Claim No: 150/2016
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE SMALL CLAIMS TRIBUNAL
BEFORE SCT JUDGE NATASHA BAKIRCI
BETWEEN
HAYA SPA LLC
Claimant
and
HARPER REAL ESTATE / HASAN REAL ESTATE
Defendant
Hearing: 15 January 2017
Judgment: 15 February 2017
JUDGMENT OF SCT JUDGE NATASHA BAKIRCI
UPON hearing the Claimant’s Representative and the Defendant’s Representative;
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 AED 194,400 as damages owed due to the Defendant’s negligence.
2. The Claimant’s claims regarding delayed NOCs, extended fit-out and a new clause to the Lease Agreement are dismissed.
3. The previous SCT Judgment of SCT Judge Mark Beer, issued on 3 October 2016, shall become enforceable upon the expiration of 14 days from issuance of this Judgment.
4. The Defendant shall pay to the DIFC Courts AED 9,692.83 as the remainder of the Court Fee. The parties shall otherwise bear their own costs.
Issued by:
Natasha Bakirci
SCT Judge
Date of issue: 15 February 2017
At: 3pm
THE REASONS
Parties:
1.The Claimant, Haya Spa LLC, is a DIFC registered company that provides beauty and health care services to women and is represented by the Founder and Managing Director (the “Claimant’s Representative”).
2. The Defendants are Harper Real Estate Development (hereafter “Harper”) and Hasan Real Estate (hereafter “Hasan”) (hereafter, together referred to as the “Defendants”). Harper is the Landlord of retail unitRU-4, DIFC (hereafter the “Premises”). Hasan acts as Harper’s property managing agency. The Defendants’ authorised representative acts for both Harper and Hasan via valid power of attorney (the “Defendants’ Representative”).
Background:
3. On 7 December 2014 the Claimant’s Representative expressed an interest via email to the Second Defendant, Hasan, in leasing the Premises, a retail outlet on the Concourse Floor, DIFC, for fit-out as a Nail Bar. The Claimant’s Representative emailed “I would like to express my interest in leasing the retail outlet of 1,365 square feet in DIFC, for my upcoming Haya, Nail Bar concept … we are offering to pay 158 per square feet for that … Can you also please send me the autocad drawing … [sic]” This email followed a visit by the Claimant’s Representative during which she had been shown UnitRU-4.
4. On 8 December 2014, Hasan’s Leasing Officer responded with a proposed revision to the rent payable with 4 cheques per year and offering a 3 month rent-free fit-out period “… however, if at all, if there is any delay from Hasan side to provide any approval or NOCs, or other documentations that delayed the fit out we can try to extend it, which is subject to confirmation.”
5. On 9 December 2014 the Claimant’s Representative wrote to Hasan stating “[I] would like to confirm my acceptable [sic] of your offer, for the details discussed that will include 3 months fit out period, also for the Rent, with a total of 220,000 a year payable in 4 cheques … Could you please email me the autocad drawing…and highlight on it; where the full glass window is? Just to send it across to my interior designer ?, for a Quick view.? … Could you send the detailed offer letter? As well, in order to move forward quickly?, and Will prepare the deposit cheque …”
6. On 10 December 2014 Hasan’s Leasing Officer sent an email attaching “… the AutoCAD drawings as requested. I shall send you the offer letter later today …” The floor plan provided by the Defendant’s employee identified different spaces in the floor plan using an alphanumerical series beginning unit to include two highlighted units labelled as Unit 11 and Unit 14.
7. On 16 December 2014 the Claimant’s Representative emailed Hasan’s Leasing Officer saying “My designer opened the file, but she was lost, about the exact outlet … which one is it?? There was Units 11, Unit 14, but for Unit 14, the size was smaller Than 1,365 square feet which is the size of my outlet [sic]”.
8. On the same day, Hasan’s Leasing Officer, wrote “Go ahead with Unit 11 please … Anyhow, you may disregard Unit 14.”
9. On 8 February 2015, the Claimant and Defendants entered into a lease agreement for the Premises, retail unit RU-4in DIFC (hereafter the “Lease Agreement”). The Lease Agreement included a “fit-out” period of three months, for which the Claimant would not be required to pay rent. The Lease Agreement states in relevant part:
“LEASE AGREEMENT
- RENT FREE/FIT-OUT PERIOD: The Landlord agrees to grant the Tenant three (3) months’ rent free/fit-out period starting on 23rd February 2015 and ending on 22nd May 2015. The utility consumption charges and all other charges for the rent free/fit-out period shall be borne by the Tenant. The rent free/fit-out period shall end on the above mentioned date regardless if the Tenant was able to finish its fit-out or obtain its commercial license.
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TERMS AND CONDITIONS OF THE LEASE
…
10. The Tenant has thoroughly inspected the Premises, and the Tenant hereby declares and agrees that the Premises is fit for decoration, fit-out, occupation, usage, free from damage and suitable for the purpose intended by the Tenant.
11.The Tenant shall fit-out and decorate the Premises, and shall be responsible for such fit-out and decorating, using fit-out contractors approved by the Landlord and concerned authorities.
12. The Tenant shall submit to the Landlord for his approval a professionally prepared interior fit-out design drawings and detailed internal and external decorations drawings for the Premises, being fully dimensioned showing floor plan layout, types and colour of material used, the intended theme of the Premises, approximate locations of air conditioning diffusers, sprinkler heads and smoke detectors and any other aspects and details deemed necessary by the Landlord (the “Designs”). Should the Landlord grants his approval on the Designs, then the Tenant acknowledges that the said approval shall be without any kind of warranty, responsibility or liability on the Landlord. In any case, the Tenant understands that the Designs must be finally approved by the concerned authorities.
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14. The Tenant’s Designs and fit-out contractors, sub-contractors and consultant must be approved by the concerned authorities and the Landlord.
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45. The Tenant undertakes to indemnify and keep the Landlord indemnified against all liabilities, claims, demands, actions, costs, maintenance, water flows, damages or loss arising out of any breach by the Tenant of any of the terms of this Lease.
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58. This Lease contains the whole agreement between the Parties and supersedes all previous agreements between the parties relating to this transaction.
59. This lease is subject to the laws of the Dubai and U.A.E. All disputes between the Parties shall be submitted to the exclusive jurisdiction of Dubai Courts. (emphasis in the original)”
10. On 8 March 2015, the Claimant’s Representative requested from Hasan’s Leasing Officer via email to obtain two No Objection Certificates (the “NOCs”) which she required before beginning the fit-out process. The Claimant’s Representative requested by email an update on the issuances of the NOCs on 16 March 2015, 17 March 2015 and 25 March 2015.
11. These NOCs were not obtained until 6 April 2015; the Claimant’s Representative wrote via email on 9 April 2015 to Hasan’s Leasing Officer that NOCs were forwarded to the DIFC for approval and that the fit-out would not likely start until the end of the month. The Claimant’s Representative requested an extension of the fit-out period to accommodate the delay, stating that “We are not able to start paying for rent on May 22nd !! If you delayed me for these weeks to get the NOC.”
12. On 12 April 2015, as part of the approval process, an official from DIFC emailed the Claimant’s Representative asking for a “key plan drawing showing the unit location stamped by Body Corporate.” After some correspondence with the building body corporate, (hereafter referred to as “Body Corporate”), the Claimant received this stamped drawing on 16 April 2015 which highlighted the correct unit, Unit 14 or RU-4or . The Claimant presumably forwarded this stamped and highlighted drawing on to DIFC officials in support of the approval process.
13. On 23 August 2015, the Claimant received approval from the DIFC for its 12 August 2015 application for fit-out in the Premises based on “the submitted concept design of unit RU-4but was requested to obtain “building FM, DEWA, Civil Defense and DCCA technical no objections/fit-out permit prior [to] starting fit-out work at site [sic].”
14. On 14 September 2015, the Claimant’s hired design and contracting company, Contracting LLC (hereafter referred to as the “Contractor”), emailed the Claimant’s Representative to inform her that there had been a misunderstanding as to the correct unit on the AutoCAD drawing and therefore the resulting plans were inaccurate and needed to be redone.
15. That same day, the Claimant’s Representative wrote to Hasan’s Leasing Officer as well as others at Hasan, pointing out that Unit 11 as marked on the AutoCAD drawings provided by Hasan’s Leasing Officer was not the same as unit RU-4referenced in the Lease Agreement. The email also highlighted that “Unit 11” was written on the wall inside the Premises. The Claimant’s Representative states “This is a complete disaster for me as a business, everything has to be done from 0, and all my business plan and investment forecast has been based on the space, that generates the income, now I’ll have to squeeze everything, have less stations and practically no space for my stock room, It is a real disaster, and a big headache and a lot of loss, for me.”
16. By an invoice dated 21 September 2015, the Contractor charged the Claimant a further AED 160,400 for “Delay Charges due to discrepancy in shop unit As-built drawing & Actual shop [sic].”
17. According to the Claimant’s Representative, Haya Spa opened for business in March 2016 but the Claimant has failed to pay any rent to the Defendant since May 2015. As the Claimant had not paid rent for this period and since the cheques given to the Defendants bounced, the Defendants ordered the Claimant to vacate the Premises and pay all outstanding amounts in a claim filed on 16 June 2016 at the DIFC Courts’ Small Claims Tribunal (the “SCT”).
The Previous Claim and Procedural History:
18. On 16 June 2016, Harper (the Claimant in the Previous Claim) lodged a claim with the SCT against the Claimant (the Defendant in the Previous Claim), in which it claimed that in breach of the terms and conditions of the Lease Agreement, the Claimant had failed to fulfil its obligation in refusing to pay any amount towards rent for a period of 12 months (hereafter referred to as the “Previous Claim”).
19. In the Previous Claim, the parties were unable to reach a settlement and the Claimant failed to formally file its counter claims against the Defendant. Thus, the Judgment of SCT Judge Mark Beer, issued on 3 October 2016, found in favour of Harper for the Claimant’s failure to pay rent pursuant to the valid Lease Agreement between the parties (hereafter referred to as the “Previous Judgment”). SCT Judge Mark Beer also ordered that the Claimant vacate the Premises but granted a stay of execution of the Previous Judgment until resolution of this current Claim was reached.
20. During the proceedings in the Previous Claim, the parties did discuss the application of the DIFC Contract Law, DIFC Law No. 6 of 2004 (hereafter the “DIFC Contract Law”), especially the law of mistake (Articles 37 to 45) but as the Claimant did not formally file a counterclaim, the Previous Judgment did not make formal findings on these issues and instead limited the findings to those relevant to the Claimant’s failure to pay rent under the Lease Agreement.
21. Based on the Previous Claim, the Claimant filed a new case to claim for damages incurred as a result of the Defendants’ alleged failures. The Claimant filed this Claim on 19 September 2016, in advance of the Previous Judgment. As the parties could not reach a settlement of this Claim, the case went for a First Hearing before me on 13 November 2016. After the First Hearing, the parties attempted another settlement conference and upon failing to settle the Claim, attended a Second Hearing before me on 15 January 2017. After the Second Hearing, the parties were permitted to make limited additional submissions after which time the case was reserved for judgment.
The Current Claim:
22. The Claimant’s initial Claim alleged that the Defendant had failed in three regards:
(a) Providing the Claimant with incorrect information regarding the AutoCad floor plan, leading to significant delays and losses on the Claimant’s part.
(b) Delay in providing the necessary NOCs for the Claimant to secure approvals on time.
(c) Misrepresenting the actual size of the Premises, which is about 5% smaller than listed in the Title Deed and advertised to the Claimant.
23. The Claimant argued that due to these failures, most significantly the failure of Hasan’s Leasing Officer to correctly identify the Premises on the AutoCad floor plan provided in December 2014, it suffered damages and losses for which it should be reimbursed by the Defendants.
24. As a result of the above-mentioned failures, the Claimant’s initial Claim Form seeks the following remedies:
(a) Reduction of the rental amount of AED 220,000 per year proportionate with the 5% smaller area of the Premises;
(b) Reimbursement of lost income as per sales reports and other losses due to the Defendants’ conduct, totalling AED 385,500 as per an attachment to the Claim Form, to include contractor fees, lost income, staff salaries and legal costs (later adjusted to AED 419,000 in the Claimant’s Supplemental Submission with the addition of licensing fees);
(c) A change to the Lease Agreement such that it will begin in March 2016 rather than May 2015 (amounting to extension of the rent free/fit-out period by 10 months);
(d) Addition of a new clause to the Lease Agreement which provides that if the Defendants seek to terminate the Lease Agreement, 6-months’ notice will be provided along with an AED 800,000 termination payment;
(e) Extension of the Lease Agreement for two additional years above the three years already included; and
(f) Return of previously provided cheques to be replaced with new cheques.
25. The Claimant clarified and amended its claims in a filing of 21 November 2016 (the “Claimant’s Supplemental Submission”). The basic content of the Claimant’s claim remained the same, with the Claimant contending that the Defendant had a “responsibility” to provide the correct information regarding the AutoCad drawing and due to the “negligence and confusions” caused by providing incorrect information, the Claimant suffered extensive losses and is entitled to damages from the Defendants. The Claimant did adjust the claim for the extended fit-out period to 6 months rather than 10. The Claimant also removed the claims for a reduction of rent based on the alleged actual size of the Premises, extension of the Lease Agreement to five years, and return of previously provided cheques.
26. The above-mentioned remedies were originally valued in the Claim Form at USD 110,775 (equivalent to AED 407,098.13) including the DIFC Courts’ Fee. The Claimant seems to have intended to adjust this claim amount up to AED 500,000 but never paid the requisite fee and thus the amount claimed for official purposes remains at AED 407,098.13.
27. The Claimant submitted extensive evidence in support of its claim including email and letter correspondence between the Claimant, Defendants, Contractor, DIFC officials and Body Corporate. The Claimant also submitted an invoice from the Contractor, layout drawings, the Title Deed for the Premises, photographic evidence of signage in the Premises, daily sales reports, and product collection reports. Finally, the Claimant submitted a witness statement signed and affirmed by the Construction Manager at the Contractor company.
The Defence:
28. The Defendants responded to the Claim in submissions of 8 November 2016, 2 January 2017, 10 January 2017 and 22 January 2017. The bulk of the Defendants’ Defence is contained in their 8 November 2016 submission.
29. The Defendants first challenged the jurisdiction of the SCT over the dispute as the Claimant has claimed remedies with a total value of well above AED 500,000 and the Defendants have not agreed in writing to proceed in the SCT for claims above AED 500,000. The Defendants reiterated this argument in their subsequent submissions.
30. The Defendants addressed the Claimant’s contention that the size of the Premises was smaller than advertised and that the rental amount should therefore be adjusted. As the Claimant has subsequently dropped this Claim from the case, I will not address the details of this argument.
31. The Defendants go on to address the Claimant’s contentions regarding the allegedly incorrect drawing or floor plan provided by Hasan’s Leasing Officer to the Claimant in December 2014. The Defendants cite eight arguments in support of their defence against the Claimant’s contentions surrounding the issue of the floor plan:
(a) The Defendants contend that the drawing provided in December 2014 was an accurate reflection of the floor plan of the building and was not inaccurate in any way.
(b) The Defendants point to Clause 45 of the Lease Agreement which allegedly indemnifies the landlord. Furthermore, Clause 10 states that the Claimant inspected and approved the Premises before signing.
(c) The Defendants cite Clause 58 of the Lease Agreement which states that the written agreement reflects the full extent of agreement between the parties. Since the floorplan was provided in December 2014, well before the Lease Agreement was signed, they argue that it has no legal effect.
(d) The Lease Agreement and all official forms identified the Premises as RU-4.
(e) The Defendants point out that the Claimant received a stamped floorplan from the building body corporate, Body Corporate, on 16 April 2015, which was used to obtain DIFC approvals and which identified the correct unit. The Defendants argue that the Claimant should not have begun work before this approval was received and furthermore, the provision of this stamped floorplan should have caused the Claimant to realize its error at this time.
(f) The Defendants contend that as landlord they were not obligated to send the Claimant a floorplan at all.
(g) The Defendants argue that the Claimant failed to comply with Clause 12 of the Lease Agreement requiring landlord approval of any designs before work has begun. Instead, the Defendants contend, the Claimant sought approval from Body Corporate and the DIFC. Approval from these other parties along with the provision of the correct drawing in April 2015 serve to cut the link of causation between the Defendants’ conduct and the Claimant’s losses. The Defendants cite Articles 10(1) and 11 of the DIFC Law No. 5 of 2005 (hereafter the “DIFC Law of Obligations”) and Article 29(1) of the DIFC Law No. 7 of 2005 (hereafter the “DIFC Law of Damages and Remedies”).
(h) Finally, the Defendants argue that the Claimant has not provided proof that she resubmitted or redid any of the approvals or work that are claimed for against the Defendant.
32. The Defendants address the Claimant’s contention that delay in providing the Claimant with NOCs caused additional loss. The Defendants argue that there was no delay and there is no proof of delay provided by the Claimant. Instead, the Defendants provided any NOCs required from them in a timely fashion. Most NOCs were required from other parties such as building management and government authorities. Furthermore, as the Claimant had failed to pay rent at the time, the Defendants were in their right to withhold their own obligations towards the Claimant.
33. The Defendants also provided numerous objections to the Claimant’s measurement of its losses:
(a) The Defendants claim that there is no proof of payment of the additional amounts to the Claimant’s Contractor once the mistake was discovered in September 2015. Furthermore, the Claimant has not submitted proof of the original costs of the project as compared to the cost to re-do the work. The Claimant has also not submitted any proof of its trade license costs.
(b) As to lost income, the Defendants question the legitimacy of the Claimant’s submitted sales reports as they are not legally prepared documents and they do not indicate profits, only income. Furthermore, the report submitted on 7 December 2016 does not match the report submitted on 27 October 2016.
(c) Regarding the claim for lost staff salaries, the Defendants argue that these staff members were hired after the September 2015 discovery of mistake and the Claimant should have refrained from hiring at a time when the business was not imminently ready to open. Furthermore, the Defendants argue that no proof that the amounts claimed were actually paid out as salaries has been submitted by the Claimant.
(d) In response to the Claimant’s request to change the lease date to March 2016 instead of May 2015, creating an additional 10-month rent-free fit-out period, the Defendants object on three points. First, the landlord is not obligated to provide a rent-free fit-out period or to extend such period. Second, the delay was not solely due to the Defendants’ alleged mistake. Finally, including an additional rent-free period represents double recovery when combined with the other remedies the Claimant is seeking. These arguments did not change when the Claimant reduced the claim to an additional 6-month period, rather than 10 months.
(e) As to the Claimant’s request to amend the Lease Agreement to include a favourable termination clause, the Defendants state that there is no legal basis for such remedy.
(f) The Claimant has removed its claim to extend the Lease Agreement to five years rather than three, thus it is not necessary to detail the Defendants’ arguments regarding such remedy.
34. In the Defendants’ submissions of 2 January 2017, 10 January 2017 and 22 January 2017, the Defendants indicate that they have relied on the Claimant’s Supplemental Submission of 21 November 2016 as a final reflection of the Claim and reiterate their own arguments set out in their submission of 8 November 2016.
35. When the Claimant submitted the witness statement of the Contractor, the Defendants objected that such witness statement is not valid and should be under oath. Furthermore, the statement reflects hearsay and reflects the Contractor’s intent to indemnify itself.
36. Throughout the submissions, the Defendants reiterate that none of their submissions should be taken as an admission and that the Defendants deny all claims against them.
The First Hearing:
37. The First Hearing was not a complete Hearing and instead the parties agreed to stay the case pending further settlement discussions between them. Although some mention of settlement was made at the First Hearing, nothing discussed shall serve to prejudice my judgment moving further. Importantly, the substantive settlement discussions between the parties took place outside of the Hearing.
The Second Hearing:
38. At the Second Hearing, the parties summarised their formal legal arguments.
39. The Claimant asserted that it intends to cap its claim at AED 500,000 to keep the case in the Small Claims Tribunal rather than move it to the Court of First Instance. The Claimant’s Representative, an individual small business owner, contended that she would not be able to continue with the claim in the Court of First Instance and therefore has capped her claim accordingly. The Defendant objected, stating that the claim value adds up to more than AED 500,000 and thus the case should be transferred.
40. The Claimant briefly summarised the Claim, highlighting that the drawings provided by the Defendants on 10 December 2014 were the basis for the design work done by the contractors and architects. The Claimant brought Hans and Mr Hagen to reiterate the contents of the Claimant’s witness statement, to the Defendants’ objection. The Claimant’s Representative also highlighted that she is a layperson and submitted that any further evidence required could be requested from her.
41. The Defendants claimed that the initial drawing provided by their agent was not appropriate for the Contractor to base its work upon. Furthermore, the Defendants emphasised the argument that any causation between the Defendants’ agent’s actions and the Claimant’s losses has been broken by the actions of the Contractor, Body Corporate, and government authorities. While the Defendants’ Representative stated that she did not want to say who specifically is responsible for the Claimant’s losses, she reiterated that the Defendants are not the ones responsible.
42. The Defendants also highlighted that the allegedly incorrect drawing was provided before the final agreement was executed and the final agreement always refers to the Premises by the formal name of “RU-4”. Furthermore, the correct drawing was provided by Body Corporate in April 2015, although the Defendants did not address how this argument would be applied to the time between December 2014 and April 2015. The Claimant responded that the drawing provided in April was also incorrect and furthermore that the Claimant had no reason to distrust the drawing provided by the Defendants’ agent.
43. The Defendants also argued that the Claimant failed to comply with some provisions of the Lease Agreement and that those entities that provided approval for the incorrectly formulated designs should be the ones held responsible.
44. Finally, the Defendants reiterated their objections to much of the Claimant’s provided evidence alleging lack of proof and stressed that none of their arguments should be taken as an admission.
45. While the parties did briefly discuss some of their previous settlement discussions, such information shall not serve to prejudice my judgment.
Findings:
46. At the outset, it is important to note that the parties are not evenly matched when it comes to the ability to make and defend against legal claims. The Claimant is a small business owned and operated by a single representative who has expressed her inability to pay for legal counsel in these proceedings and through her conduct has made clear that she is not well-versed in legal disputes. The Defendants are large companies with in-house legal teams, represented throughout the proceedings by an in-house lawyer with significantly more resources and legal knowledge. While this imbalance shall not serve to sway the outcome of the case, it is relevant to the expected sophistication of the parties’ legal arguments especially for a case before the Small Claims Tribunal.
A. Preliminary Issues
1.Jurisdiction of the DIFC Courts and the Small Claims Tribunal
47. First and foremost, the relevant Lease Agreement states at Clause 59 that “This Lease is subject to the laws of the Dubai and UAE. All disputes between the Parties shall be submitted to the exclusive jurisdiction of Dubai Courts [sic].” Without assessment of this specific clause, it is clear that the DIFC Courts have jurisdiction over the underlying dispute in this case as it relates to property within the DIFC and actions occurring within the DIFC. Therefore, it is clear and undisputed that the DIFC Courts have jurisdiction to decide this matter.
48. Use of the Small Claims Tribunal as a forum within the DIFC Courts requires a second level of jurisdiction requirements to be met. Pursuant to Rule 53.2(1) of the Rules of the DIFC Courts (hereafter the “RDC”), the “amount of the claim or the value of the subject matter of the claim” must not “exceed AED 500,000.” The Defendant has voiced an objection that the amount of the claim is, in fact, in excess of AED 500,000 and therefore the case should be transferred to the DIFC Courts Court of First Instance as the appropriate forum to hear the case. In response to this objection, the Claimant has asserted that it intends to cap its claim at AED 500,000 in order to proceed in the Small Claims Tribunal.
49. As the Claimant has indicated its intention to stay in the Small Claims Tribunal and its understanding that this will require it to cap its claim, I see no reason to transfer the case to the Court of First Instance. This is especially so because the Defendants have not included specific reasons why the case must be heard by the Court of First Instance and because the Claimant’s Representative, who is not a lawyer, asserted that she will not be able to pursue the claim further if transferred to the Court of First Instance.
50. Importantly, transfer of the case will involve a delay in resolution of the matter as the case will begin all over again in the Court of First Instance. While it is frequently in the interest of the defendant to delay the proceedings, this is a unique case where the Claimant has incentive to delay as enforcement of the Previous Judgment is stayed until the conclusion of this case. Still, the Claimant is not seeking to transfer the case and is instead seeking the speediest resolution of the claim.
51. Finally, upon consideration of the factors listed in RDC 53.37, I do not find it appropriate to transfer this case to the Court of First Instance, given that the Claimant has exercised its right to cap its claim at AED 500,000 in order to stay within the remit of the Small Claims Tribunal. Furthermore, the Claimant has not paid her court fees for any amounts beyond the AED 407,098.13 originally claimed in the Claim Form, likely due to an oversight, and thus, the amount in question will in fact be capped at AED 407,098.13 as reflected in the Claim Form and as reflected in the submitted Court Fees.
52. Therefore, as the claim value is less than AED 500,000, this claim is properly before the Small Claims Tribunal of the DIFC Courts.
1. Assessment of the evidence submitted in the case
53. It is important to address the Defendants’ many objections to the evidence submitted by the Claimant, namely the income reports generated by a business application used by the Claimant and the witness statement of the Claimant’s Contractor. RDC 53.48 allows a Judge in the Small Claims Tribunal to accept evidence without strict application of the rules of evidence, giving consideration to the fact that parties are often not represented and are seeking to reduce costs.
54. There is nothing to suggest that the evidence provided by the Claimant is false in any manner. While the Defendants point out that the sales report submitted by the Claimant on 27 October 2016 does not match the sales report submitted on 7 December 2016, these seem to be different reports. The report submitted on 7 December 2016 is entitled “Collection Reports” and reflects charges broken down by type (i.e. waxing, threading, hair cut, hair colour, etc). The report submitted on 27 October 2016 is entitled “Daily Reports” and lists the income collected on each day. It is reasonable to assume that these reports may not match completely and I deem the “Daily Reports” to be the more accurate reflection of income accrued by the Claimant company on a monthly basis.
55. The Defendants contend that the business application used by the Claimant to produce these reports is not a legally approved method of generating income reporting and was not produced by a legal audit. As reflected in RDC 53.48, the evidence need not meet strict standards of evidence law considering the Claimant is a layperson and that there is no reason to suspect that these reports are inaccurate or falsified.
56. As for the witness statement, it shall also be accepted, pursuant to RDC 53.48, but with the qualification that the statements of the Claimant’s Contractor shall only be given weight where they are based on the Contractor’s first-hand knowledge and experience, not based on information provided by the Claimant’s Representative to the Contractor. There is also no reason to suspect that this witness statement is inaccurate or falsified as the Contractor, Mr Hans, signed it and also affirmed its truth in person, at the Hearing of 15 January 2016.
2. Assessment of claims included in the case
57. The Claimant’s original Claim Form included the claims listed at Paragraphs 22 – 24 above. In the Claimant’s Supplemental Submission received on 21 November 2016, the Claimant adjusted the claims, as detailed above.
58. The Defendant has indicated that it deems the Claimant’s Supplemental Submission as a final articulation of the Claim. Therefore, this Judgment shall not address the original claims for an adjustment in rent, extension of the Lease Agreement, or return of previous cheques, which were omitted from the Claimant’s Supplemental Submission. Furthermore, this Judgment will address the claim for an extended fit-out period of 6 months, rather than 10 months as originally claimed.
59. Furthermore, there remain within the case, as per the Claimant’s Supplemental Submission, certain claims that are completely without merit or explanation. First, the claim to add a new clause to the Lease Agreement providing for 6-months’ notice on termination of the Lease Agreement and an AED 800,000 termination payment is wholly without legal explanation or merit and must be dismissed.
60. Second, the Claimant’s claim for losses due to the Defendants’ delay in providing the necessary NOCs for the Claimant to secure approvals on time has been without adequate explanation or proof. Instead, upon review of the evidence provided by both parties, it seems that the Defendants did provide the required NOCs within a reasonable time period of the Claimant’s request and any delay on the part of the Defendants in providing the NOCs did not significantly add to the losses claimed by the Claimant. Therefore, any damages claimed in association with the alleged delay in providing NOCs by the Defendants are unfounded and this claim is dismissed.
61. Thus, there remains essentially one main legal issue in the case: are the Defendants legally liable for the Claimant’s losses due to the communication received from the Defendants’ Leasing Officer misidentifying the Premises on the provided AutoCad drawing? If the Defendants are found liable, the issue of appropriate remedy must also be addressed.
3. Issue of vicarious liability and joint and several liability
62. There has been no contention that the actions of Hasan’s Leasing Officer in providing the AutoCad drawing and misidentifying the relevant Premises on the drawing are not the responsibility of the Defendants under the doctrine of vicarious liability, as Hasan’s Leasing Officer is their authorised agent.
63. There has also been no contention that either Defendant is not joint and severally liable if the Claimant’s claim succeeds as the Defendants are the Claimant’s landlord and the landlord’s appointed agent, respectively.
64. Therefore, I will proceed in this Judgment on the basis that both vicarious liability and joint and several liability apply.
B. Negligence pursuant to the DIFC Law of Obligations
65. The Claimant has made its claim under the legal doctrine of negligence pursuant to the DIFC Law of Obligations. Although the Claimant does not specifically cite the DIFC Law of Obligations, this is the legal basis most clearly referenced in the Claimant’s submission and most clearly responded to in the Defendants’ submissions.
66. In the Claimant’s Supplemental Submission, the Claimant argued that the Defendant owed a “responsibility” to provide the correct information regarding the AutoCad drawing and due to the “negligence and confusions” caused by providing incorrect information, the Claimant suffered loss. While not framed with reference to the DIFC Law of Obligations, this claim essentially states that the Defendants owed the Claimant a duty or responsibility, which they negligently failed to honour, resulting in the Claimant’s losses.
67. While the Defendant cites a number of arguments in defence of this claim, their most meritorious argument is their reference to Articles 10(1) and 11 of the DIFC Law of Obligations and Article 29(1) of the DIFC Law of Damages and Remedies, both of which address the element of causation required under the doctrine of negligence. Therefore, it seems that both parties envisioned the claim to fall under the DIFC Law of Obligations to the point that the Defendant responded to such arguments even though the Claimant did not specifically cite to DIFC Law of Obligations in its submissions.
68. Pursuant to the DIFC Law of Obligations, a party may be liable for negligence if the requirements of Chapter 2 of the DIFC Law of Obligations are met. First and foremost, Article 17 outlines the four required elements of a negligence claim:
“CHAPTER 2: NEGLIGENCE
- Liability
(1) A defendant is liable in negligence to a claimant if and to the extent:
(a) the defendant owes a duty of care to the claimant;
(b) the defendant breaches his duty of care to the claimant; and
(c) the defendant’s acts or omissions in breach of his duty of care to the claimant cause loss to the claimant.
(2) The defendant’s liability provided in Article 17(1) shall be reduced by the extent to which the claimant’s negligent acts or omissions contributed to his loss.”
69. As Article 17 of the DIFC Law of Obligations clearly outlines the four elements of a negligence claim as duty, breach, causation and damages, I will address each of these elements in turn.
1. Duty
70. As mentioned in Article 17(1)(a), the Defendants may be liable in negligence if the Defendants “owe[] a duty of care” to the Claimant. Article 18 of the DIFC Law of Obligations elaborates on the requirements under the element of duty, stating:
“18. Duty of care
(1) Subject to Articles 18(2) and (3), a defendant owes a duty of care to a claimant where:
(a) it is reasonably foreseeable that the defendant’s acts or omissions could cause loss to the claimant;
(b) the relationship between the defendant and the claimant is sufficiently proximate for a duty of care to exist; and
(c) it is fair, just and reasonable in the circumstances that the defendant should owe the claimant a duty of care.
(2) A defendant who negligently creates a situation endangering life or property owes a duty of care to a claimant who suffers loss as a direct result of attempting rescue, where it is reasonably foreseeable that rescue could be attempted.
(3) A person only owes a duty positively to act where he has assumed responsibility for the claimant, for certain property or for a third party causing loss to the claimant.”
71. Landlords and tenants typically owe a duty of care to each other, as is appropriate given the relationship that these types of parties have. While the relationship between landlords and tenants is usually governed by the relevant lease agreement, this does not preclude a coexisting duty of care between the parties, although the terms of the relevant contract between the parties may serve to adjust that duty.
72. Pursuant to Article 18(1)(a), it is “reasonably foreseeable” that either a landlord or a tenant’s “acts or omissions could cause loss” to the other party. Pursuant to Article 18(1)(b), the relationship between a landlord and tenant is “sufficiently proximate for a duty of care to exist” considering that both parties will owe responsibilities to the other. Finally, pursuant to Article 18(1)(c), it is “fair, just and reasonable in the circumstances” that both parties should owe a duty of care to the other. Articles 18(2) and 18(3) do not appropriately apply in the circumstances of this case.
73. Admittedly, the Claimant and the Defendants did not enter into their agreed Lease Agreement until 8 February 2015, a full two months after the Defendants’ Leasing Officer provided the information upon which this claim is based. However, this fact does not change the Defendants’ duty to the Claimant for two reasons. First, it is uncontroversial to state that a potential landlord owes a duty of reasonable care to a potential tenant, although this duty may be defined differently than that of a landlord to a tenant. Second, by 9 December 2014, the Claimant’s Representative had affirmatively written to Hasan stating “[I] would like to confirm my acceptable [sic] of your offer.” While it was possible at this point that the parties would not end up executing a valid lease agreement, they were already in the position of landlord and tenant as valid offer and acceptance had already occurred, even if it was not yet reflected in a formal lease agreement.
74. Therefore, it is reasonable to find that the Defendants, as the Claimant’s landlord and the landlord’s agent, owed a duty of care to the Claimant under the DIFC Law of Obligations. I have reviewed the Lease Agreement executed between the parties and find nothing relevant therein to adjust the duty of reasonable care owed by the Defendants towards the Claimant.
2. Breach
75. As established above, the Defendants owe a duty of care to the Claimant as the Claimant’s landlord and the landlord’s appointed agent. The next question is whether that duty was breached by the Defendants, which will require an assessment under the following standard of care, pursuant to Article 21 of the DIFC Law of Obligations:
“21. Standard of care
(1) In order to establish a breach of a duty of care a claimant must show that a defendant failed to exercise reasonable care to avoid causing loss to the claimant, having regard to the probability, and the likely seriousness, of the loss.
(2) “Reasonable care” means the care which a person of ordinary care and skill, engaged in the type of activity in which the defendant was engaged, would have exercised.
(3) A professional person exercises reasonable care if he shows the standard of care of an ordinary skilled person exercising and professing to have the special skill in question.
(4) Where there are different views within a profession about what constitutes reasonable care, a professional shows reasonable care when he takes an approach endorsed or followed by a responsible body of professional opinion.”
76. The facts relevant to the assessment of whether the Defendants breached their duty of care are detailed at Paragraphs 5 – 8 above. The reflection of facts detailed above is not seriously in dispute, although the Defendants continually claimed that there was no mistake on their part. Regardless, it is not in dispute that the Premises that the Claimant rented, identified as RU-4 in the Lease Agreement and Title Deed, is the same as Unit 14in the AutoCad drawing provided to the Claimant by the Defendants’ Leasing Officer on 10 December 2014.
77. When the Claimant’s Representative and her Contractors opened the provided AutoCad, they were understandably confused by the reflection of units therein. The Claimant had expressed interest in renting unitRU-4, advertised as 1,365 Square feet (126.85 Square meters), and had visited this unit as well. The Title Deed for this same unit also listed the area as 1,365 Square feet (126.85 Square meters). However, when the Claimant’s Representative opened the AutoCad drawing provided to her, upon her request, by the Defendants’ Leasing Officer, she found two highlighted units. One unit was identified in green and labelled as “Unit 14” and the other was identified in red and labelled as “Unit 11.” Both units have a square footage listed, neither of which matches the Premises as previously advertised to the Claimant’s Representative.
78. Therefore, as was reasonable, the Claimant’s Representative sought clarification from the Defendants’ Leasing Officer on 16 December 2014. The Claimant’s Representative specifically stated that her designer was lost as to the exact unit and she asked “which one is it?? There was Unit 11, Unit 14, but for Unit 14, the size was smaller Than 1,365 square feet which is the size of my outlet.” This statement reflects that she initially believed the correct unit to be the one labelled as Unit 14 but was confused as the listed square footage was smaller than she expected. That same day, the Defendants’ Leasing Officer replied to her stating “Go ahead with Unit 11 please … Anyhow, you may disregard Unit 14.”
79. In relating the above-mentioned facts to Article 21 of the DIFC Law of Obligations, it is necessary to assess whether the Defendants’ Leasing Officer’s incorrect statement identifying the Premises qualifies as a breach of the Defendants’ duty. As required under Article 21(1), the Claimant must establish that the Defendants failed to exercise reasonable care to avoid causing loss to the Claimant, having regard to the probability, and the likely seriousness, of the loss.
80. In this case, the Claimant’s Representative was understandably confused by the AutoCad drawing sent to her by the Defendants’ Leasing Officer. Furthermore, she expressed that her confusion stemmed from the listed square footage of the two highlighted units, neither of which matched the advertised size of the unit she had expressed interest in and visited. The Claimant also asserted that her designer was similarly confused, indicating that she had sent the drawing on to her designer for review. At this time, 16 December 2014, the Claimant had confirmed that she would rent the Premises and had accepted the Defendants offer in writing via email on 9 December 2014.
81. Based on these facts, it was reasonable for the Defendants’ Leasing Officer to expect that correct identification of the Premises on the AutoCad drawing had commercial implications for the Claimant. On 9 December 2014, when accepting the Defendants’ terms for the lease, the Claimant made reference to her interior designer and asked for the AutoCad drawing of the floor plan “in order to move forward quickly.” Furthermore, upon receiving the AutoCad drawing, the Claimant again expressed that her designer had reviewed the drawing and the square footage between her expected unit and the units in the drawing did not match.
82. It was a failure to exercise reasonable care to affirmatively answer the Claimant’s questions without checking on the highlighted discrepancy in listed square footage as the Claimant had given indication that her interior designer would be using this drawing in order to proceed with the fit-out as quickly as possible. The Claimant’s Representative did also state that the designer would use the AutoCad drawing “for a quick view” on 9 December 2016, but her email of 16 December 2016 more clearly indicated her intention to move forward with her plans as quickly as possible.
83. Should the Defendants argue that their Leasing Officer could not have known the “probability, and the likely seriousness, of the loss” caused by identifying the wrong unit, given that the Claimant and Defendants had not yet executed their formal Lease Agreement, they would not succeed. A person of ordinary care and skill, engaged in leasing properties, would have taken due care to ensure that any documentation provided by the Defendants was accurate and correctly labelled or else provided with the correct disclaimer as to the intended use of the information provided. If there was any doubt as to the accuracy of the information, a leasing officer of reasonable care would mention that uncertainty to the client.
84. The Leasing Officer did not provide a disclaimer, apparently did not check the information provided, in spite of the Claimant pointing out the discrepancy in square footage, and furthermore affirmatively stated “Go ahead with Unit 11 please … Anyhow, you may disregard Unit 14.” This statement understandably served to resolve any question that the Claimant had about the correct unit to move forward with as the Claimant reasonably trusted the information provided by the Leasing Officer and reasonably assumed that the Defendants, engaged professionally in owning and leasing properties, would not provide incorrect technical information as to their own properties. Furthermore, although the square footage for Unit 11 also did not match the advertised size of the Premises, Unit 11 was larger and therefore, the Claimant likely had no reason to object.
85. For the above-mentioned reasons, I find that the Defendants’ Leasing Officer’s affirmative statement that the Claimant should refer to Unit 11 rather than the correct unit of Unit 14 was a breach of the Defendants’ duty of care given the circumstances. I find that Article 21(3) and (4) of the DIFC Law of Obligations are not applicable here as there is no “special skill” involved in the particular action under assessment in this case.
3. Causation
86. As established above, the Defendants have breached their duty of care to the Claimant by providing the Claimant with inaccurate information regarding the Premises. The main crux of the Defendants argument is that the link of causation between the Claimant’s damages and the Defendants’ conduct has been severed by multiple events. Thus, I will address whether causation is present in these circumstances before turning to an assessment of the damages claimed.
87. Pursuant to Articles 10 and 11 of the DIFC Law of Obligations, an assessment of liability under negligence must involve a finding that the Defendants’ conduct caused the Claimant’s losses. The relevant provisions state:
“10. Causation
(1) To establish liability under this Law, a claimant must show that, but for the defendant’s conduct, he would not have suffered loss, and that the defendant’s conduct was a substantial cause of his loss.
(2) Once a claimant has shown that the defendant’s conduct caused his loss, within the meaning of this Article, and assuming that all other requirements for the defendant to be liable are made out, the defendant is liable for the claimant’s entire loss, subject to Chapter 1 of Part 3 and the Law on Damages and Remedies.
11. Intervening act
Where the defendant’s conduct caused loss to the claimant within the meaning of Article 10, the defendant is not responsible for loss to the claimant to the extent that a supervening event has the result that the defendant’s conduct is no longer an operative cause of the claimant’s loss.”
88. Therefore, the Defendants’ actions must be the “but-for” cause of the loss and the “substantial” cause of the loss. Furthermore, there must be no “supervening event” such that the Defendants’ conduct “is no longer an operative cause” of the Claimant’s loss. The Defendants argue that approval of the construction plans by Body Corporate and the DIFC along with the fact that Body Corporate provided the Claimant with the correct drawing in April 2015 served to cut the link of causation between the Defendants’ conduct and the Claimant’s losses. Furthermore, the Defendants argue that the Contractor should not have begun work before approvals were received and that the Claimant failed to comply with Clause 12 of the Lease Agreement. I will address each of these arguments in turn.
89. First, there is nothing to indicate that the Claimant should not have started the process of creating a design for the nail salon from the drawing and information provided from the Defendants on 10 December 2014. The Defendants point to no concrete evidence that would indicate that the AutoCad drawing provided by them was inappropriate to base design work on. In fact, it seems quite clear from the correspondence that the Defendants’ Leasing Officer should have known that the expressed purpose of obtaining the AutoCad drawing was to begin design work. Thus there is no reason why the Claimant’s Contractor, who provided both design and construction work, should not have begun the design work based on the provided AutoCad drawing.
90. Second, it is accurate to argue that the Claimant failed to comply fully with Clause 12 of the Lease Agreement, which states in relevant part that:
“12. The Tenant shall submit to the Landlord for his approval a professionally prepared interior fit-out design drawings and detailed internal and external decorations drawings for the Premises, being fully dimensioned showing floor plan layout, types and colour of material used, the intended theme of the Premises, approximate locations of air conditioning diffusers, sprinkler heads and smoke detectors and any other aspects and details deemed necessary by the Landlord (the “Designs”). Should the Landlord grants his approval on the Designs, then the Tenant acknowledges that the said approval shall be without any kind of warranty, responsibility or liability on the Landlord. In any case, the Tenant understands that the Designs must be finally approved by the concerned authorities.”
92.The Claimant has not shown that it submitted the professionally prepared Designs to the Landlord for approval, although the timing requirements of Clause 12 are not immediately self-evident upon reading. The Clause implies that the Designs should be approved by the Landlord, although the approval implies no warranty. Furthermore, the Clause implies that such approval process is independent of the approval by the “concerned authorities” although a reasonable reading implies that the approval by the Landlord would necessarily need to come before approval by the “concerned authorities.”
93. In any event, failure to comply with Clause 12 of the Lease Agreement only provides the potential for a portion of the delay and loss caused by the incorrect information to be avoided. Presumably, even if the Claimant had provided completed Designs to the Defendants for review, this would only happen upon the completion of those Designs, at significant expense to the Claimant. Furthermore, the Defendants knew of the Claimant’s plans to move forward and did not seek to approve the Designs, at least no request is reflected in the evidence. The suggestion that the Landlord would have reviewed the designs and informed the Claimant as to the correct unit is exactly that, a hypothetical, made all the less convincing considering that it is the Defendants who provided the Claimant with the incorrect information that required correction upon review in the first place.
94. More relevant is the fact that Body Corporate , as part of the approval process, provided the Claimant with a different version of a similar AutoCad drawing on 16 April 2015, indicating the correct unit, Unit 14. While the Claimant contended that this drawing was also incorrect, presumably referring to the square footage listed for each unit in the drawing, the version provided by Body Corporate did identify the correct unit. This should have at least provided the Claimant with notice that there had been an error, either by Body Corporate or by the Defendants, in correctly identifying the unit on the AutoCad drawing and should have caused the Claimant to follow up on the source of the error.
95. While it is quite reasonable that the Claimant relied upon the Defendants’ assertion that the correct unit was Unit 11, it was unreasonable for her to either fail to notice or disregard the discrepancy apparent on 16 April 2015 when Body Corporate provided another version of the AutoCad drawing. As the Defendants argue, this action served to server the link of causation between the Claimant’s full losses and the Defendants’ conduct.
96. While the Defendants may be successful on their argument for lack of causation after 16 April 2015, the Defendants’ Representative did not address how this argument would affect the time period from 10 December 2014 to 16 April 2015. I find that during this time, the Defendants’ actions were both the “but-for” and “substantial” cause of the Claimant’s losses as neither the Claimant or her Contractor would have reason to doubt the Defendants’ information and it is reasonable to assume that the Claimant would begin the expensive design process based upon the technical drawing provided by the Defendants.
4. Damages
96. Having established duty, breach and causation above, the final element of the Claimant’s negligence claim is an accurate assessment of damages in accordance with the DIFC Law of Obligations and the DIFC Law of Damages and Remedies. The DIFC Law of Obligations provides in relevant part:
“20. Economic loss
(1) Where a claimant has suffered only pure economic loss as a result of the defendant’s conduct, the defendant only owes a duty of care to the claimant if:
(a) the requirements of Article 17 are met;
(b) the defendant assumes a responsibility to the claimant;
(c) the claimant relies on the defendant; and
(d) it is reasonable for the claimant to rely on the defendant.
(2) For the purposes of this Article 20, where a person makes a statement, he assumes a responsibility to persons to whom the statement is made or becomes available (such persons being “recipients”) if:
(a) he knows or ought to know that the statement will be communicated to the recipient, either specifically or as a member of an ascertainable class and that it is likely to be acted on by the recipient for the purpose for which the statement was made; and
(b) he intends, or the recipient reasonably believes that he intended, for the recipient so to act.”
97. The DIFC Law of Damages and Remedies provides in relevant part:
“PART 3: DAMAGES IN LAW OF OBLIGATIONS
23. Right to damages
The breach of an obligation under the Law of Obligations gives the injured party a right to damages to compensate the injured party for the losses, pecuniary and non pecuniary, sustained as a result of the breach. The right to damages can either be exclusive or in conjunction with other remedies.
24. Full Compensation
The injured party is entitled to full compensation for loss sustained as a result of the breach of the Law of Obligations.
25. Measure of damages
The injured party has a right to damages as measured by that sum of money which would put him in the same position as he would have been in if he had not sustained the wrong for which he is to be compensated, plus, in each case, any other loss caused by the breach of the Law of Obligations.
…
27. Certainty of loss
(1) Compensation is due only for loss, including future loss, that is established with a reasonable degree of certainty.
(2) Compensation may be due for the loss of an opportunity in proportion to the probability of its occurrence.
(3) Where the amount of damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the Court.
28. Forseeability of harm
(1) Subject to Article 28(2), the party which committed the breach of an obligation under the Law of Obligations is liable for loss which is of a kind that a reasonable man could reasonably have foreseen as a consequence of, and at the time of the commission of, the acts or omissions of the party which committed the breach. 7
(2) In relation to that kind of damage, the liability is:
(a) in the case of pecuniary damage, for the damage so far as it could reasonably have been foreseen; and
(b) in the case of physical damage, for the full extent of the damage, whether foreseeable or unforeseeable in its extent.
29. Loss due in part to injured party
(1) Where the loss is due in part to an act or omission of the injured party or to another event as to which that party bears the risk, the amount of damages shall be reduced to the extent that these factors have contributed to the loss, having regard to the conduct of each of the parties.
(2) This Article does not apply to:-
(a) liability for deceit; or
(b) wrongful interference with property.
30. Mitigation of loss
(1) The party which committed the breach of obligation under the Law of Obligations is not liable for loss suffered by the injured party to the extent that the loss could have been reduced by the injured party taking reasonable steps.
(2) The injured party is entitled to recover any expenses reasonably incurred in attempting to reduce the loss.
(3) The injured party may not increase the damages claimed by his own unnecessary act subsequent to the breach of obligation.
31. Prohibition of double recovery
Where a breach of the Law of Obligations gives rise to liability on the part of two or more parties, and the claimant has recovered a sum from a liable party or parties, then, in proceedings brought by the claimant against other liable parties, the Court shall reduce any award to the claimant to such extent as it thinks appropriate to take account of the sum recovered by the claimant without prejudice to the injured party’s rights to recovery based on the other parties joint and several liability, if any.
32. Interest on damages
Unless otherwise agreed, interest on damages for non-performance of obligations accrues as from the time of non-performance.
33. Manner of monetary redress
Damages, including interest thereon, are to be paid in a lump sum.”
98. As found above, the Defendants’ conduct can only be deemed to be the but-for and substantial cause of the Claimant’s losses until 16 April 2015, at which point the Claimant had adequate notice of the error. The remaining challenge is to accurately measure the damages with due regard to DIFC Law.
99. As a preliminary issue, I find that the qualifications of Article 20 of the DIFC Law of Obligations relevant to a pure economic loss have clearly been met in this case. I have already detailed above that the qualifications of Article 17 have been met. Pursuant to Article 20(1)(b) and Article 20(2), the Defendants clearly assumed a responsibility to the Claimant by providing certain information and asserting the accuracy of that information without disclaimer, having reason to know that the Claimant would rely on that information for commercial purposes. The Claimant reasonably relied on the information provided by the Defendants’ Leasing Officer, having informed her that the information was required in order for her interior designer to begin the fit-out process as quickly as possible. Therefore, although the Claimant has suffered a purely economic loss, the Defendants are still liable for their breach of duty pursuant to Article 20.
100. Pursuant to Articles 23 and 24 of the DIFC Law of Damages and Remedies, the Claimant, as the injured party, has a right to full compensation for the loss sustained as a result of the Defendants’ breach of duty in the form of damages. Pursuant to Articles 25 and 27, the damages should be measured as the sum of money which would place the Claimant in the same position had the Defendants not breached their duty of care but such amount must be established with a reasonable degree of certainty. Article 27 allows some room for estimation and assessment by the Court, as indicated in Article 27(2) and (3).
101. Furthermore, damages are limited, pursuant to Article 28, to those reasonably foreseeable as a consequence of the breach. In this case, damages due to delay in opening the Claimant’s business were reasonably foreseeable as a consequence of providing inaccurate information regarding the layout and floorplan of the rented Premises.
102. Damages are further limited, pursuant to Article 29, when the loss is partially due to the injured party or some other event to which the injured party bears the risk. The amount of damages must be reduced to the extent that other factors have contributed to the loss. In this case, given that I have found above that the link of causation was broken on 16 April 2015, the amount of loss must be reduced to the extent that the Claimant’s failure to notice the error on 16 April 2015 contributed to its losses. I find that the Claimant did not otherwise fail to mitigate damages.
103. Therefore, it becomes necessary to accurately measure the damages caused by the Defendants’ conduct. As indicated above, the correct measure of damages would be the sum of money to place the Claimant in the same position had the Defendants not breached their duty of care. As the Claimant should have discovered the error on or around 16 April 2015, I find that the Defendants are responsible for the loss incurred due to a 4-month delay, from early December 2014 to 16 April 2015. Had the Defendant provided the correct information, the Claimant would have essentially had an additional 4-months to achieve her fit-out and approval process and would have likely opened for business about 4 months earlier.
104. Although measurement of this 4-months’ delay worth of damages is not precise, it is reasonably certain enough to qualify under Article 27 and especially Article 27(3). I find that it is reasonable to assess this 4-month delay at a value of the average monthly income received by the Claimant company once open. This income would serve to cover expenses such as rent and licensing fees, expenses that the Claimant still incurred each month although the business was not yet operational. Based on the “Daily Reports” provided by the Claimant, the Claimant made an average of AED 43,600 per month from April 2016 to September 2016. Thus, 4-months’ worth of lost income amounts to AED 174,400 owed by the Defendants to the Claimant as damages.
105. While the Defendants will object to this measure of damages, considering that they objected to the submission of the “Daily Reports” and claimed that the Claimant had not adequately proven her losses, the Daily Reports are admissible as I have found in Paragraphs 54 – 55 above and the Court has discretion to provide for a reasonably certain assessment of damages pursuant to Article 27(3) of the DIFC Law of Damages and Remedies.
106. In addition to the above-mentioned amount, which serves to cover the Claimant’s loss incurred due to opening for business 4 months later than would likely have been possible had the Defendants not breached their duty of care, the Claimant should be reimbursed for the additional design and fit-out charges paid as a result of having to go through the design process twice. These items are reflected in the 21 September 2015 invoice provided by the Claimant’s Contractor.
107. The Defendant will again object, stating that the Claimant has not provided sufficient evidence to prove that it in fact paid this invoice, but the witness statement provided by the Claimant and accepted into evidence states that the delay charges and penalties “had to be paid” by the Claimant and thus I am satisfied with the Claimant’s evidence on this matter.
108. The 21 September 2015 invoice includes the following charges:
1.Re-preparation of Architectural Drawings, Elevation and Detailed drawings
2. Necessary charges for Revision of 3D design based on the changes in drawings
3. Penalty Fees for delay dated from 12th Sept – 7th Oct 2015 + Govt approval time period
4. Necessary charges to allot more labour for additional 3 weeks due to delay
5. Necessary charges for scaffolding rental for additional 3 weeks
6. Resubmission of All drawings and necessary documentation for all related approvals”
109. The charges reflected under numbers 4 and 5 above clearly do not fall within a reasonable assessment of damages as, had the Claimant discovered the error in April 2015, these charges would likely have been avoided. Furthermore, the Claimant does not seem to have submitted the completed Designs for the first approval by the DIFC until 12 August 2015. This indicates that, had the error been discovered in April 2016, the Claimant would not likely have needed to resubmit all drawings and documentation for re-approval and instead would have included them in August 2015. Thus, items 3 and 6 can also be removed from the measure of appropriate damages. This leaves items 1 and 2 for AED 25,000 and AED 15,000 respectively, totalling an additional AED 40,000 of damages.
110. However, it is possible and quite likely that the Contractors were not completely done with their Designs by 16 April 2015 and therefore, had the error been discovered in April 2015, the charges to redo the Designs would likely have been less. Presumably, the Designs were ready in August 2015 as they were submitted to the DIFC for approval. Thus, the Contractor likely worked on the Designs from December 2014 until July 2015, a period of 8 months. Given that delay from December 2014 until mid-April 2015 is the responsibility of the Defendants and delay from mid-April 2015 until July 2015 is the responsibility of the Claimant, I find it reasonable to assess the Defendants’ responsibility for the cost of redoing the Designs as half of the total cost. This amounts to (AED 40,000 / 2 = AED 20,000).
111. Therefore, in total, the Defendants shall pay the Claimant AED 194,400 as damages for their breach of duty.
C. The Defendants’ remaining arguments
112. The Defendants have submitted for consideration a number of additional arguments which I will address in turn.
113. First, the Defendants contend that the drawing provided in December 2014 was an accurate reflection of the floor plan of the building and was not inaccurate in any way. Furthermore, the Defendant argued that the Lease Agreement and all other official documents always identified the Premises as “RU-4”. These arguments are accurate as statements on their own, but it is uncontested that the information provided by the Defendants’ Leasing Officer was not accurate and was the source of the Claimant’s reasonable reliance and subsequent losses.
114. The Defendants also pointed to Clauses 10, 45 and 58 of the Lease Agreement. None of these Clauses provide a defence to the claim at hand. Clause 10 asserts that the Claimant inspected and approved the Premises, but such inspection does not indemnify the Defendants from any liability for losses due to their negligence.
115. Clause 45 does seek to indemnify the Defendants from any claims arising from the Claimant’s breach of any terms of the Lease Agreement. While the Claimant may have been in breach of Clause 12 of the Lease Agreement, as mentioned above, such breach is not the source of the claim at hand. Rather, the damages due from the Defendants have effectively been reduced to account for the Claimant’s alleged breach in this respect.
116. Finally, Clause 58 of the Lease Agreement states that it represents the entire agreement between the parties and supersedes any previous agreements. However, the supply of the AutoCad drawing and inaccurate information from the Defendants’ Leasing Officer was not pursuant to a previous agreement nor does execution of the Lease Agreement serve to nullify the duty of care owed by the Defendants towards the Claimant.
117. The Defendants also claim that they were not obligated in any way to send the Claimant the AutoCad drawing. This argument is completely beside the point considering that the Defendants’ Leasing Officer did provide the drawing and additionally provided inaccurate information about that drawing. The Defendants lack of obligation to provide the same does not excuse them from liability.
118. Finally, the Defendants argue that the Claimant has not provided proof that she resubmitted or redid any of the approvals or work that is claimed for against the Defendants. The Claimant has submitted a witness statement and invoice regarding the Contractor’s charges. As regards the other approvals, the Claimant has not been awarded damages for those amounts and therefore this argument is moot.
119. The Defendants also provided numerous objections to the Claimant’s measurement of its losses. As the Claimant has not been awarded damages with regard to an extension of the fit-out period or lost salaries, I will not address those arguments here. As to the Defendants’ objections that the Claimant has not provided proof of payment of the additional amounts, proof of resubmitted approvals, or proof of the original cost of the work to the Claimant prior to discovery of the error, I find the Claimant’s evidence to be sufficient for the Court to assess the appropriate losses to a reasonable degree of certainty, in compliance with Article 27(3) of the DIFC Law of Damages and Remedies.
D. Costs
120. The Claimant has also made a claim for legal costs, although it has not articulated an exact amount for these legal costs. RDC 53.70 provides when the SCT can order a party to pay costs. This rule states:
“The SCT may not order a party to a small claim to pay a sum to another party in respect of that other party’s costs, fees and expenses, including those relating to an appeal, except:
(1) such part of any Court or Tribunal fees paid by that other party as the SCT may consider appropriate;
(2) such further costs as the SCT may assess by the summary procedure and order to be paid by a party who has behaved unreasonably.”
121. In this case, I find it appropriate to grant the Claimant half of its Court fee in the amount of AED 9,692.83 as the Claimant has been successful on part of the Claim but has claimed an amount far in excess of the amount awarded. The Claimant has already paid half of the Court fee into the DIFC Courts and therefore, the Defendant shall be required to pay the other half of the fee directly to the DIFC Courts.
122. As for any further costs, the Claimant may argue that the Defendant has behaved unreasonably. However, I do not find the Defendant’s conduct during these proceedings to have met the high threshold of unreasonable behaviour under RDC 53.70(2).
Conclusion:
123. The Defendant shall pay the Claimant AED 194,400 as damages owed due to the Defendant’s negligence.
124. The Claimant’s claims regarding delayed NOCs, extended fit-out and a new clause to the Lease Agreement are dismissed.
125. The previous SCT Judgment of SCT Judge Mark Beer, issued on 3 October 2016, shall become enforceable upon the expiration of 14 days from issuance of this Judgment.
126. The Defendant shall pay to the DIFC Courts AED 9,692.83 as the remainder of the Court Fee. The parties shall otherwise bear their own costs.
Issued by:
Natasha Bakirci
SCT Judge
Date of issue: 15 February 2017
At: 4 pm
The post Haya Spa LLC v Harper Real Estate / Hasan Real Estate [2016] SCT 150 appeared first on DIFC Courts.