Claim No. CFI 057/2024

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

SIG MIDDLE EAST LLC

Claimant

and

PERFECT BUILDING MATERIALS LLC

Defendant

ORDER WITH REASONS OF H.E. JUSTICE RENE LE MIERE

UPON the Part 8 Claim Form filed on 15 August 2024 (the “Claim”)

AND UPON the Defendant’s Acknowledgment of Service dated 5 September 2024

AND UPON the Order with Reasons of H.E. Justice Rene Le Miere dated 31 December 2024 (the “Order”)

AND UPON the Claimant’s Application No. CFI-057-2024/1 dated 15 January 2025 seeking to exclude the Defendant’s evidence (the “Application”)

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant in a hearing held before H.E. Justice Rene Le Miere on 27 January 2025 (the “Second Hearing”)

IT IS HEREBY ORDERED THAT:

1. The Application is dismissed.

2. The Claimant is the successful party on its Claim.

3. The Defendant shall pay the Claimant the amount of AED 2,841,000.

4. Each party is to bear their own costs of the Application.

5. The Defendant shall pay the Claimant’s costs of the Claim on the standard basis to be assessed if not agreed unless a party files a proposed order as to costs under paragraph 6.

6. A party may apply for an order as to costs by filing a minute of proposed order as to costs within 14 days, together with any witness statement and an outline of submissions not to exceed five pages.

7. If a party files a minute of proposed orders as to costs, the other party may file in reply within a further 14 days any witness statement together with an outline of submissions not to exceed five pages.

8. If any party files a minute of proposed orders as to costs, the Court will decide the orders as to costs on the papers.

9. If neither party files a minute as to costs within 14 days, the Defendant must pay the Claimant’s costs of the case and the Application on the standard basis to be assessed if not agreed

Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 29 May 2025
At: 9am

SCHEDULE OF REASONS

Summary

1. This Claim is brought by SIG Middle East LLC (the “Claimant”) against Perfect Building Material LLC (Defendant). Both parties are registered in the United Arab Emirates.

2. The conflict arises from a series of contractual agreements and subsequent breaches by the Defendant. Initially, the parties entered a contract on 6 June 2011, under which the Claimant was to supply materials to the Defendant. However, the Defendant failed to make the agreed payments, resulting in an outstanding amount of AED 4,141,254.76.

3. To address this, a First Settlement Agreement was reached on 21 July 2019, reducing the amount to AED 2,441,254.00, with the Claimant waiving part of the debt to maintain good relations. However, the Defendant breached this agreement by making only partial payments.

4. In response to these breaches, the parties negotiated a Final Settlement Agreement for AED 1,200,000.00 on April 20, 2022. The agreement included a structured payment plan secured by six postdated cheques.

5. The Defendant failed to adhere to the payment schedule. The Claimant seeks enforcement of the penalty clause stipulated in the Final Settlement Agreement, which imposes a daily penalty of AED 3,000 for delayed payments.

6. The Claimant filed the Claim under Part 8 of the Rules of the DIFC Courts (the “RDC”), seeking a decision on the outstanding payments and penalties, stating that there are no substantial factual disputes.

7. The Defendant filed an Acknowledgment of Service on 5 September 2024, stating that the Claim should not have been brought as a Part 8 Claim because there is a substantial dispute of fact, and the Claim should be dismissed.

8. The Claimant filed an Application No. CFI-057-2024/1 dated 15 January 2025 seeking to exclude the Defendant’s evidence submitted on 14 January 2025 (the “Application”).

9. For the reasons below, the Court will order:

The First Hearing

10. At the First Hearing, counsel for the Defendant submitted that the parties had orally agreed on different dates and payment methods. The Defendant asserts that after the Defendant had paid the Claimant the settlement amounts in accordance with the varied dates and payment methods, the Defendant and the Claimant orally agreed that all payment obligations of the Defendant to the Claimant had been fulfilled and no further amounts, whether penalties or otherwise, were owed by the Defendant to the Claimant.

11. The Court heard the Claim on 30 December 2024 (the “First Hearing”). The Defendant presented only conclusionary evidence and counsel’s assertions to support its contentions. The Court adjourned the proceedings to a further hearing on 27 January 2025 (the “Second Hearing”) to allow the Defendant to present evidence to support its contentions. The Court directed:

Application No. CFI-057-2024/1

12. On 14 January 2025, the Defendant filed a witness statement of Charles Abi Abboud and exhibits.

13. On 15 January 2025, the Claimant filed Application No. CFI-057-2024/1 seeking an order to exclude the Defendant's evidence submitted on 14 January 2025, as it constitutes a breach of the Order of 31 December 2024, and to confirm that the Defendant is barred from relying on the late-submitted evidence in these proceedings.

14. The Registry fined the Defendant for its late filing of its witness statement and granted the Claimant an extension to file its evidence in reply.

15. On 22 January 2025, the Claimant filed a statement of evidence in reply, verified by a statement of truth.

16. There was a further hearing on 27 January 2025 (the “Second Hearing”). Mr Rana represented the Claimant and Mr Karthikeyan represented the Defendant.

17. I heard the Application. I determined not to exclude the Defendant’s witness statement filed on 14 January 2025 from the proceedings. I will elaborate on those reasons.

18. When a party to court proceedings seeks relief from sanctions for failing to comply with rules, such as the late filing of documents, the court follows the three-stage rule applied by the Court of Appeal of England and Wales in the decision in Denton v TH White Ltd [2014] EWCA Civ 906. The first stage is to assess the seriousness and significance of the breach. If the judge determines that the breach is neither serious nor significant, relief from sanctions is usually granted, and there is no need to consider the second and third stages.

19. The Defendant explained that the witness statement was prepared and intended to be filed within the prescribed deadline. However, due to technical difficulties encountered while uploading a screenshot of WhatsApp communications—saved in a different file format—the document was uploaded a few hours later, although it was still on the same day. I accept that the delay was minimal and not due to any deliberate non-compliance. The Defendant acted promptly in sharing the document with the Defendant once the upload was completed.

20. The Defendant has complied with the Registry’s requirement by paying the late submission fee. The Claimant was granted an extension to file its evidence in reply and has suffered no real prejudice.

21. The breach was neither serious nor significant and was promptly remedied. Accordingly, no further sanction will be imposed, and the evidence submitted on 13 January 2025 was admitted into the record.

The Second Hearing

22. The Second Hearing then continued. Mr Abboud was cross-examined by the Claimant's counsel, and each party made submissions.

23. The Final Settlement Agreement establishes the jurisdiction of the DIFC Courts to hear the Claim. It provides that any dispute arising out of or in connection with the contract shall be subject to the jurisdiction of the DIFC Courts.

The Final Settlement Agreement

24. The Final Settlement Agreement includes the following terms:

25. The Claimant asserts that the Defendant failed to make the payments under the Final Settlement Agreement by the due dates. The Claimant states that the payment dates and the contractual penalties calculated from the scheduled payment date to the actual payment date are detailed below:

26. The payment due dates are in accordance with the Final Settlement Agreement. The Claimant’s bank statement verifies the dates of payments credited to the Claimant’s bank account.

Defences raised by the Defendant

27. The Defendant claims there are disputes of fact and raises defences to the Claimant’s Claim as follows.

28. The Defendant submits that it has fully discharged its contractual obligations, including those relating to the agreed methods of payment. It asserts that on 25 April 2022, the Defendant delivered the relevant cheques to the Claimant, who subsequently processed Cheque No. 000230 without raising any objections. The Defendant further contends that Cheques No. 000231 and 000232 were replaced by mutual agreement, and the Claimant accepted the replacement cheques without reservation. Additionally, the Defendant maintains that the parties agreed that the final three payments would be made via Letters of Credit (LCs), and that the Claimant was both aware of and consented to this revised arrangement.

29. The Defendant relies on the legal principle of substituted performance, as codified in Articles 100 and 103 of the Contract Law 2004. It argues that the original payment obligations were effectively discharged through the Claimant’s acceptance of alternative methods of performance, including the replacement cheques and the use of LCs. The Defendant submits that such acceptance constitutes a valid substitution of the original contractual terms.

30. Article 100 provides that an obligation is discharged when the obligee accepts a different performance from that originally due. This discharge occurs upon acceptance and does not require the formation of a new agreement. It is a factual inquiry into whether the obligee accepted the alternative performance in satisfaction of the original obligation.

31. In contrast, Article 103 enacts the doctrine of accord and satisfaction, which involves the formation of a new contract—an accord—under which the obligee agrees to accept a specified alternative performance. The original obligation is suspended upon formation of the accord and is only discharged upon performance of the agreed substitute. This mechanism requires a clearer mutual intention to enter into a new binding agreement and is more formal in nature than substituted performance. The Court must therefore consider whether the facts support a finding of informal substituted performance or a formal accord and satisfaction, as the legal consequences differ accordingly.

32. In the circumstances of this case, it is only necessary to consider the defence of substituted performance, because if the Defendant does not establish substituted performance, it will not establish an accord and satisfaction.

33. The Defendant further contends that the Claimant’s conduct gives rise to a waiver of any right to claim damages for delay. By agreeing to revised payment dates and methods, the Claimant is said to have waived strict compliance with the original terms. The Defendant must prove that the Claimant made a clear and unequivocal representation that it would not insist on payment on the due dates and payment of penalties for delay. It must further show that it relied on this representation and, as a result, altered its position or refrained from exercising certain rights it otherwise would have pursued, and it would be inequitable for the Claimant to enforce the original contractual right to penalties for late payment.

34. The Defendant also invokes the doctrine of estoppel, arguing that the Claimant is precluded from asserting a breach where it had previously accepted and acted upon the alternative arrangements.

35. In addition, the Defendant relies on the principle of estoppel by convention. It is submitted that both parties operated under a shared understanding that the payment terms had been varied, and that the Claimant cannot now resile from that understanding to the Defendant’s detriment.

The No Oral Modification clause

36. The Claimant argues that the Defendant's claim of oral modifications to the Final Settlement Agreement is inadmissible, as it contravenes the express term of the agreement that any waiver, modification, alteration, or addition to the settlement or any of its provisions shall be binding only if it has been mutually agreed in writing.

37. No Oral Modification (NOM) clauses, which stipulate that a written contract can only be modified in writing, have a complex history in common law jurisdictions like the United Kingdom, Australia and Singapore. In these countries, there has been a significant debate about their enforceability, with courts initially leaning towards allowing oral variations even in the presence of NOM clauses.

38. However, in MWB Business Exchange Centres Ltd v Rock Advertising [2019] AC 119 ("MWB"), the UK Supreme Court affirmed that NOM clauses are legally effective and enforceable under English law. This means that if a contract includes a clause requiring variations to be made in writing, any oral agreement to vary the contract will generally be invalid.

39. Unlike the strict approach adopted by the UK Supreme Court in MWB, the courts in Australia and Singapore have taken a more flexible stance on NOM clauses.

40. In Singapore, the Court of Appeal in Charles Lim Teng Siang v Hong Choon Hau [2021] 2 SLR 153; [2021] SGCA 43. held that an oral variation may still be enforceable despite a NOM clause, provided there is clear evidence that both parties agreed to the variation.

41. Similarly, in Australia, NOM clauses are generally treated as relevant but not conclusive; courts focus on whether the parties objectively intended to vary the contract, even if the variation was made orally, see eg Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87; Sara Stockham Pty Ltdv WLD Practice Holdings Pty Ltd [2021] NSWCA 51; White v Philips Electronics Australia Ltd [2019] NSWCA 115.

42. The relevant DIFC law is Article 31 of the Law of Contract 2004, which provides:

43. Article 31 of the Contract Law 2004 is in the same terms as Article 2.1.18 of the Unidroit, Principles of International Commercial Contracts. I am not aware of any definitive decisions on the effect of Article 2.1.18, but it appears to be treated similarly to the principles of estoppel, as seen, for example, in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [395], Finn J.

44. The Final Settlement Agreement may not be modified unless the Claimant is precluded by its conduct from asserting the NOM clause in the Settlement Agreement to the extent that the Defendant has relied on it.

45. All the Defendant’s legal defences rely on establishing that by its conduct, the Claimant agreed, represented or conducted itself on the basis that it accepted the late payments in substitution for the payments due under the Final Settlement Agreement, including penalties for late payment, and the Defendant acted in reliance on that conduct.

Mr Abboud’s evidence of agreement to vary payments

46. In his witness statement, Mr Abboud states that he, on behalf of the Defendant, and Mr Zain Ur Rahman Awan, on behalf of the Claimant, agreed to vary the payments due under the Final Settlement Agreement and Mr Zain accepted the agreed varied payments in substitution for the payments under the Final Settlement Agreement.

47. Mr Abboud states that cheque No. 000230 was handed over during a meeting on 25 April 2022, and the Claimant confirmed that it was processed and credited on 27 April 2022 without any objections.

48. Mr Abboud states that cheque Nos. 000231 and 000232 were replaced through mutual agreement. Cheque No. 000231, dated 25 June 2022, was not presented to the bank. Meetings on 4 and 5 August 2022 led to an agreement to postpone payments and replace the cheques. On 16 September 2022, a WhatsApp message was sent regarding the replacement, which was accepted. Replacement cheques, Nos. 00354 and 00355, were handed over on 20 September 2022, signed and accepted by Mr. Zain Ur Rahman Awan.

49. On 13 October 2022, Mr. Zain Ur Rahman Awan confirmed the encashment of Cheque No. 003454, dated 25 June 2022, and expressed his intention to discuss the next payment later.

50. On 30 December 2022, a WhatsApp communication occurred regarding the payment of Cheque No. 003455. It was proposed to present the cheque on 10 January 2023, but Mr Abboud states that it was agreed to present it on 17 January 2023. The amount was credited on 20 January 2023, confirmed in a March 2023 WhatsApp conversation.

51. Mr Abboud states that the fourth payment was made by a Letter of Credit (LC). Mr Abboud states that numerous discussions led to an agreement to make the last three payments via LCs. An invoice dated 31 March 2023 was issued for the LC application. Communication between 5 and 18 April 2023 coordinated the LC issuance, which was confirmed on 18 April 2023. The Claimant confirmed the cheque would be returned to Mr Abboud's representative.

52. Mr Abboud states that discussions about the LC for the fifth payment began on 27 May 2023. Mr Zain was unable to issue documents as he was out of the UAE. On 6 July 2023, Mr Zain initiated the LC process, and the LC was issued on 18 July 2023. Mr Zain confirmed the issuance and agreed to return the cheque.

53. Mr Abboud states that on 7 August 2023, a WhatsApp message discussed the next cheque due date and LC issuance. Meetings and discussions led to an agreement to issue an LC for the payment. Mr Zain suggested changing the payment date and reissuing the cheque. The LC was issued on 18 October 2023, and documents were exchanged on 23 October 2023.

54. Mr Abboud states that all cheques related to the last three payments were returned as payments were made according to discussions and agreements, constituting a variation of the original settlement terms. No discussions regarding delayed payments or penalties took place, and the original obligations were discharged.

55. In cross-examination, Mr Abboud reiterated that the cheques related to the last three payments were returned to him because all payments were made according to subsequent discussions and agreements with Mr. Zain, constituting a variation of the original settlement terms. Mr Abboud claimed that all payments were made in accordance with mutual agreements between him and Mr. Zain. Mr Abboud mentioned that he and Mr. Zain had verbal agreements more than 12 times, and these were also referenced in WhatsApp correspondences. Mr Abboud detailed several meetings and communications with Mr. Zain, where they discussed and agreed on payment dates.

56. The Claimant's evidence includes repeated assertions inconsistent with the Defendant's claims of an agreement or mutual understanding regarding payment delays. The Claimant asserts that the Defendant’s claims are contradicted by the Defendant's own conduct and communications.

57. The Court has reviewed the numerous WhatsApp messages exchanged between Mr Abboud and Mr Zain. These communications reveal a consistent pattern: Mr Zain persistently urged Mr Abboud to make payments, while Mr Abboud repeatedly delayed, proposing alternative dates and methods of payment. Mr Zain’s tone throughout was sympathetic but increasingly frustrated, as Mr Zain continued to press for payment. Despite these frustrations, Mr Zain remained cooperative and expressed a willingness to assist in facilitating the payments.

58. The content of the messages does not support any inference that the parties agreed to vary the Final Settlement Agreement by substituting new payment terms. On the contrary, the messages reflect Mr Zain’s repeated warnings and dissatisfaction with the Defendant’s delays. Illustrative examples include the following:

59. In cross-examination, Mr. Abboud did not claim that any agreement had been reached with Mr. Zain to waive penalties. On the contrary, he stated that there were no discussions regarding delayed payments or penalties. He further testified that all payments were made under mutually agreed terms, and not that there was an agreement to modify the original agreement.

60. The Court finds that no agreement was reached between Mr. Zain and Mr. Abboud to vary the Final Settlement Agreement by introducing new payment dates and waiving the penalties specified in the original terms.

61. The Claimant, through Mr Zain, did not represent to the Defendant that it would accept, or had accepted, the delayed payments in substitution for the payments due under the Final Settlement Agreement, including any penalties for delay.

62. There is no evidence that the Defendant relied on any representation by the Claimant to the effect that delayed payments would be accepted in place of the original payment terms and that penalties would be waived.

63. The Claimant did not by its conduct, agree, represent or conduct itself on the basis that it accepted the late payments in substitution for the payments due under the Final Settlement Agreement, including penalties for late payment, and the Defendant did not act in reliance on that conduct.

64. The Defendant is bound by the terms of the Final Settlement Agreement.

65. The Defendant must pay the Claimant a penalty of AED 3,000 per day from the date each payment was due under the Final Settlement Agreement until the date the amount of each payment was credited to the Claimant's bank account. That is AED 2,841,000.

Alleged retaliatory nature of Claim

66. The Defendant argued that the Claim was initiated as an act of revenge by Mr Zain due to his failure to secure a personal payment of AED 150,000.00, and that the Claim is an attempt to misuse legal proceedings to disrupt the Defendant's business operations.

67. In his oral submissions, counsel for the Defendant, Mr. Karthikeyan, referred to Mr. Zain's demand for a personal payment of AED 150,000. During the proceedings, Mr. Karthikeyan highlights a message from Mr. Zain, which states that if Mr. Abboud does not pay the AED 150,000, Mr. Zain will not honour his words or commitments. Mr. Karthikeyan suggested that Mr. Zain's demand for the personal payment is significant and implies that it affects the enforcement of penalties or obligations under the Settlement Agreement.

68. I do not accept that interpretation of the message. The message does not mention penalties. The message is about a separate matter, specifically the personal payment, and does not directly relate to the penalties or the Final Settlement Agreement's terms. Therefore, the Court does not accept the argument as a valid defence against the Claimant's Claim.

69. Furthermore, motive alone (e.g., spite or ill will) does not make a claim an abuse of process. Abuse requires misuse of the court’s procedures for a purpose other than that for which they were designed. see Willers v Joyce (No 2) [2016] UKSC 44. There is no evidence that the Claimant brought this action for a purpose other than recovering the amount owing by the Defendant to the Claimant under the Final Settlement Agreement. There is no evidence that the Claimant brought this action to disrupt the Defendant’s business.

Part 8 procedure

70. The Defendant submits that the Part 8 Claim should be dismissed because of a substantial dispute of fact. The disputes of fact include:

71. RDC 8.17provides that where the Defendant contends that the Part 8 procedure should not be used because there is a substantial dispute of fact, he must state his reasons when he files his acknowledgment of service. If the statement of reasons includes matters of evidence, it should be verified by a statement of truth.

72. The Defendant’s statement of reasons stated that there was a substantial dispute of fact. It did not include evidence but only conclusory statements that the alleged variation agreements had been made between the Defendant and the Claimant, verified by a statement of truth.

73. The Claimant asserted that the Defendant has avoided payment obligations and that the case should be resolved expeditiously.

74. To allow the Defendant to present evidence of the disputed facts, I directed the Defendant to be allowed to file any witness statement or other evidence supporting its case in opposition to the Claimant’s Claim. To ensure that the resolution of the Claim is not delayed any more than is necessary, I further directed that the Court would hear the Claim on 27 January 2025.

75. In general, a Part 8 Claim is designed for cases where there is no substantial dispute of fact. However, the Court has heard the arguments and determined that the disputed facts raised by the Defendant are not substantiated, and the Claimant’s version of the facts is accepted. The Court does not need to dismiss the Claim simply because a dispute of fact was alleged.

76. The key point is whether the dispute is substantial, such that the Part 7 procedures are appropriate. Those procedures are not necessary in this case. In accordance with the overriding objective, the Court will dismiss the Application and enter judgment for the Claimant on its Claim.

77. There will be judgment that the Defendant pay the Claimant the amount of AED 2,841,000.

Costs

78. The Claimant is the successful party on its Claim. There is no reason known to the Court why the usual rule should not apply. The appropriate order is that the Defendant pay the Claimant’s costs of the Claim on the standard basis to be assessed if not agreed.

79. However, I will allow the parties to submit that there should be a different order. The orders as to costs will be: