December 06, 2023 SCT - JUDGMENTS AND ORDERS
Claim No: SCT 385/2023
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 MAITHA ALSHEHHI
BETWEEN
MISKOFI
Claimant/Defendant in Counterclaim
and
MILBART
Defendant/Claimant in Counterclaim
| Hearing : | 24 November 2023 |
|---|---|
| Judgment : | 6 December 2023 |
JUDGMENT OF SCT JUDGE MAITHA ALSHEHHI
UPON the claim having been filed on 5 October 2023 (the “Claim”)
AND UPON the Defendant’s defence and counterclaim dated 2 November 2023 (the “Counterclaim”)
AND UPON a hearing having been listed before SCT Judge Maitha AlShehhi on 24 November 2023, with the Claimant’s representative and the Defendant’s representative in attendance (the “Hearing”)
AND UPON reviewing the documents and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. The Claim shall be dismissed.
2. The Counterclaim succeeds, and the Claimant shall pay the Defendant the amount of AED 313,766.70.
3. The Claimant shall pay the Defendant the sum of AED 11,532.20 as interest on the 24 April Invoice (with such interest calculated up to 23 November 2023). Interest shall continue to accrue on the 24 April Invoice debt at a rate of 7.40% (AED 62.16 per day) until final payment of the 24 April Invoice.
4. The Claimant shall pay the Defendant the DIFC Courts’ filing fee in the amount of AED 15,688.33.
Issued by:
Hayley Norton
SCT Judge and Assistant Registrar
Date of issue: 6 December 2023
At: 12pm
THE REASONS
Parties
1. The Claimant is Miskofi (the “Claimant”), a company registered in the DIFC, Dubai, the UAE.
2. The Defendant is Milbart (the “Defendant”), a law firm registered in the DIFC, Dubai, the UAE.
The Claim
3. The Claimant is seeking a reduction of the fees incurred pursuant to the letter of engagement dated 10 March 2023 pursuant to which the Claimant retained the Defendant to carry out certain legal services and to represent it in relation to a potential employment dispute with an employee (the “Employee”) (the “Letter of Engagement”).
4. The Claimant is of the view that the advice was in relation to a straightforward matter, however, the Defendant allegedly sought to complicate it by suggesting that a settlement agreement be drafted which was not executed. The Claimant submits that, in fact, it ultimately went ahead with a strategy proposed by itself.
5. The Claimant submits that it was constantly following up with the Defendant to provide an update as to the fees that had been incurred. The Claimant states that the Defendant kept delaying as evidenced in the Defendant’s reply email dated 24 March 2023 wherein it is stated “as promised, in terms of fees update, we have incurred approximately AED 175,000 (plus VAT) from the commencement of this matter up to 23 March 2023 inclusive”. (the “Email”).
6. Following the Email, the Claimant submits that it has raised concerns with the Defendant as to the high fees incurred by way of telephone conversation.
7. The Claimant submits that on 24 April 2023 it received the official invoice from the Defendant for work completed between 8 March 2023 to 17 April 2023 in the amount of AED 306,584.70 (the “24 April Invoice”). A further invoice was issued on 17 October 2023 for work completed on 19 April 2023, in the amount of AED 7,182 (the “17 October Invoice”).
8. The Claimant is seeking a reduction of the fees incurred to AED 205,000.
9. After reviewing the 24 April Invoice, the Claimant concedes that the Defendant lacked transparency and breached its fiduciary duties in not disclosing that it had retained overseas lawyers to assist in the matter in accordance with paragraph 3 of the Letter of Engagement wherein it states “We try hard to avoid changing the lawyers involved in the conduct of a matter, but if this cannot be avoided we will notify you promptly of any changes”.
10. The Claimant further submits that due to the simplicity of the case there was no need to retain a UK based lawyer in relation to DIFC Employment and asserts that the Defendant failed to seek its approval beforehand.
11. The Claimant submits that the Defendant inflated the costs not only in relation to overseas lawyers, but also in relation to the various internal team meetings that it believes were unnecessary due to the nature of the advice sought.
12. At the Hearing, the Claimant expressed its concerns to the inconsistencies of the billable hours of some lawyers which were not in line with the Letter of Engagement. As such it is reluctant to pay the full amount owed.
13. The Claimant submits that the 24 April Invoice was shared late and had it seen the invoice before, it would not have agreed to the contents. Therefore, the Claimant is seeking a reduction of the costs incurred to align with the actual work performed by the Defendant.
The Defence and Counterclaim
14. The Defendant denies the Claimant’s claim in full and submits that it performed all of its obligations in accordance with the Letter of Engagement.
15. The Defendant submits that when the Claimant engaged their services, it was due to a very urgent matter, and it has taken all the necessary steps at the time to assist the Claimant and rejects the Claimant’s assertation that it was a straightforward issue.
16. The Defendant submits that the Claimant was aware that fee earners in the Dubai team and London employment team had become involved in the matter and the Defendant was entitled to include other fee earners pursuant to the Letter of Engagement. Therefore, it did not change lawyers as asserted by the Claimant.
17. The Defendant submits that as soon as the Claimant retained its services, it was in constant contact with the Defendant’s team by way of emails and calls while knowing that the Defendant’s billing mechanism is to charge on hourly rates as expressed in the Letter of Engagement.
18. Due to the various phone calls and email exchanges between the parties, this resulted in the Defendant having to amend its work to suit the Claimant’s needs and wishes. Thus, assigning more people to help in the case whether locally or overseas and incurring costs.
19. The Defendant submits that the preparation of a settlement agreement was based on the Claimant’s instructions which included a waiver of alleged claims to protect the Claimant, and updated contractual terms and undertakings.
20. The Defendant rejects the Claimant’s assertion that it raised an issue with the fees mentioned in the Email via telephone conversation and submits that the Claimant continued to instruct them and incur further costs even after receiving the Email.
21. The Defendant submits that paragraph 10 of the terms of business makes it clear that if part of the Defendant’s bill is not subject to query, then this part should be paid to the Defendant within 30 days of issue of the bill and given that the Claimant sought reduction of fees to AED 205,000, this means it has admitted that the fees are payable. Therefore, the Claimant is in breach of its contractual obligations.
22. Moreover, the Defendant submits that the Claimant agreed to pay all amounts due within 30 days of issuance of an invoice as stated in the Letter of Engagement and it has failed to do so.
23. As such, the Defendant is now seeking full payment of the outstanding amount due in addition to interest pursuant to the Letter of Engagement.
24. With regards to interest, the Defendant submits that it is entitled to charge interest on overdue amounts at 2% above the UAE Federal Bank rate. The UAE Federal Bank rate was 5.15% between May and July, and from 1 August 2023 the rate has been 5.40%. The Defendant requests that the Claimant is ordered to pay AED 11,532.20 interest on the 24 April Invoice with such interest calculated up to 23 November 2023 as of the hearing date. The Defendant is not seeking payment of interest in relation to the 17 October Invoice due to the low amount.
Discussion
Was the Defendant instructed on a matter that was straightforward?
25. Given that the Claimant hired an international law firm that bills the client on hourly rates does not suggest that the advice sought was of a straightforward nature.
26. The circumstances surrounding the nature of the departure of the Claimant’s employee was not simple as suggested by the Claimant. I note that the advice was in relation to breaches of the employment contract regarding non-disclosure and inappropriate use of confidential information, non-competition, non-solicitation of employees and non-disparagement and so forth.
27. The fact that there was a possibility that the Claimant wanted to file an application for interim injunctive relief against the Employee does not suggest that the matter was straightforward as injunctive relief is typically sought in relation to urgent sensitive matters, usually requires a lot of work to be completed by the instructing law firm in order to obtain it.
Did the Claimant object to the Defendant’s fees?
28. At the Hearing, I asked the Defendant to confirm its billing mechanism to better understand whether the invoices were sent on time or not. The Defendant’s representative confirmed that they are usually sent monthly but failed to answer why it was not sent before 24 April 2023.
29. Paragraph 6 of the Letter of Engagement sets out the billing arrangements as below:
“We will render our bills to Miskofi on a monthly or earlier basis, marked for your attention.”
30. The Defendant charged the Claimant for work done starting from 8 March 2023, which means that the invoice must have been generated and sent on 8 April 2023 rather than 24 April 2023. Therefore, I find that the 24 April Invoice was indeed sent late to the Claimant.
31. However, given that the Defendant did provide the Claimant with an update on 24 March 2023 as to the incurred fees, and the Claimant continued to engage with the Defendant and request more work to be done without asking for further details or objecting via email then I am of the view that the Claimant was aware of the billing mechanism and the final amount that it can lead to.
32. On 28 March 2023, the Claimant responded to the Email and did not mention anything about the fees. Therefore, I find that the Claimant failed to properly notify the Defendant with its concerns of the inflated costs and the Claimant failed to provide proof to confirm the same.
33. Therefore, even if the 24 April Invoice was shared late, I find that the Claimant failed to properly raise its objection with the Defendant’s fees when it first became aware of it on 24 March 2023.
34. The fee section of the Letter of Engagement sets out the type of work that is subject to a charge which is typically carried out by the Defendant:
“10. Fees
You agree to pay our fees and disbursements as set out in our bills. We will charge fees for all of our time spent on the Engagement, including but not limited to, time spent attending meetings, travelling, reviewing and preparing papers, carrying out legal research, corresponding with you and with third parties, supervising and managing the team deployed on your Engagement and making and receiving telephone calls. Unless otherwise agreed, our time is recorded and charged in six-minute units.”
Were the Defendant’s actions lawful in instructing overseas lawyers and billing them?
35. The Defendant’s email dated 27 March 2023 confirms to the Claimant that it retained an overseas lawyer while there was no objection on the Claimant’s side as read below:
“As mentioned on our last call, I have discussed the increase of the restrictions back to 24 months with an employment partner in our London office who deals with restrictive covenant disputes very regularly”
36. Due to the Claimant’s failure to object to the above email or raise any sort of concern, the Defendant continued to engage with the overseas lawyers.
37. Pursuant to the Letter of Engagement, the Claimant should have been aware that any time spent dealing with the matter will incur costs, this includes the exchange of phone calls and emails between the Claimant and the Defendant as well as the Defendant’s internal team discussions.
38. Paragraph 4 of the Letter of Engagement provides that the Defendant may involve other lawyers on the matter if deemed necessary which was the situation in this case, and given that the Claimant failed to object, I find that the Defendant’s actions were lawful as it is line with the Letter of Engagement.
Is the Claimant liable to pay all the outstanding amount?
39. Although the Claimant is seeking a reduction of the fees and is not seeking a cancellation, I find that the reduction is not permissible at this instance as the Claimant failed to file submissions with the Court on time to support such reduction. As such, the Claimant has failed to provide the Court with any legal basis for a reduction of AED 205,000 to be made.
40. Given that the Claimant did not raise any objection earlier and continued to work with the Defendant, I find that the Claimant must pay the Defendant the outstanding amounts due in the 24 April Invoice and 17 October Invoice in accordance with the Letter of Engagement in the total amount of AED 313,766.70.
41. In addition to the outstanding amount, the Claimant is also liable to pay the Defendant’s interest as set out below in the Letter of Engagement:
“If our bill remains unpaid after 30 days you agree that we shall be entitled: • to charge interest on overdue amounts at the legal rate for late payments where there is one, or 2% above the base rate from time to time of the UAE Federal Bank where there is no legal rate;”
Findings
42. For the above cited reasons, I hereby order that the Claim shall be dismissed.
43. The Counterclaim succeeds and the Claimant shall pay the Defendant the amount of AED 313,766.70 in respect of the 24 April Invoice and 17 October Invoice.
44. The Claimant is ordered to pay AED 11,532.20 interest on the 24 April Invoice (with such interest calculated up to 23 November 2023). Interest continues to accrue on the 24 April Invoice debt at a rate of 7.40% (AED 62.16 per day) until full payment of the 24 April Invoice.
45. As the Defendant was successful in its Counterclaim, I hereby order the Claimant to pay the Defendant the DIFC Courts’ filing fee in the amount of AED 15,688.33.
