October 29, 2024 SCT - JUDGMENTS AND ORDERS
Claim No: SCT 426/2024
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
NITAI
Claimant
and
NICHOLSON
Defendant
| Hearing : | 28 October 2024 |
|---|---|
| Judgment : | 29 October 2024 |
ORDER WITH REASONS OF SCT JUDGE MAITHA ALSHEHHI
UPON the claim having been filed on 20 September 2024 (the “Claim”)
AND UPON the Defendant’s reply setting out its intention to contest the jurisdiction of the DIFC Courts dated 1 October 2024 (the “Defendant’s Jurisdictional Challenge”)
AND UPON a jurisdiction hearing held before SCT Judge Maitha AlShehhi on 28 October 2024 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
AND PURSUANT to Part 53 of the Rules of the DIFC Courts (the “RDC”)
IT IS HEREBY ORDERED THAT:
1. The Defendant’s Jurisdictional Challenge shall be granted.
2. The DIFC Court does not have jurisdiction to hear and determine the Claim.
3. Each party shall bear its own costs.
Issued by:
Delvin Sumo
SCT Judge and Assistant Registrar
Date of issue: 29 October 2024
At: 3pm
SCHEDULE OF REASONS
Parties
1. The Claimant is Nitai (the “Claimant”), an individual filing a claim against the Defendant in respect of repayment of a loan.
2. The Defendant is Nicholson (the “Defendant”), an individual residing in Dubai, the UAE.
3. On 20 September 2024, the Claimant filed a claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking repayment of a loan in the amount of AED 52,500, plus interest, in accordance with the agreement/Convertible Promissory Note dated 15 March 2021 (the “Note”).
4. The Claimant takes the view that the SCT can hear the Claim on the basis that the Defendant is a Dubai resident and is the Chief Executive Officer of Ninion, a company based in the DIFC.
5. The Defendant submits that Ninon lacks standing or capacity in these proceedings, as it is neither the entity that received the loan nor the entity obligated to repay it under the Note. The Defendant further submits that this company is registered with Dubai mainland and is not a DIFC establishment. The DIFC asserts that he has another company situated in the DIFC called “Ninon Limited” which did not agree to bring any claim to the DIFC Courts.
Does the DIFC Courts have jurisdiction to hear and determine this Claim?
6. I have delivered my judgment orally at the Hearing, however, in the interest of transparency, I set out below how I arrived at my decision.
7. The Note identifies the First Party as “Nicholson” and the Second Party as “Nitai”. The first page of the Note reads as follows:
“FOR VALUE RECEIVED, Nicholson, executive director of Ninion Limited (the “Promisor”), hereby promises to pay to the order of Nitai, (the “Holder”), the principle sum of PKR 4,000,000 (the “Principle Amount”), together with interest thereon from date of issuance of this convertible promissory note (this “Note”). Interest will accrue at a rate of 13.00% per annum, compounding annually. Unless earlier converted into Shares (as defined below), the principle and accrued interest of this Note will be due and payable by the Promisor on the earlier of: (i) 365 days from Date of Issuance (the “Maturity Date”); or (ii) the occurrence of an Event of Default.”
8. The Note states that the Defendant is the director of Ninion Limited and makes no reference to Ninion.
9. It is important to note that the parties confirmed at the Hearing that the Note is entered into in their personal capacities.
10. RDC 53.2 requires that the Small Claims Tribunal (“SCT”) hear only cases that fall “within the jurisdiction of the DIFC Courts” which are set out below:
“(1) where the amount of the claim or the value of the subject matter of the claim does not exceed AED 500,000 or;
(2) where the claim relates to the employment or former employment of a party; and all parties elect in writing that it be heard by the SCT (there is no value limit for the SCT’s elective jurisdiction in the context of employment claims); or
(3) which do not fall within the provisions of sub-paragraphs (1) or (2) above, but in respect of which:
(a) the amount of the claim or the value of the subject matter of the claim does not exceed AED 1,000,000; and
(b) all parties to the claim elect in writing that it be heard by the SCT, and such election is made in the underlying contract (if any) or subsequent to execution of that contract
(c) where they have been filed with the Small Claims Leasing Tribunal
or
(4) such other claims as may be ordered or directed by the Chief Justice to be heard by the SCT from time to time.”
11. For cases to be heard in SCT, first, they must first fall within the DIFC Courts’ jurisdiction by engaging any of the jurisdictional gateways set out in Article 5(A) of the Judicial Authority Law, Dubai Law No. 12 of 2004, as amended (the “JAL”) which are, as relevant:
“(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial 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 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.”
12. The Claimant elected to file the Claim against the Defendant and not against the company. Additionally, the Claimant proceeded to file in the DIFC Courts on the basis that the Defendant is the director of Ninion, which is not a DIFC company.
13. As the Note was entered into between “Nitai” and “Nicholson”; neither party is, or was, a DIFC registered or licensed entity and there is no evidence to suggest that the transactions were partly or wholly performed within the DIFC or related to DIFC activities.
14. By virtue of the JAL, the DIFC Courts shall exercise its jurisdiction to hear and determine claims that are unrelated to the DIFC, provided that 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, subject to the fact it demonstrates the parties’ intention to do so.
15. The governing law clause is encompassed in Clause 6.2 of the Note which reads as below:
“Governing Law: This Note will be governed by and construed in accordance with the laws of Pakistan without giving effect to any choice or conflict of law provision or rule.”
16. The above makes no reference to the DIFC Courts whatsoever. In other words, there is no clear express provisions to choose the DIFC Courts.
17. To successfully opt in to the DIFC Courts jurisdiction, Article 5(A)(2) of the JAL requires that the “parties agree in writing to file such claim or action with the DIFC Courts whether before or after the dispute arises”. Upon review of the submissions filed in support of this Claim, I see no evidence to suggest that the parties sought to ‘opt in’ to the jurisdiction of the DIFC Courts pursuant to Article 5(A)(2) of the JAL.
18. Having reviewed clause 6.2 of the Note and the documents filed in support of the Claim, it appears that none of these documents contain an express clause by virtue of which the DIFC Courts would be able to exercise jurisdiction over this Claim. Further, the Note was entered into by the parties themselves and the Claimant filed the Claim against the Defendant in his personal capacity rather than the company.
19. Clause 6.2 refers to the law of Pakistan and makes for no reference to the DIFC Courts as a forum to settle any dispute.
20. Therefore, I find that the parties have failed to “agree in writing” for the DIFC Courts to be the competent court to hear any claims arising out of the Note.
21. In light of the aforementioned, I find that the Claim shall be dismissed on the basis that the DIFC Courts does not have jurisdiction to hear and determine this Claim.
22. Accordingly, the Defendant’s Jurisdictional Challenge shall be granted.
23. Each party shall bear its own costs.
