Claim No: CFI 001/2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE H.E. JUSTICE OMAR AL MUHAIRI
YOUSSEF ISSA WARD
DAMAC PARK TOWERS COMPANY LIMITED
Hearing: 1 February 2015
Counsel: Jeffrey Bacon and Bushra Ahmed (KBH Kaanuun) for the Claimant
Christopher Bourke and Chong Ven Seng (DAMAC Group) for the Defendant
Submissions: 12 February and 3 March 2015
Judgment: 10 May 2015
JUDGMENT OF H.E. JUSTICE OMAR AL MUHAIRI
Summary of Judgment
The Claimant, a Canadian National, brought a claim against the Defendant, Damac Park Towers Company Limited, a real estate asset management company licensed in the Jebel Ali Freezone, specializing in property development. The claim arises out of a Reservation Agreement entered into on 28 October 2009 between the Claimant and the Defendant for the off-plan purchase of a unit in the Park Towers Development within the DIFC at a cost of AED 4,544,000. The purchase price was credited with previous payments made in 2007 towards seven identical properties in the Executive Bay Project in the amount of AED 1,279,890.
The Defendant issued two different Termination Notices alleging failure on behalf of the Claimant to adhere to the payment terms. The First Termination Notice was issued on 15 July 2010 and was later revoked when the Claimant and Defendant negotiated a revised payment plan. The second Termination Notice was issued on 22 March 2011 after a check provided by the Claimant could not be processed due to insufficient funds. Thereafter the Defendant cancelled the Claimant’s reservation of the unit and the entire payment made by the Claimant including the credit from the Executive Bay Project was retained by the Defendant. The Claimant filed a claim with the Court of First Instance on 2 December 2014 alleging breach of contract and seeks a remedy of damages and/or compensation for breach of contract, restitution and other claims for relief.
The main issue in this case centres on the terms contained in the Reservation Agreement and how they are to be construed. The Defendant believes the Claimant failed to adhere to the instalment plan contained in the agreement while the Claimant asserts that not only did he adhere to the instalment plan, but in fact paid more than was actually due at the periods at which instalment payments were due. The Court agreed with the Claimant. The transferred sum from the previous project in 2007 is to be construed as a credit that would rest in the Claimant’s account and be used toward payments which became due, rather than subtracted from the entire purchase price at once before the instalment payment sums were calculated, as the Defendant maintains. As such, both Termination Notices were invalid as the Claimant was in fact not in breach of the agreement and the second termination notice amounted to wrongful termination on behalf of the Defendant. Additionally, the Agreement of Sale, a fundamental component of the Reservation Agreement, was never issued by the Defendant, which constituted a material breach of the contract by the Defendant, thereby placing the Claimant in the position of claiming breach and terminating the contract according to Article 86 and 89 of the DIFC Contract Law.
Due to the wrongful termination of the contract as well as the breach in failing to issue the Agreement of Sale; the Defendant is ordered to return the entire amount it received from the Claimant (including the transferred sum) in the amount of AED 2,626,335 in restitution pursuant to Article 48 of the DIFC Damages and Remedies Law and Article 90 of the DIFC Contract Law.
This summary is not part of the Judgment and should not be cited as such
UPON hearing counsel for the Claimant and counsel for the Defendant on 1 February 2015
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
Date of Issue: 10 May 2015
1. Before the Court is Youssef Issa Ward, a Canadian National. The Defendant is Damac Park Towers Company Limited, a real estate asset management company licensed in the Jebel Ali Freezone, specializing in property development.
2. The Claim arises out of a Reservation Agreement (“Reservation Agreement”) entered into on 28 October 2009 between the Claimant and the Defendant for the off-plan purchase of Plot No. DFO/1A/111, a commercial unit (“the Unit”) in the Park Towers Development within the DIFC at a cost of AED 4,544,000.
3. In 2007, the Claimant entered into a number of agreements with Damac Star Properties LLC (an affiliate of the Defendant) for the purchase of seven off-plan properties in the Executive Bay Project (“The Executive Bay Agreements”). By 28 October 2009, the Claimant made payments to Damac Star Properties in the amount of AED 1,279,890 toward the properties.
4. The Claimant had fallen into arrears on his payments for the Executive Bay Agreements and nevertheless, the development was subsequently cancelled by Damac. Thereafter, the Claimant reached an agreement with Damac Star Properties and the Defendant to credit the amount paid toward the Executive Bay Project to another property within the Park Towers.
5. The Claimant signed seven Waiver, Release and Undertaking Letters issued by Damac Star Properties LLC on 28 October 2009 to give effect to the credit amount transfer and each document featured identical wording which stated:
“I/We hereby acknowledge and accept the Termination and agree that Damac No. 2 [the Defendant] shall credit an amount equal to Paid Purchase Price-1 [the Executive Bay Agreements] against Purchase Price-II [the Price], provided I/we fulfil all my/our obligations as set out within the URC including having made full payment of the amount equal to Purchase Price-II less the Paid Purchase Price.”
6. The sum transferred to the Defendant under the seven Waiver, Release and Undertaking Letters was noted in a table and referred to as the “Credited Amount” for the Park Towers project which amounted to AED 1,279,890 (“Transferred Sum”).
7. On October 28, 2009, the Claimant also signed the Reservation Agreement. The total price specified on the Reservation Agreement for the Unit in Park Towers was AED 4,544,000 and contained the following relevant terms:
“I/We am/are aware that by signing this irrevocable Office Unit Reservation I/we hereby enter into a binding contract with the Developer for purchase of the above office unit and this Reservation is subject to:
1. The payment of the outstanding balance of the deposit of AED – 1 (AED One Dirhams) by not later than 04 Nov 2009.
3. My/Our signing the Agreement of Sale for this office unit within one week of being provided for execution and subsequent payments as per the payment schedule below:
1st Instalment 0%
2nd Instalment 25% Within 180 Days of Sale Date
3rd Instalment 30% Within 270 Days of Sale Date
4th Instalment 45% On Completion
4. In case the payments above are not realized and/or Agreement of Sale is not signed as per Clause (1) and (3) above, the penalty @2% per month for late payment shall apply. The Seller shall also have an option to terminate the reservation, and in order to mitigate the Seller’s damages arising out of termination on this reservation, sell or otherwise dispose of [sic] the unit as it deems fit without any further reference to me/us. In such an event, all monies paid by me/us, including the money in terms of Clause (1) and (3) above, is also subject to forfeiture in full and shall not be refunded back to me/us.
5. The above forfeiture and damages shall also be applicable, in case I/we decide not to go ahead with the purchase of the above office unit and request the Developer to terminate the sale transaction.
9. The Agreement of Sale will be issued by the Developer in due course on its standard format. In the meantime, I/we shall continue to abide by the payment plan and other terms and conditions of the Reservation.
16. Once the detailed Agreement of Sale is executed, this Reservation shall cease to be effective.”
8. The effect of the above terms, in particular the terms as to payment and when each instalment payment became due, is in issue in these proceedings.
9. On 15 July 2010, Damac issued the Claimant a Notice of Termination (“First Termination Notice”) in relation to the unit alleging failure on behalf of the Claimant to adhere to the payment terms. The First Termination Notice refers to a statement of account letter from the Defendant dated 13 June 2010 that the Claimant maintains he never received (“Account Statements”). The First Termination Notice stated:
“You have failed to adhere to the payment terms contained in your contract (ARF/URC/SPA) for the above unit (the “Contract”). We have already notified you of this breach of Contract in our letter/s dated 13-JUN-10 &, [sic] in which we asked you to pay all outstanding sums under the Contract and to regularize your account.
You continue to be in default of the relevant clauses of the Contract.
Accordingly, we hereby notify you that if you fail to pay all outstanding amounts pursuant to the provisions of the Contract, within no later than fourteen (14) days from the date of this notice then your Contract shall immediately terminate on the date falling thirty (30) days after the date of this notice, without the need for any further notice from us.”
10. The Claimant contacted Damac after receiving the First Termination Notice and negotiated a revised payment plan (“Payment Plan”). The Payment Plan was subsequently revised and the First Termination Notice was revoked.
11. On 31 October 2010, the Claimant made further payments toward the purchase of the Unit in the amounts of AED 530,417.50 and AED 816,027.50. As of 31 October 2010, the total amount the Claimant paid to the Defendant was AED 2,626,335.
12. Subsequently, on 22 March 2011, Damac issued another Notice of Termination (“Second Termination Notice”) to exercise the right to terminate and to retain all monies paid by the Claimant. The Second Termination Notice was identical to the First Termination Notice quoted above.
13. Thereafter, the Defendant cancelled the Claimant’s reservation of the Unit and the Claimant was informed by the Defendant that he is no longer entitled to the Unit and the Defendant has since retained the entire payment made by the Claimant despite a letter from the Claimant requesting repayment of the sum of AED 2,626,335.
14. On 2 December 2014, the Claimant filed a claim with the Court of First Instance alleging breach of contract pursuant to the Reservation Agreement and seeks a remedy of damages and/or compensation for breach of contract, restitution, restitutionary damages, interest pursuant to Articles 17 and/or 18 of the Law of Damages and Remedies, costs and any other equitable relief as may be appropriate.
15. On 3 April 2014, H.E. Justice Shamlan Al Sawalehi ordered requests for further information, production of documents, witness statements, pre-trial review, trial bundles, reading lists, skeleton arguments, opening statements and chronology in preparation for trial.
16. The hearing for this case was held before me on 1 February 2015. The hearing was attended by Mr Jeff Bacon as lead counsel and Ms Bushra Ahmed assisting on behalf of KBH Kaanuun for the Claimant. The legal in-house counsel for the Defendant was represented by Mr Christopher Bourke as lead counsel with Mr Chong Ven Seng assisting.
The Claimant’s Submissions
17. The Claimant maintains that at all material times he was in compliance with the terms of the Reservation Agreement and that he performed the obligations required of him under the Reservation Agreement.
18. He maintains that at the time he received the First Termination Notice, he paid AED 1,279,890 to the Defendant, or 28% of the total purchase price of the Unit. By 31 October 2010, he maintains that he paid the Defendant a total of AED 2,626,335, or 58% of the total purchase price of the Unit.
19. Additionally, the Claimant provides that at no time was he provided with a Sale of Purchase Agreement (“Agreement of Sale”), as envisaged in the Reservation Agreement in Clauses 4 and 9.
20. It is also the Claimant’s position that Clause 4 of the Reservation Agreement, properly construed, amounts to a penalty and is therefore unenforceable.
21. Accordingly, the Claimant believes he performed all obligations expected of him under the Reservation Agreement, that the Defendant was wrong to terminate the Reservation Agreement and has been unjustly enriched to the extent of AED 2,626,335 and is therefore entitled to repayment and/or restitution of the sum of AED 2,626,335 and/or damages together with interest and costs.
The Defendant’s Response
22. It is the Defendant’s position that the Claimant failed to make payments as agreed and therefore did not fulfil the obligations under the Reservation Agreement.
23. In October 2009, when Damac Star Properties LLC and the Defendant agreed to permit the Claimant to credit the AED 1,279,890 paid under the Executive Bay Agreements towards the purchase of the Unit at Park Towers, the Defendant maintains it did so provided that the Claimant fulfil all of his obligations under the Reservation Agreement.
24. It is the Defendant’s case that the Claimant failed to fulfil the pre-condition for the credit by failing to meet the payment obligations under the Reservation Agreement and therefore the AED 1,279,890 credit never vested toward the purchase price of the Unit. Since the credit never vested, it is the Defendant’s position that the Claimant has made payments to the Defendant for the unit totalling only AED 1,346,445.
25. Furthermore, as construed by the Defendant, the Sale Date, upon which instalment payment came due, was the date in which the Reservation Agreement was signed, not the date in which the Agreement of Sale was to be signed (which never came to fruition).
26. Additionally, according to the Witness Statement of Tamer Fikry, the Director of Collections for Damac Properties Co. LLC, on behalf of the Defendant, the initial Transferred Sum of AED 1,279,890 was deducted from the Purchase Price of AED 4,544,000 so that the net purchase price to be paid by the Claimant was AED 3,264,110. It was on this basis that the amount to be paid by the Claimant in each instalment was calculated. The table for instalment payments according to the Defendant is below:
Defendant’s Instalment Payment Schedule
Date to be Paid
|2nd Instalment||25%||Within 180 Days of Sale Date||26 April 2010||816,027.50|
|3rd Instalment||30%||Within 270 Days of Sale Date||25 July 2010||979,233|
|4th Instalment||45%||Upon Completion||1,468,850|
27. The Defendant maintains that the timeline above is consistent with the Account Statements issued to the Claimant on 18 March 2010. The Defendant further submits that the common intention of the Parties at all material times was that they entered into a binding contract and that the Claimant was required to pay AED 816,027.50 by 26 April 2010 and AED 979,233 by 25 July 2010 and at no time did the Claimant raise any issue or dispute regarding the obligation to make the payments set out in the Reservation Agreement and Account Statements.
28. Furthermore, the Defendant submits that the Account Statements show that payment of the Second Instalment (AED 816,027.50) was not received by 26 April 2010 and it is due to this that the Defendant issued the First Termination Notice.
29. When the Claimant requested the Defendant accept a Payment Plan and withdraw the First Termination Notice, the Parties agreed to a mutually agreeable plan on 6 October 2010 and subsequently, the Defendant withdrew the First Termination Notice. As was mutually agreed, the Claimant provided two checks on 19 October 2010 dated 31 October 2010 for AED 530,417.50 and AED 816,027.50.
30. The Claimant also provided a third check dated 28 February 2011 in the amount of AED 448,815 which was first presented for payment on 28 March 2011 and dishonoured due to insufficient funds. It was presented for payment again on 4 April 2011 and bounced again due to insufficient funds.
31. According to the Defendant, the Claimant breached the Reservation Agreement when his last check was presented for payment and dishonored by his bank due to insufficient funds and as such, the Second Termination Notice became effective on 21 April 2011 and the Defendant was entitled to and did validly terminate the Reservation Agreement and retain the AED 1,346,445 paid towards the Unit pursuant to Clause 4 of the Reservation Agreement.
32. Additionally, the Defendant submits that Damac Star Properties LLC is entitled to retain the initial sum of AED 1,279,890 pursuant to Clause 4 of the terminated Executive Bay Agreements.
33. The Defendant denies the claim that Clause 4 of the Reservation Agreement is unenforceable under applicable laws, including Part 2 Section 21(1) of the Law of Damages and Remedies 2005, and standard practices sanctioned by law in Dubai.
Discussion – List of Issues
34. There are a number of substantive issues raised by the Parties in this case, each to be dealt with separately below.
Was the Reservation Agreement a binding contract?
35. The first issue deals with the Reservation Agreement itself and whether it was a valid, binding contract for the sale of the Unit. The Claimant contends that the Reservation Agreement was merely an agreement to agree, in anticipation of the Agreement of Sale which was never issued, while the Defendant submits that a reading of the entire Reservation Agreement shows that it was expressly agreed by the Parties that they were bound by the Reservation Agreement.
36. I am of the opinion that the Reservation Agreement constituted a valid, binding contract pursuant to DIFC Contract Law, Law No. 6 of 2006, Part 3, Section 14 & 15 which states:
“PART 3: FORMATION
14. Manner of formation
A contract is concluded by the acceptance of an offer.
15. Definition of offer
A proposal for concluding a contract constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance.”
37. The second line of the Reservation Agreement states, “I/We are aware that by signing this irrevocable Office Unit Reservation, I/We hereby enter into a binding contract with the Developer for [sic] purchase of the above office unit…”
38. It is clear that the Reservation Agreement constituted an offer as it sufficiently indicated the intention of the Defendant to be bound in case of acceptance by the Claimant and further, the offer was accepted when the Claimant signed the Reservation Agreement.
Did the absence of an Agreement of Sale negate the validity of the Reservation Agreement?
39. The Claimant contends that the Agreement for Sale was a condition of the Reservation Agreement becoming a binding agreement and that instalment payments were subsequent to the issuing of the Agreement of Sale, or triggered by the Agreement of Sale. The Claimant maintains that the failure to send an Agreement of Sale leads to the conclusion that no binding contract ever came into existence.
40. The Defendant on the other hand, alleges that simply because the Reservation Agreement refers to or envisages that a further agreement may be signed at a later date does not automatically make the Reservation Agreement not binding.
41. As to this issue, I agree with the Defendant. The Agreement of Sale was not a condition of the Reservation Agreement becoming a binding agreement and the failure to produce the envisaged Agreement of Sale does not make the Reservation Agreement invalid.
42. In support of this, I rely on DIFC Contract Law, Part 3, Article 27, which states:
“27. Contract with terms deliberately left open
(1) If the parties intend to conclude a contract, the fact that they intentionally leave a term to be agreed upon in further negotiations or to be determined by a third person does not prevent a contract from coming into existence.
(2) The existence of the contract is not affected by the fact that subsequently:
(a) the parties reach no agreement on the terms; or
(b) the third person does not determine the term, provided that there is an alternative means of rendering the term definite that is reasonable in the circumstances, having regard to the intention of the parties.”
43. It is clear that under DIFC Contract Law, terms deliberately left open, such as the Agreement of Sale in this case, does not prevent a contract from coming into existence.
What was the meaning of “Sale Date” within the Reservation Agreement?
44. The Claimant argues that the meaning of the Sale Date within the Reservation Agreement (“Sale Date”) is not the date the Reservation Agreement was signed as the meaning of the word “sale” in Sale Date means a sale, or passing of property, and the Reservation Agreement did not have that effect. Instead, according to the Claimant, it was a contract for the reservation of the Unit on terms, but not itself an Agreement of Sale, and therefore, the Sale Date never commenced since no Agreement of Sale was ever issued.
45. Alternatively, the Defendant denies this claim and argues that the Sale Date refers to the date the Reservation Agreement was signed, 28 October 2009, since this is the date in which the Claimant and Defendant entered into an agreement for the Defendant to sell and the Claimant to purchase the Unit. Furthermore, according to the Defendant, it was clear in the various Account Statements that were issued to the Claimant over the course of a two year period that the Sale Date was to be interpreted as commencing on 28 October 2009 as the second instalment that was due within 180 days is marked as due on 26 April 2010, or 180 days after 28 October 2009, and the third instalment that was due within 270 days is marked as due on 25 July 2010, or 270 days after the date the Reservation Agreement was signed, subsequently making the Sale Date 28 October 2009, or the date in which the Reservation Agreement was signed.
46. I tend to agree with the Defendant on this issue and rely on Part 5, Articles 49-51 of the DIFC Contract Law which states:
“PART 5: INTERPRETATION
(1) A contract shall be interpreted according to the common intention of the parties.
(2) If such an intention cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.
(1) The statements and other conduct of a party shall be interpreted according to that party’s intention if the other party knew or could not have been unaware of that intention.
(2) If Article 50(1) is not applicable, such statements and other conduct shall be interpreted according to the meaning that a reasonable person of the same kind as the other party would give to it in the circumstances.
In applying Articles 49 and 50, regard shall be had to all the circumstances, including
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade concerned; and
47. According to DIFC Contract Law, the contract shall be interpreted according to the common intention of the parties. In this case, the intention is not shared by the parties as is clear by the arguments presented by the Claimant. Therefore, I consider Articles 50 and 51, which provide that the statements and other conduct of a party, in this case, the Account Statements which indicated the Sale Date was the date the Reservation Agreement was signed, shall be interpreted according to the Defendant’s intention if the Claimant knew or could not have been unaware of that intention.
48. Additionally, as laid out in Article 51 (b) and (c), regard shall be had to all the circumstances, including practices the parties have established between themselves and the conduct of the parties subsequent to the conclusion of the contract.
49. In this case, the Claimant knew or should have known based on the Account Statements issued to him, (i.e. the conduct subsequent to the conclusion of the contract), that the Sale Date was to be interpreted as the date in which the Reservation Agreement was signed, or 28 October 2009. The fact that the Claimant was only sporadically checking e-mails during the time in which the Account Statements were being issued does not absolve him of the responsibility of due diligence on his part as a signatory to the contract.
What was the effect of the Transferred Sum from the Executive Bay Agreements?
50. The most contentious issue in this case is the effect of the Transferred Sum of AED 1,279,890 from the Executive Bay Agreements to the purchase price of the Park Towers Unit.
51. According to the Claimant, the percentages referred to in the Reservation Agreement are percentages of the purchase price and not, as the Defendant suggests, the percentages of the purchase price less the Transferred Sum.
52. The Claimant submits that the instalment payments in the Account Statements were not an accurate reflection of the terms of the Reservation Agreement. According to the Claimant, while the document properly shows the Transferred Sum vesting on 5 December 2009, it incorrectly credits this against the Purchase Price, adopting the balance as the basis on which to calculate the instalment payments.
53. The Claimant contends that there was no agreement to treat the money in this way and that the purchase price in the Reservation Agreement was AED 4,544,000, not AED 3,264,110 and relies on this to calculate the percentages due, as outlined below:
|Claimant’s Instalment Payment Schedule|
|%||Date to be Paid||
|2nd Instalment||25%||Within 180 Days of Sale Date||1,136,000|
|3rd Instalment||30%||Within 270 Days of Sale Date||1,363,200|
|4th Instalment||45%||Upon Completion||2,044,800|
54. Additionally, the Claimant submits that the operation of the Transferred Sum and the Reservation Agreement was that the Transferred Sum would be credited to the Claimant’s account and would rest in his account as a credit towards payments which became due to the Defendant and would be used to defray (in whole or in part) the instalment payments as they became due, so that, as of the date the Transferred Sum vested, the balance of the Claimant’s account with the Defendant was AED 1,279,890, or 28.1% of the purchase price.
55. It is the Defendant’s case, as laid out above, that the initial Transferred Sum of AED 1,279,890 was to be deducted from the Purchase Price of AED 4,544,000 so that the net purchase price to be paid by the Claimant was AED 3,264,110. It was on this basis that the amount to be paid by the Claimant in each instalment was calculated, as laid out in the Account Statements.
56. In Tamer Fikry’s witness statement on behalf of the Defendant, he stated,
“…Mr Ward says that the way Damac calculated the instalments was incorrect. I disagree with Mr Ward’s statement because the Waiver says that Damac No. 2, which is Damac Park Towers Company Limited, will credit an amount equal to the Paid Purchase Price – 1, which is AED1,279,890 [sic] against Purchase Price II, that is the amount of AED 4,544,000. There is no mention in the Waivers of crediting Mr Ward’s account with AED1,279,890 [sic] and I believe the manner in which the instalments have been calculated is correct.”
57. Therefore, according to the Defendant, on 26 April 2010, when the second instalment became due and the Claimant failed to pay the amount of AED 816,027.50, the Claimant breached the Reservation Agreement and the First Termination Notice was issued.
58. As to the first issue of calculating instalment payments and the subsequent percentages thereby, I agree with the Claimant’s interpretation and rely on DIFC Contract Law Part 5, Articles 52 and 53 which states:
“Part 5: INTERPRETATION
Terms and expressions shall be interpreted in the light of the whole contract or statement in which they appear.
Contract terms shall be interpreted so as to give effect to all the terms rather than to deprive some of them of effect.”
59. The Reservation Agreement, as a valid, binding contract shall operate as the main document in which to interpret the terms and expressions contemplated by the Parties. In this instance, the Reservation Agreement clearly stipulates the Office Unit Price as AED 4,544,000, not AED 3,264,110, or the purchase price less the Transferred Sum. As such, the instalment payments laid out in the Reservation Agreement are to be calculated based on the purchase price listed in the Reservation Agreement; AED 4,544,000. Accordingly, the Claimant’s calculation of instalment payments, that is to say, AED 1,136,000 or 25% of the purchase price; 1,363,200 or 30% of the purchase price and 2,044,800 or 45% of the purchase price is the correct calculation.
60. As laid out in Articles 52 and 53 above, terms and expressions shall be interpreted in light of the entire contract and a calculation of the Office Unit Price less the Transferred Sum, as laid out by the Defendant, would operate to deprive effect to some of the contract terms, i.e., the express term of the Office Unit Price, in violation of Article 53 laid out above.
61. The second disputed issue of the Transferred Sum is whether it would rest in the Claimant’s account as a credit towards payments and used to defray the instalment payments as they became due as suggested by the Claimant or whether the Transferred Sum operated as a credit to alter the purchase price and therefore the instalment payment percentages to be payable as they became due on 26 April and 25 July 2010 respectively, as submitted by the Defendant. In this regard, I also concur with the Claimant.
62. As stated above, the Reservation Agreement and the percentage instalments contained therein must not reflect any reduction in the purchase price as a result of the Transferred Sum. And in the absence of a clear agreement to the contrary, those percentages must be calculated by reference to the express term of the Office Unit Price stated in the Reservation Agreement.
63. Accordingly, seeing as the Transferred Sum was not to be subtracted from the purchase price, the operation of the Transferred Sum in the Reservation Agreement was that the Transferred Sum would be credited to the Claimant’s account, and the credit would then remain to settle the instalment payments as they became due.
Was the Claimant in breach of the Reservation Agreement at the date of service of the First Termination Notice in July 2010?
64. The next issue to be dealt with is the issue of the First Termination Notice on 15 July 2010. The Claimant contends that the First Termination Notice was wrong and that there was no breach at that time and that the next payment due was 270 days from 28 October 2009, or 25 July 2010.
65. The Defendant, on the other hand, contends that the First Termination Notice was valid based on the fact that the Claimant had failed to pay AED 816,027.50 by 26 April 2010 in accordance with the Reservation Agreement.
66. On this issue, I am in agreement with the Claimant. At the time the First Termination Notice was issued, the Claimant had AED 1,279,890 or 28% of the purchase price resting in his account. The next payment due according to the correct calculation of the instalment payments as laid out above was AED 1,363,200 due on 25 July 2010, just ten days after the First Termination Notice was issued. Had the First Termination Notice been issued after 25 July 2010 it would have been valid, but nevertheless it was premature in nature. Accordingly, the First Termination Notice was indeed erroneous.
What was the effect of the Payment Plan and did it vary the terms of the Reservation Agreement?
67. It is conceded by the Claimant that if there was a valid contract and the Sale Date in fact means the date of the Reservation Agreement, that the Claimant would have needed to pay a total of AED 1,363,200 by 270 days after the Sale Date, or 25 July 2010. He already had AED 1,279,890 resting in his account (AED 143,890 in excess of the initial 1,136,000 owed) and would therefore owe an additional 1,219,310 by 25 July 2010. Since he did not pay this amount by the date specified, it put the Claimant in breach of the contract.
68. It is common ground that at this point; there was a discussion between the parties to arrange a mutually agreeable Payment Plan. According to the First Witness Statement of the Claimant, he spoke with Mr Ansari (one of his points of contact at Damac) and agreed to a Payment Plan that provided a payment extension and a revised instalment plan in addition to having the effect of withdrawing the First Termination Notice. Damac sent an email to Claimant dated 15 August 2010 that stated,
“We would like to inform you that your request for payment extension has been approved by the senior management to clear the total outstanding amount due of AED 1,795,260.40 in 4 equal instalments starting from 10th Sep 2010 till 10th Dec 2010 for an amount of AED 448,815 each provided you submit post-dated cheques.”
According to the Claimant, that payment plan was modified twice at his request, to accommodate his lack of cash flow and although a revised payment plan was agreed upon, there was no written amendment to the Reservation Agreement.
69. The Defendant (regardless of the fact that the calculations are misguided) cooperated with the Defendant in good faith in order to assist the Claimant in performing his obligations under the Reservation Agreement and allow him an opportunity to remedy his default.
70. The Payment Plan did not have the effect of modifying the terms of the Reservation Agreement nor did it amount to a variation or separate agreement, and it should be noted that the Defendant does not argue as such. As the Defendant contends, the Payment Plan was simply an attempt to assist the Claimant in remedying his breach. The extensive arguments put forth by the Claimant as to the Payment Plan being void for mistake are therefore irrelevant and need not be deliberated.
Was the Claimant in breach of the Reservation Agreement at the date of service of the Second Termination Notice in March 2011?
71. According to the Defendant; as part of the revised Payment Plan, Damac received two payments in October 2010 totalling AED 1,346,445. The last check for AED 448,815 was dishonoured by the Claimant’s bank due to insufficient funds when it was presented for payment on 28 March 2011 and again on 5 April 2011. As the Defendant contends, it was due to this failure to fulfil the obligations under the Reservation Agreement by the Claimant that the Defendant issued the Second Termination Notice on 22 March 2011.
72. According to the Claimant, the Second Termination Notice was invalid because it was ineffective as notice of termination for the purposes of Article 87 of the DIFC Contract Law in that it failed to refer to the document which was said to form the contract between the Claimant and Defendant; referred to a letter dated 13 June 2010 that didn’t exist or was never sent to the Claimant, failed to specify the sums due to Defendant, failed to specify the basis on which those sums were calculated and failed to specify the basis on which the Defendant was lawfully entitled to terminate the Contract.
73. It is my position that the Second Termination Notice was invalid, but not due to the reasons listed by the Claimant. At the time the Defendant issued the Second Termination Notice on 22 March 2011, the Claimant paid a total of AED 2,626,335 or approximately 58% of the Purchase Price.
74. In view of the fact that the Payment Plan did not operate as a new agreement or a variation of the existing Reservation Agreement, one must look to the instalment payments set out in the Reservation Agreement. Accordingly, the Claimant owed AED 1,136,000 by 26 April 2010 (which was paid); AED 1,363,200 by 25 July 2010 (which was paid, albeit not on time); and AED 2,044,800 upon completion. Absent a completion notice of the Unit, the only amounts due to Damac at the time the Second Termination Notice was issued was the 2nd and 3rd instalments of AED 1,136,000 and AED 1,363,200, respectively. Accordingly, the Claimant was not in breach of the Reservation Agreement.
75. Consequently, the Defendant’s termination of the Reservation Agreement was invalid and constituted wrongful termination of the contract.
The Agreement of Sale
76. The Agreement of Sale was a fundamental component of the Reservation Agreement. So fundamental, as laid out in Clause 3 and 4 of the Reservation Agreement, that if the Claimant failed to sign the Agreement of Sale within one week of it being provided, the Defendant was entitled to terminate the contract. Furthermore, it was so fundamental, that once it was issued, the Reservation Agreement would cease to be effective, according to Clause 16.
77. Clause 9 of the Reservation Agreement states that, “The Agreement of Sale will be issued by the Developer in due course in its [sic] standard format.” The Agreement of Sale failed to be issued over a period of at least a year and a half during the time the Reservation Agreement was signed on 28 October 2009 until the date the Second Termination Letter was issued on 22 March 2011 and to date, the Agreement of Sale has still not been issued.
78. Surely the term, “in due course” was not envisaged to exceed six months when the first instalment payment came due, let alone over a year. Even the most liberally applied reasonable test would interpret this amount of time as unreasonable.
79. It is not disputed that the Claimant never received the Agreement of Sale envisaged in the Reservation Agreement. While this does not negate the existence of a binding contract, it does put the Claimant in an unfavourable position. It is very possible that clauses contained therein could have transferred more accountability onto the Defendant and put the Claimant in a more favourable position than he was with the existing Reservation Agreement. At the very least, surely it would have contained additional express terms and assurances such as the expected date of handover and a more detailed calculation of the payment terms.
80. As a result, the absence of the Agreement of Sale throughout this nearly two-year process despite the express mention of it being issued “in due course” in the Reservation Agreement constitutes a material breach of the contract by the Defendant; thereby placing the Claimant in the position of claiming breach and terminating the contract according to DIFC Contract Law, Part 8, Article 86 and 89, which state:
“86. Right to terminate the contract
(1) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.
89. Effects of termination in general
(1) Termination of the contract releases both parties from their obligation to effect and to receive future performance.
(2) Termination does not preclude a claim for damages for non-performance.”
81. It is clear from the analysis above that the Defendant wrongfully terminated or unlawfully repudiated the contract when the Second Termination Notice was issued. In addition to this, the Defendant breached the Reservation Agreement by failing to issue the Agreement of Sale.
82. The Claimant is now in the position to either elect whether to terminate the contract or keep the contract going and preserve its rights to be paid damages for the breach. It is clear from the conduct of the parties that neither party intends that the contract be further performed and the parties have conducted themselves so as to abandon the contract. According to Common Law principles, the inference of abandonment will be drawn when an inordinate length of time has elapsed, during which time neither party has attempted to perform or called the other to perform.
83. It is clear that the intention of the parties is to abandon the contract and neither party intends to perform. The significant delay from the Defendant in issuing the Agreement of Sale; the significant delay in announcing the completion of the project and initiating a handover process and lastly; the significant lapse of time that occurred between the last communication between the parties in 2011 and the filing of this claim in 2014 make it plain that there is no evidence to suggest the parties are willing to continue to perform the contract.
84. It should be noted that it was suggested at the hearing by lead counsel Mr Bacon that the Claimant would be willing to pay the remaining balance due on the contract in order to continue performance, and this was supported by the Claimant’s Further Submissions Following Trial, however I dismiss this eleventh hour attempt at continuing the contract. Nowhere in the submissions prior to the hearing was there any suggestion of continuing the contract by either party, particularly in the Claimant’s requests for relief, and I will not entertain this proposition at this juncture. At all material times, the parties conducted themselves in a matter that was consistent with non-performance.
85. Since the contract has been sufficiently abandoned with no probability of performance, it is my position that the Defendant has been unjustly enriched to the extent of AED 2,626,335 at the expense of the Claimant. The Defendant is ordered to return the entire amount it received from Mr Ward in restitution pursuant to Article 48 of the DIFC Damages and Remedies Law No. 7 of 2005 and Article 90 of the DIFC Contract Law, which states:
(1) On termination of contract pursuant to Articles 86 or 88 either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money whenever reasonable.”
86. For the absence of doubt, the amount to be returned is the entire amount of AED 2,626,335 which includes the Transferred Sum. As discussed in length above, the Transferred Sum operated as a credit and became part and parcel of the new payments made toward the Unit.
87. Due to the foregoing, it is hereby ordered that the Defendant pay the Claimant the amount of AED 2,626,335 in restitution payment for the unlawful repudiation and breach of the Reservation Agreement.
Costs and Interest
88. According to Rule 38.7 of the Rules of the DIFC Courts, if the Court decides to make an order on costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. I am satisfied that the Defendant, as the unsuccessful party in this case, should pay the Claimant’s costs of these proceedings and be subject to a detailed assessment if not agreed.
89. Interest on the judgment sum should run at the three month EIBOR + 1%, from the date of Judgment until full and final payment.
Date of Issue: 10 May 2015
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