Claim No: XXXX
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
Hearing:1 August 2016
Judgment:5 September 2016
JUDGMENT OF SCT JUDGE NATASHA BAKIRCI
UPON hearing the Claimant’s representative
UPON the Defendant’s representative being absent despite being served notice of the Hearing
UPON Rule 53.61 of the Rules of the DIFC Courts (RDC)
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 26,155.84 as payment of overdue invoices.
2.The Defendant shall pay the Claimant 12% interest to accrue from 23 April 2016 until payment is made.
3. The parties shall bear their own costs.
4. The Claimant is Giustina LLP, a Dubai-based law firm. The Managing Partner of the Claimant firm (hereafter “Managing Director”) and a “Corporate Paralegal/Legal Manager” for the Claimant (hereafter “Corporate Paralegal/Legal Manager”).
5. The Defendant is Giuseppe, a company registered in the Dubai International Financial Centre (DIFC) providing recruitment services. The Managing Director of the Defendant company (hereafter “Managing Director”) and The Defendant company’s Office Manager (hereafter “Officer Manager”).
6. On 21 January 2016, Officer Manager emailed Managing Partner seeking “guidance on partnership agreements under the DMCC” after hearing her presentation on a radio station. Managing Partner responded that same day stating that the Claimant had the “necessary experience” to assist the Defendant.
7. That same day, Corporate Paralegal/Legal Manager responded to Officer Manager setting out the terms of a preliminary consultation. Officer Manager responded on 24 January 2016 asking for a five-minute call with Managing Partner to “discuss previous relevant experience briefly.” Corporate Paralegal/Legal Manager responded that a phone call could be arranged through her and also attached documentation of Managing Partner’s background and experience.
8. Later on 24 January 2016 Corporate Paralegal/Legal Manager emailed the Defendant attaching the “Firm’s Engagement Agreement,” asking for approval. Corporate Paralegal/Legal Manager also highlighted that before legal services would be provided the Defendant was required to pay an AED 15,000 deposit.
9. The Claimant’s accounting team emailed Officer Manager on 9 February 2016 confirming receipt of AED 15,000. The parties then entered into an “Engagement Agreement” on 9 February 2016 requiring the Claimant to assist the Defendant with certain legal services. The parties also met on 9 February 2016 to discuss the scope of the legal services. At this meeting, the Claimant gave some preliminary legal advice to the Defendant and the parties discussed their project moving forward.
10. That same day Officer Manager responded with a lengthy email expressing disappointment in the service provided at the Consultation and discomfort with paying for research time. Officer Manager also inquired about a sample partnership agreement. On 10 February 2016, Managing Partner responded to Officer Manager’s email of the previous day.
11. On 13 February 2016 Managing Director responded to Managing Partner’s email expressing his understanding that minimal research would be required. He stated “I would suggest that we move forward and park this as a misunderstanding.” He then asked some additional legal questions and attached a sample partnership agreement. He then asked when a first draft would be ready and said “lets push ahead.”
12. On 25 February 2016, Officer Manager sent Managing Partner a message asking whether she is able to “go ahead & draft the partnership agreements.” On 28 February 2016, Officer Manager again asked Managing Partner via email to “please update us on this.”
13. On 28 February 2016, Corporate Paralegal/Legal Manager responded with a list of questions that needed to be answered in order to draft the agreements, stating that “we aim to get the draft to you by the end of this week.”
14. On 29 February 2016, Managing Director sent answers to the questions posed and asked “Can you please give me a timeline in which you will have first draft.” Corporate Paralegal/Legal Manager again responded saying “we will get a draft to you by the end of this week.”
15. On 6 March 2016, Managing Director again emailed asking for “Any update?” That same day Managing Partner sent a “draft of the Profit Sharing Agreement.” She indicated that she had adjusted the agreement “based on our discussions” in order that the agreement “more accurately represent your intentions.” The attached draft includes numerous items which Managing Partner indicated the Defendant should review. Managing Director responded on 9 March 2016 expressing the need for significant changes to be made to the draft.
16. On 10 March 2016 the Claimant submitted an invoice to the Defendant for legal services performed in February 2016. The Defendant did not pay this invoice and emailed back on 10 March 2016 in response to the invoice saying that the work discussed “has not been completed to a satisfactory manner” and objecting that the first meeting had lasted only 1.5 hours but had been billed for 5 hours. He asked Managing Partner to also respond to his email of 9 March 2016 regarding the need for changes to the draft agreement.
17. This email went unanswered by Managing Partner, but the Claimant’s accounting team responded on 13 March 2016 explaining further their billing practices. Managing Director again emailed Managing Partner on 13 March 2016 asking “when we can do a call to resolve the gaps.” Managing Director also emailed Officer Manager asking her to call Corporate Paralegal/Legal Manager and get the document resolved, instructing her to “ignore this email” from the accounting team. The parties then had some back and forth communications about the billing dispute.
18. On 16 March 2016, Managing Director emailed again and terminated the Engagement Agreement by stating “Please consider the contract null and void, you have failed to deliver on this simple project.”
19. On 22 March 2016, ostensibly pursuant to the Engagement Agreement, Clauses 6 and 16, the Claimant issued a Final Invoice after deducting the AED 15,000 deposit which the Defendant had previously paid. The Final Invoice amounted to AED 26,115.84 and was submitted to the Defendant on 23 March 2016.
20. The Defendant did not settle this Final Invoice. From 23 March 2016 onwards there were a series of emails between Managing Director and the Claimant’s accounting team, but from the documentation submitted there is no evidence of further correspondence from Corporate Paralegal/Legal Manager or Managing Partner addressing the Defendant’s complaints.
21. On 6 June 2016 the Claimant sent a legal notice to the Defendant regarding the outstanding invoices in a final attempt to collect payment but the Defendant again failed to pay. The Defendant responded on 7 June 2016 requesting a meeting to resolve the issues.
22. The Claimant filed a claim with the DIFC Courts Small Claims Tribunal (SCT) on 29 June 2016 seeking payment of AED 26,155.84, interest, legal fees and court fees.
23. The Defendant responded to the Claim and the parties attended a Consultation before SCT Officer Mahika Hart on 21 July 2016 but were unable to reach a settlement.
24. On 21 July 2016 the Claimant amended their Claim Form to include quantified interest on the overdue amounts. The parties were given the opportunity to make further submissions and submit hearing dates to the SCT Registry. The Claimant submitted their available hearing dates and the Defendant failed to timely submit hearing date availability or the required submissions.
25. Thus, a Hearing was scheduled before me on 1 August 2016.
26. The Defendant protested to the Hearing schedule based on the availability of their representative, Trefor Murphy, stating that he had expressed his unavailability at the Consultation. The Defendant was invited to petition the SCT Judge to change the Hearing schedule for “good reason” pursuant to the Rules of the DIFC Courts (RDC) 53.63 but did not make any such formal petition.
27. On the day of the Hearing, the Defendant informed the SCT Registry that no representative would be attending on their behalf due to scheduling conflicts. The SCT Registry offered the option to attend the hearing by teleconference but the Defendant did not call in.
28. Thus, pursuant to RDC 53.61, I found it appropriate to hear the Claimant’s representative at the Hearing and allow the Defendant further opportunity to respond to the claims via written submissions. The SCT Registry gave the Defendant the opportunity to listen to the Hearing recording and provide their responses in writing by 7 August 2016. The Defendant did not provide any such response.
29. Thus, I hereby decide the case based on the case file, including the Defendant’s initial submission, the Claimant’s submissions and the Claimant’s arguments at the Hearing.
Particulars and Defence
30. The Claimant argued in the Claim Form and Particulars of Claim that the Defendant owed the Claimant AED 26,115.84 plus interest as payment outstanding for legal services provided to the Defendant according to the Engagement Agreement between the parties. The Claimant alleges that the Defendant’s failure to pay is a breach of that agreement.
31. The Claimant highlights that the Engagement Agreement under Clause 2 provides for payment of legal services on an hourly basis. The Claimant invoiced the Defendant in accordance with Clause 4 of the Engagement Agreement. Although the Defendant terminated the Engagement Agreement as of 16 March 2016, this does not change the Defendant’s responsibility to pay for the legal services rendered. Thus, the Claimant contends, it was entitled to off-set the Defendant’s advanced deposit against the amounts owed and then issued a Final Invoice which the Defendant has failed to pay.
32. On 14 July 2016 the Defendant responded to the Claim by filing an Acknowledgment of Service indicating its intention to defend all of the Claim.
33. The Defendant responded to the claim after the Consultation with the submission of emails and other documentation. As indicated in the section entitled “Main Points” the Defendant highlights that 5 hours were charged for a 1.5-hour consultation, that they were dissatisfied with the service and that the Claimant provided incorrect information. Further, the Claimant later corrected its originally incorrect advice, provided projects late and provided the wrong documents. The Defendant argues that there was no mention that the conduct of research would be charged that the practice of charging for research to correct incorrect advice is highly unprofessional.
34. The Defendant claims that its attempt to ascertain the Claimant’s professional experience was obstructed and they were provided with false information. Furthermore, the Defendant maintains that it sent requests for updates and timeline commitments that were ignored or delayed without explanation.
35. The Claimant provided an additional submission in advance of the Hearing. The Claimant contends, in the main, that it has performed its obligations under the Engagement Agreement and the Defendant has breached the agreement by failing to pay. Furthermore, the Claimant argues that as per Article 118 of the DIFC Contract Law, the Claimant is owed interest on the outstanding payment. Ultimately, the Claimant claims AED 26,155.84 as payment for legal services and AED 773.44 for interest.
36. The Claimant contends that the Defendant chose to begin a long-term business relationship with the Claimant rather than take advantage of the preliminary consultation offered by the Claimant. The parties executed the Engagement Agreement and then scheduled the first meeting where the Defendant outlined the necessary work to include a licensing project and a draft partnership agreement project.
37. The Claimant described the chain of events regarding the licensing project, claiming that they gave the Defendant sound legal advice as to federal requirements for opening a new recruitment agency in a free zone but then updated that advice once they learned of new regulations in the DMCC.
38. As regards the draft partnership agreement, the Claimant contends that over the course of discussions, it became clear that the Defendant “was actually looking for an agreement to incentivize employees for his NewCo.” The Claimant drafted a new agreement based on discussions with the Defendant, stating that it did not sell sample agreements and finding that the sample agreement sent by the Defendant was not in line with the Defendant’s needs. Thus, the Claimant continues, they provided the work required under the Engagement Agreement.
39. As for invoices, the Claimant argues that they followed the Engagement Agreement as per their invoicing practices but the Defendant failed to pay. The Claimant contends that the Defendant failed to understand that the work performed was not on a project basis but on an hourly rate basis. The Claimant alleges that it was not until 13 March 2016 that the Defendant started to complain about the quality of work.
40. The Claimant argues that after 13 March 2016, the Defendant became “highly abusive and unreasonable” and such “abusive and unreasonable behaviour carried on” throughout the legal proceedings. According to the Claimant, the Defendant did not show dissatisfaction until receiving the February invoice and did not show “strong dissatisfaction” until four months after receiving the first draft of the partnership agreement.
41. At the Hearing, the Claimant reiterated its arguments while the Defendant was absent.
42. First and foremost, the relevant Engagement Agreement falls under DIFC Courts’ jurisdiction as it concerns the Defendant, a DIFC registered company. Furthermore, the Engagement Agreement at Clause 19, states that “Any dispute out of, or in connection, with this Engagement Agreement . . . including any question regarding its existence, validity or Termination, shall be subject to the exclusive jurisdiction of the Courts of the Dubai International Financial Centre (“DIFC Courts”). This Engagement Agreement shall be governed by and construed in accordance with the laws of the DIFC.” As the claim value is less than AED 500,000, this claim is properly before the Small Claims Tribunal of the DIFC Courts.
43. There is just one issue to be decided in this dispute: is the Claimant entitled, under the Engagement Agreement, to the payment they claim? There is no dispute between the parties as to the existence and applicability of the Engagement Agreement but the Defendant contends that the work provided was not in line with the agreement and that the Defendant was charged for items inappropriately. The Claimant asserts that they are owed the sums claimed under the Engagement Agreement and that they have complied with all obligations required.
44. The Engagement Agreement entered into by the parties provides in Clause 1 that the Claimant’s “practice is to work closely with clients, with frequent and open communication, keeping clients’ best interests in mind at all times.” Clause 2 states that “The standard and default structure [for fees] is based on an hourly rate” and goes on to list the hourly rates for the managing partner at AED 2,500 per hour, AED 950 per hour for the legal manager, and for paralegals at AED 500 to AED 700 per hour. Clause 3 outlines various costs that are meant to be covered by the Defendant.
45. Clause 4(a) provides that the Claimant will invoice the Defendant on a monthly basis “submitted electronically at the end of every month. The Monthly Invoices will outline the number of hours spent by the relevant fee earner and a brief description of the Services performed. The Firm expects the Monthly Invoices to be settled within thirty (30) calendar days from submission.” Clause 6 outlines that the Claimant may request a deposit payment from the Defendant. It goes on to state that “At the end of the Engagement Agreement, the Firm will refund the Deposit, after the relevant offsets for outstanding Legal Fees and/or Costs, as appropriate under the circumstances.”
46. Clause 9 of the Agreement states that “As the law and the practice of law are inherently uncertain, the Firm does not, and cannot, guarantee results. For this reason, it is expressly understood that all Legal Fees and Costs incurred by the Client are non-refundable. This applies to Hourly Rate fees . . .”
47. Clause 16 states that either party “will have the right to terminate this Engagement Agreement at any time and for any reason.” Clause 16(a) states that if the Defendant terminates the agreement such termination “will not relieve the Client of obligation to pay Legal Fees for all Services already rendered, including work in progress.”
48. The Claimant invoiced the Defendant for AED 22,937.50 on 10 March 2016. The final invoice issued on 22 March 2016 reflects an amount owed of AED 41,155.84. The Defendant registered his dissatisfaction with the billing and work done thus far on 10 March 2016 and continued to contest the bill from that point onwards, ultimately terminating the Engagement Agreement on 14 March 2016.
49. The Engagement Agreement is quite clear under Clauses 9 and 16(a) that fees incurred at the hourly rate are non-refundable, even in the event of termination. As the contract is worded, the Defendant seems to have little recourse to contest an invoice other than to terminate the contract and pay for the fees or counterclaim against the Claimant in some capacity.
50. The Defendant’s specific complaints about the Claimant and their practices do not exempt the Defendant from payment for the legal services provided as per the Engagement Agreement unless further counterclaim is made. While the consultation meeting may have been 1.5 hours, Managing Partner has detailed additional work provided on that same day to amount to 5 hours. If the Claimant provided any incorrect advice, this also does not exempt the Defendant from payment for legal services without some further evidence or counterclaim. The Defendant has not proved its defence that any of the included charges are false or invalid. The Defendant has also failed to show that it is excused or exempt from paying the claimed fees under the Engagement Agreement.
51. As for the Claimant’s failure to respond to a number of emails and their delay in completing the work promised, the Defendant exercised their main remedy as per the Engagement Agreement; they terminated the agreement. Any additional remedy would likely need to be claimed and quantified in damages. As regards the claim concerning the Defendant’s attempt to ascertain the Claimant’s expertise and previous experience, the Defendant has not proven that this provides an excuse or exemption from payment. No formal claim for misrepresentation has been filed.
52. The Defendant does seem to have made a good faith effort to settle the dispute but ultimately, as per the Engagement Agreement, the Defendant is responsible to pay for the legal services provided by the Claimant. The Defendant has not articulated any counterclaim or proven any breach of contract and thus cannot off-set the fees owed. The Defendant had plenty of opportunity to defend the case more robustly but did not take advantage of the opportunities provided.
53. The Claimant’s claim for payment of AED 26,155.84 for legal services provided is granted.
54. The Claimant’s claim for interest on this unpaid amount is also granted, as per Article 118 of the DIFC Contract Law. As the Claimant has claimed interest at a rate of 12% and the Defendant has not provided rebuttal, interest will accrue on the judgment amount at a rate of 12% from 23 April 2016 until time of payment.
55. The parties shall each bear their own costs.
Date of issue: 5 September 2016
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