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Claim No. SCT 172/2023

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 H.E. JUSTICE NASSIR AL NASSER

BETWEEN

MURKAN

Claimant

and

MUHY

Defendant

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JUDGMENT OF H.E. JUSTICE NASSIR AL NASSER

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UPON reviewing the Claim Form dated 4 May 2023 and the Particulars of Claim filed on 4 May 2023

AND UPON reviewing the Defendant’s statement of defence filed on 12 June 2023

AND UPON a hearing having been held before me, H.E. Justice Nassir Al Nasser, on 15 June 2023, with the Claimant’s and the Defendant’s representatives in attendance

AND UPON reviewing the expert report of Marial (the “Expert Report”) submitted on 20 July 2023 including the Claimant’s and the Defendant’s comments on his independent findings

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

IT IS HEREBY ORDERED THAT:

1. The Defendant shall pay the Claimant the total sum of AED 420,242 as set out below:

2. The Defendant shall repay the Claimant’s costs of AED 25,593.75 which was contributed towards the appointment of the expert.

Issued by:
Delvin Sumo
SCT Judge and Assistant Registrar
Date of issue: 8 September 2023
At: 3pm

SCHEDULE OF REASONS

The Parties

1. The Claimant is Murkan (the “Claimant”) an independent contractor located in office 00 Dubai, United Arab Emirates.

2. The Defendant is Muhy (the “Defendant”), a private company registered in Abu Dhabi Global Market (ADGM) under registration number 0001.

Hereinafter will be referred to collectively as the (“parties”).

Background

3. The underlying dispute is one related to an agreement entered between the Parties in which the Claimant was contracted to perform partial constructions works in connection with a private villa 001 in dubai (the “Project”). The Claimant submits that it had performed works in addition to its agreed scope of work proposed in the agreement dated 2 January 2023 (the “Agreement”). The original scope of works is set out under paragraph 2A and 2B of the Agreement and it includes provision of services such as, tower crane installation, plant and equipment insurance, precaution and edge protection, boundary wall and remaining concrete works for the neighbour side, slab MEP ventilation room, concrete for the unfinished or noncasted walls, construction of planting boundary wall and monthly rent of a tower crane.

4. During the Hearing, the Claimant’s representative confirmed that the agreed original scope of work was completed on site excluding the work related to the installation of slab MEP ventilation room as it was purportedly connected with works required to be concluded by a waterproofing subcontract

5. As such, the Claimant seeks to recover its outstanding payment arising from the existing Agreement of AED 261,620, the variation works of AED 206,462 and time delay costs as a result of being on site longer than anticipated in the sum of AED 91,140.

6. The Claimant’s case is founded on the premise that they had been contracted by the Defendant to carry out partial constructions works on site. When they commenced the scope of work, it became apparent that additional works need to be completed prior to the commencement of the original scope of work. The additional works were all identified to the Defendant for their approval as variations works to the original scope of work. Accordingly, the Claimant submits that the costs relevant to the additional works should be recovered from the Defendant attributable to the amount of work performed on site.

7. The Defendant’s case is that the Claimant was initially contracted to perform the partial construction works on the Project, albeit the Claimant was one of the contractors being considered as part of the tendering process for the whole constructions works. The Claimant made several variations works to the original scope of work, which the Defendant asserts was in order to influence their decision making when awarding the contract for the whole constructions works.

8. With respect to the percentage of work completed by the Claimant on the Project, the Defendant agreed, during the Hearing, that the Claimant completed 80% of the agreed scope of work. Therefore, I will not consider this issue to be a disputed matter between the parties. As such, the essential issues for the Court to determine are (i) whether the Claimant is entitled to receive the claimed amounts and if so (ii) the amount which the Claimant shall be awarded in light of the percentage of work that has been completed on the Project.

Preceding History

9. The following is a highly condensed summary of the factual background which was evidenced by some 500 pages of the documentary record.

10. It is undisputed that the Project experienced delays, these proceedings arose over the payment of the original scope of work, the variation works completed by the Claimant and the costs of delays. The Defendant puts forward that works completed was part of the original scope of work and the Claimant is not entitled to receive payments on the variation works as by no means that had been agreed nor approved by the Defendant.

11. On 27 December 2022, the Claimant received a letter of appointment from the Defendant assigning the Claimant as the main contractor, which was also reflected on the Dubai Municipality’s register. The Claimant’s appointment was a replacement of the previous main contractor, the Murin Group . The letter of appointment indicates that Musi is the Defendant’s assigned representative responsible for all contracted works and approvals on the Project. Subsequently, the Defendant appointed Morup (“Morup") as the consultant for the Project (the “Consultant”).

12. On the 2 January 2023, the Claimant provided the Defendant with a priced proposal to perform the Project, which was approved by the Defendant. On the 31 January 2023, the Parties agreed that work would commence on 31 January 2023 until 15 March 2023, thereby a duration of six weeks (43 days). However, the Claimant was on site until 10 May 2023 following the tower crane being dismantled, thereby an extended period of 56 days, 15 March until 10 May 2023 (the “time delay costs”).

13. On or around January 2023, the Defendant says that the Claimant sought several variations to the original scope of work, which purportedly were not related to issues with previous subcontractors, rather it was sought as a result of the Claimant’s financial difficulties, who assured the Defendant that they will withdraw the variation requests subject to the Claimant being awarded the main contract for the Project.

14. On 7 February 2023, the Claimant issued a notice informing the Defendant that partial works on site had commenced however other contracted works related to waterproofing, anti-termite, steel structure, and precast concrete had not yet begun owing to an outstanding payment of AED 61,652 payable to the Project subcontractors, thereby urging the Defendant to reach an agreement with the concerned subcontractors to ensure that the remaining works were performed within the agreed timeline.

15. On 16 March 2023, the Claimant wrote to the Defendant dismissing its liability as a result of the caused delays in commencing their agreed scope of works, submitting that the issue is essentially connected to the Defendant’s failure in paying the previous subcontractors. The letter records that the Claimant, in good faith, paid the outstanding value to the previous subcontractors, despite the fact they have not agreed for the works of the subcontractors to be carried out on site, nonetheless it intended to reach an agreement for the purposes of accelerating the works on the Project. Further, the letter clearly states that the Claimant ought to be entitled to costs related to extension of time of being on site, any additional costs for the delays including any variation works. The Claimant provides a revised completion date being the 15 May 2023.

16. On 23 June 2023, Morup rejected the Claimant’s allegations submitting that the delays were caused by the Claimant’s lack of analysing and studying the required scope of work and contacting all engaged subcontractors or suppliers to ensure a seamless progress. As such, delays are the main contractor’s liability, therefore the Claimant should not be entitled to any damages as a result of any extension of time of being on site.

17. With respect to the variation works, the Claimant submits that the provision of the variation works did not form part of the original scope of work, and they have been approved by the Defendant, therefore the costs which the Claimant incurred of AED 206,462.30 ought to be repaid in full. The Defendant disputed that these variations were payable submitting that those amounts claimed are largely part of the original scope of work of the Agreement.

The List of Variation Works:

18. On 7 April 2023, the Claimant submitted an invoice of the works completed in the amount of AED 127,506.25 plus VAT which was due to be paid on 21 April 2023.

19. On 3 May 2023, the Claimant was notified by the Dubai Municipality of a change of main contractors, based on the Defendant’s instruction, effectively removing the Claimant as the main contractor of the Project and replacing them with Musi.

20. The Claimant submits that it has incurred financial loss pertaining to the Project and seeks compensation from the Defendant as a result of (i) the works performed on site in accordance with the Agreement; (ii) the monthly costs agreed between the Parties; in addition to (iii) the works performed based on the client’s representative’s instruction and costs incurred as a result of the time delay. The total amount claimed is AED 475,838.80 plus VAT.

21. On 20 July 2023, Mr Marial, being the independent expert provided his findings on matters related to quantum providing his opinion on (i) whether the Claimant is entitled to receive the variation costs of the agreed scope of works and in the affirmative (ii) the amount the Claimant is entitled to receive. The Defendant objected to the findings of the expert report primarily because Mr did not visit the site and assess the work performed by the Claimant, the variation works were not approved by the client’s representative and the valuation range for the work performed on site is not a true reflection of the actual works completed due to the expert’s failure to visit the site and examine the actual works completed on the Project by the Claimant (the “Expert Report”).

22. The purpose of an expert report is to primarily assist the Court with the question of quantum given the fact that the Agreement between the Parties is silent on the mechanism which addresses issues related to time delay costs and prolongation costs. Marial concluded that the Claimant shall be entitled to costs claimed in these proceedings albeit not in full.

Findings

23. Pursuant to paragraph 4 of the Agreement dated 2 January 2023, which is subject to the exclusive jurisdiction of the DIFC Courts, the Agreement does not stipulate the governing law that should be applied to give effect to the parties dispute. In accordance with Article 6 of the Dubai Law No.12 of 2004, as amended, “the [DIFC] Courts shall apply the [DIFC]’s laws and Regulations, except where the parties to the dispute have explicitly agreed that another law shall govern such dispute, provided that such laws does not conflict with the public policy and public morals”. In addition, Article 10 of the DIFC Law No.10 of 2005, states that “if the parties do not specify the governing law of a contract, the contract shall be governed by the law of the DIFC”. Therefore, the DIFC law will govern this dispute.

24. Turning to the agreed scope of work, it is quite difficult to determine the original proposed scope of work with complete accuracy or the intended baseline which the Claimant was contracted to perform based on my reading of the Agreement. Having said that the items which represent the “scope of work” are described and priced in the letter and they fall into three categories (i) one-off or fixed items of work, (ii) work related and (iii) time related. I agree with the Expert Report findings at paragraph 36, in the absence of any agreed approach or rules of assessment established between the parties, an evaluation for the additional payment or compensation should be based on reasonable actual costs or demonstrated expenditure against the items claimed.

Part A: Existing Agreement

25. The parties appear to have agreed the price for the performance of certain works by way of a signed Agreement, as such, in the absence of any evidence demonstrating that this Agreement is superseded by a separate contract, the Agreement in its entirety shall represent the complete and final Agreement between the parties thereby fully binding on them.

26. The expert has assessed that the fixed items which have been performed have been evaluated at the agreed price and the Claimant should be compensated in full. The fixed items of work are those which were required regardless of the quantity or the volume of work or the time taken to complete the work, being the tower crane, all risk insurance policy, safety and protection, which are deemed essential to allow works to proceed on site. Based on that evaluation, I agree with the expert, partial completion of those items would not be adequate to allow the works to be carried out legally or practically. In support of the amount claimed, the Claimant submitted inspection records for the tower, insurance certificate for all the risk policy and plant and machinery policies and inspection records approved by the Consultant of the Project. Based on the above, the Claimant shall be awarded the amount claimed of AED 107,620.

27. Turning to the work-related items, it is my opinion that the work-related items being the boundary and remaining concrete works should reflect the extent of the work performed on the Project, thereby the quantity or the volume of work should be measured against the original scope of work. I note that the expert did not provide an assessment on the percentage of work that was completed by the Defendant on site and instead relied on the fact that both parties including the Defendant admitted to the Court that the Claimant completed 80% of its scope of work.

28. The Defendant’s comments on the Expert Report which contends that the Claimant only completed 20% of the original scope of work, has been rejected by the Claimant submitting that it had completed 80% of the agreed scope of work. However as mentioned above in paragraph [7] this will not be considered a disputed issue as the Defendant admitted at the Hearing that the Claimant completed 80% of its agreed scope of work.

29. Based on the admission made by the Defendant, it is my opinion that the Claimant should be awarded 80% of its claimed costs under the existing contract being AED 86,096.

Time related – Tower Crane

30. I will now deal with the time related costs pertaining to the crane being on site beyond the scope of the parties agreement, based on the evidence submitted, the amounts claimed are attributable to the items claimed. I note that the Claimant seeks to claim its costs with respect to the tower crane from 24 February 2023.

31. Undoubtedly, the parties have agreed to a monthly rental rate of AED 15,000 for the tower crane by signing the Agreement, as such a reasonable evaluation of the amount for the tower crane can be calculated by applying the agreed price to the time period between the crane installation and dismantling.

32. The Claimant provided the tower crane inspection report which was issued to the client’s representative on 28 February 2023, and it is evident that the Claimant started incurring costs from the crane rental company from 24 February 2023, the records show that the crane was dismantled on 9 May. The commencement of the rental period should therefore start from 28 February 2023, the date which the Claimant requested the client’s representative to inspect the installed one.

33. The amount of the tower crane rental should be based on the agreed rates between the parties and not costs. As such, considering that the monthly rate of the tower crane was agreed at AED 15,000 and since the tower crane was on site for a period of 2.33 months (70 days), the Claimant is entitled to an amount of AED 45,500.

34. The rationale in awarding the Claimant AED 45,500 is based on the fact that at the time of the Agreement, the parties expected the tower crane to be on site for longer than three months. The Claimant’s purchase order with the crane company was based on a period of 12 months, as such the Agreement between the Claimant and the Defendant did not contemplate rates based on parts of a month, or shorter time periods. Thereby, the Claimant would continue to be liable owning AED 15,000 to the crane company for the parts of the months, there would not have been special discounts or discharge of its liability to the tower crane company. It is on that basis that the Claimant should be awarded AED 45,500.

35. Therefore, under the existing Agreement, the Claimant shall be awarded its costs of AED 239,096.

Part B: Variation works

36. The provision of services outlined above in paragraph 17(a) – 17(l) of this Order were determined by the expert to be variation works beyond the agreed original scope of work. The Defendant contended that the price for the Claimant to perform all works on site are included in the original Agreement, therefore the Defendant is of the view that the Claimant should not be entitled to claim any additional amounts. The Claimant submits that those works were additional to the scope of work described and priced in the Agreement.

37. The Claimant seeks to recover under the variations works a sum of AED 206,462 (excluding VAT), however in accordance with the expert’s evaluation following a thorough analysis of the evidence and invoices submitted, it was decided that the Claimant should be awarded an amount of AED 145,325 (excluding VAT).

38. Amongst the 12 items claimed as variations to the scope of the work, the highest variation costs claimed is in connection with the additional costs in performing the works on site in the amount of AED 78,000, which include the following:

39. These costs were outlined in the Claimant’s letter to the Defendant dated 15 March and were discussed between the parties in an email dated 3 March 2023.

40. The expert concluded that the Claimant should be awarded AED 52,827 (excluding VAT) founded on the premise that the manpower allocated to each item of work has been calculated globally, meaning that there is no link between the manpower deployed and the specific tasks performed, without those records there is a danger that the allocated manpower could have been carrying out items of work claimed elsewhere. Therefore, the expert adjusted the invoiced amounts for the manpower by 10% to account for the uncertainties concerning the deployed manpower. Further, the expert considered that the DEWA deposit of AED 5,180 will be credited to the Claimant in due course, therefore in the expert’s evaluation that amount was adjusted accordingly.

41. I agree with the expert’s decision and in the absences of any evidence supporting the Claimant’s case, there is no reason for the Court to depart from the expert’s opinion.

42. I will now move on to the second highest variation item being 17 (a), the demolition works and removal of garbage and cartaway from site MEP Room Door cutting and additional support as per DM revised drawings in which the claimed amount is AED 26,000 which is based on 1,440-man hours from 1 February 2023 to 28 February 2023. The amount claimed represent about 144-man days which equates to 6 men working every day for a month. Based on the evidence provided by the Claimant, there is no proof which suggests that the manpower recorded is attributable to the volume and quantity of work performed. Therefore, I agree with the expert’s opinion in that the amounts claimed for item 17(a) are partially attributable to the works claimed, the expert considers that 540 man-hours (6 men working for 9 days for 10 hours per day) are attributable to the demolish works and it is likely the manpower claimed for this item was deployed on other works elsewhere.

43. With respect to the removal of garbage and carting away for item 17 (a), based on the evidence submitted by the Claimant which demonstrates that debris and garbage removal took place between 3 February – 10 February 2023 this clearly suggests that the demolition works on site had to be finalised on 10 February 2023 (i.e., 9 working days). As such, I agree with the expert’s analysis on this variation item claimed. As for the amounts claimed for removal of garbage and carting away, it is clearly evidenced that it is attributable to the work claimed. With respect to the item of work describing “door cutting” it is not part of the original scope of work and amounts claimed is also attributable to the works performed by the Claimant on site.

44. Lastly, with reference to item 17 (a) the Claimant shall be awarded an amount of AED 12,973.90 (excluding VAT) instead of the total amount claimed AED 26,000. I agree with the expert’s evaluation and in the absence of any evidence to provide otherwise, there no grounds to depart from the expert’s analysis.

45. Moving on to the third highest variation works claimed which involves works related to the tower crane dismantling and de-mobilisation from the site being item 17 (k). It is evident that the Agreement does not contemplate the dismantling of the tower crane nor its de-mobilisation and as such this item of work ought to be considered a variation of works to the original scope of work. The Claimant was required to demobilise from the site which included dismantling the tower crane. The purchase order with the tower crane company requires the Claimant to assist with the installation and the dismantling of the tower. Therefore, the amounts claimed to dismantle the tower crane are directly attributable to the works performed and there are evidence to support that those costs have been incurred by the Claimant in form of invoices from suppliers to dismantle the tower crane.

46. Since the parties have agreed the price for the tower crane installation at AED 25,000, the scope of dismantling should be the same as the installation. The expert considered that the AED 25,000 is a reasonable price which the Claimant should be entitled to claim.

47. Turning to the lower variation items of work being 17(b) – 17(i) and 17(l) in which the expert’s evaluation were based on a benchmark percentage of 70.39% of the total amount claimed. Therefore, it was the expert’s evaluation that the Claimant should be entitled to AED 54,524 (excluding VAT) as opposed to the amount claimed AED 77,462 (including VAT). Again, there are no reasonable grounds for the Court to depart from this evaluation and I agree with the expert’s analysis.

Part C: Time Delay

48. With respect to the time delays, the parties clearly agreed that the partial construction works were expected to be completed within 6 weeks commencing from 31 January 2023. However, the Claimant was on site until 10 May 2023, therefore an extension of 56 days. The Claimant submits that it should be entitled to an additional AED 91,140 for the extended duration. I agree with the expert, there is no apparent mechanism in the Agreement which deals with the eventuality the Claimant is on site for longer than anticipated. I will outline the items which the Claimant seeks to recover as time delays costs which are as follows:

49. I note that the supplier invoice submitted to demonstrate that the additional costs is for hire charges “scaffolding and framework materials” this item is related to the works carried out on site as part of the original scope of work. As such, this shall not be considered as a variation of works which the Claimant is entitled to recover.

50. With respect to the salaries on the time delay, undoubtedly there was a need for the Claimant’s staff to be on site to supervise the work. Based on the records submitted by the Claimant, the expert nor the Court can verify that all site staff have been deployed as claimed. For instance, Mufib is claimed to be present at the project for 100% up to 10 May 2023, upon further review of the evidence, it is evident that Mr Mufib was no present on the Project site in the month of May 2023. Further, Mr Mirok is claimed as 40% present on site for March, April and May however does not appear on the muster roll for these months. In the absences of any evidence to support otherwise, the expert adjusted the amount claimed significantly to reflect the amount recorded for these months. The expert considered an adjustment of 30% of the amount claimed which means cost for approximately 1 site supervisor being on site full time for those months.

51. Turning to the head office staff and salaries incurred as a result of the time delay, it is my opinion that the Claimant would have incurred those costs of its head office staff irrespective of the time delay to the Project, therefore I do not consider these costs as additional costs which the Claimant is entitled to recover.

52. Finally, in connection to the remaining items outlined in 48 (d)– 48 (h), I consider those works to be required to maintain a building site and may not be directly attributable to cost of performed direct works. Therefore, the Claimant should be entitled to claim those costs.

Conclusion

53. Based on my reading of the evidence and the findings of the Expert Report, I conclude that the Claimant shall be entitled to its claimed costs from the Defendant in the amount of AED 420,242 (excluding VAT).