May 13, 2022 SCT - JUDGMENTS AND ORDERS
Claim No. SCT 046/2022
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum,
Ruler of Dubai
IN THE SMALL CLAIMS TRIBUNAL OF DIFC COURTS
BEFORE H.E. JUSTICE MAHA AL MHEIRI
|Hearing :||27 April 2022|
|Judgment :||13 May 2022|
JUDGMENT OF H.E. JUSTICE MAHA AL MHEIRI
UPON the Claim Form being filed on 10 February 2022
AND UPON a Hearing having been held before H.E Justice Maha Al Mheiri on 27 April 2022, with the Claimant and the Third Defendant in attendance and the First and Second Defendants failing to appear although served notice of the Claim
AND UPON considering all documents and evidence submitted on the Court file
IT IS HEREBY ORDERED THAT:
1. The Third Defendant shall vacate the Premises within 14 days of the date of this Judgment.
2. The possession of the premises be reverted to the Claimant as of 27 May 2022.
3. The First Defendant shall pay the Claimant the amount of AED 33,890.94.
4. The First Defendant’s security deposit in the amount of AED 3,750 shall be forfeited to the Claimant.
5. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,736.03.
6. The Claimant shall serve this Order upon the First Defendant.
Ayesha Bin Kalban
SCT Judge and Registrar
Date of issue: 13 May 2022
1. The Claimant is Lanakila (the “Claimant”), the Landlord of unit 0(the “Premises”).
2. The Defendant is Lang, a holiday home company located in the DIFC (the “First Defendant”).
3. The Second Defendant is Lancelot, an employee of the First Defendant working as CEO (the “Second Defendant”).
4. The Third Defendant is Laneetees, an individual leasing the Premises (the “Third Defendant”).
Background and the Preceding History
5. On 17 February 2021, the Claimant and the First Defendant entered into an agreement to lease the Claimant’s Premises for one year (the “First Lease Agreement”), starting from 21 February 2021 to 20 February 2022, for the annual rent of AED 55,000 (plus a conditional rent-free period from 21 February 2022 until 20 March 2022). The Claimant allowed the First Defendant to sub lease the Premises to third parties for the period of the First Lease Agreement.
6. The First Defendant and Third Defendant entered into a sub-tenancy contract on 18 November 2021 (the “Second Lease Agreement”) for the period of 1 year starting from 6 December 2021 until 6 December 2022. The Third Defendant paid the full amount of AED 45,000 for the rent and AED 3,750 as a security deposit for the Premises.
7. On 10 February 2022, the Claimant filed a claim in the DIFC Courts’ Small Claims Tribunal (the “SCT”), seeking an order that the Defendants jointly and severally pay the total amount of AED 34,697, in addition to 10 % legal Interest from its due date until full payment of the amount as per clause (12) of First Lease Agreement, as follows:
(a) AED 18,333.33 rent amount in respect of the unpaid rent amount from 21 November 2021 until 20 March 2022, plus any upcoming rent amount until the date of the evacuation;
(b) AED 13,750 as liquidated damages as per Clause 11 of the First Lease Agreement;
(c) AED 500 towards the cheque returned due to insufficient funds;
(d) an order that the Defendants clear the amount of AED 2,113.67 for outstanding charges towards DEWA, District Cooling and any other service charges until the date of the evacuation.
8. The Claimant also sought an order for the following terms:
(a) an order that the Security Deposit of AED 3,750 be forfeited by the First Defendant in favour of the Claimant as liquidated damages as per clause 11 of the First Lease Agreement;
(b) an order that the Defendants vacate the Premises immediately, and to hand it over in good condition to the Claimant, and the Claimant to gain access to the Premises; and
(c) an order that the Defendants pay all legal costs associated with filing this claim.
9. The matter was called for a Consultation before SCT Judge Ayman Mahmoud Saey on 15 April 2022. Although the Claimant and Third Defendant were in attendance, they failed to reach a settlement. The First and Second Defendant were absent although served with notice of the Claim.
10. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a Second Hearing held on 27 April 2022, with the Claimant and the Third Defendant in attendance. The First and Second Defendants were absent although served with notice of the Claim.
11. RDC 53.61 of the Rules of the DIFC Courts stipulates that “if a defendant does not attend the hearing and the claimant does attend the hearing, the SCT may decide the claim on basis of the evidence of the Claimant only”.
12. The Claimant’s case is that they entered into the First Lease Agreement with the First Defendant for a period of one year, from 21 February 2021 to 20 February 2022, plus a rent-free period from 21 February 2022 until 20 March 2022, which was granted to the First Defendant conditionally upon the fulfillment of all its obligations pursuant to clause 29 of the First Lease Agreement.
13. The Claimant is alleging that the First Defendant had breached the terms and conditions of the First Lease Agreement, and that the First Defendant had failed to fulfill its obligations under the First Lease Agreement by failing to pay the last instalment towards the rent of the Premises. The fourth Cheque that had been provided by the First Defendant returned due to insufficient funds.
14. The Claimant sent several notices to the First Defendant, requesting that it pay the outstanding rent. However, no sum payment was received. The Claimant submits that the relationship between the Claimant and the First Defendant is subject to the terms and conditions of the First Lease Agreement which expires on 20 February 2022. In addition, the one-month conditional rent-free period granted to First Defendant must not be found to be in effect as the First Defendant did not fulfill its obligation and meet the requirements as per clause 29 of First Lease Agreement.
15. Therefore, the Claimant proceeded to seek the termination of the First Lease Agreement and file its Claim with the SCT. I shall elaborate on each of the Claimant’s claims in the discussion below.
16. The total sum claimed by the Claimant as set out in the Claim Form is the sum of AED 34,697, in addition to legal costs associated with the filing of this Claim. The Claimant also seeks penalties as stated within the First Lease Agreement.
17. The First and Second Defendants failed to file an acknowledgement of Service nor did they appear at the Hearing, although served with notice of the Claim.
18. The Third Defendant is currently occupying the Premises and submits the following in support of his defence.
19. As stated above, the Third Defendant entered into the Second Lease Agreement with the First Defendant, with the end date of 6 December 2022. The Third Defendant submits that he fulfilled his obligations in terms of paying the full rent amount to the First Defendant until 6 December 2022.
20. The Third Defendant submits the following:
(a) He is unaware of any relationship between the Claimant and the First Defendant;
(b) He is unaware of the existence of and the terms therein of any Tenancy Contract, or any other agreement between the Claimant the First Defendant, nor he submits, is he a party to the same;
(c) He is unaware of any payments the First Defendant owed, paid or failed to pay to the Claimant beyond what is alleged;
(d) He does not owe any payments to any of the other parties currently named in these proceedings;
(e) He is unaware of any reminders or notices the Claimant has served upon the First Defendant; and
(f) He is unaware of the relationship between the Claimant, the First Defendant and the Second Defendant.
21. The Third Defendant submits that there are two separate leasing agreements in place for the Premises and therefore they must both be dealt with separately. They are entirely separate agreements; and the Third Defendant was not a party and therefore was not capable of breaching the First Lease Agreement. The Third Defendant further submits that the remedies sought by the Claimant in relation to this claim arise from the First Leasing Agreement.
22. Therefore, the Third Defendant claims that he should not be impacted in any way by the fact that the First Defendant has not met its obligations towards the Claimant. Moreover, the Third Defendant submits that he has a valid lease in place over the Premises for a period of 12 months from the date of singing until 6 December 2022, for the rent as specified in the contract, subject to him meeting his ongoing obligations under the Second Lease Agreement.
23. First and foremost, the relevant Lease Agreements are in relation to a unit in the DIFC, therefore by default, any agreement shall be governed by the prevailing law of the DIFC, United Arab Emirates and that upon failure to resolve any disputes connected to the Lease Agreements, the dispute shall be referred to the DIFC Courts. Therefore, it is clear and undisputed that the DIFC Courts have jurisdiction to decide this matter. As the claim value is less than AED 500,000, this claim is properly before the SCT.
24. Clause 1 of the First Lease Agreement states the following in relation to the sublease of the Premises:
“The Tenant undertakes not to transfer this Tenancy Contract or sublet the Premise to anyone else under any circumstances. The Tenant undertakes not to share the Premise with any third party. The Tenant shall use and occupy the Premise solely and exclusively for residential use only.
In case the Tenant is a legal entity, the legal entity shall inform the landlord and gets the landlord’s approval of desired occupants and any change to the occupants of the unit and agrees that the occupants of the unit must be on the legal entity’s sponsorship.”
25. The Claimant and the First Defendant then signed an NOC, dated 17 February 2021, for the sublease of the Premises which states the following (the “NOC”):
“With reference to tenancy contract dated 17 February 2021 (Contract) for above-mentioned premise, we,Lanakila (Landlord) herby [sic] declare that we have no objection that the tenant sublease the premise to any third party for a period not exceed the term and expiry of the Contract subject that the tenant shall remain responsible for compliance of subtenant and occupants with the Master community and common area use and building Manual, declaration, instructions, policies, and regulation as amended from time to time by the Landlord and/or the building management and relevant authority as case may be.
The above is without prejudice to any obligation of the tenant towards the landlord under the contract which shall remain in full force and effects and also without prejudice to any of landlord’s right to claim for any of its legal and contractual rights and outstanding amount from tenant”.
26. The wording of the NOC is clear as to the term of the sublease of the Premises, which the Claimant allowed the First Defendant for the period of the First Lease Agreement, dated from 21 February 2021 to 20 February 2022.
27. Despite various email correspondences from the Claimant to the First Defendant, reminding the First Defendant of the fourth payment, the First Defendant ignored the Claimant’s emails. Therefore, on 3 February 2022, the Claimant wrote to the First Defendant the following:
“With reference to tenancy contract dated 17-February-2021 for the above-mentioned premise (The Contract), please note that you have breached the terms and condition of contract as failed to pay the 4th rent instalment for amount of AED 13,750.00 due on 21-11-2021…”
28. Pursuant to clause 11 of the First Lease Agreement, and as the First Defendant failed to pay the fourth instalment, the Claimant would be entitled to immediately terminate the First Lease Agreement, and seek that the First Defendant vacate the Premises. The said Clause reads as follows:
“Consequent to the termination of this Tenancy Contract based on above-mentioned clause, the Tenant’s right to use the premise for the rest of the Tenancy Period shall be ceased and terminated, and the remainder of the Rent Amount or an amount equal to (three) 3 months’ rent, whichever is more shall be paid to the Landlord ...”
29. However, as it now appears, the First Defendant has subleased the Premises to the Third Defendant until 6 December 2022. The Third Defendant claims that he entered into the Second Lease Agreement on 6 December 2021 with the First Defendant in good faith.
30. As unfortunate as it may be for the Third Defendant, the First Defendant had no (contractual) right to sublease the Premises after 20 February 2022, in the absence of a renewed First Lease Agreement and NOC. Although the First and Second Lease Agreement are two separate agreements, the bases under which the First Defendant can sublease the Premises is the NOC, and as stated above in the absence of a renewed NOC there is no basis that allows the First Defendant to enter into and subleasing agreement with a third party for a period outside the First Lease Agreement.
31. Although the Third Defendant entered into the Second Lease Agreement in good faith, the Third Defendant should have requested to view a copy of the NOC in order to enter any agreement with the First Defendant, especially as the First Defendant does not own the Premises. Therefore, I find that the Third Defendant must vacate the Premises within 14 days of this order and handover the Premises to the Claimant in good condition.
32. Nonetheless, the Third Defendant has met his obligations towards the First Defendant pursuant to the Second Lease Agreement, and the full rent amount has been paid until 6 December 2022. Therefore, I find that the Claimant is not entitled to claim any amounts from the Third Defendant as this would result in further damage to the Third Defendant, in addition to the loss of rent amount inflicted upon him as a result of the First Defendant’s actions.
33. It is due to the conduct of the First Defendant that the Premises were subleased in the absence of the relevant agreements and currently are still being occupied. Therefore, I find that the First Defendant shall be held liable for the Claims as filed by the Claimant as set out below in my Judgment.
34. The Claimant submits that the First Defendant failed to pay the remainder of the rent amount until 20 February 2022 in the amount of AED 13,750. In addition to the unpaid rent, the Premises will be occupied until 27 May 2022 as stated above, the period from 21 February 2022 until 27 May 2022 will be considered overstay in the amount of AED 14,666.66.
3 months and 6 days = 4,583.33 x 3 = AED 13,749.99
6 days = 4,583.33/30 x 6 days = AED 916.67
35. Therefore, the First Defendant shall be liable for the unpaid rent as stated above in the amount of AED 28,416.66.
36. In accordance with the terms of the First Lease Agreement, the First Defendant is also liable to pay the amount of AED 500 as a result of the returned cheque that was provided by the First Defendant as stated below:
“22. In the event any cheque is bounced by the bank for any reason whatsoever, the tenant shall be bound to pay AED 500 (five hundred dirhams as mutual agreed fixed compensation.”
37. The Claimant drew the Courts’ attention to a number of clauses within the Lease Agreement, each of which are set out below:
38. Clause 12 reads as follows:
“12. without prejudice to the rights and remedies of the Landlord under this Tenancy Contract or under applicable law if the Tenant fails to make any payments to the landlord of the rent or any sums whatsoever due to the Landlord under this Tenancy at the time or times or within the periods specified in this tenancy contract, the Landlord may charge the Tenant a penalty thereon in addition to the owed amount calculated at a rate of ten percent (10%) per annuum on which the payment is due in accordance with this tenancy contract until the date of full payment as mutual agreed compensation.”
39. In review of Clause 12, the Court finds that the Clause is ambiguous as to the application of the 10% penalty. The Court is of view that such a penalty shall apply on the outstanding rent that falls due under the Lease Agreement, as such 10% of AED 28,416.66 is AED 2,841.66.
40. Clause 11 of the Lease Agreement reads as follows:
“11. Consequent to the termination of this Tenancy Contract based on the above-mentioned clause, the Tenant’s right to use the premises for the rest of the Tenancy Period shall be ceased and terminated, and the remainder of the Rent Amount or an amount equal to (Three) 3 months’ rent , whichever is more, shall be paid to Landlord in addition, the security Deposit as mentioned in clause (G) of above mentioned particular shall be forfeited in favor of the Landlord as liquidated damages.”
41. Upon reviewing Clause 11, I find that there are two parts. The first deals with the penalty in the form of rent, and the second deals with the security deposit.
42. I note that the Claimant is given two options as penalty and they cannot be used at the same time, hence the word (or) that is used in the clause, set out below:
“and the remainder of the Rent Amount or an amount equal to (Three) 3 months’ rent whichever is more, shall be paid to Landlord”
43. Since the Court has granted the Claimant the remainder of the rent as mentioned above, AED 28,416.66, an amount which is greater than 3 months of rent, the Court is satisfied that the penalty under Clause 11 has been met. Accordingly, I dismiss the Claimant’s claim for the amount of AED 13,750 equal to 3 months of rent as liquidated damage penalties under Clause 11.
44. Clause 11 of the First Lease Agreement reads as follows:
“Consequent to the termination of this Tenancy Contract based on the above-mentioned clause, the Tenant’s right to use the premises for the rest of the Tenancy Period shall be ceased and terminated, and the remainder of the Rent Amount or an amount equal to (Three) 3 months’ rent , whichever is more, shall be paid to Landlord in addition, the security Deposit as mentioned in clause (G) of above mentioned particular shall be forfeited in favor of the Landlord as liquidated damages.”
45. Accordingly, I find that the Security Deposit of AED 3,750 must be forfeited by the First Defendant in favour of the Claimant as liquidated damages pursuant to Clause 11 of the First Lease Agreement.
Dewa and District Cooling bills
46. Clause 24 and 25 of the First Lease Agreement reads as follows:
“24. All fixed and consumption charges for Water, Electricity, Telephone, Internet, Air Conditioning and District Cooling (Capacity Consumption) charges and all other utilities’ bills and the related third-party billing fees are on the account of the Tenant.”
“25. The Tenant shall pay the District Cooling Bills on time without any delay. The tenant acknowledges and agrees that the district cooling bills will be prepared and collected by a Third-Party Company, and in that regard the tenant undertakes to settle in full charges and fees related to…”
47. The Second Lease Agreement states the following in regard to DEWA and chiller:
“Utility Charges (DEWA & Chiller) related to the apartment are included with the usage limit of AED 1,000 monthly (AED 500/-chiller;AED500/-Dewa) and the exceeded amount shall be chargeable to the tenant on monthly basis in the noted rental amounts, as agreed upon during commercial negotiations and mentioned in this contract”
48. Pursuant to the above, I find that the First Defendant shall pay for any outstanding amounts for the DEWA and District Cooling bills. The First Defendant has not submitted any proof or payment demonstrating that the outstanding amount exceed the amount as mentioned above. Therefore, the First Defendant shall pay the Claimant the amount of AED 2,113.67 for DEWA and District Cooling and any other service charges until the date of evacuation.
Liability of Payment
49. As the Claimant entered into the First Lease Agreement with the First Defendant only and not the Second Defendant in his personal capacity, the Court does not find the Second Defendant to be legally responsible jointly or severally to pay any of the above-mentioned amounts. Moreover, the Second Defendant signed the First Lease Agreement on behalf of the First Defendant as a representative and employee of the company and not in his personal capacity.
50. The Claimant also submits that the Second Defendant committed fraud by signing agreements that are not under his capacity nor authority to sign. In addition, the Claimant failed to provide any document to support its claims against the Second Defendant.
51. In the situation where the Claimant wishes to file a criminal case against the Second Defendant, the DIFC Courts is not the correct forum to pursue this matter, seeing as these Courts can only determine civil and commercial cases. As such, the Claimant’s claim against the Second Defendant must be dismissed.
52. The Claimant also seeks to recover the fee that was paid to the Court for the filing of this Claim. I am of the view that, although the Claimant has been unsuccessful on some of its claims, the Court granted it an amount greater than what it claimed. As such, the Claimant can only recover the fee that it paid in respect of filing the Claim.
53. The Third Defendant shall vacate the Premises on 27 May 2022 and the possession of the premises be reverted to the Claimant as of that date.
54. In light of the aforementioned, I find that the First Defendant shall pay the Claimant the amount of AED 33,890.94 in accordance with the below:
(a) AED 28,435.61 rent amount in respect of the unpaid rent and overstay until 27 May 2022.
(b) AED 2,841.66 for the legal interest.
(c) AED 500 for the bounced Cheque.
(d) AED 2,113.67 for DEWA and District Cooling and any other service charges until the date of evacuation.
55. The First Defendant’s security deposit in the amount of AED 3,750 shall be forfeited to the Claimant.
56. The First Defendant shall pay the Claimant the DIFC Courts’ filing fee in the sum of AED 1,736.03.
57. The Claimant shall serve this Order upon the First Defendant.
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