Claim No. SCT 413/2022
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
Liberty LLC
Claimant
and
Lincoln
Defendant
| Hearing : | 15 December 2022 |
|---|---|
| Judgment : | 26 December 2022 |
JUDGMENT OF H.E. JUSTICE NASSIR AL NASSER
UPON this claim being filed on 14 November 2022
AND UPON a Hearing being held before H.E. Justice Nassir Al Nasser on 15 December 2022 with the Claimant’s and the Defendant’s representatives in attendance
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 sum of AED 232,821.75 plus interest at the rate of 9% per annum from the date of this Judgment until the date of full payment.
2. The Defendant shall pay the Claimant the court fees in the sum of AED 11,641.08.
Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 26 December 2022
At: 2pm
THE REASONS
The Parties
1. The Claimant is Liberty LLC (the “Claimant”), a company registered in Dubai.
2. The Defendant is Lincoln (the “Defendant”), a company registered in Dubai.
Background and the Preceding History
3. The underlying dispute is in regards to the non-payment of invoices issued to the Defendant by the Claimant pursuant to an Engagement Letter dated 16 March 2021 signed by the parties on 17 March 2021(the “Agreement”).
4. On 14 November 2022, the Claimant filed a claim with the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment of unpaid invoices in the amount of AED 232,821.75.
5. On 21 November 2022, the Defendant filed its Acknowledgment of service setting out its intention to defend all of the claim.
6. Thereafter, in accordance with the Rules of the DIFC Courts, a Consultation was held before SCT Judge Hayley Norton with both parties’ representatives in attendance. However, the parties failed to reach a settlement.
7. Thereafter, a hearing was held before me on 15 December 2022, at which the Claimant’s and the Defendant’s representatives were in attendance (the “Hearing”).
The Claim
8. The Claimant’s case is that, on March 2021, the Defendant retained the Claimant to carry out certain legal services for the Defendant in relation to two DIFC-LCIA arbitrations initiated by Lorena Real Estate Development Company against the Defendant (the “Services”). The terms of the engagement were recorded in the Engagement Letter.
9. In consideration for the Claimant carrying out the services pursuant to the Agreement, the Defendant would pay the Claimant a capped fee of AED 700,000 (excluding VAT) (the “Professional Fee”).
10. The Claimant carried out the services and issued regular monthly invoices to the Defendant but was not paid a sum of AED 232,821.75 (including VAT) in respect of the Professional Fee and various translation charges (the “Outstanding Fees”).
11. The Claimant, on 14 November 2022, filed a claim for the payment of the Outstanding Fees.
The Defence
12. The Defendant submits that the jurisdiction to adjudicate this claim rests with Dubai Legal Affairs Department’s professional conduct section, before which, on 17 October 2022, the Defendant had initiated disciplinary action against the principal of the Claimant, Liberty, for insults and slander committed. Therefore, the Defendant requests that this claim be stayed until such time the Dubai Legal Affair’s Department Professional Conduct Section resolves the Defendant’s disciplinary action request.
13. The Defendant also submitted its defence rejecting the Claimant’s claims for the following reasons:
“a. As a result of the Claimant’s principal, Liberty’s actions, the Defendant carried out a full review of the services rendered by the Claimant and an investigation of the invoices submitted by the Claimant since the Agreement in respect of two DIFC-LCIA arbitrations took place in March 2021.
b. The review and investigation carried out by the Defendant revealed the following:
i. Most of the time claimed to be spent by the Claimant was highly overstated, as such matters, assuming carried by professional and competent personnel, do not require such an extensive period to handle.”
ii. The two DIFC-LCIA arbitration proceedings, in respect of which the Defendant engaged the Claimant, are at preliminary stage, and there remains significant time until conclusion and final award. However, the Claimant exhausted almost the entire budget with no substantial deliverables, which indicated lack of proper management of the arbitration matters and overbilling.”
14. The Defendant submits that the Claimant was late in preparing the statement of defence for the two DIFC-LCIA arbitrations, and it was only after continuous follow-up that the Claimant produced a draft statement of defence. The Defendant submits that the quality of the statement prepared was poor and did not meet minimum expected professional standards. The Defendant states that it felt at risk of not meeting the submission timeline under the two DIFC-LCIA Arbitrations timetable and was therefore forced to engage a different Law firm and seek time extensions.
15. The Defendant submits that, in a meeting held on 2 November 2022 between the Claimant and the Defendant, the Claimant had agreed to write off the amount being claimed and for each party to release the other from any further claims.
16. Therefore, the Defendant refutes the Claimant’s claim and requests for them to be dismissed.
Jurisdiction
17. The jurisdiction of the DIFC Courts is determined by Article 5(A) of the Judicial Authority Law, Dubai Law No. 12 of 2004, as amended (the “JAL”), which provides a number of limited gateways through which the DIFC Courts have jurisdiction over a claim, which are, as relevant:
“(1) …
(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.”
18. The parties are both companies registered outside the jurisdiction of the DIFC, however, by virtue of the Agreement, I note that the parties have agreed to ‘opt-in’ to the jurisdiction of the DIFC Courts pursuant to Clause (r) of the General Terms of Business that:
“In the event of any dispute arising out of the formation, performance, interpretation, nullification, termination or invalidation of this contract or arising therefrom or related thereto in any manner whatsoever, between Client and the Firm in furtherance to this Engagement Letter, the Parties shall use their best endeavors to settle such dispute failing which the disputeshall be settled by the DIFC Small Claims Tribunal.”
19. Therefore, I am of the view that the DIFC Courts have the jurisdiction to hear and determine this claim in accordance with the above clause and Article 5(A)(2) of the JAL.
20. In relation to the Defendant’s request to keep the current claim “on hold”’ until the Legal Affair Department addresses the Defendant’s disciplinary complaint, I take the view that the claims are different in their nature.
21. This Claim before the Small Claims Tribunal is in relation to a civil matter (which is unpaid invoices) while the Claim before the Legal Affairs Department is in relation to disciplinary complaint filed by the Defendant’s representative in his personal capacity against the Claimant’s representative in his personal capacity and therefore has no connection with the claim of unpaid invoices before the DIFC Courts. Therefore, I reject the Defendant’s request to stay this claim until the outcome of the Legal Affairs Department’s proceedings.
Findings
22. Pursuant to Clause 3(I) of the Agreement, the Defendant undertook to pay for the Services rendered by the Claimant as follows:
(a) A capped fee of AED 700,000 made up from fees billed at a cumulative hourly rate of AED1,500, in the event that the LCIA Court decided to consolidate the two arbitrations; or
(b) A capped fee of AED 1,000,000 made up from fees billed at a cumulative hourly rate of AED1,500 in the event that the LCIA Court decided to conduct the two arbitrations separately.
23. On 16 June 2021, the DIFC-LCIA Arbitration Centre confirmed that the LCIA Court had taken the decision to consolidate the two arbitrations. Accordingly, a capped fee of AED 700,000 (excluding VAT) made up from fees billed at a cumulative hourly rate of AED1,500 would apply in respect of the Claimant’s professional fees under the Agreement.
24. As upfront payment towards the Professional Fee, Clause 3(I) of the Agreement also required the Defendant, upon signature of the Agreement, to make payment of an “on- account fee” in the amount of AED 200,000. Despite the Agreement being signed on 17 March 2021, the Defendant only paid the sum of AED 200,000 on 27 April 2021.
25. In support of the Professional Fee, the Claimant undertook to issue monthly invoices supported by timesheets reflecting the work done for each month, and the time spent by.
“That theClient has 7 days from the date of receipt of the Firms invoice to challenge the invoiceif the Client so desires; for the sake of clarity, the first day shall be the day following the receipt of the invoice.After the period of 7 days the Client shall be deemed to have accepted the invoiceand shall have no right to dispute the invoice.”
26. During the period between 29 April 2022 until 27 July 2022, the Claimant raised 4 (four) invoices to the Defendant, all of which remain unpaid:
(a) Invoice no. LT-22-3728 in the amount of AED 32,019.75 (including VAT);
(b) Invoice no. LT-22-3870 in the amount of AED 126,393.75 (including VAT);
(c) Invoice no. LT-22-3903 in the amount of AED 18,994.50 (including VAT);
(d) Invoice no. LT-22-3948 in the amount of AED 54,951.75 (including VAT); and
(e) Invoice no. LT-21-3443 in the amount of AED 462.
27. Invoice no. LT-21-3443 in the amount of AED 462 and Invoice no. LT-22-3903 in the amount of AED 18,994.50 were raised to the Defendant in respect of translation costs. As stated in paragraph 3.9 above, translation charges were separate from the Professional Fee and the Defendant agreed to pay those charges.
28. As for the other invoices (LT-22-3728, LT-22-3870 and LT-22-3948), all of them were accompanied by official timesheets demonstrating the extent of the work undertaken by the Claimant. The Defendant did not object to any of the Claimant’s invoices, neither did it question any of the Claimant’s timesheets.
29. On 27 July 2022, the Claimant received correspondence from Mr. Lester(the Defendant’s representative) confirming that the Defendant had taken the“decision to end Liberty LLC mandate”in relation to the Services. The Defendant’s reason for ending the mandate was that it had“decided to proceed on this matter with a[n] alternative law firm”.
30. On 28 July 2022, the Defendant confirmed to the Claimant that “your SOA are in the review process by our accounting department.”
31. The Defendant failed to comply with clause (e) of the General terms of business and has not raised any challenges towards the invoices presented, whereby it was considered to be accepted by the Defendant after 7 days of being issued.
32. The Defendant made its first challenge 3 months after receiving the invoices. Therefore, I find that as per the Agreement between the parties, the Defendant has accepted the invoices by not raising any challenges within 7 days as required by clause (e) of the General terms of the Agreement.
33. Therefore, I find that the Defendant is obliged to pay the Claimant the invoices in the sum of AED 232,821.75 plus interest at the rate of 9% per annum from the date of this Judgment until the date of full payment.
34. The Defendant shall also pay the Claimant the court fees in the sum of AED 11,641.08.