Claim No. SCT 018/2022
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
BEFORE SCT JUDGE DELVIN SUMO
|Hearing :||11 February 2022|
|Judgment :||16 February 2022|
JUDGMENT OF SCT JUDGE DELVIN SUMO
UPONthis Claim Form being filed on 24 January 2022
AND UPONa Hearing having been listed before SCT Judge Delvin Sumo on 11 February 2022 with the Claimant’s representative and the Defendant in attendance
AND UPONreviewing all documents submitted on the Court file
IT IS HEREBY ORDERED THAT:
1. The Defendant shall pay the Claimant the sum of AED 22,805.40 (the “Amount”).
2. The Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,240.27.
3. In the event that the Defendant fails to comply with Paragraph 1 within 21 days from the date of this Order, interest at the rate of 9% per annum, pursuant to Practice Direction No 4 of 2017 (Interest on Judgments) shall accrue on the Amount from the date of filing this Claim until the date of full payment.
Ayesha Bin Kalban
SCT Judge and Deputy Registrar
Date of issue: 16 February 2022
1. The Claimant is Mahina (the “Claimant”), a construction company established in Dubai, UAE.
2. The Defendant is Mahesa (the “Defendant”) an individual who engaged the Claimant’s services to renovate her property located in Dubai, UAE.
Background and the Preceding History
3. The underlying dispute arises over a conflict between the parties pursuant to an agreement dated 1 August 2021 (the “Agreement”) in relation to the renovation of the Defendant’s property (the “Property”).
4. On 24 January 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”) seeking payment of fees allegedly owed to the Claimant by the Defendant pursuant to the Agreement in the sum of sum of AED 24,805.40 which consists of the following:
(a) The sum of AED 22,805.40 for the fees pursuant to the Agreement;
(b) The sum of AED 2,000 for administrative costs incurred; and
(c) The DIFC Courts’ filing fee.
5. On 27 January 2022, the Defendant filed an Acknowledgment of Service setting out its intention to defend all of the Claim.
6. The matter was called for a Consultation before SCT Judge Maitha AlShehhi on 1 February 2022. Although both of the parties were in attendance, they failed to reach a settlement.
7. In accordance with the rules and the procedures of the SCT, the matter was referred to me for determination, pursuant to a hearing held on 11 February 2022 (the “Hearing”). After reviewing all documents and evidence submitted on the Court file, I give my judgment below.
8. On 1 August 2021, the parties entered into an Agreement whereby the Defendant agreed to retain the services of the Claimant for renovation works at the Defendant’s Property (the “Works”) as set out in Clause 1 of the Agreement:
“The Contractor shall carry out the Works as described in the Agreement and in accordance with the line item descriptions on the Quotation”.
9. Pursuant to Clause 2 and 3 of the Agreement, the Claimant charged the Defendant a professional fee (the “Fees”) to perform the Works as set out below:
“The Price for the Works under the present Agreement is a fixed fee of AED 243,192.88 (255,352.65 inclusive of VAT) subject to Clause 9
Any additional fees relating to the Project that are required by the relevant authorities or community management including but not restricted to Dubai Municipality, Civil Defence, Lootah Gas, Trakhees, Dubai Development Authority and DEWA are excluded from this Agreement and are payable directly by the Client”.
10. The Parties agreed to the following payment plan contained in Clause 26 of the Agreement (the “Payment Plan”):
“The Client agrees to pay the Contractor the total contract sum, being the agreed Price for the Works referred to under Clause 2 and if applicable adjusted by any Variations as per Clause 9 of this Agreement as follows:
Stage 1: 10% Upon signing of this Agreement
Stage 2: 25% three working days prior to the commencement of the Works
Stage 3: 35% on completion of 30% of Works
Stage 4: 20% on completion of 65% of Works
Stage 5: 5% on completion of 100% of Works
Stage 6: 5% on completion of Snagging
Each stage payment shall be due payable within 2 working days of receiving an invoice via email requesting for payment of the corresponding stage. Each invoice will be sent with a Variation list stating the progress of the Works”.
11. In accordance with the Agreement, variations are any items added, removed, or adjusted on the Quotation prior to or post commencement of the Works. Clause 9 of the Agreement states the following in relation to variations to the Works (the “Variation” or “Variations”):
“The Contractor will not carry out any variation, change, omission or carry out additional work to that described on the Quotation without first agreeing the specification and price with the Client. Should the Client wish to request for a variation to the Quotation, the Client must provide the request in writing via email or WhatsApp and the Contractor will reply with the price variation. No variation will be actioned until the Contractor is in receipt of an Email or WhatsApp from the Client approving the price and time adjustment (where possible). The variation amount will then be added to, or subtracted from the Price referred to in Clause 2 of this Agreement as applicable and the payment schedule adjusted accordingly. Variations increasing the Scope of Works are payable at the time the requested works are carried out unless the Contractor agrees to defer payment to the next stage payment. The Contractor reserves the right to reject any variation request and to charge the Client for materials already purchased or ordered where the scope is being reduced. Any variations that increase the scope shall increase the time for completion as defined in Clause 20. Where no individual time per variation calculation is possible / viable to calculate it is agreed that the time for completion be adjusted prorate to the price increase. For clarity and example a 10% increase in the contract sum shall equate to a 10% extension in time for completion.
In the event the Client should decide to omit items from the Quotation which reduces the contract value by 12.5% or greater, then the Contractor shall apply an adjustment factor calculation to cover costs from declining other works based on the size of the agreed scope or costs accrued in mobilising for the Workforce”.
12. During the course of the Works, the Parties agreed to several Variations, which were consequently shared by the Claimant to the Defendant in the form of a variation list (the “Variation List”). Variation Lists would list additions and deletions from the Quotation and the progress of the Works. The Variation List No. 13 included the revised Fees in the sum of AED 203,862.
13. In total, the Claimant issued to the Defendant the following 6 invoices for payment towards the Works provided by the Claimant:
(a) Invoice No. 001, dated 29 July 2021 in the amount of AED 25,535.26;
(b) Invoice No. 002, dated 19 September 2021 in the amount of AED 40,378.49;
(c) Invoice No. 003, dated 22 November 2021 in the amount of AED 76,293.35;
(d) Invoice No. 004, dated 12 December 2021 in the amount of AED 38,849.50;
(e) Invoice No. 005, dated 11 January 2022 in the amount of AED 12,612.30; and
(f) Invoice No. 006, dated 19 January 2022 in the amount of AED 10,193.10.
14. The Claimant submitted that the Defendant has made payments in the sum of AED 181,056.60 for Invoice No. 001, 002, 003 and 004, however, it had failed to pay the remaining invoices. The sum of AED 22,805.40 remains unpaid for Invoice No. 005 and 006 (the “Outstanding Amount”).
15. The Claimant alleges that the Outstanding Amount is payable by the Defendant, however, the Defendant has failed to adhere to the terms of the Agreement as set out under the Payment Plan, which, the Claimant submits constitutes a breach of the Agreement.
16. The Claimant asserts that it has rendered all the Works as provided for in the Agreement and the Variation Lists and that it is entitled to payment from the Defendant of the Outstanding Amount.
17. Therefore, the Claimant seeks payment of the Outstanding Amount in the sum of AED 22,805.40 in addition to the amount of AED 2,000 for administrative costs incurred and the DIFC Courts’ filing fee associated with filing this Claim.
18. The Defendant, in short, objects to the Outstanding Amount and contends that the Claimant is therefore not entitled to payment of the Outstanding Amount.
19. The Defendant submits, firstly, that the Claimant has wrongly applied the adjustment factor in accordance with Clause 10 of the Agreement which states the following with regard to the adjustment factor (the “Adjustment Factor”):
“In the event the Client should decide to omit items from the Quotation which reduces the contract value by 12.5% or greater, then the Contractor shall apply an adjustment factor calculation to cover costs from declining other works based on the size of the agreed scope or costs accrued in mobilising for the Workforce”.
20. The Defendant submits that the approvals for the extension work in the Property were rejected by the Developer, and therefore, the Defendant is of the view that she should not be held liable for the decrease of the scope of the Agreement. The Defendant relies on the Claimant’s confirmation through a voice note message dated 31 July 2021, prior to the signing of the Agreement, stating that the Defendant shall not be penalised in the event of the rejection of the extension works (the “Voice Note”). Alternatively, the Defendant submits that this should be considered as Force Majeure.
21. Secondly, the Defendant submits that the Works were not completed in the Property and that the Defendant at all times rejected the completion due to unfinished Works. The Defendant further submits that it was a one-sided decision of the Claimant to leave the Property on 4 January 2021 and that the parties never mutually agreed to the completion of the Works.
22. Moreover, the Defendant submits that she had expected a certain level of service from the Claimant, which, she alleges, the Claimant has failed to provide. The Claimant’s one-sided decision that the Works were completed left the Defendant with no other option but to proceed in appointing other parties to complete the unfinished Works in the Property.
23. Therefore, the Defendant argues that the Works were not delivered as agreed between the parties, but rather only partially performed, and as such the Defendant is of the view that Claimant should not be not entitled to payment of the Outstanding Amount and that the Claim should be dismissed in its entirety.
24. 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 may exercise jurisdiction over a claim, which are, as relevant:
“(a) Civil or commercial or Employment claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial or Employment 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 or Employment 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.”
25. Pursuant to the JAL, the DIFC Courts can exercise its jurisdiction over a matter that is unrelated to the DIFC, where 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, provided that it clearly demonstrates the parties’ intention to do so.
26. It must be noted that by virtue of an opt-in clause found at Clause 34 of the Agreement, I am of the view that the parties have opted into the DIFC Courts’ jurisdiction to hear and determine this matter. The relevant opt-in clause states as follows:
“Should any dispute arise between the parties relating to this Agreement that cannot be settled amicably the parties hereby agree that the dispute shall be object to the exclusive jurisdiction of the DIFC Courts”.
27. As the claim value is less than AED 500,000, this claim is properly before the SCT, pursuant to Rule 53.2 of the Rules of the DIFC Courts.
28. In essence, the disagreement between the parties pertains to whether the Claimant should be compensated for the Works carried out in the Defendant’s Property pursuant to the Agreement.
29. In accordance with the terms of the Agreement, the completion date is defined as follows (the “Completion Date”):
“The date where the scope of works plus any variations is complete as per the definition of Completion and the Stage 5 Invoice is sent to the Client”.
30. Completion is defined in the Agreement as follows:
“Delivery to site or installation for items the Contractor is supplying and carrying out works as per the line item descriptions on the Quotation including any additionally approved Variations but excluding the remedy of any defects herein referred to as Snagging”.
31. Clause 28 of the Agreement states the following in relation to snagging (the “Snagging List”):
“Within 7 days from Completion Date (Stage 5 Invoice date), the client may issue a Snagging list relating to the items that the Contractor supplied or carried out as listed on the Quotation or in any agreed Variation. The Snagging list is to be mutually agreed upon prior to commencing the Snagging and excludes any damages caused by the Client or third parties employed by the Client. Further submissions to the list outside of the 7 day period are not permitted. Snagging will only commence once the Stage 5 payment plus any Variations have been paid by the Client.
The Contractor agrees to rectify those defects to its best ability and at its sole cost within one month from receipt of the list. The Client agrees to provide feedback on all rectification works within 48 hours of them being carried out should they feel they require further attention after which time they are deemed to be accepted and complete.
In the event that no Snagging list is received within the 7 day period then it is agreed”.
32. On 4 January 2022, the Claimant sent the Defendant an email informing the Defendant that the“Works had reached 99% completion and so they had a 7 day period to provide the Claimant with the missing items for installation that the Defendant were to supply as per the scope in order to reach the Stage 5 Milestone of Completion”.
33. On 11 January 2022, as no response was received from the Defendant, the Claimant sent the Defendant the revised Variation List No. 14 together with Invoice No. 002. The Claimant further requested the Defendant to“provide a list of any snagging/defects that required rectification within the 7 day period in accordance with Clause 28 of the Agreement.”
34. On 19 January 2022, the Claimant sent the following email to the Defendant:
“As no snags/defects have been reported within the snagging period the project is now complete so we are providing the below final invoice for your project (Stage Invoice 6 below)”.
35. I note that the Defendant failed to reply to any of the above-mentioned email communication sent by the Claimant. However, as per the Defendant’s submissions, she did communicate to the Defendant on several occasions via WhatsApp messages to that she did not agree with the quality and the completion of the Works.
36. Only on 19 January 2022, the Defendant sent the Claimant an email setting out her objections to the Adjustment Factor which was applied to the Fee. The Defendant further provided her unsatisfaction on the quality of the Works and various explanations on the unfinished Works in the Property and therefore objected to the Completion of the Works.
37. As per the Agreement, after items are delivered, installed, or carried out, they are considered to be complete. Therefore, once the full scope is delivered, the Stage 5 milestone is reached and the Invoice for Stage 5 becomes due. In review of the submissions made by both parties, I find that the Claimant complied with, and performed, several activities in accordance with the Agreement and carried out all Works which led to the completion of Stage 5 of the invoicing.
38. In my view, the unfinished Works which the Defendant refers to throughout its submissions, are to be considered as snags and defects in accordance with Clause 28 of the Agreement as stated in Paragraph 31 of this Judgment. The Defendant should have provided the Claimant with a Snagging List within the period provided for in the Agreement, however, the Defendant failed to do so. Therefore, I find that the Stage 6 of the Invoicing was completed and therefore due to be paid by the Defendant.
39. Over the course of the Works, the Parties agreed to 13 different Variation Lists which consequently led to the adjustment of the original agreed Fee. In review of the submissions by the Claimant, I find that the Variation Lists were at all times shared with and agreed by the Defendant through emails.
40. On 19 September 2021, the Claimant shared an email with the Defendant which set out a new calculation of the Fee based on an updated Variation List. In the same calculation, an Adjustment Factor is applied, however, it appears that the extension related works were not considered in the Fee which served as the base line for the Adjustment Factor. On the same day, the Defendant responded to the email stating:
“Ok I confirm please send Stage 2 Invoice based on Variation 4”.
41. The Adjustment Factor was not pointed out as an issue thereafter until 19 January 2022 as set out in Paragraph 36 of this Judgment. The Defendant continued to make payments for Stage 3 and 4 of the Invoicing based on the approved Variation Lists and amended calculations. Nonetheless, I note that the Voice Note which the Defendant refers to dates from 31 July 2021, prior to the signing of the Agreement. Clause 33 of the Agreement further states that:
“This Agreement supersedes all prior agreements or understandings and may only be modified or amended by the mutual agreement in writing of both parties”.
42. The Defendant agreed to the terms of the Agreement and acknowledged its obligation to pay the Outstanding Amount in full. Therefore, I find that the Claimant has performed its contractual obligations which entitles it to payment of the Outstanding Amount in the sum AED 22,805.40.
43. The Claimant has failed to provide any proof or supporting documents in support of its Claim in the sum of AED 2,000 for administrative costs incurred, therefore, I find that this Claim shall be denied.
44. In light of the aforementioned, I find that the Defendant shall pay the Claimant the sum of AED 22,805.40 (the “Amount”).
45. The Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,240.27.
46. In the event that the Defendant fails to comply with Paragraph 44 within 21 days from the date of this Order, interest at the rate of 9% per annum, pursuant to Practice Direction No 4 of 2017 (Interest on Judgments) shall accrue on the Amount from the date of filing this Claim until the date of full payment.