Claim No: XXXX
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
IN THE SMALL CLAIMS
Hearing: 18 August 2016
Judgment: 25 September 2016
JUDGMENT OF SCT JUDGE NATASHA BAKIRCI
UPONhearing the Claimant and the Defendant
AND UPONreading the submissions and evidence filed and recorded on the Court
IT IS HEREBY ORDERED THAT:
1.The Defendant shall pay the Claimant AED 83,333.33 as reimbursement for five months of rent.
2. The Defendant shall submit the following listed documents to the SCT Registry
a. A documented inspection of the Premises, including photographs of necessary repairs;
b. A list of proposed necessary repairs; and
c. Quotes from qualified service providers for completion of the necessary repairs.
3. Upon approval of the submitted documents by the SCT Registry, the Defendant shall transfer the remainder of the AED 10,000 security deposit, if any, to the Claimant within 15 days.
4. The Defendant shall pay the Claimant AED 3,454.50 in reimbursement of the DIFC Courts
5. The Claimant is Gert, the tenant in the DIFC
6. The Defendant is Germaine, the owner of the Premises and the Claimant’s landlord.
Background and the Preceding History
7. The Claimant and Defendant entered into a “Tenancy Contract” for the period of 1 September 2015 until 31 August 2016 with a rental amount of AED 200,000 for the year, payable in two cheques. The Tenancy Contract incorporates an “Addendum Apartment” (hereafter the “Addendum”) signed by both parties.
8. The Addendum at Section 3 states that “Two months’ notice in writing should be given to the Landlord if the Tenant wishes to vacate on expiry of the lease [sic].” Section 6 states “In the event of the Tenancy being terminated by the Tenant before the expiry of the Tenancy period, the Tenant shall be liable to pay 2 month’s rent as penalty for such termination. The Tenant shall give a notice of two months indicating his intention to terminate the Tenancy. If, however, the Tenant does not notify the Landlord before terminating the tenancy, then apart from paying 2 month’s rent as penalty, the Tenant shall also forfeit the Security Deposit.”
9. Section 7 of the Addendum states that “Major maintenance is the sole responsibility of the Landlord. Major maintenance is described as maintenance on the structure of the building include, but is not exhausted by work required to the roof, drainage, major plumbing, electrical, including maintenance for private swimming pool pumping equipment where present. Minor maintenance is the responsibility of the Tenant. Minor maintenance is described as maintenance on leaking faucets and exposed pipes in the kitchen, laundry, toilets, faulty locks and fused light globes [sic].”
10. Section 9 of the Addendum states that “Tenant agrees to permit the Landlord or his representative entry to the premises in order to carry out inspections, general maintenance or repair upon receiving a 48-hour notice. Such permission is not to be unreasonably withheld.”
11. As early as 7 October 2015 or at least in November 2015, the Claimant complained of a sewage smell in the master bedroom and bathroom of the Premises. This complaint resulted in considerable exchanges between the Claimant, the Defendant, the Defendant’s property manager and the Building Management as to the cause of the smell and the solution to the problem.
12. It is agreed that although considerable effort by all was expended towards remedying this sewage smell, the problem persisted and was not fixed. The Claimant and Defendant provide evidence of numerous maintenance visits from the period of November 2015 until May 2016 at the considerable expense of both the Claimant and Defendant.
13. It is also agreed between the parties, after much deliberation, that the sewage smell may be coming from the Fresh Air Unit. The Fresh Air Unit is applicable to the entire building, rather than one unit, and its proximity to the sewage pipes may be the source of the smell.
14. In March 2016, the Claimant asked to be released from the Tenancy Contract due to the ongoing and as of yet unresolved problem with the sewage smell. The Defendant refused to release the Claimant without adherence to the two months’ notice and two months’ penalty required in the Tenancy Contract. As the Claimant was unwilling to pay four months of rent to be released from the Tenancy Contract, he did not pursue the matter further.
15. The Claimant then filed a claim with the DIFC Courts Small Claims Tribunal
16. The parties attended a Consultation before SCT Officer Ayesha Bin Kalban on 7 August 2016 but were unable to reach a settlement. Thus, a Hearing was scheduled before me on 18 August 2016.
Particulars and Defence
17. The Claimant argued in his Claim Form that there has been an ongoing maintenance problem in the Premises regarding a sewage odour. While the Claimant acknowledges that many attempts have been made to remedy this problem, he claims that it persists such that he asked to be released from his contract. He states that the Defendant insisted that any termination of the contract would be as per the penalties included therein, in spite of the ongoing maintenance issues. The Claimant asserts that he has had to be present for over 30 maintenance visits during working time and that the odour often times made him feel sick. The Claimant contends that he was unable to use his main bedroom and bathroom due to this odour and therefore he should receive a refund in rent based on his inability to use the space during the period of his tenancy.
18. The Defendant responded to the claim, indicating his intent to defend against it. In his submission, the Defendant highlights that all maintenance requests were dealt with promptly and professionally. While the Defendant acknowledges that there was a bad smell in the apartment, he claims that all appropriate measures were taken to remedy this. He goes on to state that it was discovered that the smell came from the Fresh Air Unit, which was under the control of the Building Management and thus “totally out of control of the Apartment Owners.” The Defendant also asserts that the Claimant has not complained about the bad smell for the last few months. Further, the Defendant maintains that the Claimant was often unavailable due to travel and living alone, making remedying the issues more difficult.
19. The Defendant also raises an issue that the Tenancy Contract was signed on behalf of the Claimant’s company, not for the Claimant himself and thus he is the inappropriate person to bring this case. Furthermore, the Defendant argues that the correct entity to sue regarding the Claimant’s complaints is the Building Management, not the Defendant.
20. The Claimant provided responses to the Defendant’s submission. He highlights that he has a contract with the Defendant, as the apartment owner, and no contract with the Building Management. He rejects any argument that he failed to give access to the apartment promptly and as per the Tenancy Contract and instead states that he gave access over 30 times and many times waited for maintenance crews that did not show up. The Claimant also addresses the claim that he is not the real signatory of the Tenancy Contract. He states that he is a joint signatory and a director of the company and thus is the correct person to bring this claim.
21. At the Hearing, both parties reiterated their arguments. The Claimant argued that he is owed compensation for the Defendant’s failure to fix major maintenance issues in the Premises. The Defendant argued that he did all that was possible to fix the issues and that the real dispute is with the Building Management as he does not have control over the repair of the Fresh Air Unit.
22. First and foremost, the relevant Tenancy Contract falls under DIFC Courts’ jurisdiction as it concerns the Premises which are located within the DIFC. The Addendum at Section 12 states that “This Contract is governed by the DIFC Law . . .” Therefore, it is clear and undisputed that the DIFC Courts have jurisdiction to decide this matter and should apply DIFC Law in doing so. As the claim value is less than AED 500,000, this claim is properly before the Small Claims Tribunal of the DIFC Courts.
23. There is just one issue to be decided in this dispute: whether the Defendant upheld his responsibilities under the Tenancy Contract and if not, what remedy is appropriate. This issue is governed by the DIFC Contract Law, DIFC Law No. 6 of 2004 (hereafter the “DIFC Contract Law”).
24. The relevant provisions of the DIFC Contract Law are as follows:
a. Article 77 of the DIFC Contract Law states that “Non-performance [of a contract] is failure by a party to perform any one or more of its obligations under the contract, including defective performance or late performance.” Article 78 states that “A party may not rely on the non-performance of the other party to the extent that such non-performance was caused by the first party’s act or omission or by another event as to which the first party bears the risk.”
b. Article 82(1) of the DIFC Contract Law states that “Except with respect to a mere obligation to pay, non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.” Article 82(3) goes on to state that “The party who fails to perform must give notice to the other party of the impediment and its effect on its ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, it is liable for damages resulting from such non-receipt.” Furthermore, Article 82(4) states that “Nothing in this Article prevents a party from exercising a right to terminate the contract or to withhold performance or request interest on money due.”
c. Article 86(1) of the DIFC Contract Law states “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.” Article 86(2) states that “In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether:
(a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract;
(b) . . .;
(c) . . .;
(d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.”
d. Article 87(1) of the DIFC Contract Law provides that “The right of a party to terminate the contract is exercised by notice to the other party.” Article 89(1) states that “Termination of the contract releases both parties from their obligation to effect and to receive future performance.” Article 89(2) states that “Termination does not preclude a claim for damages for non-performance.”
e. Article 90(1) of the DIFC Contract Law provides that “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.” Article 90(2) states “However, if performance of the contract has extended over a period of time and the contract is divisible, such restitution can only be claimed for the period after termination has taken effect.”
25. As mentioned above, the Addendum to the Tenancy Contract clearly states in Section 7 that “Major maintenance is the sole responsibility of the Landlord.” It was never substantially contended by the Defendant that the sewage smell problem did not qualify as “Major maintenance” especially as the resolution of such problem depends on structural changes to the building. Instead, the Defendant claimed that all that could be done about the problem had been done and that the real solution was the responsibility of Building Management. Therefore, it is agreed that rectifying the sewage smell issue qualified as “Major maintenance” under Section 7 of the Addendum to the Tenancy Contract. Based on this finding, it is the landlord’s responsibility to remedy the problem as per the Tenancy Contract.
26. Both parties are in agreement that the problem has not been remedied. The Defendant points out that the Claimant has not complained about the problem in the last few months but the Claimant contends that he has essentially given up considering the long history of maintenance he has been through with no positive result. Therefore, the Court finds that the sewage smell problem has not been remedied and has been ongoing almost throughout the term of the Tenancy Contract, at least since November 2015.
27. Under Article 77 of the DIFC Contract Law, failure of the Defendant to remedy the sewage smell qualifies as “non-performance” of Section 7 of the Addendum. The Defendant has failed to perform his obligation under Section 7. Furthermore, although the Defendant asserted that the Claimant was unavailable or failed to give access to the apartment on a number of occasions, such failures do not fall under Article 78 of the DIFC Contract Law as the non-performance under Section 7 was not caused by the Claimant’s travel or failure to allow access. Furthermore, any failure to provide access did not significantly impede the Defendant in fixing the sewage smell, evidenced by the fact that the smell has not subsided even after thirty plus maintenance visits. Finally, the Claimant cannot be said to have assumed the risk that the Premises would have an ongoing sewage smell in the main bedroom and bathroom.
28. Thus, it follows that as major maintenance is the Defendant’s responsibility as landlord and as the problem has not been remedied, the Defendant is in breach of the Tenancy Contract due to non-performance of Section 7 of the Addendum.
29. It may be that the Defendant was excused from performing under Article 82(1) of the DIFC Contract Law, but the Defendant did not give notice of such inability to perform his obligations as required under Article 82(3). Furthermore, Article 82(4) explicitly reserves the Claimant’s right to terminate the contract even if such notice is provided.
30. While the Defendant is likely correct in arguing that he has done all that he personally can do towards fixing the problem, this does not excuse his failure to deal with this issue of major maintenance. Instead, he remains in breach of the contract and the Claimant is due some remedy as a result of that breach.
31. While it may be the case that the Building Management bears ultimate responsibility for rectifying this matter, this is for the Defendant to take up with the Building Management. The Claimant’s argument that he has only contracted with the Defendant and not the Building Management is noted. It is the Defendant’s responsibility to take up any breach that the Building Management may or may not be committing as per his own agreement with them. The Claimant has no contract with the Building Management and has sued the Defendant as is his appropriate course of remedy.
32. Under Article 86(1) of the DIFC Contract Law, the Claimant was able to terminate the contract if the Defendant’s non-performance amounted to a “fundamental non-performance.” In considering the factors listed in Article 86(2), it is relevant to assess how intrusive the sewage smell was and whether it deprived the Claimant of “what [he] was entitled to expect under the contract” (Article 86(2)(a)). It was clear upon hearing the parties that the smell was quite intrusive and deprived the Claimant of the use of his master bedroom and bathroom for significant periods of time. The Claimant was entitled to expect use of the full Premises at all times during the term of his tenancy with reasonable allowances for maintenance and repair. I consider that thirty plus maintenance visits and the inability to sleep in the master bedroom or use the master bathroom for significant periods of time amounts to a fundamental non-performance by depriving the Claimant of what was expected under the contract.
33. Furthermore, the Defendant’s ongoing non-performance gave the Claimant reason to believe that he could not rely on the Defendant to ultimately fix the problem. This further qualifies as fundamental non-performance under Article 86(2)(d) of the DIFC Contract Law. Therefore, the Claimant had the right to terminate the Tenancy Contract and attached Addendum pursuant to Article 86 of the DIFC Contract Law.
34. Under Article 87(1) of the DIFC Contract Law, the Claimant was required to give notice of his desire to terminate the contract. Both parties agree that the Claimant did attempt to terminate the contract in March 2016, after at least 5 months of exchanges regarding the sewage smell problem. Thus, the Claimant gave adequate notice of his desire to terminate the Tenancy Contract for non-performance. The Claimant even offered one month’s notice of termination. Such notice effectively released both parties from their obligations under Article 89(1) of the DIFC Contract Law, even though the Defendant rejected the Claimant’s termination. Furthermore, such termination does not preclude the Claimant from seeking damages under Article 89(2) of the DIFC Contract Law.
35. Therefore, the Tenancy Contract should have been terminated as of March 2016, pursuant to the Claimant’s notice. Thus, the obligations under the contract stopped running from that time, starting 1 April 2016, including the obligation to pay rent. As per Article 90(1) of the DIFC Contract Law, either party can claim restitution of whatever it has supplied. Furthermore, Article 90(2) provides that if the contract is divisible, such as a Tenancy Contract where rent falls due in monthly periods, restitution can only be claimed for the period after the termination has taken place.
36.Therefore, as the Tenancy Contract was effectively terminated as of 1 April 2016, restitution should be calculated as per that date. The Defendant therefore owes to the Claimant rent applicable from 1 April 2016 to 31 August 2016. Under Article 90(1) of the DIFC Contract Law the Claimant would be required to pay for any benefits received during this time period, such as use of two thirds of the Premises. However, seeing as the Claimant only received that benefit because the Defendant refused to release him from the Tenancy Contract on reasonable terms, the Claimant should not be required to pay for his use of two thirds of the Premises during this time.
37. Thus, the Defendant shall pay the Claimant AED 83,333.33 as reimbursement for five months of rent for the period after the Claimant terminated the Tenancy Contract, 1 April 2016 to 31 August 2016. The Claimant’s claim for reimbursement of agent fees and moving fees is rejected as these expenses would have been incurred regardless of the maintenance issues.
38. The Claimant’s claim for reimbursement of his AED 10,000 security deposit is also granted, although the Defendant shall have the opportunity to deduct valid expenses against the security deposit, as per the Tenancy Contract and Addendum. The Defendant shall submit documented inspection of the Premises, a list of proposed deductions against the security deposit, and corresponding quotes for the needed repairs to the Small Claims Tribunal Registry no later than 15 October 2016 for approval. Upon response from the SCT Registry, the Defendant shall have 15 days to transfer the remainder of the security deposit, if any, to the Claimant.
39. The Defendant shall also pay the Claimant AED 3,454.50 as reimbursement of the Claimant’s court fee.
Date of issue: 25 September 2016
At: 4 pm