by-way-of WhatsApp, the First Defendant provided the Second Defendant with the DIFC proof receipt of payment of AED 3,150 as fees for the “NOC_Fit_out_EFT_N2003” and also reminded the Second Defendant to process the payments in respect to the approval fees to which the Second Defendant responded with, ”Pls don’t worry about it…We will get it done.”

46. Similarly, on 17 May 2021, by way of WhatsApp communication, another reminder was sent by the First Defendant to the Second Defendant to which the Second Defendant responded with, “It is in progress.” Further reminders were sent to the Second Defendant on 24 May 2021 and 8 June 2021 with regards to the payments that were owed by the Claimants. On 10 June 2021, payments in respect to the aforementioned amounts were received by the First Defendant.

47. The First Defendant submits that the fit-out period provided by the Claimant in the Special Terms was unfair due to their expertise. The First Defendant submits the terms and conditions of the Mabili Quotation provides that “Project Completion Time :- 70 To 80 working days from date of handing over the site & after advance Payment and other payments as per schedule and after any govt or owner approval for work permit like NOC and work commencement approvals..” and term 2 of the Special Terms which states “the fit-out period begins from March 2021 to 14 June 2021, including all approvals and permits”, even though the Special Terms shall take effect in the event of inconsistency, however, the First Defendant in their capacity of being the appointed contractor and their expertise provided the project completion time under the Mabili Quotation, taking into consideration the time required to obtain approvals.

48. The First Defendant also submits that there were frequent changes in designs made by the Claimant, which required further approvals, which led to delays to complete the Project.

49. The First Defendant in response to the Claimant’s submission “that the project completion was less the 50%” submits that the excel sheet sent to the Second Defendant by way of email on 4 July 2021 indicates a 50% completion and on 11 July 2021 by way of email to the Second Defendant, an update was provided that the completion was 50%.

Discussion

50. The Second Defendant failed to attend the Hearing listed before me. Therefore, pursuant to Rule 53.61 of the Rules of the DIFC Courts (the “RDC”) “if a defendant does not attend the hearing and the Claimant does attend the hearing, the SCT may decide the claim on the basis of the evidence of the Claimant alone”. Therefore, I shall decide the claim against the Second Defendant based on the evidence provided by the Claimant.

51. The First Defendant submits that, pursuant to RDC 22.8 and RDC 22.13, a statement of truth must be signed by the Claimant, which the First Defendant understands should be applicable on the basis that the Claimant has not been granted permission to have legal representation as required by RDC 53.55.

52. Rule 53.7 of the RDC, provide the extent to which rules apply in the Small Claims Tribunal “53.7 The following Parts of the RDC shall apply to small claims except to the extent that a Rule limits such application or the SCT Judge orders otherwise:

53. In relation to Rule 53.55, it provides the following: “(1) A party should present his own case at a hearing; (2) A party may be represented at the hearing by a non-lawyer or lawyer only after obtaining permission from the SCT which is to be given where it appears to the SCT on reasonable grounds that it is necessary in the circumstances; (3) If a party wishes to be represented at the hearing by a lawyer, that party must inform the SCT and the opposing party that it is intending to do so 4 days prior to the scheduled date of the hearing in order to allow sufficient time for the opposing party to also instruct a lawyer if he wishes to do so. (4) Parties’ attention is drawn to RDC Part 53.78.

54. The Claimant was not represented by a legal representative at the Hearing, and was represented by an employee of the Claimant. Therefore, the Courts accepts the Claimant’s statement of case.

55. Clause 2 to of the Mabili Agreement provides the following: “The fit-out period begins from March 2021 to 14th June 2021 [(theProject Completion Date)], including all approvals and permits. [sic]

56. Clause 3 of the Mabili Agreement provides the following: “In case of delay caused by any reason, other than solely caused by Maalik Investments Limited. Mabili Technical Services is responsible of paying a penalty of 750 AED per day for Maalik Investment Limited as compensation after the end of the fit-out period.”

57. The question that arises is whether the delay in paying for the approvals and permits was caused by the Claimant, the First Defendant or the Second Defendant.

58. As per Clause 2 of the Mabili Agreement, the Claimant submits that it is the First Defendant’s responsibility to complete the fit-out by 14 June 2021 including all approvals and permits.

59. However, the First Defendant submits that the Claimant failed to pay the cost of such approvals and permits to start the work. The First Defendant provided a WhatsApp conversation dated 7 April 2021 to the Second Defendant informing him of the building charges and requested him to get the money from the Claimant. In response to the WhatsApp conversation, the Second Defendant informed the First Defendant to prepare the invoice and that it will take time to pay such amount. The Second Defendant requested the First Defendant to make the payment and provide the invoice to not delay the matter. On 12 April 2021, a follow up was made by the First Defendant to the Second Defendant in relation to the payment. The Second Defendant’s response to this was that 2 payments would be made on the next day, which I assume was 13 April 2021 and 1 payment would be transferred on 14 April 2021 and the deposit to be on the First Defendant. The First Defendant responded to say “OK”.

60. On 3 May 2021, the First Defendant sent the Second Defendant a copy of payment made to the DIFC for “NOC Fit-out” and provided the payments made by the First Defendant in the sum of AED 20,930 and requested that the Second Defendant process it as soon as possible.

61. The Approvals were obtained on the following dates:

62. On 17 and 18 May 2021, the First Defendant requested payment. On 8 June 2021, the First Defendant again asked for the payment, and in response, the Second Defendant said that “your delay penalty continues as you’re abandoning your work.” On 10 June 2021, the transfer was made by the Claimant.

63. Although the First Defendant argues that the delay of the approvals and permits are caused by the Claimant, the Claimant submits that the delay in completing the project was due to the fault of the First Defendant by:

64. The First Defendant failed to provide evidence that there was a delay from the Claimant or the Second Defendant. Therefore, I find that the First Defendant has breached the Mabili Agreement, by failing to complete the Project by 14 June 2021 as per clause 2 of the Mabili Agreement. Following which, the First Defendant remained on the Project but failed to complete it.

65. By 17 August 2021, the First Defendant decided to pause the work for two days alleging that the Second Defendant had left a negative review about the First Defendant on Google. However, the First Defendant did not provide proof evidencing that the Claimant was the one who left the review.

66. On 19 August 2021, the Claimant did not allow the First Defendant to enter the premises, which I shall consider to be the termination of the Mabili Agreement.

67. On 23 August 2021, the Claimant, via its legal representative, provided the First Defendant with a notice terminating the Mabili Agreement due to the breaches.

68. Under DIFC contract law, there is a distinction between “fundamental” and “non-fundamental” breaches of contract. This distinction is important in the present matter because DIFC contract law provides distinct regimes for the termination of contracts depending on whether the wrongdoers breach was fundamental or non-fundamental.

69. Article 81(1) and (3) of DIFC Law No. 6 of 2004 (the “Contract Law”) relevantly provide:

70. The Claimant did not give written notice to the First Defendant allowing him an additional period of time of a reasonable length to perform his obligations under the Mabili Agreement. It follows, that, if the First Defendant’s presumed breaches were non-fundamental breaches, the Claimant did not follow the correct procedure for terminating the Mabili Agreement and the Agreement was therefore not terminated by the Claimant. It would follow from this that, the Claimant’s purported termination would need to have followed a fundamental breach of contract by the First Defendant.

71. Was the breach fundamental?

Article 86(1), (2) and (3) of the Contract Law provide as follows:

72. Applying Article 86, I determine as follows. There is sufficient evidence that the First Defendant’s breach substantially deprived the Claimant of what he was entitled to expect under the Mabili Agreement: the breach caused the delay of several Months from the date the Project was to be completed under the Mabili Agreement. There is also evidence that strict compliance with the completion date was of the essence of the Mabili Agreement, the penalties under clause 3 of the Mabili Agreement is sufficient evidence that the completion date was of the essence of the Mabili Agreement. There has been reason to believe that the Claimant could not rely on the First Defendant’s future performance: by not completing the project by 14 August 2021 which is two months from the Agreed completion date and by deciding to pause the work due to an allegation that the Second Defendant left a negative review on google. Article 86(3) of the Contract Law, moreover, suggests that where a breach merely causes delay, the procedure set out in Article 81 should be followed, which in turn suggests that such breaches will generally be considered “non-fundamental”. In conclusion, I do not think that the First Defendant’s presumed breaches were “fundamental” breaches of the Agreement. As such, I do think that the Claimant was entitled to immediately terminate the Agreement in accordance with Article 86(1) of the Contract Law.

73. Due to the First Defendant fundamental breaches, the Claimant suffered the losses set out below:

74. The Claimant argues that the Second Defendant failed to exercise “Reasonable Care and Skill”. Pursuant to the First Agreement, the Second Defendant had a duty to manage the Project and complete it by no later than 15 June 2021. As established above, the Project was not completed.

75. The Second Defendant received 50% of the Project Management fee in the sum of AED 23,382.50.

76. The Second Defendant although served, failed to attend or submit any documentation, therefore, pursuant to Rule 53.61 of the RDC I shall decide the claim against the Second Defendant based on the evidence provided by the Claimant only.

Findings

77. I find that the Claimant is entitled to the sum of AED 5,775 being the cost of the Independent contractor brought in to assess the Project.

78. I also find that the Claimant is entitled to penalties in the sum of AED 750 per day from the project completion date until the handover. The Claimant claimed 71 days being from the Project Completion date until the termination date on 23 August 2021 amounting to AED 53,250.

79. I find that the Claimant is entitled to the rent for the period he did not benefit from the Unit pursuant to the First Defendant’s breach. The Claimant provided evidence of the rent in the sum of AED 70,000 which I find the Claimant is entitled to.

80. I am not satisfied with the receipt provided in relation to Project Permits in the sum of AED 27,587.50. Therefore, I dismiss the claim for the Project permits.

81. I am also not satisfied with the Claimant’s calculation of the Additional cost claimed in the sum of AED 318,859.80. However, as per the MADI Survey Report, the value of the works completed by the First Defendant amount to AED 130,940. The Claimant has paid the total sum of AED 232,921.50 to the First Defendant.

82. Therefore, I find that the First Defendant shall repay the Claimant the difference between the amount paid and the total value of the works, which calculates as follows: AED 232,921.50 – 130,940= AED 101,981.50.

83. The Claimant filed a claim against the Second Defendant claiming payment made to him in the sum of AED 23,382.50 as he was also in breach of the First Agreement.

84. The Project Management fee is 14% of the project value, and the value of the Project completed by the First Defendant and under the management of the Second Defendant as per MADI’s report is AED 130,940 in which 14% calculates to 18,331.60.

85. Therefore, I find that the Second Defendant shall return to the Claimant the sum of AED 5,050.90.

Conclusion

86. In light of the aforementioned, the First Defendant shall pay the Claimant the sum of AED 231,006.50 plus interest accruing at the rate of 9% per annum from the date of this Judgment until the date of full payment.

87. The Second Defendant shall pay the Claimant the sum of AED 5,050.90 plus interest accruing at the rate of 9% per annum from the date of this judgment until the date of full payment.

88. The First Defendant shall pay the Claimant the Court fees in the sum of AED 11,550.32

89. The Second Defendant shall pay the Claimant the Court fee in the sum of AED 252.54.