Claim No: SCT 210/2016
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
IN THE SMALL CLAIMS
ORDER OF SCT JUDGE MAHA AL MEHAIRI
UPONconsidering the written submissions of the Defendant/Applicant and hearing the Claimant/Respondent at the Jurisdiction
AND UPONreading the submissions and evidence filed and recorded on the Court
IT IS HEREBY ORDERED THAT:
1.The Defendant’s application to contest jurisdiction is granted.
2. The DIFC Courts
3. Each party shall bear their own costs.
4. The Claimant/Respondent is Halvar (the “Claimant”), an individual filing a claim against the Defendant regarding the alleged breach of an MOU dated 18 October 2016 (the “Agreement of Sale”).
5. The Applicant/Defendant is Hana, (the “Defendant”) the owner of the Villa that is the subject of the Agreement of Sale.
Background and the Preceding History
6. The underlying dispute arises in relation to an Agreement of Sale for the purchase by the Claimant of the Defendant’s property: Villa H Dubai located in Jumeirah Park, UAE
7. On 12 December 2016, the Claimant filed a claim in the DIFC
8. The Defendant responded to the claim on 18 December 2016 by contesting the jurisdiction of the DIFC Courts and the Small Claims Tribunal over the dispute.
9. On 29 December 2016 I heard submissions from the Claimant and the Defendant at the Jurisdiction Hearing and considered the written submissions provided by the parties regarding the issue of jurisdiction.
Particulars and Defence
10. In the Defendant’s response to the Claim Form it was submitted that the Agreement of Sale was never properly executed between the parties and is thus invalid. The Defendant argues that he signed the original contract and sent a copy to his broker as a signal of his intent to proceed but he fully expected that both parties would need to sign the original contract in order to validly conclude the agreement. As this never happened, the Defendant contended that the Agreement of Sale is invalid and any opt-in jurisdiction clause contained therein would also be invalid. This was the core basis of the Defendant’s Application to Contest Jurisdiction.
11. The Claimant submitted at the Hearing that the parties had mutually agreed for the DIFC Courts and the SCT to have jurisdiction in the event of a dispute between them, pursuant to Article 3.1 of the Agreement of Sale which states:
“This Agreement shall be governed by and construed in accordance with the laws of the Dubai International Financial Centre. In the Emirate of Dubai, UAE.”
12. Based on the written submissions of the parties and the arguments put forward at the Jurisdiction Hearing, and based on consideration of the law
13. Rule 53.2 of the Rules of the DIFC Courts (“RDC”) requires that the SCT hear only cases that fall “within the jurisdiction of the DIFC Courts.”
14. The jurisdiction of the DIFC Courts is determined by Article 5(A) of the judicial authority law
“(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; . . .
(d) 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.”
15. There is no evidence of any of these gateways except Article 5(A)(2) having the potential to apply in the circumstances. I am satisfied that Clause 3.2 of the Agreement of Sale would ordinarily have the effect of the parties ‘opting in’ to DIFC Courts Jurisdiction as its provisions are specific, clear and express, as required by Article 5(A)(2) above. However, the implications of the subject matter of the Agreement of Sale being real property and the location of that property must be considered.
16. Article 8 of DIFC Real Property Law provides:
“(1) From the date on which this Law comes into force, all real property from time to time within the jurisdiction of the DIFC is governed by this Law.
(2) Real property within the jurisdiction of the DIFC includes:
(a) the real property referred to in Article 4(1); and
(b) any real property later brought within the jurisdiction of the DIFC, by any method.”
Thus, it is clear and both parties accept that property located in Jumeirah Park Dubai would not be considered to be within the physical jurisdiction of DIFC.
17. Generally, the parties to a dispute may agree on the jurisdiction of a specific court pursuant to Article 31(5) of Federal Law No.11 of 1992 Concerning Civil Procedures (the “CPC”), which states:
“Save in the cases provided for in article 32 and articles 34-39 it shall be permissible to agree on the jurisdiction of a specified court to determine a dispute and in the event jurisdiction shall be vested in such court or in the court in whose area the defendant has his domicile or place of residence or place of business.”
18. Article 32 of the same law provides for the following exception to the above:
“(1) In actions in rem in respect of real property and actions for possession jurisdiction shall be vested in the court whose area the real property, or a part thereof if it located in the areas or more than one court is located.
(2) In actions in personam in respect of real property, jurisdiction shall be vested in the court whose area the real property is located or the defendant has his domicile.”
19. The Claimant’s claim concerns real property located within Dubai but outside of the DIFC. As the dispute relates to the Defendant’s alleged breach of the Agreement of Sale, I determine this claim to be an ‘action in personam’ in respect of real property and Article 32(2) would apply in the circumstances. Accordingly, ‘jurisdiction is vested in the court in whose area the real property is located or the defendant has his domicile’ would effectively exclude the DIFC Courts from having jurisdiction as neither the property or the Defendant are located within the DIFC.
20. Furthermore, Part 5 of DIFC Law No. 10 of 2005 provides that the law governing rights in property, including the validity of transfer of property shall be that of the jurisdiction where the property is physically located. Thus, the DIFC Courts must apply UAE Federal and Dubai laws when determining issues relating to the rights and transfer of property within Dubai. Therefore, DIFC Law No. 10 of 2005 in conjunction with Article 32 of the CPC, mandate that the DIFC Courts cannot have jurisdiction over a claim relating to rights in property or transfer of property which is located outside of the DIFC. This position must be adhered to even where the parties have previously agreed for the DIFC Courts to have jurisdiction, as any attempt to ‘opt-in’ to the jurisdiction of the DIFC Courts would contradict DIFC and UAE law.
21. Accordingly, the Claimant’s claim must be dismissed as the DIFC Courts lack jurisdiction over the matter. The Defendants’ application to contest jurisdiction is therefore granted.
22. Each party shall bear their own costs as to the application to contest jurisdiction.
Date of issue: 22 January 2017