Claim No: SCT 223/2023
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 OF DIFC COURTS
BEFORE H.E. JUSTICE NASSIR AL NASSER
BETWEEN
MRUTTI
Claimant
and
(1) MIKARTIL
(2) MUHAR
Defendants
| Hearing : | 12 July 2023 |
|---|---|
| Judgment : | 11 August 2023 |
JUDGMENT OF H.E. JUSTICE NASSIR AL NASSER
UPON a Hearing having been listed before H.E. Justice Nassir Al Nasser on 12 July 2023, with the Claimant and the Defendants 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 Du payment in the sum of AED 1,599.19.
2. The Claimant’s other claims shall be dismissed.
3. Description automatically generatedEach party shall bear its own costs.
Issued by:
Hayley Norton
Assistant Registrar
Date of Issue: 11 August 2023
At: 12pm
THE REASONS
Parties
1. The Claimant is Mrutti (the “Claimant”).
2. The First Defendant is Mikartil (the “First Defendant”).
3. The Second Defendant is Muhar (the “Second Defendant”).
Background and Procedural History
4. On 12 June 2023, the Claimant filed a claim seeking damages due to an alleged breach of a Settlement Agreement dated 31 March 2023 (the “Settlement Agreement”) and a Consent Order dated 1 April 2023 (issued in Claim No. SCT-076-2022) in the sum of AED 403,429.45 (the “Consent Order”).
5. On 19 June 2023, the Defendants filed an Acknowledgment of Service setting out their intention to defend all of the Claim.
6. The parties met for a Consultation with SCT Judge Hayley Norton on 29 June 2023 but were unable to reach a settlement.
7. In line with the rules and procedures of the Small Claims Tribunal (the “SCT”), this matter was referred to me for determination pursuant to a Hearing scheduled on 12 July 2023 with all parties in attendance.
Claim
8. The Claimant filed its claim against the Defendants to recover damages arising out of an alleged breach of the Settlement Agreement.
9. The parties entered into a Sale and Purchase Agreement, dated 24 January 2022 (the “SPA”), whereby the Claimant sold two companies, namely, Murp Murp (“Murp”) and Mepil (“Mepil”) (collectively referred as the “Companies”) to the Defendants for a total price of AED 168,000 (“Sale Consideration”).
10. In accordance with the terms of the SPA, the Defendants were under an obligation to pay the Sale Consideration to the Claimant within the time specified in the SPA and sign new lease agreements for the Companies’ leased premises in Jumeirah Beach Residences (“JBR”) for Mepil and the Dubai International Financial Centre (“DIFC”) for TEL. Clause 3.2 (vi) of the SPA specifically stated that the Defendants were required to replace all the cheques associated with the JBR lease agreement for Clean Way and the DIFC lease agreement for TEL within 10 days of completion of the SPA. The Defendants were also required to promptly return any signed cheques previously provided by the Claimant to the JBR and DIFC landlords.
11. The Claimant submits that the Defendants, however, failed to comply with clause 3.2(iv)(c) regarding 70% payment of the balance Sale Consideration and clause 3.2(vi) of the SPA for the replacement of the cheques. As a result, the Claimant filed a claim with the SCT on 7 March 2022, seeking specific performance of the SPA and claiming an amount of AED 125,484. Subsequently, the parties signed a Settlement Agreement dated 31 March 2023 (the “Settlement Agreement”) pursuant to which, the SCT issued a Consent Order dated 1 April 2023 (the “Consent Order”). Multiple requests were thereafter made to the Defendants to provide the updated trade license of Mepilduring June 2022, October 2022 and also during the enforcement proceedings in DIFC Courts since January 2023, with no compliance by the Defendants which lead to further consequences for the Claimants.
12. The Claimant submits that the Defendants violated the terms of the Settlement Agreement forcing the Claimant to file enforcement applications in October 2022 (ENF-216-2022) and then again in January 2023 (ENF-001-2023), seeking orders from the SCT to compel the Defendants to adhere to the terms of the Consent Order. On 16 January 2023, the SCT issued an enforcement order (the “Enforcement Order”), explicitly directing the Defendants to comply with clause 4.2 of the Settlement Agreement which states:“Replacement of all Landlord cheques signed by the Sellers as specified in the SPA within a 30-day time frame from the date of this Agreement and return to Sellers”.
13. Due to the Defendants' continuous failure to comply with the terms of the Settlement Agreement, the Claimant initiated contempt of court proceedings against the Defendants. The Court of First Instance issued a Penal Notice, dated 12 May 2023 (the “Penal Notice”) referring the Defendants to the Attorney General of Dubai for review and consideration regarding committal and contempt of court.
14. While the Claimant was engaged in SCT proceedings against the Defendants, Mibat Realty FZ-LLC ("Mibat"), the property owner which had leased the premises to Mepil in JBR, filed a claim against Mepilat the Rental Disputes Centre Dubai ("RDC") for non-payment of the rental post-transfer of the Companies to the Defendants. It is important to note that the Claimant had already communicated the transfer of ownership of Mepil (that the Defendants will be co-ordinating with them for updates and further matters) to Dubai Properties Asset Management LLC (“Dubai Properties”) (acting on behalf of Mibat) via email correspondence during the period from 9 February 2022 to May 2022. The Defendants were copied in all such communication at all times. The Defendants had also been in communication with Dubai Properties themselves for providing the updated Trade License and MOA post-transfer of Mepil, but this was never done.
15. The Claimant adds that the RDC issued an ex parte judgment for AED 83,619 against Mepilpursuant to which Mibat commenced execution proceedings to recover the unpaid rent. As part of the execution process, Mibat submitted an application to impose a travel ban specifically targeting the Claimant. Since the Defendants failed to update Mepil's trade license, which identified the Claimant as the manager despite his disassociation from the company, a travel ban was imposed on the Claimant, impending his business travel since May 2023. The travel ban remains in effect, and the Defendants have made no effort to resolve the situation or clear the Claimant's name in the RDC case.
16. Further, the Defendants were provided with the login credentials of the Companies. The Defendants filed a VAT submission of the Federal Tax Authority (“FTA”) portal, with the submission reflecting the Claimant as a signatory to the filing without his knowledge, which resulted in a fraudulent representation to the government authority by the Defendants. Through various communications, the Defendants were repeatedly requested to remedy the situation by providing the updated details of the Companies on the FTA portal. This was not actioned upon and additionally due to the outdated records of Companies’ licenses on the FTA portal, it is possible that tax liabilities, fines, penalties or any other actions could be taken by FTA and imposed on the Claimant.
17. Lastly, since the Defendants failed to make payment towards the Telecom account of the JBR premises for more than a year, the Claimant received a notice informing him that legal proceedings would be initiated against the Claimant. The Claimant, to avoid any such action, proceeded on 3 June 2023 to clear this payment. The Defendants were informed of the same immediately, but they failed to clear the outstanding dues for the Du Telecom account as well.
18. The Claimant submits that the original claim SCT-076-2022 filed against the Defendants was for an amount of AED 125,484 which was reduced, as part of the settlement agreement to AED 80,000. Since the Settlement Agreement was breached, the Claimant seeks to recover the waived amount of AED 45,484 in addition to other damages caused to the Claimant.
19. The Claimant submits that the Defendants’ breaches resulted in the Claimant suffering the following damages:
(a) Difference between the original claim amount owed by the Defendants under the SPA and the settlement amount agreed under the Settlement Agreement in the sum of AED 45,484;
(b) Fee and expenses incurred in providing power of attorney to the lawyers for handling the RDC case in the sum of AED 850.44
(c) Cost of the Claimant’s Flynas air ticket for the flight that was missed due to unexpected travel ban imposed due to the Defendants’ fault in the sum of AED 1,140.86.
(d) Non-Refundable hotel booking for Kingdom of Saudi Arabia which was wasted due to the travel ban in the sum of AED 854.96;
(e) Taxi / Careem expenses to and from airport / courts in the sum of AED 1,500;
(f) Translation Costs in the sum of AED 2,000;
(g) Claimant’s inability to travel for work and the cancellation of several meetings in Riyadh due to the imposition of travel ban because of the case filed against Mepil, leading to the arrest order and travel ban on the Claimant hindering his business travel plans and losing business opportunities and significant loss of earnings in the sum of AED 335,000;
(h) Fraudulent utilization of the Claimant’s name in filing of tax returns with the Federal Tax Authority, and any associated liabilities / penalties that could be imposed on the Claimants due to the Defendant’s actions in the sum of AED 15,000; and
(i) Du payment for JBR premises made on 3 June 2023 in the sum of AED 1,599.19.
20. The Claimant adds that the Defendants’ actions resulted in mental trauma and stress on the Claimant. In addition, the Claimant had to incur legal expenses in the sum of AED 150,000 in seeking legal advice which he now seeks to recover.
21. Therefore, the Claimant seeks the following:
(a) payment of the Claim Amount in the sum of AED 403,429.45;
(b) payment of the legal expenses and the court fee;
(c) interest at the rate of 12% per annum on the Claim Amount from the date of filing this claim until the date of full payment;
(d) within one week, confirmation of updating the details of the Companies’ new ownerships with all authorities, utilities, landlords and other parties removing the Claimant’s name from any association with the Companies and all matters;
(e) a full and complete indemnity in any matters pertaining to the Companies from the date of the SPA going forward with no further obligations on the Claimant due to the continuous breach and actions in bad faith by the Defendants;
(f) payment of any further amounts / charges / fines that could be imposed on or payable / incurred by the Claimant resulting from the RDC proceedings or removal of travel ban from the Claimant; and
(g) such further or other relief as the Honourable Court deems fit.
Defence
22. The Second Defendant submits that that the First Defendant is not involved in the current dispute as he transferred his ownership and operational rights of the company to the Second Defendant on 1 July 2022. This transfer was conducted in accordance with all legal requirements, and the First Defendant has no legal standing or responsibility in relation to the matters raised by the Claimant.
23. The Second Defendant adds that the Settlement Agreement clearly states that both parties must adhere to its terms, which serve as a full and final settlement of the claim which is fully paid to the Claimant. Any further actions or claims arising from the same dispute are therefore invalid and contrary to the terms agreed upon.
24. At the time of SPA signing, “Murp ” was not an active company hence the Defendants at that time agreed with the Claimant to “activate” the company by renewing the license. In this process, the business required a signed lease which was at Damac Park Towers, DIFC. As a part of the lease agreement completion, the Defendants requested the Claimant to issue 7 cheques from the company bank account (Murp – Mashreq neo biz current account) for 24 months of the lease period coverage as the Claimant was the authorised signatory when the cheques were issued since the ownership of Executive Laundry was not transferred to the Defendants at the time. The Second Defendant submits that this was a usual business transaction whereas executive laundry has issued cheques to the landlord.
25. At the time of signing the SPA, Mepilwas an active company, the business was operating in Sadaf 7, Jumeirah Beach Residence with an existing lease contract valid up to 30 May 2022. All the cheques were issued to the landlord from “Murp – Mashreq neo biz” bank account, however 3 cheques (Post Dated Cheques) were due for payment between 16 February 2022 – 30 May 2022 (post SPA). Based on the Claimant’s request, the landlord did not produce these cheques to the bank, hence the Defendants directly deposited a cash payment into the landlord’s account. There are no dues associated with the landlord for this period. Since these cheques were dated for the period mentioned and the Defendants settled these dues in cash, any claim to receive these cheques, which are company property and do not have any open liability is out of scope and not valid. This has been explained several times to the Claimant, but he kept insisting on receiving these cheques. However, due to the instruction received from the DIFC Court, the Second Defendant submits that he attempted with good intentions to recover the cheques from the Landlord in JBR but without any success.
26. The Second Defendant submits that the Claimant (seller) did not issue any personal commitment to any of the landlords, and all of the cheques issued are “Property of Murp Mepil” which means these cheques, commitments, and liability will remain within Murp and its owners also this should remain as it is in the future as a part of new owner’s right.
27. The Second Defendant submits that based on the Claimant’s claim, the DIFC Court has issued orders in Claims SCT-076-2022 and ENF-001-2023 enforcing the Defendants to comply with clause 4.2 of the SPA. Despite all the above facts, the Defendants recovered 6 cheques from the landlord – DIFC and shared the evidence of the destroyed cheques with the Claimant, however he refused to accept the cheques, instead he demanded that the cheques be couriered in physical copy to him. The Defendants submit that while they tried to deliver the parts of the destroyed physical cheques, the Claimant refused to accept the cheques claiming that he will not accept DIFC related cheques unless the JBR landlord cheques are included in the delivery. The Defendants submit that this means the Claimant never intended to accept the evidence of the remaining cheques and he was continuously applying the force on the buyer to fulfill an obligation which is beyond the buyer’s control.
28. The Second Defendant submits that as a part of Claim SCT-076-2022, the court ordered the return of the cheques within 30 days, however, the MepilShare sale transfer between the Claimant and Merit was executed on 30 May 2022 (this was confirmed by the Claimant in his previous claims) in order to transfer the ownership of Mepil. This means the Claimant was the legal owner of Mepiltill 30 May 2022 and he also had the opportunity to approach the JBR Landlord and request to release the cheques.
29. In addition, the Defendants submit that all claims, disputes raised around clause 4.2 of SPA and the return of all cheques given to all landlords within 30 days, is a malicious intent. Whereas the Claimant directly or indirectly claims rights that are part of Murp properties, also any of the issued cheques have not cause any liability, claim or financial loss to the Claimant. Also, the court has issued a “Contempt of Order” associated with Claims SCT-076-2022 and ENF-001-2023 which demands to buyer (the Defendants) to handover an object (cheques) which is not in buyers’ possession.
30. The Second Defendant submits that the claim SCT-223-2023 alleges that the Defendants caused a number of breaches regarding clause 4.2 of the Settlement Agreement resulting in Mibat Realty FZ-LLC filing a recovery suit before the RDC. SCT-223-2023 includes a claim, amounting to AED 403,429.45 and AED 5,492.57. The Second Defendant contest the validity and accuracy of these claims, as submits that the amount claimed lack proper substantiation.
31. The Second Defendant submits that the Claimant’s claim lacks substantial evidence and fails to establish a valid breach of the Settlement Agreement.
32. The Second Defendant submits that he continued to negotiate with the JBR landlord (Dubai Properties) to renew the Ejari, however, the Second Defendant submits that there is a discrepancy of the security deposit whereas the Claimant informed the Second Defendant during the sale that the security deposit available with the landlord is in the sum of AED 15,000. The same is reflected in old Ejari but the landlord states that the available security deposit is only AED 10,000 (the Claimant waived off the AED 5,000 from his final settlement to compensate the same) and the landlord requested from the new owners an additional AED 8,000 to be added to the security deposit. The landlord demanded 12 PDCs to be issued from Murp which is 98% of the shareholder in Mepil.As per the SPA, the Claimant was required to complete his obligation to transfer the Mashreq Bank account ownership to the new owners whereas till date the Mashreq Bank ownership and authorisation not been fulfilled.
33. The Second Defendant submits that it requested the landlord to accept personal cheques and the landlord agreed to receive the personal cheques which should be replaced by Murp cheques upon resolving the bank account matter with a AED 500 surcharge for every replacement which the Second Defendant agreed to pay to resolve the matter. The Second Defendant submits that at this point onwards, the landlord’s leasing team stopped attending to his requests though he tried visiting them multiple times to their office. The landlord filed an eviction case with the RDC though the landlord had all documents to prove that the business is being sold to new owners, however, the case was filed under the Claimant’s name.
34. The Second Defendant submits that the travel ban imposed on the Claimant was not the Second Defendant’s fault as he made efforts to remove the Claimant’s name from the trade license. However, due to unforeseen circumstances such as the tenancy contract being locked, the Second Defendant submits that he faced difficulties in removing the Claimant from the trade license.
35. The Second Defendant submits the he is working on removing the Claimant from the trade license and resolving the dispute raised against the Claimant in the RDC to remove the imposed travel ban.
36. The Second Defendant also submits that the Claimant failed to fulfil his obligations pursuant to the Settlement Agreement, which are as follows:
(a) the Claimant failed to transfer the bank account of Murp to the Second Defendant;
(b) unsettled labour camp rental dispute in the sum of AED 27,000 which was during the Claimant management period which he failed to provide clearance;
(c) A payment default to Mepilsponsor as part of supplier payment in the sum of AED 35,000, where the Claimant was requested to resolve the matter, in which he failed to do so;
(d) The Claimant revoked access to business social media platforms, web and emails which is considered as the company assets that should have been handed over to the Second Defendant as agreed in the Sale and Purchase Agreement;
(e) The Claimant prevented the Defendants from filing VAT associated with Mepilover the last 9 months claiming that using the credentials provided by him is a Cybercrime and threatened to sue the Defendant.
37. The Second Defendant submits that he as a buyer was also affected by the Claimant’s failure to perform his obligations by not providing him the bank account.
Discussion
Claims against the First Defendant
38. In relation to the First Defendant, it appears from the evidence submitted that the First Defendant it not part of the companies.
39. At the hearing, the Second Defendant confirmed that he is solely responsible for the companies and any liability imposed upon the companies shall be his responsibility.
40. Upon reviewing the evidence, I find that the First Defendant is not anymore part of this claim and any liability on the companies shall be on the Second Defendant. Therefore, I dismiss the claims against the First Defendant.
The Claimant’s claim for damages
41. The Claimant submits its claim on the basis that under the terms of the SPA, the Second Defendant was under an obligation to pay the Sale Consideration to the Claimant within the time specified in the SPA and sign new lease agreements for the Companies’ leased premises in Jumeirah Beach Residences (“JBR”) for Mepiland the Dubai International Financial Centre (“DIFC”) for TWL. Clause 3.2 (vi) of the SPA specifically stated that the Defendants were required to replace all the cheques associated with the JBR lease agreement for Clean Way and the DIFC lease agreement for TEL within 10 days of completion of the SPA. The Defendants were also required to promptly return any signed cheques previously provided by the Claimant to the JBR and DIFC landlords.
42. The Claimant submits that the Second Defendant, however, failed to comply with clause 3.2(iv)(c) regarding 70% payment of the balance Sale Consideration and clause 3.2(vi) of the SPA for replacement of the cheques. As a result, the Claimant filed his claim with the SCT.
43. clause 4.2 of the Settlement Agreement states:“Replacement of all Landlord cheques signed by the Sellers as specified in the SPA within a 30-day time frame from the date of this Agreement and return to Sellers”.
44. Upon reviewing the Settlement Agreement, it appears that both parties were under specific obligations including that the Second Defendant should replace all landlord cheques signed by the Claimant within 30 days and the Claimant should have also provided the Second Defendant with the bank account related to the companies.
45. Both parties have failed to perform their obligations up to date, although the Courts have directed the parties to do so within a specified time period.
46. Article 77 of the DIFC Contract Law provides as follows:
“Non-performance is failure by a party to perform any one or more of its obligations under the contract, including defective or late performance”.
47. Article 78 of the DIFC Contract Law provides the following:
“A party may not rely on the non-performance of the other party to the extent that such non-performance was caused by the first party’s act or omission or by another event as to which the first party bears the risk”.
48. The Claimant argues that due to the Second Defendant’s failure to perform he has suffered consequences. The Claimant submits that the Second Defendant’s breaches resulted in the Claimant suffering the following damages:
(a) Difference between the original claim amount owed by the Defendants under the SPA and the settlement amount agreed under the Settlement Agreement in the sum of AED 45,484;
(b) Fees and expenses incurred in providing a power of attorney to the lawyers for handling the RDC case in the sum of AED 850.44;
(c) Cost of the Claimant’s air ticket for the flight that was missed due to unexpected travel ban imposed due to the Defendants’ fault in the sum of AED 1,140.86;
(d) Non-Refundable hotel booking for Kingdom of Saudi Arabia which was wasted due to the travel ban in the sum of AED 854.96;
(e) Taxi / Careem expenses to and from airport / courts in the sum of AED 1,500;
(f) Translation Costs in the sum of AED 2,000;
(g) The Claimant’s inability to travel for work and the cancellation of several meetings in Riyadh due to the imposition of travel ban because of the case filed against Mepil, leading to the arrest order, and travel ban on the Claimant hindering his business travel plans and losing business opportunities and significant loss of earnings in the sum of AED 335,000;
(h) Fraudulent utilisation of the Claimant’s name in filing of tax returns with the Federal Tax Authority, and any associated liabilities / penalties that could be imposed on the Claimant due to the Defendants’ actions in the sum of AED 15,000; and
(i) Du payment for the JBR premises made on 3 June 2023 in the sum of AED 1,599.19.
(j) The Claimant had to incur legal expenses in the sum of AED 150,000 in seeking legal advice which he now seeks to recover.
49. The Second Defendant argues that the Claimant’s failure to also perform its obligations have caused the Second Defendant to suffer consequences as well.
50. The Claimant expects the Second Defendant to perform its obligation by replacing all of the landlord cheques signed by the Claimant. The question is how the Claimant expects the Second Defendant to replace the cheques when he did not perform his obligation and transfer the bank account to the Second Defendant.
51. I find that the Claimant cannot rely on the non-performance of the other party to the extent that such non-performance was caused by him as well.
52. Therefore, I dismiss the Claimant’s claims for damages in accordance with Article 78 of the DIFC Contract Law.
53. In relation to Du payment for JBR premises made on 3 June 2023 in the sum of AED 1,599.19. I find that the Defendant should pay the Claimant the sum paid.
Conclusion
54. In light of the aforementioned, the Defendant shall pay the Claimant the DU payment in the sum of AED 1,599.19.
55. The Claimant’s other claims shall be dismissed.
56. Each party shall bear its own costs.